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Zimbabwe back in vogue with London investors

Zimbabwe back in vogue with London investors

Could this be the beginning of a new dawn in Anglo-Zim relations?

By
Published: 16 December 2012

Zimbabwe – Could this be the beginning of a new dawn in Anglo-Zim relations?

When it comes to Great Britain, President Mugabe might not be its biggest fan, but he even the great warrior of African politics can not deny the importance of attracting foreign direct investment.

So it was a welcome piece of news this week out of London that saw investors gather to support the junior mining venture, Premier African Minerals. Led by the colorful South African natural resources and UraMin veteran, George Roach who is leading a team comprising South African, Canadian and Scottish nationals (more pleasing to the ear in Zim than the word Britain) the Premier team through the support of broker Shore Capital, has been able to do a first class job in promoting not just the Premier business model, but also Zimbabwe itself.

What is remarkable about the Premier African Minerals IPO, is just simply the fact that it has happened at all. The reason I say this is simply because, having spent over twenty years working in London in the natural resources sector, I can honestly say that market conditions have never been more challenging.

There is zero appetite by mid cap brokers to take on a junior miner and try and bring it to the market. The boom that the sector enjoyed prior to the financial crisis has now turned to bust. Institutional investors have lost appetite for the junior mining sector and where once they would have been happy to invest for the long term, today it’s all about short-term.

So why have Premier and Zimbabwe been supported?

To be a successful AIM stock and one that appeals to investors, the holy-grail is liquidity. Premier’s business model is a new twist on the traditional junior miner. The company has a portfolio of assets, where the two flagship projects are its Zimbabwe tungsten project, RHA and a large-scale rare earths concession.

What Premier will do is work the projects up and then transact them, either through joint venture, trade sale, offtake or IPO, in what is a liquidity event development strategy. Investor’s benefit from Premier’s multi commodity portfolio, that contains only projects that have mine potential.

This model generates news flow, and therefore liquidity and shareholder returns.

In the case of Zimbabwe, Premier is working hard with the Ministry of Youth Development, Indigenisation and Empowerment to ensure its projects in Zim are developed in close co-operation with the Ministry, a fact that will stand the company in good stead for the future.

Whilst there is a price to pay for satisfying Zimbabwe’s indiginisation criteria (up to 51% of a project has to be shared with the government / local indigenization investors) the long term value can only be enhanced as projects that conform properly to the law are the ones that will hold their greatest value; a fact that has encouraged London investors to support Premier.