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from the smh

Private equity goes digging for gold in the West

Jamie Freed
June 11, 2007

IT MAY not be as high profile as the Consolidated Minerals deal but Crescent Gold has sealed what is believed to be the first partial private equity takeover of a mining company.

On Friday Crescent's shareholders overwhelmingly approved a proposal for Deutsche Bank's London branch to take a 55 per cent stake in the goldminer in return for providing a $122 million cash injection.

"For us, it's kind of a marriage between very, very big brother and very small brother," Crescent managing director Andrew Haythorpe said. "Very big brother has a large balance sheet and we have the operational skills."

Just before the deal was announced in March, Crescent poured its first gold from its low-grade, 90,000 ounce a year Laverton project in Western Australia.

Mr Haythorpe said his company had not been searching for a partner with deep pockets. But after Deutsche's originally strategy of taking a majority stake in a one million ounce-plus gold producer did not work out, the bank turned to Crescent, since it had an old relationship with a board member.

"The private equity chaps were very keen to get a hold of gold," Mr Haythorpe said. "I think it's fair to say … they're very optimistic on the gold price."

But, given bankers do not know much about running mining companies - and a listed vehicle provides the opportunity for scrip deals - it made sense for them to take a majority stake rather than buy the company outright.

"That is something we're starting to see a bit more of," a resources analyst said. "There are probably going to be more partial than full-blown [private equity] takeovers. It's such a high-risk industry, there needs to be an ability to get in and get out."

Crescent plans to use its newfound funds to purchase one or two goldmines. It recently looked at LionOre Mining's Thunderbox mine and is also believed to have considered a bid for Barrick Gold's Paddington assets last year.

Although neither deal worked out, Mr Haythorpe said there were a number of other WA gold assets up for sale.

He added Crescent would also consider deals elsewhere in Australia or overseas if the risk-reward opportunity was right. "We're looking at a number of opportunities which have been brought to our attention," he said.