V

DeWet Steyn was struggling to keep his head above water. Forgetting the issues for the company of the squeeze Metal-Exx were putting on, his own personal finances were taking a beating. He enjoyed all the trappings of being a wealthy man, the ceo and a substantial shareholder of a global company, but of course it was all predicated on the value of his stake in the company. The Knightsbridge residence, the estate down in Sussex with its Georgian house, parkland and pheasant shoot, the yacht, the cars – all seemed rock-solid. But as the Congo Copper share price kept dropping, his ability to keep financing it looked more and more precarious. Macho South African that he was, he couldn’t bring himself to admit the problems to his wife and his mood became darker and darker. As the winter of 2016/17 began to turn to spring, with virtually all avenues of short-term credit closed to him, he could only see one possible way out.

Feinstein’s was pretty much the last remaining independent merchant bank in London; the others – Warburgs, Schroders, Kleinwort Benson and the rest – had been swallowed up by bigger fish over the years and their unique business style bastardised into a ‘big is beautiful’ model. Feinstein’s had kept its independence, largely through the way it remained strictly family run. Jacob Feinstein was the ceo-in-waiting, once his father had decided to retire, and for the moment he ran the bank’s substantial advisory business in the raw materials and resources field. In the early days, they had worked with Steyn on a number of his projects, but as Congo Copper grew, Steyn had become more and more reliant on lending banks, rather than on Feinstein’s advisory style. Nevertheless, Jacob and Steyn had remained friends, if not hugely close ones.

Steyn stepped out of his car. Feinstein’s were one of the very few City institutions that owned their own building and land, and the builders had only recently finished the gleaming new glass and aluminium tower that was the fourth iteration of their headquarters. An elevator whisked him up to the top floor, where the private family rooms were located. Jacob was waiting for him as he stepped to into the corridor.

“DeWet! It’s a pleasure to see you. How do you like our new home? We’ve only been back in for a couple of months.”

“Jacob, likewise. It’s certainly very impressive. Business must be good.”

Feinstein ushered him into a room, speaking as they went.

“Well, you know, business is usually good for us. People need advice, in good times and bad. We’re there, either to open the champagne or provide a shoulder to cry on. We keep our costs in order, we look after our people and that seems to enable us to keep on, even up against the big boys. Take a seat, and tell me what we can do to help you.” he gestured towards a group of armchairs around a low table, on which sat a coffee pot and cups, milk and sugar. Nothing as vulgar as a ‘meeting room’ for the blue bloods at Feinstein’s. The style was very definitely private home.

“Well, Jacob, you’re right, that I hope there is something you can do to help me. But first, I guess I’d better recap a bit, let you know where we are.”

Feinstein nodded, as he poured coffee for them both and handed a cup across.

“We haven’t done business for some time, in fact not really since Congo Copper really got going. But I guess you know the story. I was able to get in on the ground floor when the government started privatising assets, and I ended up with the lion’s share of the DRC copper mining business. We have a good business; our reserves are substantial, our product is high quality. In normal markets, we have no problem in selling everything we mine. For some years now, we have had a very close relationship with Metal-Exx – in fact, they basically take virtually all our production and ship it into their Chinese smelter customers. Since the end of 2015, they’ve been owned by a US fund, Leopard-Star, who are also one of our major shareholders. So the relationship works on all sorts of levels.” He paused, and drank from his cup.

“At least,” he resumed, “it has worked up until recently.”

Feinstein cocked an enquiring eyebrow.

“Since late last year, they have pared back to the bone the amount of product they take from us. It’s all on fairly typical contracts for concentrate, so they have plenty of quantity options built in. The market’s been tough for a fair while now, and frankly they had been supporting us through it, because although we try to reduce it, our cost of production is still some way off the comfortable bit of the curve.” He stopped speaking again and Feinstein detected an uncertain look in his eye, unusual in the brash, confident miner.

“So you want us to a find a way of closing your – hopefully – short-term funding gap.” Feinstein summarised for the other man.

“Well, that’s one thing to look at, but in fact my immediate concern is my personal position.” Feinstein raised his eyebrows. Nobody in Feinstein’s family had worried about their personal finances for the last 200-odd years.

“Frankly, Jacob, I’m struggling to keep above water. Life is expensive, and I depend on the value of Congo Copper – my wealth is completely tied in to the company. With the fall in the share price, I’m pretty exposed, so what I’m really looking for is some way of securing financing without selling any of my assets. I mean, you know, we’ve built up the life; I don’t want to see anything slipping away because the copper price stays too low for too long.”

“Mmm. Well, personal finance isn’t really my thing, but I guess this is actually more like refinancing a business than anything else. Why don’t you run through the real position for me, then we’ll see how we can address it.”

Steyn reached for his briefcase and extracted a couple of sheets of paper. He passed them across the low table. “This is pretty much a summary of my position right now. The bottom of the second page will show you the size of the problem.”

Feinstein looked at the document for a few moments. “Mmm,” he said. “Not very pretty, is it? Looks like you have a serious problem. What do you think we can do to help?”

“Well, in an ideal world, look at my assets and see what sort of loan you could advance.”

Feinstein just looked at him for a moment, then shook his head. “Come on, DeWet, you know as well as I do that you have no unencumbered assets. You said it yourself – everything is supported by your stake in Congo Copper and the value of that at today’s price won’t support anything more.”

“But you know the company’s worth more than the current share price. We’ve been targeted by somebody who is putting out rumours about our viability and that’s hit our price hard. But that’s not reality; that’s a short-term aberration until those people – whoever they are – give up the game.”

“What I know is that the company is worth what somebody will pay for it; and that is the current share price. You’ve always been very careful to keep your real cost of production out of the public eye. That’s probably been good for you in the past, but now you’re seeing the downside of it, because you haven’t got the track record to disprove the critics. Look, even one of your own major shareholders is being quoted as having concerns about your costs.”

“You mean Jason Serck?”

“Yes, he’s been quite open about the problems he thinks you have.”

“Maybe, but he’s still holding on to his position.”

Feinstein picked up the document again. An idea was beginning to come into his mind. “I suppose your main concern is to keep your private wealth. Between these walls, you don’t have to give me the corporate bullshit about preserving value for shareholders and all that stuff. The bottom line is, you want a way of keeping what makes your life how it is, right?”

Steyn nodded. “Yup, that’s about right. But I’d like to do both, so –”

Feinstein interrupted. “I’m sure you would, and you’ve been doing that for a few years now. But I’m afraid that you’re pretty much at the end of the line. I can actually see a possibility, but it will mean something of a change in your overall position with the company.”

“What do you mean? Change my position how?”

“Well, although I re-iterate what I said before about value and price, you do in fact have a point. Regardless of the current share price, Congo Copper owns some valuable deposits, and those deposits will be mined, whether it’s today, tomorrow or the day after. So that means there is a different possible value to the company than that put on it by the stock market. In other words, it’s not like a factory, where future performance will depend upon a raft on inputs – prices, availability of raw materials, demand and so on; we can look at a mine and see the resource sitting there, and we know we can exploit it at whatever time in the future we choose. So there’s more of an inherent value there than there would be in, say, manufacturing. That’s what Congo Copper – like any other mining company – does. But at the moment, you’re overstretched, because you have been operating effectively on the false premise that the time to exploit your deposit was now. But that turns out to have been wrong, and in reality you’ve been wasting the asset by using it up at the wrong point on the curve of the price development. If you’d cut production when the price dropped below your production cost, you wouldn’t have wasted it.”

“Yeah, OK Jacob, I understand all this stuff – it’s what I’ve spent my life on. But the practice can’t always follow the theory, when you have ongoing employment and commitments to honour. We can’t just switch the mines on and off as the copper price goes up and down.”

Feinstein spoke patiently. “Indeed. But somebody else might look at it with a different time perspective. I may be able to find someone who would be interested in taking part of your stake off you, and, which is the key as far as you’re concerned, be prepared to pay a premium to the current price to get the stake without having to go and play in the stock market to get it.”

Steyn looked less than impressed. “Jacob, that company is the sum of my life’s work. I built it from all the experience and contacts I made in the DRC over years of kicking around in their mining industry. It’s a big business, and I put it all together. I don’t think I want to start selling out any more of it; I already let some go with the flotation a few years ago; I’m not about to start giving any more away.”

“DeWet, you’re not listening. You can’t stay where you are and hope everything will turn out all right; it won’t. You are in a position where something has to give, and if you don’t want it to be your way of life, your personal wealth, then you’re going to have to make some uncomfortable decisions. I think – and bear in mind, so far it’s only an idea – that we can show you a way out; but you will have to sacrifice some of your part of Congo Copper. Now, what does that mean? Well, it means you get to keep all those trappings of wealth you are so attached to. And yes, it means that if and when the share price goes up again, you will make less than you would if you had not sold. That’s the downside. But you are swapping the certainty of keeping what you have against the unknown future. Let me tell you, in building this bank and the family’s wealth, my ancestors took that route every time it was offered. Sense before greed; keeping what you have rather than gambling the ranch. That’s how success builds, DeWet. You’ve been lucky – and you worked for it, I don’t deny that – but you need to bank that luck, not gamble it away.”

Steyn was silent. Then he sighed, and nodded. “OK, I can’t see any other way out. See if you can find a buyer who will pay some reasonable sort of premium, and we’ll see where we go from there.”


Chapters Vi-VII will follow daily this week.