Newbie Giyani Gold's prospects

Jul 03 2013 14:07
*David McKay
THE former business development officer at the JSE, Noah Greenhill, knows a thing or two about new listings, especially in the mining field, having helped attract numerous debutants to South Africa’s shores over the years.

Now as Sasfin’s head of corporate finance, he brings SA its second new mining listing in six months: Giyani Gold.

Whether it’ll quite have the wings of Master Drilling, a mining machinery company sponsored by Sasfin Capital that recently said earnings would be up to 95% better than the previous year, remains to be seen.

Sasfin Capital is sponsoring Giyani Gold, but it can do nothing about the hazardous nature of exploration companies in SA. In fact, the track record has been poor. Great Basin Gold, Wits Gold, Tawana Exploration – these are just a few examples of exploration companies that have found it difficult to thrive in SA.

In its favour, the backers of Giyani Gold, “Canadian entrepreneurs with huge collective knowledge of geology and the venture capital game,” have their own track record to fall back on.

Duane Parnham, executive chairperson of Giyani Gold, is best known for having sold a Namibian oil exploration company, UNX Energy, to Brazilian state-owned entity, HRT Participações em Petróleo, for $730m in 2011.

Says Chuck Allen, Giyani Gold’s president: “The UNX deal is the model to take something that is unappreciated, and then build it into something valuable.” The assets Giyani Gold wants to explore are gold deposits in Limpopo’s so-called greenstone belt of Giyani.

The area once sustained 25 gold mines “the last in the Eighties” – according to Giyani’s website, so the notion is to explore for outcrops of near-surface gold deposits near these areas.

Whether this activity will actually materialise into a gold mine is something of a moot point, especially when even established, well-funded gold mines in SA are only clinging on to viability by dint of the rand’s weakness against the dollar.

One also has to be cautious about the long-term prospects for gold, with the 12-year bull market in the metal deemed to be over.

Investors curious about Giyani Gold will have to decide for themselves whether it’s the dream of Parnham or Allen to see gold mines built in Limpopo, or whether they would sell them off to another party – government, for instance.

The gold assets are held in Rock Island Holdings in which Giyani Gold has a 45% stake with the Limpopo Economic Development Enterprise holding another 45% through its mining venture, Corridor Mining Resources (CMR).

The Limpopo provincial government has long coveted its own mining assets and sought coal mining investments at a time when nationalisation of the mining sector was all the talk.

Interestingly, CMR has Phaswana’s Steve Matlou as its chairperson, a former National Union of Mineworkers official, deputy regional secretary of the ANC in Limpopo, and mayor of Ellisras (1995- 1999) no less.

He more recently has a seat on the board of Primedia’s Out Of Home company as well as African Vanguard Resources, which was established by President Zuma confidant and Black Business Council spokesperson, Sandile Zungu.

Allen says the sale of the company’s gold exploration properties is a possibility, even to government. “We will eventually do what is best for shareholders.” That’s an important point. A good part of Giyani is owned by its managers, including Parnham (12% of the stock), Allen and others.

What this means is that Giyani Gold will be entrepreneurially driven, but there’s reason to doubt whether the firm is in the mining game for the long haul bearing in mind it takes years and years to build a gold mine often with heavy capital investment, and even longer payback.

Gold is a contrarian’s place to be at the moment so it might make sense to join the Canadians for the ride, provided you know when to get out.

 - Fin24

For more go to finweek.com or follow Finweek on Twitter.

*David McKay is the editor of Miningmx.

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gold  |  mining



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