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Lonrho comes back to life
David McKay
Posted: Sun, 20 Aug 2006
[miningmx.com] -- IT will be interesting to see if investors take a long-term shine to Lonrho Africa, now under the management of straight-talking Aussie David Lenigas. Thick set, and unblinking, Lenigas expresses an interest in widening the company’s current resources and hotel bent to include agriculture and infrastructure.
So far, investors like the story. Lenigas says that around 300m shares in Lonrho Africa have turned over since February. Its price nearly doubled over the same period and is currently trading at just under £40/share.
About 90% of shareholders are institutions. Blakeney Management owns 30%; Goldman Sachs and JP Morgan Fleming also have shares. The name change to Lonrho Africa only thinly masks the fact that this is the old Lonrho shaken from its slumber. In fact, many shareholders were original Lonrho investors. “I have more lords and kings for shareholders
than you can poke a stick at,” says Lenigas.
The idea they’ve bought is that Lenigas can build a share that represents all that’s sexy about new Africa business. While fund managers like focus, Lenigas’s idea is to spread risk through diversity. So in addition to more resources acquisitions Lonrho Africa wants to add, for instance, to its US$2m Luba Freeport investment in Equatorial Guinea. Investments in agriculture have not yet been touched. But they will, says Lenigas.
Lonrho Africa was formerly Tiny Rowland’s Lonrho, the firm that former British prime minister Edward Heath called “the unacceptable face of capitalism”. And while Rowland was known for being calculated – not necessarily in the best sense – Lenigas speaks in the newfangled language of social upliftment. It’s not lost on anybody that playing the developmental card in Africa is good business, especially as the British government has thrown itself behind the continent’s economic
recovery.
For example, commenting on building Lonrho Africa’s infrastructural investments, Lenigas says: “We can make Luba bigger quicker. And we think we can do it elsewhere. The best way to invest in Africa is through infrastructure – in roads and ports. Donor money just gets nicked.”
On the mining side, Lonrho Africa has spent £1,m buying a 17% stake in Nare Diamonds, a company led by South African Charles Mostert. A listing on London’s Alternative Investment Market is expected later this year.
Lenigas also sanctioned a £5m investment in 10% of Brinkley Mining, a speculative uranium play digging in SA’s semi-arid Karoo. “The potential for uranium in the Karoo is outstanding,” Lenigas says. Assuming a uranium price of $39,0/lb and a molybdenum price of $21/lb, the current licensed area has an estimated in ground value of up to $4,bn. “We have a big tiger by the tail,” says Lenigas. “Africa is undercapitalised and we have the money.”
The
appointment of Gerard Holden, the former MD and global head of mining and metals at Barclays Capital, to Lonrho’s board as joint chairman is also meant to oil the wheels of finance. Holden will consult to Barclays and Barclays owns Absa, SA’s largest bank, says Lenigas.
Commenting on whether there are plans to install a framed portrait of the late Rowland in his offices, currently being refurbished with new pictures, Lenigas says bluntly: “Rowland is dead. I’m alive.”
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