Mines & Money: Private equity eyes mining sector

Lee Downham
  • Publishing Date
  • 05 Dec 2012 6:23pm GMT
  • Author
  • Mining Journal

Private equity funds, sovereign wealth funds and state-owned enterprises are set to play a larger role in investing in the mining industry next year, according to Ernst & Young’s global mining and metals transactions leader, Lee Downham.

Speaking at the Mines & Money conference in London, Mr Downham said preliminary analysis showed private capital investors accounted for 21% of mining mergers and acquisitions in the nine months to September 30 compared with just 12% for the same period in 2011. 

“Private capital investors are increasingly looking at the sector, typically through non-controlling equity stakes,” he said.

“The reasons for investment range from security of strategic minerals supply to pure financial returns from investors who believe the sector is undervalued right now.”

“What we are seeing in the market suggests this will continue into 2013 as capital remains constrained and many corporates focus on cost reduction and recycling capital.” 

He said there was a wide range of private wealth investors, such as state-owned enterprises, wanting to secure strategic minerals supply, downstream customers looking for off-take deals and financial investors seeking opportunistic shorter-term returns.

He added that financial investors were typically taking toehold investments of 10% to 15% while state-owned enterprises were commonly adopting a larger investment strategy.