TARVA as an investor and manager
TARVA’s belief is the best way to influence positive investment and operational outcomes is to appropriately align with and have control of management. Accordingly, one of our over-arching principles is to seek minimum 51% equity positions and to manage the Investment Subco through a Manageco structure.
The Manageco will rigorously control review, assessment, acquisitions, and operations management services of the Subco. A centralized structure of management that reports to the Holdco will allow economies in management oversight and standardization of best practices.
In addition, TARVA recommend having both ownership and management interests in the Subco, which will align the profit motivation with the other essential co-investors.
TARVA will act as a paid consultant-advisor to “valued counter-parties” who wish to receive expert advice and opinion on opportunities or troubled assets and investments. However, TARVA views this more as an opportunity to leverage into investment opportunities than as a business in itself. TARVA will not gear-up heavily to pursue this line of business but will rely on the owners to do the high level consulting.
TARVA will form early views on “holding windows”, value add strategies, opportunities to generate non-dividend returns to Subco shareholders, and the potential to IPO a collection of assets which would be attractive for that purpose.
In addition TARVA has the knowledge, experience, networks and access to investors to put together a Holdco and investment structure to support the above strategic approach.
TARVA as a consultant and advisor
We proudly support
Successful investing in mining requires discipline and a strong focus on managing risk and reward. These words are easily spoken by many promoters, but many fail in their execution. One gains sustainable reward by
investing in high quality assets,
targeting troubled or undervalued opportunities,
appropriately structuring transactions and
ensuring that the portfolio companies are proactively managed to capture the latent value.
High quality assets are long life, high grade, low impurity, benchmarkable resources with low cost structures delivered to customers. These assets survive the difficult markets and are cash generators when commodity prices are high.
Identifying latent value in opportunities requires both a strong technical mindset and operational knowledge and experience. Knowing how difficult it is to unlock that value helps with proper valuations and guidance to the team which will assume management of the asset.
It is important to structure the entry transactions to enhance upside (e.g. warrants) and protect downsides. Equally important is the ability to control the operational management of the asset.
Ensuring latent value is captured and inherent value not wasted, emphasizes the need for the right strategies and partnerships to be in place for each asset. Ensuring excellence in resource optimization, mining, processing and logistics and management means having the right leaders and partnerships in place. These partners should include
capable investors who can follow their money,
a global trading house who can ensure reliable, low cost logistics and internationally indexed prices
contract operators and process plant designers/suppliers who want to have “skin in the game”
Local partners are also important and desirable, however one needs to be very clear of the expectations of the partners and the dangers around governance. Competence, financial capability and strong ethics are highly desirable in a local partner. Establishing excellent, transparent governance practices will lessen the prospect of having to manage difficult situations in the future.
Due Diligence (DD) is critical
Competent DD is a KSF and will influence negotiation strategies and investment decisions. The key aspects are
Desktop studies coupled with site visits. These need to be thorough and focus on geological, metallurgical, environmental, developmental, operational, logistics and marketing, OPEX and CAPEX
Political risk reviews – covering jurisdictional (local and country level) and regulatory risk
Transactional risk assessments – covering legal, corporate, partner assessments and financial Due Diligence
PE funds in mining are complicated
TARVA is not an advocate of a typical PE fund structure for building a portfolio of mining investments. This is due to the narrowness of strategies required by LP investors and the “high return – low risk” promise which is requisite of the GP hopefuls. In addition, mandated exit strategies, within short time frames do not easily align to the realities of the mining industry which is characterized by cyclical pricing and highly volatile market sentiment on the bourses.
Tarva advocate deliberately structuring asset investment opportunities which will yield early cash flows, which leverage off-balance sheet financing and focus on long term realization of the value of the resource. This aligns with sustainable best practice protocols in the industry and is generally well- regarded by the authorities in the jurisdictions in which you own and operate.