London Mining GC: Ground rules
14 April 2014 | By Kate Beioley
17 October 2014
17 October 2014
17 April 2014
14 April 2014
7 March 2014
London Mining GC Rohit Bhoothalingam had to show his grit last year for a legal battle worth more than the company itself
Digging holes is what mining companies do best. But London Mining general counsel Rohit Bhoothalingam must have felt he had landed in one last year when he took up a legal battle worth more than the market cap of his company.
The mining group is no stranger to litigation but its $650m (£390m) battle with joint venture partner Wits Basin Precious Minerals will have been unsettling. The £123.3m AIM-listed company had pursued Wits Basin over a $1.2m loan obligation. Bhoothalingam found himself fighting the claim in Minnesota rather than his preferred UK base.
For the cross-border dispute over a Chinese mine he lined up a characteristically mighty roster of law firms. The company turned to Dorsey & Whitney in the US and Travers Smith in the UK as well as Jun He in China and a host of offshore firms. The other side had turned to Mas-lon Edelman Borman & Brand as well as DLA Piper in China.
The trial may sound alarming, but the lawyer says that “the Wits case was huge in terms of the long hours and high stakes, but interesting in terms of strategy as a multi-jurisdictional case – which jurisdictions were going to be put in play”.
The case settled and Bhoothalingam is pretty pleased with the result. His adversary walked away with the rights to the Chinese mine and all claims have been dropped, helping bring down the legal budget by 70 per cent this year.
After all that excitement it is perhaps hardly surprising that, when we meet, the lawyer seems less than devastated that he lost his mobile phone at the weekend.
London Mining was not always a heavyweight. When Bhoothalingam joined from hedge fund Navigator Asset Management Capital Partners in 2008, it was three years old and had nine employees. That was about to change.
“The end of 2008 was a tough time – Lehman [Brothers] had just collapsed and hedge funds were doing really badly,” he says. “But ironically [co-founders] Graeme Hossie and Chris Brown had bought this mine for $120m in Brazil in 2007 and sold it for $810m to ArcellorMittal a few weeks before the crunch hit.”
The group paid over 50 per cent more than London Mining’s market value for the Brazilian business, handing the co-founders “almost a billion dollars to play with, for a young company”.
“They said ‘we have a great opportunity because mines are being sold due to lack of financing – the cash available would allow us to buy attractive assets’,” he says.
Now the company has around 2,000 employees and an operating profit of $22.6m in 2013.
However, Bhoothalingam is still only one of two lawyers based in London. It is his second in-house role after five years at Navigator.
The Indian-born lawyer studied at Cambridge and was offered a training contract at legacy Herbert Smith, which he turned down to study securities law at Georgetown University. Jobs at Orrick Herrington & Sutcliffe and Brobeck Phleger & Harrison in the US followed, before he returned to the UK.
“Moving in-house was a different experience,” he says. “At law firms everyone is specialised and the moment you veer off-topic they say ‘I’ll just get someone from down the corridor’, which is fair enough, but the challenge here is piecing it together.
“You use almost every aspect of the law in a natural resources company. You’re in so many geographies, employing so many people and you’ve got to deal with risk, geography and the environment. You’ve got to build huge infrastructure and deal with a lot of litigation.”
Bhoothalingam says that 2009 was “the year of M&A”. The company bought mines and businesses in Colombia, South Africa, China, Mexico and Chile before listing on the London Stock Exchange.
The next year was “the year of financing”, as the company fed cash to its capital-hungry plans.
“Over 2010, 2011 and 2012 we probably did every type of financing you could possibly imagine,” says Bhoothalingam.
It started with syndicated loans from its major banks, including Standard Chartered, and moved on to convertible bonds, royalty-based financing and offtake financing.
In 2011 Glencore signed a five-year deal for 1.6m tonnes of iron ore over five years for a $30m upfront payment. Bhoothalingam values that deal at about $100m in total.
With the company’s Sierra Leone mine weighing in at a cost of $350m and the next stage set to cost about $280m, cash is king. The mine produces around 5 million tonnes of iron ore per year.
Creative financing is the name of the game at London Mining as its shareholders, City institutions such as BlackRock, Schroders, Investec and Goldman Sachs, do not want to see their stakes diluted.
To push through heavyweight finance deals Bhoothalingam needs strong external relationships – and lots of them.
Travers Smith is his primary adviser, with corporate chief Spencer Summerfield running the relationship.
“We do everything in-house, but to get targeted advice we call on the greyhair at the firm,” he says. “Spencer Summerfield is worth his weight in gold in experience so it would be remiss not to call on him, but we don’t need him to sit in the room with us for a whole day of negotiation.”
He turns to Travers for most external finance advice – and gets a healthy discount in the process – but Bhoothalingam says a lack of project finance and mining focus means Milbank Tweed Hadley & McCloy and Clifford Chance pick up juicy roles too.
Bhoothalingam often turns to Milbank project finance head Phillip Fletcher and projects group mentors John Dewar and Cathy Marsh. Meanwhile, on the lender side the company uses Clifford Chance energy partner Russell Wells, construction and banking partner Jeremy Connick and banking and projects partner James Pay, who advise Standard Chartered among other lenders.
As well as with US and UK lawyers, Bhoothalingam has relationships with firms around the world.
He is eyeing a deal with Linklaters in China, although nothing has been decided. He also uses Basma and Macaulay, which London Mining now turns to in Sierra Leone. The company also uses Jun He in China and Werksmans in South Africa, plus a host of offshore firms including Walkers.
“Local counsel in emerging jurisdictions are often ‘the wise ones’ of a country in terms of knowing what’s happening, who to go to and how you can network,” he says. “It’s not how you traditionally use a law firm over here, so I’ve got go-to lawyers in the countries we operate in or have operated in.
“It’s really about finding the right person because it tends to be an individual rather than a firm, in the way we know it here.”
Pick and mix
Despite the swelling number of contacts, Bhoothalingam does not operate a panel. He does, however, put work out to tender, and always drives a hard bargain.
“Whether it’s for legal providers or to buy a widget, we go out to tender to maintain transparency,” he says.
This was true of a recent consideration about a round of syndicated finance. He approached Latham & Watkins, Cravath Swaine & Moore and Paul Weiss plus two other firms, but they all came back with estimates of around $1m for the job and in the end market conditions meant the board decided not to go for it.
So for now the company will tick along as normal, which means another year of litigation and working “at the ore face”.
Bhoothalingam says he loves his job but is looking forward to an upcoming trip to the Maldives.
“We’ll be on a boat, so I don’t know if there’ll be any mobile reception,” he says, with more than a trace of relief in his voice.