Hambro said that recent changes in the mining industry meant that most investors needed to update their view of the sector. He pointed to a growing focus on reducing carbon emissions in metals production, a more disciplined approach to spending than in previous booms and a rapid decrease in the cost of capital as governments throw money at miners amid concerns about supply security.
Industry executives, analysts and specialist investors have for several years been predicting a bull market as the shift to a lower-carbon economy drives a wave of demand for the metals needed for electricity grids, electric-vehicle batteries and solar panels. Yet while prices rallied sharply in the rebound from the COVID pandemic, they have stagnated in the past year.
"The story isn't about now, the story is about what's happening over the next 10 to 15 years," Hambro said, arguing that the sector is undervalued. "If you wanted to rebuild the copper industry globally, you couldn't do it for the market cap of the copper companies out there today. So, I think there's a huge gap in that regard."
Hambro was an influential critic of miners' overspending in the last boom, and he doesn't want them to restart the era of profligacy even as he predicts a coming supply shortage.
"We're not saying companies must go out there and build: We don't want them to verge away from capital allocation models that have helped rebuild trust within the sector over the last eight to nine years," he said.
BlackRock is also calling on metals companies to invest in decarbonization. "People pay premiums for companies that are lower carbon producers," said Olivia Markham, who manages BlackRock's mining investments together with Hambro. "If you look at the U.S. steel industry, which is a much lower carbon intensity versus say the European steel industry, there's a higher premium that is paid for that," she said.
"If we're just simply stopping burning fossil fuels for the production of energy and continuing to burn them for the production of materials, and we need a lot more materials, then we're not actually going to solve the challenge that we face," said Hambro.