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Mining
The US market surged overnight, with the lowest year-on-year inflation rise since January spurring dreams the US Fed could put the kibosh on future rate rises.
Gold? Up 2.5% to US$1753/oz. Silver? Up 2.9% to US$21.69/oz. Copper? 2.1% to US$8272/t. And nickel? 5.1% to US$25,949/t.
To explain the effect in gold – inflation is good for gold because gold retains its shine while cash gets poorer and investors lose their faith in currency.
But it can also be bad because inflation results in rate rises, which means cash becomes more attractive because you can earn interest on it.
Long term gold has significantly outperformed cash over the last two decades.
The All Ords Gold Sub-Index today is up 2.77%, while the materials sector has risen 3.16% amid a broader 2.35% run for the ASX, basking in the afterglow of the US rocket ship overnight.
Iron ore futures are also up, despite some poor recent economic and steel news out of China.
The big three iron ore plays are all up more than 3.5% this morning.
Among the goldies Northern Star (ASX:NST) is above $10 a share for the first time since late April, while more marginal players like St Barbara (ASX:SBM) and Aeris Resources (ASX:AIS) lifted around 10%.
Battery metals stocks were also up, with IGO (ASX:IGO) rising 2.77% to $16.70, a new record if it holds.
Everyone wants a piece of lithium, even the government, which has let Pilbara Minerals (ASX:PLS) head back to the well to tap some $250m in taxpayer loans to fund the expansion of its Pilgangoora lithium mine.
The expansion will add another 100,000t of spodumene concentrate production capacity at Pilgangoora, taking what is already one of the world’s largest lithium mines to 680,000tpa, preparing for a larger expansion to 1Mtpa.
And it comes around five-and-a-half years after the Clean Energy Finance Corporation made PLS the first miner to receive a cornerstone investment from Canberra.
That investment foreshadowed a world where resource security and critical minerals production would become a core priority of Western governments, including Australia.
While Canberra’s investment bets have not always paid off (cf. Salt Lake Potash), its PLS investment has helped create a $16.3 billion lithium powerhouse on account of this year’s phenomenal price boom and electric vehicle explosion.
The new loans will see Export Finance Australia offer the equivalent of $125m in US dollars and the Northern Australia Infrastructure Facility tip in $125m via a 10-year facility, the latter half subject to the approval of the WA Government.
“The continued support from the Australian Government is a significant endorsement for Pilbara Minerals, an Australian company that is a major player in the growing global lithium supply chain and demonstrates the Australian Government’s commitment to our domestic critical minerals industry,” PLS head honcho Dale Henderson said.
“On behalf of Pilbara Minerals, I would like to thank the Australian Government for their ongoing support of our business, from the initial financing support provided by the Clean Energy Finance Corporation which allowed the Pilgangoora Project to be built, to this additional support through EFA and NAIF that will assist with its continued expansion.”
The funding package was celebrated by Federal Labor brass as well, who have put the alignment of critical minerals funding and net zero commitments down as a major part of their resources agenda.
“The global path to net zero runs through the Australian resources sector and producing battery materials is a vital contributor to a lower carbon economy,” Resources Minister Madeleine King said.
Newcrest (ASX:NCM) says a new development at Australia’s largest gold mine, Cadia East, will be in production by FY26 and hit its full rate in FY29, producing 231,000t of gold and 42,000t of copper a year.
The P1-2 block cave would sustain Cadia’s position as one of Australia’s top producing gold mines over the next two decades, with an IRR of 18%, NPV of US$1.4 billion and 16-year mine life.
Approving the feasibility study to move to the “execution phase”, Newcrest says it would deliver gold at stunningly low life-of-mine all in sustaining costs of just $198/oz.
That does include copper credits, but still stands out in the context of a market where costs are rapidly rising.
Those costs are US$154/oz higher than the US$54/oz forecast in a PFS last year.
Newcrest anticipates it will cost $1.4 billion to build the mine on a real basis, and $1.6b on a nominal basis, with a total output of 3.7Moz of gold and 670,000t of copper.
“We are very pleased to announce the findings of the Cadia PC1-2 Feasibility Study today, which indicates strong financial returns and underscores the quality of this world class asset,” Newcrest MD Sandeep Biswas said.
“Together with the Cadia Expansion Project which is nearing completion, we are confident that Cadia will continue to be an outstanding gold and copper producer for decades to come.”
“Through applying our technical expertise in deep underground mining and value breakthrough strategies, our team has further optimised the PC1-2 mine footprint since the Pre-Feasibility Study, creating a more efficient cave and substantially increasing expected ore production across the life of the project.
“We now expect to deliver additional gold and copper production over the next decade and beyond, which is an outstanding achievement by our team and a great example of our innovation and creativity in action.”
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