Wed, 04/11/2009 - 09:01
Scipion Capital, the African hedge fund manager, has launched a mining fund which allows investors to capitalise on the recovery of the junior mining and natural resources sector in Africa.
The Scipion Mining & Resources Fund launched to investors on 1 November with USD15m of seed capital commitments. Scipion expects the fund to make annual returns of over 50 per cent.
The fund, which has a minimum investment of USD500,000, is targeting international institutional and traditional hedge fund investors, including pension funds and endowments, wealth managers, funds of hedge funds, high net worth individuals, sovereign wealth funds, private banks and family offices.
The fund is managed by Scipion’s Geneva-based chief investment officer Nicholas Clavel (pictured), who will be supported by Andrew Garden, the firm’s head of structured trade finance, and Scipion’s research team in London.
Scipion is planning to partner with, and take equity stakes in, junior mining companies listed on the Sydney, Toronto and London AIM stock exchanges, all of which have mining operations across Africa.
The investment team is supported by an advisory board, comprised of six mining industry figures.
Clavel says: “There is no other fund on the market that offers investors this kind of opportunity. We believe that the fund will appeal to investors who want the security of fixed income with the reward of equities.”
Scipion will supply partner companies with funding that will allow them to initiate mining projects. This approach will enable Scipion to capitalise on both the rising share price and production profit of the companies it invests in. Targets companies will typically have a market cap of up to USD200m.
The fund offers investors the opportunity to capitalise on Africa’s unique combination of geological strength and favourable investment conditions. Africa has over 80 per cent of the world reserves of platinum, and more copper than any other region, while its companies have low level of debts, pay high dividends and can be bought at a more cost efficient price to earnings ratio than most other emerging markets.
The junior mining industry has suffered significant damage during the global downturn, and this strategy will enable the fund to build an early equity stake in the distressed stock prices of these companies. Scipion’s investments will help to fund mining projects in countries across the continent, including South Africa, Namibia, Rwanda, Zambia, Ghana, Tunisia and Democratic Republic of Congo.
Clavel adds: “The junior mining industry in Africa has suffered badly in the last year, and the share prices of some companies have been slashed by up to 90 per cent. Taking an equity stake in these companies, and providing the funding for their projects, allows us to give high returns to our investors as the share price goes up. The junior mining companies that did secure financing have achieved returns in excess of 100 per cent this year, so the potential is there for all to see.
“This approach also means that we can play a role in supporting African industry, which is a major consideration for us. Credit is extremely tight, and many companies are struggling to obtain the project finance required to move into production. Our fund will provide the debt required to put a mine into production. The strategy will act as a one stop shop for mining companies, and we hope to partner with as many as we can.”
The Mining & Resources Fund is domiciled in the Cayman Islands. The fund will employ a 2/20 fee structure. Citi Hedge Funds Services and Barclays Bank will act as administrators and custodians to the fund respectively. Deloitte are auditors to the fund.
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