Fresh from speaking at the 121 Group mining conference in South Africa, Lenaig Trenaux, Global Head of Mining, Metals and Industries Finance, shares her views on the evolution of the mining sector.
Lenaig, what are the current trends in the Mining, Metals and Industries market?
The critical importance of mining and metals to the energy transition is a central theme and the development of new mines is unavoidable to progress towards net zero. Project development however must be managed extremely carefully to ensure extraction and production are done in a responsible manner.
Reputable mining companies, and the projects they support, are today focused on this more than ever before, and their objective to ensure their contribution to the energy transition is clearly understood contributes to greater self-scrutiny and to further raising the bar on their sustainability and ESG requirements for projects.
Through this same lens, mining companies are looking more and more towards plugging their projects, and the metals and minerals that come from them, beyond traditional industry towards the overall ‘value chains’ linked to decarbonization. Considering electric vehicles as a simple example, the value chain spans the mining company, the Gigafactory, the car manufacturer, and, ultimately, the end customer. Without the metals and minerals, electric vehicles simply cannot be produced, so the mining company is central to the value chain, and this trend is only set to continue across other sectors and industries.
Is the symbiosis across the value chains optimized?
Yes and no. While the value chains bring together many stakeholders, there is still a need for better coordination between the upstream and the downstream, and especially through investment. There is, however, progress. We now see miners investing downstream and downstream players investing further upstream with a view to managing their supply chain and securing their access to supply, but also for traceability and sustainability purposes, emphasizing the self-scrutiny and accountability point raised earlier.
Investment in the sector to ensure the supply of metals and minerals is still not sufficient to meet the increased demand linked to the energy transition, and recycling will only solve part of the problem. Unlocking private capital – from banks to private equity to financial sponsors – is therefore another component of the value chain that needs to be nurtured.
There are also other important considerations. A lot of the minerals in demand are in challenging jurisdictions that require very prudent approaches. There’s also the question of security of supply and national or regional independence, and then of course the question of the social acceptability of mines. Mining companies have a new and critical role in supporting the energy transition, but this should not undermine the way projects are undertaken. Policy and social discussions are therefore also central to value chains developments.
How has your business model evolved recognizing the shift in the mining sector?
The key word here is ‘shift’. Societe Generale, through its Global Banking and Advisory business, has implemented its own shift, where we no longer operate only in verticals reflecting individual expertise, but through horizontals across multiple businesses to leverage the collective intelligence of all our teams across sector value chains.
Looking at my own teams, we expanded our mandate a number of years ago leveraging on our core skills and sector understanding. It has enabled us to follow new value chains from the upstream to the downstream and to bring our understanding of the metals and mining trends and challenges to new players across value chains, while accompanying our existing clients in their new developments.
When we discuss projects today, it’s not just a discussion with my team, it includes colleagues from the infrastructure team, the mobility team, the financial sponsors and investment banking teams, to leverage private capital in the form of debt and equity, our environmental team to scrutinize projects, and so on. We have aligned ourselves through the value chains we see across prominent sectors, and holistically leverage the collective intelligence of all colleagues to best advise our clients.
In the first quarter of 2022 alone, my teams have been awarded three high profile advisory mandates in the Gigafactory space, and this is only possible thanks to the way we have shifted our business model.
Click here to know more about how Societe Generale, through its GLBA business, has implemented its own shift.