➤ Mining companies will be called on to provide the needs of the growing energy transition, but the sector has been starved of the capital necessary to do so, said Rhett Bennett, the founder and CEO of Texas-based natural resources company Black Mountain.
➤ "Capital is going to have to come back and support the metals mining sector," and it needs to occur quickly, the executive added.
➤ Bennett sees the transition to greener energy as inevitable but says it will take long enough that opportunities in traditional energy markets remain.
Black Mountain founder and CEO Rhett Bennett.
Black Mountain is a family of natural resource companies established and run by founder and CEO Rhett Bennett with a focus on "identifying and capturing high-growth opportunities in the global energy sector." Operations overseen by Bennett have mined millions of tons of sand for use in hydraulic fracturing for natural gas and drilled thousands of wells.
However, Black Mountain is making a move toward investing in the transition away from fossil fuels. Black Mountain Metals LLC seeks investment opportunities in assets that produce materials essential to batteries and other energy technology. On Oct. 14, Black Mountain Acquisition Corp., a special purpose acquisition company, announced it priced its upsized initial public offering at $240 million. The blank check company aims to take advantage of low valuations in the exploration and production segment of the energy industry. Bennett is also a director of Metals Acquisition Corp., a special purpose acquisition company with the goal of identifying opportunities in the mining sector including assets that produce metals used in electric vehicles and other energy transition sectors.
S&P Global Market Intelligence spoke with Bennett on Oct. 19 about the opportunities he sees in both traditional and new energy markets. The following conversation has been edited for clarity and length.
S&P Global Market Intelligence: Do you think that the mining sector is prepared to meet the needs of the global energy transition?
Rhett Bennett: Wildly underprepared. The parallels to oil and gas are similar. With oil and gas, it's more recent, but in metals and mining, you had close to a decade of underinvestment. In general, it feels like markets have been more attracted to tech and kind of new economy themes for, gosh, probably two decades now. But for metals and mining, I would say easily in the last half-decade, it is just really attracting no interest whatsoever.
But, with all these commodities, they're all cyclical. At a certain point, capital starvation really starts to create consequences, which you totally see in metal and mining. But, you're layering in a generational shift, the energy transition thematic.
All of a sudden, you look up, and we've got just drastic under-investment for a half-decade and all of a sudden, now you want to triple, or many times, quadruple demand in a matter of like five years. There's a real physical restraint that is actually coming to fruition.
I think today, everybody wants to invest in battery manufacturing facilities, sort of the next Tesla Inc. Nobody wants to do the really hard, gritty things such as actually providing the natural resources to make that energy transition occur.
We understand you're passionate about an "all the above approach" when it comes to energy. How do you use that as a framework for an investment strategy to go after both traditional energy assets and assets in the green metal space?
In 2018, I went up to the New York Stock Exchange Energy Leaders Forum. The head roundtable that an IHS Markit economist was giving was titled "The Coming EV Revolution and Implications for Oil and Gas." Really, up to that point in time, EVs were a novelty. This was 2018. But the economist said something pretty profound and definitely changed the trajectory of Black Mountain. He said that EVs are 80% more efficient than internal combustion engines due to heat loss. It really just resonated with me. In my mind, over the course of human history, efficiencies win.
I just got super fascinated with this theme. We're a more natural resources-focused company. I'm just starting to think, well, how would you play it if you think EVs are going to become prevalent? Capture a tremendous amount of market share whether it is copper, nickel, cobalt, what have you.
I'm a huge energy transition bull. It's definitely coming. I think it's preordained. You've got the regulatory and societal pressures pushing in that direction, so EVs are going to grow. With that in the background, battery metals demand is going to ramp rapidly. Then, you just look at the space, the current productive capacity versus the targets people want to hit, and it's an easy conclusion to arrive at that metals prices are going higher, and miners are going to do really well this decade.
That's where I get excited about helping build energy transition from a raw materials perspective, natural resources perspective. What I would say in that same breath is energy transition is a two- to three-decade event. Fundamentally, overnight, you can't change the way the world does global mobility. I think we're hasty and a bit premature on totally abandoning traditional energy — oil left for dead.
It's probably more of a not-so-fast moment. The entire world uses your product to the tune of 100 million barrels a day every day. So not reinvesting is kind of like stopping running on the treadmill. You're going to fall off the back, and it's going to hurt. You're seeing all that manifest in higher prices.
I get really bullish in both sectors for the same reasons, which was a lack of capital investment over the last part of the cycle and just a general kind of lack of interest from capital to really participate in earnest.
Is the coal sector also a space where you might consider looking for opportunities in North America, or are there even any opportunities to find there?
It's funny, I actually grew up around coal mining. That's what my family did and still does for a living back in eastern Kentucky. Coal is probably one that's just a bit too challenging. I think oil and gas can be done right, and I think it's super relevant.
Boy, coal, that's a harder phone call to make to [private investment in public equity] and investors and PIPE participants. We'll probably stay away from coal.
Are we going to see the industry resolve this mismatch in supply and demand as it relates to the energy transition in the next couple of years, or are we just going to have high prices for the next decade or so?
I think high prices are going to persist this decade. I've heard it characterized as "revenge of the miners" or "revenge of the old economy." I think it's totally true. Capital's just had an aversion to that space and oil and gas here as of late. I do think higher prices are in store.
Ultimately, to get where we're going, capital is going to have to come back and support the metals mining sector. There's just too much of a shortfall without pretty serious investment, and it really needs to occur quickly.
Generally speaking, do you think investors focusing on environmental, social and governance factors understand the connection between mining and the energy transition, or is there a knowledge gap?
I think a lot of investors have no idea the role mining plays in the creation of an energy transition and new economy capabilities. Fundamentally, you can't have electrification of the world if you don't have those ingredients: copper, nickel, cobalt, graphite. You can get a list of elements that are required to do that, and I think a lot of a lot of investors really don't appreciate that aspect of it.
I can tell you when you kind of look at global supply and demand outlooks, it's just not going to be there. I think that's when the markets will really wake up to "Gosh, what we've been investing in, we really haven't secured our supply chains to the extent we can actually make a product."
That's going to be a moment of panic, and I think you'll see some materially higher prices start to set in at that point.