The ‘now or never moment’ for private equity in mining

With the mining sector suffering asset sell-offs, cost cutting, and dried-up public funding, now is the time for private equity funds to increase their industry presence by pouncing on low valuations.

“There are a lot of buying opportunities, and for those who have the funds, you might find there is less competition, and that is what private equity looks for – a good deal,” Jason Burkitt of PricewaterhouseCoopers told Reuters in an interview Monday.

But the next few months will be crucial in deciding whether or not private equity funds actually move from niche to key players in mining.

There is some indication that this transition is underway: data from research firm Preqin show that “eight natural resources funds focused solely on mining raised an aggregate $8.5 billion in 2012, more than the years 2006-2010 combined.”

And research from Ernst & Young suggests that “private capital investors accounted for 21 per cent of mining deal activity globally in the nine months to September 30 last year, against just 12 per cent for the same period in 2011.”

Others are less optimistic that private equity will play a significant role going forward.

Finance industry analysts suggest that traditional barriers of political risk and the large scale of many mining projects remain, and senior mining professionals express doubt that general equity funds would react quickly enough to sector developments on and under the ground.


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Sources: Anjuli Davies and Clara Ferreira-Marques of Reuters; Price Waterhouse Coopers