There’s quite a bit of volatility globally, with geopolitics and economics impacting the industry. What are the key impacts you’re seeing on the metals and mining industry, and how is that also impacting investment policy?
| Molebogeng Mazibuko
What we’re seeing in the market, especially from an African perspective, is clearly geopolitical. It’s no secret that many civil licences have been seized or that the cadastres are not very transparent in different African jurisdictions, which can discourage the investment sentiment. The infrastructure backlog in Africa is significantly high, and that is not aiding or enabling investments into any industry, including mining, especially for the bulk metals. A good case study is the Simandou project, which is now becoming a success story, but we know how long that took. So, from a geopolitical perspective, it’s an infrastructure issue that is currently inhibiting investments into the sector. But there are upsides. There are a lot of jurisdictions that are working on their policies to be more transparent. Botswana has one of the best mining cadastres. It has one of the best databases if you want to apply for a licence. Everything is online. From a future-proofing mining perspective, we need to collaborate and ask what will make the industry better? There are many vehicles that are trying to connect the region from a policymaking perspective. So, that same school of thought is starting to shape the industry to be in uniform with each other, where there aren’t a lot of nuances that drive away investments.
| Cathy Nader
I think regional geopolitical risks are a key factor when we look at any opportunities. But the current global geopolitical climate creates opportunities for Africa. Trump is looking to secure supply of particular minerals out of China, and we don’t know how that’s going to play out. This creates a geopolitical risk overlay that we’re probably going to see come through in price volatility. And, for us, that’s a key factor we consider when financing any project. So, we go back to basics: as long as the capital structure works, strong management, and robust cash flows, those overlying themes are not going to stop us from doing deals.
| Julian Treger
I see two interesting trends. One is that change is happening quickly, but our sector is a long-term sector. For example, the Trump tariffs could change in a couple of days, like we saw in Colombia. And over the last year or two, we’ve seen what’s considered to be critical, in terms of minerals, change. So, I think that’s an issue in terms of long-term planning. The other issue is that, whilst the geopolitical significance of our sector has significantly increased, the connection with the market hasn’t improved. So, there’s this tremendous disparity between the perception of the sector in Washington, or in Beijing, versus in the markets of London or Toronto. How that gap gets closed is an issue that needs to be solved.
| Philip Clegg
The most pertinent topic right now is investment from the Middle East. We just announced a US$1.2B joint venture (JV) with ADQ, who is, in my view, the most dynamic of the sovereign wealth funds in the Middle East. We’ve done that for a very specific reason, which is to invest in emerging markets. Through this JV, we get to supercharge what we’re doing into emerging markets. We wanted to do this because that’s where the opportunity lies. If you add investment in the region with political capital, which is what the Abu Dhabi government is giving us, you have a level of comfort to be able to invest more. We now expect to be making more investments into Africa, Latin America, and Asia.
| Paul Brink
My take on it is driven by the gold market, which is the market that we principally invest in. The overarching trend you’ve seen in the last couple of years, is the world splitting into the Western world trading bloc and the BRICS trading bloc. This has really changed the nature of the gold market. Conventional logic on the gold price is that the bottom was set by Chinese and Indian retail buyers. But to have a run on the gold price, it was driven by US financial investors, which has really been changed. Those correlations have broken down because the marginal buyer of gold, over the last two or three years, has been the BRICS central banks, led by China. They peaked at about US$1.3T in their reserves. It’s a major structural change in the gold market, and it’s been driving gold prices higher, along with other risk factors. But it’s a major change in our generation, and I think you’re going to see gold assets do terrifically well over the next couple of decades.
| James Dendle
On a macro level I think it’s chaos. There’s policy that is probably going to continue to whipsaw for the next couple of years. We’re dominated by a US presidential cycle that, ostensibly, is four years long, but really, it’s split into three months of integration, a year or so of actual governing, midterms, and then the run-up to the next US presidential election. What we saw in the first Trump administration was very rapid shifts in policy that was largely dictated by Trump wanting to see the markets perform well, and as a proxy, present success. When you stand back, it’s problematic, and very difficult to see how it resolves itself into the metals business in general. If I’d sat here a couple of years ago, I would’ve strongly believed that it was the concept of friendshoring, where flows of commodities would generally be oriented towards the West or the BRICS. And if you were within one sphere or another, you’d benefit from the support of either those countries that comprise the extended BRICS or the US. Now, I think that’s broken down because the US is following a somewhat imperialist, and almost isolationist, set of policies that are not necessarily lending themselves to friendshoring. Whilst the macro level is really complicated, at the project level, we are looking for the same things we’ve always looked for, which are good, well-run projects, with a prudent and appropriate capital stack, that we can finance and develop. So, I think good projects will still shine through, despite a really chaotic macro system.
We’ve talked about the Middle East being a new major player investing into African markets, and we’ve talked about futureproofing and the role of the critical minerals within the region itself. So, what are the emerging opportunities you’re seeing these days?
| Cathy Nader
The US and the other powerhouses are looking to secure critical minerals, which is a great opportunity for the continent. There’s so much in the ground in Africa. That being said, it’s important for African governments and regulatory authorities to practice strong ESG practices. They need to display environmental stewardship, skill upliftment, community development and, of course, governance. So, while there’s a big opportunity for Africa, they need to attract investors, and they need to make sure they comply with ESG requirements themselves.
Is the much-needed investment coming into the region?
| Cathy Nader
It’s definitely there, but more is needed. As foreign investors into Africa we have certain criteria. There is resource nationalization and security risks that are also overshadowing the potential in Africa.
| Molebogeng Mazibuko
There is a lot of capital coming into Africa, and that’s been the trend for decades. You’ve seen a lot of capital from China, Europe, and the US. The new kid on the block now, the UAE, wants to bring a lot of capital in, which is an upside. So, for me, the question is when they do bring capital into Africa, what is our bargaining position? We often talk about value addition, but, often, these ambitions are not met because maybe we’re not bargaining when we get the capital. Because whoever gives the capital, chances are, they’ve set up house in their own country for processing. So, the element of future-proofing here then becomes a question of how do we share the benefits from processing? We need to start ensuring that we are multiplying the revenue that we are making just from an upstream play. Therefore, our bargaining needs to change. We are no longer desperate for capital because you also have something imposing on the table. Our attitude towards capital must change. However, I’ll go back to the fact that it is a huge upside that Africa has been looked at as an investment destination. And, there is sufficient capital out there. There’s also sufficient capital domestically that we can now start investing into projects.
| James Dendle
We speak to a lot of North American investors into Triple Flag, and one of the challenges we see is investors, in the US and Canada in particular, look at Africa as a monolithic block. And they make very few regional or local scale distinctions. I think there’s an educational element to help outside investors understand how people allocate capital to the continent, and what the risks and opportunities are. Because there is a wonderful opportunity set more broadly across this continent. Linked to that is the timescales over which we invest. In the streaming and royalty business, we’re often exposed to these operations for extremely long periods of time, basically for life of mine. And we offer a long tenor form of capital that gets paid back over many years. So, we may be in a country through one, two, or even three election cycles, before we’ve had our money paid back. Hence, the capital is at risk for a very long period. Finding countries that can offer a period of consistency of government frameworks, and allow operations to be successful over that period, is crucial. That’s what we’re looking for and part of what we must explain to our investors when we make investments that are outside of typical mining jurisdictions.
| Philip Clegg
The key point here when it comes to investing in emerging markets, and in Africa, is stability. You have to have stability. You have to believe that you’ll be there for a few election cycles. I agree that processing would be wonderful in Africa. I would say that it’s risky. It’s risky to do that anywhere, let alone Africa. And one of the things that we have to attract globally to our business is human capital. We don’t really understand how to do that kind of thing. That’s the kind of thing that’s done in China.
| James Dendle
I think the human capital is a positive for this continent. People in North America or Europe are not choosing to work in the mining business. It’s hard enough to find skills for operating equipment or those very traditional mining skills. When you’re looking at downstream metallurgical operations, it requires a very complex and quite niche set of skills that are not massively prevalent in the sector at large. But I think this continent has a young population with a huge amount of potential. So, if that can be tapped into, there’s a lot of potential.
| Molebogeng Mazibuko
Another key advantage in Africa is that we have a financial system where there are investors that have an appetite for Africa. At AFC, we invested in Guinea, Gabon, the DRC, Sierra Leone, etc. We’ve invested in places where, when we were initially investing, no one wanted to go in. Some projects that we’ve looked at, from a risk profiling perspective, no one wanted to go initially, but we took the risk. And now, others have come on board, or are coming on board to support it. We have investors that are able to take that initial risk, which is a significant booster to ensuring that other players can start to see value. So, it’s not like we’re in this corner all alone and there’s no one looking at us internally. There are internal players, like Nedbank, that want to be in it.
How are local investors and other industry players helping to propel the industry forward, and to share what they do to bring in a broader audience?
| Molebogeng Mazibuko
We’re starting to see a lot of plays where we’re syndicating, or we’re coinvesting. And as we co-invest, there’s an elevation of the narrative about African investments. Because whenever there’s a success story, all of us ought to share it, and it brings an elevated pitch to the rest of the world to say, “These are good projects.” So, yes, there are external factors, but when you have a strong management team, or a strong sponsor, people tend to be solution driven and can make a success out of a project.
| Cathy Nader
Nedbank is often the only African bank in a lending syndicate in some of the transactions we do. And having an African partner in a lending syndicate does bring comfort to the other lenders. We’re very like-minded, we have similar goals, and are aligned on how we do deals. But, also, for the company itself, having an African bank that can support the company and country with other products, export LCs, on the ground banking, does help the company in their financing structure.
Can we talk more about the impact of Trump, his tariffs, and impact on critical minerals sourcing and processing?
| Paul Brink
There’s a book which really helped educate me on the battery metals called Volt Rush which is really worth reading. I started with the perception that global warming was a global issue, and the world would work in concert to address it. Reading through it, it became very clear to me how so many countries think about it as just their own competitive volleys. China took the lead on electric vehicles (EVs), 15, 20 years ago, and is the global leader. Other parts of the world look at it from the perspective that the auto industry is such a massive industry for so many regions, that their response to it is less about global warming, it’s more about how do we protect those industries. The response is very nationalistic. The world will continue to break up into these various trading blocs. One of the things we think about when we’re investing is that it’s not for three or five years, it’s for 20 or 30 years. And so, a big question we’ve got to ask ourselves is, where do we think that country ends up in 20 years’ time? What trade bloc is it going to be in?
| James Dendle
Trump has a very clear ideological perspective on how it should work. He has a distinct view of the US versus pretty much everyone else. But what hasn’t been demonstrated is that there’s a flow of physical commodities that’s required. So, the tariffs are appealing for lots of different reasons, particularly rhetorical ones. But, over time, there may be a demonstration that tariffs are causing the flow of commodities to go elsewhere. And that might cause a re-examination of how the US approaches the provision of commodities.
| Julian Treger
I think the culture of the Trump administration is going to be to test things, and then change them if they work or don’t work quite quickly, which makes it very difficult to plan long term. But I would definitely expect them to put some tariffs in South Africa. I think the definition of critical minerals is changing, and it’s becoming much more defense-led than necessarily electric battery-led because China has overproduced vast amounts of the materials for electric batteries. It looks like, in the very long term, those batteries are going to be just sodium batteries in large part. So, it’s those materials, like tantalum and tungsten, critical rare earths, that are going to be more of the focus when you talk about critical minerals going forward.
How are the Trump policies, and other global policies, impacting the supply chains and the metals value chains overall? What are the broader impacts that you’re seeing in the global markets?
| Julian Treger
I think there’s going to be differential pricing in the US and outside the US. There’s going to be different supply chains. And short term, as we go from a global just-in-time system to many different national supply chains, which is much less efficient. So, there’ll be more stockpiling, but, ultimately, the world will pay a price because it’s going to be less efficient.
| Philip Clegg
Short term, there is uncertainty. But we operate in Washington, at the highest level, to really understand what the US wants to achieve when it comes to critical materials. And we’ve been doing that now for a few years, and it’s pretty much a bipartisan policy that security of critical materials needs to be had by the US, which we’re seeing a keen interest in from the government, in terms of trying to achieve it.
We’re starting to see more use of artificial intelligence (AI) in the mining sector. Have you embraced any form for your business?
| Philip Clegg
We actually started a venture capital business around AI last year, which has now made five or six investments. We see huge opportunities to create efficiencies within the value chain of any mining asset. But we see that particularly in mine planning and processing, not so much in drilling.
| Cathy Nader
We’ve been thinking a lot about artificial intelligence, how it can improve processing, data analytics, safety. What’s interesting for us, and what we need to get our heads around as funders, is how the exploration using AI is going to feed into a BFS, and how we take reliance on that.
| James Dendle
For several years, I was on the board of a company that was doing cutting-edge research in deploying AI applications in the exploration space. Through that, they discovered a major gold deposit in Canada, which is currently being developed in Newfoundland. The technology was fundamental to that discovery, and the research that was being done was really impressive. The challenge they faced, though, was turning the science into a business. It’s a very R&D-hungry business, but the audience for the technology is relatively small. Mining exploration is a small and a rather uncapitalized sector of the economy. It was very difficult for them to take the projects they were running, and the products they were developing, to the next step. Philip is talking about funding these ventures, and I think it’s crucial that capital is being deployed in that cuttingedge research because it’s so difficult to make headway. One thing we do in exploration is generate huge amounts of data, but very little information. And what we are really seeking to do is get more information from our data. We generate lots of it that sits in four sheds in Northern Ontario, or in odd servers all over the place. There’s a huge opportunity there that I think is extremely underutilized, even with some of the advances the last couple of years.
| Molebogeng Mazibuko
The challenge that I see, and there’s also an opportunity, is how we transition the AI applications into the reporting instruments that we use online. And how verifying that this data is something that is acceptable to the industry from a global standard perspective. So, that will be interesting to see that particular transition. I’m even wondering if there’s already a think tank focused on this particular aspect, bringing the AI in, or if it’s just still us dilly-dallying and talking about it. It would be great from these discussions to then say, “How do we then develop a global think tank that can now focus on pulling it into practice?”
| Julian Treger
AI is clearly being weaponized. And there’s an economic and military battle between the East and the West. What’s interesting about AI, from my perspective, is what it’s going to mean in terms of demand for our industry. We, are going to see a lot of demand for uranium, in terms of the power, and that’s a theme that’s well established. One of my businesses is recycling magnets in the US, because the magnets are going to be needed for all the hard disk drives. If they don’t get them in the US, and China stops them, then the US progress on AI will be much more limited.
| Paul Brink
Your mind goes to the opportunities that AI creates. I often think about the jump in data we used when we first started with smartphones, when you could just send emails and texts. And then to think, today, where just about everything that we get is graphical, and the quantum leap in the amount of data that gets transferred day to day just because of that. To me, AI is just another quantum leap in the availability of data. I think everyone will eventually want to use AI, but that means the amount of data that we’re all going to use will multiply by a quantum of 10. And so where’s the energy going to come from to generate all of that? In the US, there’s a huge land grab going on right now for people saying, “Where can we build data centres? Where is there sufficient power? How do we put in sufficient power that we can power up these data centers?” That trend is going to spread around the world as people say, “How do we participate in this? How can we have that data generating capacity?” I think that’s going to be a huge opportunity for investing.
Earlier we touched on the Chinese influence on markets. The DRC has recently said all their operations and minerals are 80% owned by the Chinese, but they want to divest and bring in the rest of the world. How do we grow the investment in countries dominated by the Chinese? And if we can do that, are governments open for companies to come in?
| Philip Clegg
You see this in certain countries, you mentioned the DRC, but I would actually point out Indonesia, which is probably the main country that has been completely dominated by China, particularly in the nickel market. But there’s a new president in Indonesia right now, and it’s not a comfortable position for Indonesia to have that level of dominance from the Chinese. And so there is outreach to try and attract Western investment into the country. But the question is, how do you do it? Because you need operating partners, and who are the operating partners?
| Molebogeng Mazibuko
On that note, there are a lot of companies and priorities, where a country needs capital. And they get external capital because the party that comes in often has their own priorities and objectives. In a case like that, I really don’t see a balance. The only balance is with new assets. If you go to DRC, there’s a lot of projects being explored, not all of them are China-dominated. There is, obviously, a Chinese play, which we are grateful for because it’s enabling the development of the industry, but there’s still an opportunity for other parties to come in. The question now is, are there other parties with appetite to come in? Is there sufficient capital that is looking for the same opportunities that the Chinese are looking for? The dynamic in DRC is the fact that they have a lot of cobalt, but they can’t process it because of other political things that are attached to the cobalt, like labour issues. Hence, they’re not always buying directly from DRC. But when China is selling, they buy from China, not understanding that it is coming from DRC. So, there are certain advantages to having the Chinese capital there that has enabled the DRC economy to also achieve certain milestones. So, I really don’t see the balance because there’s competing priorities. Unless we say, “Let’s go in alone and invest in this project alone without the Chinese.” Often, there’s not enough capital to cover the total project cost.
| Cathy Nader
I think you’ve got to ask why the Chinese were there and not other investors. And if those fundamental risks or situations are still there, it may be difficult to get in other investors. It depends on the context of the country. A good project still needs all the basic fundamentals, when that happens, investment should come.
| James Dendle
If you think about it from the point of view of a Western company as an alternative to a Chinese company, you have to ask yourself whether they have a mandate to take on the risk that is inherent in some of these jurisdictions. If you’re sitting opposite shareholders, and you’re a major diversified mining company, do you have the capacity to tolerate the headline risk, the instability that may come from investing in the DRC? I think there’s a lack of risk appetite, which probably reflects the appetites of the shareholders of many of these companies that tolerate that sort of risk. I contrast that to companies, like Zijin, who have been on the most incredible acquisition track record over several years and have generated huge value to their shareholders by acquiring interesting projects, completely within the DRC. They clearly have a mandate to continue that growth. Western companies, in many instances, do not have that mandate. And I think what changes it is demonstrating stability over a period of time, which is very hard to achieve.
| Molebogeng Mazibuko
I’d like to revert to my initial point. You need local investors that have an appetite for Africa because instability and uncertainties can be unpredictable. You need people that understand that, either way, we just invested in DRC, you can’t always predict it. But you can at least try your best to mitigate the risk where you can, but you need investors that have an unbiased appetite for Africa.
Let’s end with some key takeaways for our investor and corporate audience and where you think the industry will move next.
| James Dendle
We see a huge amount of potential to invest on the continent. We are actively looking at transactions in Africa, all over Africa. We have pretty specific perspectives on what we need for investments, but Triple Flag is actively investing Africa, and I hope that continues for a long period of time.
| Paul Brink
What we’ve found over time is, when governments have a preference for one party, or one country to invest, and start giving preferential treatment, often, that’s a reflection of the government, and not of the countries. And, quite often, what you have is, when you have a change in regime four years later, more likely than not, the new government that comes in will favour a different party. I’ll echo all of James’ comments to say, where we’re looking to invest, it is for stable governments, where there is a good rule of law, where they treat all the capital equally over time. It’s what gives you the greater certainty over the long term.
| Philip Clegg
Africa has always been an investment destination for us. And, over the years, it’s become clear that this is a really interesting continent. Some of the assets are excellent. What we would call for is stability. But this is the whole reason why we just closed the JV with the Abu Dhabi government is to allow us to invest more in this region because it provides us with the political cover that we require.
| Julian Treger
I think when we sit here next year, we’ll have seen a year of enormous change, both in terms of commodity pricing and priorities. And I think it’s going to be important to be very flexible in the months ahead. And that change will create opportunities.
| Cathy Nader
These are very exciting times for the continent. Obviously, key themes, we need regulatory stability, ESG awareness, skills. But I think what’s important, and we have a concept, is we need to be unbiased, and not just read a report on a computer and take a view. It’s important for equity and data investors to be on the ground and understand the context in which they’re investing.
| Molebogeng Mazibuko
My very consistent tagline is that Africa is the opportunity. I don’t see any other continent that has such great potential as Africa. Yes, from an upstream perspective, but also from a midstream and downstream perspective. All the countries talk about global north and global south. They have their politics. Every president that comes in, Biden had his own circle, Trump is going to have his own circle. Presidents in Africa do that all the time. The only difference is the global market, they have their own capital. We need to start generating our own capital. We need investors that are fully focused, and fully intending to commit to investing in Africa. And are seeing a long-term perspective, not a short-term perspective, because like I said, Africa is the opportunity.
Panellists:
Paul Brink, Director, President, & CEO, Franco Nevada
Philip Clegg, Managing Partner, Orion Resource Partners
James Dendle, Chief Operating Officer, Triple Flag Precious Metals
Molebogeng Mazibuko, Mining Lead, Associate VP, Africa Finance Corporation
Cathy Nader, Principal: Mining and Resources, Nedbank CIB
Julian Treger, President, CEO, and Director, CoTec Holdings Corp.
