Natalie Bellis, CEO at Seventy Ninth Resources, explains why precious and base metals offer a golden opportunity for investors
The natural resources sector has historically been overlooked, but the spotlight could be set to shine on this asset class.
Natural resources investments range from safe-haven assets to high-risk and potentially high-reward early-stage exploration. They aren’t always well understood, even by sophisticated investors.
The sector comprises assets including precious metals (like gold and silver), diamonds, minerals, base metals (such as copper) and other materials such as lithium. By investing in natural resources, asset managers can diversify their portfolio across different high-demand, low-supply metals and materials as well as across countries.
Supply and demand
Growing geopolitical instability has boosted the appeal of investment safe havens over recent years. Gold in particular has been a store of wealth for thousands of years and continues to be in demand, with the gold price busting through $2,000 last November and hitting $2,487 in mid-July.
But this is more than just a safe-haven asset class.
Mined materials are literally in high demand across the world, as we see greater environmental and technological change. They are needed for many essential items we use today, such as laptops and smartphones. In addition, they’re important for the shift to a low-carbon future, as components in wind energy production and electric cars, for example.
Tackling climate change requires a move towards electrification and away from fossil fuels, which means copper, lithium and cobalt have become sought after.
The cells in just one electric vehicle battery can contain roughly 185 kilograms of minerals, including 20kg of copper.
Tesla uses Lithium-ion batteries, for example, which use lithium, cobalt, aluminium and nickel, and one of its batteries can use the same amount of lithium as 10,000 smartphones – 63kg.
Plus, this is a rapidly growing market. The global EV battery market size is projected to increase from $49 billion in 2022 to $98 billion by 2029.
Smartphone adoption is also on the rise, with 60% of the world’s population already owning a mobile phone. Most smartphones can carry 80% of the stable elements on the periodic table, but the availability of some of these metals is in decline.
Copper in particular is an enabler metal that underpins the move towards electrification. Lithium has significant growth potential too, due to its use in batteries for electric vehicles and other renewable energy sources.
There’s a finite supply of natural resources and these essential and tangible assets are also rare and difficult to extract, which makes them particularly valuable.
That’s why we’re seeing demand for more investment into mining activity to boost supply of these essential components to meet the net-zero ambitions of governments around the world.
A global asset
There are regional hotspots in the natural resource asset class ranging from the well-established, such as Australia and South America, to the unexplored.
Canada is another well-established region with strong regulatory and sustainability standards and advanced infrastructure. As well as gold and diamond mining, Canada also has copper and lithium mining resources.
Africa is a key region with a mix of established and developing natural resources hotspots. South Africa is already well known for the production of gold and diamonds.
However, other countries, including Guinea, are relatively untapped sources of natural resources. They have fantastic mining potential, even at surface level, meaning exploration can be achieved more economically. There are still lots of assets and discoveries to be made in parts of Africa that have not had massive attention.
Over the last 15 years, many countries have revamped their mining codes, bringing in the best parts from codes in more established mining regions. This has created robust frameworks that include environmental governance, which is absolutely key for businesses working in this market.
Not only do the codes mean that everyone knows how to operate compliantly, they are also reassuring for those who want to invest in less established mining regions.
How to invest in natural resources
Like other assets, you can invest directly or indirectly in natural resources, from buying shares in large mining companies to investing in funds.
In addition to large multinational mining companies and smaller regional mining businesses are also ‘junior exploration’ companies.
This is a sector of the mining industry that isn’t well-known but provides investors with the opportunity to invest in the natural resources asset class at a very early stage.
Junior exploration companies go out initially to find, scope out and purchase assets (land). Then they work to develop and get those sites ready for production, before selling to a mining company.
Seventy Ninth Resources uses exactly this ‘prospect generator’ approach, purchasing and developing assets and bringing in partners to do testing and data analysis of the site, before selling at the ‘drill ready’ stage.
It means we have exposure to the project as it goes through the line without taking on the enormous costs of mining. And we aim to flatten the risks by having multiple projects (physical sites) across multiple assets (gold, diamonds, copper) and multiple jurisdictions (Guinea, Canada).
Risk vs. reward
Early stage natural resources exploration is clearly high risk with potentially high rewards. It’s only for experienced investors and asset managers who want this exposure as part of a diversified portfolio.
For those looking to build a portfolio of mining assets, now is arguably the time to consider natural resources exploration before attention turns to this untapped market.
Seventy Ninth Resources has operated in this sector for the last decade, building up assets to position ourselves ahead of the curve.
We’re committed to sustainable development, particularly in our work in Guinea, where we’ve worked closely with local communities to support infrastructure development, job creation as well as funding education.
We understand that stability, governance and strong regulatory controls are as important as investment potential. The natural resources sector offers a combination of potentially high returns combined with regulatory structures and global standards that ensure mining practices are ethical, sustainable and support local communities.
This robust and transparent approach is the only way to attract investment that leaves a positive legacy in mining communities as well as creating wealth for our investment partners.