The healthy outlook for the mining and metals sector has not only boosted access to debt but also imporved the ease of raising finances via equity markets. With strong cash generation, sector capital allocation decisions are increasingly investment focused, rather than geared toward financial resilience. The focus is shifting to growth with a balanced capital agenda. Moreover, this balanced capital agenda will cater to both the short-term needs of shareholders and the long-term sustainability of shareholder returns.
The ease of securing funding for the growth agenda has also improved markedly. Key to competitiveness and sustainable value creation will be achieving the right mix of capital, which balances near- and long-term liquidity with flexibility and at an optimal cost.
Future demand: electric vehicles and battery minerals
Many of the world economies are introducing measures to reduce the reliance on internal combustion engines. In response, car manufacturers have been shifting their focus to the development of EVs and investing in battery technology. Sales of electric cars are forecast to exceed diesel cars as early as May 2019.
Key metals in the batteries powering these EVs are cobalt, lithium and nickel. Supply of these metals is not expected to meet forecast demand. Increased interest is expected in assets producing fourth generation metals from car manufacturers that are looking to invest in mines to source materials for their EVs.