UPDATE 1-Sprott, Zijin Mining to set up $500 mln mining fund

Wed Mar 20, 2013 8:31pm EDT

By Shounak Dasgupta

March 20 (Reuters) - Canadian asset manager Sprott Inc and Chinese gold miner Zijin Mining Group Co Ltd said on Wednesday they have agreed to set up an offshore mining fund with a target size of $500 million.

Under the agreement, Zijin will contribute $100 million, while Toronto-based Sprott will pay $10 million. The rest will come mostly from investors in China, Sprott said in a statement. ()

"Precious metals equities are historically cheap right now and there is tremendous value to be captured," Sprott Chief Executive Peter Grosskopf told Reuters.

Zijin said in a statement the fund will invest in equities and debt instruments related to gold, other precious metals, copper and other minerals and be co-managed by the two firms.

The mining fund -- which is a first for Sprott -- would also invest in physical bullion, and would usually stay away from new ventures and greenfield projects, said Grosskopf, who has led the firm since 2010.

"The fund will invest internationally but we expect the majority of the holdings to be concentrated in North America," he said.

Toronto-based Sprott, founded by contrarian investor Eric Sprott and taken public in 2008, had about C$10 billion in assets under management as of Dec. 31.

Sprott shares closed down 1.7 percent at C$3.42 on the Toronto Stock Exchange on Wednesday.

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