With a career that has been directed to finance and investment since day one, we jumped at the chance to have AngloPacific CEO Julian Treger present at both our Mines and Money London and Mines and Money Australia at IMARC events in 2015. We caught up with Julian to gain a little insight into where he views the best investment opportunities are and how to get your hands on them.
M&M: Where, globally do you see the next key investment opportunities in mining?
JT: I think there are many different opportunities depending upon your skill set. If you believe you can correctly predict commodity price trajectories and have long term patient capital, you can buy deposits today at a fraction of their value a few years ago. Or, if you are a talented mining operator who can cut costs, you can buy marginally profitable or loss-making assets and make them more profitable. Or you can assemble platforms of strategically important neighboring assets quite cheaply to capture synergies. Honestly it is an amazing time to invest in the sector with a medium time horizon.
“Honestly, it is an amazing time to invest in the sector with a medium time horizon.”
M&M: How do you look to minimise risk when making an investment?
JT: We do a huge amount of due diligence – on jurisdictional risk, on counterparty risk, on the position on the cost curve, on what is within our control and what is out of our control, and of course on the underlying commodity dynamics. God is in the details.
M&M: How do you think China’s anti-corruption drive is likely to impact the global investment community?
JT: The Chinese are very impressive and competent and they will, I suspect, manage their economy in a sensible fashion. I think there will be a hiatus, as we have already seen, but eventually they will need to speed up their growth. It’s a generational handover of power and it takes some time to settle down. In the interim, demand for luxury goods, including diamonds and rubies and expensive watches will be slow though.
M&M: Where do you think we are in the current mining cycle?
“If you have stuck it out this far and taken the pain then hang around for the gain.”
JT: I don’t know exactly, but I suspect we are nearer the bottom than the top, so generally on the medium term outlook there is more upside than downside. If you have stuck it out this far and taken the pain then hang around for the gain.
M&M: What advice would you give a mining company currently attempting to source and secure capital?
JT: Speak to Anglo Pacific if you are in or close to production. Royalties have significant advantages over both debt and equity and we would love to explain these to you. Compared to debt, our financing is off balance sheet and doesn’t often require repayment. Compared to equity we require lower returns which rise and fall with sales, plus we aren’t dilutive. Royalties should be the perfect financing instrument for this part of the cycle when debt is hard to come by and equity is very undervalued.
M&M: Which factors are key when choosing between different mining investment opportunities?
M&M: The key things to look at are jurisdiction, counterparty risk, position on the cost curve, operational and geological complexity, commodity exposure and most importantly price and capital structure – don’t overpay and don’t over-leverage . There are a whole range of factors but there is no magic formula.
“Most importantly (look at) price and capital structure – don’t overpay and don’t over-leverage”
M&M: What are the main problems facing the mining industry today?
JT: The key things I see are a continued herd mentality, along with backward looking price decks and either too much pessimism from some or over optimism from others. The industry also is too often failing to communicate the importance of the mining sector, along with the strong examples of responsible behaviour by the sector. These problems are endemic to the industry. We are regularly vilified in the press and don’t stand up proudly enough for the many good things that we do collectively, individually and as a sector.
M&M: Will resource companies continue to have a role to play in investment portfolios?
JT: Absolutely. Resource companies provide the raw materials for globalisation and as such they fuel global growth and prosperity. We may be experiencing a dip but this won’t last forever and resource companies should be a central part of all portfolios.
Catch Julian at Mines and Money Australia at IMARC and Mines and Money London 2015 this November and December.
The post “The industry also is too often failing to communicate the importance of the mining sector” Julian Treger, CEO, AngloPacific Group appeared first on Mines and Money.