Small Talk: Central African hopes to dig itself out of a hole

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The Independent Online

After a turbulent year for Central African Mining & Exploration, the group is hoping a crucial court ruling this month will allow it to leave political wrangling behind and concentrate on expanding operations across Africa. Andrew Burns, the group's chief financial officer, said: "The company was in a thick fog at times last year. We feel we are coming out of that now."

The AIM-listed mining group hit the headlines regularly in 2007, and not just because of the English media's obsession with its chairman Phil Edmonds, who also happens to be an ex-England cricketer. The group's year took a turn for the worse after the summer. It was sparked by a dispute with the government of the Democratic Republic of Congo, followed by a failed and acrimonious takeover bid that has left the group hoping for a better 2008. Central African, or Camec as it is known, listed on AIM in October 2002 at 3.25p, soared to a peak of 97p in May 2006 but subsequently struggled to rest above the 40p mark. That was until it launched a bid for Canadian rival Katanga Mining in August last year, and the wheels came off.

The group has mining and exploration operations in South Africa, Mali, Zimbabwe and Mozambique, as well as a trucking and logistics business on the same continent. But its main focus is on the production of copper and cobalt in the Democratic Republic of Congo, and disruptions in the region are quickly translated into dips in the share price.

So when the country's government decided to pull crucial licenses to operate in August, the company fell into confusion and the stock slumped. From 52p, it spiralled over the next month, hitting a low of 20.5p in October.

Conspiracy theorists speculated over the timing of the government's decision to withdraw its approval; mainly that it came just days after Camec had launched a bid for Katanga Mining.

Katanga is a rival company based in the eponymous region in the DRC. The speculation ran that the government feared the creation of a monopoly, so moved to stop the deal. The immediate fall in Camec's stock price effectively killed the deal, as the value of its all-share offer was slashed by more than a third.

The company was as surprised as the rest of the market, finding out the ruling from a press release issued by a UK public relations firm representing the DRC government.

Since then, the company has had no direct contact with government officials, but has conducted inquiries, negotiations and appeals through its lawyers.

Andrew Burns must have cursed his luck when he joined the group in September, when it was effectively the eye of the storm. He came from the leisure and gaming industry, no stranger to politicking itself, but he said dealing with the DRC government was an eye-opening experience. "From an outsider's perspective, the political machinations take your breath away," he said.

In September, the group appealed to the high court and the licenses were deemed valid. The legal wrangles continue, but the company hopes it is approaching the finishing line. It is waiting on one further ruling from the government before it can be confirmed legitimate. The company is quietly confident about the result, which is expected within the next month.

The Katanga deal, however, is dead and buried. The Canad-ian group merged with Nikanor, another AIM-listed miner, in a deal worth $2bn in November. It had been Camec's first foray into an acquisition of a company on the public markets after several smaller private deals. "It is clear that the higher profile associated with public companies brings higher risk," Mr Burns said.

Mr Burns said the company is now confident it can concentrate on preparing for future growth. The first step was the creation of a joint venture with Dan Gertler, a heavy investor in the DRC, at the end of last year. They jointly own a mine at Mukondo, which has the largest cobalt deposit in the world, according to Mr Burns. The two parties have since decided to bundle their DRC assets into a separate company and float the company, possibly in London. It is a strategy the group intends to roll out with other ventures. It could possibly be used with its development of a sugar cane to ethanol plant in Mozambique. It is aiming to be the largest project of its type outside Brazil. Other earlier stage plans include the development of its coal operation in Mozambique, fluoride in South Africa and bauxite in Mali.

The company hopes 2008 will provide a clean slate. With the share price now up around 40p again, the fog certainly seems to be lifting.

Capital Ideas

One company that might be worth keeping an eye on is the AIM minnow Capital Ideas. The investment company was a strong riser last week after it revealed a profit on an investment in the Australian water exploration group Primary Water in a pre- IPO funding. The group was more prominently in the news recently after it emer-ged as backing the consortium that bought Dateline, Britain's oldest dating agency. Capital Ideas is now busy arranging funding and has invested in its next venture, a 100m telecoms company. Word is that Capital will announce the new deal within the next month.

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