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International Investors: The prospects for the mining sector going forward

07/10/21 Joburg Indaba Day 2 Session 1.

Chaired by Fiona Perrott-Humphrey, Aim Mining Research, and Senior Adviser, Mining Team, Global Advisory, Rothschild & Co. London

with
– Brett Beatty, Partner, and Head of Australia, Resource Capital Funds
– Olivia Markham, Managing Director, Natural Resources, BlackRock
– Mick McMullen, CEO, Metals Acquisition

 

  • Are we in a super cycle or an “energy-spiked” cycle? What are the main drivers affecting the current rising commodity prices and how long will this last?
  • What implications does this have for mining companies’ strategies and future growth?
  • What are some of the risks of the current bull market, e.g., increased taxes/royalties, demands for increased wages, etc.?
  • What are the potential rewards? Is now the time to make capital investments or exercise capital discipline?
  • What are the prospects for mining given the Covid recovery strategies of the developed countries/regions and the current global impetus towards clean energy?
  • How can South African mining companies ensure that they take advantage of these opportunities?

The changing geopolitics: the new “cold war” for strategic minerals to fuel the energy transition

06/10/21 Joburg Indaba Day 1 Session 3.

Chaired by Fiona Perrott-Humphrey, Aim Mining Research, and Senior Adviser, Mining Team, Global Advisory, Rothschild & Co. London

with
– Brian Menell, Chairman and Chief Executive Officer TechMet Ltd
– Richard Williams, Executive Chairman, Bunker Hill Mining & Director Trevali Mining
– Stuart Brown, President, and CEO, Mountain Province Diamonds

  • How is the energy transition changing the demand mix for mined products? Will the West be capable of pushing back China’s current domination of assets and refining in the strategic minerals space?
  • How “green” is the processing of critical metals, and will this constrain supply?
  • How can SA best position itself as a mining jurisdiction to participate in the energy transition?
  • What specifically can an individual company do to mitigate the risk or seize the opportunities of the new scramble for resources?

Mining Magazine recently wrote an interesting article on permitting in the US. Read here – US ‘must streamline permitting’ – Mining Magazine

Building a green and digital future is not without its contradictions

On 6th October, I am chairing a panel at the 2021 Joburg Indaba entitled “The changing geopolitics: the new “cold war” for strategic minerals to fuel the energy transition”.

There is increasingly a consensus amongst people from all walks of life and regions of the world that we must fight back against the effects of climate change. But, I would suggest there is significantly less understanding around the metals and minerals required to drive the new technologies. What are these metals, where are they found, how are they processed, and what are their applications?

Ahead of my panel, I can do no better than offer a few quotes from an insightful book by Guillaume Pitron entitled “THE RARE METALS WAR – the dark side of clean air and digital technologies”.

In his introduction, he points out some very significant trends (direct quotes from the book are shown in italics).

The Rare Metals War“The disruptive effects of fossil fuels on the climate since the turn of the current century have driven humanity to develop new and supposedly cleaner and more efficient inventions – wind turbines, solar panels, electric batteries – that can connect to high-voltage ultra-performance grids. After the steam engine and the internal combustion engine, these “green” technologies have shifted us into a third energy and industrial revolution that is changing the world as we know it.”

“By seeking to break free from fossil fuels and turn an older order into a new world, we are in fact setting ourselves up for a new and more potent dependence. Robotics, artificial intelligence, digital healthcare, cybersecurity, medical biotechnology, connected objects, nanoelectronics, driverless cars…the most strategic sectors of the economies of the future, all the technologies that will exponentially increase our computing capacity, and modernise how we consume energy, our daily routines, and even our most significant collective choices will depend entirely on rare metals.”

“In the twenty-first century alone, their use has consolidated China’s supremacy”.     

It is thus becoming progressively more evident that while the West is promising to pursue a much more green and digital future, the reality of mining and processing the minerals and metals required to deliver this to their citizens is going to be challenging. This is true of the full range of battery metals (primarily copper, nickel, lithium, manganese, cobalt and graphite) and other strategic metals (tin, tungsten, rare earths and platinum group metals, to name a few).  A few reasons are:

  • Permitting restrictions will constrain new mines, and even where they are allowed, they can take up to ten years to bring into production.
  • Processing can be dirty, and new build of plants resisted by “NIMBY’s”.
  • Raising funds for such projects will require costing and pricing assumptions that are complex to frame with any degree of certainty at this juncture.
  • A broad swathe of the mineral resources are not found in the West, and new strategies will be needed to enter and work with the host countries and their communities, often in competition with Chinese state-sponsored entities.

Join us on Wednesday 6th for the panel discussion at the Joburg Indaba, and join the debate! Does the West have what it takes to walk the green walk, as well as just talk the green talk?

2021 Joburg Indaba (online) 6th -7th October

2021 Joburg Indaba (online) 6th -7th October

As a result of the Covid pandemic, this year’s Joburg Indaba event will once again be held online. Regardless of the format, you can expect a highly engaging and interactive two days packed with no-holds-barred constructive conversations on a wide range of critical issues affecting all stakeholders in the mining industry.

Renowned as a leading industry gathering, the Joburg Indaba will once again bring together CEOs and senior representatives from all major mining houses, local and international investors, government, parastatals, experts from legal and advisory firms and representatives from communities and organised labour.

Fiona Perrott-Humphrey, Aim Mining Research, and Senior Adviser, Mining Team, Global Advisory, Rothschild & Co. London will be chairing sessions on both days of the event.

Day One 10h40-11h25  Session Three

The changing geopolitics:  the new “cold war” for strategic minerals to fuel the energy transition

  • How is the energy transition changing the demand mix for mined products?
  • Will the West be capable of pushing back China’s current domination of assets and refining in the strategic minerals space?
  • How “green” is the processing of critical metals, and will this constrain supply?
  • How can SA best position itself as a mining jurisdiction to participate in the energy transition?
  • What specifically can an individual company do to mitigate the risk or seize the opportunities of the new scramble for resources?

Brian Menell, Chairman and Chief Executive Officer, TechMet Ltd
Richard Williams, Executive Chairman, Bunker Hill Mining and Director, Trevali Mining
Stuart Brown, President, and CEO, Mountain Province Diamonds

Day Two 09h50-10h20   Session One

International Investors:  The prospects for the mining sector going forward 

  • Are we in a super cycle or an “energy-spiked” cycle?  What are the main drivers affecting the current rising commodity prices and how long will this last?
  • What implications does this have for mining companies’ strategies and future growth?
  • What are some of the risks of the current bull market, e.g., increased taxes/royalties, demands for increased wages, etc.?
  • What are the potential rewards? Is now the time to make capital investments or exercise capital discipline?
  • What are the prospects for mining given the Covid recovery strategies of the developed countries/regions and the current global impetus towards clean energy?
  • How can South African mining companies ensure that they take advantage of these opportunities?

Brett Beatty, Partner, and Head of Australia, Resource Capital Funds
Olivia Markham, Managing Director, Natural Resources, BlackRock
Mick McMullen, CEO, Metals Acquisition

If you’d like to attend the event register here

Joburg Indaba’s online PGM Industry Day

It was the annual PGMs Industry Day on Wednesday 24th March 2021, a high-level strategic gathering that brought together leading industry players, including local and international mining companies, users and investors.  Against the backdrop of soaring PGMs prices, key stakeholders discussed the huge potential of this sector. Chaired by Bernard Swanepoel, some of the crucial issues addressed included:

• The outlook for platinum group metals globally
• The supply and demand fundamentals affecting the market
• Producers’ strategies for future production, supply, investment, modernization and energy
• Potential growth opportunities and new projects
• The role of PGMs producers in Zimbabwe in the global market
• Investors’ perspectives on the PGMs industry
• Future markets and applications
• The specific role of PGMs in the hydrogen economy

Session Two was the Spotlight on investment:
Dr. Fiona Perrott-Humphrey ‘In Conversation’ with Evy Hambro, Managing Director, BlackRock (London)

Hambro said the hydrogen economy “could have a massive addressable market in the future but the journey will be incredibly volatile in terms of the move from labs to large scale deployment.”

He said the platinum industry had gone through “significant pain” because of the “moving parts” on the demand side which had played out negatively into the pricing of the commodity. “The industry reacted in many cases by taking capacity out and right now the industry is in a much stronger position, it has really sorted itself out. We have had the consolidation which has rationalised part of the industry. We have had the internationalisation. We have had the balance sheet repair. That has had an impact on the way that people value those businesses. In terms of investment quality, it is a vastly superior investment proposition than it has been many times in the past. Right now the industry is in a much stronger position. Its balance sheets are very robust, and I think that is something that cannot be ignored. The PGM industry – and other parts of the resources industry that are so well financed – deserve a different level of discount rate because I think the risk to those businesses is significantly lower because of that lack of gearing and that’s one of the reasons we feel it is the right place to have our clients’ capital invested.”

Asked about investor concerns over the traditional risks associated with mining companies operating in South Africa Hambro replied: “All of the traditional risks associated with South Africa – such as power supply, currency and so on have always been the case in the past during my career and are likely to be the case going forward. I think that’s reflected in the valuations.”

Turning to the issue of diversification by platinum groups through possible mergers with other mining groups such as gold producers Hambro commented: “This debate goes back to the past where gold companies were trading on dramatically higher premiums.

“In the Nineties, it was common to see gold companies on 30 times multiples versus a diversified resources company on a single-digit multiple, but those premiums have now narrowed drastically so the debate is less relevant than it was in the past.”

Hambro also pointed out that PGM producers did not just produce one metal, but multiple metals out of the same orebody being mined and commented: “You have commodity diversification embedded within the business right now so to add something else is not going to change things significantly.”

Fiona Perrott-Humphrey ‘in conversation’ with Sir Mick Davis, Jhb Mining Indaba (online) 8th Oct 2020

Mining majors must convince investors of need to replace value – Sir Mick Davis

When asked about what he thought the major miners had done well or badly during the seven years that he had been on the sidelines of the industry following the Xstrata merger with Glencore, Sir Mick said:

  • Some good progress had been made in reducing costs and restoring balance sheets post the excessive capital spend binge that had occurred mid-decade and destroyed considerable shareholder value.
  • Now, however, there is a danger of the miners and investors being too focused on short- term cash returns, whereas natural resources companies need to be investing constantly to replace the reserves they dig out of the ground.
  • One of the biggest challenges was finding investors who truly understood the cyclicality of the industry,  and emphasising that it cannot be seen as a quasi-annuity.
  • One of the ways to start investing in growth again would be to partner with junior explorers and developers, to share geographic risk and to tap the entrepreneurial spirit that is in danger of being wiped out in the very large, very centralised majors.
  • Another challenge facing the industry is persuading bright young people to follow a career in the mining sector when it gets such bad press on ESG issues. The sector does a very poor job of portraying its strengths and explaining that the metals and minerals that it mines and beneficiates are used in improving the lives of people across the globe. In particular, there is a compelling story to be told around those commodities whose characteristics may enable them to be used in working towards a “greener economy” (e.g. batteries in electric vehicles and developments around a hydrogen economy).

Environmental under-investment comes back to bite – Sir Mick Davis

Sustainable Finance is a very important trend in banking – but what does that mean for mining finance?

Africa Mining Summit 2020, Virtual Event Session 6 Financing mining projects in Africa today

Stefan Eitel, Director Metals & Mining at KFW Ipex Bank discussed this issue at a panel at the virtual Africa Mining Summit 2020. He summed up that taking further social risks into account increases the importance of environmental and social sustainability of any project in the world. A milestone on this path: The update of the “Equator Principles” with stricter criteria for decision-making. He shared the panel with Dr Fiona Perrott-Humphrey (nee Halse), Senior Adviser of Rothschild & Co, Mike Seeger, Director of MX Mining Capital Advisors, Brosi Kamstra, Director of Pangea and Remy Welschinger, Finance Director of Arc Minerals Limited.

The 2020 Joburg Indaba (online) 7 & 8 October

The 2020 Joburg Indaba (online) 7 & 8 October

As a result of the Covid-19 pandemic, this year’s Joburg Indaba event will be held online. No travel required! Download 2020 Joburg Indaba Brochure

On day 2 of the conference at 10.05, Dr Fiona Perrott-Humphrey will be in conversation with African Resources Legend Sir Mick Davis.

At 12.30pm Fiona will also be chairing Session 2: International Investors’ perspectives in the new economy with George Cheveley, Portfolio Manager, Ninety One (London), Charl P. de M. Malan, Senior Metals & Mining Analyst, VanEck (New York) and Douglas Upton, Investment Analyst & Partner, Capital Global (London)

The session will explore:

  • A dramatically increased dispersion in equity markets was an early outcome of the pandemic:  is this set to continue?
  • Which could be the winners and losers amongst the commodities?  Will gold continue its run?
  • What are the hopes for, and risks to, a China-led demand recovery for commodities? 
  • Is the focus by politicians on a “green recovery” realistic, and is the debate on battery metals vs PGMs heating up? 
  • Has the perception of the mining sector shifted during the pandemic, given its relatively resilient performance to date? 
  • What has been the reality of ESG on the ground in this crisis?
  • What are the emerging risks and potential rewards for mining companies in a time of diminished and dislocated globalisation trends?

Africa Mining Summit (AMS2020)

On 16 September 2020, Fiona Perrot-Humphrey chaired a panel on Financing Mining Projects in Africa at the Africa Mining Summit 2020.

The session explored:
What makes a project financeable in Africa today? What are the roles of Private Equity, Public Listing, Banking and Development Institutions to stimulate investment? What commodities and/or project types are likely deemed most attractive in 2020 and the next decade? What other factors are financiers considering as part of the investment decision? 

  • How is the seismic wave of ESG affecting mining finance in Africa?
  • Can some commodities be of such special interest to investors that they override political risk perceptions?
  • Is Africa looking more heavily to China for funding, or is there a resurgence of interest from the Western nations?
  • The range of financing instruments available, and their relevance in different jurisdictions/ commodities?

Understanding Junior Miners

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