Private capital flowing into mining on track for record year

Fundraising by unlisted funds for investment in mining and metals was a non-starter last year. A single private capital fund closed last year after rustling up all of $24 million.

A further 13 funds targeting the mining sector are currently in the market, seeking a combined $4.9 billion

The total included $5.1 billion of capital raised by diversified natural resource closed-end funds, which may allocate a small portion to mining, but overall institutions shunned the industry.

Three months into 2018 and the environment couldn’t be any different.

Orion Mine Finance in February closed on the largest mining-focused fund in five years, and the second biggest fund dedicated to the sector in history. The New York-based firm closed on its Fund II after securing $2.1 billion including a co-investment vehicle. That brings total funds raised by Orion, over the last 10 years to more than $6 billion.

Orion is not wasting time finding targets for Fund II either and has already completed six deals with nearly $830 million committed to investment. The company also exited two large Fund II investments last year, selling a global portfolio of assets to Osisko Gold Royalties in a $1 billion transaction in July and a zinc mine in Macedonia that fetched a reported $400m in November last year.

Two other small mining funds closed during Q1 and, according to Preqin's 2018 Global Natural Resources report, a further 13 funds are currently in the market targeting the mining sector, seeking a combined $4.9 billion from so-called limited partners which include sovereign wealth funds, public and private pension funds, foundations and family offices.

43% of fund managers believe it has become easier to find attractive investment opportunities compared to a year ago

If successful, it would make 2018 the best year ever for the sector. 2012 was the peak year for mining fundraising with $4.6 billion of capital commitments from investors.

Preqin also found that 43% of fund managers in the metal and mining space believe it has become easier to find attractive investment opportunities compared to a year ago. A majority of those surveyed say mining assets are priced about right, or consider them cheap. A third of the fund managers also say that competition for the best deals in the field has become more competitive.

As of June 2017, the latest data available, mining and metals fund managers hold $6 billion in so-called dry powder (funds ready to be invested). Unlisted mining assets under management total $15 billion.

Across the natural resources sector which is dominated by oil and gas, 85 funds secured $70 billion in 2017.

The private capital space has experienced rapid growth over the last decade with overall assets under management approaching $5 trillion, some $533 billion of which is classified as natural resources investment such as water, timberland, mining and metals, and oil and gas.

Private capital includes 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.