Some $2 trillion is being invested worldwide by private equity funds every year with a chunk of that destined for junior mining companies. Demand is as strong as or stronger than ever as investors see a shopping opportunity. Who is deciding where it goes and based on what criteria? At the annual Fall Mining Showcase event in Toronto, Red Cloud Mining Capital enlisted the help of three private equity panelists to answer those burning questions. Cheryl Brandon, a partner at Waterton Global Resource Management; Dan Wilton, a partner at Pacific Road Capital Management; and David Thomas, managing director of Resource Capital Funds, brought their insight. Anthony Vaccaro, publisher of The Northern Miner, moderated the spirited discussion that shed light on how private equity investments in junior mining work, the widely held fear of private equity among CEOs and a surprising level of interest in junior mining equities by private equity fund investors. What follows is an edited version of that panel discussion.
Anthony Vaccaro: A few years ago, there was a perception that private equity was going to come in and wash away the junior sector’s worries about insufficient capital. Was that perception misplaced?
Dan Wilton: The perception was somewhat misplaced. I think people saw big numbers being raised, $2, $3, $4 billion ($2, $3, $4B) by people like Mick Davis, but that’s very different from what we do. You need to understand our investors to understand how we invest. It’s a different investor base than you would find in a traditional mining resource fund. Our investors tend to be big U.S. pension funds or university endowments—not retail investors. They commit money to us for 10 years, and they’re patient. Unless the fund has a specific mandate to go out and fund exploration—and few of the private equity funds do—there tends to …read more