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African investment pause

hile travel to many African destinations
Wremains restricted due to the COVID-19
pandemic, investors will continue to favour the
more developed mining markets where there
is no shortage of trusted consultants capable
of running an independent ruler over a pro-
spective project, according to respected fund
manager Caroline Donally.
Speaking to Paydirt from her Houston
base, Donnally indicated that many investors
and funds would be reluctant to deploy big
licks of capital on projects in Africa due to ei-
ther physically not being able to do a site visit
themselves or the challenge of finding some-
one with the requisite skills and capabilities to
complete due diligence over the opportunity
in question.
“I think what we’ve seen this year is the con-
tinuation of a lot of deals and transactions that
were already in the pipeline, so where people
had already been to site and done quite a lot
of due diligence, those carried on,” Donally
said.
“For new deals, that’s challenging…and I Caroline Donally
think unfortunately the fallout for Africa is that slightly different than the private equity where
it has become even more challenging, which typically that focus is all wrapped up with oth-
is not really anything to do with political risk er strategies,” she said. package,” she said. “Our deals are cash ba-
or jurisdiction, it’s just the travel restrictions “Where we sit in streams and royalties, we sis…so when we’re creating streams and roy-
and being able to get there has added to the have full commodity price exposure and that alties, we’re actually physically putting cash
complexity. we’ve seen is something that investors have into these businesses and we’re looking for
“In the developed mining markets, you been really interested in because in these returns based on that cash.
have a lot of consultants and you have a lot times of uncertainty, like we’re living in these “We’ve found with the much larger royalty
of people that you can tap for expertise, so it’s days, investors may not necessarily want to companies and streaming companies, they
less of an issue to find someone who knows be in the equity because they’re actually look- need to do much bigger deals than what we’re
the assets, who has been there recently, who ing for longer-term commodity exposure with talking about. We see a niche in the market
you can have a conversation with and figure a manager such as ourselves who is able to for where we’re playing, given the other mar-
out whether it makes sense for you or not. pick and choose which companies we’d like ket participants and we’re they’re focused.”
Whereas in some of the African countries, to back. Africa-raised Donally said while her fund
they don’t have that level of internal consult- “The opportunity we see in the space at the had no specific rules on where it can and
ants who live in country and who have been moment is in the development stage com- can’t invest, she indicated those jurisdictions
there recently. panies, so where there’s been substantial with stable governments and polices would
“Obviously you have pockets of countries progress made in permitting and feasibility always be favoured over those that don’t.
[in Africa] which are easier to invest, which studies and the company is considering their Following on from her comments at the
have more stability and a better reputation options as to how to get themselves into pro- Mining Indaba in Cape Town earlier this year,
for investing, so I think those will come back duction.” Donally again urged countries to “stick to the
sooner than the ones which frankly have just Deterra Royalties Ltd became the ASX’s rules” if they wish to continue attracting for-
been more challenging. But for the meantime, most significant royalties company in Octo- eign investment.
I think people will keep looking around in their ber following its successful demerger from “Going into a transaction, especially where
backyards where they can get a good read on mineral sands miner Iluka Resources Ltd. we’re doing something like a stream or a roy-
what the pandemic numbers look like, travel Underpinning the spinout was an iron ore roy- alty which could be a 10-12 year life of mine,
restrictions, lockdowns, etc.” alties stream from BHP Ltd’s South Flank op- in which case these are long-term financing
After almost a decade with Denham Capi- erations in Western Australia which netted the relationships that we’re setting up, we do look
tal, Donally recently joined Michael Harrison Iluka group $85 million in revenue last year. for stability in the rules and when the rules
as a managing partner in Sprott Inc’s newest Donally said the Sprott fund was more like- change overnight, that makes investors very
fund, Sprott Resource Streaming and Royalty ly to appeal to juniors with a sub-$US1 billion skittish,” she said.
Corp. market cap, especially those looking for an “We’re not seeking 20-year tax holidays
Established in late 2019, the fund is look- investment in the $US10-15 million bracket. and these outrageous deals that countries
ing to pull together about $US500 million and “What we see with a number of other used to do before. What we’re looking for is
then deploy that investor capital into various royalty companies, specifically on the listed stability. We can then figure out whether the
streams and royalties around the world. side, is that they tend to buy more royalties investment makes sense – and if it makes
Donally said streams and royalties were from others, so they’ll buy a package from sense, then let’s stick to what those rules are.”
ideal for investors seeking full commodity one of the mid-size mining companies and – Michael Washbourne
price exposure. then use their shares so that mining com-
“Our focus on streams and royalties is pany still gets some upside to the royalty

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