Australia Strengthening Critical Minerals Partnerships as Decarbonisation Gains Steam

Asia Pacific region presents opportunities for investors

When looking at how much critical minerals demand could grow, Tribeca Investments believes the need for commodities such as lithium, nickel and graphite could rise by 20 to 40 times by 2050.

“(It's) a huge demand growth that the industry is really not prepared for,” Portfolio Manager John Stover said during a keynote presentation in Singapore. “And this is all happening at the same time that mining capital expenditure is at multi-decade lows.”

The firm has ESG credentials top of mind when investing, and this is a trend Stover has seen rising in recent years.

“But often we felt like this thematic was on shaky ground. It sort of became more important to create a story rather than creating a real business model with profits, or at least the potential to be profitable,” he told the audience at the Future Facing Commodities event. “Certainly, we want the companies that we’re invested in to be focused on this, but if you look at it, sort of what it morphed into, was this disturbing trend where the story was ahead of profits.”

Stover said Tribeca has always taken a proactive "boots on the ground" approach.

“We're looking for companies that can reinvest their cash flows into decarbonisation at strong rates of return,” he said. “And a part of the reason we feel this way is this huge demand boom coming from electrification.”

For the portfolio manager, the Asia Pacific region is going to drive decarbonisation going forward — one of the biggest human undertakings seen since the Industrial Revolution.

“Asia Pacific is going to provide investors the best opportunities to invest in decarbonisation at strong rates of return going forward,” he said. “Asia is already a leader in wind and solar capacity additions and battery storage installations. We think there's going to be a lot of really interesting investment opportunities to invest in companies that have opportunities to decarbonise at good rates of return.”

Compared to other regions, Asia Pacific companies have shown a much greater willingness to reinvest their cash flows and capital expenditure in research and development.

“Some of our global institutional investing peers have taken a divestment approach and divested from certain companies that have emissions,” Stover said. “At Tribeca, we think a much more nuanced and intelligent approach is warranted. It's not realistic to think that we can go to net zero overnight. So we need to be willing to finance these companies to take the transitionary steps to a net-zero world rather than divesting completely.”

The Asia Pacific area is poised to benefit from the energy transition as it has an abundance of the upstream minerals needed and also has the processing capacity. “The region is set up really well for investors to look at if they want to be involved in the decarbonisation thematic,” Stover added.