Oct. 5, 2016


Dean Cunningham

Oman

Dean Cunningham

CEO, Kunooz Holding

"I divide the Omani market into two mining sectors: bulks and metals."

BIO

Dean Cunningham is a mining engineer who has actively worked in private equity and corporate finance over the past 26 years. He was previously the Managing Director of Auroch Minerals NL, an ASX an exploration company in Mozambique. He held the position of Executive Director, Corporate Finance for Basil Read and simultaneously held the position of CEO of TWP Investments, the investment arm of TWP Holdings, investing in Africa. He ran and owned his own mining advisory and stock broking firm, Micofin Corporate Services and Rice Rinaldi, providing advisory, capital raising, and research services to African-based mining and financial institutions. He is currently the CEO of Kunooz Holding.

What are the main activities of Kunooz Holding's various subsidiaries?

We have five subsidiaries in Muscat, including a business that supplies aggregate and sand to the construction and road industries, a marble quarry, and a polishing facility where we produce polished slabs, tiles, steps, and raises for both the local and international market. In Salalah, we have business involved in the mining and exporting of gypsum, ready-mix, meaning the production of concrete products and paving blocks, and the sale of aggregates and sand to third parties. Supporting these two business and our Muscat operations is our logistics business, which undertakes all transportation and logistics internally and for third parties. Our business is roughly 75% export orientated and 25% local. In addition, we have two associates (investments). The first is Majan, which produces and exports around 4 million tons of limestone per annum, which also supplies our investment in Carmeuse Majan with raw material, which is then converted into lime for the export market. We export roughly 45-50% of all exports from the Port of Salalah.

What are the holding's production capabilities?

For marble, we produce and sell about 42,000sqm of polished and cut product per month. We do about 1.2 million tons of aggregates and sand on an annual basis. In the ready-mix business, we produce roughly 250,000 cubic meters of concrete on an annual basis plus blocks, curbstones, and aggregate and sand. We produce about 2.4 million tons and 4.2 million tons of gypsum and limestone, respectively, on an annual basis. At Carmeuse Majan we have one kiln commissioned producing about 150,000 tons of lime per year.

How has your transport network expanded beyond serving your own subsidiaries?

We have taken the next step in this regard and brought on a logistics graduate to turn our captive transport business into a logistics and warehousing hub business. We now provide transport to all of our subsidiaries and for our clients between Salalah and Muscat in both directions. We are considering a warehousing facility in Muscat to centralize our activity. We are looking at this on a regional basis, but our initial focus is on Oman. In terms of export markets, a big market for us is India. It is close and has huge urbanization and infrastructure projects, which provide good demand for our gypsum and limestone. We also export to Vietnam, Thailand, Australia, and the east coast of Africa, including Mozambique, South Africa, and Tanzania.

Do you see room for growth in the mining sector, and what measures do regulators need to adopt to increase overall production and competitiveness?

I divide the Omani market into two mining sectors: bulks and metals. It is all about economies of scale and, when the two are divided into different projects, the latter comprises a relatively small percentage. This means in metal projects when building a mining operation, it is going to be based on a number of smaller satellite mining operations that focus on a centralized processing facility. That brings a lot of risks in itself and I am not that positive on the outlook for the metals with scrap constituting a significant proportion of annual supply and demand fundamentals. For example, steel scrap comprises about 50%, copper is about 45%, and PGMs are about 40%. I do not see massive price movements in these commodities with global GDP growth at current levels and most economies are out of synchronization. Cumulative global growth needs to be above 4% to stimulated additional demand to strength metal prices from current levels. As for the steel industry, it is associated with urbanization and infrastructure projects. It's our opinion that Oman should focus on the bulks, like gypsum and limestone. These are world-class assets in Oman and the government needs to get aggressively behind this to make it easier for the big players to do their job, to grow, and to create new markets. That also means more infrastructure from an export capacity perspective because constrained logistics will erode the premium benefits from the quality of the assets. Consolidation to get economies of scale should be the main driver in Oman and support for the big players who have the technical expertise, financial capacity, and the existing operations to expand.

What are some principal impediments to growth in the mining sector in terms of attracting investment or bureaucratic issues?

The government has been historically slow in granting licenses and fixing certain problems; however, a new CEO has been appointed to run the Public Authority of Mining and he is in the process of addressing all of these historical issues. Current and future mining operations and potential investors require certainty in sustaining and developing new and existing mining operations. It should be noted that investors look at the global opportunities and are not just looking at Oman. Ease of access, legal tenure, and stable investment environments with low risk (relative to the mining sector) will be their focus and will attract investment. Any volatility in these key areas will see investors looking at alternative investment opportunities.

Kunooz Holding plans to hold an IPO in the near future. What is the current strategy behind your IPO?

The government has encouraged family businesses to hold IPOs in Oman. The market is relatively small and this gives the public the opportunity to invest in high growth areas. It is a distribution of the mineral wealth into the local economy. We need to continue to expand our assets and take advantage of the expansions and contractions in the markets of India on an annual basis. We are currently in discussions with a sovereign wealth fund to take a portion of our equity pre-IPO. The IPO date is going to be dependent on the market and perception of the market in the next couple of years. I think we will have the IPO at some point in 2017.

What is your vision for the next 12 months for Kunooz Holding?

We are still in the process of converting a family business into a professional organization, so for us the focus will be internally on setting goals and achieving our budgets. We will be focusing on our markets and our customers, creating better long term relationships, and we are working making our assets sweat. Attracting talent into our businesses to make us globally competitive. Our aspirations are not just local, global.

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