China expanded its global reach again this past week. With the first-ever rail shipment of Chinese goods arriving in London, as part of a new Silk Road train route.
And news yesterday suggests China is taking big leaps in resource finance as well.
That announcement came from China Molybdenum Company — the world’s largest moly miner. With the company saying it has an unusual new financial partner for its latest mine acquisition.
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
Chinese private equity.
China Moly Co said Sunday it has signed an agreement with PE outfit BHR Partners for the Tenke copper mine in the Democratic Republic of Congo. With the miner supporting BHR to buy a 24% stake in the Tenke project, formerly held by Lundin Mining.
That follows China Moly’s purchase of a 56% interest in Tenke last May from Freeport-McMoRan. A deal that initially looked rocky after objections from DRC state mining firm Gecamines — but which has now reportedly been endorsed by the DRC government.
The Chinese miner bringing in BHR is a very interesting move. Representing one of the first forays we’ve seen for China-based private equity into the mining space.
BHR does have a Western flavor to it — having U.S. advisors Thornton Group and Rosemont Seneca (run by the son of departing U.S. Vice-President Joe Biden) as minority partners. And the investment group is getting a lot of support from China Moly, including financial guarantees for BHR’s $1.14 billion purchase price on the 24% Tenke interest.
But this shows private investment appetite for mining is rising in China. An observation supported by recent data from private equity analysts Preqin — who reported that Chinese backers are right now preparing the world’s largest mining private equity fund.
As the chart below from Preqin’s latest report shows, Chinese PE group Power Capital is currently marketing a $3 billion mining fund. Dwarfing other mining funds in market, and substantially larger than the reigning biggest PE mining fund, the $2 billion Resource Capital Fund VI.
All of which suggests there may be a lot of money coming soon from China for mining deals. Watch for more private equity buys emerging from this part of the world, and for a completion announcement on funds like Power Capital’s.
Here’s to deep pools,
Article by Pierce Points