Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Appian Capital Advisory, the mining-focused private equity firm, has raised $2 billion for its latest fund as its takes advantage of renewed investor interest in the sector fueled by the move toward green energy.
Appian’s Fund III will focus on middle-market investments in the mining sector, looking at potential transactions in energy-transition commodities and also precious metals, according to a statement from the London-based private equity firm.
“This is the first fundraising we have done where mining is seen as part of the solution than being the problem itself,” Appian founder Michael Scherb said in an interview. “From an ESG perspective, investors understand the importance the sector is going to play in energy transition.”
The latest fund, which takes Appian’s total assets under management to about $4 billion, can also invest as much as a third of its assets in areas like credit as banks cut their exposure to the sector.
Founded in 2012 by former JPMorgan Chase & Co. banker Scherb, Appian is one of the few dedicated investment firms focused on the mining sector. It has a team of about 75 professionals and the firm’s portfolio companies have built nine mines into production in the last six years.
The latest fund will also look at co-investment opportunities, widening the pool of capital available for the firm. Its geographical focus will be on countries with proven geology, supportive governments and robust legal frameworks, Appian said in the statement.
“The fundraise was perhaps more accelerated than we expected, and we are oversubscribed in what is otherwise a challenging environment for a lot of the firms,” Scherb said.
Fund III has already deployed about 10% of its capital, including through a joint venture with Toronto-listed Osisko Metals to develop a zinc-lead project in Canada’s Northwest Territories. It’s also bought a majority stake in the Rosh Pinah zinc-lead mine in Namibia.
“Investors seem to have done a lot of the homework when it comes to mining,” Scherb said. “They realize that mining is probably the procurement point for everything you are trying to achieve in renewables and energy transition.”
In June, Appian agreed to sell two Brazilian mines for about $1 billion to Russian metal industry veteran Artem Volynets’ blank check firm ACG Acquisition Co.
That deal collapsed when the parties couldn’t agree on revised terms of the transaction, ACG said in a statement last month. Appian has since been speaking with other buyers for the assets.
“Appian has received a lot of interest from potential suitors for our Brazilian mines,” Scherb said. “We are in discussions with one party around these assets now.”
(By Dinesh Nair)
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