Mining companies will find it difficult to raise capital in the current environment, especially if a trend emerges for miners to spin-off assets, says Melbourne-based private equity fund African Lion.
Rio Tinto Ltd said recently it would spin off some of its United States coal assets in a company called Cloud Peak Energy.
African Lion manager of African funds Tim Markwell said the fund was watching keenly for large initial public offers (IPOs) by mining giants that sought to realise higher value from their assets than from a straight acquisition by another major.
Mr Markwell told the Paydirt Africa Down Under Conference in Perth on Wednesday that if BHP Billiton Ltd gained control of fellow mining giant Rio Tinto there may be more mining spin offs.
"There will be a lot of surplus assets," he said.
"If that happens, that will be a bit of a warning sign that things are a little bit toppy at the moment because the majors think they can get better value for their projects by looking to the general market rather than another mining company paying hard-earned cash.
"If they do an IPO, they're saying they think the market is going to pay more for an asset than another mining company.
"But that hasn't happened yet."
Australian stock exchange-listed resources investment house Lion Selection Ltd is among African Lion's owners, which also include British government fund CDC Group and the European Investment Bank.
Lion Selection was unable recently to sell its 20.5 per cent stake in Africa-focused nickel miner Albidon Ltd because of weak market conditions.
Mr Markwell said Lion Selection was happy to hold on to the stake and was in no hurry to divest.
"They are in the ramp-up for producing nickel concentrates now (from its Munali project in Zambia), so Lion Selection is in no rush to do anything."
Rio Tinto Ltd said recently it would spin off some of its United States coal assets in a company called Cloud Peak Energy.
African Lion manager of African funds Tim Markwell said the fund was watching keenly for large initial public offers (IPOs) by mining giants that sought to realise higher value from their assets than from a straight acquisition by another major.
Mr Markwell told the Paydirt Africa Down Under Conference in Perth on Wednesday that if BHP Billiton Ltd gained control of fellow mining giant Rio Tinto there may be more mining spin offs.
"There will be a lot of surplus assets," he said.
"If that happens, that will be a bit of a warning sign that things are a little bit toppy at the moment because the majors think they can get better value for their projects by looking to the general market rather than another mining company paying hard-earned cash.
"If they do an IPO, they're saying they think the market is going to pay more for an asset than another mining company.
"But that hasn't happened yet."
Australian stock exchange-listed resources investment house Lion Selection Ltd is among African Lion's owners, which also include British government fund CDC Group and the European Investment Bank.
Lion Selection was unable recently to sell its 20.5 per cent stake in Africa-focused nickel miner Albidon Ltd because of weak market conditions.
Mr Markwell said Lion Selection was happy to hold on to the stake and was in no hurry to divest.
"They are in the ramp-up for producing nickel concentrates now (from its Munali project in Zambia), so Lion Selection is in no rush to do anything."
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