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Is private equity the solution to funding shortfalls? FINANCING BY FRÉDÉRIC TOMESCO
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rivate equity’s interest in mining remains robust despite a short-term slump in deals, industry executives and financiers say. Metals and mining transactions involving private equity and venture capital firms fell 46% in the first nine months of 2024 as debt financing rates rose, S&P Global Market Intelligence data show. The picture in Canada — home to 40% of the world’s publicly traded mining companies — is even bleaker, with industry data showing private equity firms completed only three mining transactions in 2024. The slowdown comes as junior miners have seen options such as stock market listings become less attractive amid depressed valuations after commodity prices for nickel, cobalt and lithium have collapsed in recent years. Companies are struggling to raise capital just as global demand for base metals and critical minerals is set to take off amid a rush to join the energy transition. “We’re in the infancy of a secular change in commodities usage. We still have decades to run,”
| Developers scramble amid low valuations, commodity price falls
Michael Scherb, founder and CEO of Appian Capital Advisory, a London-based, mining-focused private equity firm, said in a mid-February interview. “The world will always use commodities,” added Scherb, whose firm manages about US$3.5 billion and recently closed its third fund. US$5.4T in demand Global miners will need to spend at least US$5.4 trillion on capital expenditures by 2030 to meet future demand in mining, according to a McKinsey & Co. forecast. Much of that sum will need to come from private sources. Trends such as electrification are boosting mining’s appeal as a long-term investment, said Martin Valdes, head of private equity strategy at Resource Capital Funds (RCF). Investors will have to identify which minerals are best placed to ride the energy transition wave. Aluminum, copper and lithium are among the metals that could face deficits in primary supply this decade, according to an October forecast by Bloomberg NEF. “Everyone wants to be part of the energy transition,” Valdes said in an interview from Miami. “People
Novel Metallurgical Processes for the Mining Industry Cyanide-free Gold Extraction Arsenic Stabilization
“(Private equity firms) have taken advantage of a weakening financing market for junior miners.” JOHN BURZYNSKI OSISKO METALS, EXECUTIVE CHAIR
are trying to figure out what are the new technologies that are coming, and what are the commodities that will be needed to satisfy the new technology.” That optimism isn’t translating into sustained deal flow just yet. Private equity down Private equity investments in mining dropped to US$4.76 billion during the first nine months of 2024 from US$8.79 billion a year earlier, S&P says. Third-quarter deal value plunged 80% to US$240 million. The situation is even worse in Canada. Private equity firms invested a mere $5 million in min-
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ing during 2024, Canadian Venture Capital and Private Equity Association data show. That’s a fraction of the $27.5 billion in private capital that was deployed across 658 deals. To John Burzynski, Osisko Metals’ (TSXV: OM) executive chairman, private equity remains a fringe player in the financing market for miners, especially for early-stage projects. “The PE funds have become more active in the space over the last 10 or 15 years, but I wouldn’t say they’re a mainstream part of the financing available to mining companies,” said Burzynski, whose Toronto-based company is working with Appian to advance the Pine Point zinc project in the Northwest Territories. Private equity firms “have taken advantage of a weakening financing market for junior miners,” he added. “Step in, buy the company at a premium, get the work completed, wait for the cycle to turn and sell it for a multiple of what they bought it for - this is how they make phenomenal returns.” Canadian miners have been hit hard by a shift from retail investors away from actively managed mutual funds into exchange-traded funds, Burzynski said. Private Equity 24 >
How Canada beats the world: flow-through shares / 22
Osisko Metals’ Gaspé copper project in eastern Quebec. REFINED SUBSTANCE
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