The future of the mining industry


The global capital markets are concentrating on quality mining assets preferably close to production, according to a panel of experts at the International Mining and Resources Conference. There are big changes in the use of royalties and Environment, Social and Governance (ESG) investing, reports David James.

From left to right: Peter Rozenauers (Orion Resource Partners), Jason Chang (EMR Capital), Michael Huggings (Partners in Performance), Julian Treger (Anglo Pacific Group) and IMARC MC

Jason Chang, Managing Director and Chief Executive Officer at specialist resources private equity manager EMR Capital, said there’s more private capital available for mining, especially from US pension funds and endowments. He also mentioned there is a lot appetite for mining investments from China and Japan.

‘Asian capital markets and debt markets will fund good assets globally. Ultimately appetite quality will prevail.

‘There is no drop in capital going to quality projects. I think what miners need to figure out is [where are] the pools of capital. Knowing where to go is increasingly becoming very important.’

Julian Treger, Chief Executive Officer and Executive Director, Anglo Pacific Group, said the greater emphasis on Environment, Social and Governance (ESG) criteria for investments has meant that the sources of capital have changed in some jurisdictions.

According to S&P Global, US$22 trillion is invested according to ESG guidelines. Oil Search reportedly rates highly on ESG principles.

‘There is still money out there, but the focus will be on the quality end. The investment industry is wising up.’

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‘Large swathes of the world are now uninvestable for Western capital. If you are in more difficult jurisdictions, there are other sources of capital from other parts of the world that might be more comfortable in those places. You need to think about your commodity and where it is [in the cycle] and try to attract appropriate capital.’


Anglo Pacific Group’s Treger said investors are increasingly looking for returns from royalties as part of the funding mix, which may have an influence on the PNG government’s attempt to increase revenues on resources projects by increasing the royalty payments (when both government and investors extract royalties, this changes the shorter term pricing of projects). He says the construction phase of projects, typically the most capital intensive period, is where the use of royalties is becoming more common.

‘The copper industry doesn’t produce enough cash flow to fund those investments. I think the demand in base metals will remain acute and provide opportunities.’

‘We are seeing more projects at a later stage with advanced feasibility studies struggling to find appropriate financing. We see much greater deal flow [where companies are] open to the royalty model. The quality of the spec, management and business plan will determine which will succeed.’

Which commodities are hottest? Orion’s Rozenauers nominated gold, copper and zinc. Olsen, CEO of Arete Capital Partner, said there has been a lot of production aimed at battery technology, but demand for electric cars has to date been disappointing. He pointed to copper as a strong opportunity, noting that the industry will need $US30 billion capital investment over the next decade.

‘The copper industry doesn’t produce enough cash flow to fund those investments. I think the demand in base metals will remain acute and provide opportunities.’

There was general agreement that there will be few new large mining discoveries. ‘There aren’t the top tier assets any more,’ Olsen said. Chang agreed, saying it pushes the focus on to frontier countries. ‘There are not going to be too many discoveries of scale in any of these commodities.’

Treger believed a ‘supply shock’ is coming ‘in a couple of years’ in many mining sectors. ‘As providers of capital, we just have to be patient and we will be rewarded.’

What is ESG investing?

  • Environmental risks created by business activities have actual or potential negative impact on air, land, water, ecosystems and human health.
  • Social risks refer to the impact that companies can have on society, such as promoting health and safety, encouraging labor-management relations, protecting human rights and focusing on product integrity.
  • Governance risks concern the way companies are run. It addresses areas such as corporate brand independence and diversity, corporate risk management and excessive executive compensation, increasing diversity and accountability of the board, protecting shareholders and their rights, and reporting and disclosing information.


Campbell Olsen, Chief Executive Officer, Arete Capital Partner, said the market has gone through a structural change, bifurcating into high quality assets, for which premiums are paid, and lower quality assets, for which interest is not high.

‘There is still money out there, but the focus will be on the quality end. The investment industry is wising up.’

Peter Rozenauers, Portfolio Manager at Orion Resource Partners, said it is critical for mining companies to articulate their strategy well. ‘No shareholder will say: “I can’t buy your company because it is too small”.’

He said that the technical complexity of projects is often problematic for investors, partly because of a dearth of research. ‘There are no equity analysts any more beside the big guys [large investment houses]. It has got to be stuff where the opportunities are not too far off – the last mile of production.

‘The market is not rewarding resource tables [mineral discoveries] any more: “Go ahead and drill away, but don’t think I am rewarding you.” They are rewarding on production – we are seeing that a lot.’

What this may mean for business …

* Early stage miners need a clearly thought out and articulated strategy when raising capital.

* PNG miners will have to be careful not to be negatively assessed on Environment, Social and Governance (ESG) grounds.

* Miners should widen their geographical scope when looking for capital.

* If royalties are becoming more popular with investors, this may affect PNG’s use of royalties to generate more revenue.


  1. Valuable information, Thanks a lot for sharing them with us.

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