By Thomas Biesheuvel – May 27, 2010
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Harbinger Capital Partners senior managing director Philip A. Falcone testifies during a hearing on Capitol Hill. Photographer: Brendan Smialowski/Bloomberg
Harbinger Capital Partners LLC, the U.S. hedge-fund firm run by billionaire Philip Falcone, plans to boost investment in African resources as commodity companies compete for some of the world’s biggest mineral deposits.
“Africa is the last untapped resource frontier left on earth,” Harbinger Managing Director Lawrence Clark said in a telephone interview. “Over time we’re going to work towards making more investments, but we’re only going to do so with great caution.”
Companies from South America, Europe and Asia have been drawn to Africa by its mineral riches, including the world’s biggest deposits of platinum, chrome and diamonds. Capital flows into the continent rose 16 percent in 2008 to a record $62 billion, even as foreign direct investment around the world fell 20 percent, according to the World Economic Forum.
Harbinger, which has about $10 billion in assets under management, holds three investments in Africa, Clark said. The company owns a 22 percent stake in Sable Mining Africa Ltd. and 45 percent of African Medical Investments Plc, both run by Andrew Groves and Philippe Edmonds. It also has an interest in iron-ore explorer African Minerals Ltd.
Investing in Africa isn’t without its risks. Copper miner First Quantum Minerals Ltd. said a license for one of its mines in the Democratic Republic of Congo was reassigned to another party on May 25. African Consolidated Resources Plc has been in dispute with Zimbabwean authorities over the cancellation of its permit to mine gems in the Marange diamond fields since 2006, while Rio Tinto Group has been stripped of assets in Guinea.
Clark said he’s conducted due diligence in 15 African countries over the past nine months for prospective Harbinger ventures and will only commit funds to projects he has visited himself.
“The dollar value of our African investments, to date, has been very small as an overall percentage of our portfolio,” Clark said. “We’re doing a hell of a lot of work on small dollars right now to get comfortable that we’re making the right investments.”
Harbinger’s planned expansion in Africa follows Vale SA’s $2.5 billion purchase agreement in April for iron-ore deposits in Guinea. A month earlier, Singapore’s state-owned investment company Temasek Holdings Pte, which manages about $122 billion, said it’s seeking mining ventures on the continent.
Among Harbinger’s Africa investments, Sable holds coal and uranium deposits in South Africa and Botswana and plans to buy iron ore assets, while African Medical runs hospitals. African Minerals agreed last month to sell a 12.5 percent stake to China Railway Materials Commercial Corp. to help fund its Tonkolili iron-ore project in Sierra Leone.
Harbinger, based in New York, counts stakes in Cliffs Natural Resources Inc. and EXCO Resources Inc. among its top 10 holdings. Last month it sold A$150 million ($124 million) of stock in Fortescue Metals Group Ltd., Australia’s third-largest iron-ore exporter.