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Norman MacDonald | March 28, 2012

On the road – Africa: In search of gems

In February, I spent some time in Capetown, South Africa for the annual Investing in African Mining Conference. Unlike many mining conferences, this event is more industry-focused than investor-focused. The participants ranged from suppliers and geologists to executives and engineering companies. And there were investors like me.                

Because I’m at this conference as an investor and it’s not an investor conference, I kind of blend into the woodwork a little. I was able to get away with asking questions that people might otherwise be more guarded about answering. For me, this means great opportunities to find new companies and different investment themes that I might not have exposure to in Canada. It’s more than identifying topical themes; it’s also about trying to find that new, potential gem that might make it into the portfolio.

For example, I met with one company that I came across by chance at a dinner. That’s the beauty of this conference. The executive I met managed a mining company with assets in Guinea. I wasn’t very familiar with Guinea, so throughout dinner we discussed all kinds of issues related to the country. This led to an exchange of business cards and a second face-to-face meeting a couple of days later at the conference.

Now that I’m back on home turf, I am following through on this company. When I’m meeting with at least 45 companies in a few days, of course I won’t do due diligence on them all. But for those that make it through my funnelling process, I’ll get home, gather materials and consider taking the next step. In this case, the next step would be setting up a conference call to ask specific questions and start discussing financial details.

There are all kinds of meetings, insights and invaluable learning experiences that come out of attending a conference like Indaba. Here are a few quick examples that come to mind:

At this same conference last year, I ended up visiting a diamond mine of a company we owned. As a result of the visit, I actually increased the company’s weighting in the portfolio

On the flip side, after meeting with one CEO at the conference, I made the decision to sell that company’s stock and reduce our exposure because I concluded that it was fully valued

I had a chance conversation with an Australian mining contractor, who was able to really articulate some of the challenges of the contracting business in Australia and how his company is trying to build a footprint on the continent of Africa and how those costs get passed on. He was a private businessman with no vested interest in promoting his story to me. Speaking with him helped connect the dots for me in terms of what mining companies are telling me about inflation, finding skilled labour and the cost of doing business

Overall, when I’m asked if there is real value in attending conferences, I can absolutely say yes, and that the time commitment and travel are very worthwhile.

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2 responses to “On the road – Africa: In search of gems

  1. Hello Norman….just wanted to say I really appreciate your dilligence in investigating companies. I met you in person in Edmonton back in June. You were talking about Nexen and Progess Energy as a couple of companies that were off the radar but had tremendous potential. It was less than a month later when these companies starting making the news and the share prices jumped. The examples you gave of how you research companies and seeing these companies show strong results shortly after your presentation really sold me on your funds. Thank you for being available in person and on this blog.

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