About a decade ago, private equity (PE) funds began to take an interest in the mining sector. At the time, financing was hard to come by, and the growth of private equity beyond the few players already established in the space promised a potential lifeline for the industry.
U.K.-based Appian Capital Advisory, founded in 2012, was one of the first of that wave of PE entrants, raising US$400 million for its first fund in 2014. But far from being mining’s saviour, the amount of private equity investment in mining has since fizzled, Scherb told The Northern Miner in early July.
“If you compare it to even oil and gas where there are hundreds of general partners or private equity funds, there just isn’t that number in mining. The barriers to entry are very high. So there has not been a huge influx of capital into our sector — if anything, you’ve seen players disappear.” Scherb says the reason is that PE investors have made mistakes around analyzing permitting, political, infrastructure and other risks.
“Mining is a sector where you have to get many things right. So it’s not just the technical issues, you’ve got the financial, the software, the ESG, all of those need to come together. And if you get one of those wrong, then through the entire chain, you’re likely to lose money — and obviously if you lose money in a fund for investors it’s tough for you to get money for the second fund.”
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