MagIndustries: Difference between revisions
Muzzleflash (talk | contribs) →Hunt for a strategic buyer: debt financing |
Muzzleflash (talk | contribs) →Hunt for a strategic buyer: debt financing |
||
| Line 36: | Line 36: | ||
===Hunt for a strategic buyer=== |
===Hunt for a strategic buyer=== |
||
Although it had a fair wind with high potash prices and construction work was already in an advanced stage for Mengo potash project, the company had much difficulty in finding debt financing or the strategic partner necessary to invest in the estimated total of US$1.4 billion including financing necessary to develop the mine.<ref name="financialpost"/><ref name="raises">{{cite news |title=MagIndustries raises $26M for Kouilou |url=http://www.northernminer.com/news/magindustries-raises-26m-for-kouilou/1000328322/ |work=Northern Miner |date=June 2, 2009}}</ref> In 2009 it |
Although it had a fair wind with high potash prices and construction work was already in an advanced stage for Mengo potash project, the company had much difficulty in finding debt financing or the strategic partner necessary to invest in the estimated total of US$1.4 billion including financing costs necessary to develop the mine.<ref name="financialpost"/><ref name="raises">{{cite news |title=MagIndustries raises $26M for Kouilou |url=http://www.northernminer.com/news/magindustries-raises-26m-for-kouilou/1000328322/ |work=Northern Miner |date=June 2, 2009}}</ref> In June 2009, it raised $26 million by issuing new shares to tide over the continuation of Phase 1 development as it waited to close debt financing.<ref name="raises"/> There were also talks in 2009 with two Chinese state owned enterprises [[Sinohydro]] and [[Complant]] that were seen as strategic partners because of deep pockets but those talks fell through. The company announced an investment in late 2010 with investment company TSC Capital but the proposed deal was terminated.<ref name="tsc">{{cite news |title=MagIndustries shares plummet after TSC Capital cancels investment |url=http://www.miningcapital.com/companies/news/76231/magindustries-shares-plummet-after-tsc-capital-cancels-investment-12237.html |work=Mining Capital |date=February 11, 2011}}</ref> In 2011, a Chinese private company, Evergreen Industries Group, purchased 76% of the shares of the company for $115 million.<ref name="financialpost"/> After the acquisition, the company was kept listed on the [[Toronto Stock Exchange]]. An executive of the company in public remarks found that Western investors were not familiar with the [[Republic of Congo]] and put off by risks of the location and so avoided investing in the company.<ref name="financialpost"/> |
||
===Bribery investigation and collapse=== |
===Bribery investigation and collapse=== |
||
Revision as of 20:51, 1 August 2018
| Company type | Publicly traded |
|---|---|
| Industry | Mining |
| Founded | 1997 |
| Headquarters | Toronto, Canada |
| Website | None |
MagIndustries is a Canadian potash mining company operating in the Republic of Congo, majority owned by a Chinese shareholder.
History
Establishment
The company was established in 1997 as Congo Minerals Inc. and set out to be a low-cost producer of magnesium from the Republic of Congo. In May 1997 it concluded an exploration research agreement with the Congolese Ministry of Mines in the Kouilou area, which included the Holle Mine, a former potash producing mine. On the corporate side, the newly established private company converted itself into a publicly traded company by conducting a reverse takeover. In October 1997 the company emerged as the Magnesium Alloy Corporation through amalgamation with Clavos Enterprises, a largely inactive publicly traded company. The executive team at this stage included Chairman and President George Creber, Executive Vice-President William Burton and Vice-President Kim Barkan. The board of directors included the three executives and Stephen Dattels and Patrick Mitchell.[1]
Diversification
The company became engaged in business lines outside of magnesium mining and changed its name in February 2005 to MagIndustries from Magnesium Alloy Corporation to reflect its interests in "multiple businesses and products".[2] Besides the main asset under the subsidiary MagMining for the development of the potash/magnesium mine, varied business interests under separate divisions included the following: MagEnergy (refurbishment of the Inga II dam in the the DRC); MagForestry (a 68,000 hectare eucalyptus plantation located mostly on the surface of areas where the company held mineral rights); MagMinerals (a plant plant near Pointe-Noire); and MagMetals (magnesium smelter next to the potash plant). The MagForestry division had been formed through transactions made in 2005-6 resulting in the complete acquisition of the plantation.[3]
Concentrating on potash
By the late 2000s, potash enjoyed the limelight as the price of the mineral and key ingredient in chemical fertilizer skyrocketed. Around 2009, potash sold for record prices of US$700 to US$900 a tonne. The primary business of MagIndustries became potash and magnesium, the namesake of the company, became a secondary consideration.[4] In 2008, the company announced it was shelving the magnesium metal plant to concentrate on advancing the Mengo potash project (formerly called Kouilou).[5][6]
The Mengo potash project moved along rapidly in 2007-2009 with favorable developments in financing, fuel supply, marketing, tax, permitting, design and pre-construction. The feasibility study was completed in February 2008. The company received a mining permit from the Congolese government in March 2008. In April 2008 it closed second tranche of a private placement that raised $100 million for the development of the Mengo potash project.[7] Sometime before the commencement of project development work the company was able to negotiate a tax holiday of 10 years in the Republic of Congo, after which the corporate tax rate would rise to 30%.[8] These positive developments were reflected in its share price with the company becoming in 2008 the third largest mining company by capitalization on the Toronto Stock Exchange Venture Exchange.[9] In June 2008, it received US$70 million from Ameropa Holding, the offtaker of the potash and major shareholder in the company. The project required a huge volume of natural gas. The company signed a natural gas supply agreement with Eni to meet its requirements.[10]
Hunt for a strategic buyer
Although it had a fair wind with high potash prices and construction work was already in an advanced stage for Mengo potash project, the company had much difficulty in finding debt financing or the strategic partner necessary to invest in the estimated total of US$1.4 billion including financing costs necessary to develop the mine.[5][11] In June 2009, it raised $26 million by issuing new shares to tide over the continuation of Phase 1 development as it waited to close debt financing.[11] There were also talks in 2009 with two Chinese state owned enterprises Sinohydro and Complant that were seen as strategic partners because of deep pockets but those talks fell through. The company announced an investment in late 2010 with investment company TSC Capital but the proposed deal was terminated.[12] In 2011, a Chinese private company, Evergreen Industries Group, purchased 76% of the shares of the company for $115 million.[5] After the acquisition, the company was kept listed on the Toronto Stock Exchange. An executive of the company in public remarks found that Western investors were not familiar with the Republic of Congo and put off by risks of the location and so avoided investing in the company.[5]
Bribery investigation and collapse
The company was investigated by the Royal Canadian Mounted Police for making corrupt payments to Congolese officials. Ultimately, no charges were laid by the RCMP against the company or individuals in connection to the Congolese bribery allegations.[13]
The RCMP raided the Toronto office of the company in January 2015. The company began an independent investigation after the raid and in June 2015 the internal investigation disclosed the allegations that were made against the company in the Information to Obtain Search Warrant authorizing the search of the company offices.[14] It was alleged in the warrant, but charges were never laid, that the company had made payments and given gifts to Congolese officials including cash payments, a house, furniture, 4x4 vehicles, and ornamental stone lions. The company was unable to fund a continuation of the internal investigation and the controlling shareholder Evergreen Holding Group refused to provide the funds. The corruption investigation and lack of funding sent the company into disarray. The company stopped filing financial reports and the stock ceased trading on the TSX. By June 2015, the board of directors involved in the corruption investigation resigned and the chief financial officer was removed.[15] The company was delisted from the Toronto Stock Exchange in August 2015.[16]
Operations
Over the course of the company's history it became engaged in or would shelve pursuit of several areas of business organized as separate divisions in the Republic of Congo and Democratic Republic of Congo.[3]
Potash mining
The prized asset of the company by the late 2000s became the Mengo potash project (formerly called Kouilou) in the Makola license area. The development of the Mengo potash project was developed under the MagMining, reaching an advanced stage in 2009 with the project team commencing the pre-construction and drilling activities. A total of US$100 million had been spent on the development of the mine by 2009.[10]
Potash plant
The processing side of the potash project was under the MagMinerals division. A potash plant was planned near Pointe-Noire that would eventually reach 600,000 tpy in capacity. The recovered brine solution would be processed at both the potash plant and the next door magnesium plant. It had been planned for construction of the US$723 million plant to begin in 2009 with production beginning 2011 and a second phase modular expansion in 2013.[10]
Magnesium production
Under the MagMetals division, a magnesium smelter had been planned with a capacity of 72,000 tpy magnesium smelter. Located next to the potash plant it would have drawn its feedstock from the company's potash mines.[3]
Hydroelectric dams
The MagEnergy division engaged in the rehabilitation of one of the eight Inga II turbines in the DRC. It was to receive 50% of the 164 MW restored capacity. Also, the division had the rights to the 250 MW Busanga hydroelectric site in the DRC's Katanga province.[10]
Eucalyptus plantation
The company's MagForestry oversaw its operational 68,000 hectare eucalyptus plantation over the surface of the Makola license area. The plantation was acquired over 2005-6 and by 2007 the company had invested $8 million in operations.[17] In 2009, the plantation employed 400 full time workers and 1,500 contractors.[10]
References
- ^ "Magnesium Alloy active in Republic of Congo". The Northern Miner. March 9, 1998.
- ^ "TSX Venture Exchange Approve Name Change to MagIndustries Corp". Market Wired. February 4, 2005.
- ^ a b c "MagForestry Division of MagIndustries Acquires 100% Control of Congo Eucalyptus Operation". Market Wired. August 10, 2006.
- ^ "MAGNESIUM IN THE FIRST QUARTER 2008" (PDF). Mineral Industry Surveys. USGS.
- ^ a b c d Koven, Peter (April 20, 2011). "MagIndustries taken over by China's Evergreen". Financial Post.
- ^ "Three junior potash picks". Mining Markets. December 10, 2010.
- ^ "MagMinerals Potash, a Subsidiary of MagIndustries, Closes Second Tranche of $100 Million Capital Raise". Market Wired. April 29, 2008.
- ^ "Scoping Study for the Dougou Carnallitite Deposit, Republic of Congo" (PDF). Kore Potash.
- ^ "junior mine*" (PDF). pwc.
- ^ a b c d e "Potash in the Republic of Congo". Mining Review Africa. May 6, 2009.
- ^ a b "MagIndustries raises $26M for Kouilou". Northern Miner. June 2, 2009.
- ^ "MagIndustries shares plummet after TSC Capital cancels investment". Mining Capital. February 11, 2011.
- ^ "MagIndustries Reports No Charges from RCMP to the Company or Individuals". News File. April 17, 2017.
- ^ "The MagIndustries Investigation: Another example of RCMP's investigation into CFPOA violations arising out of overseas corruption". Osler. June 18, 2015.
- ^ "MagIndustries Corp reveals evidence that subsidiaries allegedly paid major bribes in Republic of Congo". Financial Post. June 17, 2015.
- ^ "MagIndustries Corp. Announces Results of Delisting Review". Market Wired. July 20, 2015.
- ^ "Toronto-listed company advancing potash, magnesium, forestry projects in Republic of Congo". Mining Weekly. November 2, 2007.