Mining Hedge Funds Just Bought These Copper Deposits… Cheap

I wrote earlier this month about speculation that investment funds were circling mining operations in Chile. 

And this week, the rumours were confirmed. 

As reported by local Chilean press, the buyer of Anglo American’s for-sale copper assets in the country was confirmed as the U.K.’s Audley Capital. A billion-dollar hedge fund specializing in natural resources. 

Audley will now take control of the Mantoverde and Mantos Blancos mines. In partnership with Orion Mine Finance Group. 

The buy confirms a trend that’s been shaping up of late — namely, the increasing role of investment funds in the natural resource market. 

With funds from traditional mining firms drying up, and retail financing markets still bleak, such investment groups have become one of the only buyers in the market when it comes to assets. Especially given the billions of dollars such funds have raised over the last few years. 

And it appears these groups are buying at at opportune time. Based on the purchase price Audley is paying for its new Chilean mines.

That’s $300 million. A far cry from the $1 billion purchase price that was originally being pegged by analysts for this week’s purchase — and had been confirmed by unnamed sources close to deal in an interview with the Wall Street Journal last November. 

If those figures are correct, it suggests the market value of these assets has declined by 70% over the last nine months. Perhaps driven by the decline in copper prices of late. 

All of which is great news for buyers. The consortium did throw a bone to the sellers at Anglo American by agreeing to pay an extra $200 million based on criteria related to operating performance, mine life, and even the copper price itself. But overall, the deal looks to be very low risk for incoming owners. 

This could become the first in a series of such transactions. Watch for more asset purchases from investment funds over the coming months. 

Here’s to buying cheap,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

 

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