“I haven’t seen anything like it in more than 20 years,” said Tim Schroeders, who helps manage about $1 billion in equities, including BHP and Rio Tinto (RIO) Group, at Pengana Capital Ltd. in Melbourne. “Mining companies have done pretty well buying assets at the bottom of the cycle and turning some over near the top, but this is completely the other way around.”
BHP, the world’s biggest mining company, and London-based Rio Tinto are leading the global asset disposal and may sell businesses or stakes in mines for as much as $35 billion, according to Deutsche Bank AG. Private-equity firms are finding that tempting, raising almost $9 billion in 16 months for mine investment, more than the previous four years combined, according to data compiled by Bloomberg.
Aaron Regent, who was fired last year as chief executive officer of Barrick Gold Corp. (ABX), the biggest producer of the metal, started a company to invest in mining assets, according to two people familiar with the matter. KKR & Co. (KKR), the firm run by Henry Kravis and George Roberts, is considering a bid for Rio’s stake in an Australian copper and gold mine, two people with knowledge of the matter said last month.
Steve Okun, a spokesman for KKR in Hong Kong, said the firm doesn’t comment on market speculation.
Richard Barker, Sydney-based co-head of metals and mining in Australia at RBC Capital Markets, sees private equity ready to step up acquisitions.
“When you think of the financial firepower of the resource-focused private equity firms, they can put a lot of money into transactions,” Barker said at a May 1 media briefing. “Private equity is going to be the solution to funding many of these projects.”
Former Xstrata Plc CEO Mick Davis and Chief Financial Officer Trevor Reid are weighing plans to set up a privately backed mining fund, people familiar with the matter said last month.
Bankers led by Lloyd Pengilly, previously at JPMorgan Chase & Co. (JPM), are setting up a London-based fund to invest mainly in African mining. Denham Capital Management LP, a $7.3 billion U.S. private equity fund focused on mining and energy, said in February it aims to sign a deal for as much as $300 million in Australia, the biggest exporter of iron ore and coal.
On the Block
BHP may sell stakes worth as much as $25 billion in coal mines and oil and gas fields from Algeria to the U.S., Deutsche Bank said in a March 11 report. Rio, the world’s second-biggest miner, could offload as much as $10 billion, the bank said.
That’s as commodity prices as measured by the S&P GSCI (SPGSCI) had their worst month in almost a year in April on concern the slowdown in China’s growth will curtail demand.
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