[miningmx.com] — MAYFAIR Mining SA, a gem dealing company that wants to raise R20m to shift into mining activities, has released a business plan that’s bound to raise a few eyebrows in the diamond industry.
The group’s Business Plan to potential investors values the company at over R600m despite the fact that no audited financial statements are presented to support such an astounding claim.
At this point Mayfair does not seem to own any actual mining concessions – although the Business Plan does conveniently list a handful of areas the company would target if it had access to the necessary capital.
What the business plan does show, however, is a clumsily worded “Letter of Intend” (sic) from Harambee Investments – dated mid-2006 – offering to purchase Mayfair for $85m (about R600m at the time).
At a value of R600m, Mayfair – which wants to list offshore and on the JSE – would be worth more than JSE listed counters like BRC DiamondCore and Kimberley Consolidated Mines.
Trans Hex, which is a well-established diamond mining group, currently holds a market value of R900m.
This seems to indicate the value accorded to Mayfair, which intends raising R20m from investors, could be just a tad generous.
Mayfair’s website shows that Mayfair Mining was founded in June 2000 by Colin Stein and Johan Kruger as a rough diamonds dealership for the European and local market.
Now Mayfair wants to transform into a diamond Mining and exploration company that will “seek out potential new concessions and to put them in production”.
And the rationale for the operational switch? “As a result of shortages of rough diamonds and the high prices attached thereto, the directors of Mayfair Mining decided to rather mine diamonds themselves.”
Mayfair claims that through many years of research and negotiation, Mayfair Mining has been able to obtain ceded rights for certain mines to prospect and to wash mine debris.
The R20m loan raised from investors (offering an extravagant monthly return of 3%) will be used to finance plant and equipment, provide working capital and secure real estate.
Most observers in the mining industry will know that R20m does not go very far in a fledgling mining operation – even if the self-proclaimed value of the venture is north of R600m.
But Mayfair directors predict their ambitious venture has the potential to yield a projected $75m to $100m – given “some of the offers we have already received”.
Perhaps a reality check would be in order, because such a yield would amount to more than the annual profits of all the JSE’s diamond mining listings.
Although mining industry sources are not familiar with the company, the Business Plan states boldly that Mayfair Mining has played and is continually playing a leading role in the market.
“A couple of new competitors have come into the market but no one company has considered the opportunities nor do they have the contacts with current and prospective overseas investors to pose any major threat.”
The competitive advantage looks woefully cliched. “Mayfair mining is in a niche market in that they are acquiring concessions for mines too large and expensive to mine by the individual landowner, but too small to be considered by the larger mining entities”.
Mayfair’s investment manager Francois Ellis last week initially declined requests for further detail on the company – claiming all relevant detail was in the Business Plan.
But what could not be located in the Business Plan was recent audited financial statements or any vestige of an operational update.
Results for the year to end February 2005 were attached to the business plan. These showed no income to cover expenses of R1.9m and total assets of less than R50,000.
The company in financial 2005 was sustained by shareholder loans of R4m from Stein and Kruger.
Without access to subsequent financial statements it is impossible to gauge whether Mayfair is an entity of any substance or just a shell company with big dreams.
Ellis later advised that Mayfair only recently started looking for finance from investors “in order to finalise certain options pertaining diamond mines”.
He indicated that Mayfair was in the process of finalising a sale to an overseas consortium for 49% of the company.
We’d very much like to see what kind money this consortium chucks into the venture.
