KEY POINTS
- Metals and mining deal values are down over 50% this year.
- Higher financing rates and fewer investors impact deal activity.
- The mining industry could need $2.1 trillion for net-zero goals.
Private equity and venture capital transactions in the global metals and mining sector dropped sharply in 2024 after reaching a five-year high in 2023, according to S&P Global Market Intelligence.
Private equity and venture capital in metals sector plunge
As of Sept. 30, total transaction value was $4.76 billion, down more than 50% from the $10.52 billion recorded for all of 2023, S&P’s latest report shows.
According to mining.com, H2 Green Steel’s $4.14 billion funding round in January was the largest private equity and venture capital deal in the sector through September. The number of announced deals in the first three quarters totalled 59, putting the year on track for the fewest deals in five years.
In the third quarter alone, total deal value plunged 80% year-over-year to $240 million from $1.22 billion, with the number of deals declining to 15 from 37.
Antti Gronlund, managing director of U.K.-based private equity firm Appian Capital Advisory, attributed the lower totals to higher acquisition debt financing rates and reduced venture capital investment.
Transactions in 2023 were likely boosted by large deals and interest from investors outside the sector, partly driven by upbeat headlines about electric vehicles, which require substantial amounts of critical minerals. Those headlines have since slowed, affecting deal interest, Gronlund said.
New opportunities emerge as net-zero goals drive demand
Investing in metals and mining remains challenging for private equity due to the sector’s “working capital intensive” nature, said Kyle Mumford, partner at KPS Capital Partners LP.
“There are no small capital requests in a metals business—only really big ones,” Mumford said. “In metals and mining, changes in profitability and manufacturing to meet demand take a long time and can require significant new equipment, mills, or recycling capacity.”
Still, there is potential for further investment in the coming years. Gronlund noted that the mining industry is expected to need about $2.1 trillion by 2050 to support global net-zero goals, citing BloombergNEF estimates. “A significant portion of that will need to come from private capital sources,” he said.
