Private capital rotating into mining and metals
After four-plus years of declines, 2016 was a comeback year for natural resources and the oil and mining industries – with only a couple of exceptions, energy, metal and mineral prices rallied last year.
According to a new report by private capital tracker Preqin, the improving conditions of last year did not filter through to all sectors.
Overall fundraising for natural resources investment actually declined declined by a fifth in 2016 to the lowest since 2012.
Coming off a record 2015, 70 funds raised a total of $58bn for investment in natural resources in 2016 (a figure that could go higher as more information becomes available says Preqin).
In 2015 mining and metals made up a paltry 0.6% of funds raised
But mining and metals enjoyed a much better year. In 2015 mining and metals made up a paltry 0.6% of funds raised with just two funds closing on $400 million in 2015. Last year five funds managed to raise $2.1 billion.
That's still small beer compared to the money going into oil and gas however. Of the top 10 largest natural resources funds that reached a final close in 2016, all 10 are focused on energy-related assets, and all but one focus on projects in the US.
Together, these 10 funds alone raised $38bn, two-thirds of all natural resources capital raised through the year according to the report. So called dry powder – money ready to be invested – for natural resources now total $173 billion. Dry powder destined for mining stood at around $7 billion last year.
In 2017, across natural resources 250 funds are look to raise just under $120 billion. Of those only 13 are primarily focused on metals and mining and are hoping to raise $10bn (although some of $2.9bn for diversified funds could go into mining). The biggest mining-focused fund is China's Power Capital which is seeking $3bn to invest in Asia. Diversified US-based Energy and Minerals Group is looking for $4 billion.
Tom Carr, Preqin's head of real assets products, says there is more diversity present among those funds that are currently in market: "In particular, large vehicles focused on
mining and agriculture may see these sectors account for a greater proportion of activity than in 2016."
Private capital encompasses a range of investment vehicles and strategies including traditional private equity such as buyout, venture capital and turnaround funds, private debt including distressed debt and direct lending, and private real estate, infrastructure and natural resources funds.
A total of $602bn were raised by 1,228 funds across all strategies and sectors in 2016 according to Preqin data.