‘We are looking to double down on mining’: Chrysalix’s Haythornthwaite

Canada’s Chrysalix Venture Capital is again scouring the globe for high potential early-stage technology firms for its latest, US$120 million fund. Mining Beacon editor Richard Roberts caught up with Dr Charles Haythornthwaite ahead of Resourcing Tomorrow 2024, where the Chrysalix senior partner is speaking on the evolving mining-tech development and financing landscape.

Richard Roberts: You wrote five years ago about how the venture capital model could, and should, play a greater role in funding potential step-change innovation in mining and metals. Chrysalix is a fairly unique global VC fund which has had mining technology as an investment theme for longer than most others, including with your latest fund. Has the potential investor landscape changed markedly in that five-year period?

Charlie Haythornthwaite: Chrysalix is a global venture capital fund that specialises in transformational industrial innovation, especially mining and metals. While we are a financially-driven investor in high growth tech start-ups we are as much an innovation model to help large industrial corporates simplify their engagement with the start-up world.

Many large industrials recognise that continuous innovation alone is not enough stay ahead and seek to leverage the venturing/start-up model of innovation to access step-change solutions too. Outside of mining – in oil and gas, chemicals, manufacturing and electric power, for instance – partnering with entrepreneurial start-ups with passion, focus and different incentives to take risk is often a key element of an external innovation strategy. Yet this is still a relatively new concept for many mining and metals companies. 

Over the past two decades Chrysalix has raised its funds from large industrial leaders who have the problems to solve and seeking the solutions to drive their own competitive advantage. They are really seeking a strategic return and the fund's financial return is a further benefit. Outside mining our past and current investors included the likes of Shell, Total, EDF, BASF, Petronas and Evonik.

In the past 10 years we have been giving special attention to mining and metals where there is so much opportunity for new technology to solve a variety of high value problems. In our last fund, we teamed up with Teck, South32, Mitsubishi Metals, Caterpillar, Hitachi and FLSmidth.

Richard Roberts: What about the appetite of investors, generally, for mining and metals tech vehicles? We have definitely seen a quantum shift in the past 3-4 years, with circa-US$10 billion of mining/metals tech financing and M&A, but mining and metals tech still doesn’t show up anywhere as an investment class. Is that within sight, do you think?

Charlie Haythornthwaite: While there are signs that the mining industry is engaging more actively with the start-up world most mining executives are still relatively unfamiliar with the opportunity start-up innovation brings. Some large mining companies have relatively new corporate venture capital initiatives, including Caterpillar, Mitsubishi Metals, Vale, BHP and Rio Tinto. Other companies are looking to work with start-ups but frequently struggle to find the most effective way to engage with them.

Investing in capital development projects in mining involves often hundreds of million and billion-dollar sums and the lower investment returns require a high degree of project certainty. In contrast, early and growth stage investing in start-ups and scale-ups has the potential for greater IRR upside but puts less money to work and there is greater risk. Not just technology risk but market risk, too. It's a very different investment profile and a different investment skillset required. Experienced VC funds manage that risk with skilled selection and active support.

In the past five years we are seeing some notable trends that should benefit mining innovation.

Recently, new climate-tech venture funds and project finance funds are now paying much more attention to mining and metals. Not long ago mining was considered a traditional, dirty industry that was part of the climate problem. Now it’s completely different and mining is viewed as a critical component of the climate answer: to not only supply the materials required for the energy transition but also an industry with the potential to clean up its environmental footprint.

Equally there is huge opportunity for the circular economy to profitably upcycle metals and materials. 

Richard Roberts: How, if at all, are the conversations around this subject changing at events such as Resourcing Tomorrow? I note the article you wrote five years ago on nascent VC investment in mining tech and innovation. I wouldn’t think mining-tech investment was a thing at that time, except for some select people and groups with some real foresight. What about now?

Charlie Haythornthwaite: Yes, it still feels that we are battling against a head wind because the opportunity to leverage start-up innovation is so misunderstood and underestimated. Large industrials with the ability to bring much-needed solutions to scale and innovative agile start-ups need each other, but they are two worlds that don't easily interact.

In some ways, Chrysalix is the gearbox that helps the two worlds engage and communicate. 

Richard Roberts: What are you watching most closely at events such as Resourcing Tomorrow?

Charlie Haythornthwaite: I am excited to see many Chrysalix portfolio companies come to Resourcing Tomorrow for the first time as well as other technology start-ups in attendance.

For instance, VERAI has an AI-driven mineral discovery targeting solution for the challenge of covered terrain. They have been demonstrating eye-opening results.

Equally, Novamera has a transformational mining solution that economically unlocks the stranded assets of narrow veins with low-capex projects and minimal environmental footprint. These are the types of solution the industry really needs and both are targeting junior explorers and developers as partners.

However, it’s project investors willing to think differently about much more economic and scalable opportunities who will be the biggest beneficiaries. 

Equally, Chrysalix is always on the look-out for new start-ups with transformational breakthroughs!

Richard Roberts: Mining OEMs and the odd larger tech/service company are still the natural scalers of promising mining and metals tech. They are now becoming more serious integrators. Are we far away from a Schlumberger of the mining tech space? Indeed, is a Schlumberger a logical consolidator in the space?

Charlie Haythornthwaite: That's a wonderful question for why the mining industry has not had the same solution integrators as we have seen in other industries like oil and gas. As the industry further embraces step-change innovation, I think mining operators would like more help from sophisticated solutions providers integrating and customizing whole solutions.

Part of the problem is that upstream mining and downstream mineral processing which is so interconnected in reality gets siloed by different departments in operating companies and is also supported by different solutions companies.

I do think there is a tremendous opportunity for equipment companies who are already increasingly focused on solutions and services to leverage the partnerships with start-ups to bring step-change technology to scale. I think that's the direction it’s headed and it’s another dimension of the win-win opportunity between large corporate leaders and innovative start-ups.  

Richard Roberts: In terms of the focus of the new fund, how, if at all, has this shifted?

Charlie Haythornthwaite: In the last fund we really think we found the formula to deliver strategic returns to our mining partners and financial returns, too.

So really we are looking to double down on mining and gather together our next strategic partners who are looking to take their external innovation strategy to the next level, capitalising on transformational breakthroughs from start-ups. Thematically, we will continue to focus on productivity solutions and digital and intelligent systems that help enable decarbonisation. 

One change is that in addition to the mining vertical we are further emphasising the downstream metals sector. There is so much opportunity for new technology to move the needle in both.