BME: EVOLVING TO LINK RESOURCE ECONOMICS TO SUSTAINABILITY

Currently investors in Roskill, Skarn Associates and Metal Price Analytics

Bloomsbury Minerals Economics Ltd (BME) was founded in 1993, by Peter Hollands and Barbara Sotowicz. It initially published a monthly copper report, subsequently adding mathematical price modelling of various markets and then, over the last fifteen years, gradually re-focused on investments in other companies active in mining and commodities news, data, maps and analysis then most recently, on sustainability.

Today, BME has itself exited copper reports but owns 40% of the Roskill Group (five companies – experts in metals and materials critical to a low-carbon economy), 20% of Skarn Associates (mining and metals ESG) and 25% of Metal Price Analytics (price models). From mid-2021, potential investments in forest products market analysis, and directly in sustainable forestry, kelp aquaculture and closed system horticulture, are being investigated.

Directors are Peter Hollands (Chairman), Barbara Sotowicz (Managing Director), Martin Hollands (Environment & Sustainability) and Simon Benney (I.T. & Data). BME’s history is set out below.

In the beginning: monthly Copper Briefing Service launched in September 1993

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.

Fundamentals-based forecasting models of six base metals introduced in 2001

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.

A step up in value: trading models and expert systems introduced in 2004

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 bought in 2010 (EV / battery materials focus)

In 2010, BME bought into the Roskill Group and now owns 40% of it. Over 2011-2016 Roskill’s reports were re-oriented towards forecasting, its data handling modernized, and sales and marketing functions greatly strengthened. In 2017, Roskill acquired Heinz H. Pariser Alloy Metals and Steel Market Research of Germany. The Roskill Group now comprises Roskill Holdings and four wholly owned subsidiaries: Roskill Information Services, Roskill Consulting Group, Roskill Pariser and Roskill (Shanghai) Business Consulting. Simon Benney is BME’s Director on the Board of Roskill.

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. It produces sustainability studies for: lithium; nickel sulphate and cobalt (so far); and cost models for: chromium ore and ferrochrome; cobalt metal and chemicals; lithium from hard rock, brine and clay sources; nickel sulphate; and vanadium.

Stakes bought in MPA & Skarn; a move beyond mined commodities coming next

In 2019, via its 25% shareholding in Adam Sotowicz’s company – Metal Price Analytics (MPA) – BME re-entered price modelling. Models of the LME cash and three-months (3M) prices will emerge in 2021 Q3 for use in scenario analysis and price risk management. MPA is now seeking alliances with conventional (non-modelling) market analysis companies to access (i) market balance and stock forecasts and (ii) marketing services.

In March 2020, BME took a stake in Skarn Associates, which analyzes and forecasts mine-by-mine and company-by-company environmental, social and governance (ESG) metrics. BME now owns 20% of Skarn. Coverage so far is gold, copper, nickel, cobalt, zinc, aluminium-alumina-bauxite, seaborne metallurgical coal and seaborne iron ore. Corporate level GHG emissions analysis will emerge in 2021 Q3. A BME Director – Martin Hollands – is also a Director of Skarn.

From mid-2021, BME is investigating potential diversification outside mined commodities, into forest product market analysis and also directly into the sustainable forestry, kelp aquaculture and closed system horticulture industries.




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