Mining talisman Bill Beament has told investors they should not expect his new venture to become one of Australia’s most valuable companies, in an unorthodox pitch that tapped into the junior mining traditions of Kalgoorlie’s Diggers & Dealers conference (reports The Australian Financial Review).
In a passionate proclamation of the virtues of small company life, the former Northern Star executive chairman said the value creation opportunities were bigger at the marginal end of the mining industry and people were leaving majors like BHP and Rio Tinto to work in junior miners.
Mr Beament made his name over the past decade by taking Northern Star from a microcap explorer to Australia’s second-biggest gold miner with a market capitalisation that briefly touched $16 billion.
He exited Northern Star shortly after last year’s merger with Saracen and made a rock star launch of his new venture Develop Global at last year’s Diggers & Dealers conference.
Develop is intended to be a mix of miner and underground mining services provider, with Beament saying on Tuesday it was a business model based on the one Rich Lister Chris Ellison has built at Mineral Resources Limited.
“So it is not surprising that Chris Ellison is now one of our biggest shareholders,” added Beament.
Develop will provide underground mining services to Bellevue Gold’s eponymous mining project in WA, has a small copper project of its own in the Pilbara and has acquired the idled Woodlawn zinc and copper project near Canberra off the administrators of Heron Resources.
Mr Beament said Develop’s small and marginal projects offered huge leverage to better management approaches and movements in commodity prices.
“I don’t want to be too big. I’ve got two mines, I may partner with one or two and I only want two or three contracts, that’s it. We aren’t really competition to other mining service companies,” he said on Tuesday.
“The mining services division in the coming year or two is going to well and truly cover all the costs of this business, so there is no more dilution for shareholders.”
But despite telling the conference Develop shares looked “cheap”, he warned that people should not expect a repeat of the valuation growth he delivered at Northern Star.
“For the benefit of prospective employees and investors alike, I want to be clear on one point. We are not setting out to create a mining behemoth. Nothing of the sort,” he said.
“In fact, I don’t want to get in the ASX100 again.
“We are aiming to be large enough to have genuine scale and the ability to be able to capitalise on opportunities small enough that senior management including myself can remain very hands on, be involved in day to day decisions and importantly know everyone on site.
“This will help us achieve superior financial returns while providing a highly desirable work environment and great career pathways.
“There are certain size businesses that deliver value. Once businesses get to a certain size, they get real hard work and cumbersome and you don’t create value, I mean proper value.
“Value creation is when you go from 5¢ to $5 a share and that was in 2010 to 2015 [at Northern Star].”
”Once you get a bit bigger, it gets much, much harder to move the needle, look at BHP and Rio, that is a pretty big needle to move.”
The comments echo the narrative Mr Beament espoused in the early days of Northern Star, when he acquired mines off bigger companies and ran them in a leaner, less bureaucratic way.
The comments also hint at the change of culture that Northern Star has undergone since the merger with Saracen cemented its status as a large blue chip stock; Mr Beament was replaced as Northern Star chairman by Michael Chaney, who had previously served as chairman of blue chips like Wesfarmers, Woodside and National Australia Bank.
But investors may also want to take Mr Beament’s comments about never returning to the ASX100 with a pinch of salt; before the merger with Saracen, Mr Beament used to say gold companies should avoid getting too big and bureaucratic and should “never have more mines than days in the week”.
The merger with Saracen gave Northern Star 12 mines.
Mr Beament’s unorthodox pitch to prospective employees came one day after the other major influence on the modern shape of Northern Star – former Saracen boss Raleigh Finlayson – used his speech to Diggers & Dealers to tell prospective employees they should not bother applying for a job at his new exploration company Genesis Minerals if they were looking for a big pay rise.
Mr Finlayson’s point was that remuneration at Genesis would be heavily weighted toward incentives linked to performance, as Genesis sought to become a mid-tier miner by consolidating the gold province around Leonora.
While many of the companies presenting at the conference have been plagued by labour shortages over the past two years, Mr Beament said Develop’s small and contained business model was immune from the trend.
“Everyone is talking about people shortages, not at Develop,” he said. “We haven’t advertised for anyone.
“There is a growing undertone of people leaving BHP and Rio and joining the small companies.
“Everyone is paying great money, everyone is giving you the great roster and people want to give back to smaller companies.”
