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Scipion launches mining fund to capitalise on recovery in Africa

Wednesday, November 04, 2009
Opalesque Industry Updates - Scipion Capital (“Scipion”), the trailblazing African hedge fund manager, has launched a mining fund which allows investors to capitalise on the recovery of the junior mining and natural resources sector in Africa.

The Scipion Mining & Resources Fund launched to investors on 1st November with US$15 million of seed capital commitments, and the firm expects to announce significant inflows shortly. Scipion expects the fund to make annual returns of over 50%.

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 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 high-level industry Advisory Board, comprised of six leading mining industry figures. It will allow Scipion a unique insight into the market, allowing it to call upon the board’s vast industry experience and on-the-ground knowledge to identify the best opportunities available. The board will also advise on technical aspects of specific projects, such as engineering, geology and metallurgy.

Nicolas Clavel commented: “There is no other fund in the market that offers investors this kind of opportunity. 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. This approach will enable Scipion to capitalise on both the rising share price and production profit of the companies it invests in. Targets companies will typically have a market cap of up to US$200 million.

The fund offers investors the opportunity to capitalise on Africa’s unique combination of geological strength and favourable investment conditions. 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 has suffered significant damage during the global downturn, and the fund’s strategy will enable the fund to build an early equity stake in the distressed stock prices of these companies. Scipion’s investments will help to fund mining projects in countries across the continent, including South Africa, Namibia, Rwanda, Zambia, Ghana, Tunisia and Democratic Republic of Congo.

Nicolas Clavel continued: “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%. 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.

“This approach also means that we can play a role in supporting African industry, which is a major consideration for us. Credit is extremely tight, and many companies are struggling to obtain the project finance required to move into production. Our fund will provide the debt required to put a mine into production. The strategy will act as a one stop shop for mining companies, and we hope to partner with as many as we can.”

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 an outstanding track record investing in Africa. The Scipion Commodity Trade Finance Fund, launched in August 07, has returned 22% since inception. The Scipion Alpha Seeker Fund,/i> 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.

Since it was established, Scipion has consistently ranked in the top five hedge funds globally on a risk return basis for both Credit and Absolute Return strategies*.

Scipion Capital are a uniquely focused team of finance professionals whose senior management have significant experience of banking and investing in emerging markets, particularly in Africa. Scipion African Opportunities Fund SPC (domiciled in the Cayman Islands and registered with the Cayman Islands Monetary Authority) is an Exempted Segregated Portfolio Company incorporated with limited liability with a number of different share classes all focused on Africa. Scipion clients include hedge funds, European family offices, financial advisors, private banks, endowments and pension funds.


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