Orion raises over $2bn for its global mine finance fund

The specialty financer closed its second global debt fund amid a five-year down-cycle in the mining sector where companies still have tight cashflows.

Orion Resource Partners, the New York-based specialty lender to the mining sector, held a final closing of $2.1 billion for its second mine finance fund on 31 January, the firm told Private Debt Investor on Monday.

The firm raised new capital across its commingled Orion Mine Finance Fund II and a related co-investment vehicle, the firm said in a statement on 8 February.

Fund II plans to deploy 40 percent of its capital to senior loans. It is also looking to deploy 35 percent of $2.1 billion into mezzanine type production-linked strategies by seeking cashflows from securitised products with underlying assets of either streaming agreements or loyalty contracts. The remaining 25 percent will be deployed in structured equity.

Limited partners committed to the vehicles included sovereign wealth funds, pension funds, endowments and foundations, family offices, and funds of funds, both onshore and offshore.

Among those US public pension plans that committed to Fund II was Texas Municipal Retirement System, which allocated $100 million, according to a preliminary investment staff report disclosed by the pension fund.

North Carolina State Treasury and the Washington State Investment Board also backed the vehicle with a $125 million commitment apiece, according to PDI data.

The mining sector is still not in favour with most generalist firms, according to Oskar Lewnowski, Orion’s chief executive, adding that this has made it very hard for mining companies to raise money.

“The mining industry, alongside the larger commodity sector overall, has been through a rough patch for the last couple years,” he told PDI on Monday.

He noted that copper prices, for instance, finally started to move to the right direction in the last 12 months, although this upswing has not been particularly reflected in the equity values of earlier stage mine exploration companies and development companies.

Asked whether he sees more mining companies in distressed and special situations now compared to 2015, Lewnowski said: “It remains true that there are still numerous companies with tight cashflows. This has led to a lot of talk in the industry about consolidation, although transaction volume has not borne this out.”

The 2012-vintage predecessor vehicle, Orion Mine Finance Fund I, raised at least $1.16 billion from commitments from US investors, including $100 million from the Florida State Board of Administration, $ 75 million from the North Carolina State Treasury, and $25 million from University of Michigan, according to PDI data.

PDI understands that the size of a typical transaction for the Orion Mine Finance series depends on the type of mine: the development cost of a median copper mine is near $1 billion and $500 million for a median gold mine.

It is not clear whether the firm applied a leverage on the vehicle. The fund has a four- to five-year life with a target net internal rate of return of over 20 percent per annum.

The firm manages $4.5 billion in assets as of 31 December and finances the construction of later-stage mine projects through a combination of debt, equity and production-linked investments.