African-focused hedge fund firm Scipion Capital has launched a mining fund which aims to capitalize on the recovery of the junior mining and natural resources sector in Africa.
The Scipion Mining & Resources Fund launched on Nov. 1 with $15 million of seed capital commitments, and the mangers of the fund say they expect it to make gains of over 50% annually.
The fund is managed by Scipion’s Geneva-based CIO Nicolas Clavel, 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 a an advisory boar comprised of six leading mining industry figures. According to the firm, the board will provide a unique insight into the market. The board will also advise on technical aspects of specific projects, such as engineering, geology and metallurgy.
“There is no other fund in the market that offers investors this kind of opportunity,” said Clavel. “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. Targets companies will typically have a market cap of up to $200 million.
Africa has over 80% of the world reserves of platinum, and more copper than any other region, while its companies have low level of debt, 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 in Africa has suffered badly in the last year, and the share prices of some companies have been slashed by up to 90%,” said Clavel. “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% this year, so the potential is there for all to see.”
The fund - which has a minimum investment of US$500,000 - is targeting international institutional and traditional hedge fund investors, including pension funds and endowments, wealth managers, funds of hedge funds, HNWI’s, sovereign wealth funds, private banks and family offices.
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.
Established in February 2007, Scipion has solid track record of investing in Africa. The Scipion Commodity Trade Finance Fund, launched in August 2007, has returned 22% since inception. The Scipion Alpha Seeker Fund, launched in May last year, has returned 9% in 2009. The firm is also the provider of the first pan-African investible index, the Scipion Ai40 Index Tracker Fund.