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Mining
Last year we brought you the game Monster or Mouse, where we demonstrated for our readers just how hard it is to divorce the two.
The juxtaposition between the creatures is not an obsession of Stockhead’s alone. See, for example, the bonkers cult 90s animation The Mouse and the Monster. It’s about a bongo-loving beatnik monster and talking mouse who regrets leaving his job in the cheese factory as they go on the run together from a, you guessed it, mad scientist.
Our designation of monsters and mouses makes a lot more sense if you ask me. We’ve chosen to separate our very arbitrary $500 million line for companies who have ‘made it’ into the (relative) big leagues of the ASX resources game and those still in the pack.
2021’s big moves were characterised by jubilant markets for most commodities, led by lithium, graphite, high grade iron ore and other battery metals. All up the 13 new monsters outnumbered the 6 new mice more than 2 to 1, a reflection of the gains made by most small cap investors last year.
There would have been more if our stocktake had been done at the very end of the year, after a late run last year for lithium and iron ore miners.
This year has been more tumultuous, with that situation almost reversed as more companies ducked under than jumped over the $500m hurdle. Among the eight new monsters are coal miners (duh) spurred by record energy prices, while rare earths, graphite, lithium, mineral sands and mining services are all represented.
Gold only found favour towards the end of 2022 after months weighed down by interest rate rises, with stagnant prices and high costs across the low-margin mid-tier spooking investors for much of the year. A few of those companies are represented in the sliders.
Also among the 13 new mice were tin miners, nickel plays, a battery anode materials stock and salt/potash developer.
Note: All data taken from IRESS, with market caps correct as of December 13.
Market cap: $637 million
Change: +80%
ASX graphite stock Renascor Resources opened the year with the two greatest words in the English language: Government Funding.
Yes, Canberra is like other Western Governments desperate to wind back the clock and reduce the reliance of them and their trading partners on China’s critical minerals supply chains.
That has seen cash fly for projects which have the potential to build out the supply chain for key future-facing technologies, especially electric vehicles.
While it hasn’t seen the same uplift as other metals linked to the electric vehicle boom like lithium and nickel, graphite is one of the key commodities and Benchmark Minerals Intelligence sees a major shortage looming with as many as 97 new graphite mines needed by 2035 to service expected demand.
Renascor received conditional approval of a $185 million loan through Export Finance Australia as part of the $2 billion Critical Minerals Facility, one of the miners to benefit in the dying days of the Morrison Government’s ill-fated term in office.
It sets up its integrated Siviour project in South Australia to be among the first in the China-dominated market to be developed on-shore and receive the Made in Oz label.
RNU followed that success up with a $65m insto cap raising in April, resource upgrade in August, PEPR approval for its mine and concentrator and a $70m institutional placement in December ahead of a final investment decision next year.
According to a project study completed in 2020, Siviour’s first stage would produce 28,000tpa of purified spheronised graphite for export to customers in Korea, Japan and China, suitable for use in lithium ion batteries.
Market cap: $513 million
Change: +79%
Nick Jorss is looking to do it again after turning Stanmore Resources (ASX:SMR) into a major Queensland coal player on the back of the $1 purchase of want away Vale and Sumitomo’s Isaac Plains coking coal mine in 2015.
He is now the executive chairman at Bowen Coal, who had to stump up a bit more than that to grab a foothold in the State’s booming coal sector over the past couple years.
But if coal prices remain high they could be similarly valuable deals. Bowen picked up the Broadmeadow East coking coal mine off Peabody for $1 million plus a $1/t royalty capped at $1.5m in 2020.
BCB then put up $20m plus milestone and royalty payments up to a maximum of $77.5m for New Hope’s (ASX:NHC) 90% share of the Burton and Lenton JV and $5m plus a royalty for the since exercised option to buy the Bluff PCI mine last year.
In an industry dominated by mid and large caps, including international majors like Glencore and Anglo American, investors have been keen to head a little further down the totem pole for growth stocks in the booming industry.
And boom it has come from an underinvestment in new operations and sudden supply shock from Russia’s invasion that sent coking coal prices briefly to ~US$670/t.
They have since moderated to ~US$260/t, still levels that would have had a coal producer’s eyes all buggy like a Looney Tune a couple years ago when the pandemic struck.
Thermal coal prices have been even more extraordinary, rerating to more than US$400/t ($585/t). Futures maturing five years from now still have thermal coal punters paying over US$285/t.
Bowen waved off its first shipments this year from Bluff and Broadmeadow East, and has designs on turning from a blank canvas into an eventual 5Mtpa producer.
One complicating factor for future investments could be a big hike in royalty rates introduced by Queensland Treasurer Cameron Dick earlier this year.
Market cap: $664 million
Change: +323.5%
If Bowen is one for the future (as much as you can say that about the coal market), TerraCom has quickly made itself a miner for the now.
The Blair Athol mine owner spent much of 2021 refinancing its debt.
It has spent 2022 retiring it and tipping cash back in the pockets of long-suffering shareholders.
Such is the extraordinary turnaround of the Australian and South African coal producer its shares have lifted almost 350%, a clear winner among the ASX’s mid-caps.
A 10c per share dividend in August was followed by another in November, part of a policy that will see TER return 60-90% of after tax profits to investors each quarter.
Market cap: $504 million
Change: +4.3%
Centaurus was the smallest gainer in our new monsters, rising almost 4% since the end of 2021 as it put the jigsaw in place around its Jaguar nickel sulphide project in Brazil.
CTM shares rose as high as $1.53 in April in the aftermath of an historic short squeeze after Russia’s invasion of Ukraine which saw nickel prices hit US$100,000/t and force the suspension of the market.
The LME controversially cancelled billions of dollar in trades and reset the market at a near record price of US$48,300/t.
They have fluctuated since but at around US$28,200/t for three-month nickel current LME prices would be highly profitable for nickel producers are are around 33% up on the start of the year.
A financial investment decision on Jaguar is due in the third quarter of 2023, with Centaurus shares dropping below 2021 levels before a run through November off the back of a resource update.
The explorer boasts 938,000t of nickel in resource with 730,000t in the higher confidence measured and indicated categories, with a high grade core of 28.6Mt at 1.51% Ni for 431,800t.
Market cap: $520 million
Change: +45.5%
Strandline’s star has risen with the construction of the Coburn mineral sands project in WA, where it achieved commercial production of heavy mineral concentrate from the wet concentration plant in November.
Nearly doubled in value since the start of 2022, Strandline shares have risen as high as 56c this year on the back of building the $338 million project near Denham on the picturesque coastline of WA’s Shark Bay community.
Its zircon and ilmenite rich concentrate will head into ceramics for tiles and titanium dioxide feedstock for paint pigments, producing 34,000t of premium zircon, 54,000t of zircon concentrate, 110,000t of chloride ilmenite and 24,000t of rutile annually over its 22.5 year mine life.
An onrushing shortage fuelled by a dearth of new discoveries has supported higher prices for the commodities, stubbornly so in the face of macroeconomic pressures that have weighed down other metals.
Despite the impacts of Covid-19 in China and energy crisis in Europe, prices for premium grade zircon were still fetching more than US$2000/t in recent months, above the US$1495/t long-term pricing assumption in the Coburn feasibility study.
Market cap: $884 million
Change: +114%
After over 20 years exploring the Nolans tenements in the NT, Arafura is closer than ever to becoming a miner, anticipating a final investment decision next year on a development which will make it one of the largest producers of NdPr outside China from 2025.
Arafura’s Nolans mine will produce 4,440t a year of NdPr oxide along with 474t of SEG/HRE oxide and 144,393t of phosphoric acid over a 38-year mine life with a post-tax NPV of $2.4 billion and IRR of 19.3%.
It anticipates a long-term NdPr price of US$130/kg, as demand accelerates from the energy transition, averaging $573m in EBITDA a year.
A 45,000t supply gap is expected to emerge by 2030 – equivalent to 10 Nolans Projects – leaving a hole in the market for non-Chinese producers of electric vehicles and wind turbines, expected to make up 55% of magnet demand by 2035.
Arafura made waves when Australia’s richest person Gina Rinehart took time out from her day job mining iron ore and lobbying the Government to can its IR laws and was revealed as a $60 million backer of a $121 million institutional placement in the emerging critical minerals player.
An FID is due in March and financial close in June, with the now ASX 300 company boasting Korean auto giants Hyundai and Kia as its first binding offtake partners.
Market cap: $850 million
Change: +85.9%
If you thought the gains had all been made in lithium by early this year when Goldman Sachs published its sector stalling call that lithium prices would fall ~80% by 2024 you may not have been looking hard enough.
Sure some companies had used up their fuel by then, but the big producers resumed their climb to record highs later in the year, while some quiet underachievers slowly moved up the ranks.
Count Argosy as one of those. Jerko Zuvela’s Argentine brine play entered the ASX 300 in the September rebalance.
Its secret? Getting into production. AGY has started small, 98% through development and 90% of the way through commissioning at its 2000tpa pilot operation at the Rincon Lithium Project in Argentina’s Salta Province.
It expects continuous lithium carbonate production to begin next quarter, with battery grade prices still at a near record US$78,000/t CIF North Asia according to S&P Platts.
“The Company is targeting to become the 2nd ASX listed commercial scale lithium carbonate producer, transforming into a cashflow generator and leading to a significant near-term growth phase for the Company,” Zuvela said this month.
“The lithium market and lithium carbonate prices are forecast to continue around record highs into 2023 and beyond, resulting in very lucrative upcoming product sales revenues.”
Special mention should be made of a number of other lithium stocks who have made outsized gains in recent months but have not quite cracked the $500 mil mark.
Anson Resources (ASX:ASN) and Latin Resources (ASX:LRS) are up more than 80% and 300% respectively over the past year, both boasting a market cap of around $250m, while Global Lithium (ASX:GL1) shares have doubled, with the $450m capped WA explorer in a trading halt pending resource upgrades at its Manna and Marble Bar projects at the time of writing.
African lithium developer Leo Lithium (ASX:LLL) was also close to the mark having spun out of troubled gold miner Firefinch (ASX:FFX) earlier this year, while dual listed ASX newbies Atlantic Lithium (ASX:A11) and Patriot Battery Metals (ASX:PMT) were also there or thereabouts.
Market cap: $672 million
Change: +36%
The field service firm, born out of founder Luke Mader’s Kimberley ute in 2005, has grown substantially since listing on the ASX four years ago.
It crossed the $600 million mark in what has been a generally strong year for mining services, riding a major boom in mining and exploration activity across Australia and abroad.
Equipment and plant service provider Mader upgraded its financial guidance in October after announcing a 46% year on year lift in EBITDA to $15.8 million for the September quarter of FY23, with revenue up 48% to $135.3m.
The Justin Nuich led contractor expects to generate ‘at least’ $550m in revenue and $35.5m in NPAT in FY23.
However, it saw net debt lift from $26.7m on June 30, 2022 to $34.2m on September 30 “due to continued expansion of the Group’s revenue base which required an investment of working capital.”
Market cap: $265 million
Change: -85.42%
Rare earths have been one of the hottest commodities among Australian juniors, with investors going categorically batty for any hint their penny dreadful may be onto some of the delicious critical minerals.
Even Gina Rinehart, Andrew Forrest and Chris Ellison, all of whom made their initial fortune off the back of WA’s Jurassic iron ore industry and China’s CO2 pumping steel sector are eyeing a slice of the market for the futuristic commodities.
But not every rare earths stock has found favour from the market this year.
Australian Strategic Materials lost a harrowing 85% of its value in 2022 despite hitting a number of milestones including the opening of its first ‘critical metals plant’ 115km from Seoul in South Korea.
It expects subsidiary KSM Metals to deliver 10t of NdPr ingots to Korean magnet producer NS World between September and December this year.
A spin-out from long running NSW gold miner Alkane Resources (ASX:ALK), ASM’s flagship asset is the Dubbo project where Korea’s Hyundai were awarded a conditional contract for engineering, procurement and construction definition work in June.
But, once a billion-dollar plus company, it’s been trending down since the release of an optimisation study in December last year that saw capex estimates rise from a previous $1.297 billion to $1.678 billion.
According to that study it would generate $425m in free cash flow annually.
The project would produce oxides of zirconium, hafnium, niobium, didymium (NdPr), dysprosium and terbium. But CEO Rowena Smith flagged in November that ASM was seeking an offtake partner that may take an equity stake in it with the fall in ASM’s equities posing questions around its funding options.
Market cap: $371 million
Change: -33.3%
Companies from the Ian Gandel stable go two for two in this invidious countdown, with Alkane struggling to fight the tide against gold miners in 2022.
That’s a strange one, not least because Alkane while small in scale has put up strong numbers at its Tomingley gold operations.
It was the second lowest cost gold only producer among Australasian gold ops in the September quarter behind market darling Capricorn Metals’ (ASX:CMM) Karlawinda mine.
On top of that ALK beat gold guidance by over 6000oz in FY22, producing 66,804oz at Tomingley at below guidance costs and posted a 10.1Moz gold equivalent resource for its much touted Boda porphyry discovery, with a resource for its nearby Kaiser discovery due soon.
This could be one to watch next year.
Market cap: $371 million
Change: -33.3%
After delivering its first dividend in FY21, things were looking up at Westgold heading into 2022.
But a big non-cash impairment fuelled a $111.1m loss in FY22 ($76.8 profit in FY21), despite record full year gold production of 270,884oz.
As with most of the sector costs have been on the rise, with WGX expecting to deliver 240,000-260,000oz from its Mid-West gold mines in FY23 at $1900-2100/oz.
Former executive director Wayne Bramwell stepped into the managing director’s role at WGX after CEO Debbie Fullarton’s decision to step down in May following four years at the helm.
Westgold delivered 66,048oz of gold produced at an All-In Sustaining Cost of $2106/oz in the September quarter, but generated $21m in positive operating mine cash flow, with the gold miner eyeing expansion plans at its major Big Bell gold mine near Cue.
Market cap: $371 million
Change: -33.3%
Bill Beament proudly told media around Diggers and Dealers he didn’t want Develop Global to become, like his previous employer Northern Star Resources (ASX:NST), an ASX 100 company.
“I will literally sell something and give it back to shareholders, mark my words and write that down,” he said.
“I never want to go there again, it’s a different shareholder base and I love the ASX 300, ASX 200 shareholders, they’re the ones that move the needle.”
Wish granted… so far.
After becoming one of the new monsters in 2021, Bill Beament’s mining contractor felt the market downturn through the first part of the year before rebounding through the second half of 2022 and is now close to reclaiming its $500 mil market cap status.
It has plenty on the go to look out for, including a mining contract on the Bellevue Gold mine, due to enter production in the second half of 2023 as well as the development of its own Whim Creek and Woodlawn copper and zinc mines in the Pilbara and New South Wales respectively.
With Beament at the helm, DVP has a canny dealmaker and shrewd operator whose track record at NST will keep investors interested as the story unfolds.
Market cap: $365 million
Change: -37.8%
Galan is unlucky to be here in 2022 given it would have made the monster list last year had our data been pulled a little closer to New Year’s Day, owing to a late surge in its share price as the EV and lithium market set the groundwork for this year’s price run.
Investors who have seen Galan’s share price 14 bag over the past five years can’t be too disappointed. A DFS at its Hombre Muerto West brine project in Argentina is due in the first quarter of 2023 after a massive 2.5x resource upgrade to 5.8Mt LCE at 866 mg/l Li with 76% in the measured category.
Galan also secured the 20% of the Greenbushes South tenements it didn’t already own off JV minority partner Lithium Australia (ASX:LIT) in December, where it has identified potential spodumene bearing pegmatites just 3km south of the world’s biggest lithium operation, the Greenbushes mine in WA’s South West.
Market cap: $424 million
Change: -47.2%
Aeris Resources has been a confusing one to track in 2022 given a big share consolidation and the $234 million deal to acquire Round Oak Minerals, owner of the Jaguar and Mt Colin copper and base metals mines, something that brought Washington H. Soul Pattison onto its register as a 30% shareholder.
Both its Tritton copper and Cracow gold mines saw costs rise above guidance through FY22, producing 18,581t copper at AISC of A$5.10/lb (guidance was set at 18,500t–19,500t at $4.60-4.85/lb) at Tritton and 53,920oz gold at $1911/oz at Cracow (guidance 56,000-59,000oz at AISC of $1,775-1,825/oz).
Aeris and boss Andre Labuschagne will see the scale of their operations grow significantly in FY23 after the Round Oak deal, with guidance of 32,000-40,000t copper, 24,000-29,000t zinc, 60-78,000oz fold and 1.1-1.3Moz silver, with a copper equivalent production rate of 57,000-71,000t and forecast FY23 EBITDA of $140-170m.
Market cap: $185 million
Change: -65.48%
If fellow NSW goldie Alkane was a victim of sentiment in the gold space Aurelia was a victim of its own folly. The owner of the Peak, Hera and Dargues gold mines has spent years building up to the development of its Federation mine, where it broke ground on an exploration decline in April.
But AMI faced a revolt after word of a placement got out ahead of the release of its feasibility study, prompting investors terrified of a dilutive, discounted capital raising to run for the hills. AMI’s shares were not in a halt, tanking the price and hurting the prospects of raising the finance for the $108m development.
It took just over a month for incumbent CEO Dan Clifford to leave, replaced on an interim basis by general manager of growth Andrew Graham.
High costs at its mature Peak and Hera operations have also hurt.
Chairman Peter Botten said at the miner’s AGM, where it copped a big protest vote on its remuneration report, a funding structure for Federation would be finalised in the March quarter. He also offered that the board of the miner intended to turn things around in the coming year.
“It is with determination we pursue three leading priorities as we close the chapter on FY22: One, recover performance at the mines to ensure high margin, low cost production that delivers cashflows to fund future growth. We need to predictably deliver on budgets and guidance and rebuild the confidence of our shareholders and financiers in the ability of the Company to deliver operational and financial objectives.
“Two, ensure highly skilled, capable leaders are at the helm of the Company to successfully achieve value adding growth, and three, deliver a competitive funding solution to commence development of what is our highest in-situ value asset, Federation.
“I hope after today you will leave confident your Company is in good hands, with a clear pathway to strong shareholder returns over the next 12 – 18 months.”
Market cap: $268 million
Change: -50%
Metals X is the main way to play the tin market on the ASX, and one of the few listed stocks worldwide producing the critical product, mainly used in the solder holding electronic circuitboards together.
Experts say the tin market is dramatically undersupplied, and the metal proved the canary in the coal mine last year and this for a dramatic fall in warehouse stocks later seen across copper, nickel, zinc and aluminium.
With few large new sources of production coming online and prices rising to record highs early this year, there was speculation tin could rise beyond their ~US$50,000/t highs. The International Tin Association thinks production needs to grow by 50,000tpa to address demand by 2030.
As it transpired falling demand from China, Europe and elsewhere in the midst of an economic slowdown saw prices fall by almost two thirds to their October lows of US$17,631/t before rebounding to over US$23,000/t recently along with other base metals.
MLX’s 50% owned Renison mine in Tasmania produced 1848t of tin metal on a 100% basis in the September quarter at an all in cost of $35,113/t against a realised price of $43,410/t.
Market cap: $398 million
Change: -30%
There have been mixed fortunes for the cohort of graphite mine owners turned battery anode materials stocks who emerged as some of the ASX’s most loved companies in 2020 and 2021.
Syrah Resources (ASX:SYR) is up 26% YTD having begun the year with the announcement of a major supply deal from its Vidalia active anode materials plant in Louisiana to Tesla. The company is one of three Aussie listed companies along with Piedmont Lithium (ASX:PLL) and Novonix (ASX:NVX) to share over $800 million in grants for projects in the States under the Biden Administration dig ‘er up policy on American critical minerals.
Others haven’t been as lucky. Magnis Energy Technologies, 60% owner of a lithium ion battery plant in Endicott, New York, and the Nachu graphite project in Tanzania, where an investment decision could be made next year, is down 30% YTD.
Magnis is yet to announce sales from the battery plant, which began production in August, though its chairman Frank Poullas told shareholders at the company’s AGM last month it expected to see revenues from the Imperium3 factory from December.
Market cap: $327 million
Change: -38.4%
Former iron ore producer BCI, which still generates its revenue from MinRes’ mining of its Iron Valley deposits in the Pilbara, has spent most of the year in the construction phase of its massive Mardie Salt and Potash project in WA’s north after approving construction of the 5.4Mt salt development last year.
But flagged cost and schedule overruns and the exit of long-time managing director Alwyn Vorster have halted its momentum, while issues in WA with the ramp up of long promised sulphate of potash developments have weighed on sentiment.
Vorster’s replacement, former Bravus Mining CEO David Boshoff, will be tasked with bringing the project into production in late 2025.
Market cap: $268 million
Change: -50%
Activist short seller J Capital has copped plenty of flak for its aggressive reports critiquing ASX-listed companies it holds short bets against, famously coming a cropper and forced to issue an apology after a dispute with geothermal lithium stock Vulcan Energy (ASX:VUL) last year.
But its worst call is likely its decision to go LONG on Firefinch just months before things came unstuck at its Morila gold mine in Mali.
Having hived off its 50% stake in one of the world’s largest lithium developments, Goulamina, in the Leo Lithium spin-off, focus was due to turn to its efforts to recapture the former glory of Morila, once known as Morila the Gorilla for its heft and grade.
But it proved a disaster. FFX partly blamed restrictions from embargoes against Mali resulting from its recent coup and failure to progress a plan to return to democracy and production levels failed to meet expectations.
FFX saw the exit of its CEO and chairman within a month in June and July and eventually made the decision this month to stop funding the Morila gold mine and start a stategic process to find a buyer for the asset.
FFX has been under suspension since late June.
Special mention to fellow African explorer AVZ Minerals (ASX:AVZ), which powered into the ASX 200 but has not seen trade in its shares since May after China’s Zijin made a claim to ownership of part of its Manono lithium project in the DRC in a dispute that has dragged through virtually all of 2022.
Market cap: $379 million
Change: -31.5%
Panoramic owns the Savannah nickel-copper-cobalt mine in the Kimberley region of WA, one of the few standalone nickel projects in Australia outside of BHP’s Nickel West network.
Leveraging nickel’s emergence as a battery metal, Panoramic has been a strong performer in recent years, but has seen its recovery dulled as it ramps up Savannah and faces global economic and cost pressures despite turning a $6.25 million profit in FY22.
The mine, which had a 12 year mine life on reopening in 2021, is expected to produce 6600-7100t of nickel, 4100-4500t copper and 400-500t cobalt in concentrate at a C1 cost of $7.30 – $8.30/t in FY23.
At Stockhead, we tell it like it is. While Renascor Resources, Galan Lithium and Arafura Rare Earths are Stockhead advertisers, they did not sponsor this article.
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