What role does MMG Capital play in the mining industry and which resources are in high demand?
Besides investing in mining companies, we are also advising them on raising equity and debt, and engaging in strategic partnerships, like mergers, acquisitions or joint ventures. We are funding them from resource identification per international standards and preliminary economic assessment reports all the way to the construction phase, with the help of private equity and institutional investors or trading companies that provide financing. We work with companies across all minerals (except Coal, gems and uranium), in all geographies (except Iran and Russia which are under sanctions), and we are also active in the steel and aluminum sectors, going both downstream and upstream. Although recycling is playing an increasingly important role, there is no way human society can function without mining for the foreseeable future. Minerals extracted from Recycled goods can only cover so much of the entire global demand, and their processing still requires energy and chemicals, so there is no such thing as zero footprint for all of demand worldwide. Of course, we can use wind turbines or solar panels to produce green energy for recycling, but these devices themselves are also made out of many different minerals including iron, zinc, nickel, copper, tin, boron, rare earths etc. By 2030, we will probably need in the range of 3 to 5 times more of many minerals needed to support battery manufacturing and transition to green energy, including Lithium, cobalt, copper (used three times more in EVs than in ICEs), manganese, nickel or graphite.
What kind of companies do you prefer to invest in - is there an ideal candidate profile that you pursue?
We are mainly interested in companies that already have at least an inferred resource, and which are usually in the stages after the geophysics studies and have completed much of the drilling and assaying activities. Most institutional investors come around this point in time, before that being the domain of high-net-worth individuals and specialist funds that are willing to look into very early-stage projects. As preliminary economic assessment reports start to come in, we can bring more sophisticated investors who, usually, want to see all the economics of the project, which can only be obtained once the metallurgical route is 2larified, and a competent understanding of the deposit is available. Last but not least, ESG compliance, management/board composition and competences and access to infrastructure are also among very important elements that we are factoring in when deciding whether to invest or not in a certain mining company.
What is more prevalent for investors when looking at ESG aspects: financial benefits or environmental concerns?
More and more institutional investors have their own investors (pension funds or sovereign funds ) which give the mandate to invest only in socially and environmentally responsible projects.
Vehicle and battery OEMs are interested in having their entire supply chain based on highest acceptable ESG standards, from resource mining all the way to car manufacturing. Moreover, we are seeing more and more mining entrepreneurs interested in being environmentally and socially responsible because otherwise, their projects fall under social pressure and are prevented from a timely development, as we have seen happen in some parts of Latin America and other jurisdictions.
Although, in the short term, companies can save money by overlooking ESG aspects, there are long term adverse side effects that lead to investors pulling out their money or their operations halted due to local distress. Once more governments will push incentives to support these frames of action around high ESG standards , more mining companies will be encouraged to operate in a sustainable way.
Is the geography where projects are being developed an important factor in your decision-making process?
Jurisdiction is very important because we need a solid, transparent and easily understood legal framework that can sustain mining companies for the whole ten years or more that may take to develop a project. Mining is a very capital-intensive process so it cannot thrive in a volatile unattractive environment, be it due to corruption, political disruptions or social unrest. Furthermore, some jurisdictions in Europe and North America also suffer from long permitting times that can linger for years on end, and which may result in frustrations both for mining companies and for investors. Provinces like Quebec, that have a strong hydroelectric grid, or mining friendly U.S. states, like Nevada or Arizona, or Western Australia are among the best investment destinations.
What are the main challenges that stand in the way of the mining industry in the years to come and how can they be overcome?
The lengthy permitting processes and the funding challenges are some of the main obstacles that cause unnecessary delays for many mining companies. Macroeconomics also has a big impact, and due to market vitalities around commodity prices, investors are mostly placing their bets on mining projects that have a low all-in sustaining cash cost that can support their project even if the price of their commodity drops significantlys. The European Union is a huge consumer of mineral resources, but they have not yet started supporting development of mining projects in Europe due to misconceptions linked to the negative impact mining has on the environment. However, in the past ten to fifteen years, technology has considerably helped mining companies greatly reduce their carbon footprint and, hence, the mining that is being done today is not the same as the one we are historically accustomed to. European Union increasingly realizes that self-sufficiency is vital during the energy and global political crisis that we are now facing, so a change of perspective towards mining is inevitable.
