Interview with Ryan Dodd
Ryan Dodd, a partner at DBM Capital Partners, joined Russia Today to discuss Norilsk Nickel's acquisition offer for Canada's LionOre.
Russia Today: $US 6.5 BLN is a big step. What is the attraction of LionOre for Norilsk?
Ryan Dodd: Well, I think the main attraction for LionOre is that it gives Norilsk the ability to have sustained production increases over the next five to, say, seven years. The other thing is that it gives Norilsk a foray into two different areas – now they have a foothold in Africa as well as in Australia. But really as I have mentioned before the real issue with LionOre is the technology aspect. The company really wasn't a star in capital market until it proved over the last two years that the technology really does work. And so of course for Norilsk it opens many doors in terms of some nickel licenses that they have, they would require a lot of money and infrastructure to build. Now they might be in a position they can actually start to produce maybe within three or four years. So, it is a major value-creating deal for Norilsk Nickel for sure.
RT: Do you think we might see some further acquisitions?
R.D.: As a norm Norilsk has an excellent balance sheet and is certainly one of the best among the majors in Russia and certainly among the global peers in the world. I think Norilsk would have no problem in the future paying for this and other acquisitions. The cash they produce is enormous and certainly that financing base on the cash flows would be something that would make many banks line up to give Norilsk the money for future acquisitions. So I think Norilsk still has a number of options available to them if they want the finance going forward for future acquisitions.
RT: Do you think they are looking at any particular further acquisitions?
R.D.: Well, I think, if we look at where we are all right now, certainly we are in the middle or maybe in the beginning of the cycle in terms of this company going forward. Norilsk certainly has now the ability to move into other countries like they are doing in this particular one. But to be honest I think what we don't know is what the experts in Norilsk know about the LionOre technology. It could be that Norilsk as a whole had these things lined up, but once they get a hold of the way the technology works and get their own Russian engineers there working, you could see a number of acquisitions coming up for Norilsk. But this is on a small scale I think, there is no need for them to go after something big.
RT: There has been a lot of movement in the global resources sector and more general resources sector. Are we looking at a global resources consolidation phase?
R.D.: Yes, I think we are. Essentially these companies have an enormous amount of cash and if you look from their point of view it is actually quite advantageous for them to go out and make acquisition with the free cash flow they have. That's one aspect. The other aspect is that if you look at the sort of the tendency in the world and especially the mining and the resource industry going forward and certainly in the last two years the costs have been rising dramatically. A lot of these guys have the cash they need to lower costs and so they are looking for synergies around. I think we definitely in the mid-cycle period and we are going to have more consolidation over the next three or four years – in base metals as well as in precious metals. And Norilsk is right in the middle of all the action I think.
