Objective Capital Rare Earth and Minor Metals Investment Summit: An Investors Perspective On Exotic & Specialty Metals - Adam Darling
RARE EARTHS, SPECIALITY
& MINOR METALS
4.35 – 5.00
Closing Keynote: Investing in the Exotic and
Speciality Metals Sector
Mark Brown - Managing Director, Head of Barclays Natural Resource Investments
THE LONDON CHAMBER OF COMMERCE AND INDUSTRY ● THURSDAY, 18 MARCH 2010
Fund Manager's View
An investor's perspective on the Exotic and Specialty Metals Sector
Vice President, BNRI
Fund Manager’s view
“An investor's perspective on the
Exotic and Specialty Metals
… OUR view, not MARKET view
Barclays Natural Resource Investments
Global private equity team, investing in private companies
Exclusive focus on natural resources
18 investment professionals + advisory panel
Invests Barclays money… recently opened to 3rd party capital
$1bn allocated to 10 portfolio companies since 2006
Oil and gas Mining Renewable
(upstream) (upstream) Energies
Why Natural Resources?
World class commodities franchise
Emerging markets expertise Focus on natural resources private
Relative lack of competition
How do we invest – what are our key criteria?
Key criterion - PEOPLE
Basis of success: find & fund best-in-class teams – YOU
We are management led
Even “good” assets do not run themselves…
…so what do we look for in a management team?
What do we look for in a management team?
Proven track record We will do a lot of referencing
Experience, geographical focus,
Aligned with management from the
Alignment of interest
Skin in the game Meaningful personal financial investment
Clear business plan to make money We ask a lot of questions
Balancing risk and reward
Realistic assessment of risks and reward
Focus on financial returns
… cash on cash
Ensure management is highly motivated and aligned
Understand key risks
Develop conservative risked base case… with management
Execute business plan with patience
Bringing it together: What works for us?
Skin in the game Operational enhancement
Clear business plan to make money
Sensible risk adjusted returns
Proven track record
Exit strategy within 5-6 years
An angle Opportunities for a nimble private company
What doesn’t work for us…
Build the new BHP Billiton
Bet on copper being $5/lb for the next 10 years
Management won’t co-invest despite “dead-cert” 4x deal
Build $4bn mines
Own mine for 30 years
Back a team… who have not visited the country they target...
More of what doesn’t work for us…
Team that just wants a day job
Team that just wants a hobby
Acquire 10 x 5% stakes in public companies
Compete in auctions
No ‘inside track’
Team that ramps up a share price in the public markets
Would you rather be mining or fund-raising?
Average Fundraising per Issuance: AIM Mining Stocks
2004 2005 2006 2007 2008 2009 BNRI
Source: Ernst & Young New Equity Issue Follow- on Equity Issue
We’ve historically found more oil and gas teams with the criteria we look for
11 teams backed to date, but only 2 mining teams (coal, copper)
…despite meeting over 250 mining management teams!
Private equity model more proven in oil and gas?
Mining industry reliant on public markets?
…are our criteria too difficult in mining?
Why are we attracted to Exotic and Specialty Metals as a sector?
Niche investment sector; less competed
Assets in attractive geographies
Projects of manageable scale and cost
Exposure to new and growing industrial applications
Strong public market & strategic interest supports exit routes
Specific Exotic and Specialty Metals concerns
…opaque cost curves, concentrated asset ownership
…poor forward curve visibility, limited ability to hedge
…buyer relationships – new project risk extends beyond mine gate
…niche uses & industrial customers always looking to save money
…can we invest enough?
Can we back a management team in Exotic and Specialty Metals?
We’re choosy about our partners
But we’re always looking
We have capital, time, and patience
Come and see us