Canadian private equity firm Waterton Global Resource Management LP has raised another US$725 million for mining acquisitions, proving that investor interest in private gold and copper deals remains robust.
The capital will be deployed in Waterton’s third private equity fund. In 2014, the Toronto-based firm raised more than US$1 billion for a separate fund. Waterton has managed to raise massive amounts of money despite challenging conditions in the mining sector.
Isser Elishis, Waterton’s managing partner and chief investment officer, said the firm could have raised more than US$725 million in this latest financing round, but that is the amount management thought it could spend efficiently.
“Our plan is not just to hoard cash,” he said in an interview. “That’s what our investors appreciate from our approach.”
The firm’s biggest investors are sovereign wealth funds, large university endowments and foundations, according to Elishis.
Waterton has been one of the most active private equity firms in the mining space. The company has completed dozens of acquisitions since 2009, with a focus on precious and base metal assets in Canada and the United States that are either in production or relatively close to it. Waterton completed its most high-profile deal last December, when it acquired two projects in Nevada from Barrick Gold Corp. for US$110 million.
The vast majority of Waterton’s acquisitions over the past few years were in precious metals, because there were many bargains available in that space. But since January, gold and silver asset valuations have soared alongside rising prices.
On the other hand, valuations for copper and other base metal assets remain heavily depressed. As a result, Elishis expects his firm to do more of those deals with the newly raised capital in the months ahead.
“That’s why we have two sides of the business,” he said. “One goes one way, one goes the other. They all end up in the same place over a five or 10-year process.”
Private equity investments in mining have increased in recent years, but they still lag most other sectors. Mining is a tough nut to crack for private equity because of commodity price volatility, which makes returns highly unpredictable. Mining also requires a lot of technical knowledge, and it can take many years before an asset generates any cash, which frustrates private equity.
Waterton is one of the few private equity firms to come up with a workable model for mining. The company maintains a long time horizon in its investments, it has an experienced technical team (largely made up of ex-Barrick employees) and it keeps a narrow focus on North American assets with manageable capital requirements.