10 minutes with Keith Neumeyer
Issue 158, March 2016
Mining dealmaker Keith Neumeyer bought five gold and silver companies last year, but after a bounce in precious metals, he wants the market to go back down, so he can buy a few more.
“I think we're going to have a summer correction, like we always do,” he says, talking down the telephone over lunch at Miama airport. “I do believe the bottom is in on the gold and silver price, I don't think we're going to retest the lows that we've seen last year, but at the same time, I'm not ready to say that this market's ready to take off yet.”
Nor does he want it to. Neumeyer, who co-founded First Quantum in the early 1990s and First Majestic in 2002, launched his latest vehicle last year, First Mining Finance, buying up beaten down juniors. It has been quick to do deals, some of them hostile, rolling-up a long list of companies, from Coastal Gold to Clifton Star.
In total, Neumeyer has mopped-up nearly 9m ounces of gold. “We're in buying mode right now,” he says, “this is not selling mode, so we're going to keep buying assets until we run out of assets to buy, or the price of the assets go up high enough and at that point, we'll flip to the other side.”
Of the 21 projects that First Mining has acquired, Springpole in Ontario and Hope Brook in Newfoundland are the two Neumeyer is excited about. “Hope Brook, we flew in by helicopter, we land on the landing pad, there's a power line that goes right up to the camp,” he says.
“The power line cost $40m to build, the camp is worth $7 to $8m and you've got an airstrip there big enough for a jet. You've got a big dock where you can bring in all your supplies, the replacement cost of just what's sitting on the ground is probably $60m to $70m, then you've got the gold and there's tonnes of blue sky and the whole thing we paid $11m for.”
Neumeyer traded equities at three brokerages in the 1980s. “I traded equities for the banks, so I arbed equities between New York and Montreal and Toronto and Vancouver,” he says. The stock market crash in 1987 “decimated the Canadian brokerage business” and Neumeyer got his “feet wet” working for mining companies.
Takeover targets on his latest list have risen with gold this year, making new deals harder to agree. “We have to kind of be careful, we don't want to overpay. Unfortunately a lot of these people that run these companies, they're not really the best management teams and yet when their stock goes up a little bit, all of a sudden they get super confident.”
Doing deals in a downturn is harder than it looks, he says. “People who've spent their life building these assets don't want to hand them over to a bunch of stock promoters. Just because you've got a cheque book and walk into a management team, that's not going to work. These people love their assets, they've spent decades building their assets, they're not going to hand them over to some bank in New York.”
First Mining is planning to upgrade its listing this year, allowing it to buy shares in other companies, giving it greater leverage going into hostile deals. “We're not going to be buying minority positions in other public companies,” Neumeyer says. “I've never done that, I think it's a waste of time. I don't like partners, when I buy stuff, I buy 100 per cent.”
“People are always trying to figure out what our next move is, we obviously keep our hats to our chest. We have to. I think with this portfolio of assets we're putting together, I'm expecting to build another billion dollar company. It will take time obviously, it doesn't happen overnight, but this whole sector will boom again and we'll have a portfolio that will be one of the best portfolios on the street.”
Neumeyer has been aggressively buying shares in First Mining Finance, scooping up C$4m ($3m) of stock. He has also “arbed” the company's own equity, buying shares in target companies, once a bid has been announced. “I'm a huge believer in the mining space right now. I think the valuations are ridiculous.”
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