Investment by private equity (PE) firms in
the mining industry has seen a major increase in H1 2015,
but this interest is restricted to the major commodities,
leaving speciality industrial minerals to continue to rely on
capital markets.
The first half of the year saw 61 reported
PE investments into the mining industry, up from 50 in the
whole of 2014, according to a report by Berwin Leighton Paisner
(BLP).
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| PE investors have shown little
appetite for industrial minerals projects in 2015
(source: OTA Pictures). |
H1 2015 investments totalled $1.76bn, versus $2bn in the
whole of the previous year, the report, entitled "Private
Equity in Mining: H1 2015" stated.
Of the investments made this year, gold
remains the most popular commodity. At 29 instances, it
represents almost half of all PE investments made.
Copper and nickel also feature
prominently, with eight and six PE injections made in these
areas, respectively.
Alexander Keepin, lead author of the
report and co-head of mining at BLP, told IM
that, from a PE point of view, speciality minerals remain "less
popular" than their mainstream counterparts.
Vanadium and niobium are the only two
speciality minerals which have successfully piqued the interest
of PE investors so far this year, according to Keepin
– a similar figure to 2014.
TSX-V-listed vanadium producer, Largo
Resources Ltd, received Canadian dollar (C$) 75.2m ($57.4m*)
via private placement funding in May, with the majority coming
from US private equity firm, Arias Resource Capital
Management.
The funds received via this deal are to be
put towards the ramp up in production of Largo’s
Vanadio de Maracas Menchen vanadium mine in Bahia state,
Brazil, where it has an initial production of 11,400 tpa
vanadium pentoxide (V2O5) equivalent.
The niobium deal came in the form of
PE-backed Magris Resources Inc., acquiring Iamgold
Corp.’s niobium mine in Quebec, Canada –
one of just three in the world – for $530m cash.
Vanadium is used principally in the form
of V
2O
5 as a steel additive, a use which accounts for
90% of the market and Largo has the benefit of an offtake
agreement with trading giant Glencore to supply this industry.
The mineral also has a small but growing market in the vanadium
redox battery (VRB) industry. Steel manufacturing has been
slowing lately, while VRBs are still in their infancy.
Niobium (also known as columbium) is used
in the form of ferroniobium as an alloying element in steels
and in superalloys. It is also used in the forms of high-purity
ferroniobium and nickel niobium, which feature in nickel-,
cobalt-, and iron-base superalloys for such applications as jet
engine components, rocket subassemblies, and heat-resisting and
combustion equipment, according to the US Geological Survey
(USGS).
Geographically, Europe accounted for the
lion’s share of PE investment in the mining
industry in H1 2015. BLP reported four deals within the
continent, accounting for $1bn.
North America accounted for the majority
of deals made – 12 in Canada and 11 in the US.
However, their sum total was just $282.9m.
51% of deals had involved stake increases,
up from 44% in 2014. BLP said that this may be indicative of
the "general difficulties faced by mining companies in the
sector with low commodity prices".
Further illustrating issues faced by
companies in the period, one in every six deals involved
refinancing or rescue.
In relation to the trend at large, Keepin
said: "The data shows that even with the commodity market in
flux, the momentum which began in 2014 has continued into the
first half of 2015."
"If the trends we have seen continue
throughout the rest of the year then we will see nearly double
the amount invested in 2015 compared to 2014."
*Conversions made July 2015