This Major Investor Says It’s Time to Buy Mining

The mining sector got a big vote of confidence this week. From a high-profile backer.

At least in one part of the world.

That’s Australia. Where $7.9 billion private equity firm Denham Capital said it is launching a venture solely aimed at helping struggling firms in the minerals sector.

Denham will devote $200 million to the new vehicle. And then put that cash to work turning around under-performing assets in the mining world.

“It will be focused on improving and restoring the profitability of assets,” Denham’s managing director Bert Koth told local press.

Denham didn’t specify whether the venture will be in the form of an investment fund, or a corporate entity that will take direct control of assets. But either way, it appears that the main focus will be acquiring good assets that have been mismanaged. And helping to get them back on the right track.

Toward that end, Denham has reportedly already assembled a team of “turnaround” specialists from the mining business. With the group suggesting that much of the activity will involve re-engineering of projects in order to “eliminate every single redundant dollar in the cost structure”.

The approach indeed has some sense to it. With Denham’s management pointing out that many mining firms suffer from entrenched management who simply aren’t the right people for the job. Often being explorationists or developers who stay on after a project moves to a more advanced stage–when a team of engineering experts would probably be a more effective choice.

It will be interesting however, to see how many projects the firm identifies fitting their investment criteria. With many struggling mining projects simply being held back by mediocre geology, infrastructure or markets.

Watch for the first deals from the new venture, which will reportedly be launched in about four weeks. First targets apparently include “bulk minerals” (presumably coal and iron ore), along with base metals.

Here’s to pointing things in the right direction,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

 

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