A light news day.  A good read with some interesting facts on private equity’s growing importance in the mining industry from the Financial Post.

Private equity will play a larger roll in the financing mix of distressed miners

Private equity will play a larger roll in the financing mix of distressed miners

In 2012, private equity was involved in eight mining deals worth $8.5 billion and that is expected to grow to $10-$15 billion over 2013.  Contrastingly, miners in Canada are expected to raise $2 billion of equity, down sharply from the $9.3 billion of equity raised on average annually over the last five years.

“The extremely low valuations in the sector today have given them more confidence that they can invest and generate a good return. And they are now working with some of the mining industry’s top people, which erases the expertise gap.”

They site Mick Davis’ (former Xstrata boss) X2 Resources which raised $1 billion on the back of private equity investors as well as Aaron Regent’s (former CEO of Barrick) Magris Resources which will likely gain strong interest from private equity groups.  Furthermore, US private equity heavyweights such as Blackstone, Carlyle and Apollo have all set up mining teams.

I was in New York last week and the bankers and fund managers I spoke to agree.  The appetite for traditional equity in the mining sector is non-existent there; however non-traditional sources of financing, including private equity, are well-funded for activity in the resource sector.  Furthermore, the bankers I spoke to said that private equity has yet to jump into the sector in a big way, but that they are getting closer and closer each day.  As these miners start to behave better and drive more stable earnings and cash flows, the chances of the larger private equity firms coming into the space increases.

Read: A Financial Buyer's Market: Private Equity Firms Continue to Circle Mining Sector