Category Archives: Mining

US Silica to be taken private by Apollo for $1.85 billion

US Silica, based in Katy, is to be taken private by Apollo. The deal values the company at $1.85 billion. The price being offered is $15.50, which represents an 18.7% premium to US Silica’s closing share price of $13.06 on April 25.

The company primarily produces silica which is used as a proppant in fracking. It also produces diatomaceous earth which is used as a filtration product in various industries. The company has revenues of $1.5 billion.

Long storied history

The company traces its roots to two companies over 120 years old. The first is Pennsylvania Glass Sand Company, founded in 1894 to mine sand from the Oriskany formation in West Virginia. It was acquired by ITT in 1968 and then by RTZ Corporation (now Rio Tinto) in 1987. The second is Ottawa Silica Company, founded in 1900 in Illinois. RTZ acquired the company in 1986 and merged it with Pennsylvania Glass Sand the following year to form US Silica.

4 PE owners in 16 months!

RTZ sold US Silica in 1995 for $120 million, which began a series of PE owners for the company. First up was D George Harris and Associates, who bought the business from RTZ. The eponymous founder died in 2007 and, shortly after, US Silica was sold to Harvest Partners for $200 million. Less than one month later, Harvest flipped it to Harbinger Capital Partners for $300 million. In turn, Harbinger sold the business 15 months later for $337 million to Golden Gate Capital.

Golden Gate took the business public in 2012 in an IPO that valued the business at $900 million.

The business moved its corporate headquarters from Maryland to Katy, TX in 2018.

The agreement with Apollo includes a 45-day “go-shop” period that will expire at 12:01 AM ET on June 10, 2024, which permits U.S. Silica and its financial advisor to actively initiate, solicit and consider alternative acquisition proposals from third parties.

Long- serving CFO Don Merril was terminated in October 2023. Kevin Hough, Corporate Controller, has been interim CFO.–specialty-products-isp-segment-301394507.html


Houston SPAC to take Silica company public in $708m deal

Pyrophyte Acquisition Corp, the Houston special purchase acquisition company (SPAC) , chaired by Dr. Bernard Duroc-Danner (the former Weatherford CEO) is to take Sio Silica public. Sio, based in Calgary, intends to extract high-quality quartz silica, which is used in solar panels, semiconductors and batteries. The deal values Sio at $708 million enterprise value.

Pyrophyte went public in October 2021 in a $175 million initial public offering (IPO). The company said it would seek targets involved in energy transitions. That could mean renewable power generation, energy storage, zero-emission transportation, carbon capture or zero/low-carbon industrial applications.

Originally, Pyrophyte had until April 2023 to complete a deal, otherwise it would have to refund the monies from the IPO. Just before the original deadline date, shareholders approved an extension to April 2024.

The Mine

Sio is developing the Vivian Sand Project, southeast of Winnipeg, Canada, which is one of the highest natural purity silica deposits in the world. Most of the world’s silica is too impure to be used in high-end products such as semiconductors. It can only be used in other products such as agriculture, low quality glass, coatings and energy. Some low-quality silica can be converted to high purity silica but at a cost of $70-$100 per ton (and most of this silica is located in Australia).


The project is estimated to have a net present value (NPV) of $3.9 billion, using a 10% discount rate. The payback period is projected to be just over one year. The transaction values the equity of the company at 19% of the NPV. Developers of copper and lithium deposits that are not yet in production are typically valued at around 50% of NPV.

Sio will use the proceeds of the deal to fund the Phase 1 construction. It expects the project to be operational within 18 months of close.

Political risk?

Interestingly, the investor presentation doesn’t mention that the go-ahead for the project requires the approval of the Manitoba Minister of Environment and Climate. In the Manitoba elections last month, the government switched from the center-right party (Progressive Conservative Party) to the left-leaning New Democratic Party. I suspect the new Minister is in no rush to make a decision.

[UPDATE – 02-16-24 –  The Manitoba government has denied the application to issue an environmental license for the project.]

The deal is expected to close in the first half of 2024.

Investor Presentation


Houston-based mining company upgrades its listing

The stock of Contango Ore is now trading on the NYSE American. It was previously traded over-the-counter. The company has a market capitalization of $181 million.

The company has its head office in the Greenway Plaza area. It engages in the exploration of gold, silver and copper in southeast Alaska. The company’s main operations are a 30% interest in Peak Gold, LLC which leases 675,000 acres from the Tetlin Tribal Council. Contango also owns a 100% interest in mineral rights of another 200,000 acres nearby.

The company has been working to develop its main property since 2009. In September 2020, it sold a 70% share to Kinross Gold for $39 million, including $32 million in cash. Kinross will be operator of the property and will have primary responsibility to generate production.

Contango Ore is seeking other properties in Alaska and, in August 2021, bought the mineral rights to a mine north of Anchorage for an initial payment of $5 million. The purchase price could rise to $30 million.

The chairman and co-founder of Contango Ore is Brad Juneau. He also co-founded Contango Oil and Gas, another publicly-traded company in Houston. He now runs Juneau Exploration L.P.

Rick Van Niewenhuyse was appointed CEO in January 2020 and is an experienced minerals mining executive. Leah Gaines has been the CFO since October 2013. She is also the CFO of Juneau Exploration.

You can see the full list of Houston-area public companies here.

Contango Ore press release



Two Houston blank check companies complete their IPOs

Two Houston-area SPACs (Special Purpose Acquisition Corporations), otherwise known as blank check companies, have completed their Initial Public Offerings (IPO).

ESM Acquisition Corporation

ESM Acquisition Corporation has completed its $300 million IPO.  The company just filed its registration statement in February.

The CEO of the company is Sir Mick Davis, who was the CFO of mining group Billiton plc (the predecessor to BHP Group) and the CEO of Xstrata plc, an Anglo-Swiss mining company that merged with Glencore plc in 2013. Until July 2019, Mr. Davis was the CEO and Treasurer of the British Conservative Party. He was born in South Africa but has British nationality. He is based in London.

The Chairman is John Raymond, who is Co-Founder and CEO of The Energy and Minerals Group, a leading natural resources-focused private equity firm, based in Houston. It manages funds of approximately $10 billion. ESM has its head office in the River Oaks area.

The company is looking for companies that mine commodities that are critical in order to achieve de-carbonization (think batteries for electric vehicles).

Peridot Acquisition Corp II

Peridot Acquisition Corp II upsized its IPO and raised $360 million. The Company’s sponsor is an affiliate of Carnelian, a Houston-based investment firm that focuses on opportunities in the North American energy space.

The company intends to target opportunities and companies that focus on environmentally sound infrastructure, industrial applications and disruptive technologies that eliminate or mitigate greenhouse gas (GHG) emissions and/or enhance resilience to climate change.

The first Peridot Acquisition went public in September with its $300 million IPO. It In February, it announced plans to take Li-Cycle, a battery recycler, public.


ESM Acquisition Corp announces pricing of $300m IPO

Peridot Acquisition Corp II announces upsized $360m IPO



Mining blank check company files for $300 million IPO

ESM Acquisition Corporation has filed for a $300 million initial public offering (IPO).  The company has its head office in the River Oaks area.

The CEO of the company is Sir Mick Davis, who was the CFO of mining group Billiton plc (the predecessor to BHP Group) and the CEO of Xstrata plc, an Anglo-Swiss mining company that merged with Glencore plc in 2013. Until July 2019, Mr. Davis was the CEO and Treasurer of the British Conservative Party. He was born in South Africa but has British nationality. He is based in London.

The Chairman is John Raymond, who is Co-Founder and CEO of The Energy and Minerals Group, a leading natural resources-focused private equity firm, based in Houston. It manages funds of approximately $10 billion.

The company is seeking a “target that is positioned to benefit from the global transition towards a low carbon economy… In particular a target that explores for, mines, processes and/or refines commodities that are critical in order to achieve de-carbonization. Among other commodities, this may include cobalt, copper, graphite, lithium, manganese, nickel, palladium, platinum, rhodium, vanadium, rare earth elements, and/or other directly related raw materials.”

The company plans to list on the NYSE. Credit Suisse is the sole bookrunner on the deal.

S-1 filing – ESM Acquisition Corporation


SEC charge former CEO and CFO of Rio Tinto with fraud

The Securities and Exchange Commission (SEC) has charged Rio Tinto, its former CEO Thomas Albanese and former CFO Guy Elliott with accounting fraud and it’s a doozy.

Rio Tinto is a London-based minerals company that is quoted in London, New York and Australia. Because the company is listed in New York it has to comply with Sarbanes-Oxley and false certifications under that law are a criminal offense.

Albanese became CEO in May 2007 and two months later acquired Alcan for $38 billion. Between 2009 and 2013, the valuation of that business was written down on four separate occasions. Eventually the whole investment was written off.

In 2010, the CEO decided to buy Riversdale, an Australian company that owned large coal mines in Mozambique. He decided that Rio Tinto could rapidly increase production to 30 million tons of coal a year, primarily by getting a permit from the government to barge most of the coal down the Zambezi river. That would justify the purchase price of $3.6 billion. The deal was finally closed in April 2011.

The SEC allege that the in-house due diligence team identified that there was a major risk that the permit would not be granted but the CEO withheld this information from the board when they signed off on the acquisition.

Within 7 months of the deal, Rio Tinto received a double blow. In October its VP of Logistics had determined that the maximum barging capacity was only 10 million tons, not 30. In any case, the following month the Mozambique government declined to issue a permit to barge. The company also over-estimated rail capacity in the country. As a result, the maximum coal production capacity was only 2 million tons, rendering the investment as basically worthless. Because of the debacle with the Alcan acquisition, the SEC allege that the CEO and CFO decided to withheld these facts from the auditors (PwC) conducting the audit for the 2011 report.

By May 2012, just over one year after the acquisition, the Rio Tinto executives in Mozambique had determined that the value of the business was a negative $680 million.

In March 2012, days after issuing the false audit report, the company issued four bonds totaling $2.5 billion. In August 2012, days after the half-yearly results were issued, they raised another $3 billion through three bonds.

In late 2012 the CEO and CFO began concealing information from the audit committee that was looking at possible impairment issues for the 2012 annual report.  Finally in December 2012, a senior executive found out about the withholding of the information and went directly to the Chairman with his concerns on the over-valuation.

The CEO was fired (technically stepping down ‘by mutual agreement’) in January 2013 and the investment was written down to $600 million. The CFO left in April 2013 and the Mozambique business was sold for $50 million in October 2014. The CEO and CFO didn’t get any cash bonuses in that period (because of the Alcan write-downs) but did receive long-term stock incentives.

Albanese, the CEO, receives an annual pension from Rio Tinto worth $738,000 a year. Elliott, the CFO, is a director of Shell and has a role on the UK’s Takeover Panel! (UPDATE: Elliott has resigned as a non-exec director of Shell)

It should be noted that, both the company and the CEO deny the allegations. In a separate statement the UK Financial Conduct Authority said that Rio Tinto will pay a fine of $36 million for breach of disclosure rules by failing to carry out an impairment test.

My take

  • Easy to make profits on a spreadsheet!
  • Don’t let a CEO ego get in the way of due diligence concerns!
  • The executives at the very top can often override system-wide internal controls and procedures. Companies should mitigate this risk.
  • I suspect that many senior executives kept quiet about their concerns on the over-valuations.
  • Hard to deny the allegations in the USA when you have just paid a fine in the UK!


Houston mineral rights company promotes CFO to COO position

Natural Resources Partners LP, a master limited partnership with its head office in downtown Houston (market capitalization $350 million) has promoted CFO Craig Nunez to be the Chief Operating Officer following the resignation of Wyatt Hogan.

NRP primarily owns, operates and manages a portfolio of mineral properties in the US, primarily coal and construction aggregates.

Mr Nunez joined NRP in January 2015 having previously been Treasurer at Halliburton (2006-2011) and Colonial Pipeline (1995-2006) and CEO of Bocage Group, a private investment group.

Replacing Mr Nunez as CFO and Treasurer will be Chris Zolas, currently the Chief Accounting Officer. He joined NRG in March 2015, having previously been the Director of Financial Reporting at Cheniere Energy.

No new compensation details were disclosed. According the 10-K, the departing COO had a base salary of $400,00 in 2016 and received a cash bonus of $450,000. Mr Nunez had a base salary of $375,000 and received a cash bonus of $425,000.