Barry FitzGerald: ScoMo’s Korean BBQ stoppers - he likes his earths rare

Scott Morrison had a big night out with the mining industry on Wednesday.

More than 450 government and business types rocked up to hear his address to the Minerals Council of Australia’s “Minerals Week” dinner in parliament’s Great Hall.

Garimpeiro did not score an invite to the knees-up but a copy of ScoMo’s address did find its way to his digs in lockdown Melbourne.

The reason why others thought Garimpeiro should see a copy was ScoMo’s reference to a couple of rare earths/strategic metals players Garimpeiro follows – Australian Strategic Materials (ASX:ASM) and Arafura (ASX:ARU).

ScoMo mentioned 10 other companies, including rare earths leader Lynas. But Lynas and the others are all from the big end of town, so they are of no interest to Garimpeiro.

ASM shares rose by 9% to $5.52 in the two trading days after ScoMo’s address. So it pays to listen in when the PM is talking stocks. Arafura has put on a lesser 1.6% to 16.25c, but at least the trajectory was up in a down market.

So why did the PM find time in his speech to mention ASM and Arafura?

Thoroughly modern manufacturing

The context was that their projects are of the type the government wants to see coming forward under its modern manufacturing strategy.

“Through assistance from export finance Australia, and working with partner nations on off-take agreements, particularly on the modern manufacturing strategy, the resources sector, is a key sector that we’ve highlighted as an area of strategic importance,’’ the PM said.

That is all very meaningful to ASM and Arafura as they work away at getting their projects, in Dubbo and the Northern Territory respectively, into production.

But wait there is more, particularly in relation to ASM. Admittedly, Garimpeiro is joining the dots here, but ScoMo later in his address also mentioned he was off to Cornwall in a couple of weeks to meet with the G7 leaders.

Australia is not part of the G7 summit but ScoMo has been invited along anyway. So too has President Moon of South Korea, with ScoMo singling him out as someone he would be meeting up with.

ASM has hitched its Dubbo project and a metallisation technology to South Korea’s understandable desire to have a non-Chinese source of strategic metals. In ASM’s case, that means zirconium, rare earths, niobium, hafnium and a bunch of others.

They are all metals that the Australian government, in its modern manufacturing strategy paper, described as being “critical for a diverse range of advanced technologies, such as clean energy and electric vehicles”.

Here’s a couple of quotes from ASM’s March quarter report to highlight just how close ASM is to what could be called Korea Inc.

“It is increasingly well-understood that ASM is in a unique position to provide certainty to the supply of critical metals to South Korea.’’

“Financing for the Dubbo project (it has previously been priced at $1.3 billion) will include a strategic partnership underpinned by offtake agreements, construction and engineering, and ultimately project finance. It is increasingly likely that that strategic partner will be from Korea.’’

There’s more: “During the March quarter the company signed non-disclosure agreements with Korea industry to progress these matters. The company will announce progress on these discussions as and when definitive agreements are completed.’’

Given ScoMo’s mention of ASM in his Wednesday speech, and his particular mention that he would be catching up with President Moon in Cornwall, the market clearly thinks some big news is on its way for ASM. The two-day 9% share price gains tells us that.

A wonderful thing it would be too for the PM, under pressure as he is to step up Australia’s emissions reduction targets, if ASM and South Korea Inc were to “get on the tools’’ at Dubbo with its “clean’’ technology metals and strategic supply credentials.

As one keen ASM observer put it: “Imagine – a significant mining project, in a major regional town, modern manufacturing of critical metals of the future, carbon neutral, hundreds of jobs. Absolute nirvana for the pollies! Cameras everywhere for the turning of the first sod!”