Bert Koth of Denham Capital, Julian Treger of Anglo Pacific Group, Martin Valdes of Resource Capital Funds and Andrew Ballingal of Ballingal Investment Advisors discussed financing trends in the mining space.
The world continues to fight against the coronavirus pandemic, and even as the year moves along its impact on global markets remains.
For resource companies, the financing landscape has certainly changed from the end of 2019.
Speaking at a Mines and Money panel, Julian Treger, CEO of Anglo Pacific Group, said trends that existed before the virus hit have been accelerated.
“One is lack of finance,” he said. “In the coming months, there’s going to be rolling bankruptcies in real estate, which are severely going to affect the ability of banks to lend money. So you’ll see further pullbacks from general lending and also to the mining sector.”
Treger expects to see environmental, social and governance (ESG) issues as well, and anticipates that the development of domestic supply chains will become more prominent.
“(National supply chains) are paradoxically good for the mining sector in that they are less efficient, and so there’ll be more demand for raw materials,” he said.
For Bert Koth of Denham Capital, this season has brought challenges for investment funds.
“I see at the moment the ability of investment funds to carry out proper technical due diligence quite compromised because of all the travel restrictions,” he said. “That’s probably just a temporary thing, but that definitely is an obstacle to mobilizing the deployment of capital.”
Similarly, Martin Valdes of Resource Capital Funds said travel restrictions have been an obstacle.
“The new opportunities that we’ve seen — for us it’s quite critical to perform site visits, we believe that we learn a lot from those sites,” he told the online audience. “We’re also putting a lot of focus on ESG as well and how the market is going to change.”
Koth added that the world seems to be assuming a vaccine will be found and V-shaped recovery will take place — but that is not a given.
“We certainly look at projects now (and consider) what is the real life of mine, because if it’s relatively short it does not give you enough optionality for real prolonged long run and prices,” he said.
Valdes agreed, saying that looking at longer-life assets can give investors a way to combat the short-term volatility in the markets.
As pressures rise, particularly on emerging market economies, some of which are very dependent on commodities prices, Andrew Ballingal of Ballingal Investment Advisors said there will inevitably be rising tensions and efforts to claim more of the pie from commodities producers.
“But more important, and it’s one that works to the definite advantage of the precious metal spectrum in particular, is that the virus has unleashed a whole lot of problems that were waiting to be unleashed,” he said. “But behind them lie some very profound social and political tensions within countries, and geopolitical tensions between countries.”
Treger said “the west and the rest” is going to become a theme in the commodities space going forward.
“I think we are going to be seeing in the coming months already the western governments starting to play more obviously in the metals space, and I think in the next couple of months we’ll see the first US-backed equity story in mining from the US government.”
For the CEO of Anglo Pacific Group, the developing world will be in a very difficult spot after COVID-19.
“I think ESG trends, unfortunately, have encouraged us all to get less exposure in countries which may need more improvement,” he said. “And then in the developed world, there’s going to be this macro clash with governments increasingly intervening in the mining space.”
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.