RPT-DEALTALK-Private equity seen moving on cash-starved miners

Mon Mar 10, 2014 7:05am EDT
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(Repeats story first published on Sunday (

By Nicole Mordant and Euan Rocha

VANCOUVER/TORONTO, March 9 (Reuters) - Private equity firms are going underground.

In the past, they have largely shunned mining acquisitions, as the volatility of commodities prices and cash flow made it difficult to structure leveraged deals. Those concerns are on the wane.

Bankers, deal lawyers and some of the firms are predicting a flurry of such transactions around the world this year, mainly in the $50 million to $800 million range, with the possibility of one or two substantially larger deals.

The prospect of cash-rich private equity players buying into the potentially lucrative but risky mining sector, lured by cheap valuations, has been talked about for the past two years. Those predictions turned out to be more sizzle than steak.

Things have changed, in part because private equity firms, whose money comes from big investors such as pension funds, university endowments and charitable trusts, have had more time to come to grips with the mining sector. A handful of new mining-focused shops with in-house expertise has sprung up. And in some cases, bankers and industry insiders say mining companies may have few options.

An extended freeze in capital markets has left many small and mid-sized miners starved of cash and willing to consider a marriage of convenience with private equity firms, who need to put massive amounts of unspent capital to work.

Industry tracker Preqin estimated they had $1.1 trillion available at the end of last year. Of that, some $20 billion to $30 billion could be available for deployment into mining, industry players say.   Continued...