Saved in the time of Nik?

Saved in the time of Nik?

by London Calling

19th May 2007

Little noticed by even the keenest London market watchers over recent months has been the extraordinary rise of Nikanor, an AIM-registered mining company which claims to possess the largest bunch of mineral prospects in Africa's most "prospective" but conflict-ridden state, the Democratic Republic of Congo (DRC).

Last year, those of us who knew something of the key players in Nikanor - Barry Steinmetz, the Israeli diamond king, the Gertner family and Dan Gertler (not to be confused with the Gertner's) - became considerably alarmed at their direct participation in this new UK company which was accepted for a London listing at almost lightning speed.

It wasn't so much that the prospective ventures could create unprecedented environmental messes (no more so than other "rehabilitated" mines in the former Zaire). Rather, it was that these men were highly untrustworthy, secretive and proven rank speculators, whose aim was obviously to usurp DRC's mineral wealth and subvert anything approaching democratic control over its citizens' resources.

Last week, shareholders - including the minority in Nikanor who don’t necessarily follow the two G's and the S - voted at the company's annual general meeting against a buy-out offer for the company in the form of a "special purpose vehicle", dubbed "Cosaf Limited". This comprises two entities wholly owned by RP Capital Partners Cayman Islands Limited, and Glencore International AG, along with Nikanor's three existing major shareholders who hold some 72% of Nikanor. (Steinmetz: 36%; the Gertner family 20%; Dan Gertler 16%. )

However, as an illuminating article from Mineweb pointed out last week, it’s far from clear which of these existing or putative partners are actually in play, or what they're playing at.

Certainly Nikanor needs loads-a-money: its revised capital expenditure estimates have increased since the company's London listing last year - by $335m to $1.6bn. And it should be no surprise that Glencore - the world's most ruthless and profitable private trading company - may be waiting in the wings to pounce on stage when the time is right. Glencore's partner, RP Capital, is yet another of those shady Hedge Funds which have been creaming profits from so-called "long-short" share deals; as happened during Xstrata 's 2006 takeover of Canada's mining company, Falconbridge. (And Glencore, of course, along with Credit Suisse, is the biggest shareholder in Xstrata.)

Mineweb's Barry Sergeant comments : "[I]t's likely to become increasingly clear that Cosaf's putative offer is contrived, and aimed almost solely at the non-dilution of stakes held by Nikanor's founding shareholders."

That may be. But it's also possible that Glencore will end up controlling Nikanor. Nor should we be tempted to cast Nikanor's minority directors as innocents going unwillingly to the slaughter. Among them is:

* Jonathan Leslie , who worked 26 years for Rio Tinto, and headed its copper division when the UK company cranked up production at the notorious Grasberg mine in West Papua, resulting in a devastating 200,000 tonnes a day of wastes cascading into the Ajkwa river system.

* The Rt Hon Earl of Balfour, who's a director of a subsidiary of the Rothschild international investment bank.

* Peter Sydney-Smith, who was former finance director of Vedanta Resources plc until his sudden resignation in mid-2005.

*Dan Kurtzer, US ambassador to Israel until September 2005, and:

* Terry Robinson, a non-executive director of steel-maker Evraz (biggest shareholder: Roman Abramovich) which was responsible for the worst-ever recorded coal mine "accident" in Russia last year.

As the saying goes: with friends like these...

Source: “Nikanor directors in civil war Private equity-type buyout, needing close to $2bn, would force delisting from the LSE.” By Barry Sergeant, Mineweb 16 May 2007

[London Calling is published by Nostromo Research, London. The views expressed do not necessarily represent those of the MAC editorial board, or any non-quoted source. Reproduction is welcome, provided full attribution is made to the author.]