The second day of the four-day Mines and Money (M&M) conference in London included a discussion, styled as a 'fireside chat', between the CEO of IBK Capital, Michael White, and a man described as one of Africa's richest businessmen, Naguib Sawiris. Since 2012, the Egyptian mobile phone entrepreneur has moved half of his estimated wealth of over US$5 billion into gold assets.
Mr Sawiris is chairman of both La Mancha Resources Inc. and Orascom Investment Holding. The latter is part of a family business empire that was established (initially as a construction company) by his father Onsi Sawiris in 1961. Since joining Orascom in 1979, Mr Sawiris is credited with helping the company become one of Egypt's largest and most diversified conglomerates.
Mr Sawiris established his name by investing in the telecom sector in Egypt and in less popular markets including Bangladesh, Iraq, North Korea and Pakistan. He acquired Italy's Wind Telecomunicazioni before merging it, along with a number of his telecom assets, with Veon Ltd in 2011. Mr Sawiris subsequently diversified into the financial sector by buying the Egyptian investment bank Beltone Financial Holding.
It is, however, for Mr Sawiris's activity in the mining sector over the past six years that he appealed to M&M delegates. Mr Sawiris acquired the Australia-based gold producer La Mancha for US$492 million in 2012 and took it private. The company had two mines in Australia and two in Africa.
Mr Sawiris's gold-mining acquisitions since 2012 have included Evolution Mining Ltd and Endeavour Mining Corp. Having initially held 31% in Evolution (after the sale of La Mancha's Mungari operation to Evolution), the holding has been sold down to under 10%, worth around US$550 million. Mr Sawiris himself currently holds almost 30.5% of Endeavour, worth over US$400 million.
In November last year, La Mancha launched a new investment vehicle to acquire further gold mining assets. The initiative was headed up by Andrew Wray, the former chief financial officer of London-listed Acacia Mining. In August 2018, La Mancha paid US$125.7 million for a 30% equity stake in Golden Star Resources Inc., whose assets include two producing mines on the Ashanti gold belt in Ghana. Mr Sawiris now has gold-mining assets across West Africa (Burkina Faso, Côte d’Ivoire, Ghana and Mali) plus Australia and Argentina.
Mining Beacon (MB) caught up with Mr Sawiris after his discussion with Mr White and asked him about his investment strategy.
Naguib Sawiris (NS): It is important to have multiple assets. In this way you can exchange ideas, and resources, and also centralise procurement. At the centre of La Mancha's strategy is the need to de-risk assets and having mines in multiple jurisdictions helps in this regard as well.
MB: You are particularly proud of your record in adding value to your investments; which are the best examples in mining?
NS: Both Evolution and Endeavour have performed well. Despite an unhelpful gold price, the former grew from a market capitalisation of around US$500 million when I acquired it to around US$4 billion at the moment, and the latter grew from circa US$250 million to a value of some US$1.5 billion currently.
MB: Why have you have sold down shares in Evolution this year?
NS: I am constantly rationalising my assets, so that funds can be brought to bear on other opportunities.
MB: You made several comments during M&M about directors.
NS: Yes, far too few mining boards contain businessmen, only miners and bankers, who do not necessarily recognise business opportunities. Indeed, I think mining companies should hire businessmen to lead their exploration departments; their criteria in any exploration budgets should be the dollars per ounce found.
MB: You also criticised M&A in the sector.
NS: Certainly. Many transactions are undertaken with far too little regard for the cost of acquiring the gold in the ground. I believe exploration is cheaper; La Mancha is finding gold at barely US$30/oz.
MB: And staff have a role to play you told delegates?
NS: You must instil entrepreneurship in staff. Too many people follow the consensus (including active investors), rather than looking for value creation.
MB: I gather that you are perplexed by the gold price.
NS: Absolutely. The price is practically the same as when I entered the sector in 2012; it makes no sense with everything that is going on in the world!
MB: What next for you?
NS: I intend repeating the success of Evolution and Endeavour. We are also looking now in East Africa and Nigeria, and underground preferably — I have made a career by investing in places that others fear to tread. Africa is not well understood in the US, so assets there are still undervalued. There are problems, including corruption, but it is not as risky as it is portrayed. However, I always under-promise, so let's just see.
MB: Thank you.