BME: ADDING NATURAL CAPITAL CONSIDERATIONS TO A WIDENING RANGE OF PRIMARY INDUSTRY INVESTMENTS

Adding investments in forestry and aquaculture to existing metals coverage

Founded in 1993 by Peter Hollands and Barbara Sotowicz, Bloomsbury Minerals Economics (BME) was originally a market analysis company, specializing in mined commodities. However, in June 2021, it sold its last significant investment in commodity market analysis: its 40% stake in Roskill. BME retains its 20% stake in Skarn Associates, but the latter researches environmental, social and governance (ESG) aspects of mining, not mined commodity markets. BME’s assets are now mostly cash, and future investments will now be focused on small and medium size producing companies in sustainable / regenerative businesses: forestry (and services related to it), macro- and micro-algae cultivation and closed system horticulture.

The Board has been expanded to cover these new fields. Directors are Peter Hollands (Chairman), Barbara Sotowicz (Managing Director), Martin Hollands (Environment & Sustainability) and Simon Benney (I.T. & Data).

Existing investments in mining ESG research and planned investments – in producing companies in forestry, aquaculture and closed-system horticulture

BME retains its original connection to mining with a 20% holding in Skarn Associates, which undertakes asset-by-asset ESG analysis and forecasting for production of gold, copper, nickel, cobalt, zinc, aluminium-alumina-bauxite, seaborne iron ore and metallurgical coal (so far!). Analysis of corporate level ESG will begin during 2021 Q3.

BME is currently in discussion on funding for both (i) a macro-algae cultivator which is scaling up from pilot level production to commercial production and (ii) a prospective micro-algae producer which is planning to set up its first bio-reactor. Both companies are based in Europe.

In July 2021, BME commissioned a scoping study to assess investment opportunities in forestry and in hi-tech companies servicing the industry. BME is also exploring opportunities in closed-system horticulture.

Maths, data and information businesses will continue

BME retains its 25% holding in Metal Price Analytics, which produces mathematical models of metals and minerals cash prices, and for exchange traded commodities, also forward spreads.

BME is looking to make investments in further mathematics, data and information businesses, including in sectors unrelated to metals and mining.

Background: BME’s gradual evolution from 1993 through 2020

In the beginning! In 1993, BME launched the “Copper Briefing Service”, a 12-page monthly report in easy-access newsletter style but with rigorous forecasts two years ahead of mine, smelter & refinery production, and refined consumption, country-by-country and globally, market balance and stocks, prices, plus treatment & refining charges (TC/RCs) for custom concentrates (copper in ore minerals) and RCs for blister (unrefined) copper. That was a level of analysis which BME supplied monthly but which competitors mostly only provided in quarterly or annual reports. Twenty-seven years ago, it was a fore-runner of today’s high-frequency or continuously updated analytical services.

In 2001, Adam Sotowicz began BME’s mathematical modelling of the cash prices and (uniquely at the time, we believe) forward spreads of copper, nickel, aluminium, zinc, lead and tin. Price drivers were the rate of global industrial production (IP) growth (based on a unique – and superb – data series from CHR), LME stocks, exchange rates and, for the spreads, interest rates. At that time, there were two quite separate schools of thought on base metal prices. For price drivers, single-metal specialists mostly followed market balances and stocks, while multi-commodity analysts mostly believed in turning points in the global IP cycle. Adam’s models provided a breakthrough: they showed that it was the interaction between IP growth rates and stock levels that drove both prices and spreads – a unified theory of price.

That radical insight brought great clarity and accuracy to BME’s forecasting of LME cash prices and forward spreads. This was widely noticed and, at the request of a Hedge Fund, a subsidiary, BME Price Models (BME PM), was set up in 2004 to provide traders with fundamentals-based models of prices and spreads for the LME metals, as well as Expert Systems that incorporated ‘Quant’ techniques to complement traditional technical analysis. From 2005, BME PM also became the first company to incorporate into its fundamentals-based models the impact of the financial community’s new investment vehicles in physical metals, futures and options, which introduced long-side bias to the market: a price bubble. The financial community’s long positions in commodities rose from $75 Bn in 2005 to $400+ Bn in 2012.

Profits reinvested in mining-related news, price & map businesses from 2006

Performance fees from the Hedge Funds models brought BME PM and BME itself profits that are believed by its founders to have exceeded both CRU’s and Brook Hunt’s (BME’s much larger rivals) for several years, and BME quietly became a significant investor in other companies servicing the metals, minerals and mining sectors, but outside price forecasting (of which BME was starting to take a jaundiced view, given the bubble which was then developing).

In 2006, BME bought into Mining Communications – the owner of Mining Journal and the Mines & Money conferences – when the venture capital shareholders were being bought out. In 2008, BME bought a 10% stake in (the original) FastMarkets, which ran the websites TheBullionDesk.com, BaseMetals.com and MinorMetals.com. In 2009, BME participated in a refinancing of Intierra, of Australia, which went on to acquire RMG and become IntierraRMG. Those companies went into trade sales as the investments matured. BME also bought its own office building in London.

Significant stake in Roskill held from 2010-21 (EV / battery materials focus)

In 2010, BME bought into the Roskill Group and owned 40% of it before its sale in June 2021. The Roskill Group comprises Roskill Holdings and four wholly owned subsidiaries: Roskill Information Services, Roskill Consulting Group, Roskill Pariser and Roskill (Shanghai) Business Consulting.

Roskill covers over forty commodities: electric vehicle and battery raw materials, copper, hi-tech materials (including rare earths), steel and alloying elements, minor metals, industrial minerals, carbon and chemicals.

Last updated: 23rd July 2021

 




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