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Egyptian billionaire Naguib Sawiris has set up a $1.4bn fund to hold his gold mining investments and pursue new opportunities in the sector, which he says is need of consolidation.
The Luxembourg-based La Mancha Fund will be a “deep value, long-only fund” dedicated to gold mining and open to new investors, Sawiris said. The fund will also invest in battery metals needed for electric cars.
While the world’s largest gold miners Barrick Gold and Newmont Corporation have bulked up in recent years through acquisitions there remain a huge number of gold producers that are not big enough to appeal to mainstream investors.
Sawiris said the fund would take stakes in some of these junior miners and encourage further consolidation through mergers and acquisitions. It will also seek to improve the environmental, social and governance performance of the sector and broaden its appeal.
“Transitioning to a fund structure and welcoming new investors is timely when we are seeing opportunities in a gold mining sector, which is fragmented and needs further consolidation,” he said.
The launch comes after shares in gold miners have dropped 20 per cent this year, as measured by NYSE Arca Gold Bugs Index, as investors have focused on assets tied to the “reflation trade” and the global recovery from Covid-19. These have included commodities such as copper and other industrial metals, which have benefited from governments’ trillions of dollars poured into recovery packages.
The price of gold has fallen 7 per cent year-to-date and currently trades just above $1,800 a troy ounce on Monday, retreating from a record high of more than $2,000 an ounce last year as vaccinations have reduced the economic damage from the Covid-19 pandemic.
The fund will hold Sawiris’ stakes in Endeavour Mining, the largest gold producer in West Africa, as well as Evolution Mining, Golden Star, and Altus Strategies. It also includes a $100m investment from “a strategic partner”, who was not named.
The fund will look to buy “significant stakes” in junior mining companies with “strong managerial and geological potential to implement a 3-to-5-year value creation strategy,” it said.
It will also look to improve operational efficiency of mining operations and help companies expand through exploration and new mines.
Sawiris, who made his fortune in telecoms, has been one of the biggest investors in the gold mining sector, through his investment vehicle also called La Mancha.
Launched in 2017, La Mancha has amassed a 19 per cent stake in Endeavour Mining. Since he acquired his stake Endeavour has expanded by buying two west African gold producers, Semafo and Teranga Gold.
It listed on the London Stock Exchange in June and has a market capitalisation of $5.7bn. That means it could be gain entry to the FTSE 100 index at the next quarterly review in September.
The fund will be supported by an advisory committee made up of mining professionals that will be chaired by Sawiris.