As Amara’s chairman he’s only too aware of the funding constraints that are holding back gold developers these days.
Amara’s Yaoure gold project is big. At over seven million ounces, it’s one of the biggest in Africa. And it’s good too, with head grades running at 1.62 grams per tonne.
But it also needs US$344 mln to get built. And that’s the hard part.
“The story’s going very well,” says McGloin. “But one thing’s always concerned us and that is the state the market’s in. The concern was always that we would complete our work and find there was no one there at the end for us.”
Under that scenario the vultures would have started circling pretty quickly and Amara could well have found itself the target of rapacious bottom feeders seeking to dilute existing shareholders down almost to zero.
But McGloin is no stranger to capital markets and their ways. As long ago as 18 months Amara opened a data room and, as McGloin says, was “pretty passive” about who it allowed in.
Perseus came and went a couple of times and got thoroughly familiar with the assets.
Equally though, Amara knew it was going to have to put its best foot forward. Accordingly, an optimised pre-feasibility study was commissioned, the results of which were released at the end of February.
And towards the end of last year, at the Denver Gold Show in particular, potential suitors were put on notice that the offering was about to get serious.
And so it was that on 26th February Amara announced that Yaoure was capable of producing an average of just over 200,000 ounces of gold over a 15 year mine life, generating an internal rate of return in the process of 38%, assuming US$1,200 gold.
And just a couple of days later, on 29th February, the Perseus tie-in was announced.
Whether it amounts to a sale or a merger remains moot. On one scenario, which allows that Amara shareholders exercise all the options in Perseus that they will be allotted, Amara shareholders could end up with 44% of Perseus.
Be that as it may though, from here on in it will be Perseus’s show. Because the other element of the Perseus-Amara combination, aside from cash and growth, is skills. One thing Perseus knows how to do, as demonstrated by Edikan, is build mines. That’s a skill set that’s largely lacking in Amara, but which will be increasingly needed.
And so, although Amara shareholders may end up with up to 44% of the enlarged group, control will rest with Jeff Quartermaine, the Perseus CEO.
Amara’s shareholders appear largely to be reconciled to this. McGloin already carries in his pocket irrevocable undertakings in regard to 15% or 16% of the shareholders and undertakings from another 20% to support the deal.
“I’ve spoken to 50% of our shareholders,” he says. “They are all very supportive.”
Because the deal wipes out in a single stroke several long-standing criticisms that have been made in the market about Amara over the years.
“The criticism that Amara is a single asset company in a single jurisdiction goes,” he says. “The criticism that we haven’t got a team goes. The criticism that we haven’t got cash goes. And the criticism that we haven’t got the ability to raise debt goes.”
But what about the price?
There may be certain sensitivities that this transaction has been agreed at what amount to historically low levels, both on the part of Amara and on the part of Perseus. According to the official share exchange ratios, the deal values Amara at around £68 mln, or just over 16p per share.
But for McGloin that price is just a staging post. This is all about the upside of the combined group.
“This is a phenomenal story for the market at the moment,” he says. “Cash and cashflow come together with growth. It’s the perfect combination.”