Private equity abandons mining as deal opportunities dry up
Private equity firms lost interest in the mining world last year, pumping 75% less money into the sector as they focused more on funding existing investments.
Investments dropped to $500 million from $2 billion a year earlier, according to a report by law firm Bryan Cave Leighton Paisner. That was the lowest amount since the company started tracking the space in 2013.
Private equity poured money into the mining sector several years ago when big producers were forced to shed assets amid a collapse in commodity prices. That trend appears to have ended, and the law firm said private equity is now focused on raising additional funds for existing investments rather than looking for new deals. There was also a dearth of big single deals last year.
“Increases in stakes are often focused on protecting existing investments from dilution where additional capital is needed to progress the project or for working capital,” Alexander Keepin, head of mining at BCLP, said in the report.
Gold remained the most popular commodity sector last year, attracting $192 million in investment, followed by lead and copper. This year, the law firm expects to see significant disposals by private equity.
A number of funds “are now in year seven of what is often a 10-year fund life, meaning that the focus for these funds will shift from deployment of capital to investment realization,” Keepin said.