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Critical Metals Plc

Critical Metals gets set to list in London, with a focus on strategic and specialty commodities

Snapshot

Economic warfare is hotting up internationally, and some commodities are set to be crucial in the conflict

Money

Russell Fryer, executive director of Critical Metals Plc, likes to talk of the ABC metals he’s planning to get his company into.

These metals, antimony, beryllium, caesium and copper, he reckons are going to become absolutely key in the ongoing and escalating trade war between the US and China.

In Fryer’s estimation, this trade war is or will be the equivalent of World War Three, only without boots on the ground. And in any global war, commodities and security of supply will play a crucial role.

It’s not just the ABCs that will be in demand in the event of any escalation. The truth is there are a couple of other metals Fryer’s interested in too - namely vanadium, tantalum and tungsten - but the acronym for these, the TTVs is slightly less catchy.

Still, all told, the ABCs and the TTVs combine to form the “critical metals” group from which the company takes its name.

But why these metals in particular? China is key here. Antimony hasn’t been a particularly favoured metal with investors over the years, as its primary uses in flame retardants and lead alloys haven’t allowed promoters much to get their teeth into, but crucially, China controls a significant portion of supply.

Similarly, beryllium, a crucial ingredient in the manufacture of aircraft and space rocket components. Only three countries figure in the list of serious producers: China, Kazakhstan and the US.

Caesium, used in drilling fluids is slightly different, in that what supply there is comes mainly from Canada. But the US has none of its own, and there’s precious little anywhere else in the world outside of South Africa and Zimbabwe. Perhaps of much more significance though, was the announcement earlier in the year that Cabot Corporation, which controls the bulk of Canadian supply, is to sell its specialty fluids division, which includes the caesium used in drilling, to you guessed it, a Chinese company.

The TTVs are to some extent similarly restricted, in that there are assets producing these metals elsewhere in the world, and outside of Chinese control, but the overall markets are not big, and even in these areas Chinese influence is strong.

Thus in vanadium, China is amongst the top three producers, alongside South Africa and Russia, in tungsten the bulk of the world’s reserves are held in China, and in tantalum China is a major player in the market alongside Australia.

Tellingly though, Fryer is less interested in rare earths, in spite of all the recent trade war hype around them. He has two reasons for this. The first is that rare earths aren’t really that rare. But more pertinently to the Critical Metals business plan, there are very few opportunities available that aren’t six or seven years away from production.

Because, for Critical Metals, near-term production is absolutely crucial. The company is planning to list in London within a few weeks as a cash shell committed to doing a deal within the statutory amount of time. And when such deal or deals get done, Fryer is utterly committed to making sure they are cash generative.

“In eighteen months’ time we’d like to have three or four different EBITDA-generating operations,” he says.

Since the raise that is accompanying the London listing is for a relatively modest £2mln, the first deal, which will be cash-based is unlikely to be huge. But it will be cash generative, which will allow the market to assign a rating to Critical Metals and, crucially, allow the company to use its paper in further deals.

“We have a great pipeline of projects,” says Fryer. “Hopefully after we list we’ll make an M&A announcement within 45 days.”

The targets identified by Critical Metals are primarily in sub-Saharan Africa, hence its decision to list in London, where there is a greater depth of knowledge about the African mining scene. One or two projects elsewhere in the world may present themselves too, and it’s by no means clear in which order any of the potential deals Fryer has been working on will come to fruition.

“But,” he says, “we are doing due diligence on one of the opportunities, and I’ve already done the initial analysis. And the nice part about the ABCs and the TTVs is that we don’t have to compete against the big boys who have the big wallets.”

The idea is to focus on cash flow, and to pay a dividend after three years. To that end, there will be some emphasis on keeping things simple. Production is likely to take the form of concentrate rather than a doré or an ingot.

“We’re just going to ship it right out,” says Fryer emphatically.

Fryer’s confidence may seem surprising, but it stems from years of experience in the mining and metals industries. He’s done this sort of thing before with a company called Western Uranium, and he’s well enough connected in financial circles to be confident enough to the £2mln raise without the aid of a broker.

“It hasn’t been easy,” he says. But he’s getting it done.

And after listing, is there a worry that the market might not know how to value any potential Critical Metals assets, given that the number of listed vehicles that hold antimony or, particularly, caesium and beryllium projects is very low?

“I think all the market cares about is profitability,” he says.

“I’d like to get to five or six projects that are generating EBITDA and then pay a dividend.”

There can’t be any doubt that if he achieves all that the market will sit up and take notice. And by that point, Critical Metals’ listing and £2mln raise will probably seem an age away.

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