Private Equity Firm Grabs an Australian Copper Mine


September 22, 2015


A joint venture, led by the private equity firm EMR Capital, has secured a deal to buy an Australian copper mine. EMR Capital is teaming up with Lighthouse Minerals in a deal worth $10.75 million. It is a relief for the mine and its owners Aditya Birla Minerals, which have struggled under the current slump in commodity prices.


The Deal


Copper ore is currently suffering from its lowest figures in the past six-years, with tonne of copper ore selling at around $5,000. This has led many companies to suspend production and the struggling companies and mine producers are providing cheaper investment opportunities.


EMR Capital will join forces with Lighthouse Minerals, whose owner Craig Williams has plenty of expertise in the industry. Williams is the former chief executive officer of Equinox Minerals. The copper producer was taken over by Barrick Gold in 2011 in a deal worth $7.5 billion.


The Mt Gordon mine deal will see the partners pay A$5 million upfront, with further A$10 million paid if the copper prices manage to climb up to a specific level. The firms are also providing A$45 million in environmental bonds.
Owen Hegarty, the chair of EMR Capital, told the Australian, “The acquisition of Mt Gordon creates an exciting opportunity to leverage the fundamental strength we see in the copper sector”.


Turning the Fortunes


Together the two partners have quite a proven track-record in the industry. As mentioned above, Lighthouse Minerals owner is well known in the copper industry and the private equity firm backed the big copper companies that made fortunes during China’s copper boom.


But the Australian mine has not done well in the past few years, as the slump has hit the mid-market hard. The Mt Gordon mine has been on care and maintenance for over two years. But the two firms are betting for the fortunes to turn.


Carl Hallion, managing director of Lighthouse Minerals and the person who’ll be in charge of the mine, told Reuters, “The primary focus for now will be building up and making sure we have a successful restart at Mt Gordon”. Hallion also revealed this might mean further acquisitions could well take place in the near future.


Long-Term Investment Strategy


The slump in commodity prices has lasted for a long time with some analysts fearing whether the prices can pick up in the near or even long-term future. But the private equity firm doesn’t seem to be too worried.


Jason Chang, the chief executive of EMR Capital, said in an interview with the Sydney Morning Herald that the firm is not betting on copper price increase. “Even at current prices, we think this asset can achieve a very appealing return on equity, with its potential cost structure, long life, upside potential and good grade and scale,” Chang told the newspaper. The firms are creating a long-term investment strategy, which would see the mine turned into a mid-tier copper producer.


The investment is the fifth for EMR Capital’s first fund. The private equity firm closed the fund at the start of the year, having raised $450 million. It’ll be interesting to see whether the firms can lift the mine from its current slump.


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