Growing the golden mile

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The Dubai International Financial Exchange, one of the youngest bourses in the world, has been criticised for not attracting enough home-grown and international names ever since it was born in September 2004. However, it seems the tide is at last turning - and turning yellow.

Last week, for example, the world's first sharia-compliant real estate listing, HDG Mansur Capital Group, with assets worth between US$1.2bn and US$2bn when fully invested, announced it was to list on the DIFX. Large multinationals such as Halliburton and DP World are said to be close to listing on the fledgling exchange, while, more importantly, an increasing number of Australian commodities players are eyeing up the DIFX as a means of broadening their investor base, thanks largely to the boom they are experiencing in selling their natural resources to the Chinese.

"Australia has very close ties with Dubai," says Michael Kiernan, the imposing Aussie executive chairman of US$100m Monarch Gold, which is expected to have its listing application granted later this week. "A lot of contractors and suppliers come from Oz to Dubai, it's the natural bridge to India and the test of Asia."

Kiernan, a well-known Australian businessman, founded Monarch Gold in 2002 and listed the company on the Australian Stock Exchange (ASX) in the same year. Since then the tough talking, no-nonsense head of Monarch has never looked back, only forwards, hence his presence in Dubai. "We're one of the first ones here. We know that others will follow but we're just concentrating on attracting interest from Dubai and the rest of the Gulf. We've applied to list on the DIFX and pretty sure this will come off," he says.

"It gives the opportunity for investors to have direct access and involvement to resources in Australia as well as broaden our investor base." Since November 2005, Monarch has laid the foundations for its growth as a mid-tier Australian gold production company.

In the same month it acquired Davyhurst Gold Project and in 2006 reached an agreement with Gindalbie Metals to acquire the Minjar gold projects 500km North east of Perth. It also completed a merger with Siberia Mining Corporation, providing it with access to Siberia's 1.2 million ounce resource base and the largest Australian controlled ground position in the Kalgoorlie region, better known as the ‘Golden Mile' thanks to its vast gold reserves. This might not mean much to many people, says Kiernan, but quite frankly he doesn't care. He is more than confident that spreading the business's wings to places like Dubai can only extend the message even more, attracting a wider range of investors who, he says, would be foolish not to take advantage of the Australian commodities boom.

In a bid to maintain, and if at all possible, grow its current GDP of 10.1%, this has mainly been driven by China's insatiable appetite for Australia's abundance of natural resources. Steel, copper, iron ore, coal and gold, to name a few have seen unprecedented growth and sky-high prices thanks to China. And the boys down under aren't complaining, happily selling millions of tonnes of raw material and making enormous profits along the way.

The main issue for Kiernan and his competitors is, as with any booming business sector, that demand is far outstripping supply. Yet what Monarch is cleverly doing on the DIFX is not initially seeking to raise additional revenue. If all goes well it can do that at a later stage, as well as on its own ASX exchange back home, as well as the costly but well-established and highly regarded AIM in London. Instead, it is looking firmly towards the future seeking to expose as many ‘emerging markets', such as the Gulf, to as much investment and interest in commodities as possible. "We currently have a resource base of more than 2.4 million ounces, two state-of-the-art gold treatment plants and dominant ground positions in the prolific gold mining region to the Northwest of Kalgoorlie, but we want to reach 500,000 ounces by December 2009, and it looks like we will more than over-achieve that target," he says.

"We are entering larger capital markets, we don't want to rely solely on Australian markets and we are confident that we can take the business forward in a very big way."

Kiernan, however, is keen to bide his time and see what reaction the Dubai listing generates, but has equally hinted that if things go smoothly he might even bring two more of his businesses, iron ore explorer Territory Resources, and copper, diamond and coal explorer India Resources, to the exchange bringing the potential total number of companies on the DIFX from eight to 12.

The company's goal from the DIFX listing is to have approximately 15% to 20% of its shareholders based in the UAE. "What you have to remember," he says firmly, "is that this is a listing by compliance. It is an investment approach and a way of introducing ourselves to the investment community here in the UAE as well as a way of gaining credibility here.

"We first have to prove our credentials, build up the relevant amount of interest and then go for the second stage further down the line. This is an investment approach, introducing ourselves to the investment community and gaining a good reputation along the way. We are expanding and broadening our base for now."

No wonder the loudly spoken Australian and his son James, a broker who works for his father, are confident. Kiernan senior has a successful track record in business. His main achievement was rescuing another of his businesses, Consolidated Minerals, from a failed set-up into one that re-listed on the ASX in June in 1999, and then later on London's AIM. Kiernan grew it from having a market capitalisation of US$8m to today's approximate market cap valuation of US$583m. He has he says, however, "done his bit", and is stepping down from Consolidated later this month to concentrate on Monarch and his other interests.

So why not list Monarch straight away on AIM? Kiernan is well aware that this question was about to pop up and, without dismissing AIM, he explains his reasoning. "The region here is a growth sector and that's where we want to be. The cost benefit of being associated with AIM has gone the other way now.

"It is too costly compared to the benefits you receive. The liquidity possible on AIM is not as high as here and it has expanded so dramatically that it is probably, in my opinion, at its zenith," he says. "Sure the DIFX is immature but my role is to look towards the future and look into new markets such as Dubai and the remainder of the Gulf.

"We want to be part of those visionary markets and the visionary drive that three to five years down the road will pay off. The DIFX is a very important institution for the UAE and will become even more important as time goes on," he adds.

His experience in business and commodities has taught Kiernan that if you're in the gold market "you should always look for growth".

"Australian companies are now taking advantage of that growth, especially in Dubai. We were and still are the trailblazers as well as one of the early commodities companies listed on AIM.

"By doing this we now want to broaden our shareholder base, not just with local investors but also to draw in Gulf and international players."

Australian commodities companies are enjoying unprecedented success not only abroad but also at home with mining companies listed on the ASX experiencing record highs.

"Businesses and companies including the larger players such as Rio Tinto and BHP Billiton are doing extremely well at the moment. The commodity boom is far from over and will continue for the next five to 10 years at least. This is only a short-term prediction; I can see it continuing for much longer," explains Kiernan.

With this month's listing Kiernan hopes to educate Gulf investors in the benefits of being associated with an Australian mining business. "People here in the Middle East aren't educated in the ways of mining yet, they just haven't had the exposure but we hope to change all that and get as many regional investors involved as possible," Kiernan explains.

"We have had lots of offers to buy us out, especially from Chinese companies but it is not good to have your main customer acting as your main shareholder. It muddies the commercial waters. Dubai was the only external market we were looking at entering in the last few years and it forms part of our constantly moving strategic plan."

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