The metals and mining sector stands at a pinnacle, where global demand fuels innovation. As the world craves more sustainable solutions and advanced technologies, the industry must adapt. This involves embracing cutting-edge exploration techniques, developing environmentally friendly extraction methods and investing in renewable energy sources. Embracing innovation helps companies ensure a future where metal resources meet the needs of a growing population while safeguarding the environment for generations to come.
In the heart of this transformative environment lies Appian Capital Advisory—a pioneering force in the metals and mining industry. Appian’s commitment to innovation and sustainability is personified by its Founder and CEO, Michael Scherb. With a global perspective honed through experiences in eight cities worldwide, Scherb is a visionary leader driving Appian’s success. As Chairman of the Investment Committee, he oversees the development of Appian into a leading private equity investor in the sector.
Complementing Scherb’s leadership is Richard Clark, the Global Head of Specialty Materials and Processes at Appian. With expertise spanning from product creation to international sales and management, Clark brings invaluable insights to the table. As a recognized industry expert in lithium-ion batteries and a named inventor on several key patents, Clark plays a pivotal role in shaping Appian’s technical strategy.
Together, Scherb and Clark embody the ethos of Appian converging innovation and sustainability in the pursuit of a brighter future for the metals and mining industry. Through their leadership and expertise, they navigate the complexities of the sector, guiding Appian towards new heights of success and sustainability. Their dedication to advancing the industry while making a positive impact on local communities sets a precedent for the future of responsible resource management and economic development.
For readers inspired by the transformative potential of innovation and sustainability in the metals and mining sector under the guidance of these leaders, we invite you to explore further!
Leading Across Continents
Scherb brings a global perspective to the helm of the company. With a keen understanding of the mining industry’s international landscape, he has adeptly steered Appian towards success. “Mining is a truly global industry,” he asserts, emphasizing the significance of this perspective in Appian’s operations.
Appian’s reach extends across continents with investments spanning North America, South America, Europe, Australia, and Africa. Scherb’s vision encompasses overseeing a diverse team of nearly 7,000 employees across the company’s portfolio companies. “Understanding different cultures and ways of working is absolutely vital,” he notes, reflecting on the importance of cultural sensitivity in Appian’s endeavors.
Operating in eight countries with professional staff, Appian’s global footprint underscores Scherb’s upbringing and professional experience in an international environment. “Growing up and working in an international environment has allowed me to understand the nuances of different stakeholder groups,” he explains. This understanding equips him to build relationships and communicate effectively with investors and stakeholders worldwide, ensuring Appian’s continued growth and success.
Building Resilience
Scherb embarked on his career journey in Beijing during the mid-2000s. “The level of construction activity was truly inspiring,” he recalls, reflecting on his initial foray into the commodities industry. His early experiences ignited a passion for the sector further propelling him to dedicate his career to its advancement.
Transitioning to London, Scherb joined JP Morgan’s Metals and Mining team, where he played a pivotal role in transactions totaling $185 billion. “What became apparent was a significant mismatch in the mining sector,” he observes, highlighting the challenge of short-term capital in a long lead-time, capital-intensive industry.
Scherb identified a critical issue, “Short-term capital was chasing what is a very long lead time and a capital-intensive business.” This mismatch led to cyclicality with speculative investors marking the market every quarter, hindering management teams from navigating through cycles effectively. “Management was making the same mistakes, buying and building assets at the wrong times,” he laments.
In response, Scherb and his team at Appian devised a strategy to mitigate cyclicality. “We decided that we could avoid a lot of the cyclicality by thinking through cycles,” he explains. Combining this strategic approach with a robust technical and operating framework, Appian offers management teams the support they need at the most suitable time, rather than on a short-term horizon. This approach enables Appian to foster sustainable growth and navigate the intricacies of the mining industry with resilience and foresight.
Navigating Export Control
Clark shares his journey towards U.S. citizenship which was influenced by his work on the propulsion system for the space shuttle. “One of the reasons I became a U.S. citizen was because of the work I did on the material used in the propulsion system for the space shuttle,” he reveals.
Navigating export control regulations, Clark gained insight into the delicate balance between technology protection and collaboration for common goals. “This was an early exposure to me of export control regulations which have become even more important in recent years,” he explains.
As Appian embraces its role as a global company, Clark emphasizes the importance of cultural awareness and respect for the communities in which they operate. Cultural awareness is critical for the company’s commitment to fostering inclusivity and diversity.
Going beyond basic considerations of Environmental, Social and Governance (ESG), Appian actively invests in local communities through the Appian Way Charitable Foundation. “We go far beyond the basic considerations of ESG to investment in local areas,” Clark highlights initiatives aimed at promoting health, education, poverty alleviation, and gender empowerment.
Through its philanthropic efforts, Appian demonstrates its dedication to making a positive impact beyond business operations embodying a commitment to social responsibility and sustainable development.
Pioneering Technical Excellence
Scherb acknowledges the significance of recognition, stating, “It’s humbling to be recognized on a personal level.” More importantly, he emphasizes the success of Appian’s unique approach, characterized by “technical excellence, or ‘technical arbitrage’ as we call it.”
With a hands-on approach, Appian has established itself as the largest private equity investor in metals and mining globally. Scherb explains, “By taking a very hands-on approach, we have just raised our third fund with around US$4 billion under management.” This approach has resulted in the development of nine mines into production over the past six years, a feat equivalent to all the major miners combined.
Appian’s commitment to technical excellence and strategic investment has propelled its remarkable growth in the mining sector, cementing its position as a leader in the industry.
Powering the Future
Clark frames the battle against climate change as the topmost priority. “We are engaged in a battle to protect the environment from the ravages of climate change,” he asserts, underlining the urgency of the matter.
Lithium-ion batteries emerge as a crucial solution in this battle, owing to their high energy densities and relatively low costs. Clark highlights their suitability for electric vehicles and energy storage units as essential components in transitioning away from petroleum-based vehicles and maximizing renewable energy utilization.
Despite significant advancements since their commercialization in 1991, Clark sees ample room for improvement in lithium-ion batteries. “There are many opportunities to improve the current chemistries and to develop new chemistries,” he explains, underscoring the potential for innovation in this field.
Motivated by the opportunity to contribute to this evolution, Clark expresses his enthusiasm for collaborating with the team at Appian. “I am thrilled to be able to work with the team at Appian to ensure that we make the best use of the earth’s resources in making the best batteries,” he says, highlighting the company’s commitment to sustainability and innovation.
As part of a monumental shift towards renewable energy sources, Clark recognizes the importance of Appian’s role in shaping the future. “We are part of a once-in-a-lifetime shift away from fossil fuels to renewable energy sources,” he affirms, acknowledging the responsibility to future generations in navigating this transition effectively.
The Path to Excellence
Clark reflects on his experience navigating the transition within the synthetic diamond industry during the mid-1990s. “As a leading graphite rod supplier with substantial revenue from this business, this made life uncomfortable for my company,” he recalls, highlighting the challenge faced by his company during this period.
Tasked with developing a competitive powder solution, Clark emphasizes the importance of building close relationships with potential customers. “The first stage of this journey was to develop a close relationship with one of the engineers at a potentially large customer,” he explains, underscoring the significance of receiving quick and detailed performance feedback to refine their product.
Securing purchase orders early on enabled Clark’s company to generate revenue while subcontracting part of the manufacturing process. This strategic approach allowed them to mitigate risk and accumulate income before making significant investments. “By the time we installed the required equipment, we already had significant income,” Clark notes, illustrating the effectiveness of this approach.
Through this process, Clark’s team gained a comprehensive understanding of key operations, facilitating rapid replication of their success with other customers. Eventually, they emerged as the largest supplier of raw materials for polycrystalline diamond cutters globally recognized for providing premium materials and often securing exclusive supply agreements.
Reflecting on his journey, Clark identifies three key lessons—the importance of nurturing customer relationships, mitigating risk through early revenue generation and persisting to achieve excellence. “Great customer relationships are indispensable,” he emphasizes. “You can mitigate risk by gaining revenue before making a huge investment, and you can be the best in the world if you persist.”
Motivated by these lessons, Clark aspires to leverage his experiences within the Appian portfolio companies, guiding them towards new heights of excellence and success.
Selectivity in Investment
Scherb shares the intricacies of the mining industry. “Mining is an incredibly technical industry, with high barriers to entry,” he highlights the challenges that deter many investors, including large global private equity firms.
Contrary to conventional wisdom, Appian perceives these barriers as advantageous leveraging its investment approach built on technical expertise. “At Appian, we see these barriers as a real advantage,” Scherb asserts that the company’s in-house team of over 80 experienced professionals and its ‘technical arbitrage’ approach to unlock value.
This approach focuses on the fundamentals of each project, prioritizing factors such as operating cost and capital cost over volatile commodity prices. Scherb explains, “Rather than betting on commodity prices, which is almost impossible, we spend a lot of time looking at operating cost, capital cost and getting those right.”
With a discerning eye, Appian evaluates thousands of projects annually, selecting only the most promising opportunities. Looking ahead, Scherb emphasizes the critical need for significant investment in the mining industry in the coming years. The mining industry needs hundreds of billions of dollars over the next few years.
Despite the potential for increased investor interest, Scherb acknowledges the persistent technical barriers that limit entry into the sector. He notes, “While we do expect to see more investors looking to get into the sector, the technical barriers remain, so those who can manage the risk will remain well placed.”
Capturing Value
Scherb highlights the company’s keen awareness of market dynamics and its commitment to innovation. “As mentioned, we are incredibly well plugged into what is going on in the market,” he states focusing on the expertise of Appian’s leading team comprised of industry experts.
Recognizing the importance of innovation, Scherb reveals Appian’s strategic shift towards the mid and downstream space for specialty materials. “Innovation is hugely important and we always look at new opportunities,” he affirms. This shift is exemplified by recent investments, including a significant stake in Urbix to develop a downstream graphite processing facility and financing for U.S. Strategic Metals, poised to become a key player in battery metal recycling for electric vehicle supply chains in the U.S.
Amid escalating geopolitical tensions and intensifying competition for resources, Scherb identifies a compelling opportunity in securing long-term, secure supplies for original equipment manufacturers (OEMs). He explains, “As geopolitical tensions increase and competition for resources becomes greater, OEMs are increasingly looking to lock in long-term, secure supplies of the products they need.”
By expanding into the mid and downstream space, Appian aims to capture additional value in the supply chain, positioning itself strategically amidst evolving market dynamics.
Mining the Future
Clark elucidates on the robust realm of the energy storage market. He explains that regardless of the technology employed, the energy storage market is growing rapidly in many different subsegments. With the growth areas in need of low-cost solutions, Clark highlights the significance of mined materials in energy storage technologies. “Almost all employ one or more specific mined materials which are subsequently refined to high purities,” he highlights the dichotomy between the demand for new mines and market prices for materials.
To address this challenge, Appian employs a forward integration strategy in Fund III, aiming to develop efficient methods for producing needed materials. “Appian in Fund III is employing a forward integration strategy,” Clark outlines the company’s proactive approach to resolving market challenges.
While acknowledging Appian’s limitations in investing in every material for every technology, Clark anticipates that investments in relevant technologies will yield material advantages, stimulating market growth and benefiting investors. “We would believe that the technologies related to areas where we do invest will gain some material advantages,” he also shares the potential for mutual growth and success in Appian’s investment strategy.
Spotting Megatrends
Scherb delves into the macroeconomic landscape, outlining four main themes guiding the company’s investment strategy.
Scherb begins, “Energy transition is a megatrend we spotted a decade ago and made an early move into.” He highlights its appeal to blue-chip generational investors seeking long-term trends with metals and mining serving as an avenue to tap into this transition.
Scherb continues that Inflation Protection noting mining’s role as a hedge in the current economic climate. He emphasizes that commodities are essential for the global economy, allowing miners to pass on inflation.
Geopolitics also feature prominently, with uncertainties in the Middle East, Russia and China driving the need for a secure supply of critical minerals. To achieve the energy transition, OEMs in the West need a safe and secure supply. Scherb underscores the demand for miners with viable projects.
Furthermore, “ESG continues to be critical,” Scherb affirms, noting the evolving perception of mining as part of the solution. He highlights mining’s potential to positively impact local communities, with a 3-5x multiplier effect in job creation.
Taking a long-term approach, Appian focuses on targeted investments based on technical analysis, rather than cyclical market trends. In his words, “More broadly, we don’t pay a lot of attention to cyclicality. We take a very long-term approach, making very targeted investments based on technical analysis. That way, we aren’t at the mercy of commodity markets and by maintaining a very low-cost position we remain incredibly well placed.”
Through strategic foresight and a commitment to long-term sustainability, Appian navigates the complexities of the mining industry, positioning itself for continued success amidst evolving global trends.
Contrarian Wisdom
As discussed previously, Appian focuses on investing in key megatrends and utilizes technical arbitrage to generate long-term returns. Scherb notes “On a broad level, we invest in key megatrends and use technical arbitrage to generate long-term returns.”
An important aspect of Appian’s investment strategy is its contrarian approach. “One thing to note is that we don’t follow the crowd,” Scherb emphasizes. For instance, Appian began investing in energy transition commodities a decade ago, well ahead of the trend. While these commodities have gained popularity recently, Appian believes their short-term prices are overvalued. Consequently, the company sees opportunities in undervalued commodities like mineral sands, phosphates, zinc, and lead.
By remaining independent-minded and discerning in its investment decisions, Appian positions itself to capitalize on opportunities overlooked by the mainstream market. Through this approach, the company seeks to maximize returns for its investors while staying true to its long-term vision and commitment to excellence.
Community First
Appian distinguishes itself as a hands-on investor, offering value-add capital and leveraging extensive technical expertise to benefit portfolio companies. “Appian is a very hands-on investor,” Scherb states. With a team comprised of leading technical professionals recruited from major mining companies, Appian ensures maximum collaboration and optimization of resources. “We employ leading technical professionals,” Scherb notes, highlighting the caliber of talent driving Appian’s success.
Beyond financial returns, Appian is deeply committed to the well-being of the communities in which it operates. “We are heavily invested in the communities in which we operate,” Scherb affirms the integration of ESG considerations into every investment decision.
Appian goes beyond mere compliance with ESG standards by prioritizing initiatives that focus on health, education and employment within local communities. “We go beyond a mere tick box exercise,” Scherb explains the company’s dedication to maintaining its social license to operate and fostering sustainable development.
