“There are three ways to make money in commodities”, says Stan Bharti. “In ETFs, in the majors, and in the juniors. And juniors is where the leverage is.”
Stan should know. In 1995 he started Forbes & Manhattan, the company he still chairs, with a view to turning it into the next Barrick.
But he quickly realised that the real opportunity wasn’t at the top end of the market, it was lower down.
And armed with that insight, in the two decades that followed he was able to build Forbes & Manhattan into a multi-billion dollar merchant bank that boasts offices and operations round the world and a portfolio that contains more than 30 junior companies.
Not all are in mining. Some are in agriculture, and there’s also significant exposure to oil and gas and shale oil through companies like Brookwater Ventures, Irati Oil, and Stetson Oil and Gas.
But mining remains at the heart of the Forbes & Manhattan offering and is an area that’s still very much in growth.
“We are a mining finance house”, says Stan when he strides into an office in the heart of the City for an interview with Minesite. “We are builders.”
And he has the track record to prove it. Among the more notable of Forbes & Manhattan’s successes was the development of Consolidated Thompson, an iron ore miner in Quebec, from a US$1 million company at the time of Forbes’ first involvement, into a US$4.9 billion company at the time of its eventual sale to Cliffs Natural Resources.
That represents a return of 7,700 per cent in little more than five years.
Another was the recent sale of Avion to Endeavour. Avion’s gold assets in Mali were originally acquired by Forbes & Manhattan from Nevsun for US$20 million. When Endeavour finally took out Avion a couple of months ago the total sale price was US$390 million.
There have been other successful forays into coal and nickel mining, and serious exploration success in silver, zinc, potash, phosphate, vanadium, tungsten, lithium and others.
Most of the activity to date however, has focussed on the Americas. Forbes & Manhattan has some presence in Africa and the Far East, but is keen for more. Which is why Stan is casting his gaze out ever wider and is beginning to build a serious presence in London, which he regards as a good jumping off place for both of those markets.
Black Iron, which we featured on Minesite last month is a case in point. It’s sitting on a very attractive iron ore asset in the Ukraine, but is currently heavily discounted on the Canadian markets on account of political risk. “It is Canada’s only Ukrainian company”, says Stan.
The thinking is that the company will get a more sympathetic hearing and more support in London, which is more familiar with Ukrainian companies, and an Aim listing is duly planned, once markets turn slightly more friendly. Silver Bear, a company with a significant silver asset in the Far East of Russia is another candidate.
And then there’s Africa. “In the last ten years the biggest focus for us has been Brazil”, says Stan. “In the next ten years the biggest opportunities will be in Africa. South America is fully priced.”
Forbes Coal is the trailblazer in this regard, sitting as it does on coal assets in South Africa. But, says Stan, Forbes & Manhattan is also moving into Zimbabwe, and making moves into West Africa too.
Expect more news on that in due course, and for Stan and his London-based representative Robin Birchall to become ever more active in the capital markets here. Robin was a former Vice President Investment amd Corporate Banking at BMO’s London office, so he knows his way around.
Already the two of them are lining up brokers for potential deals, but they are keen to cast the net as widely as possible. Hence Stan’s visit, and hence a concerted effort to promote the Forbes name in London, which included a large and well-attended booth at this year’s Mines & Money event.
The timing of any UK listings of companies in the Forbes portfolio will in part depend on market conditions, and although optimism is hard to find at the moment, there are plenty of people around who note that London is far more open to business than Canada at the moment.
That dynamic may be another reason for Stan’s new interest in London as a springboard, but there’s no denying that London’s well known penchant for and expertise in African projects makes it the ideal centre for the next leg of Forbes’ growth strategy.
As for the market, Stan is cautiously optimistic. It’s possible, he says, that we may have already seen the first uptick. In particular, he notes that housing is booming in the US.
“I think the second quarter could be very good”, he says. “Historically January to March has always been very good. And there’s the Chinese New Year in February. We’re predicting for gold to go much higher, although base metals are well priced. Among the base metals the one I like the most is zinc. The opportunities are phenomenal. We’re aggressively looking at assets and we’re getting assets cheap.”
it seems pretty certain we’ll be hearing plenty more from Stan and from Forbes & Manhattan as 2013 gets underway in earnest.