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Lonrho energy gambit worth a flutter Posted: Fri, 22 Sep 2006 [miningmx.com] -- NEW-LOOK investment company Lonrho Africa, once the domain of the legendary Tiny Rowland, is rustling up some interesting deal flow after casting off the last of its legacy businesses in tourism and transport. Admittedly, the newly assembled Lonrho portfolio is not the stuff for widows and orphans. However, new management (under CEO David Lenigas) has made a rather inspiring start to rebuilding the group into a specialist player in a number of continental niches. To date, the South African market has been slow to pick up on the changes at Lonrho, which may be doing itself a gross disservice by retaining its listing on the moribund venture capital board. With an increasing commodity focus at Lonrho it may be better to transfer the listing to the AltX, which is keen to enhance its reputation as a host for junior mining/exploration entities. But pundits plying the Alternative Investment Market (AIM) have shown some strong support for new-look Lonrho. Last month Lonrho announced two share placements: the first pitching 46 million shares at 28p with institutions and investors to raise £12.5m and the second placing 21 million shares with selected institutions at 28c to raise £5.7m. Initially, Lonrho kicked off in a rather low key fashion by taking a 10% stake in South Africa uranium player Brinkley Mining and a 17% stake in Charles Mostert’s Nare Diamonds as part of that company’s initial public offering (IPO). While Brinkley and Nare represented encouraging first steps in a strategy to re-establish Lonrho Africa on the African continent, the deal that has piqued investor interest is its investment in Luba Freeport in Equatorial Guinea. In May this year, Lonrho announced the acquisition of 63% of Luba Freeport for $2m, along with secured debt of around $11m. It’s not a huge deal, but in the shorter term it’s the most interesting project on Lohrho’s books. Luba has a growing reputation as a free port in the West Africa region serving as a logistics node for the vibrant oil and gas industries in the Gulf of Guinea. Lonrho Africa aims to maintain the overall development programme for the port’s facilities –whose clients include Amerada Hess, Mobil Equatorial Guinea, Baker Hughes, Marathon, LOTEG, Schlumberger, Nalco, SBM, ChevronTexaco, Devon Energy and Petronas. The Luba Freeport investment also appears to have some momentum already. Recently Lonrho Africa announced that Exxon-Mobil subsidiary Mobil Equatorial Guinea Inc (MEGI) and Luba Freeport had agreed to build a 60,000sq m logistics facility. This world-class facility will include warehousing and office space, marine hose storage, a pipe yard, inspection shed, washing bay and storage area. Construction is expected to be completed by mid-2007, when the MEGI contract will become effective for seven years but with an additional three one-year extension options. The value of the contract is more than $30m. MEGI’s relocation to Luba Freeport increases its level of commitment to it as a regional hub for their expanding operations. Lonrho’s Lenigas has already described the contract as a significant milestone in the ongoing transformation of Luba Freeport into a major regional hub for the oil and gas industry in the Gulf of Guinea. “We hope that MEGI’s relocation will have a multiplier effect and act as a catalyst for other leading oil and gas industry participants to review the location of their base of operations in West Africa.” Lonrho seems confident of further interest in Luba Freeport from oil and gas giants in the region, having already committed to expansionary longer-term plans – most notably the development of an additional 350m of quay. Indeed, the old adage that in a mining boom it’s better to invest in a supplier of mining equipment and services than a mining company may well apply to Lonrho’s investment in Luba Freeport.Free news alerts: click here to subscribe
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