What do commodity investment bankers look for when deciding whether to back an ASX-listed company financially?
At the Critical Minerals and Energy Investment Conference in Perth, I spoke with NAB commodities investment banker Fabian Fuentes.
Focus on transition commodities
“NAB – like a lot of the Australian and international banks – is very much focussed on transition commodities,” Mr Fuentes said.
“We’re still very solid in gold and bulk commodities in general, but we’ve been really challenged over the last couple of years to increase our exposure to transition commodities.
“We’ve recently been doing a lot of work in the lithium space; trying to do more in rare earths; and, any commodity that’s tied to global decarbonisation and transition is something that we want to be a part of.”
He said NAB was confident in the long-term outlook for lithium, and it was working to better de-risk rare earths projects, where Chinese dominance can see the supply/cost structure ‘opaque.’
Interrogating feasibility studies
He said the bank looked at management’s track record, the commodity the company was focussed on, cost-competitiveness of projects, sponsors backing the company, off-take agreements and the ‘robustness of the feasibility study.’
“We do a lot of work with consultants interrogating feasibility studies, doing our own financial modelling, and, really picking those projects we feel can withstand the commodities’ cycles and ultimately will be able to repay our debt,” he said.
HotCopper has become a tool for bankers
He says that audience comments on HotCopper have become valuable to the due diligence process.
“HotCopper, I think, has become a tool that now is used by a lot of bankers – a lot of industry participants – to actually learn something that may not necessarily be out in the press or in company presentations,” Mr Fuentes said.
“The community’s just getting bigger and bigger and the quality of information and the opinions I think just continues to improve and it’s just a great resource and great asset for people like me!”
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