BOSTON-BASED private equity fund Denham Capital is shifting its Asia Pacific head office to Perth to support a planned increase in mining sector investments. With $US7.3 billion of invested and committed capital, Denham has the capacity to shake-up the local capital market.
BOSTON-BASED private equity fund Denham Capital is shifting its Asia Pacific head office to Perth to support a planned increase in mining sector investments.
With $US7.3 billion of invested and committed capital, Denham has the capacity to shake-up the local capital market.
Its move coincides with another private equity group active in the mining sector, Resource Capital Funds, commencing a US$1.75 billion capital raising.
Denham is looking to fill what it calls the "funding void" for junior mining companies, which are currently struggling to raise equity capital on the stock market.
As well as pursuing metals and minerals investments, Denham’s Perth office will seek opportunities in power and renewables, and oil and gas.
The Perth office, due to open in February, will be led by Bert Koth (pictured), a director of Denham’s metals and minerals team.
Originally from Austria, Dr Koth has previously worked for BHP Billiton, ING Barings and Deutsche Bank, and will be relocating from the firm’s London office.
He will be joined in Perth by Spencer Soh, an associate who will be relocating from Denham’s Singapore office, which was closed in September as part of the process of relocating the firm’s Asia Pacific operation to Perth.
Dr Koth said he anticipated many opportunities in all of Denham’s target sectors.
“While Perth and Australia are rightfully thought of as global centres for metals and minerals, investment opportunities in the country and Asia Pacific region in all three of our core sectors are abundant,” he said.
“For instance, while the European debt crisis and a softened outlook in China have damaged the traditional capital markets-based funding model for junior mining companies and created a funding void for private equity to fill, there are also meaningful onshore natural gas shale resources in Australia that will require capital.
“This is an area in which Denham has been very active in the US.
“In addition, the climate for deals within the power and renewables sector in the region is equally compelling.”
In the mining sector, Dr Koth predicted many listed junior mining companies will soon run out of funding.
"This will lead to a significant redistribution of control in assets over the next few years," he said.
"It is thus the right time for private equity to step into this funding void to back the best possible teams, securing and resetting the value of the best possible assets."
Denham has previously made one investment in Western Australia, in the renewable energy sector.
In 2008, it announced that it would invest up to $US80 million in unlisted company Plantation Energy, which established a wood pellet plant at Albany.
The wood pellets were exported as an environmentally friendly feedstock to European power stations; however, the plant was mothballed in January this year, with the operator blaming the high Australian dollar for its inability to compete.
Denham has two current investments in the Asia Pacific region.
Wellington-based Trans-Tasman Resources is exploring iron sands deposits off the New Zealand coast, while Manila-based GNPower is constructing a 600-megawatt project in the Philippines.
Another Denham company, solar power developer Fotowatio Renewable Ventures, has been awarded a 20MW power purchase agreement with the Australian Capital Territory.
Denham’s move coincides with the takeover of one of its local would-be competitors, listed private equity investor LinQ Resources Fund.
Singapore-based IMC Resources Holdings is in the process of buying LinQ, which has provided both equity and structured debt to mining companies such as Atlas Iron, Ferrous Resources, and Zambezi Resources.
Denham’s main like-for-like competitor will be Resources Capital Funds, run jointly from Perth and Denver, Colorado.
RCF has previously raised US$1.9 billion, mainly from US investors, and is in the process of raising a further US$1.75 billion for its sixth investment fund.
The group has backed a wide array of mining companies, currently including Bannerman Resources, Finders Resources and Mirabela Nickel.
Other private equity investors active in the local mining industry include Sydney-based Pacific Road and The Sentient Group.
Only a handful of private equity funds have a Perth office. The latest to open here was Catalyst Investment Managers, which opened its local office after investing in Bhagwan Marine.
