Private equity has been a rapidly-rising force in natural resources of late. With global PE firms holding an estimated $156 billion in funds for resource investments.
And a big announcement this week suggests such buyers are having exceptional success in the mining sector.
That news came from sources close to mining private equity group EMR Capital. Who said that fund is close to a sizeable buyout on mining assets in an unexpected part of the world: Indonesia.
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More
Familiar persons told Bloomberg that a number of groups are preparing to bid on EMR Capital’s Martabe gold mine in North Sumatra. Including two Chinese firms — Shandong Gold and China Gold International Resources.
Sources further said that the buyout on Martabe could reach as much as $1.5 billion. Which would be a very interesting data point in the mining sector, for a number of reasons.
First, it would be a major win for EMR Capital. With the PE group having paid only $775 million to buy the mine in March 2016.
That means the apparent coming buyout could give EMR nearly 100% profits in just 18 months. Showing that good deals are still available in the mining space for savvy investors.
The other critical point here is the geography.
One of the reasons EMR was able to pick up Martabe on the cheap is current poor sentiment around Indonesia — at least amongst Western mining groups. With high-profile problems at big mines like Grasberg, as well as harsher financial terms introduced by government weighing on the Indonesia sector.
But a deal on Martabe would show that many big mining players still see Indonesia as workable. And would continue the trend of Chinese miners picking up in countries that Western firms view as too difficult.
All of which is generally encouraging for the global mining sector — showing there are still buyers for good projects wherever they are, and good profits to be made picking up under-appreciated assets. Watch for an announcement on a deal here to see who buys and for how much.
Here’s to a quick flip,
Article by Pierce Points