Asian capital is flooding into Australia's junior and midcap miners and corporate activity is set to ramp up as Hong Kong private equity firms beef up their metals teams, S&P Global Market Intelligence has learned.
Increasing corporate activity in Australian mining has prompted Perth-based institutional stockbroking and advisory firm Ashanti Capital, which has teams in both Hong Kong and Western Australia, to grow its technical team with the addition of Morgans Financial Research Analyst Tom Betlehem.
Ashanti founder and Managing Director Rob Hamilton — whose career progressed from Montagues Stockbroking to Macquarie Bank and Argonaut before moving in 2011 to Hong Kong with Reorient Financial Markets Ltd. which was sold to Jack Ma's private equity group Yunfeng Financial Group Ltd. in 2015 — said 70% to 80% of Ashanti's clients were mining-related.
"We're going to see a lot more consolidation in the mining space," Hamilton said, adding that he has seen significant activity in battery metals, and that mergers and acquisitions activity is "only going to increase".
He told S&P Global Market Intelligence that most of the M&A activity, particularly in battery metals, will be directed by the end users of those products — the Chinese, and in some cases the Japanese and South Koreans.
"I would still spend the majority of my time in Asia with my clients, and a large percentage of the capital we introduce to our clients comes from that network in Hong Kong and Singapore," Hamilton said.
Ashanti was joint lead manager for MOD Resources Ltd. raising A$18 million in which Hong Kong investment fund, LIM Advisors, was the sub-underwriter to the A$6 million rights issue.
Ashanti also advised on a transaction in Greenland Minerals & Energy Ltd. in securing A$10.3 million to advance the Kvanefjeld rare earth elements project, which was again cornered by a Chinese investor, Shenghe Resources Holding Co. Ltd.
Hamilton said the majority of the traditional funds were out of Hong Kong and Singapore, which followed Shenghe's lead.
Adriatic Metals Plc's institutional and retail book also just closed heavily oversubscribed on March 15 ahead of an IPO due early April, and Hamilton said the quality of the capital introduced out of London, Hong Kong, Singapore and the domestic institutions in Australia for that deal was "quite unique" for a A$20 million company.
Hong Kong rising
Mining-related private equity funds are also expanding their Hong Kong teams in response to the bull metal markets, according to recruiters in the city.
"Private equity funds are looking into the mining pace, in both secondary and direct investment teams, due to the bullish outlook for metals," Lilian Yeung, associate manager with Michael Page Hong Kong, told S&P Global Market Intelligence.
Yeung, who specializes in buy-side front office recruitment, said her Chinese clients were generally more optimistic in expanding compared to their western or American counterparts.
"We have a couple of Chinese funds that are particularly looking for candidates in the [mining] space," Yeung said. "They are more open minded in terms of where they can get revenues from whereas global firms are more skeptical."
However, Yeung cautioned that she did not expect to see a sizable increase in total headcounts in private equity for the mining sector, adding that the most popular sectors were fintech, the internet and real estate. "Some might be interested in [mining] deals but [it] does not necessarily mean that they will set up a team just for that."
Adam Johnston, managing director for Robert Half Hong Kong, said the company also noticed recruitment growth among private equity firms that specialize in the mining space, but considered it as "minimal growth" compared to other sectors.
"The most popular areas in [private equity] in Hong Kong and the wider Asia region remain in [technology, media and telecommunications], healthcare, credits and education," Johnston said.
Meanwhile, private equity firms looking to hire additional staff specializing in mining may find the going tough, due to the lack of professionals with the specific backgrounds in the city, according to both recruiters.
"The Hong Kong market is quite small and the talent pool is small compared to those in Australia, South Africa or Canada," Yeung said. "It is quite hard for our buy-side clients to look for [mining talent]." Both pointed to the fact that Hong Kong funds would usually recruit from overseas, especially from countries with developed mining markets.
