Fox Marble Holdings PLC (LON:FOX) Chief Executive Officer Chris Gilbert caught up with DirectorsTalk for an exclusive interview to discuss their acquisition of Gulf Marble Investments Limited.
Q1: We’ve just seen the announcement of the acquisition of Gulf Marble Investments Limited, can you explain how the arrangement came about and what its provided for Fox Marble?
A1: About 3 or 4 years ago now we were lucky enough to acquire the property in Macedonia which contains a white marble, it’s a very very popular, very desirable white marble. It was the marble that used to build the Sheikh Zayed Grand Mosque in Abu Dhabi. White marble is generally very attractive and very scarce. So, we were offered the opportunity to acquire this quarry so of course we grabbed it with both hands and then obviously we needed to develop it.
We were approached by Gulf Marble who said let us be your joint venture partners and we will contribute the money needed to develop the quarry. So, we entered into that arrangement under the terms of which they were due to receive 40% of the gross revenues of the income of this quarry for which they provided just under €2 million in capex or opex in order to get the quarry open and developed and producing white marble.
This is the arrangement we entered into in order to do this and get us into the white marble business which is something that provided us not just with a lot of status but this particular material, which is very much in demand all round the world, and that’s how we came into this arrangement with Gulf who are based in Dubai.
Q2: So, what did it allow you to achieve?
A2: Basically, we got the quarry opened. We applied the equipment, we were able to go out and buy all the very expensive equipment that you need to open a quarry and develop it, it bought us the time to develop the quarry from a standing start, it was literally a field when we acquired it. It allows us to turn this site into a commercially-viable quarry, capable of producing this material which we’re now extracting from this quarry site. So, our relationship with Gulf allowed us to do all of that.
Q3: What is the status of the quarry now Chris?
A3: The quarry is currently open, obviously, it’s producing marble in commercial quantities, we’ve got about 3,000 or 4,000 tonnes out of the ground currently as a cumulative total.
The status of the quarry in the world is that people are coming to visit it, they’re inspecting the blocks, they’re buying blocks, they’re taking it away.
We’re also shifting a lot of blocks from the quarry in Macedonia up to our factory in Kosovo which is now fully operational. So, we’re able to take these blocks and process them into slabs and cut-to-size and we’ve got significant orders for this material in that form so transformed into tiles and slabs, and that’s obviously very exciting for us going forward.
Q4: What is the implication then of the announcement that you made?
A4: What we’ve done here is we have entered into an arrangement that we signed off, the day before yesterday which is why it was announced this morning, under the terms of which we have acquired Gulf Marble, we’ve bought Gulf Marble the company with the rights we had granted it earlier as part of the original arrangement.
So, the 40% gross margin revenue that we were required to pay away under the terms of that agreement, we have now reacquired back in Fox. We now have the majority of the revenue from the quarry through the ownership of Gulf Marble and all of the rights that were granted to it. It was the simplest thing to do to just acquire the company which is what we’ve done so it’s now a Fox Marble company and all of the benefits Gulf had, we now own.
We are basically paying back Gulf Marble’s owners the money they invested in the quarry with a small interest payment, Libor plus 1.5%. They invested an original €1.7 million amount and that we either repay them in 2 years’ time or at their election, they are allowed to convert that into shares at Fox Marble so obviously we think in 2 years’ time our share price will make that a very successful arrangement for them. In the meantime, we get the opportunity to pay them back in cash if that what we decide to do.
So, all in all, this is a good arrangement for us, it allows us to increase the gross revenues from this quarry, from now on basically.
Q5: What do you expect the impact will be going forward?
A5: The quarry is now in a state where we think that the production rates will meet the demand that this marble naturally has around the world so next year, we will start to see these gross revenues feed through into our bottom line and of course, they’re increased by a gross 40% of those revenues.
So, we expect this to have a very beneficial and positive effect to our bottom line, particularly in 2019 when we get back to it after the winter shut down.