UK-based private equity company Appian Capital Advisory is seeking a downstream location to process material produced at the graphite project it is developing in Brazil, as demand for the commodity grows apace, CEO Michael Scherb said in an interview.
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Graphcoa, with various graphite deposits in Brazil, is moving into pilot production this year and should be in full production in two years, producing for the electric-vehicle batteries industry, Scherb said this week.
The planned spherical graphite downstream processing facility may be located outside Brazil. "This a big investment for us: We should make an announcement early next year," the CEO said.
Despite announcing plans June 12 to divest two mine assets in Brazil – Atlantic Nickel and copper-gold concern Mineração Vale Verde – Appian remains "committed to Latin America," Scherb said.
Latin American projects currently represent some 60%-70% of the company's overall investments, with the region offering "better reward for the risk you take on, relative to other jurisdictions, including more developed markets where the return may be lower, and also Africa, where the risk may be excessive," he said. "You've got the right balance with Latin America."
Appian also has mining projects in Canada, Australia, Italy, Namibia, Burkina Faso and Ivory Coast.
"We're also looking at Mexico, Peru, Chile and other jurisdictions," Scherb said. Brazil, relative to its peers in the region, is seen to offer political and institutional stability to foreign investors and is one of the company's most important investment jurisdictions.
Appian aims to identify and acquire mine projects with potential which may need "de-risking" – bringing into production or turning around – and then sell them on to strategic investors, Scherb said.
Appian bought Atlantic Nickel out of bankruptcy with 10 "demotivated" employees in 2018. It now has 2,000 on site and an output of 13,0000 mt/year nickel. MVV had a dozen employees when taken on, also in 2018, and now also has some 2,000 and production of 20,000 mt/year copper. Appian previously sold the mines' output to trader Trafigura.
"Once in production we see them as de-risked: we don't look to hold assets into perpetuity," Scherb said. "We have a 10-year fund life, which means we typically take 10 years to invest and then sell on."
In addition to its current planned sale of Atlantic Nickel and MVV in Brazil, Appian recently sold projects in Tanzania and in West Africa.
Supercycle not in doubt
Despite recent concerns over the global economy, Scherb has "no doubt" that metals are firmly in an energy transition supercycle.
"The transition to electrification is not up for debate, only its timeline," he said.
"The bottlenecks are very much in the upstream: lack of critical commodities. For everyone to drive an EV by 2040, we'll need seven times more copper and forty to fifty times more nickel, and we have no way to see where this is coming from."
There has been only one major copper discovery in the last 10 years: Ivanhoe Mines' Kamoa-Kakula in the Democratic Republic of Congo.
Society and politicians need to be cautious on EV update forecasts "because we're going to see a cost curve in metals production: People will need to mine deeper and inflation will be a problem," Scherb believes.
"No way can we make the 2040 (EV) targets, we don't buy the 2040 thesis: There aren't enough commodities to do the job. We think this is a longer-term 2050-2060 transition," he said.