Login

Egyptian tycoon makes "spectacular" $500m bid for Canadian gold firm

Share on Facebook Tweet on Twitter

Posted by Arabian Money

on Tuesday, 17 July 2012 08:04

Egypt’s second richest man Naguib Sawiris has made a $500 million bid for the Canadian gold mining group Mancha Resources, the most spectacular move yet into the yellow metal by an Arabian businessman.

sc

Mr Sawris confirmed to The National newspaper that talks are in progress but declined further comment, except to say La Mancha has a ‘geographically diverse portfolio of assets offering exposure to growth.’

Golden assets

La Mancha operates four gold mines in Africa and Australia. Mr Sawris and his even richer brother have amassed a multi-billion dollar fortune as the founders of Orascom Telecom and have major investments in cement, construction, fertilizers and hotels.

They have made a great deal of money by being early investors in sectors before their future value became apparent. But gold mines are a completely new field for Mr Sawris and mark a major diversification away from his past successes.

Naguib Sawiris is worth $3.1 billion and his brother Nassef $5.1 billion, according to Forbes magazine. They could well be readers of the ArabianMoney investment newsletter which has been advising such a diversification strategy for some time (subscribe here).

It certainly does not say much for the global economic outlook that a man of such wealth is turning to the yellow metal as an investor rather than redeploying money into telecommunications, for example, where he has previously done so well.

Investment logic

But if you think the global economy is going to contract and the central banks print money to try to offset that deflation then it makes a great deal of sense to invest in precious metals. The price of these assets along with food, certain commodities like oil and even real estate are likely beneficiaries of central bank money printing even while the rest of the economy struggles at best with stagnation.

In this environment taking wealth out of the stagnant sector and putting it into an asset class that will benefit from reflation is a clever one. By buying a gold company Mr Sawris is also taking a bet that the highly depressed market for gold equities will outperform the metal itself as the price of gold goes up.

That is the theory, although it has not worked for the past few years. Arguably, however, that leaves gold mining shares cheap and even more attractive to bold investors like Mr Sawris. Perhaps his move is bold enough to spark a revaluation of the sector.

 

ABOUT US: (Sign Up for free News Alerts)

Arabianmoney.net is the first dedicated financial comment website to be published from Arabia, and provides lively and topical commentary on both local and global news (For our introductory video click here).

It is a free website that introduces the more detailed investment analysis of our paid-for subscription newsletter, and anybody seriously interested in Arabian investment should get this monthly pu


Free Subscription Service - sign up today!

Exclusive content sent directly to your Inbox

  • What Mike's Reading

    His top research pick

  • Numbers You Should Know

    Weekly astonishing statistics

  • Quote of the Week

    Wisdom from the World

  • Top 5 Articles

    Most Popular postings

Learn more...



Our Premium Service:
The Inside Edge on Making Money

Latest Update

Looking for the Bounce

On Monday from the morning high to the afternoon low the DJIA dropped over 900 points, then bounced over 300 points to “only” close down...

- posted by Martin Straith, Trend Technical Trader

Michael Campbell
Tyler Bollhorn Eric Coffin Patrick Ceresna
Josef Mark Leibovit Greg Weldon Ryan Irvine