Jim Mellon: Bullish on
Gold & Silver
Issue 114, February 2015
Jim Mellon, one of the UK’s wealthiest investors, owns everything from German property to a bank on the Isle of Man, but few investors have played the mining markets as adroitly in recent years.
Mellon’s first major foray into the mining industry began in 2005. He and a friend from Hong Kong, Stephen Dattels, were in a pub Mellon owns in Notting Hill discussing uranium. They each put $50,000 into a shell company, UraMin, which bought up uranium concessions in Africa. The company raised $500m and in 2007, just as the uranium price peaked, was sold to France’s Areva for $2.5bn.
“I’m a totally opportunistic investor,” Mellon says. “You can buy concessions for very little money and if you can time your entry into a commodity well, those concessions become much more valuable. It’s a bit like playing the futures market.”
Mellon has timed the iron ore market with equal brio. In June 2009, his Hong Kong-based holding company, Regent Pacific, took a 20 per cent stake in a little-known iron ore developer, BC Iron. 6 months later, the company announced a breakthrough rail deal and within 12 months, the iron ore price had doubled.
Mellon launched a takeover bid in 2011, planning to sell the company on to a Chinese buyer, but decided to exit the stock when the bid was blocked, booking a threefold gain and pre- empting a wholesale collapse in the iron ore market.
“This is a purely cyclical game,” Mellon stresses. “It was a very lucky break. The price went up and up and I always say that shares are made for selling as well as buying, so there’s nothing, especially in commodities, that you want to hold onto forever.”
Mellon says he did not expect the ensuing collapse in BC’s stock, which has plunged 90 per cent in the last 12 months, worsened by an ill-timed acquisition, but cautions that it is too early to re-enter iron ore. “The big boys are doing what Saudi Arabia is doing with oil. They’re forcing...
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