ADANSONIA PE OPPORTUNITIES (“APEO”) SUCCESSFULLY LAUNCHED
APEO was launched successfully in the third quarter of 2016 as a Mauritian registered permanent capital investment vehicle that co-invests with Adansonia group clients and associates. We are delighted to announce that Brett Childs, a well-known figure in private equity circles in Mauritius, joined the APEO board and investment committee in October 2016.
APEO’s investment objective is to generate above average returns from the investment opportunities the directors introduce through their involvement with various investment structures and/or corporate networks, mainly in Africa. APEO evaluates investment decisions with the aim to deliver a total US$ portfolio return of at least 12,5% per annum above US inflation.
APEO had made two investments by 30 September 2016 (its first quarterly reporting date), being:
Novare Africa Property Fund II
Novare II is a USD350 million property development fund. Novare II launched its first completed shopping mall in Lekki, Lagos during August 2016, the opening of which was attended by Brendon Jones and Rudolf Pretorius. Notwithstanding the dire economic circumstances in Nigeria, the mall is on plan to be 85% occupied by December 2016, once shop fitting for some of the smaller tenants have been completed. In addition, a number of new shopping malls are currently under various phases of construction in Abuja, Lusaka, and Maputo.
Novare II’s business model is to develop retail and commercial developments in major African cities with very low shopping mall penetration on the back of successful anchor tenants such as Shoprite and Game. These major cities benefit from higher economic growth than the countries they are situated in because of the strong trend of urbanisation. To optimize eventual rental yields, Novare II’s manager retains a high management presence in country while they look for suitable land to buy, rezone the land, project manage the building process, and to retain their own leasing and marketing managers.
We expect strong performance from Novare II after shopping malls become operational when the valuation methodology changes from cost to discounted cash flow in terms of IFRS. The current shortage of foreign currency in most of the countries in which Novare II is active is not currently of great concern as Novare II will be either deploying cash to build, or repay debt held against the shopping centres in the medium term. It is also of interest that there is currently strong demand from foreign investors to acquire completed and well run shopping malls in these countries at yields well below Novare II’s estimated rental yields against building cost.
Alphamin Resources Corp.
Alphamin is a Toronto listed tin mining company is gearing up to build a USD 135 million tin mine in 2017 at Bisie, North Kivu Province, in the DRC. The Bisie tin deposit is one of the largest and most significant tin deposits in the world. Alphamin is making good progress in raising the debt and equity components of the capital required for the formal mine construction planned to commence during 2017. On the assumption that construction activities will commence in Q1 2017, first production of tin in concentrate is anticipated in Q4 2018. Steady state production is anticipated by 2019.
Future tin supply is globally uncertain as tin inventories are running low and economically viable tin reserves are being depleted. The International Tin Research Institute (ITRI) has forecast that there is likely to be a global shortfall of tin commencing in 2018. There are a limited number of active industrial scale tin mines outside of China and Indonesia and the majority of other new projects face significant technical, financing and other challenges. In addition, obtaining the required permits to build new mines remain complex. As a result, tin mining companies with verifiable conflict free resource credentials should become of increasing interest to the owners of consumer brands and their manufacturers, who use tin in their products (laptops, mobile phones and cars). Consumer companies will need to secure future supply.
The cost to bring Alphamin into production is forecast at USD 135 million. The project has a forecast payback of around two years. ITRI calculates that Alphamin will be in the lowest 10% of “all in cost” global tin producers at 2020 costing.
In the current quarter, APEO is making an investment into a fast growing pharmaceutical manufacturing business in Ethiopia which was initially funded by a private equity group with a good track record in country. We are also in the early stage of exploring a number of investment opportunities in Tanzania, Botswana, Namibia, and Mauritius. Adansonia’s initial capital was raised from its directors and a number of close associates – we intend to issue more shares to interested investors as and when suitable investment opportunities present themselves.