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Vision Blue helping world to achieve green dream with high-return prospects for investors

Sir Mick Davis interviewed by Mining Weekly’s Martin Creamer about Vision Blue Resources. Video: Darlene Creamer.

10th February 2021

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – The world’s energy transition away from fossil fuels is a phenomenon that is not dependent on any assumptions about gross domestic product (GDP) growth or countries urbanising or industrialising.

It is a phenomenon driven by international consensus that the carbon footprint of the world has to be managed and reduced.

Governments have translated that into regulation and legislation, which drives the nature of energy usage in their own countries.

“We see the massive inroads of renewable energy into the primary energy mix and we see the helter-skelter drive into the electrification of motor vehicles. All of this means that the commodities that support batteries and the consequences of renewable energy in the primary energy mix are going to be vital to achieving this decarbonisation.

“Our vision is simply to be part of that process and to facilitate development of mines which can deliver those commodities to enable the world to actually achieve its dream and its goal of a greener economic environment, and at the same time support high living standards,” energy and mining luminary Sir Mick Davis explained to Mining Weekly in a Zoom interview. (Also watch attached Creamer Media video.)

The Vision Blue Resources which Davis leads made its first investment this week, with its focus strongly on battery materials.

Vision Blue needed $50-million from the market, received $66-million and will be going back to the market to raise more funds for the many opportunities it sees.

In the next five to ten years, Vision Blue is poised to be all about battery materials, where it not only expects to generate a good return for investors, but also foresees those investments helping to create a greener world.

In the longer term, its first and lead investment in graphite is also set to play an important role in the rollout of hydrogen fuel cells as the hydrogen economy develops.

Mining Weekly: You’re out of your starting blocks, you’ve put close on $30-million of the money you’ve raised into NextSource. What is NextSource going to do for you?

Davis: NextSource has a very, very significant and hugely interesting graphite deposit in Madagascar. It’s interesting because of its size, it’s interesting because it is outside China and it’s interesting because of the high quality of the resource, which meets the particular requirements of both small-scale and large-scale batteries. The battery has a cathode and an anode and the graphite goes to make the anode. That graphite is a strategically important mineral and users of batteries and people who require batteries in their machines and their motor vehicles essentially want to ensure that there’s an adequate supply. So, we’re pleased to be able to partner with NextSource in providing sufficient capital to start the first phase of production, and to help them in their feasibility that’s looking into the scaling up of that project to significant size over time, and also to go downstream in the development of anodes. That’s a very exciting venture for us as our first investment. I’ve had a lot of deal flow coming past my desk in the last few years and I think this is one of the more exciting projects. We have two other projects which we’re working on which we hope to close and complete during the course of this month, or early next month. We actually needed $50-million and when we made our announcement, we had $61-million and another $5-million came in thereafter to take it to $66-million. But we needed that money to actually complete these transactions. Once that’s done in the first half of the second quarter, I’ll go back to the market to raise more funds so that I’m in a position where I can also complete further transactions, because there are further opportunities that we’re looking at.

You have also outlined the kind of mine asset you want, which must be near production or at an advanced stage of exploration. Are there quite a few of those around?

Yes, there are. Hence my need to raise funds quickly, which we did, and my conviction that there are more funds that we need to raise, which we’ll do a little later this year. There are projects. If you go back and look at the mining industry, it’s gone through one of these very typical phases, having been late out of the starting blocks, in the early part of the 2000s, to address the supply needed to satisfy the secular change in demand caused by the industrialisation and urbanisation of China, when hundreds of millions of people moved from rural areas into urban areas. The infrastructural requirements to satisfy that meant that there was a vast and massive increase in the requirement for commodities to support that and the supply side was inelastic. After a few years the industry caught up, started to invest in projects and it takes ten to 14 years from the time you think about a project to the time it can actually produce. Unfortunately and ironically, as the industry was ready to launch production, we had the global financial crisis. So, we ended up with huge amounts of supply and lower levels of demand. The industry has been under pressure, as a result of that, from its institutional investors to curb its energies in terms of  developing the supply side; not investing money in the optionality of its asset base, not looking for new assets, but devoting their time and their focus on maximising cash flow from existing operations. Making existing operations resilient and sending that cash back to shareholders. That’s good for returns and good for investment, but it’s not good for preparing the ground for the next time you have a secular change in demand. So, what we have here is a changed demand which is not reliant on our assumptions of where GDP is going to be, and not reliant on finding the next great economy that’s going to urbanise and industrialise, like China did almost 20 years ago, but it actually is a function of this international consensus that the world needs to manage its carbon and carbon footprint, and governments translating that consensus into regulation and legislation requiring a transition away from fossil fuels and the use of batteries in the propulsion of vehicles, and in large-scale battery to storage systems to support and stabilise energy goods which are served in the main by renewable energy. That drives the demand and therefore we need a supplier response and there is not a sufficient supplier response but we have, within our universe of options, a number of companies which have very high quality resources, which are large in size, which produce low-cost product, which don't require significant collateral investment and logistics infrastructure to support them, and which have benign mining and metallurgical process. We, from a risk point of view, feel comfortable in pursuing those projects, and yes, there were a number for us to actually look at going forward.

What are the other battery metals?

This is a very interesting question that you ask because most of the battery metals are metals which have an existing industry usage – copper, nickel, cobalt, certain rare earths and vanadium, for instance, for vanadium redox batteries for large-scale energy storage and also for strengthening carbon steel. Over and above that is this growing demand for commodities to address the need for batteries to be located in motor vehicles, batteries for mobile phones, systems for 5G and, of course, the very large-scale storage systems for electricity grids, which use an increasing amount of renewable energy and, let me also say to you, renewable systems that will go into supporting electrification of villages and towns in remote areas across, for instance, the continent of Africa. They will need large-scale battery systems to ensure that energy can be provided consistently when the source of renewable power is not working at that point in time, because it’s night time or the winds are not blowing etc. So, it’s a wide range of commodities that we're talking about, commodities that we actually all know about, but commodities that will have an additional source of demand, therefore driving the secular change and the pricing profile. I think a very exciting area to be involved in, not only from the point of creating high returns for our investors, but the fact that we can play a meaningful role in addressing reduction in the carbon footprint, the reduction in emissions, and still providing solutions for improving the quality of lives of people around the world.

Are you playing any role in the hydrogen economy? I noticed that more flake graphite goes into fuel cells than into batteries. So, is this broader, can your graphite also go into the hydrogen economy?

Yes, indeed, but I think we have to be cautious about the pace. The technology around hydrogen fuel cells is there. The commercial application of that, I think, is some years away, in size. I would think, and this is just me speculating, that you’re sort of 15 years away from where you’re going to see hydrogen fuel cells and the hydrogen economy playing an important role. Certainly, in the next five to ten years, it’s all about batteries. So, if I want to focus my investors on where they can actually gain immediate return and contribute immediate value in their investment in terms of this whole question of creating a more benign environment for our world to operate in, then it’s in the battery space that we want to be in. But certainly, in the longer term, new technology will develop, the hydrogen economy that you talk about is going to be a thing of the future, and also, as you say, our first investment, our lead investment – graphite – is going to play an important role in that as well.

Are platinum group metals out of the question for you?

No, they’re not out of the question, not at all. They certainly have a role to play going forward. But at the end of the day, you have to pick. You can’t pick your commodity. You’ve got to pick your opportunity. We have to find opportunities which match our investment and risk profile, and that’s what’s going to drive us more than anything else, and also to ensure that we can invest in the geographic areas where we can identify and mitigate any risks.

STRUCTURAL DEMAND CHANGE

Vision Blue was created by Davis in December 2020 to capitalise on the structural change in battery mineral demand.

The investment company is targeting assets in established mining jurisdictions, with well advanced assets that are scalable, have low logistics and processing risks and can be brought into production rapidly.

It aims to work with existing management teams to provide critical growth capital, technical support, experience in securing future finance, and delivery of ultimate exit strategy. Where possible, it will utilise a phased development approach based upon a self-financed expansion to achieve large scale revenue and cash flows.

Davis built Xstrata plc into a large mining company prior to its acquisition by Glencore plc. Before listing Xstrata on the London Stock Exchange as CEO, he was CFO of Billiton plc and before that Eskom.

During his career in mining he has raised over $40-billion from global capital markets and successfully completed more than $120-billion in corporate transactions.

Edited by Creamer Media Reporter

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