Secrets of Success
Having interviewed hundreds of CEOs over the years, it is rare that an interviewee manages to stand out from the crowd. In addition, most will keep their cards close to their chest, normally because there may not necessarily be something positive to shout about, or they prefer to keep the secrets of their success private.
The Majors vs the Juniors
Therefore, interviewing Quinton van der Burgh for the first time proved to be not only highly memorable, but also a great education. This is because he revealed how you can pivot from sector to sector in business, and how in the case of Q Global Commodities, identify what a particular sector needs and then exploit. This is even when there is an existing number of players dominating a sector. Indeed, in the case of mining it is the very dominance of the big names such as Rio Tinto, Anglo American and BHP, which has provided QGC with the opportunity to become a giant in its own right. But more than this one would say that the company has been able to do what the big players do not do.
Small Cap Scouts
There are a couple of key aspects here: the first is that the strategy amongst mining majors has been to allow small players to scout and prove up assets. Then when they are in production starting to scale they will swoop. The net effect of this is that the majors allow the juniors to do all the heavy lifting, take the biggest risks, allow only the strong to survive, and then when the dirty work is over, acquire. In fact, this approach is not unique to mining, we see it frequently in the biotech / pharma area. Majors are more predisposed to spend $1bn on an acquisition, than $10m or $100m. The problem for the juniors is that even if they are literally sitting on a gold mine, they may never have the cash or resources to develop it, and take it to production. Given that we are already on the journey to energy transition, and are way off in addressing the supply crunch that this will trigger. If one adds in increasing geopolitical risk and jurisdictional risk, a new approach in the commodities space has been long overdue, something that Quinton van der Burgh identified, and $60bn later has been overwhelmingly vindicated. This was no fluke, given the competition in the space this would be impossible. Instead, as van der Burgh said regarding his move from telecoms to mining, his intense research into his new sector delivered its strengths, weaknesses and the opportunity.
One would have thought that even though we are in a world where billions and even trillions are now commonplace, any company with a $60bn critical minerals portfolio is a big deal. It is of perhaps even more interest if it is company which is not a household name, when it should be, if only on the basis of its focus being on critical minerals.
Why are critical minerals important? We are in the run up to the energy transition, Net Zero, and perhaps most importantly the need to wean ourselves off dependency on such countries as China. Commodities security is going to be a big deal, something underlined by China just announcing the tightening of exports of graphite from December 1. Given that China is the top graphite producer it means that there will have to be a scramble to source new, reliable sources of minerals of all kinds in coming years.
QGC’s Future Growth
What is interesting as far as QGC is the exponential growth we have seen for the company over the past decade, is that it is arguable that there are more drivers for growth in the coming decade than there were at the company’s foundation. The key now is to catch the zeitgeist as far as ESG and renewable energy, and the reality that for the time being green will have trouble replacing fossil fuels. Interestingly enough, van der Burgh / QGC has a backbone of coal in terms of its 200 million tons reserves. However, it can be argued that the thrust going forward is to finesse the big win that coal recent during and since the pandemic, and look to what seems to be an inevitable push towards a world with a smaller carbon footprint. The diversity of the QGC portfolio with 14 metals and a total of a billion tons of ore bodies suggests that it is well placed in a high risk environment. With $6bn of growth in the portfolio in the past couple of years, the prospect of a jump in value of up to a third from current levels may be envisaged over the next few years.
QGC’s Latest UK Investments: Marula and Shuka
Few would deny there has been a liquidity crunch on the financial markets since Russsia / Ukraine, and off the back of post pandemic inflation / rising interest rates. The junior mining space is generally underfunded, and cannot rely on shareholders or the secondary market to acquire and develop projects. Enter QGC with Marula Mining (AQSE:MARU), which has perhaps not surprisingly been one of the best performers on the London market in 2023, a double achievement given the lay of the land. In February 2023 Marula signed a co-operation agreement with QGC, and the Marula has not looked back since. This is both in terms of development of existing projects, and expanding its footprint both in terms of commodities and new projects.
The same winning formula looks to be on the cards at Shuka Resources (SKA) after a near £900,000 strategic investment by QGC, as part of a £1.5m raise in June. We would expect to see a Marula type transformation here, as the fruits of the restructuring at the company are concluded. The latest news that van der Burgh has joined the board of SKA is as transformational to the company now, as his investment was earlier this year.