Big domestic and offshore commercial wins by Australian mining and metals technology firms over the next few years could be reflected in the fortunes of a circa-US$200 million private investment fund looking to connect the country’s vast family office wealth with dynamic segments of its large mining supply ecosystem.
Melanie Hay, managing partner at Perth-based Viburnum Funds, says the group’s latest fund will target up to a dozen Australian-based companies in the mining equipment, technology and services (METS) sector to shoot for a 25% IRR goal.
More mature firms generating reliable returns are expected to be the “ballast of our portfolio”, with earlier lifecycle and then smaller tech companies – including potential later-stage venture-type transactions – making up the balance.
Australia has a large and diversified METS sector that features global leaders in the contract mining and drilling and engineering services markets and a big and growing mining start-up and scale-up tech ecosystem.
The latter has provided numerous targets for international original equipment manufacturers, larger tech groups and private equity firms over the past decade and there are at least two Australian mining software companies with billion-dollar price tags on them now. In the past four years there has been more than US$10 billion of financing and M&A in the global mining and metals tech space.
Hay says it is difficult to isolate tech in a sector dominated by equipment and product suppliers, but it is definitely emerging and Australia is figuring prominently.
“I think there are significant challenges for the mining industry going forward and there’s a greater acceptance that technology is key to unlocking a lot of value,” she said.
“And so I do think there are more investors that are perhaps now more willing to look at some of these opportunities.
“I think it is becoming more widely accepted and understood the role of mining in the energy transition … and Australia, with all of the innovation that takes place, we are strong supporters that it’s the best place to get exposure to that trend.
“From a strategic perspective you see a lot of these big multinational companies are making incredible inroads into a variety of different technology angles. So there’s interest; there’s obviously the strategics, but from a private capital perspective I think the market is increasing.
“We’re looking at robotics, consumables, mining capital products … We’re looking at some mineral processing technologies.
“A core part of our strategy is to invest in productivity-enhancing technology, products and services, which will then lead to better outcomes with regards to emissions and the like.
“So it’s fairly broad and there are a lot of opportunities out there at the moment.”
Hay says the “rise of the family office” in Australia in recent years has brought a different dimension to local capital markets.
Viburnum’s new A$300 million fund has WA-based DFD Rhodes as a cornerstone investor.
“We are seeing more and more families and family office money that is looking to invest directly in opportunities,” Hay says.
“That is a really interesting development for the markets because I think there is potentially a different risk appetite for some of those families that might be more willing to have a look at those earlier stage opportunities.
“And I think in a city like Perth there’s a lot of familiarity with mining and its importance to the Australian economy.
“The Don Rhodes family office has taken a cornerstone position in our fund and they were one of the pioneers of the Pilbara iron ore industry.
“I think the reason our strategy works is that we’re based here in Perth and we have lived and breathed this sector for most of our history and we have got to know a lot of people in the industry.
“That means we’ve got a lot of people that will bring us ideas. We’ve got people that we can bounce some of the new ideas off. And in fact, we have appointed an advisory partners group, which includes [mining industry veterans] David Flanagan, Jimmy Wilson, Kate George and Callum McCracken, to help us look at these opportunities and provide their perspective on what we’re seeing.”
If Viburnum gets to its $300 million target it will have raised more than $1 billion since its formation in 2007.
Hay says while Australia’s private equity capital market continues to mature, venture capital remains tough for start-up firms.
“If businesses can bootstrap their way through there is an increased interest from private capital to invest in these businesses,” she said.
“There has also been a mixed experience for some investors around venture capital over the last couple of years – not getting liquidity. And that’s not just mining tech, it’s generally, and it’s probably also fair to say in private equity.
“So liquidity has been an issue in a lot of areas and people remain wary.”
