Small Talk: Takeover fun as African Minerals calls ENRC's bluff
Monday 21 September 2009
Aim-listed African Minerals caused much excitement last Thursday when it announced to the market that it was in discussions with a plethora of much bigger mining groups about a takeover of its Tonkolili site, an estimated 5.1bn tonne iron ore asset in Sierra Leone.
The apparently interested groups include the FTSE 100-listed Kazakh digger Eurasian Natural Resources Corporation (ENRC), "a Chinese consortium" and "a Brazilian organisation".
The problem for Frank Timis, African Minerals' colourful executive chairman, is that despite the statement telling investors that ENRC had been trawling through the books for three months, with a view to signing a joint venture agreement (cue: share price rise of 14 per cent), ENRC was nearly as quick out of the blocks to dampen the story. The group said it was indeed looking at a range of opportunities, but its focus was on a deal to buy Camec, another AIM-listed miner, a takeover that was concluded last Friday.
True, at no point on Thursday did ENRC actually say what had been put out by Mr Timis was porkies, but the company's annoyance at African Minerals' announcement was palpable. A spokesman for African Minerals insisted on Friday that talks with ENRC were at an "advanced" stage, despite the claims getting no support from the bigger company.
The fact is that African Minerals is unable to fund the exploration of Tonkolili alone, and needs a partner to pay for the lion's share of the work needed to get the project off the ground: "The move appears to be a blatant attempt to ramp the company's share price on the back of another deal. Again, investors should be wary of the promoters behind the stock in our view," said analysts at Fairfax.
Mr Timis, 45, is certainly no stranger to controversy. On his own website, he admits to having three convictions for possession of heroin as a teenager. That was years ago, and Mr Timis says he "deeply regrets" the peccadillo.
More recently, in 2005, Mr Timis stepped down as chief executive of Regal Petroleum, another Aim-listed group, after allegations of overstating of the company's Greek oil assets. Mr Timis says that independent analysts had told him that the site contained plenty of the black stuff. However, the estimates turned out to be excessive with much less oil actually being discovered.
ENRC said on Friday that it "does not comment on rumour and speculation", which while very noble does rather ignore the fact that African Minerals has made a statement to the Stock Exchange.
Vale, the Brazilian group that the market seems to assume is one of the other interested parties, will not even return calls on the matter.
However, while it is true that an MBA student would hardy be advised to run a takeover in the way that this has been approached, the fact that ENRC have not actually said that anything in African Minerals' statement in untrue suggests the deal might actually have legs.
BIS in a spin on small business HR practices
The Department for Business Innovation and Skills (BIS), through the Employment Relations minister Lord Young, has released what appears to be a very encouraging report this morning, noting that 40 per cent of small firms in the UK have developed "creative solutions to strengthen their business during the downturn".
The research, which focuses on HR and leadership, involved asking 500 small business owners what they have done to offset the worst of the recession.
And of course, the results are impressive, at first glance. Of the 500 companies questioned "over three-quarters ... who have made changes [to employment practices], believe their business is stronger as a result." Changes include recruiting new staff, which 15 per cent of businesses have done, while 19 per cent have "adjusted staff roles".
One question that the Government did not consider important when asking about employment practices, however, was whether or not they had made any staff redundant (in a recession? Of course not), which means that the 26 per cent of companies that said they had "adjusted staff working hours" may not having been giving quite the upbeat reply as BIS are trying to suggest.
While innovation is no doubt a good way of avoiding job losses, not to ask how many jobs a company has cut in an employment practices survey, somewhat misses the point. Spin is one thing, but we thought the Government was now sanctioned to talk about cuts.
LSE boss backs small caps
Good new for those that depend on the small-cap equity markets this week.
The new chief executive of the London Stock Exchange Group, Xavier Rolet, told the Quoted Companies Alliance's annual dinner that the exchange was committed to the small-cap sector. "We firmly believe the solution to the debt-fuelled binge of recent years is equity. Small and medium-sized enterprises are a central part of our strategy, and essential to the UK," he said.
That will be no doubt welcomed by a raft of groups in sectors such as mining and biotechnology that are desperate for investors to start putting money back into speculative companies.
As ever with the small-cap sector, it was two steps forward and one back, however. Hours before Mr Rolet took to the floor the markets were awash with rumours that Deutsche Bourse, the LSE's rival, was again mulling a bid for the group. Quite what any eventual deal would mean for small cap stocks is, of course, unknown.
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