What is the story of La Mancha in the mining space and what is your mission today after the acquisition and identity shift?
La Mancha was founded in 1996 as a mining company, originally focused on precious metals. In 2012, it was acquired by the Sawiris family, and worked as a gold mine operator for three more years in Australia, Ivory Coast, and Sudan. In 2015 La Mancha transferred its operational assets to larger companies, and switched to supporting those companies with capital as the junior market was short of funding. Later in 2018, La Mancha created a team of its own, looking for new investments. We adjusted the portfolio, exiting Evolution Mining, and, one year later, investing in Golden Star Resources. In 2021 we welcomed third party investors, contributing the assets to La Mancha Resource Fund. Today, the Fund has about $1.3 billion invested in junior mining companies. Our philosophy is to be supportive shareholders and find capital tickets between $75 million to $150 million that are not necessarily on the market.
The mining industry has diverse opportunities and we have to be nimble enough to capture them, with the crux of identifying opportunities where we can make a difference. We mainly focus on developing at an efficient cost that can assure resiliency across the cycle. We believe that all production is needed in light of the energy transition, especially copper, lithium, and graphite. The second tenet of the energy transition is that we need to mine more responsibly, and in a more efficient way to reduce both CO2 emissions, and the risks that have affected mines and mining in the past.
How do you go about finding the capital tickets that are not available on the market?
We are blessed with a good reputation of being supportive and maintaining good relationships with the industry, the banks, and the capital providers. We work with companies to expand their base and make them more liquid, which puts us in an interesting position in a market where big equity tickets are really difficult to raise at the moment. We work in an honest and transparent way, and when we are concerned about something, we sit with management teams and try to solve issues together.
We get between 250 to 300 ideas coming to us [per year], and generate about 50 by ourselves, so we have a generous catalog to choose from. Given that our job inherently involves risk-taking, we need to understand what we are signing up for, so we have an equity style approach, where we spend a lot of time testing scenarios. Ultimately, we never commit to anything without the support of our investment committee.
What is the role that gold is going to play in the economy of the coming years?
There is a social utility to gold that people tend to overlook. We see it as very important to areas in the world where there is nothing else to mine. Gold mining is about creating jobs for communities, and allowing reinvestment into farming and renewable energy, acting as an enabler of progress for those countries. Central banks are trying to depart from the dollar, diversifying their resource base, and we believe gold has been one of the beneficiaries of this shift, acting as a hedge against inflation. From a secular standpoint, mining a bitcoin versus an ounce of gold is not favorable to the bitcoin, so, to a certain extent, the digitalization of gold could reconcile future generations with the old. We see a currency that is backed by a physical asset, that has been there for thousands of years, as starting to have increasingly more traction.
What is Brazil like for mining operations? Was your investment there a valuable experience?
The last two big investments we have made have been in Brazil and, although we were not specifically seeking this country, it is a very well established mining jurisdiction in our experience, with many opportunities, both from a geological and a talent pool standpoint. It does have a complex tax system, but with the help of a local team that knows how to navigate the local environment, there are no irresolvable situations.
When we make an investment, we spend a lot of time doing due diligence, and the gold and nickel assets showed a potential for expansion, with both mines having a solid foundation, ideal for further exploration.
In addition, there are sensible production costs, and we are joined by amazing partners, such as Glencore and the automakers that are looking to secure their raw material supply chain needed in the electrification of cars.
Where do you see the company going in the next three to five years?
We plan to continue along the same path, expand in a clear and thoughtful way and instill a sense of capital discipline within our niche. We wish to continue to support small companies as we expand our portfolio while, at the same time, keeping an appropriate balance between growing existing investments and looking for new opportunities.
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