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Elliott Management is setting up a company to invest at least $1bn to buy mining assets globally, as it seeks to take advantage of the depressed valuation of groups operating in the sector, people familiar with the matter said.
The New York investment firm’s new venture, Hyperion, will be led by Sandeep Biswas, the former chief executive of gold mining group Newcrest Mining and a veteran dealmaker and operator in the sector, those people added. The mandate is to buy across all assets, including base metals and precious metals in addition to commodities in demand for electric vehicle production.
Elliott’s move comes when metal prices have pulled back because of macroeconomic weakness but are expected to rise rapidly on a surge in demand, particularly for electric vehicle batteries, renewable energy and power grids, as supply struggles to keep pace.
However, valuations of mining companies have been hit by investor concerns over environmental, social and governance risks as well as geopolitical volatility and the boom-bust nature of commodity markets, leading institutional shareholders to reduce their exposure to the sector.
Elliott, headed by Paul Singer, joins a nascent wave of private equity groups such as Orion Resource Finance and Appian Capital that focus on mining, as they attempt to provide capital to a sector that needs to spend trillions of dollars to meet surging global demand for metals.
Sovereign wealth has also emerged as a force of capital to help the sector boost the supply of minerals needed for the energy transition and push up valuations, most notably Saudi Arabia’s establishment of the Manara Minerals joint venture last year.
Hyperion will have at least $1bn to start hunting for assets, which could range from single mines to more complex transactions such as buyouts of public companies and acquiring stakes in existing groups. Elliott is particularly interested in underfinanced mines.
People close to the firm said the strategy echoed Biswas’s tenure at Newcrest, where he significantly enhanced returns through dealmaking and revitalising underperforming assets before its $19bn sale to rival Newmont last year.
Elliott is also willing to leverage the $65bn it has under management to go after larger deals if the opportunity arises.
The firm’s goal is to finance most of the investment but it could opportunistically partner with a co-investor for bigger transactions, people close to Elliott said.
The decision to invest in the mining sector comes after Elliott suffered huge losses two years ago linked to the London Metal Exchange’s decision to wipe out billions of dollars of nickel trades to stabilise the market after a frenetic surge in price.
Elliott accused the LME of illegally overstepping its remit as an exchange when it decided to cancel thousands of nickel trades and requested to be compensated $465mn for its losses. A UK court later dismissed Elliott’s claims.
However, people close to the US group said that this investment was very different given that Elliott planned to operate the company and its assets rather than trade commodities.
Elliott declined to comment.
