Mark Burridge, Managing Partner and Fund Manager, Baker Steel
Mark Burridge, Managing Partner and Fund Manager, Baker Steel, sponsor of the Funds to Watch 2024 event, discusses how the Electrum Fund leverages expertise in metals and mining to capitalise on structural supply-demand imbalances driven by electrification, green energy, and AI, while mitigating risks through disciplined ESG-focused investment in high-quality miners.
Why is your fund a ‘fund to watch,' and how could it work in an investor's portfolio?
The new industrial revolution is creating unprecedented demand for metals and minerals. The Electrum Fund offers investors exposure to four key elements:
1. Enabling technologies and AI: These innovations depend on diverse, often scarce, metals.
2. Zero-carbon energy transition: Clean energy systems, from renewables to nuclear, require responsibly sourced materials.
3. Critical metal supply deficits: Lengthy development timelines, resource nationalism, and supply challenges are widening deficits for essential metals.
4. Mining equities upcycle: Miners offer value, growth, and yield, supported by favourable macro conditions and improving profitability.
Mining equities also have a relatively low correlation to broader equity markets, making them valuable for diversification. Precious metals offer an added hedge against inflation and currency risks, while base and specialty metals provide exposure to megatrends like electrification and decarbonisation.
As a thematic investment, the Electrum Fund focuses on high-quality miners, which are well-positioned to capitalise on these structural drivers. Offering diversification, resilience, and the potential for outsized returns, we believe the Fund is highly relevant for investors seeking growth and inflation protection.
Can you give an overview of the team running the fund and your investment process?
Baker Steel is an independent investment manager specialising in metals and mining, with decades of experience across natural resources and precious metals markets. Our team combines technical expertise in geosciences, mining, geology, and engineering with financial and investment acumen. This unique blend allows us to identify opportunities across market cycles, delivering a strong performance track record.
Our disciplined investment process emphasises bottom-up stock selection, rigorous technical analysis, and macroeconomic insights. We engage directly with management teams, assess project quality, and adhere to strict ESG criteria to ensure alignment with sustainability goals. This approach enables us to navigate the complexities of the mining industry, adapting to changing commodity cycles while capturing value across diverse markets and sub-sectors.
What do you see as the big opportunities and risks for your strategy?
The mining sector is poised to benefit from structural supply-demand imbalances. A range of industrial, specialty, and precious metals face growing deficits amid rising demand from electrification, green energy, and AI technologies, coupled with tight supply-side dynamics. We favour miners positioned for margin expansion through disciplined capital management and cost controls as commodity prices rise. Active management is critical in this specialist sector, enabling effective allocation across sub-sectors. In practice, the Electrum Fund combines bottom-up stock selection with top down asset allocation, focusing its portfolio on those sub-sectors of the mining industry which face near-term catalysts, as well as long-term drivers.
Key risks include geopolitical factors, regulatory changes, and commodity price volatility. Our strategy mitigates these risks through diversification, thorough due diligence, and a focus on high-quality assets.
Long-term trends are highly supportive, with supply chain vulnerabilities bringing mining equities back into focus. The sector also benefits from the broader rotation toward value stocks. History shows that during upcycles, the resources sector can deliver significant returns, which active management enhances further. As demand for critical metals accelerates, mining equities offer thematic exposure, inflation protection, and diversification - making the Electrum strategy a compelling component for forward-looking portfolios.
Can you identify a couple of key investment opportunities in the portfolio?
Our portfolio targets metals critical for the new industrial revolution, including copper, lithium, and silver, which face significant supply deficits amid surging demand.
Copper, vital for electrification, is forecast to face a cumulative supply deficit of 19% by 2030, driven by electric vehicles, renewable energy, and grid upgrades. Battery and specialty metals, including lithium, also present substantial opportunities as demand for electrification and energy storage accelerates. Silver, a key material for solar panels and potential solid-state battery technologies, is expected to see a cumulative deficit exceeding 100% of supply by the decade's end[i].
Despite their importance, mining valuations remain significantly undervalued compared to the broader technology sector. For instance, the total market capitalisation of the copper mining industry is under 400 billion, far less than even one of the "Mag 7" technology companies.
In the Electrum Fund, we focus on miners with strong balance sheets and capital discipline, positioned to benefit from tightening market dynamics. The mining sector offers unique exposure to the megatrends reshaping the global economy, combining value, growth, and yield potential in a way that traditional equity sectors cannot match.
Sources
[i] Benchmark Minerals Intelligence, BMO, Baker Streel Capital Managers LLP, Canaccord Genuity, RBC, Wood MacKenzie, CRU.
