Lithium mine

There are obviously a lot of reasons why mining might be attractive.  Maybe they see that global electrification means that our planet is systematically short copper.  Maybe they believe that lithium batteries will be necessary for a much larger slice of the transportation industry.  Maybe, they see an opportunity to corner some rare earth mine for electronics manufacturing.   And maybe it’s even about reshoring and national security.  They’re all great reasons.  But we suspect that those are justifications, not the real reason.  

According to our friends at PitchBook, there have been more than $300M in 2023.  The numbers have been up the last two years, but Q2 of 2023 was a significant outlier.  On some level, we love seeing these investments take place.  Mining is a filthy industry.  Lithium mining is particularly bad for the environment, and we’d love to see that get cleaner.  Furthermore, national security threats and trade wars have made it clear that some of these minerals are necessary for our supply chains.  They’re great justifications.  

But we’ve noticed something else.  While VC deals themselves are WAY down this year, somehow asset heavy new ventures are somehow thriving.  That doesn’t generally fit the stereotypically asset light or tech heavy mold that VC usually use.  This conclusion may come from anecdotal evidence, but we believe that one of the reasons that VCs are playing these asset-heavy models is because they have assets to pledge as collateral. 

Banks are tightening; that’s well documented and one way to do that is to focus on collateral rather than cash flow potential.  But equity investors have been using similar tactics to reduce risk.  We’ve talked before about private investors getting creative to get deals done and make money in any environment.  We believe this is more of the same.  

Source: Pitchbook


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