Private Equity Made 100% Gains In 18 Months In A “Weird” Nation

Private Equity Made 100% Gains In 18 Months In A “Weird” Nation
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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.

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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.

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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,

Dave Forest

Article by Pierce Points

Updated on

Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.
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