Investing in Russian Gold Mining Companies

THIS POST WAS ORIGINALLY PUBLISHED AUGUST 02, 2007

Investing in Russian Gold Mining Companies

While there is a lot of materials on the Internet about Russian gold mining industry and investments in it, here I would like to present a mini-case of a Russian company that is mulling IPO later this year on LSE (LON:LSE) AIM or TSX (TSE:X). Of course, this is not big one, but shows a potential of investments that was actually well captured by Renaissance pre-IPO Fund that already made it. (BTW a nice news item was posted today at RBC Daily about the Fund).
Golden League Limited was founded in the summer of 2006 by the former CEO of Highland Gold Mining (SEA:HGM), for the purpose of exploration and development of gold deposits in Khabarovsk Region. The current management is former Highland Mining employees and among the shareholders is Flemings Family & Partners. The Company is currently developing the gold project, which consist of a 4.8 sq km gold deposit and the surrounding ore field (348.2 sq km), located 610 km east of Khabarovsk.

Renaissance pre-IPO Fund invested $5 mln and became the largest financial investor. The purchase price implies the company valuation of 4 x EV/EBITDA 2008
The current round of financing will be used to finalize the payment for the company, which acquired a new license ($1.5 mln) and is continuing exploration work on the edge of the old and new license plots. Another round of financing will be needed to continue the exploration of a new plot and to conduct a feasibility study for a factory. However, if the result of the reclassification is not sufficient to reach the target capitalization for the IPO, shareholders may choose to raise private funds and postpone the IPO for one more year.

The Company has identified a “market niche,” exploring quality, lesser-known deposits that are available for acquisition. Once acquired, the Company’s team has the experience necessary to plan and execute phased exploration programs designed to economically evaluate the full geological potential of each project

Source: Renaissance pre-IPO Fund