A venture set up in Abu Dhabi Global Markets, which is being backed by Abu Dhabi Catalyst Partners, plans to provided finance worth $500 million for mining projects in emerging markets within the next three to five years.
Alphastream Partners, a joint venture between two investment bankers running UK-based Portman Partners and ADCP, will provide debt and equity funding to companies developing mines for precious metals, industrial metals and rare earth elements.
"We've targeted $500m over the next three to five years both in the form of debt and equity," co-founder Prashant Francis told The National.
He did not disclose the amount of funding Alphastream Partners received from Abu Dhabi Catalyst Partners, but said the company also plans to raise debt to acquire royalties or commodities streams generated from the projects it funds. The company does not plan to finance exploration projects, focusing instead on ventures with proven reserves.
Demand for metals such as lithium, nickel and cobalt has soared in recent years due to their increased use in batteries required to power electric vehicles. If the clean energy transition develops at a pace to meet the Paris Agreement's climate goals, demand for graphite, cobalt and nickel is likely to grow about 20-25 times current levels by 2040, the International Energy Agency said in a report last month. Demand for lithium is expected to grow over 40 times.
"There is no shortage of resources worldwide, and there are sizeable opportunities for those who can produce minerals in a sustainable and responsible manner," Fatih Birol, executive director of the IEA, said.
Lithium prices are up 69 per cent so far this year and cobalt prices are up 39 per cent, but both remain below 2018 peaks.
Although companies like Canada's Franco-Nevada currently fund mining projects in return for a cut of the royalties or commodities generated, most are focused on developed markets, Mr Francis said.
"For the EV revolution to become successful, money has to go into the mining space because these minerals are going to become a bottleneck to achieving the energy transition," he added.
"Even though we are at the start of potentially a big commodity bull cycle [and] there is a lot of capital going into markets, it's still very selective. Debt financing is still relatively constrained in terms of the markets we are looking at."
Alphastream Partners will primarily focus on funding projects in Africa, Asia and South America, Mr Francis said.
Alphastream co-founder Reyhaan Aboo said that its partners plan to "build a company that sits at the crossroads of East and West".
"We see strong tailwinds for commodity markets as the global economy emerges from the pandemic lull and believe that we are well positioned to fund miners to take advantage of this opportunity.”
ADCP is a $1 billion joint venture between Abu Dhabi sovereign fund Mubadala Investment Company and New York-based investment company Falcon Edge Capital. It has been backing a number of investment firms to help them build a presence in the UAE capital's financial free zone.
“AlphaStream is another unique proposition that will further enhance the reputation of the ADGM ecosystem to act as a location of choice for innovation," James Munce, ADCP's chief executive, said.