One of the world’s biggest mining events kicked off yesterday: the Mining Indaba in South Africa.
And one of the initial presentations at this big show provided some shocking numbers on mining finance — showing that private equity investment in the minerals sector is seeing an unprecedented surge.
The research came from natural resource specialist law firm Berwin Leighton Paisner (BLP). Who told Indaba attendees that their data shows private equity buying in mining took a big jump during the past year. Related: Tesla Falling Out Of Favor With Investors
All told, BLP’s numbers showed that private equity poured $3.15 billion in equity into mining during 2015. With that amount coming through 119 separate deals in the space — representing a stunning 238 percent increase from the number of transactions seen in 2014.
BLP noted that private equity buying is thus becoming more pervasive throughout the mining business — with such buyers now doing smaller and more numerous transactions, as opposed to the few large deals that were normal in the past. During 2015, the average PE deal value was $26.5 million, down from $40 million in 2014.
And there were some other interesting trends that BLP noted during the past year. Related: Despite Huge Losses Oil Companies Reluctant To Shut In Production
For one, a definite focus on gold. With 36 percent of all private equity deals targeting this metal.
Copper was also popular, seeing the highest total level of investment — with $868 million worth of private equity dollars spent on the red metal.
In terms of location, North America was the favorite for private equity buyers — with $758 million invested in this jurisdiction.
BLP also said that 2015 saw the rise of more complex private equity deals in the mining space. With 11 percent of transactions having exposure to the underlying commodity, through mechanisms such as royalties. Related: Genel Producing Oil For $1 Barrel, Investors Still Cautious
The firm also said that 18 percent of private equity investments were coupled with some form of debt. Which–when added to equity investments–brought the 2015 deal total to $4.53 billion. More than doubling the investment amount for 2014.
All of which shows that private equity is a major new force in mining finance — although it may take some creative dealmaking for project owners to access this cash. Watch for more PE investments coming in 2016.
Here’s to alternatives
By Dave Forest
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