Q&A with Mehdi Ali, Partner, Woodcross Capital
Can you introduce us to Woodcross Capital and your investment focus?
Woodcross Capital was established at the height of the SPAC boom back in 2021. We had some early success stories as a group but quickly realised that you couldn’t build a long term sustainable private investment firm betting on speculative pre-IPO plays. It was serendipity, our respective backgrounds and some foresight into the global geopolitical environment that got us focused on commodities, which is what the primary focus is today. We run what we call the A/S/M investment strategy which is a play on the acronym for Artisanal and Small Scale Miners. The A stands for agriculture, S is for sustainability, and M is for metals.
What is it about the metals and mining/resources space that makes you want to invest?
We all need metals – love them or hate them, we can’t live without them. You just need to look at any real-life strategy game like Settlers of Catan or Age of Empires, etc. to realize the importance of metals. Metals are what led Phoenician traders to traverse the seas from the levant all the way to Ireland and further afield to look for cassiterite.
Where are you finding the most interesting opportunities at the moment?
We’re an Africa focused group so naturally our bias is to focus on opportunities within the continent. The projected demographic shift across the continent, increased awareness of the importance of in-country value addition, and necessary government support to develop value chains within the continent is why we are long on Africa. One also needs to look at the broader geopolitical tensions across Europe and the Middle East and wonder whether an investment is safer there or in Africa?
What makes African projects so investable at the moment? What sort of opportunities are you seeing there specifically?
As mentioned, we’re long on Africa for multiple reasons. The continent has the world’s youngest and fastest-growing working-age population which is leading to fast urbanization, industrialization, and a rising middle class. While the rest of the world is fighting stagflation, most African countries are projected to grow at 7-8% and, in some instances, higher.
From a mining perspective, the continent is abundant with resources, and we find that the barriers to developing a project are less burdensome than they are in established jurisdictions. On top of that, we’ve been blown away by our experience with young local talent – the hunger and ambition they have demonstrated is incredible and we’ve re-visited our approach to hiring. We’re proud to say that we have a workforce which is over 90% local in each of our projects. All that is needed now is some stability and peace and the rest will take care of itself. That’s not to say that the continent isn’t without its challenges – that’s a given like most places. But, as you can see, our general sentiment is very positive and we’re slowly seeing the fruits of that thesis bearing today.
You’re based in Dubai, which is a growing investment hub for the resources space, especially as regional investors diversify their portfolios away from oil and gas. What are some of the opportunities you find being based here?
The United Arab Emirates, and particularly Dubai, has become a real powerhouse for deal making. Dubai provides the best connectivity for travel to and from Africa and is often the place where business leaders from, or involved in business within, the continent will be. The regional push from the UAE and Saudi to diversify away from oil is a welcome development, however, greater work is required to see if it competes with Canada, the UK, or Australia – particularly from a fund raising and capital markets perspective. That said, Rome wasn’t built in one day and the UAE has certainly made some significant inroads to facilitate that growth and is using its sovereign wealth as a catalyst to attract talent to the region.
It is no longer a matter of if, but rather a matter of when the UAE will be listed alongside the other named countries as the primary jurisdiction to raise capital for new projects.
As someone who straddles both the investment and corporate side, can you share your outlook for the mining investment industry moving forward? Do you see the much-needed investment coming into the junior sector?
I suspect we will see a significant amount of consolidation taking place across the industry – this includes a number of neck turning mergers and larger sovereigns continuing to scoop up significant assets (e.g. Abu Dhabi / KSA etc). Unfortunately, that means there will be less liquidity to go around for juniors as sovereigns and large funds will concentrate their fire power on the larger and more strategic deals, but there is always room for disciplined junior players that can demonstrate an ability to carefully manage cash through project development. We pride ourselves on the fact that we’ve achieved a sustainable cashflow positive tin producing business within a matter of years on a relatively shoe-string budget (even after paying some heavy early school fees). We’ll continue to apply that same cash management discipline as we ride up the J curve for Woodcross Resources and we’re keen to announce some of the other transactions we’ve been cooking up in the African 3Ts space in due course.
