Private equity interest aroused

A recent report by Ernst & Young Global Mining and Metals Center has suggested that private equity investors are becoming interested in the mining sector.

Traditionally, private equity houses have shunned the industry because cash flows were unpredictable and capital costs significant but the report, which is entitled Mining Is Now the Time for Private Equity, suggests that management of the mining sector has become more skillful, leaving it less vulnerable to overproduction.

In addition, Ernst & Young has observed that short-term cash returns are potentially higher than acquisition prices would suggest and this could allow private equity investors greater opportunities than before to make a return on a mining investment.

Sector analysts are optimistic that the current high levels of metals prices will be maintained by a supply/demand imbalance in many markets that could take years to balance out.

As these imbalances are expected to remain beyond the short-term, private equity investors can be more confident that the sector will provide them with the exit opportunities they seek.