Journey to acquisition: Outgoing Shanta Gold CEO talks deals

Setting the identity in your mining company and getting the culture right is what sets apart the successful junior miners to those languishing with little liquidity, outgoing Shanta CEO Eric Zurrin told Mining Journal.

Zurrin, who served his last day as chief executive last Monday, was speaking to Mining Journal about Shanta Gold's journey.

The company was sold to Saturn Resources, after it submitted a bid at 13.5p/share, or $141.95million. This represented  a premium of 6.72% to the closing price of 12.65p/share on December 19, when talks began. The final deal was done at 14.85p/share equating to an equity value of approximately £156.1million. This represented a premium of 17.4% to the closing price on 19 December.

Part of the deal was that Shanta left the AIM exchange, where it had been listed since 2005.

The company had previously rejected other bids for being too low.

"It's good to keep your ear to the ground with M&A," Zurrin said.

"Often with these mining companies - particularly given the cyclicality of the industry - it is good to re reinvigorate them: so redefine them, reinvent them. And in this case, this is exactly what's happened. Because often, if companies don't reinvent themselves it just kind of reverts back to the mean. And I don't think that's good for anyone," he added.

Saturn Resources is owned by the Patel family which were the original founder's of Shanta Gold – in fact Shanta is named after Saturn director Ketan Patel's mother. 

"They've effectively found a chance to bring life to it after two decades. It has gone full circle to bring it back into family hands. [Saturn] have a very large agri commodities trading business in Africa. And so they see this as another one of their subsidiary companies and they can add a lot of value because of their position in East Africa. They're very experienced in both Kenya and Tanzania," Zurrin said.

"The future of Shanta is in very safe hands, because Saturn is such a credible partner to chances progress in East Africa because it's been there all along. It's been there right from the start. So it's a really good story," Zurrin said.

Turnaround 

Zurrin joined the company in 2017. In the same year the Tanzania Government upped royalties by two percentage points and introduced a new 1% clearing fee in the wake of the Acacia Mining fraud accusations, which came as Shanta was finishing the $85 million New Luika underground project.

Despite these curveballs, the company posted EBITDA of $37.7million in 2017 and set to work reducing costs and changing the culture of the company.

When Zurrin came in to the team in 2017, he said that the employee base was 92% nationals, 8% ex-pats. Today, Shanta is made up of 99% nationals.

"I think Shanta has been exceptional over the last six or seven years. It does come down to the people operating the assets and whether they have this shared vision of where they want to see the assets go."

"And this goes back the whole the whole identity of Shanta; we talk about the Shanta DNA when we're on site. And it's a Tanzanian company run by Tanzanians at the end of the day."

Zurrin said that the vision came from the top down, but was taken on by the whole team. 

"Once we had the culture set, (…) then we started to really focus on our assets with: one improving New Luika; and two, we redefined ourselves by really getting to that 100,000oz pa production base; And then three was turbocharging the growth through West Kenya," Zurrin explained.

The success of the company was within the  same time frame that Barrick's acquisition of the remaining shares of Acacia took place, which was anything but smooth.

"In terms of other mining companies - I don't want to say they stagnate, but it's really important that (…) there's a bit of a vision, to say ‘what's the identity of the company? Where are we taking it, who's on board in terms of the culture and the vision?' and then actually executing on it," Zurrin said.

Integrity from the top

Despite the latest slew of scandals rocking gold miners – from Endeavour former chief executive being dismissed on suspicion of facilitating disguised payments, to news that former Red Pine chief executive Quentin Yarie manipulated assay results - Zurrin believes the mining industry has learnt from lessons of the past.

Specifically, the Bre-X scandal of the mid ‘90s which has regained notoriety with a BBC podcast series called ‘The $6billion gold scam'.

 "I think the mining sector has come a long way since the you know, the the age of Bre-X -  I would say that the mining sector has really grown up over the last 20 years. You're always going to get rogues in any industry," Zurrin said.