Mining Finance Model Needs a Shake-Up: Tribeca

THE CONFERENCE CALLER: The mining finance model needs to change if the industry is to compete with the technology sector, according to Tribeca Investment Partners Singapore’s Scott Clements. By Kristie Batten

Speaking on the first day of the Tribeca Future Facing Commodities Conference in Singapore, Clements said the three key investment themes for 2024 were the energy transition and decarbonisation, onshoring supply chains and artificial intelligence and big tech.

However, he pointed out that investment flows had been narrowly focused to date.

Clements said the thing that was being missed is that all three investment themes would create increased demand for power and for the raw materials that fed into supply chains.

He used copper as an example, with new demand for mined copper from artificial intelligence data centres set to surge at a time of declining production from operating projects.

“That supply gap in 2030 is about 7 million tonnes globally,” Clements said.

For perspective, the world’s largest copper mine, BHP and Rio Tinto’s Escondida in Chile, produces about 1Mt of copper per year.

“You potentially need seven of those,” Clements said.

Clements said the current extractive industry model was far too slow, citing S&P Global Intelligence figures stating that the average time from discovery to production for a deposit was 15.7 years.

“Any first-year finance student could tell you if you’re pitching a project that doesn’t achieve cashflow for 16 years, it’s a pretty hard sell,” he said.

Complicating matters is the challenged finance model for early-stage resource companies.
Clements said there needed to be a new model, closer to the venture capital model.

“In my view, that probably needs to be led by governments and end users,” he said.

“Governments need to lead the way.”

According to Clements, the most significant thing governments could do was streamline the permitting process.

He said there was too many conflicts between federal governments and state/territory/provincial governments in many cases.

“There also needs to be more accountability on timeliness,” Clements said, adding that could be achieved without compromising environmental regulations.

At the same time, Clements said miners could be doing a better job on public relations.

He said the public only really heard negative stories about mining and pointed to an ABC headline which stated that federal taxation revenue from mining covered the salaries of all of Australia’s teachers and police.

“Those things aren’t widely known,” he said.

Miners also needed to do more to appeal to young people, according to Clements.

“The industry is typically populated by white guys in their 50s,” he said.

There are still only two mining companies in the S&P 500 – Newmont Corporation and Freeport-McMoRan – and the market capitalisations of the 10 largest battery materials miners is still less than one 10th of the 10 largest tech companies.

Clements used Andrew Forrest and Gina Rinehart as examples of the value that could be generated by mining.

“It can generate extraordinary wealth,” he said.

A more recent example he used was Azure Minerals, which had risen 10 times since its appearance at the same conference in Singapore a year ago, thanks to its Andover lithium discovery.

Azure is set to be acquired by Rinehart’s Hancock Prospecting and Chile’s SQM for A$1.7 billion next month.

Azure managing director Tony Rovira made his final presentation for Azure at the conference today before he “rides off into the sunset”.

He said if someone had invested A$10,000 in Azure a year ago, it would be worth A$112,000 today.
“Azure Minerals is an example of what you can achieve if you invest in the right company,” Rovira said.