Electric vehicles and batteries are expected to create huge demand for copper and cobalt
FOR mining investors there is something sinfully alluring about Glencore, an Anglo-Swiss metals conglomerate. It is the world’s biggest exporter of coal, a singularly unfashionable commodity. It goes where others fear to tread, such as the Democratic Republic of Congo (DRC), which has an unsavoury reputation for violence and corruption. It recently navigated sanctions against Russia to strike a deal with Rosneft, the country’s oil champion.
Yet Glencore could still acquire a halo for itself. It is one of the world’s biggest suppliers of copper and the biggest of cobalt, much of which comes from its investment in the DRC. These are vital ingredients for clean-tech products and industries, notably electric vehicles (EVs) and batteries.
The potential of “green” metals and minerals, which along with copper and cobalt include nickel, lithium and graphite, is adding to renewed excitement about investing in mining firms as they emerge from the wreckage of a $1trn splurge of over-investment during the China-led commodities supercycle, which began in the early 2000s. The most bullish argue that clean energy could be an even bigger source of demand than China has been in the past 15 years or so.
Optimism about the mining industry is a remarkable turnaround in itself. In the past four years the business has endured a slump that Sanford C. Bernstein, a research firm, judges to have been as deep as in the Depression. In 2014-15 the four biggest London-listed miners—BHP Billiton, Rio Tinto, Glencore and Anglo American—lost almost $20bn of core earnings, or EBITDA, as commodities plunged. Glencore, which was hit hardest, scrapped its dividend and issued shares to rescue its balance-sheet.
Commodity valuations rebounded last year, and again led by Glencore, mining-company share prices rallied. Recent results show that the four biggest firms not only swung from huge losses to profits but also cut net debt by almost $25bn in 2016. BHP and Rio made unexpectedly large payouts to shareholders.