MAGICIANS GLOVES: Tanzanite from Richland's operations in Tanzania, which were sold to a private company, Sky Associates Group Ltd. Photo: Richland Resources

MAGICIANS GLOVES: Tanzanite from Richland's operations in Tanzania,
which were sold to a private company, Sky Associates Group Ltd.
Photo: Richland Resources

 
 

A Peculiar Pattern of
Private Deals

Issue 134, August 2015

Continued from Page 1 ➤

The company also has a history of buying assets from private companies at substantial prices. An almost identical deal to the Gregcarbil transaction happened in 2007.

Kirkwood Resources

Richland, then known as TanzaniteOne, bought twelve licenses in Tanzania from two private companies, Kirkwood Resources and Green Hill Mining. In total, the deal was worth £6m, equal to $12m at exchange rates at the time, landing Kirkwood and Green Hill cash and more than 9 per cent of Richland's stock.

The licenses never entered production and were resold this summer to Sky Associates Group Ltd, another private company, registered in the British Virgin Islands.

Who owns Sky Associates Group? Richland says it is a consortium of Tanzanian and Indian businessmen. Who owned Kirkwood and Green Hill Mining? Ed Nealon and Nicholas Sibley both held interests, but the company has never disclosed the level of their holding. Why did Richland enter such generous terms with Gregcarbil? Gregcarbil initially denied any connection to the old Australis license and refused to discuss the agreement.

Richland says the terms were competitive. Its shares have bounced, up 157 per cent this year to 4.5p, but a third, similar transaction gives an intriguing insight into the future.

Magnum Mining

Magnum Mining & Exploration, based in Perth and listed on the Australian Stock Exchange, is superficially separate to the Ed Nealon camp of companies. HSBC nominees rank as the largest investor, holding 7.97 per cent. A list of private companies also hold large positions, including Aero Agencies International, Stately Glory Ltd and Rogue Investments Pty, whilst Ed Nealon appears lower down the register, holding 1.8m shares.

Gerry Nealon (Ed Nealon's brother) holds a further 3m shares. Together, it equates to a 2.99 per cent interest, but because they are not directors, they would not have to disclose any larger, affiliated interests sitting in private companies.

Magnum's core asset was a tantalite deposit in southern Namibia, but last year, the company exited tantalite and announced the acquisition of G.E.M Venus Holdings, a private company that owned the Gravelotte emerald deposit in South Africa's Limpopo province.

G.E.M Venus

Amongst gemstone dealers, Gravelotte is known as the Cobra emerald mine, reportedly producing more than 100m carats until its closure in the 1980s. Magnum paid roughly A$1.2m, including 8.5m South African rand and 20m shares, valued at A$260,000. It was primarily a cash transaction, but that was not originally intended to be the case.

G.E.M entered the deal on the basis that Cobra would be vended into a London-listed company, but “at the nth hour”, Ed Nealon, who led the negotiations, switched the acquisition vehicle to Magnum Mining. Magnum's shares at the time were trading at 1 Australian cent, slashing the value of the deal, but G.E.M had already committed to selling Cobra and ran out of options.

Why stop there? Magnum is one transaction short of a fourth, Nealon-style deal. Why not vend Magnum into Richland Resources, allowing the company to sell the story of a consolidated gemstone house, raising fresh capital to keep the wheels turning? Shareholders in Magnum, including Ed and Gerry Nealon, would meanwhile receive a healthy takeover premium.

Magnum said it was not considering a deal with Richland “at this stage”, whilst Richland deferred questions to an email address that has not been used since March. Magnum last traded at 2.7 Australian cents.

“Australis experienced inter alia working capital shortfalls…”

Clarendon House, Bermuda (click to enlarge)

Richland's "purpose-built alluvial processing plant" in Queensland, which the company describes as "one of the largest of its kind in the southern hemisphere."

Dilutive deals have taken their toll on Richland's share price

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