ECP buys $15.2m stake in African gold mine

Emerging Capital Partners has made its fourth investment in the African mining sector with the acquisition of a 16 percent stake in gold producer Central African Gold.

Africa-focussed Emerging Capital Partners has paid $15.2 million (€10.2 million) for a 16 percent stake in Central African Gold, which owns and operates gold mines in Ghana and Zimbabwe, as well as exploration properties in Mali and Botswana. ECP is now the largest single shareholder in the company.

The acquisition is ECP’s fourth in the African mining sector. The firm believes the industry has reached a critical juncture that presents excellent investment opportunities, managing director Navaid Burney told PEO.

“Africa holds a tremendous amount of mineral wealth,” he said. “It’s also a place that has been historically under-explored. The production-to-resource ratio is actually very low in comparison to North America, Latin America or Asia.”

At the same time, Burney said, many mineral-rich African nations are seeing improved governance, and an influx of foreign investment that has allowed smaller mining operations to take buy assets off of the major players, and take advantage of rising commodities prices driven by unprecedented demand from India and China.

Central African Gold will use most of ECP’s investment to finance the final phases of restarting production at its Ghana mine, Bibiani, which it bought from Anglo Ashanti in November 2006 for $40 million. At the time, Anglo believed nearly all the mine’s resources had been extracted, Burney said, but Central African Gold’s geologists were able to find more reserves. The mine now produces gold at a rate of 80,000 ounces per year, and within the next year plans to quadruple production to 200,000 ounces per year.

ECP looks for companies that are “on the verge of production”, Burney said, and has tried to build a diversified portfolio of mining investments. Last November, ECP partnered with Truffle Capital to acquire a Moroccan mining company for $53 million. The company, which now operates as OSEAD Maroc Mining, produces silver-bearing lead and silver-bearing zinc. In June of last year the firm invested an undisclosed amount in a Mineral Deposits, which has a gold production arm and a mineral sands production arm, both in Senegal. ECP also holds a stake in Anvil Mining, a copper mine in the Democratic Republic of Congo, which it acquired in March 2006.

ECP looks at hold periods of between three and five years for these investments. The exit environment for mining assets in Africa is also improving, thanks to increasing corporate activity in the sector, Burney said.

The sector is attracting increased attention from US-headquartered private investment firms. Publicly traded hedge fund Och-Ziff Capital Management said earlier this week it had partnered with South African multimillionaire Tokyo Sexwale to target natural resources on the continent. And in early January, energy-focussed buyout firm First Reserve paid $420 million for the uranium and gold assets of Harmony Gold Mining Company in South Africa, in partnership with AMCI Capital and Pamodzi Investment Holdings.