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).
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.
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?
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?