Tony Sage is well known within, yet considered an outsider of, Western Australia’s resources industry. Paul Garvey reports.
Tony Sage is well known within, yet considered an outsider of, Western Australia’s resources industry. Paul Garvey reports.
TONY Sage’s ownership of the Perth Glory soccer team has given him a public profile that extends well beyond the state’s mining sector. Ask any passer-by on Hay Street to name three Western Australian mining identities, and chances are Mr Sage’s name will come up soon after those of Andrew Forrest and Gina Rinehart.
Yet he is a different beast to many of the other men and women who run Perth’s vibrant junior resources sector.
You don’t find many geologists and engineers gracing the social pages where Mr Sage is a regular fixture.
Unlike many of his West Perth peers, Mr Sage is neither a geologist nor engineer, coming instead from a funds management and accounting background.
And unlike those technically trained peers obsessed with one day graduating their junior explorer into a bona-fide miner, Mr Sage has no such goals. The business model of his key vehicle, Cape Lambert Resources, states an objective to cash in the exploration projects in its portfolio through trade sales or spin-offs, rather than getting its proverbial hands dirty through actual mining.
Business philosophies aside, some remain skeptical that a man who owns a soccer team, has a 49 per cent stake in the Perth Fashion Festival, and who has at various times owned nightclubs, fashion magazines and radio stations, could run an effective and credible resources company.
The smartly attired Mr Sage looked straight out of Subiaco when he caught up with this WA Business News correspondent inside Hong Kong’s Mandarin Oriental hotel recently.
Mr Sage is used to copping it from the doubters, but having delivered a number of successful deals in both bull and bear markets, one can sense a little bit of pride in his status as an outsider.
Cape Lambert is one of the few local companies to have made money out of low-grade magnetite iron ore in Australia, having offloaded its namesake project in the Pilbara to China Metallurgical Group Corp for a headline price of $400 million (the pair are in a dispute over the final payment of $80 million). Some of the cash from that deal went into buying assets during the GFC – such as the Lady Annie copper project in Queensland – that have since been flipped at solid profits.
“You could say to me, like everyone else has for years, ‘you won’t be able to do that Tony’,” Mr Sage says, while discussing his numerous ambitious projects planned for West Africa.
“I sold Cape Lambert for $400 million when I bought it for $20 million. I sold Lady Annie for $135 million when everyone said it was worthless because it wasn’t in production. We’ve got a track record.”
Mr Sage hasn’t had to mine a tonne of rock to generate returns for his shareholders. In the past 18 months, Cape Lambert has returned more than $150 million to shareholders in the form of dividends and share buybacks, while shareholders have also been handed shares in four new ventures spun out of the company.
“You ask all the original [Cape Lambert] investors, they’re extremely happy,” Mr Sage says.
“We’ve outperformed the ASX 200 four times [since 2006] including the dividends and the spin-outs.”
Cape Lambert today holds a complex network of more than 20 projects, companies and equity stakes. While those interests take in a variety of commodities and countries, the portfolio is clearly overweight towards West African iron ore.
The company owns outright the Marampa and Kukuna projects in Sierra Leone and the Sandenia project in Guinea, as well as a 26 per cent interest in ASX-listed Republic of Congo explorer African Iron.
African Iron and its Mayoko project are textbook examples of the Cape Lambert model in action.
Mayoko was first picked up by Cape Lambert, which carried out some exploration work and then spun it out into African Iron, collecting some cash from that process and retaining a sizeable stake in the (then) fully funded vehicle.
With African Iron now getting closer to a development decision, Mr Sage is confident of getting another payday out of the asset soon.
Neighbouring play Equatorial Resources has already bought a 19.9 per cent stake in African Iron, and with iron ore acquisitions heating up in the region, Mr Sage believes African Iron is a genuine takeover target.
“With our model, we bought [Mayoko] for about $20 million in cash all up, we’ve already got $50 million back from the float, and if we get say 60 cents [a share] for [African Iron], which is what the minimum would be, that’s another $80 million in our bank account. So it’s $130 million for something we paid $20 million for,” he says.
Cape Lambert is eyeing a similar plan for Marampa, with the group well under way with planning for a spin-out of the asset on London’s AIM exchange early next year.
The company is also running a data room, which could result in Marampa being sold off first, with several Chinese companies among those taking a look at the project.
Should the AIM listing come together, Marampa would be looking to replicate the success of African Minerals. Frank Timis, the controversial businessman who is a close friend of Mr Sage, founded London-listed African Minerals and has helped it climb from 11 pence in late 2008 to as high as 653.5 pence earlier this year.
Mr Sage is unashamed of his admiration for Mr Timis, who picked up a heroin possession charge in his youth and who more recently had his attempts to list his latest vehicles on the ASX rejected by the exchange. Mr Timis was ruled an unsuitable person to act as a director of a Toronto Stock Exchange-listed entity, and another London-listed company he founded, Regal Petroleum, was hit with a record £600,000 fine for misleading investors.
Nevertheless, there’s a real possibility that ore from one of Mr Sage’s ventures could ultimately be using the same West African rail and port infrastructure being used by Mr Timis’s African Minerals.
Mr Sage believes West Africa’s fledgling iron ore industry is in a unique position, given the presence in the region of the world’s three iron ore heavyweights – BHP Billiton, Rio Tinto and Brazil’s Vale – and the potential for China to secure assets capable of making a dent in their huge iron ore requirements.
“It’s the hottest place for iron ore in the world,” Mr Sage told WA Business News.
“I say that with all due deference to Western Australia and all the activity that’s going on, but it’s historical what’s happening here.”
Mr Sage sounds less enthusiastic when asked about the Glory, his moderated tone perhaps tempered by the 4-0 flogging the team had received the day before he sat down with WA Business News.
He says he has lost $7 million on the venture in the past three years, although it has proved a handy conversation starter when negotiating with government officials in soccer-mad Africa.
The most vexing aspect of the Glory ownership is that, unlike his life in business, he has no control over what happens.
“It drains me. If I lose a business deal, then that’s business. But I can control a business, I can make a deal or break a deal by just my actions,” he says.
“But there’s 11 bastards on the pitch who don’t listen to me, for 90 minutes, and I’ve got no control over what they do. It’s frustrating, and it’s frustrating as hell when you’re in charge of everything else in your life and you can’t control it.”
Also beyond his control is the broader market. With the European debt crisis dragging on, finance for junior resources companies is drying up.
While Mr Sage’s stable won’t be immune from the market weakness, he says he and his team will be using the current uncertainty to snap up promising but underfunded projects.
Whether or not Cape Lambert can find another Lady Annie remains to be seen, but more deals seem certain.
The chances of Mr Sage being embraced by the rest of the resources community would look far less likely, although it’s just as unlikely he will care.
