THE LEADER VOLUME 16 • NUMBER 11 / 12
Tech savvy mining deals
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Private equity firms might not be the most obvious port of call for companies in need of the technical skillsets to transition ‘ projects ’ to ‘ mines ’, but , in recent years , Appian Capital Advisory LLP has shown the industry that it has all the credentials to help with this transition . The firm , headquartered in London but calling on expertise from across the globe , has just completed divestments of the Santa Rita nickel mine and the Serrote copper mine , both in Brazil .
Sibanye-Stillwater , the purchaser , agreed to pay Appian $ 1 billion , plus a 5 % net smelter return ( NSR ) royalty over potential future underground production at Santa Rita , for the assets , with the private equity firm , in the process , pocketing a pretty profit . In 2018 , Appian acquired Atlantic Nickel ( owner of Santa Rita ) out of bankruptcy for $ 68 million and Mineração Vale Verde , the owner of Serrote , for $ 40 million .
It reoriented the former large-scale open-pit mine into a much more conservative – and profitable – mine able to produce around 20,000-25,000 t / y of contained nickel sulphide equivalent . It also carried out extensive drilling to showcase its underground potential , prolonging its mine life .
The plans at Serrote , meanwhile , were re-evaluated in a DFS . Having completed project construction and commissioning ahead of schedule and under budget , the mine is now ramping up to nameplate capacity of 20,000 t / y of copper equivalent .
These two divestments represent the fourth and fifth portfolio sales the company completed this year . The others included the sale of its 13.2 % interest in West Africa-focused gold company Roxgold to Fortuna Silver Mines , the sale of its 0.28 % NSR royalty over the large-scale Caserones copper mine in Chile and the repayment of a royalty Appian held over Peak Resources ’ Ngualla rare earth project in Tanzania .
The diversity of these asset exits is indicative of how well-versed mining-focused Appian is in the sector ’ s ‘ hot commodities ’, but there is more to appreciate here than purely financial gains and well-timed acquisitions and divestments .
“ People know that not all money is created equal ,” Michael W Scherb , Founder and CEO of Appian , told IM . “ We have a team that is able to solve specific operational challenges – we can call on specialists to solve problems on the process flowsheet side , for instance – while providing financial advice to avoid expensive streams and set assets up for profitability .”
Scherb ’ s words are backed up by a solid track record : seven of nine investments it has made have resulted in mine builds . Its divestments have also provided healthy returns . The company has been able to do this by recruiting industry specialists – mining and finance – and educating them on the facets they need to succeed in both the private equity and mining world .
“ People that join Appian need to be multi-faceted ,” Scherb said . “ We get mining folks to think like investors and vice versa ,” he said . This has seen them build a project review team populated with former consultants and an operations team full of mine personnel with operational experience . “ We then get all personnel to cross-train across these teams to avoid any siloed disciplines .”
The company carried out a six-month due diligence process on Santa Rita , which led to the development of a more defensive and low-cost mine plan able to see the asset through nickel price peaks and troughs – in stark contrast to the plan former operator Mirabela Nickel had for the asset .
Among the operating changes implemented were the use of a smaller , locally procured equipment fleet and the use of shorter benches and tighter blasting patterns . This resulted in better grade and fragmentation control , improving the feed to the crusher . It also defined a significant underground resource base at the mine .
Such moves were based on exploiting the nickel sulphides at Santa Rita . This reoriented focus aligned with the industry preference for nickel tied to the battery materials space , which eventually paid off with the amount of interest in the asset .
This blend of technical and financial expertise has served the company – and any company it has an interest in – well . Backed by a long-term investment philosophy where its funds are 12 years in duration , the company can make moves aligned with the realities and timelines associated with turning assets into mines .
The next asset on the Appian books likely to move into construction-ready territory is Kalbar Operations ’ Fingerboards mineral sands project , which focuses on the Glenaladale deposit in Victoria , Australia . Scherb said this project will be “ build-ready ” very soon , explaining that it is currently going through the permitting stage .
The project has the potential to be one of the world ’ s major producers of zircon , ilmenite , rutile and rare earths , and Kalbar is proposing an investment of over A $ 200 million ($ 148 million ) in the development of a project able to produce around 575,000 t / y of heavy mineral concentrate over 15-20 years .
Scherb said Appian is keen to further pursue commodities associated with the electrification of industry , but he is aware of the premiums that may come with these deals . “ A lot of money has flooded into the battery metals ,” he said . “ We can be patient and are starting to look earlier stage in some investments .” Earlier stage still has the potential to be producing in four- or five-year ’ s time , he clarified .
What ’ s clear is that the Appian team is gaining widespread recognition , with Scherb saying larger mining companies are starting to approach them with proposals that would see Appian gain operational control of assets , realising the firm has the right blend of “ operational skill ” and “ value principles ” to succeed .
With plans to make one-to-three investments per year – along with the same number of exits – and expectations of committing its latest $ 775 million fund within the next two quarters , expect to hear more from Appian into 2022 .
Daniel Gleeson Editor daniel @ im-mining . com
NOVEMBER / DECEMBER 2021 | International Mining 3