Resources rockstars

Take Mick Davis, former chief executive of Anglo-Swiss mining giant Xstrata. A chartered accountant from South Africa, Mr Davis began his career at Peat Marwick, the accountancy group that expanded to become KPMG. He later became chief financial officer of a company he helped turn into the resources behemoth that is now BHP Billiton (BLT). And, in 2002, at the bottom of the last major mining downturn, he joined Xstrata where he led the acquisition of Glencore's (GLEN) unloved coal assets and listed the company's shares in London.

Over the next 10 years, Mr Davis spearheaded a string of acquisitions and mergers that increased Xstrata's market capitalisation a hundredfold to $55bn. For investors, this meant a ninefold share price rise from 2003 to the heady days of early 2008, and a threefold share price rise from the dark depths of the financial crisis to Glencore's drawn-out takeover of Xstrata last year. Mr Davis has since raised $1bn for a new private mining venture, X2 Resources, and his backers are betting he has got his timing right again by shopping for mining assets at another low point in the commodities cycle.

True, very few natural resource executives stack up to Mr Davis either in stature - his imposing height and voracious appetite for acquisitions earned him the nickname 'Big Mick' - or in sheer magnitude of success. But there are dozens of seasoned professionals who repeatedly line the pockets of retail investors by regularly achieving commercial success with their ventures.

With mining equity valuations approaching three-year lows, and oil and gas equities also depressed, now could be a good time to start digging around for the bargain-priced companies run by management who have successfully grown or sold resource venture across several commodity cycles.

We take a look at 10 such executives below, and highlight a few key bull and bear points about their current businesses.

Algy Cluff

John 'Algy' Gordon Cluff is a man who needs little introduction to longstanding Investors Chronicle readers. The septuagenarian has founded four successful resource companies during a City career spanning the best part of four and a half decades. He launched a fifth venture, Cluff Natural Resources (CLNR), in the spring of 2012.

The eternally restless entrepreneur stepped down as chairman of his previous company, Africa-focused gold miner Amara Mining (formerly named Cluff Gold) in April 2012, after nearly a decade in charge. Since then, the price of gold has collapsed and has sent the company's share price down from 80p to just 15p.

Mr Cluff readily admits his decision to leave Cluff Gold was not a direct result of anticipating the looming gold price crunch, but was instead driven by a wish to start a new, leaner venture. Still, you can't fault the resource legend's impeccable timing.

Cluff Natural Resources sees Mr Cluff return to the North Sea, where he first made a name for himself in the 1970s and 1980s after helping to discover the Buchan oil field. His new company is entirely focused on 'deep underground coal gasification', or deep UCG, which involves underground coal seams being burned in a controlled environment deep underground, with the resulting gas (syngas) brought to the surface via a production well. The technique has been tried and tested for decades, but it has never really caught on with the industry because of its high costs of production.

IC view: The advancement of horizontal drilling could change deep UCG's prospects and Cluff has tied up five UCG licences across the UK, where the company will eventually look to carry out test drilling - if it can ever get past environmental activists who confuse it with fracking. But until drilling is imminent, Cluff Natural Resources will remain merely on our watchlist.

Peter Levine

Peter Levine made serious money - both for himself and his investors - when he sold Imperial Energy, a Russian oil producer, to an Indian oil group for £1.4bn ($2.1bn). Imperial's share price rose an astounding 4,700 per cent between listing in 2004 and being taken over in 2009 - soaring from 25p to roughly 1,200p. And investors in his new company, President Energy (PPC), are betting he can do it again.

We're not so sure. Mr Levine is well connected in Kazakhstan and Russia, but President Energy is currently exploring risky frontier oil prospects in Paraguay. Prospects like these often have less than a one-in-10 shot of success. And speaking with Mr Levine last year raised a few red flags. He told Investors Chronicle he was confident President will soon discover enough new resources to make Paraguay self-sufficient in oil in as little as three years. Indeed, he said he believes the country could actually become an oil exporter shortly after. In reality, President has no idea yet if its licences contain a significant oilfield or not - only drilling will determine that. Until then, it is merely an exploration target on a licence where previous drilling failed to find hydrocarbons. All in all, his statements seemed far too bullish to us given the early stage of the project and the fact that Paraguay currently produces no oil at all. It smacked of hype and heavy promotion.

Still, at least Mr Levine is putting his money where his mouth is. Last year he spent hundreds of thousands of pounds buying millions more President shares, bringing his total holding to 71.9m shares, or 27 per cent of the company.

IC view:

Exploration drilling is due to begin in the second quarter of this year, but we think there are several exploration companies out there with much better risk-reward ratios. However, if you don't mind leaving a bit of risk capital on the table, it could be well worth a punt.

John Craven

Petroleum geologist John Craven has been in the upstream oil and gas industry for nearly four decades, but his status as a resource executive has really only climbed into the stratosphere these past few years. The oilman presided over a 20-fold jump in value as chief executive of Cove Energy, a Mozambique-focused gas explorer. He ultimately sold the company to Thailand's PTT Exploration & Production for $1.9bn after a bidding war with Royal Dutch Shell (RSDA). Prior to Cove, Mr Craven was the founder and chief executive officer of Petroceltic International (PCI) and worked in a senior role at Dana Petroleum.

Investors in Cove's 2009 initial public offering at 12p a share would rightfully have little hesitation putting some of their winnings from the 240p share sale into Mr Craven's new exploration vehicle, Discover Exploration. Unfortunately, it remains privately held for now as it explores for oil and gas off the coast of New Zealand with America's Anadarko Petroleum.

In the meantime, there are two ways for Aim investors with a high tolerance for risk to invest in a venture backed by the experienced geologist. Mr Craven is currently the chairman of unconventional energy explorer Falcon Oil & Gas (FOG), which is looking to exploit shale gas in Australia, Hungary and Australia. He also sits on the advisory board of Fastnet Oil & Gas (FAST), which is exploring for oil in frontier regions such as offshore Morocco and offshore Ireland.

IC view: Fastnet's share price has retreated in recent months, but the company could soon benefit from an upcoming drill programme offshore Morocco. The company is well capitalised, boasts a good exploration strategy and has a solid management team in place. Falcon Oil, on the other hand, is having real trouble crystallising value from its shale gas assets, which are proving expensive and difficult to drill. We like the company's new strategy of farming out its assets to larger players with deep enough pockets to give drilling a real go, but until formal agreements are in place the company is merely 'one to watch'.

Phil Edmonds & Andrew Groves

Former England cricket bowler Phil Edmonds has spun several companies onto Aim during his long innings in the City. The most notable, if controversial, venture was Central African Mining & Exploration Company (Camec), which he and partner Andrew Groves sold to Kazakh miner Eurasian Natural Resources Corporation (ENRC) for £584m in 2009. Mr Edmonds faced some criticism during Camec's time for the company's lucrative business arrangements with a state-run company in Zimbabwe, as well as his willingness to cosy up to Robert Mugabe's government. But for shareholders, Camec proved a treat: its share price climbed from 3p upon listing in 2002 to a high of 82p in 2006. The 2008 financial crash sent the company's share price tumbling, however, before it stabilised at 20p a share during the sale of the business to ENRC. ENRC then delisted from the London Stock Exchange late last year in the throws of a corporate governance scandal.

Prior to Camec, Mr Edmonds and Mr Groves co-founded African Platinum, which was sold to Impala Platinum for around £297m in 2007. Central African Gold was another of their ventures, albeit a briefer and much less successful one.

These days the pair run a small stable of Aim ventures focused on Africa including: Agriterra (AGTA), an agricultural business focused on cattle, maize, palm oil and cocoa; Sable Mining Africa (SBLM), an iron ore explorer with a promising project in Guinea; and Africa Oilfield Logistics (AOL), a start-up oil services provider with big plans for growth. Until 2012, Mr Edmonds and Mr Groves were also at the helm of African Medical Investments (AMEI), but it was suspended from trading in August 2013, having not published its financial accounts for some time. Andrew Groves is also a non-executive director of African Potash (AFPO), a potash explorer with acreage in the Republic of Congo.

IC view: Sable Mining looks the pick of the bunch to us. The company's high-grade Nimba project has a sizeable resource, is close to available rail and infrastructure, has good metallurgy, is almost fully permitted and most importantly these days, would be relatively cheap to put into production. We would prefer to see the company sell the project to a well-heeled partner for a modest price than for Sable to try to go it alone, however.

Tom Cross

Born the eldest of seven brothers and sisters into a working-class family in East London, oil and gas veteran Tom Cross is not shy of putting in a hard shift of work. While at school, he took four part-time jobs to help support his family, reported Andrew Cave at the Daily Telegraph in media-shy Mr Cross' first ever interview with a national newspaper in 2010. Mr Cross graduated with a first-class engineering degree from Exeter University before finding wealth and success in the oil patch.

"I've bought many companies and I've sold three," said Mr Cross - the latest of which, Dana Petroleum, Mr Cross sold to a Korean oil group for £1.87bn in 2010. It was the best price paid for any independent UK oil exploration company. Indeed, shareholders saw Dana's share price climb over 1,000 per cent from the time he founded the company in 1994.

Mr Cross is setting out to create Dana II with his new venture, Parkmead Group (PMG). And he seems well on the way to doing so. Over the past two years, Parkmead has made half a dozen transformative acquisitions that have boosted oil production 400 per cent and added profitable gas production from the Netherlands. Parkmead also successfully completed horizontal appraisal drilling at the Platypus field, made a new discovery with the Pharos exploration well, and has been awarded 25 exploration licences across the UK Continental Shelf.

IC view: Steady production growth, minimising risk and focusing on good quality assets in safe jurisdictions is what Parkmead is all about. We tipped the shares a strong 'buy' in both October 2012 and December 2013 and continue to view them as a great long-term addition to your portfolio. The shares have had a strong run recently, but periodically drift down as news flow or sentiment peters out, so don't be afraid to bide your time to 'buy the dips'.

Colin Bird & Jan Nelson

Colin Bird has founded and floated several mining companies in the UK, Canada and South Africa. Arguably his most successful venture was Zambia-focused copper-nickel explorer Kiwara, which he sold to Canada's First Quantum Minerals (FQM) for £158m in 2009. Among the many hats he wears these days, Mr Bird is chairman of Jubilee Platinum (JLP), a South Africa-focused platinum explorer; chairman of rare earth explorer Galileo Resources (GLR); chairman of Canada-listed but Chile-focused Polar Star Mining; and chairman of Chile-focused phosphate and copper-gold project developer Xtract Resources (XTR).

Mr Bird recently brought in experienced mining engineer Jan Nelson as chief executive of Xtract Resources. The pair have worked together before. At Pan African Resources (PAF), Mr Nelson transformed the company from a small shell into a 200,000-ounce-per-year gold producer and dividend payer. Pan African would have represented a fabled 'ten-bagger' had you held the shares from 1.5p in the early noughties to an all-time high of 20p in late 2012.

Mr Nelson controversially left Pan African for 'personal reasons' last year and joined shell company Xtract shortly thereafter. Xtract had acquired a phosphate project in Chile from Mr Bird's Polar Star Mining and only recently signed an agreement to acquire a nearby copper-gold mine that is currently in production.

IC view: Admittedly, none of Mr Bird's more established ventures interest us at this point in time. A quick glance at the depressed share prices of nearly all his companies suggests value could be on offer somewhere, but we can't easily separate the wheat from the chaff. And, while we would back Jan Nelson to slowly build up Xtract into a profitable producer over the medium term, the venture is simply too early-stage for us to advise buying right now. One to watch.

Ethelbert Cooper

A Liberian with long-standing links to senior politicians and businessmen in West Africa, Ethelbert Cooper has built up a surprisingly strong presence in the City since co-founding African oil group Afren (AFR) in 2004. He currently acts as a strategic advisor to the £1.8bn company, but maintains a large shareholding in Afren. Corporate governance has been a touchy subject for Afren since the Financial Times lifted the lid last year on how Afren directors and insiders held significant personal stakes in an Afren subsidiary, First Hydrocarbon Nigeria, which was previously undisclosed. They have since converted their private interests into Afren shares. According to Bloomberg, Mr Cooper is a director of First Hydrocarbon Nigeria.

Mr Cooper also plays an active role in the African iron ore sector, most notably through his involvement in a private venture named African Iron Ore Group (AIOG). Here he is able to leverage his strong political connections across the continent to finance and build much-needed iron ore rail infrastructure in West and Central Africa. AIOG has partnered with Aim-listed International Mining & Infrastructure Corporation (IMIC) to assemble a portfolio of stranded iron ore projects across West and Central Africa, where he hopes to unlock value through building infrastructure.

In a similar vein, Mr Cooper is working with Aim micro-cap Gasol (GAS) to advance stranded natural gas assets in West Africa by helping to build gas distribution networks. The company is currently severely undercapitalised, however.

IC view: Afren and IMIC's opaque shareholding structures are cause for concern, and we're generally uncomfortable with the huge political risks involved in investing in natural resource projects across Nigeria and West Africa. For investors willing to take on such risk, Afren is undoubtedly the best of the lot and, indeed, the company has been a very successful long-term IC speculative buy tip since 2009. Afren's share price soared to a five-year high in 2013 and we currently rate the shares a 'hold'.