Tycoon takes 9.9% stake in Teranga Gold

David Mimran — a financier, Hollywood movie producer and CEO of his family’s Mimran Group, whose wealth stems from agri-industry (flour, sugarcane, grain, animal feed) to banking, shipping and real estate — has taken a 9.9% stake in Canadian junior Teranga Gold (TSX: TGZ).

The Mimran Group is the largest private sector employer in Senegal, where Teranga’s Sabodala open-pit gold mine, the country’s largest commercial gold mine and mill, has been producing the precious metal since 2009.

“He and his family are active in French West Africa with a number of businesses. He’s bullish on gold, and the family was looking to diversify from their current core holdings,” says Richard Young, Teranga’s president and CEO, in an interview.

Mimran first approached the company for technical assistance after he got a mining licence in Côte d’Ivoire, Young explains. Mimran visited Sabodala in March, and the two parties talked over the summer months.  

“They believe French West Africa is a growing region, and David thought Sabodala was a well-run operation,” Young says. “He was impressed by its quality, our social licence and the free cash flow it was generating, and what he saw as opportunities to grow the business.”

The non-brokered private placement raises $22.7 million for the company, and Mimran gets a seat on the board for at least three years. “David shares our vision of being able to grow the company,” Young continues. “The fact that he’ll join the board and actively participate in building the business is terrific.”

Having Mimran on Teranga’s team will likely open doors across West Africa, too, where the family’s business is a large employer in Côte d’Ivoire as well as in Senegal, and where during his career, Mimran has served on the boards of several key companies in the region ranging from Compagnie bancaire d’Afrique de l’Ouest, a private retail and commercial banking group in Senegal, to Eurafrique, Sometra and Cavpa.

Before moving back to Geneva to run the family business (he spends about three weeks of each month in West Africa), the financier was based in New York, where his business affiliations included board seats on companies such as Archer Daniels Midland, a global food processing and commodities trading group headquartered in Chicago.

He has also held board seats at Milestone Merchant Partners, LLC, a merchant bank; Milestone International Asset Management; high-tech and next generation companies such as Inaura Inc., Ample Communications and Realm Systems; Blackstreet Capital Management; and Mount Sinai Hospital. Mimran has also produced a number of Hollywood movies, including Stone, starring Robert DeNiro and Edward Norton; Henry’s Crime, with Keanu Reeves and James Caan; and Pawn Shop Chronicles, featuring Paul Walker and Elijah Wood.

Mimran’s grandfather and founder of the family business, Jacques, was born to a modest family in Algeria. “After building his first fortune, which was confiscated during the war, he was the head of several flour mills in Morocco, before realizing his ambition to set up large industrial mills in the growing urban centres of sub-Saharan Africa.” In 1946, he created Les Grands Moulins de Dakar, and in 1963, Les Grands Moulins de Abidjan. (Today Les Grands Moulins de Abidjan is the largest flour producer in the Côte d’Ivoire, according to figures from Bloomberg.) In the early 1970s, Mimran’s founder developed a sugarcane estate in northern Senegal, and created Compagnie Sucrière Sénégalaise, a major producer and exporter of sugar.

Explaining his latest investment in Teranga Gold, Mimran said in a press release that he was impressed by the company’s “track record of operating and financial discipline, its high-calibre management team and its position as the only large-scale commercial gold producer in Senegal.”

He also said he looked forward to working with the company “to execute on a strong platform of sustainable cash flow generation, and achieving the company’s vision of becoming a pre-eminent, mid-tier gold producer in Senegal and Greater West Africa by leveraging its asset base, people, operating experience and social licence.”

Teranga’s Sabodala mine is situated within the West African Birimian gold belt in a part of Senegal that has only recently been opened to mining and mineral exploration.

The mine is made up of six open-pittable targets, three of which have been developed and are producing, with the fourth scheduled to move into production in the first quarter of 2016, the fifth in 2017 and the sixth in 2019.

The remaining mine life based on current reserves is 11 years, but Young says that could be extended to between 12 and 15 years, with production close to 150,000 oz. gold a year during that time.

The company’s production guidance for 2015 is between 200,000 and 215,000 oz., at cash costs per oz. of US$650 to US$700 per oz., and all-in-sustaining costs of US$900 to US$975 per oz.

As of December 2014, measured and indicated resources stand at 141.8 million tonnes grading 1.33 grams gold per tonne for 6.05 million contained oz. gold, and inferred resources measuring 71.3 million tonnes averaging 1.03 grams gold for 2.37 million contained oz. gold.

Young notes that Senegal offers tax holidays for the first seven years once a mining licence is granted. (Teranga has just exited its tax-holiday period.) Tax rates are 25% and royalties are 5%.

“You get a stability agreement over the life of the mine — including licence renewals — it is a mining friendly jurisdiction, the current president is a geologist and it has a good geology school,” Young says. “We only have a couple of expats on the geology side—the majority of the team is Senegalese, and mining is one of the six pillars of the economy.”

Commenting on Mimran’s purchase of 39.2 million shares of Teranga at 58¢ per share, analysts at Macquarie Research noted that “Mimran is a someone in Senegal,” and that while the company “didn’t need the extra cash, it will allow them to advance the mill expansion and escalate reserve definition on the Niakafiri deposit, and resume exploration without taxing the balance sheet.”

“We didn’t expect this, given the US$38.4-million cash balance in the till, but when a long-term investor with deep pockets came knocking at their door and was willing to come in at market, Teranga elected to bolster their cash balance by issuing equity.”

Maquarie Research has a 12-month target price on the stock of 90¢ per share. At press time Teranga traded at 61¢.