Monsters of Rock: Lithium companies are reshaping Australia’s mid-tier mining landscape

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It’s not just your imagination.

The growing publicity around ‘critical minerals’, ESGs and battery metals is having a transformative impact on the value and makeup of the Australian resource sector.

The proof is in the pudding, as they say, and that pudding is the PricewaterhouseCoopers AussieMine 2021 annual report, which shows that ‘critical mineral’ miners and explorers are now worth almost as much to the Australian mid-tier as gold producers. .

Released today, the survey reflects the strength of the resource market more broadly, with the top 50 mining companies outside the ASX 50 increasing in value by 50% to $ 113 billion with an average increase of market capitalization of 78%.

But it is the composition of this list that is most remarkable. The 18 gold companies represent 33% of the value of the list, but have seen this value decrease by 8%.

Critical mineral companies including lithium, mineral sands and rare earths are knocking on the door at $ 35 billion, 31% of total value, 167% more than in 2020.

The iron ore companies on the list rose 178% in value in 2021, but this is due to the short-term price spike we saw in early to mid-2021, which has now cooled and the addition of Deterra Royalties (ASX: DRR), Iluka Fallout from Resources royalties (ASX: ILU).

Who is new to the MT50?

With a market capitalization of around $ 2.4 billion as of June 30, the aforementioned Deterra royalties were the biggest newcomer to the list.

But rising prices for lithium, rare earths, uranium and mineral sands led the rest of the new boys in the PwC investigation, all attached to the decarbonization narrative in one way or another.

Lithium prospect Liontown Resources (ASX: LTR), up 759% from FY21, entered the list at 22, with a market cap of $ 1.55 billion, ahead of established producers like the miner Gold Lake Resources (ASX: SLR) and the New Hope coal miner (ASX: NHC).

Incredibly, Liontown has since more than doubled its market cap to $ 3.23 billion, after releasing the DFS for its Kathleen Valley mine last week.

Australian Strategic Materials (ASX: ASM) (mineral sands / rare earths), Ioneer (ASX: INR) (lithium), Vulcan Energy (ASX: VUL) (lithium), AVZ Minerals (ASX: AVZ) (lithium) and DEVELOP ( ASX: DVP) (mining / copper services) all entered the list for the first time.

Graphite miner Syrah Resources (ASX: SYR) and shelved uranium miner Paladin Energy (ASX: PDN) also returned to the list, while lithium, rare earths and nickel stocks Pilbara Minerals ( ASX: PLS), Galaxy Resources and Orocobre (ASX: ORE), Lynas (ASX: LYC) and Chalice Mining (ASX: CHN) were the fastest climbers on the MT50 list of 2020, with critical mineral companies already in the 2020 cohort 373% larger on average over 12 months.

PwC described it as an “ESG-led reshuffle” that fundamentally changed the makeup of Australia’s mid-tier mining sector.

“Time will tell the makeup of the MT50 in 2022, but we expect strategic changes in ESG, as part of the transition to a low carbon future, will continue to impact the fate of the MT50, ”said the report’s authors.

As operating cash flow has skyrocketed, helping large miners pay off debts, make acquisitions, and invest in capital expenditures, market funding has also been important for non-producing companies. of the MT50.

“The market has been willing to support critical undeveloped minerals, gold and copper projects with equity financing. A total of $ 468 million has been raised by the non-operating MT50 companies, and cash reserves of $ 829 million remain for their respective projects (as of June 30, 2021). Exploration spending for non-operators increased 13%, ”the authors said.

First Quantum and POSCO open new nickel mine in Ravensthorpe operations

The Ravensthorpe nickel operations have been one of the great sagas of WA mining.

Opened by BHP in the late 2000s after a series of cost explosions, the nickel laterite mining has been relaunched twice by First Quantum, producing more than 200,000 t of nickel and 7,500 t of cobalt since 2011 , when Canada’s FQM first opened the mine.

The project produces approximately 30,000 tpa of a mixture of nickel and cobalt hydroxide for processing into nickel sulphates, making it one of the few laterite mines created to supply the battery industry.

A new mine in Ravensthorpe – which South Korean steel and battery giant POSCO paid $ 240 million for a 30% stake last May – will extend its life by more than 20 years.

The mine was opened today by WA Minister of Mines Bill Johnston.

“Ravensthorpe has felt the impact of a volatile nickel market in previous years, but since 2020 nickel prices tend to increase due to increased global battery production,” he said. he declares.

Did it do all of this for the Ravensthorpe operations?

According to FQM’s latest quarterly accounts, they recorded a further loss of US $ 23 million in the September quarter, with COO Tristan Pascall telling analysts that labor and chain issues supply had resulted in increased costs, project delays resulting in lower production and higher cost forecasts for 2021.

Evolution hits four-month high with Glencore

Evolution (ASX: EVN) shares hit their highest level since July, hitting around 10% from the latest news yesterday, the gold miner will pay Glencore $ 1 billion for full ownership of the Ernest Henry copper-gold mine.

Evolution has comfortably recouped the $ 880 million it paid in 2016 for gold and some copper and silver rights to Ernest Henry.

The full mine acquisition will transform Evolution into a 60,000 tpa copper producer to add to its gold production, but more importantly, will act as an important lever to reduce gold mining costs from about 12% over the next three years through by-product credits. .

Other gold and copper producers / explorers were in fairly positive territory today, with OZ Minerals (ASX: OZL) up 2.77%, De Gray Mining (ASX: DEG) up 6.58 % and West African Resources (ASX: WAF) up 4.64%.

Lynas and Liontown, who yesterday signed an Indigenous title agreement with the Tjiwarl people for their Kathleen Valley lithium mine, were the other notable miners.

Monsters share price today:


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