Investment

Mining is hot and two investors and their investment offices want a big slice of it

The race is on between mining financiers Robert Friedland and John Raymond, son of a former chief executive of ExxonMobil, for access to the clean energy sector.

Friedland has raised $276 million for a SPAC with Fidelity dealsmith Andy Boyd to acquire prospects. John Raymond and business partner Mick Davis have raised $300 million to buy minerals producers.

As is the case with successful mining executives, they have extensive connections in international finance. They have realised that a global shift from fossil fuels to clean energy requires a vast number of mineral supply contracts, many of which are tied to China.

He recalls that Thomas Edison, another miner, raised money in the 19thCentury to put up street lamps in New York by launching a penny stock, a predecessor to the SPAC, now part of General Electric

They are particularly fascinated by the potential in batteries, viewed by Friedland as the most intelligent part of an electric car. McKinsey says battery demand will grow nine-fold in ten years (see Family Capital’s recent story about an investment group behind a huge European maker of batteries). Electric car purchases are likely to increase dramatically, along with government support.

Friedland adds the world is being carved into three vertically-integrated supply chains centred on China, the US and Europe. This could be inconvenient for everyone.

In a recent YouTube interview, he said: “It’s wildly inflationary…Once people start talking about national security, and rampant nationalisation and everybody wants to own everything, this is going to drive up the price of things very, very, dramatically.”

In a rising market, business orders push up commodity prices in ways buyers and sellers never anticipate. 

Friedland dislikes the phrase “commodity supercycle” but copper ETFs have tripled in twelve months and their iron equivalent has doubled. 

He says: “We will use 620 million additional tonnes of copper in the next 15 years as we did in modern history since Thomas Edison invented the dry current light bulb. We don’t understand where that’s going to come from.”

Friedland says the minerals which benefit from a sustainable future include aluminium, nickel, copper, cobalt, platinum, palladium and rhodium. In his view, the Democratic Republic of Congo will become a critical supplier.

He is less convinced by the use of lithium in batteries, seeing more potential in nickel, as well as vanadium for large batteries, which can store electricity, as it flows. For all its safe-haven status, gold has relatively few new applications.

Friedland believes the buying process will become more complicated, as a result of ESG supply chain certifications and exploitation curbs, but accepts this has become a permanent feature of the industry.

Friedland’s SPAC is called Ivanhoe Capital Acquisition. It is checking out the battery industry in detail before choosing its targets, while looking at mining and transportation: “We may seek a target in disruptive technology more generally.”

He likes the way SPACs look to the future, rather than the past. He recalls that Thomas Edison, another miner, raised money in the 19thCentury to put up street lamps in New York by launching a penny stock, a predecessor to the SPAC, now part of General Electric. 

Persuasive and strong-minded, Friedland befriended the late Steve Jobs, founder of Apple, at Reed College, Oregon. Allegedly, Jobs named his company after an apple orchard owned by the Friedland family. 

Friedland’s master company/family office is Ivanhoe Capital Holdings. He has financed mines in places like Congo, Papua New Guinea, Mongolia and South Africa. He was forced out of a Mongolia project by business partner Rio Tinto in 2012, but his access to international finance makes his business reverses quite rare.

Friedland has an appetite for technology, believing that minerals extraction is ripe for disruption. He sees potential in electromagnetic pulses which can remove minerals from rocks without needing to crush them: “It’s the opposite of crushing and grinding. It’s popping away from the matrix.” 

I-Pulse, a company chaired by Friedland, can compress and release electro-magnetic energy in billionths of a second. 

Technology can help you pin down mineral prospects. More than that: “If you put a Wi-Fi system underground all its equipment can be automated. A smart 18-year-old boy or girl can run an entire mine.”

Friedland is involved in a joint venture in Australia involved in sustainable metals recovery. He chairs VRB Energy, which is developing a vanadium battery system in China.

He backed a Chinese online entertainment company in the 1990s. He has gone into the entertainment business with Sidney Kemmel, producing the 2008 film Crazy RichAsiansin 2018.  He owns Italian boutique hotel Villa TreVille at Positano once owned by filmmaker Franco Zeffirelli.

Andy Boyd is chief investment officer at Friedland’s SPAC. He previously led Fidelity’s private investing arm for the Johnson family. His deals included SpaceX, Uber, Spotify, Groupon and Moderna.

In the rival camp, Michael Davis has turned his back on the coal sector, where he built one of the world’s biggest coal producers to sponsor a newly minted green metal SPAC called ESM Acquisition.

He was chief executive of Zug-based miner Xstrata for twelve years, sold to Glencore for $62 billion in 2013. He has a plan to produce iron ore in Guinea and his private company, Vision Blue, has bought an $11.5 million stake in a vanadium project. 

He has teamed up with veteran dealsmith John Raymond, CEO of private equity firm Energy & Minerals Group which retains assets of $10 billion. Vice-chairman John Calvert, a former Deutsche investment banker also works at EMG.

Raymond is the son of former Exxon Mobil chief executive Lee Raymond, better known as a climate change sceptic, who has been a shareholder and adviser to EMG. John Raymond has also done business with Vulcan Capital, founded by the late Paul Allen.

This SPAC prospectus agrees the use of minerals needed for clean energy will grow dramatically. It favours copper, vanadium, aluminium, cobalt, lithium, manganese and graphite, platinum, palladium and rhodium. 

It says its plan is to merge with a company: “positioned to take advantage of paradigm shifts created by the global transition to low carbon.” 

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