Interest in Australia’s embattled mining sector has been gaining momentum for some time, and now Hong Kong’s LIM Advisors is going to see what it can unearth with $120 million.
The hedge fund, which is raising a total of $400 million to invest in distressed assets across Asia-Pacific, is looking to spend the next 18 months targeting distressed miners and mining services companies hit by the fall in commodity prices.
George Long, the firm’s founder and CEO, told the Australian Financial Review, that the pain felt by these companies will get worse before it gets better.
“We’re slowly edging back into the mining and mining services,” he said. “But I think it could be a year or two before it really bottoms.”
A lot of the earmarked capital will be used for funding rights issues, convertible stock deals and buyouts. LIM has already got to work digging out the diamonds in the rough. In July, the firm agreed to provide $26 million in debt financing to Austin Engineering, a struggling Queensland mining equipment company.
Alternative investors chasing after mining services and equipment companies is nothing new. While these companies still suffer from downturns, they are traditionally seen as being better insulated from the commodities cycle. How far upstream LIM will wade, towards riskier investments in actual mining companies, is unclear.
Like many in the industry, Long predicts a lot of consolidation with many junior miners being wiped out and giants like Rio Tinto and BHP swallowing up the smaller guys.
Photo: Stefan Jürgensen