Lundin: The Biggest Family in Natural Resources

Do you know the Lundins?

Unbeknownst to most U.S. investors, a single family has been behind many of the largest natural resource discoveries and natural resource deals of the last 80 years.

Since 1976, they’ve discovered the largest natural gas field in the world, oil fields that have generated more than 300 million barrels of oil, and several of the world’s largest gold deposits. They all became billionaires in the process.

Today, this family controls 15 companies located in the U.S., France, Russia, China, and more. Every year they produce more than a billion dollars’ worth of oil, gold, uranium, nickel, diamonds. Their name is the Lundins. And just like the Rockefeller or Carnegie empires, their fortunes began with a single self-made man: Swedish patriarch, Adolf Lundin.

If you’ve never heard of Adolf Lundin, it’s not surprising. The self-made Swedish billionaire invested primarily in natural resource companies outside of the U.S. Because of this, his name is rarely known outside of natural resource circles.

However, to anyone involved in natural resources investing, Adolf Lundin is something of a god. He started off working for the Royal Dutch Shell Group fresh out of school. Later he joined Sweden's Axel Johnson Group. And in 1971, he left the latter to found his own firm. It was during this period of his life that the Lundin name became legendary.

Between 1976 and 1999, Adolf Lundin made four of the largest natural resource discoveries in history. In 1976, he discovered the North Gas field offshore of Qatar: the largest gas field in the world. This alone would cement the name Lundin in the pantheon of great resource discoverers.

However, Adolf’s success was only beginning. In 1998, he discovered both the En Naga oil field—a 100-million-barrel discovery in Libya—and Block PM-3—a 144-million-barrel discovery offshore of Malaysia. The following year, at age 67, he discovered the Thar Jath oil field: a 150-million-barrel discovery in Sudan.

These discoveries made Adolf famous. But it was his ability as a dealmaker that made him rich. The natural resources industry is typically split between two groups: the financiers and the geologist/ explorers. Adolf Lundin was both.

He built up Lundin Oil and sold it in 2001 for $480 million. Musto Exploration, a gold company he owned shares in, was sold to Rio Algom for $500 million. And another gold company, Argentina Gold, went to Homestake for $300 million. By the time he retired from exploring, Adolf was a billionaire. And he’d made many investors’ fortunes as well.

It sounds almost too simple, but anyone who bought shares in Lundin’s companies and held long-term would have made a fortune. Investing in natural resource companies, more than any other sector, is about putting your money with the right people.

On the one hand, you need expert geologists and wildcatters capable of discovering major finds. But you also need knowledgeable financiers who can put together the capital to start production or arrange a buy-out. Since Adolf Lundin was talented at both, his involvement in a company almost always resulted in large profits.

Atacama Minerals (ATAAF.PK), a iodine/nitrate company he became involved with in 1996 saw its share price rise 250% from 2000-2007 alone. Over the same time period, another Lundin venture, Canadian Gold Hunter [TSE:CGH], rose over 1,000%.

All too often investors focus on quarterly estimates and profits. But in reality, the quality of a company’s management is far more important that short term gains. Warren Buffett (BRK.A)(BRK.B) routinely raves about the quality of the CEOs that work at Berkshire subsidiaries. And if you can find yourself a couple of guys like the Lundins, you, like Buffett, will be filthy rich in no time.

Comments

[fxtrader07:]

Hi graham,

interestingly, you don't say a single sentence about Lundin Mining (LMC). What do you think of it? a newbie investor who never heard of the Lundins before might come to the straight conclusion that investing in LMC was similar to the stellar deals of the past that you named. But then again, LMC is down 60% from its IPO price. What gives?

2008 Jul 31 11:35 AM

[ValueInvestor:]

I followed EuroZinc Mining before they were acquired by Lundin Mining and let me tell you Lundin did a terrible job. EZM was a terrific mining company with excellent margins and a huge mine with incredible expansion possibilities. Standing alone they would be a great mid-tier miner. The Lundin's acquired the company at an incredibly cheap price (I believe the EZM CEO was in their pocket and kinda pressured the BOD to give a favourable recommendation). The purchase was fully funded by issuing LMC shares which in turn diluted the company so much that their per share earnings are now lower than they were before even though they got the incredibly lean and profitable EuroZinc.

2008 Jul 31 12:12 PM

[InvestingPe...:]

Like fxtrader07, we're surprised you didn't mention a work about Lundin Mining Corporation (LMC). Nevertheless, its in our opinion that the company remains undervalued in light of its holdings and reserves. Our full recommendation can be found here: investingpennies.com/i...

2008 Jul 31 01:24 PM

[yellowman98:]

are you telling a story so people will buy a stock which you paid for at a higher price? is this a pump and dump?

why don't you disclose what interest or you or GPS capital have in LMC....

how about starting with whether you own shares or what your cost basis is?

2008 Aug 01 03:31 AM

[fxtrader07:]

@ValueInvestor: LMC took a substantial goodwill-writedown on the ezm acquisition which would signal that they rather overpaid for it. and zinc prices have gone sharply down ever since. Coupled with the surging euro that was as bad as it could possibly get for eurozinc/lundin. so i would very much question your interpretation.

2008 Aug 01 03:38 AM

[Periploi:]

I've owned LMC since before the EZM buyout. I'm not a billionaire yet. I keep thinking someone will buy it, FCX, RTP, RIO for example, but those guys apparently are smarter than me. Go figure.

2008 Aug 01 09:43 PM