Over the past few years, we’ve experienced levels of inflation not seen in decades. At its peak, in October 2022, inflation hit 11.1% – the highest level in 41 years.
In this context, it’s understandable for clients to be concerned. High inflation puts pressure on returns and erodes the value of assets – and that’s setting aside the inevitable interest rate rises. As inflation comes back to a more manageable level (slowly!), in my opinion, it’s more essential than ever that investors diversify their portfolios into asset classes that are protected against the kind of economic disruption we’ve seen over the last few years.
And that’s where natural resources come in. Natural resources have long been considered an inflation hedge, and for good reason. With all the economic uncertainty of recent years, it’s essential for clients to increase their exposure to material assets that have a tangible use in the real world – which is exactly what natural resources offer.
We’re on a mission to find innovative strategies for our clients in a range of natural resources. And we’re doing it without compromising on our ethical obligations.
Surging Demand: Natural Resources in the Spotlight
As we slowly move past the lingering effects of the COVID-19 pandemic and the global economic crisis it triggered, governments and businesses across the world are looking to rebuild in a more sustainable way. And that means the demand for natural resources is stronger than ever.
Of course, natural resources have always been essential for modern, technologically advanced economies. They provide the building blocks for everything from the steel in our skyscrapers to the silicon in our smartphones, and their importance has only grown as technology has advanced and we transition towards greener technologies, which rely heavily on minerals like lithium, copper, nickel, and cobalt.
Gold has also played a vital role throughout this history. As well as a store of value, it has been used extensively in numerous industrial and technological applications thanks to its unique properties like excellent conductivity and resistance to corrosion.
As the world begins to transition away from non-renewable energy sources, and develop and build the technology to support this, natural resources become more important than ever before. And fulfilling this growing demand is a key part of our mission here at Seventy Ninth Resources.
Meeting this demand means mining more minerals, more efficiently. It also means a greater emphasis on exploration to locate new resource deposits. As PwC noted, 2023 saw the highest spending on exploration by the top 40 mining companies since 2013.
When it comes to locating new sources of the most sought-after minerals, certain regions are crucial – and West Africa is foremost among them. The Republic of Guinea has extensive reserves of gold, diamonds and iron ore, as well as a quarter of the world’s known bauxite reserves.
This mineral wealth is the reason why we have put so much energy into building up an extensive portfolio of concessions in Guinea.
Natural Resources as a Vital Asset for Investors
Dave Webster, our Chairman, and his sons Jake and Curtis, our Managing Director and Investment Director respectively, have been long-term proponents of natural resources.
The Websters have been building a portfolio of natural resource concessions for more than a decade. Dave first visited Guinea in 2011, and over the course of 13 years he has gradually built up a portfolio of concessions across the mineral-rich Siguiri region.
Natural resources also have unusual return drivers. They have a range of concrete material uses that give them an intrinsic value other investments may lack. And in a digital-first, tech-driven environment like the present, this is even more significant.
Finally, some aspects of their value growth are independent of the wider economic environment. For instance, the value of a concession will potentially increase as it moves through the various stages of mine development. This means that, if you enter at an earlier stage, you could well see the value grow, irrespective of the wider economic climate.
Treading Lightly: How We Minimise Our Environmental Impact
We have to acknowledge that the mining industry doesn’t have the best reputation. Without proper care and attention, mining activities can have a devastating impact on the local habitat and wildlife. And that’s why it’s so essential that, when working in this space, you commit to operating in an ethical way.
Here at Seventy Ninth Resources, we approach this through a set of internal policies designed to support a consistently ethical and environmentally sensitive approach to developing our concessions. We conduct in-depth environmental impact assessments to bring our operations in alignment with our ESG ambitions.
Pursuing a sustainable approach to the natural resources sector also means working with companies that share our commitments. Thanks to our thorough due diligence and our partnerships with leading companies, we are able to ensure that everyone involved in our operations are on the same page when it comes to the importance of Environmental, Social and Governance (ESG).