Commodity Watch: Mining and the Infrastructure Boom

AHMAD AL-SATI
PORTFOLIO MANAGER

Ahmad is the President and portfolio manager for Gemcorp Capital Advisors LLC, based in New York. 

Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser. 

In 1919 it took a US Army convoy 62 days to traverse the 3,200 between the White House and the Presidio in San Francisco. The trip had a lasting impression on a young lieutenant colonel named Dwight Eisenhower who later, as President, pushed for the interstate highway system (IHS). Today, it takes about 40 hours to make that trip. More importantly, the IHS carries $14 trillion of goods per year and 75% of all truck freight.

The wonders of good infrastructure are undisputed. It is vital for the movement of data, energy, people and products and is integral for economic development and growth. Yet, investments in infrastructure have lagged resulting in old or non-existent services and facilities (e.g., 750mm people don’t have access to electricity). The World Bank estimates that the annual global deficit in infrastructure spending is over $1 trillion. Across the developed and emerging markets governments and private stakeholders have realized the importance of infrastructure and are allocating more resources to the asset class.

Yet, you cannot build a bridge with two guys in a garage. Builders must marshal the requisite people, funding and materials. To date, the focus has been on human and financial capital. But if infrastructure is the building block of an economy, then materials are the building blocks of infrastructure. Securing these commodities is the third leg of the infrastructure stool. Steel, cement, copper, sand, aluminium, timber, and a variety of other minerals and metals are essential for digital, energy and physical buildouts.

The amounts required are staggering. The Golden Gate Bridge used ~1 ton of steel/lineal foot. A four-lane highway uses ~6k tons of asphalt (equivalent to 33k barrels of oil). The global electricity grid is projected to expand to over 100mm kilometres of copper by 2030 (enough to circle the Earth 2,500 times). Data centres use ~30tons of copper per megawatt of power (the average data centre is 100-300 MW) and 40% of the building is cement. Frackers use 10k tons of sand per well. In addition, a variety of other commodities are essential for: sanitation facilities, ports, and batteries. 

This demand is now colliding with constrained supply. Mining capex in 2024 is lower than it was in 2012, and the amount of capital being allocated to the sector has been shrinking. The boom in private credit has focused on other sectors as lenders may lack the geographic and subject matter know-how to participate in commodities credit. In turn, the dearth of capital means better terms on pricing and covenants and less competition. Commodity production may also benefit from trade dislocation as it cannot be onshored. Rather, commodities must be developed on site, processed and transported (the US imports 25% of its cement). During the California gold rush, pick and shovel sellers (a derivative of mining) made a mint. Today, mining might be that derivative in an infrastructure boom.

The above is an extract from a LinkedIn post by Ahmad Al-Sati from 04/05/2025.