Objective Capital Rare Earths, Speciality and Minor Metals Investment Summit
Investing in the Exotic and Speciality Metals Sector
18 March 2010
by Adam Darling, Barclays Capital
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Objective Capital Rare Earth and Minor Metals Investment Summit: An Investors Perspective On Exotic & Specialty Metals - Adam Darling
1. Investment Conferences
RARE EARTHS, SPECIALITY
& MINOR METALS
INVESTMENT SUMMIT
4.35 â 5.00
Closing Keynote: Investing in the Exotic and
Speciality Metals Sector
Adam Darling â Vice President, Barclays Natural Resource Investments
THE LONDON CHAMBER OF COMMERCE AND INDUSTRY â THURSDAY, 18 MARCH 2010
www.ObjectiveCapitalConferences.com
2. Fund Manager's View
An investor's perspective on the Exotic and Specialty Metals Sector
Adam Darling
Vice President, BNRI
March 2010
3. Fund Managerâs view
âAn investor's perspective on the
Exotic and Specialty Metals
Sectorâ
⌠OUR view, not MARKET view
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4. Barclays Natural Resource Investments
ďŹ Global private equity team, investing in private companies
ďŹ Exclusive focus on natural resources
ďŹ 18 investment professionals + advisory panel
ďŹ Invests Barclays money⌠recently opened to 3rd party capital
ďŹ $1bn allocated to 10 portfolio companies since 2006
Oil and gas Mining Renewable
Power
(upstream) (upstream) Energies
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5. Why Natural Resources?
World class commodities franchise
Emerging markets expertise Focus on natural resources private
equity
Relative lack of competition
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6. How do we invest â what are our key criteria?
ďŹ Key criterion - PEOPLE
ďŹ Basis of success: find & fund best-in-class teams â YOU
ďŹ We are management led
ďŹ Even âgoodâ assets do not run themselvesâŚ
âŚso what do we look for in a management team?
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7. What do we look for in a management team?
Proven track record We will do a lot of referencing
Experience, geographical focus,
An angle
commodity insightâŚ
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8. What else?
Aligned with management from the
Alignment of interest
outset
Skin in the game Meaningful personal financial investment
Clear business plan to make money We ask a lot of questions
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9. Balancing risk and reward
ďŹ Realistic assessment of risks and reward
ďŹ Focus on financial returns
⌠cash on cash
ďŹ Ensure management is highly motivated and aligned
ďŹ Understand key risks
ďŹ Develop conservative risked base case⌠with management
ďŹ Execute business plan with patience
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10. Bringing it together: What works for us?
Committed management
Alignment
Competitive advantage
Skin in the game Operational enhancement
âInside trackâ
Clear business plan to make money
Sensible risk adjusted returns
Proven track record
Exit strategy within 5-6 years
An angle Opportunities for a nimble private company
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11. What doesnât work for usâŚ
ďŹBuild the new BHP Billiton
ďŹBet on copper being $5/lb for the next 10 years
ďŹManagement wonât co-invest despite âdead-certâ 4x deal
ďŹBuild $4bn mines
ďŹOwn mine for 30 years
ďŹBack a team⌠who have not visited the country they target...
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12. More of what doesnât work for usâŚ
ďŹTeam that just wants a day job
ďŹTeam that just wants a hobby
ďŹAcquire 10 x 5% stakes in public companies
ďŹCompete in auctions
ďŹNo âinside trackâ
ďŹTeam that ramps up a share price in the public markets
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13. Sounds demanding?
ďŹWould you rather be mining or fund-raising?
Average Fundraising per Issuance: AIM Mining Stocks
45
40
35
30
25
ÂŁm
20
15
10
5
0
2004 2005 2006 2007 2008 2009 BNRI
Cheque
ďŹSource: Ernst & Young New Equity Issue Follow- on Equity Issue
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14. Weâve historically found more oil and gas teams with the criteria we look for
ďŹ 11 teams backed to date, but only 2 mining teams (coal, copper)
ďŹ âŚdespite meeting over 250 mining management teams!
WhyâŚ.?
ďŹ Private equity model more proven in oil and gas?
ďŹ Mining industry reliant on public markets?
ďŹ âŚare our criteria too difficult in mining?
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15. Why are we attracted to Exotic and Specialty Metals as a sector?
ďŹ Niche investment sector; less competed
ďŹ Assets in attractive geographies
ďŹ Projects of manageable scale and cost
ďŹ Exposure to new and growing industrial applications
ďŹ Strong public market & strategic interest supports exit routes
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16. Specific Exotic and Specialty Metals concerns
ďŹ Competition
âŚopaque cost curves, concentrated asset ownership
ďŹ Price
âŚpoor forward curve visibility, limited ability to hedge
ďŹ Marketing
âŚbuyer relationships â new project risk extends beyond mine gate
ďŹ Substitutability
âŚniche uses & industrial customers always looking to save money
ďŹ Scale
âŚcan we invest enough?
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17. Can we back a management team in Exotic and Specialty Metals?
ďŹ Weâre choosy about our partners
ďŹ But weâre always looking
ďŹ We have capital, time, and patience
ďŹ Come and see us
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20. Disclaimer
This presentation has been prepared by Barclays Capital - the investment banking division of Barclays Bank PLC and its affiliates worldwide (âBarclays Capitalâ). This publication is provided to you for
information purposes, any pricing in this report is indicative and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has been
obtained from sources believed to be reliable but Barclays Capital does not represent or warrant that it is accurate and complete. The views reflected herein are those of Barclays Capital and are subject to change
without notice. Barclays Capital and its respective officers, directors, partners and employees, including persons involved in the preparation or issuance of this document, may from time to time act as manager,
co-manager or underwriter of a public offering or otherwise deal in, hold or act as market-makers or advisors, brokers or commercial and/or investment bankers in relation to the securities or related derivatives
which are the subject of this report.
Neither Barclays Capital, nor any officer or employee thereof accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. Any securities
recommendations made herein may not be suitable for all investors. Past performance is no guarantee of future returns. Any modeling or backtesting data contained in this document is not intended to be a
statement as to future performance.
Investors should seek their own advice as to the suitability of any investments described herein for their own financial or tax circumstances.
This communication is being made available in the UK and Europe to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion Order) 2001. It is directed at persons who have professional experience in matters relating to investments. The investments to which is relates are available only to such persons and will be entered
into only with such persons.
Barclays Capital - the investment banking division of Barclays Bank PLC, authorised and regulated by the Financial Services Authority (âFSAâ) and member of the London Stock Exchange.
Copyright in this report is owned by Barclays Capital (Š Barclays Bank PLC, 2005) - no part of this report may be reproduced in any manner without the prior written permission of Barclays Capital. Barclays
Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. EUxxx
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