A double-whammy of benefits should incentivise extra investment in base metals in 2018 and beyond. With global economic growth expected to be between 3.1% and 4% for the year, depending on who you ask – the IMF (3.8%), The World Bank (3.1%) or the more bullish Goldman Sachs (4%) – commodities such as copper and nickel will see increasing demand as China’s burgeoning economy continues to expand and the West’s appetite for the industrial metals remains strong.
Granted, labour issues, underinvestment in mining projects and a current trade spat between Washington and Beijing risk an unattractive volatility in prices in the very short-term. But it is very important to note that the fortunes of the base metals will also benefit from the Electric Vehicle (EV) revolution sweeping through the automotive industry alongside global economic growth.
A January report from big accountancy firm PwC, for example, estimated that the EV stock in China is expected to increase by almost 50% by 2030, while 55% of all new cars in Europe and the US will be electric over the same period. With major manufacturers like Volvo Cars quickly embracing EV technology – the Swedish-based business is dropping the combustion engine from 2019 – these changes are clearly not a fad.
Exposure to the likes of cobalt, copper and nickel, which is used in EV batteries, effectively enables some well-placed miners and royalty companies to benefit from this serious economic disruption, whilst keeping their hand in tried and tested commodities. Precious metals do not offer this kind of exposure – an attractive mixture of the old and the new – with the EV shake-up expected to negatively impact platinum and palladium in the long-term as Western governments such as the UK and France ban fossil fuel vehicles and introduce tougher carbon-emission tax regimes. With those factors and the great potential of the EV market in mind, Anglo Pacific Group has, amongst other things, made an investment in the Brazilian-based Piauí nickel and cobalt project.
We also seek to maintain a diverse portfolio of base metals, including copper and zinc, so as to hedge against any unforeseen legislative, political or operational risks – a strategy which should be adopted by any sensible mining investor.
All in all, there are some significant aforementioned headwinds, with the unpredictability of current US trade policy raising a unique concern for miners and royalty companies alike. But the strong fundamentals of base metals combined with their exposure to the EV revolution and global economic growth, means the years ahead look brighter for these type of commodities when compared to precious metals. Royalty financing also has its own role to play in providing flexible capital, where producing and development base metal mining projects need much needed investment to meet this new demand. In short, it is time the industry gets bullish on base metals.
About Anglo Pacific
Listed on the London and Toronto stock exchanges, Anglo Pacific Group is a leading international diversified royalty company. The business’ portfolio is centred on base metals and bulk materials, with exposure to 13 producing, development and early-stage royalties. Those commodities include vanadium, nickel, cobalt, copper, uranium and gold.
Anglo Pacific Group operates in typically safe jurisdictions, such as Australia, Canada, Brazil and Spain. The company is led by Chief Executive Officer ,Julian Treger, who joined Anglo Pacific Group in October 2013. Julian has an MBA from Harvard Business School and a BA from Harvard University. He began his career working for Lord Rothschild as an in-house corporate financier, managing a portfolio of public and private equity investments before co-founding Active Value Advisors Ltd. to invest in undervalued, predominantly UK-listed companies, where he advised on more than US$900m of funds over a 12-year period.
Most recently, he has served as one of the principals of Audley Capital Advisors LLP, an investment advisory firm, which he co-founded in 2005, managing value-orientated, special-situation investment strategies through hedge fund and co-investment vehicles, with a principal focus on the natural resources sector. Julian also holds an external Non-Executive directorship with Mantos Copper S.A. Here, Julian argues why it is time the mining industry gets bullish on base metals