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Mining
Cha-ching!
Australia’s resources exports are forecast to hit a record $425 billion in 2021-22 new figures released by the Department of Industry, Science, Energy and Resources.
Powered by the rocket global uncertainty around the Russian invasion of Ukraine and Covid has put under commodity prices, that’s 33% higher than the record of $320b in 2020-21 and almost $50b higher than the previous forecast of $379b.
According to the Office of the Chief Economist’s Resources and Energy Quarterly the unprecedented surge in coal and LNG prices is driving the big upswing with combined met and thermal coal earnings to hit a record $110b, up from just $41b in 2020-21.
The LNG take will more than double from $32b to $70b with iron ore falling slightly from a record $158b in 2020-21 (a year which included record high prices upwards of US$230/t) to $135b.
Soaring nickel, copper and lithium prices on the back of the energy transition will also see their earnings climb 38% to $23b.
As prices ease Canberra’s forecasters think the haul will fall to a still substantial $370b in 2022-23 and slide gradually over the long term to $263b in real terms by 2026-27.
These figures are independent and tend to be on the conservative side. Governments shouldn’t go chasing waterfalls after all.
But with the acceleration to election mode confirmed in last week’s sugar hit budget, it won’t stop the Morrison Government turning the numbers into an election issue a la Queensland 2019.
“The March 2022 REQ has found that soaring demand and high prices for Australia’s gas, coal and oil are a key contributor to our record export earnings. In short our resources sector is knocking it out of the park and underpinning our economic growth, our energy security and our national security,” Resources minister Keith Pitt said.
“Our resources and energy sector is too important to risk in the hands of a government that doesn’t fully support it.”
“The Greens plan to form government with Labor and kill of (sic) hundreds of projects and thousands of jobs. Make no mistake, a Labor / Green Alliance would be a disaster for our country.”
Haven’t heard about the Labor Green Alliance yet, but they’ll be sure to let us know when Pitt’s straw man emerges.
Iluka Resources (ASX:ILU) will spend up to $1.2 billion building Australia’s first rare earths refinery in WA, helped with a $1.05 billion loan from the taxpayers’ pockets.
The $5 billion capped company announced the final investment decision on the project today.
The Eneabba refinery has been placed high on Canberra’s priority list, securing the non-recourse loan from Export Finance Australia as part of the Federal Government’s $2 billion critical minerals supply chain fund.
Located in WA’s Mid West it marks Australia’s first step into the downstream side of the rare earths metals market, more than four-fifths of which is concentrated in China.
Iluka is best known as a leader in the mineral sands industry, producing zircon, rutile and other industrial minerals at mines across Australia and Africa.
But the rapid expansion of EV production, renewables and infrastructure spending has sent prices for rare earths, and especially the neodymium-praseodymium oxides used in permanent magnets booming.
Stockpiles of monazite at Eneabba comprise the highest grade source of rare earths supply globally, according to Iluka.
It expects to have a total rare earths capacity of 17,500tpa with construction to begin in the second half of 2022 and first production in 2025.
The “Phase 3” development will be fed by nine years of stockpiles of monazite and xenotime at Eneabba, with future growth to come from the development of the Wimmera deposit in Victoria and third party feed. With just the Eneabba stockpiles alone the project carries an NPV of $500 million.
“Rare earths are among the key building blocks of an electrified economy and our final investment decision for Phase 3 will see Eneabba become a strategic hub for the downstream processing of Australia’s rare earth resources,” Iluka said in a statement this morning.
“The refinery has been designed specifically to have the capacity to be globally material, the capability to process both Iluka’s feedstocks and those held by third parties, and to have minimal environmental impact, including as a result of being located entirely on a brownfields site.
“Beyond the production of rare earth oxides, the refinery also provides a foundation for undertaking potential further steps along the value chain in future, such as rare earth metallisation.”
It will be the second major rare earths development in WA following the construction of Lynas Rare Earths’ (ASX:LYC) $500 million cracking and leaching plant in Kalgoorlie.
However, Lynas will still complete the separation of rare earths into refined products, where the real margin is at a plant in Malaysia.
Raleigh Finlayson has delivered on the new vision for gold explorer Genesis Minerals (ASX:GMD) he foreshadowed last week.
And as we suggested, this Genesis 2.0 deal is looking a lot like Saracen 2.0.
The Genesis MD wants to create a “premium Australian gold producer wth sustainable high quality” production of 300,000ozpa with a mine life of over seven years and two or more operations with a West Australian focus.
That was the exact aim Finlayson’s former company Saracen articulated a few years ago before it became so big it bought up half of the Super Pit and merged to turn Northern Star Resources (ASX:NST) into Australia’s clear second largest gold miner.
The vision is to grow the existing resource base at Genesis’ Leonora district projects, already up from just 400,000oz to 2Moz inside the past four years, with some of its prospects seeing virtually no exploration in two decades.
But M & A will also be a key factor, with a five year strategy targeting mines with 100,000ozpa plus potential in WA, with the Leonora district in particular bearing “high investor appetite for sensible regional consolidation.”
The personnel is looking similar as well. Along with Finlayson Genesis has pulled in Saracen’s old CFO Morgan Ball as chief commercial officer and Corporate Development Officer Troy Irvin for the same role at Genesis.
Lee Stephens, who spent 12 years as a general manager at Saracen’s Carosue Dam and Thunderbox gold mines and was most recently the general manager of open pits at KCGM, will become Genesis’ general manager of projects and operations.
All will be on fixed remuneration of $100,000pa but have some pretty tasty performance rights and options incentives if Genesis increases its resources to 2.5Moz, a 1Moz ore reserve and eventually enters production.
“We are building a team of leading industry specialists as part of our strategy to establish a substantial gold business,” Finlayson said.
“Morgan and Troy are highly respected in their fields, with extensive experience in the resources industry and capital markets. Lee has extensive operating and development experience, with a track record of delivering consistent production and tight cost control.
“The fact these key executives have committed to Genesis on fixed remuneration of just A$100,000 with substantial at-risk performance-based equity incentives provides a massive vote of confidence in our growth strategy.
“We have no doubt that there is substantial investor appetite for more mid-to-large-tier gold companies on the ASX. The team we are building will help ensure we capitalise on that opportunity.”
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