NAMF in crisis talks to save $120m fund

[miningmx.com] – NEW Africa Mining Fund (NAMF) is in talks to save its second exploration and development fund capitalised at about $120m.

Neil Gardyne, CEO of NAMF, said: “There are challenges for the fund, but we are in discussions and an announcement will be issued. It is not true that the plug has been pulled on the fund”.

It has been speculated this week that members of the fund’s backers were dissatisfied with the rate of investment by NAMF II and that capital allocation had been viewed as ‘inefficient’.

The fund’s backers include the World Bank’s International Finance Corporation, the Development Bank of Southern Africa, and the African Development Bank. BHP Billiton South Africa also provided capital to the fund.

Asked for his view on developments, NAMF’s Ross Gardiner said: “There are some changes”. He referred further inquiries to Gardyne.

The NAMF’s first fund, which deployed about $86m in venture capital projects in the mining exploration sector, was a success and included supporting Petmin’s Somkhele anthracite mine which recently completed its third expansion, and produces about 1.2 million tonnes/year of coal, mostly to the domestic market.

Gardyne said in 2012 that the NAMF II would focus on early stage mining projects in nearly all commodities in Africa except for uranium and diamonds. It typically targets an internal rate of return of about 26% taking up 30% to 40% of greenfields projects.

Given the speculative nature of the investment, there is a significant need for venture capital, especially in South Africa, but the country – and Africa in general – has proved a less than easy hunting ground.

In 2009, Gerard Kemp, chief investment officer of the $1.3bn Pamodzi Resources Fund 1, said the torpid state of the resources market was to blame for the lack of investment in new deals. The fund eventually wrapped up after launching in 2007 hoping to ride the wave of the commodity bull market.

Investment appetite has dropped in South Africa owing to regulatory uncertainty and inefficiencies such as the three years it takes on average for the country’s Department of Mineral Resources to permit new mining projects.