First Tidal Acquisition Corp T.AAA

Forbes and Manhattan background

[MrMurf]

STAN BHARTI FORBES MANHATTAN GROUP

Stan Bharti explains Forbes & Manhattan's market success
TEXT SIZE
2011-05-13

Vancouver- Hitting it big with one company during a career spanning more thantwo decades in the public mining sphere is certainly commendable. Twobig market successes might even be considered remarkable. When itreaches three or more, however, a certain pattern of success startsbeing attributed to the individual or organization, and such is the casewith Stan Bharti and hisForbes & Manhattan group.
Forbesnow controls roughly 25 publicly traded companies focused on theresource sector with a combined market capitalization of several billiondollars. It employs over 50 mining engineers and geologists, more than40 financial professionals and four full-time securities lawyers. It hasraised at least $3 billion for exploration and development over thepast four years. And all the while it is exploring for economic mineraldeposits across more than 40 projects located in 22 countries around theworld.
From precious metals producers to base metals explorers, fromenergy companies to fertilizer companies to commodity traders, theForbes group has had more than its fair share of successes recently, aswell as a few letdowns.
In a telephone interview from the group'shead office in Toronto, Forbes' founder and executive chairman, StanBharti, explained the reasons behind his company's relatively high rateof success and what he says it takes to run one of Canada's largestresource groups.
"We've been able to hire very good people, that's been a key part.
"Itell people, we don't trade stocks - we build assets. When I getinvolved in a deal, I know it's three to five years before I'll unlockthe value and sell the stock, because that's how long it takes."
Bornand raised in India until he was 16, Bharti left to complete a miningengineering degree in Moscow and later a master's degree in London. Hefound a job with Falconbridge in Sudbury, Ont., and made the move toCanada in the 1970s.
After more than a decade working as an engineer,Bharti co-started a successful mining consulting and contracting firmin the late 1980s called Bharti Laamanen Mining, or BLM, which alsoacquired struggling mining assets and tried to turn them around. Thebusiness essentially went public in 1994 when it was acquired by TorontoStock Exchange-listed William Resources, with Bharti becomingpresident.
"We did a lot of acquisitions," recalls Bharti, who ledWilliam Resources to projects in South America, Mexico, Australia andScandinavia, including the Jacobina gold mine in Brazil and the Bjorkdalgold mine in Sweden. By 1997 the company was producing more than200,000 gold oz. per year, but a series of debt-laden, share-dilutiveacquisitions proved to its downfall when commodity prices plummeted atthe end of the decade.
Bjorkdal went into receivership, Jacobina wasshut down, and William was forced to restructure about $70 million ofdebt. The stock fell to a few pennies before the company reorganizeditself as William Multi-Tech, a "technology incubator," amid the2000-2001 internet bubble. That didn't amount to much, however, and by2003 William had rolled back its shares 1:100 and changed its name to Valencia Ventures (vvi-v),how it remains today. (Remarkably, it remains in control of the Forbes& Manhattan group, though it trades for around 8¢ a share and iscurrently run more or less as a shell.)
As Bharti tells it, when the resource sector started to bottom out at the end of 2001, he and his team thought of a better businessmodelthan that of William Resources. "What we recognized was that thebiggest value proposition is in junior stocks. The challenges anddifficulties with junior stocks are that most junior companies don'thave the financial know-how, the technical know-how and cannot hire thetechnical/financial expertise to build these companies to where theyshould go, to unlock the value of the asset.
"And for juniors tounlock the value of these assets isn't a two-month process, it's athree- to five-year process. You have to take a good asset, put a goodmanagement team around it, support it with financial and technicalbackup, and then unlock the value slowly by taking a project fromadvanced exploration through to feasibility and production. So we saidlet's create a model that allows us to do that."
Bharti started thefamily-owned merchant bank Forbes & Manhattan in 2001 to invest injunior exploration companies and their assets. He brought in lawyers,accountants, engineers, geologists, IR people, "the total depth, so thatit could operate like a major, like a Barrick, without the overhead of aBarrick.
"We started initially with two or three companies, and it'sgrown now, we've got about 25 companies within the group... but themodel is the same. We will either find an asset, put it into a shell,put our own capital into it and then built it over three to five years,or look for an undervalued asset that is in a public company, invest inthe public company - and that way take control of it - and then unlockthe value."
Forbes' first success came in the form of Desert SunMining, which optioned the mothballed Jacobina gold mine from arestructuring William Multi-Tech in early 2002. Three years worth ofexploration, infill drilling, metallurgical testwork, advanced modellingand construction brought Jacobina back to production at a rate ofaround 100,000 gold oz. per year in 2005. Major gold miner Yamana (yri-t, auy-n) then picked up the company in 2006 for $450 million, or around $7.50 a share.
An even bigger winner for Forbes was Consolidated Thompson Iron Mines. On May 12, 2011, resource giantCliffs Natural Resources (clf-n) closed its acquisition of the Quebec-focused iron ore producer for $4.9 billion.
Alongthe way, Forbes has carved out a reputation in the mining industry forbringing mid-sized, advanced-stage mineral projects to productionquickly. Typically, the projects will be in districts which aredifficult for juniors to work in or projects that are deeply discountedby the market for a variety of reasons.
The group's Peruvian explorer Sulliden Gold (sue-t)suffered for almost a decade from land claim problems and anoverbearing local drug lord before Forbes came in and brokered a deal in2009; its Avion Gold (avr-t) was transformed with the 2008 acquisition of the Tabakoto gold mine in Mali from a formerly beleaguered Nevsun Resources (nsu-t, nsu-n); Allana Potash (aaa-v) picked up a past-producing potash project in Ethiopia; Apogee Silver(ape-v) operates in troubled Bolivia; Vast Exploration (vst-v) acquired a block of oil claims in northern Iraq's Kurdistan region; the list goes on.
Bhartiattributes the usually accretive acquisitions to his large network ofcontacts and the even larger network of his international advisoryboard. The board includes five retired US military generals (three fromthe U.S. and one each from Canada and the U.K.), a former CanadianMinister of Foreign Affairs and, most interestingly, former CNN talkshow host Larry King.
"These advisers help you open doors indeveloping countries," explains Bharti. "I sometimes tell people you caneither buy political insurance, or you can have a good adviser that'sconnected in the country." He notes Vast Exploration's acquisition ofits Iraqi oil claims, in which retired Gen. Jay Garner, the man whofirst governed Iraq after the 2003 U.S.-led invasion, helped introduceForbes to the right people and sign a deal.
According to SimonMarcotte, Forbes' vice-president of corporate development, Larry Kinghas even helped the company arrange a meeting with Vladimir Putin, thecurrent prime minister of Russia.
And while this extensive networkhas often helped Forbes obtain many potentially valuable assets, it hasnot always led to a smooth ride for shareholders afterward. Severalrecent Forbes promotions have ended up as underachievers lately as theystruggle with production issues, notwithstanding their impressivelyquick construction times.
Forbes' Crocodile Gold (crk-t),for example, hit a high a $2.40 in early 2010 after Bharti and his teamput the company's Australian gold mines into production within a yearof taking control. Crocodile has since slumped to its current one-yearlow of 75¢ after a series of problems hampered production, such asmonsoonal rainfall, maintenance issues and lower-than-expected grades.After originally forecasting 2010 production targets of 120,000 goldoz., it poured just 81,800 oz at an average cash cost of $1,109 per oz.during the year. For 2011, it predicts similar production in the rangeof 85,000 oz. to 100,000 oz., much less than the original forecasts of200,000 oz.
At Alexis Minerals'(amc-v) Lac Herbin gold mine in Val d'Or, Que., the company produced22,600 gold oz. in 2010 at an average cash cost of $1,261 per oz. (thisballooned to $2,020 per oz. in the fourth quarter). The company'saverage realized gold price: $1,215. Shares of Alexis are down from 20¢at the start of 2011 and from around 50¢ the year before; they currentlytrade around 9¢ apiece. Nevertheless, Forbes still hopes to turn boththe mine and the company around. It raised $17.5 million this month forAlexis in order to advance its Snow Lake gold project in Manitoba towardproduction as well as lower costs at Lac Herbin.
"Some assets we have just not been able to unlock the value," admits Bharti. He points to what happened atCrowflight Minerals (cml-t)last year as one example. (After facing mining difficulties andfinancing issues at the company's Bucko Lake underground nickel mine innorthern Manitoba, Forbes lost control of the company to its currentChinese backers, the Hebei Wenfeng Industrial Group.)
"Don't forget,some of the assets that we acquire, sometimes they take some time. Themarket sometimes doesn't have the patience. Our goal is always to takethe project to the final degree. That's the way you unlock the value."
Andlike any good promoter with a handful of companies to choose from,chairman Bharti could not quite be persuaded to choose just one as hisfavourite. "I really only get involved in projects that I'm passionateabout and really believe in. These are all projects that I think have alot of potential, especially in a bull market for commodities."


Cheers
Murf