As we get closer to Mines and Money Asia 2019, we’ve started to catch up with some of our speakers to hear more about market outlook and their corporate growth plans.
Here, Alberto Migliucci, CEO and Founder of Petra Commodities, a Singapore-based investment & capital advisory firm that specialises in natural resources, provides insight into the current commodity trends and where he sees the commodities market heading.
What do you think are the hottest commodities right now?
There are a few key trends that I’m tracking right now. First, let’s touch on nickel. Nickel has hit a six-month high now and there seems to be a lot of activity in the corporate and development space for this metal, especially on the processing side (e.g. in Indonesia).
Next is gold. Gold recently broke US$1,300/oz, and Reserve Banks are buying it up. Australian production has hit an all-time high (317t 2018) against a previous record of 314.5t in 1997. We are seeing quite a lot of action on the M&A scene in gold, particularly at the big end of town.
Last is vanadium – perhaps one of the least known of the “energy” metals but its status is rising, and likely to become more popular as renewable storage energy technologies really begin to take off. After spectacular increases over the past two years (ferrovanadium prices went from US$24/kg in 2017 to over US$125/kg in Q4 2018), they appear to have stabilised to an average of US$75-80/kg (F) this year to date.
What do you look for in a prospective investment?
Apart from valuing the geological attributes of a deposit/asset, there are two other key factors to concentrate on:
The first is a successful team / track record. You need a good management team and board – and need to pay attention to any self-serving boards. The best assets usually end up with the best people.
The second is funding. The mining industry tends to operate in cycles of over-investment followed by under-investment. High leverage during upcycles attracts investors but this motive often leads to material balance sheet impairments and destruction of shareholder value during cycle downturns. I typically take an early view on whether the project can survive in a downturn? Will it be able to get funded? Where are the sources of funds? What are the alternatives? This is an area which Petra Commodities specialises in.
What is your outlook for the mining sector in the next 12 months?
The resources industry has been starved of capital by tech and pot – kudos to those who have made money from these speculative investments, but I sense the crypto-cannabis bubble is deflating so we should expect some of the investment dollars to flow back into the junior resources sector. A much-needed shot in the arm.
You focus quite a bit on the electric vehicle (EV) story and the rise of the battery metals. What is your outlook for this industry in particular?
The continued focus toward cleaner energy solutions has meant the battery metals, particularly nickel, cobalt and copper, vanadium and lithium have been showing strong momentum backed by the excitement surrounding battery storage demand, the expanding electric vehicle (EV) market, renewables, and our hunger for more and more consumer technology. It’s all about commodities that underpin energy and mobility transformation. The surge in interest in electric vehicles has led to strong rallies in these “new age” metals in recent years and are expected to continue.
Your presentation at Mines and Money Asia this year will focus on gold and cryptocurrencies. What will this cover?
Gold has been around for millennia and its track record as a monetary instrument remains solid. The interesting thing about cryptocurrencies is that in a very short time frame they have brought a new product to a new market creating a new class of investors. This has been quite impressive, however, an over-valued tech market and inefficiencies in the cryptocurrency markets over the last few months has exposed and deflated the crypto bubble, creating a catalyst for yellow metal to shine once again as gold has historically been negatively correlated with risk-on assets.
I am currently exploring how we can relate crypto and gold back to commodities investments, in particular with gold and the creation of a new class of investors.
Alberto Migliucci is a keynote speaker at the upcoming Mines and Money Asia, taking place in Hong Kong, 2-4 April 2019, where he will be doing a presentation on Mining Gold vs Mining Cryptocurrencies. He will also take part in a panel discussion on alternative financing trends in the battery metals space.