uae pours oil money into mining

UAE POURS OIL MONEY INTO MINING

Madhu Koneru, Trimex Group Executive Director

UAE POURS OIL MONEY INTO MINING In an effort to shield itself from escalating costs of infrastructure-related

materials, the government of Ras Al Khaimah, a part of the United Arab Emirates (UAE), has set up what may become the first Middle East mining firm with operations around the globe: Dubaibased RAK Minerals & Metals Investments.

A joint venture with Trimex Group -- a company that has been in the mining business for 25 years -- RAK Minerals has an annual budget of more than US$1 billion to invest in mining companies worldwide.

"RAK Minerals was set up to be the first Middle East mining company with a global reach," says Madhu Koneru, managing director of both RAK Minerals and Trimex. "We have the idea of developing commodities which are directly related to infrastructure: coal, copper, and the raw materials used in the manufacturing of ceramic tiles: clay and feldspar. These four are our favourites."


Koneru says that the company was not established to just invest in any good mining story that comes along, but rather with a strategic view to assist Ras Al Khaimah, a Mideast emirate, in infrastructure development projects that consume vast amounts of raw materials.

"The government wanted to do a lot of development work in the city (Ras al Khaimah), and they realized that the infrastructure costs were going to be very high," Koneru says. "So they came to us (Trimex) offering to form the joint venture. . . so that they could hedge the (raw material) costs.“

With a target of doubling the population to 10 million within 10 years, the scope of infrastructure projects in the UAE is vast. So far this year, RAK Minerals has committed to invest US$650 million, of which US$250 million was allocated to two copper-cobalt projects in the Democratic Republic of the Congo


(DRC), US$200 million to three copper and polymetallic projects in Armenia, and US$200 million to a possible coal project in Indonesia. There are also small investments in clay and feldspar mines in Indonesia, India and Thailand.

Since his investment budget for 2008 is US$1 billion, he is planning to invest another US$350 million this year, but Koneru is willing to exceed his budget if the right opportunities come along. In keeping with RAK Minerals' global reach mandate, he is particularly interested in Australia, Southeast Asia and the Americas.

The DRC investment consists of a small producing copper mine, plus two copper-cobalt projects totaling 2,750 sq. km. The Armenia investment includes three Greenfield copper and polymetallic projects totaling 340 sq. km. The Indonesia coal deal has not yet been finalized.


Koneru's view of his company is the polar opposite to that of a hedge fund or an investment bank. He wants to add value through his knowledge of the mining business, create strong partnerships, and then leverage long-term relationships to more projects.

RAK Minerals has two ideal investment targets: a mid-sized company that owns a mine it would like to expand, and a Greenfield project with a resource that needs more drilling to comply with Australia's JORC standard. In both cases, Koneru believes that companies will benefit from working with someone who understands mining, speaks their language, and who can support them.

In the past, Mideast investors have been comfortable investing in smelters, but not in mines. In the Persian Gulf area, Koneru says the availability of energy has attracted investments in aluminum smelters.


The company is open to building smelters eventually, but it's not the current focus.

"The resource is more important than the smelter," Koneru says.

He gives as an example Rak Minerals' plans for Armenia and what the company wants to achieve in the next two to three years.

"In Armenia right now, the plan is to finish the exploration work, put up a concentrate plant, then start production of concentrate.“

A smelter may follow once the plant is producing. In the DRC, RAK Minerals has agreed to build a US$200-million copper-cobalt smelter.

uae pours oil money into mining

Business