Upstream Strategy is a Necessary Condition

Penned by Tshepo Magagane

There is this view in the West that “we will just buy the materials”!

Have seen it in so many conversations (see comments in attached) – European industry is struggling to plan for the future – the most jarringly surprising thing was: 

1. Strategy team at OEM is telling us “not promising anything but we are just waiting for final sign-off” – 2 days go by and they come back going “procurement has vetoed it at EXCO” – detailed conversations with procurement as well but they were going “we need metal for this order book”

2. DFIs – “we dont have the resources to do Africa and mining”

3. Largest Private Company – CEO of Precious “we don’t need you guys because in our sub-sector, there is enough ounces out there” – Group CEO “we are more specialists in this sub-sector, we still do not have a strategy on how to evolve to others” – honestly, I understood their position – I would have struggled to move into Copper and others if I was in their position – they are the leading in the sub-sector there.

The West has this strategy of hoping that this will somehow sort itself out – see China ex Khoemacau – when you go to Zambia, DRC, Mongolia – their recent copper bets are on at best sub-Tier 3 assets (c3, LoM, grades, reserves, production) – but they know that you need to secure ore (they still haven’t figured out how to “define projects”)! There is no Copper ore out there – if you are out there on the ground – you will see scouts from end-users who are spending a year in the Copperbelt trying to source new supplies OR listening to a small smelter owner who is going “I have offers of capital to expand but I am not some dodgy businessman who will take the money while I do not have the ore to expand”!

This is a Mercantile Era type of economics – if you do not have the minerals, you will be de-industrialised (or you can’t industrialise) – it really is that simple!

There is simply no way you will convert these renewables into primary energy without the Copper – just no way – basic primary school general science – those transmission lines need so much copper – current 80m kilometers need to be upgraded and then doubled in the West and then build out in the Global South!

Sort out Upstream or just forget about this Transition.

PS: FQM – why I harp on that Geology Risk > Political Risk – Geology eg low grades & issues with recoveries = fatal (all capital written-off) v Political = worst case – arbitration & you get capital back with IRR…

…see what I have been saying about FQM – https://www.linkedin.com/posts/activity-7266871627127156737-Wr4V?utm_source=share&utm_medium=member_desktop