Mining veteran Mick Davis, best known for serving as CEO of Xstrata until its merger with Glencore and then forming mining venture X2 Resources, is getting back into the mining industry after a stint in politics, The Wall Street Journal reported.
Nicknamed “Mick the Miner,” Davis exited the mining industry after his X2 Resources raised more than $6 billion but failed to make any investments. After quitting the mining industry, he went on to serve as CEO and Treasurer of the British Conservative Party.
Davis highlights global politics as a motivating factor for creating a new fund that will focus exclusively on investing in companies that mine metals required to store power, according to WSJ. He is likely looking at ongoing shifts towards low-carbon energy production that require more batteries and this will create a long-lasting shift in demand for metals.
Current technology allows energy companies to store wind and solar power through batteries. By default, the metals required for the batteries have seen a surge in demand, including lithium, cobalt, graphite, and nickel.
Davis motivated by politics
Davis highlighted global politics as a motivating factor to create his fund, according to WSJ. Specifically, former US President Donald Trump’s decision to withdraw from the Paris climate accord “shone a light” the world needs to head towards a greener future.
“There is a secular change in demand, not driven by GDP growth but by a consensus in government,” he also said.
His fund secured $60 million in cash with the ultimate goal of building a cash position in the hundreds of millions of dollars. So far, he invested $29.5 million in NextSource Materials, a Madagascar-based graphite mining company.
Companies that can scale their operations quickly and don’t require investments in transportation and infrastructure are ideal targets for his fund.
Analysts are bullish on metals
Bernstein analysts said in a recent research report that an average electric car today includes anywhere from 50 kilograms to 200 kilograms worth of metals, according to WSJ. This means that each car requires $500 to $2,000 worth of metals.
Assuming the global auto industry eventually scales to 1 billion electric vehicles, the demand for metals would be “tremendous.” Demand for electric cars should start to accelerate within five years when automakers should be able to manufacture an electric car for the same cost as a gas-powered car.
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