News

November 20, 2008

Griffin Mining Goes Into The Lignite Business, And Still Has $70 Million Left Over For Other Deals

By Rob Davies

When the finance director of a mining company, yes one that is in production, says that his company has 26p a share in net cash and that the share price is 18p you can begin to get a sense of how dislocated the current market is. It was only just over a year ago that that Griffin Mining’s shares were trading at 110p and that it was able to raise money at that level for potential acquisitions. At the time there were a few rumbles from shareholders, but they stumped up. Including Citadel, the US hedge fund. It, like a number of its peers, has found life a little hard of late and was known to be looking to offload its holding of 79 million shares. Roger Goodwin, finance director of Griffin, said that the company had become aware of this as an overhang of stock, and was concerned that it might end up in unfriendly hands. So, to help Citadel out, it repurchased the stock at 76p. Add in a favourable turn on the exchange rate and Roger reckons Griffin made about US$40 million on the transaction. Minews thought it best not to ask the Americans for its opinion of that deal.

At the time Roger says the Griffin team thought it had pulled off a neat trick. However, no one had any idea the stock would plummet to 18p, a level way below the value of the US$70 million in net cash the company has on its balance sheet. With hindsight, Roger says the company should have waited. But being based in China, where Griffin’s Caijiaying mine was supplying the metaphorical “coal face” of the then booming global economy with zinc and lead concentrate, there could have been no...