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Private equity eyeing downturn for bigger slice of mining M&A

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Private equity eyeing downturn for bigger slice of mining M&A

Thecurrent downturn is expected to allow different players, and particularlyprivate equity funds, to come into the mining sector, Dean Braunsteiner, apartner at accounting firm PricewaterhouseCoopers, said during a paneldiscussion at the Mines and Money Asia 2016 in Hong Kong on April 7.

"Therewere plenty of deals happening in the private market but you just didn't hearabout them," he said. "I think the next step for private equity fundsis to move to the public market where the big opportunities are."

Privateequity is expected to help fill in the gap left bythe public market,according to Braunsteiner.

"[Privateequity] found it hard to compete with big mining companies'cheap financing resources. That's starting to change now," he said, notingthat mounting debts at large mining companies have pushed them to tryalternative financing methods.

"Theyare starting to get a little bit desperate now," he added.

JasonChang, CEO of EMR Capital, noted that opportunities for private equity funds topartner with mining companies are emerging.

Whilecommenting on private equity's risk appetite, Chang said that the marketsentiment among private investors is shifting towards later stage projects dueto the low price environment.

"Weinvest across the mining curve but the only exception is that we don't do greenfield exploration. We don't fund the first drill hole," Chang said.

BertKoth, managing director of Denham Capital, agreed and noted that "almost90% of mining M&A targets are producing assets."

Braunsteinersaid that it would take another two to five years before mining majors start toprogress their early stage projects with substantial investments.

"Thebig companies are doing early stage work, targeting where they want to be, butthey probably won't be putting a lot of money into these projects for anothertwo to five years," he said.

Braunsteineradded the downturn would be a good time for private investors if they werewilling to take the risk.