Keegan gets major endorsement, new management

A group of the original founders and former executives of LionOre Mining are throwing their weight behind Keegan Resources (KGN-T) with a strategic alliance and private placement that further de-risks the junior’s Esaase gold project in Ghana.

The former executives at LionOre, which was acquired for $6.3 billion in 2007 by Norilsk Nickel, are now key investors in Johannesburg-based Highland Park and behind the group’s strategic investment in Keegan, which will add about $32.5 million to Keegan’s existing $186-million-strong treasury through an equity financing of 9.4 million units at a price of $3.44 per unit. (Each unit includes a warrant exercisable at $4.00 for a two-year period.)

Perhaps more important than the financing however is the endorsement and new management Highland Park’s strategic investment brings to the junior. Peter Breese, previously LionOre’s chief operating officer, will take the helm at Keegan as its new president and chief executive, while Colin Steyn, LionOre’s president and chief executive from 1999, and currently chairman of Coalspur Mines (CPT-T), will join Keegan’s board.

Both executives have decades of experience ranging from project development to operations management and are intimately familiar with working in Africa. In addition to LionOre, Breese has held a number of senior executive positions including chief executive of Mantra Resources before its US$1 billion acquisition by ARMZ Uranium Holding Co., the 51.4% shareholder in Uranium One (UUU-T). He was also chief executive of Norilsk Nickel, and held senior management and board positions with Impala Platinum Holdings (LPLA-L) in South Africa, Mimosa Mining Company and Zimasco in Zimbabwe, and BCL in Botswana.

Before Steyn joined LionOre as president and CEO, he served as executive director of Rio Tinto’s metallurgical operations in Zimbabwe. During his time as chief executive at LionOre, the company grew from a market capitalisation of US$100 million to over US$6 billion.  

Keegan’s new chief operating officer, meanwhile, will be Tony Devlin, who has operated and managed projects in Africa for more than a quarter of a century. Most recently Devlin was managing director of Mantra Tanzania and prior to that served in the same role at Williamson Diamonds in Tanzania. He also held a number of executive management positions with Anglo American (AAUK-Q, AAL-L) including chief executive of Zimbabwe Alloys.

“This gives Keegan a proven development/operating team to move its Esasse project in Ghana forward and some new faces to market the story,” Dave Kaiser, senior investment advisor at Canaccord Wealth Management in Toronto wrote of the deal in his morning note to clients. “LionOre was well respected. It was primarily nickel but they also had the Thunderbox gold mine in Australia that they operated.”

For its part, Highland Park was behind the development and strategic direction of Mantra Resources into a leading uranium explorer and developer prior to its buy-out by ARMZ Uranium in 2011.

At presstime in Toronto Keegan was trading at $3.99 per share within a 52-week range of $2.38-6.33. the junior has about 75 million shares outstanding.