05 November 2019
Renaissance Capital and London Stock Exchange Group hold the EMEA Metals & Mining Conference

Highlight the sector fundamental value and buying opportunities

Renaissance Capital, a leading emerging and frontier markets investment bank, jointly with London Stock Exchange Group (LSEG) held the EMEA Metals & Mining Conference on 1 November 2019 at LSEG’s headquarters in London.

Welcoming the conference participants, Dmitry Gladkov, Acting Global Head of Investment Banking and Global Head of Financing Group, mentioned that in 2002, Renaissance Capital was the first Russian investment bank to become a fully registered member firm of London Stock Exchange, and has since extended the relationship. Welcome remarks were followed by a keynote speech from His Excellency Ganbold Nandinjargal, State Secretary, Ministry of Mining and Heavy Industry, Mongolia.

The event was attended by more than 120 guests, of which ca. 70 represented global investors in the M&M industry. In addition to around 40 one-on-one meetings between funds and corporates, there were two panel discussions – one focused on public companies and the other on private companies.

The panel discussion for public companies highlighted efficiency as the core priority for sector players as well as the paradox of under-investment signalling investment opportunity. In addition, the panel participants discussed in what ways ESG can add value. The participants represented the following major M&M companies and investors:

  • Rt Hon Lord Barker of Battle PC – Executive Chairman of the Board of Directors, EN+
  • Natasha Braginsky Mounier – Global ESG Director, Capital Group
  • Nicholas Bridgen – CEO, Ferro-Alloy Resources Group
  • Johann Pretorius – Head of Research Africa, Renaissance Capital
  • Dr Alya Samokhvalova – Deputy CEO, Petropavlovsk
  • Niels Wage – CEO, Danakali

Rt Hon Lord Barker of Battle said: “We are long-term optimistic on aluminum price and expect continued y-o-y growth through the next decade because aluminium is a building block of the low-carbon economy with a strong recycling potential. However, short-term price outlook does not look very exciting and is driven by sentiment rather than real supply and demand with the biggest driver of this sentiment being the dampening effect of the trade war between the US and China.”

Natasha Braginsky Mounier said: “M&M companies stand to operate in areas where local communities are very dependent on their success. Partnership with communities helps achieve better social outcomes. It’s a long journey, but this industry has a huge positive role to play in transport electrification and the whole energy transition.”

Dr Alya Samokhvalova said: “Consolidation should make sense in the context of wider business development. In the gold mining industry, consolidation has been often driven by markets, pushing companies to become bigger, to acquire assets with very wrong valuations and without any real synergies. When some companies want to become big and be included in indexes, they are in fact driven by investors. However, gold mining in Russia remains one of least consolidated, and we rather look for growth through new technology.”

The private companies’ panel centred on the capital allocation priorities of PE investors, analysed greenfield projects vs producing assets, and considered what mines of the future might look like. Speakers came from not only operating companies and investment funds, but also government agencies and advisory firms:

  • Nariman Absametov – Head of Investment Department, Tau-Ken Samruk
  • Tamara Makarenko – COO, Sibylline
  • Manduul Nyamandeleg - Executive VP, Erdenes Tavan Tolgoi Mining LLC
  • Adrian Rimmer – Senior Advisor, Green Finance, LSEG
  • Andrea Salvatori – Head of Emerging Markets, ESG Strategies, Amundi

Tamara Makarenko said: “ESG is a concept that is not niche anymore, it needs to be normalized as a generally good business practice. People are looking for better way to run companies, companies are looking to be more profitable – and ESG offers that.”

Andrea Salvatori said: “Integration of ESG is at the heart of how investments processes are changing today. The conversation about all stakeholders, not only shareholders obviously, is beginning to impact the cost of capital. Major changes are happening in the FI universe. We see M&M companies from EM raise financing not for expansion of operations but for the purpose of reducing their emissions, which is an important breakthrough.”

The conference also featured a presentation delivered by Charles Robertson, Global Chief Economist, Renaissance Capital, on the current cyclical slowdown and a presentation on Mongolia’s petroleum and heavy industry, delivered by Ayasgalan Molor, Head of Finance Division, Ministry of Mining and Heavy Industry of Mongolia.

Mr Robertson said: “The trade war is contributing to falling confidence in the biggest exporters and manufacturers in the world, and hitting global trade. If investors are prepared to invest in risky credits at all, we think they will choose dollar debt rather than local currency bonds.”

Renaissance Capital has an established track record of executing capital markets and M&A transactions for M&M companies out of the EMEA region, of which the most recent landmark deals are:

  • A $500mn 5-year benchmark 144(A) / Reg S bond issue for Uralkali, one of the largest potash producers in the world with one of the lowest-yield / coupon issues for Russian or regional corporate borrowers with comparable ratings
  • A $300mn debut bond 5-year issue for ChelPipe (Ba3/—BB-) at a 4.50% yield / coupon – a rare and very successful EM corporate debut of a major Russian pipe producer
  • A $700mn 5-year benchmark bond issue for Evraz, an FTSE100 company and one of the blue-chip EM issuers. 

Renaissance Capital also provides extensive research coverage of the M&M sector with eight research analysts covering 35 industry stocks across EMEA markets.