Mining assets may be targeted by dormant US$8b private equity pool

The world's mining assets may be the target of mergers and acquisitions as a US$8 billion pool of private-equity money that has lain dormant is stirred this year by attractive valuations and predictions of resilient demand for raw materials.

Some of the biggest names in the industry are keen to buy assets at the same time as the world's largest producers including Rio Tinto are looking to offload unwanted mines. Former chief executives Mick Davis of Xstrata and Barrick Gold's Aaron Regent are plotting a return to the business by buying mining projects, backed by private funds. Two new mining investment ventures were started last week, one backed by Warburg Pincus, the other founded by two former JP Morgan Chase bankers.

While buyout firms have targeted mining since 2012, only about 14 per cent of the almost US$10 billion raised in the past two years has been used. That could change if they face pressure from their investors to act, said Michael Rawlinson, co-head of mining and metals investment banking at Barclays.

"They've all set up, no one's done anything," Rawlinson said. "The sand is going through the hourglass and the money is going to get taken away if they don't start spending."

The optimism for a revival in M&A this year comes as nearly 8,000 executives, bankers and analysts descend on Cape Town this week for the annual Mining Indaba conference.

While valuations remain depressed, potential buyers are attracted by signs that the bottom might be near. Meanwhile, BHP Billiton, Rio Tinto and Anglo American are among major mining companies seeking to shed unwanted and higher-cost assets as part of an industry-wide push to trim expenses and bolster profits. This combination of reduced values and an influx of mines for sale is luring private equity investors.