Ernst & Young: Private capital pursuing mining and metals

By Rob Starr, Content Manager, Big4.com

Increasing interest in mining and metals from private equity funds, sovereign wealth funds and state-owned enterprises is set to be a key trend in the sector in 2013, according to Lee Downham, Ernst & Young’s Global Mining & Metals Transactions Leader.

Further analysis of private wealth investments in the sector suggests there are a wide range of investors – from state owned enterprises looking to secure strategic minerals supply through to downstream customers looking for offtake, and financial investors seeking opportunistic shorter term returns or counter-cyclical value hunting.

Downham says typically financial investors are taking “toehold” investments of 10% to 15% while state owned enterprises are commonly adopting a larger investment strategy.

“Outside the largest companies, financing remains extremely difficult, which when combined with low equity valuations is creating opportunities for those with cash – and increasingly this is privately held capital,” says Downham.

“For junior miners, vulnerable to unsolicited takeover, some of these investors can provide much-needed capital not available to them on debt and equity markets.”