LONDON, Nov 7 (Reuters) - African gold miner Amara Mining has sold roughly a fifth of its shares to a wealth management firm investing on behalf of one of America’s richest families, in a deal that will bring in cash, a drilling firm, and exploration licenses.
Under the deal, RDV Corporation - which invests on behalf of the DeVos family who co-founded direct sales giant Amway, one of the largest U.S. private firms - will take a stake of around 21 percent in Amara. They will also fold in assets from their exploration company Amlib, including $10 million in cash.
Smaller miners and companies developing mining projects have come under severe pressure since the financial crisis, squeezed by a shortage of bank finance and lacklustre public markets - forcing more to turn to alternative sources of funds like stake sales, royalty deals or debt that converts into shares.
Share sales to sovereign wealth funds and family offices, which invest the fortunes of wealthy families, have long been touted as a potential source of cash for the mining sector given their long-term view, but Amara is one of the first to bring in a major U.S. family fund.
John McGloin, chairman of Amara, said the company had weighed up the family investment against other options like a royalty deal, which would swap cash upfront for a percentage of future revenues, or selling forward its gold production.
“This (deal) has allowed us to plan for 12 to 18 months, but in the long term it brings in a very solid investor with a long-term view,” he said.
He said royalty deals risk hobbling projects in the future, as they take a share of revenues and not profit, while hedging can also prove a difficult bet on future prices.
Major share sales by heavyweights like Barrick Gold , issuing up to $3.45 billion of shares to pay down part of its heavy debt load, had also sucked up cash from traditional investors that could otherwise have gone to smaller producers.
“It is a really tough market at the moment. You can’t rely on the old investor base, a lot have left the table,” McGloin added. “You have to find fresh, fallow fields.”
AIM-listed Amara, formerly Cluff Gold, has a producing gold mine in Burkina Faso and is aiming to become a mid-tier producer, through the development of projects in Sierra Leone and Ivory Coast.
As well as the $10 million cash from Amlib, acquiring Amlib’s drilling company could allow it to save up to $3 million alone in drilling at Yaoure in the Ivory Coast. The deal also brings in three exploration projects in Liberia.
RDV invests on behalf of the DeVos family, which owns 50 percent of Amway - a direct selling firm which sells consumer goods like skincare and cleaning supplies. They also own basketball team Orlando Magic and a portfolio of private businesses, and have invested in West African gold for over a decade.
Richard DeVos was listed as the 67th richest person in America by Forbes magazine in 2012 with a net worth estimated at $5.1 billion.