Andrew Groves, the Zimbabwean entrepreneur who sold his Central African Mining & Exploration Co. for $840 million, aims to replicate that success with a new venture after breaking from former backer Billy Rautenbach.
“We want to show the market that Camec was not a one-off,” said Groves, whose new company is backed by U.S. investors Harbinger Capital Partners and Eton Park Capital Management LP. “We’ve learnt a lot of lessons from Camec. We have a very different relationship with the hedge funds we have backing us now.”
With the support of Zimbabwean businessman Rautenbach, Camec snapped up copper, bauxite and coal mines from Mali to Mozambique, boosting its shares more than sixfold between its 2002 initial offering and last year’s sale. Rautenbach, 50, has been slapped with sanctions by European Union and U.S. authorities for his links to President Robert Mugabe’s regime.
Groves, who said he’s split from Rautenbach, will use new venture Sable Mining Africa Ltd. to buy and develop coal and iron-ore deposits in Africa as prices for the commodities surge. Groves and Sable Chairman Philippe Edmonds, a former England cricketer, also have uranium projects on the continent.
“Phil and Andrew have learned the lesson of what not to do,” said Brock Salier, an analyst at Ambrian Partners Ltd. who has a “speculative buy” recommendation on Sable. “There’s no doubt that they are not going to repeat any potential mistakes that happened.”
The EU added Rautenbach to its list of people subject to financial sanctions in January 2009, saying he had “strong ties” to the Zimbabwean regime when it gave military assistance to the Democratic Republic of Congo in its fight against rebels. Rautenbach was appointed head of Gecamines, Congo’s state mining company, after Zimbabwe’s military intervention.
The investor has also been pursued by authorities in South Africa on fraud charges linked to the collapse of Hyundai Motor Distributors, a Botswana-based company he controlled. He agreed to pay a 40 million-rand ($5.1 million) fine in September to settle related claims.
While Rautenbach wasn’t a direct shareholder in Camec, indirect holdings were acquired by family members, Madelain Roscher, his spokeswoman, said in a May 25 e-mail.
Rautenbach is not involved in Sable and has “no plans to become involved in any listed company and will not consider doing so until the sanctions issue is resolved,” Roscher said.
Shares tied to Rautenbach remain frozen by the EU. Eurasian Natural Resources Corp., which bought Camec for about 584 million pounds ($840 million) in September, was unable to acquire that stock. Charlotte Kirkham, a spokeswoman for ENRC, declined to comment on the shares when contacted by Bloomberg.
Buy Up, Sell On
Groves, 42, and Edmonds, 59, made their names buying up African mines, proving their development potential and selling them on. They launched Sable as a mining company in October after scrapping plans to invest in Mozambique ethanol.
Sable, formerly known as BioEnergy Africa Ltd., acquired Delta Mining Consolidated Ltd., which gave them four coal projects in South Africa and Botswana. Those included the Rietkuil deposit, which may start production by the end of 2011, Groves said in an interview in London, where Sable is based.
The pair’s experience in African resources attracted New York-based Harbinger, the fund’s Managing Director Lawrence Clark said May 25 in a telephone interview. Harbinger has a history of backing mining projects, yet its investment in an early-stage venture goes against its usual strategy.
“If we weren’t comfortable that these guys would either find opportunities, or return the capital if they couldn’t find worthy opportunities, then we wouldn’t have invested,” he said. “We typically invest when we can evaluate a project at hand.”
Groves and Edmonds’s past ventures include African Platinum Plc, which they founded in 2002 and took to startup stage before stepping down in 2005. It was sold to Impala Platinum Holdings Ltd. for 55 pence a share in 2007, a 54-pence premium on its initial sale price five years earlier.
“That’s probably what they are trying to achieve in the future,” said Brian Moritz, who became chairman of African Platinum in 2006. “They’re best at bringing in management around them then moving on to the next deal.”
Not all their backers have reaped such rewards. While Camec was sold for 20 pence a share, up from its initial 3-pence price, it had raised 100 million pounds in 2006 by selling shares at 80 pence apiece, and 100 million pounds in 2008 with stock at 50 pence.
“I was disappointed by the price it was sold at, but sometimes you have to lick your wounds and move on,” said Russell Fryer, founder of Baobab Asset Management, who was an investor in Camec and holds shares in Sable.
Commodity Price Jump
Mining companies are competing for assets in Africa as China’s commodities demand soars. Following a twofold increase in iron-ore spot prices in 12 months, miner Vale SA agreed to pay $2.5 billion for deposits in Guinea in April. JSW Energy Ltd. bought 50 percent of Royal Bafokeng Capital (Pty) Ltd. the same month, gaining access to coal mines in South Africa.
Harbinger, founded by billionaire Philip Falcone, holds stakes in African Medical Investments Plc, another Groves and Edmonds company, and Frank Timis’s African Minerals Ltd., which is developing iron ore in Sierra Leone, Director Clark said.
Sable is 22 percent held by Harbinger, 4.5 percent by Eton Park and 4.3 percent by OppenheimerFunds Inc., according to data compiled by Bloomberg. Groves and Edmonds each have a 0.65 percent interest.
Mary Beth Glover, a spokeswoman for Eton Park, declined to comment.
Groves and Edmonds “seem to be able to raise funds pretty easily from North America funds,” said Moritz, who is now chairman of Chromex Mining Plc and Goldplat Plc. “That’s the only thing anybody cares about: they’ve made money out of Phil and Andrew’s deals.”