It’s a unique gameplan, and it’s all in the name.
Critical Metals Plc (LON:CRTM), which listed in London at the end of September, plans to build up a portfolio of assets focused on the more exotic metals, rather than the usual suite of base or precious metals that you find inside any standard diversified miner.
The thinking is straightforward enough.
With new trade barriers going up all the time and with the coronavirus highlighting the fragility of crucial supply lines, the Western World is now asking itself where exactly it gets its supplies of cobalt, niobium, titanium, tantalum, tin, niobium and copper from?
The answer, in many cases, is from jurisdictions that are less than salubrious and which in many cases have strong ties to China.
Accordingly, there have been various initiatives mooted in North America and Europe to try ensure secure supplies in the event of accidental or deliberate disruption in the future.
And this is where Critical Metals comes in.
“What I’m trying to do is move fast,” says chief executive Russell Fryer.
As it stands the company doesn’t have any assets at all – it listed on London as a shell, with cash in the bank and a plan, as is allowed under the listing rules. Listing rules also state that for a vehicle set up like this a deal has to be done within a certain amount of time.
But that’s not why Fryer wants to move fast.
In fact he’s had several potential transactions on the boil for some time now, all waiting for the listed vehicle to make its entrance stage right and to provide them with a home. Initially, most of the assets that will come into the company are likely to be situated in Africa, but in due course the company will likely add a suite of North American assets to its portfolio too.
“Within thirty or sixty days we should make one or possibly two announcements,” says Fryer.
“Or maybe even three. It’s in full swing. We have cash. We have a low burn rate. We have a pipeline of M&A deals that will give us cashflow within a year.”
What the company also has now is legitimacy and proper visibility. Where before, what Fryer was marketing was to some extent just a concept, now it’s a hard reality. The show is up and running, and potential partners or counterparties can see that. All of a sudden, he’s busy, and where before capital was scarce, now there are offers coming across his desk.
But this is all to the good – it gives the company plenty of room for manoeuvre and the ability to be flexible when it comes to deals.
It’s also a recognition that Critical Metals is offering something a bit different. Whereas in most cases companies that are interested in the more exotic metals tend to stick with just the one and make a speciality out of it, the idea that Critical Metals will build a portfolio across several different commodities is likely to make it stand out from the crowd. Will it become the go-to company for exotics? – don’t rule it out, because whereas on the one hand the single commodity companies some companies are too niche, on the other the standard diversified companies don’t offer the exotic exposure.
“Over the next two-to-three years we’ll do three or potentially four transactions,” says Fryer.
“Allowing that some projects will be polymetallic that will likely bring us in between six and eight streams of EBITDA, such that by year three we want to be paying a dividend.”
At the same time, Fryer also knows that in making such statements he’s giving himself a lot to live up to.
“What I don’t want to do is feel like I’m kicking up a storm,” he says.
“I have a lot to prove in the UK market, and that drives us to get something done rapidly.”