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Audley Capital launches natural resources fund, re-opens European Opportunities Fund

Thursday, November 25, 2010
Opalesque Industry Update - On 18th November, Walter Energy USA announced a bid of C$11.50 for Western Coal Corp of Canada.  The 23% equity stake in Western Coal held by funds advised by London-based alternative investment advisors, Audley Capital Advisors LLP, values Audley’s stake at some C$730m, a far cry from the C$80m entry price, Audley paid approximately 5 years ago.

This dramatic change in Western Coal’s fortunes, largely brought about by Audley’s active yet friendly involvement in the company’s structure and management, is likely to propel the European Opportunities Fund towards the top of the European Event Driven rankings (Eurohedge), a position it held for the two years to end-December 2007. 2010, year-to-date returns (dollar class), are 78% as of Monday 22nd November.

Audley’s work and expertise was acknowledged by Walter Energy. According to the press release issued by Walter Energy on 18 November 2010, Michael T. Tokarz, Chairman of Walter Energy, commended Audley “for the key role they played in the development of Western Coal over the last three years.”

Mining will continue to be a key theme for Audley Capital. “We continue to see substantial investment opportunities in mining,” said Julian Treger, Managing Partner of Audley Capital. “In the past three years, European Opportunities, our activist private equity product, has primarily concentrated on this area and just as we have re-opened that fund to new investors, we have also chosen to launch Natural Resources specifically focused on long/short equity investment in this important sector.”

The new Fund formally begins trading on 1st December with some $50m in seed assets expected under management. Investment rationale reflects the continuing support for commodities as global inventories decline and, in particular, declining grades at long established mines curtail supply growth.  At the same time, emerging market demand for infrastructure and continued industrialization is driving commodity prices higher, coupled with the fact that mining equities are trading near their lowest P/E ratios in a decade creates, in Audley’s analysis, a compelling investment scenario.

Founded in 2005, Audley Capital advises close to $1bn of assets. The Firm’s general approach is so-called ‘friendly activism’, acting to make companies more efficient and cogent in facing the exacting demands of today’s financial markets.

The Natural Resources Fund will hold a diversified portfolio of mining companies with class leading assets, and although not an activist fund will seek to offer financial and corporate governance advice to those companies backed by the Fund.

Audley Capital’s senior investment team of Julian Treger and Mark Potter, for the Natural Resources Fund, has been augmented by the appointment of Lucio Genovese who has spent more than 23 years in the metals and mining sector. Mr Genovese worked at Glencore and held a number of positions, including a senior member of the Copper Division and CEO of CIS Operations. He is a director of Ferrexpo Plc, Armajaro funds and Crossbow Advisors in Switzerland. Mr Genovese will be based in Switzerland and will focus on the key sectors of Africa, Australia and Eastern Europe.


Investment Range: 25 to 40 investments representing some 1% -2% of the total potential investment universe of mining and natural resources equities.
Investment Size: Typical investment size will be 1% to 5% of the company. (Max 10%). Target aum size; $500m.
Investment Focus: The Fund will focus on commodities that have high supply deficits and/or a high level of strategic interest from China, India and Brazil. Equally the Fund will focus on companies trading at a deep discount to NPV valuation.
Opportunities: Including companies with significant exposure to Metallurgical Coal, Thermal coal, Iron ore, Copper, Zinc and Platinum.
Registration Cayman Islands
Min Investment: $1m. Large investors ($20m+) will be offered opportunities to co-invest alongside Audley Natural Resources Fund.
Fees 2% management, 20% incentive subject to a high water mark
Redemptions: Monthly liquidity with 60 days’ notice.
Optional Sidepocket Investors may elect to participate in pre IPO situations, expected to be no more than 10% of the portfolio.

Corporate website: Source

- FG

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