Naguib Sawiris, an Egyptian billionaire, has established a $1.4 billion fund to hold his gold mining investments and chase new prospects in the industry, which he believes is in need of consolidation.
The La Mancha Fund, based in Luxembourg, will be a “deep value, long-only fund” focused on gold mining and available to new investors, according to Sawiris. The fund will also put money into battery metals, which are required for electric vehicles.
While the world’s largest gold miners, Barrick Gold and Newmont Corporation, have grown through acquisitions in recent years, there are still a considerable number of gold producers, notably in Canada, that are too small to appeal to mainstream investors.
Sawiris stated that the firm would invest in some of these smaller mines and promote further consolidation through mergers and acquisitions. It will also work to improve the sector’s environmental, social, and governance performance while broadening 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 remarked.
Shares in gold miners have fallen 20% this year, according to the NYSE Arca Gold Bugs Index, as investors have shifted their focus to assets connected to the “reflation trade” and the global recovery from Covid-19. Commodities like copper and other industrial metals have benefited from the trillions of dollars put into recovery packages by governments.
Gold’s price has dropped 7% year to year and is currently trading slightly around $1,800 per troy ounce on Monday, down from a record high of more than $2,000 per ounce last year as immunizations have decreased the economic harm caused by the Covid-19 outbreak.
Sawiris’ investments in Endeavour Mining, West Africa’s largest gold producer, as well as Golden Star and Altus Strategies, will be held in the fund. It also includes a $100 million investment from an unnamed “strategic partner.”
The fund intends to purchase “substantial shares” in junior mining firms with “strong managerial and geological potential to pursue a 3-to-5-year value development strategy,” according to the statement.
It will also strive to improve mining operations’ operating efficiency and assist corporations in expanding through exploration and new mines. It will be supported by a mining-industry advisory committee, which will be led by Sawiris.
Through his investment company, also known as La Mancha, the billionaire, who gained his fortune in telecoms, has been one of the largest investors in the gold mining sector.
It owns a 19 percent investment in Endeavour Mining, and since then, the firm has grown by acquiring two gold producers in West Africa, Semafo and Teranga Gold.
Endeavour went public on the London Stock Exchange in June, with a market capitalization of $5.7 billion. As a result, at the next quarterly review in September, it is likely to be included to the FTSE 250 index.