* M&A activity picking up in Africa precious metals
* Randgold acquisition of Moto clear example of appetite
By Pav Jordan
TORONTO, Sept 22 Canadian miners are jostling
for position in gold-rich Africa, chasing capital to fund new
production as they wager gold prices will hold near-record
levels for years to come.
Gold is trading at over $1,000 an ounce, several times what
it was a decade ago, and miners, many of them Canadian, are
looking to cash in by bringing new production on as soon as
For many, that means mining in Africa, and brokerages are
fielding calls from companies eager to finance work on the
politically sensitive continent.
"If you want to go elephant hunting, you have to go to
elephant country," Mark Bristow, the chief executive of
London-based Randgold Resources (RRS.L), told investors in
Toronto, repeating a favorite refrain in lauding Africa's gold
Bristow is in the midst of a major bid to build his
company's presence in central Africa, where risks run high, but
potential rewards run higher.
Partnered with fellow African miner AngloGold Ashanti
(ANGJ.J)>, Randgold bid C$546 million ($510 million) in August
to buy Toronto-listed Moto Goldmines MGL.TO, whose key assets
are in the mineral-rich Democratic Republic of Congo, home to
massive gold assets, and lawless bandits.
Randgold's bid beat out an attempt by Canada's Red Back
Mining RBI.TO to acquire Moto.
"At that ($1,000/ounce) price point, a lot of mining assets
that are undeveloped become very profitable enterprises, and so
we have seen a very busy M&A market in precious metals
recently, and the best example of that is Randgold's
acquisition of Moto," said Dan Barclay, head of mergers and
acquisitions, Canada, for Bank of Montreal (BMO.TO).
He said the bank's investment banking arm, BMO Capital
Markets, has seen increased appetite for capital by companies
in African mining, especially in gold and precious metals.
Canada has one of the highest concentrations of mining
equity in the world, and many of its gold producers are
actively looking in Africa.
Earlier this year, Toronto-based Iamgold (IMG.TO) bought
junior miner Orezone to acquire its Essakane gold project in
Burkina Faso, and then issued C$345 million in stock to fund
construction of the project.
NO EASY TASK
But with much of the world still crawling out of recession,
financing is difficult even for gold producers.
To win investors' favor, a company needs to show its
mineral deposit is big enough and cheap enough, and has an
acceptable level of political risk -- three variables that
often conspire to eliminate some projects from the get go.
"When the watering hole shrinks, animals look at each other
differently," Kim Harris, chief executive at Canada's Midlands
Minerals (MEX.V), said of the availability of financing.
Harris, a Canadian born in Zimbabwe, knows all about
political risk after she and her company were driven out of
Zimbabwe amid civil strife at the end of the last decade.
These days she operates in Ghana and Tanzania, where gold
mining has attracted billions of investment dollars.
"Mining is no stranger to Africa," she said. "It is not new
to the Congo, or South Africa. It is certainly not new to
Ghana, where they have over 200 years of mining history."
Harris, who is seeking to raise $6 million to restart her
Ghana mine, also predicted a pick-up in mergers and
acquisitions among companies operating in Africa.
She said her company has been approached several times, and
Bristow said Randgold had also seen interest from buyers.
Bruce Shapiro, president of the MineAfrica organization
that promotes mine investment in Africa, said Africa is
becoming more attractive to investors as its nations slowly
become more transparent and democratic.
"But the obvious reason is that the resources in Africa are
underdeveloped and enormous," he said last week on the
sidelines of the MineAfrica investor event, which was
co-sponsored by the Canada-South Africa Chamber of Business.
Democratic Republic of Congo, home to some of Africa's most
promising gold deposits, is seen doubling growth next year,
helped in large part by a recovery in the mining sector, Budget
Minister Michel Lokola said last week.
The question is who will lead the charge.
"You know, the Canadians are always first in," said
(Additional reporting by Cameron French; editing by Janet