Battery metals makeover sends spending by Aussie explorers on copper and nickel to all time high
Base metals like nickel and copper have embraced their new appearance as “battery metals”, in a makeover that’s helping support prices and record exploration investment in Australia.
The momentum behind the energy transition thematic along with tight supplies that have driven prices higher has sent Australian companies on a frenzy to find new sources of metals for lithium ion batteries like nickel, copper, cobalt and lithium.
All are projected to be in short supply as green industrial demand ramps up at the same time ageing mines become less productive.
ABS quarterly exploration spending numbers showed drilling in Australia for selected base metals hit a new record in the December quarter of $265.4m, up from $236.8m in the September quarter, even as general exploration spending fell for the first time since the early days of the pandemic.
Nickel and copper, the two main base metals that have a part in the electric vehicle and battery thematic, have each enjoyed big price rises in the past 12 months.
Copper prices surged to all time highs in May last year on tight supply and recovering demand for industrial metals, then held in the US$9000-10,500/t range for the rest of the year.
LME copper is currently trading for US$9983/t, up 29% on the start of 2021, with analysts like Goldman Sachs seeing the potential for the metal to hit US$12,000/t in the next 12 months. Little wonder explorers are keen to make a discovery.
Nickel hit 11-year highs of more than US$25,000/t last week before a pullback in recent days, while the price of cobalt, which is regularly found as a by-product in nickel sulphide and laterite deposits, has more than doubled to US$73,700/t since the start of 2021.
In original terms total exploration spend dropped 4.4% from $997.6m to $953.3m, mostly due to less drilling for gold and iron ore in WA where lower commodity prices and labour shortages had an impact.
That’s still around four times the cyclical low of $290.4m hit in the March quarter of 2016.
Despite the stumble, exploration remains near historically high levels according to the Association of Mining and Exploration Companies, a lobby group representing the small cap resources sector.
“Total Australian mineral exploration expenditure fell in the final quarter of 2021 following 12 months of strong growth. The ongoing challenges of COVID-19, heightened by the Omicron outbreak, continued to impact industry’s ability to access tenements and sufficiently resource projects,” AMEC CEO Warren Pearce said.
Greenfields exploration on areas where mines have not been operated previously, a major focus for industry organisations like AMEC, did drop from $338.3m in September to $305.9m in December.
But Pearce noted it was at a record level for the full year after years of greenfields drilling lagging safer brownfields exploration near existing mines.
“Nationally, when considered over the full year, greenfield mineral exploration expenditure reached a record $1.207B in 2021. Annual greenfield exploration expenditure has not been this high since 2012, when it was $1.127B,” Pearce said.
“Although the figures today show a decline in greenfields exploration, 2021 has overall been a strong year for greenfields exploration.”
In WA and Queensland, exploration levels fell 9% and 8% respectively in the December quarter.
On the flip side Victorian exploration levels climbed to record levels, up 31%, with South Australian exploration expenditure (benefitting strongly from IOCG copper discoveries) up 41%, Tasmania up 6%, the NT up 10% and NSW flat.
WA in particular has been impacted by labour shortages, with rigs reportedly sitting idle in Kalgoorlie yards because of a lack of qualified drillers and offsiders to man them.
Despite the December fall however, WA enjoyed record annual exploration expenditure for greenfields and brownfields drilling, with $2.352b drilled into the turf in Australia’s largest state in 2021.
Gold exploration was also well supported, hitting a record annual high of $1.601b.
“We are still in a period of heightened demand, and the commitment to mineral exploration remains the focus of our industry,” Pearce said.
“Continued investment is needed to find the mines of the future and unlock the jobs and growth still waiting to be discovered.”