Pic: Getty
Mining
Let’s play a game. Is this a monster or is it a mouse?
You’re right, it’s a monster. That’s Godzilla. Well done. Is this a monster or a mouse?
Neither, Master Splinter is a rat and a gentleman. He raises four orphaned anthropomorphic turtles. Next! Is this a monster or a mouse?
A monster, obviously, that was an easy one.
That was fun, thanks for playing. You know who else had fun in 2021?
Investors in junior mining companies who have seen incredible returns from a select group of rocket ships in 2021. And that’s in a hot market that has seen money stuffed down the pockets of exploration companies drilling for the next big gold, nickel, copper or lithium discovery, and talk of a new green energy led supercycle as supply shocks have sent commodities to record levels.
Over at Stockhead we’ve started tracking the fortunes of Australia’s biggest mining companies in our daily Monsters of Rock column.
A feature of this year has been the rise of multi bagger explorers, especially those focused on lithium, who have redrawn major resources indices with impunity.
Incredibly the S&P ASX Small Ordinaries Resources Index (up 23.87%) over the past 12 months has radically outpaced the S&P ASX 300 Metals and Mining Index (up just 1.09%).
Like all good things market caps never last, and using an arbitrary $500 million line, we can reveal the 13 companies which have joined our Monsters of Rock community in 2021 and the six which have fallen below that mark since January 1 this year.
Market Cap: $594 million
% Change: 165.31%
Uranium stocks returned to favour this year, charging as Sprott’s feverish buying of uranium from the lightly traded spot market sent prices soaring to nine-year highs.
Despite its controversial past, nuclear power has come back in vogue as supporters say its status as a “low emissions” energy source must be tapped to provide baseload power and displace coal and gas from the global electricity network.
Even without a paradigm shift in how the industry is viewed, so much production has left the market over the past decade due to unprofitable prices that it is widely accepted the world’s current and planned nuclear fleet will need new sources of yellowcake by 2024.
Boss is arguably at the front of the queue to join the next generation of uranium producers. Its Honeymoon uranium mine in South Australia would cost $107 million and only take 12 months to bring back into production.
It already has export permits, making it a far safer bet than greenfields developers who will likely need hundreds of millions of dollars to start from scratch.
Boss’ MD Duncan Craib has become a voice for the junior end of the uranium sector as Boss’ stock has literally and figuratively risen in 2021.
With a feasibility study in the bag, the next step for the uranium hopeful will be locking in long-term contracts which will deliver prices upwards of US$60/lb. Spot prices are currently around US$43.50/lb, well above decade lows of US$18/lb seen five years ago.
“For us, we’re only looking to contract about 40% of our mine life,” Craib said in October.
“At these prices, we can do that and keep a lot of the spot material to get exposure to the upside.
“We’re on the cusp of this new Renaissance period.”
Market Cap: $1.51 billion
% Change: 339.7%
Vulcan Energy carries the hopes and dreams of scores of parochial retail investors and one of Australia’s biggest corporate figures in iron ore magnate Gina Rinehart.
Its promise is to make lithium hydroxide for European carmakers from brines deep below the surface of Germany’s picturesque Rhine Valley that also produce geothermal energy, theoretically making the battery chemical on a “carbon negative” basis.
It’s raised $320 million this year from investors, including a $120 million raising that brought iron ore magnate and global-warming sceptic Gina Rinehart’s Hancock Prospecting on board as a 6.5% shareholder, Vulcan’s second largest behind MD Francis Wedin.
But questions abound whether it is achievable or whether the company’s claims are just a well-crafted PR campaign.
Vulcan’s shares touched 60 bagger status at more than $16 a pop before being struck with a report from activist short seller J Capital in October that took the wind out of its sails.
Among other things, J Capital and its boss Tim Murray claimed Vulcan had used unrealistically optimistic assumptions of its brine flow rates to beautify its early 2021 PFS, had not disclosed local opposition to its project and that experts used in the PFS were compromised by their business interests in Vulcan.
Vulcan’s bosses issued a strongly worded rebuttal to the report, categorically denying the claims and sued for misleading and deceptive conduct in the Federal Court.
They were able to get an out of court settlement, including an apology from Murray and J Capital and a promise he wouldn’t republish the report or any materials related to it.
With that out of the way, will the Zero Carbon Lithium Project do what it says on the tin? For now, we’ll have to wait and see.
Market Cap: $718.9 million
% Change: 271.05%
Firefinch is a double-headed monster, with both the Morila gold mine and Goulamina lithium project in Mali in its belt.
Purchased for just US$28.8 million from gold majors AngloGold and Barrick last year, FFX has been working to ramp up production at Morila over the course of 2021, replacing its low grade, low recovery tailings dam gold with higher margin ounces from satellite pits.
But Firefinch’s big prize is the Morila Super Pit, a 1Mozpa producer in the early 2000s once known as Morila the Gorilla for its heft and grade.
While it is unlikely those sort of numbers will come out of Morila any time soon, Firefinch does have a well mapped plan to get to a 100,000oz rate next year by restarting mining in the Morila pit and 200,000ozpa by 2024.
It has been well backed by investors to do that, raising $172 million in new capital.
Goulamina meanwhile has re-emerged amid the revival of the lithium sector in 2021. The massive Malian spodumene deposit is being prepped for development in a 50-50 JV with Chinese lithium giant Ganfeng, which will tip US$130 million in equity and arrange US$64 million in debt to get the project off the ground.
Firefinch’s share in Goulamina is being spun out into its own ASX-listed company, Leo Lithium, giving the option for investors to back two horses.
Market Cap: $616.8 million
% Change: 51.82%
Malaysia’s OM Holdings has benefitted from the supply crunch in a couple of key but relatively obscure commodities – ferrosilicon and silicomanganese, two alloys used in steelmaking.
Ferrosilicon in particular has been hard to come by, with prices soaring 116.2% to US$4,150 per tonne CIF Japan at the end of September 2021 compared with US$1,920 in the June quarter.
OM owns the Bootu Creek manganese mine in Australia, which is wrapping up at the end of 2021, an indirect 13% interest in the Tshipi manganese mine in South Africa and processing operations in Sarawak, as well as an exploration JV with WA explorer Bryah Resources (ASX:BYH).
The company banked a $23.5 million net profit after tax in the first half of 2021, and its second half results will be an interesting read with both prices and production of ferrosilicone on the up since.
Market Cap: $567 million
% Change: 17.22%
Another miner for whom it’s been an up and down year, Emerald Resources sagged from 90c at the start of the year to just 73c in March as gold stocks lost their lustre.
But Simon Lee’s Cambodian gold miner has bounced back after successfully commissioning the 100,000-110,000ozpa Okvau mine, the first large-scale gold mine in the South East Asian nation, in June.
The mine has a 907,000oz reserve at 2g/t, underpinning a 7 year mine life at over 100,000ozpa.
It looms as another success story for the well-known WA-Singaporean resources investor, a backer of Nick Giorgetta and Mark Clark’s gold businesses whose previous successes including building Great Victoria Gold, Samantha Gold and Equigold into major players.
Hitting commercial spurred a run for the miner through the second half of the year as it ramped up to full production by late September.
Emerald said its all-in sustaining costs were within guidance, with forecasts to produce 25,000-30,000oz a quarter at US$720-780/oz.
The company announced its expansion into WA this month by declaring a recommended takeover offer for privately owned Goldfields explorer Bullseye Mining in an all-share deal worth $117 million.
Bullseye had previously fought off the advances of King of the Hills gold mine owner Red 5 (ASX:RED) in 2018.
Market Cap: $1.14 billion
% Change: 1062.5%
Lake Resources is another direct lithium extraction stock which has caught the eye in 2021.
It owns the Kachi, Cauchari, Olaroz, Catamarca and Paso projects in Argentina’s Catamarca Province, the southern end of the Lithium Triangle which produces around 40% of the world’s lithium and stands as the only major competitor to Australia’s hard rock miners at present.
The 74,000 hectare Kachi is the most advanced asset on Lake’s books, and has risen to prominence with Lake as lithium prices have charged up to 300% higher this year.
The project has a total resource of 4.4Mt, 1Mt of it in the higher indicated category, with less than 20 per cent of that incorporated in a 2020 PFS that outlined an operation delivering 25,500tpa of lithium carbonate over 25 years.
But Lake has larger ambitions to become a major producer of scale in the lithium industry and wants to expand the operation to 50,000tpa.
“Argentina continues to be one of the few locations where lithium production can increase to assist the significant supply gap to increasing demand. Lake is one of only a few companies that can transform into a globally significant producer with a number of projects that can deliver high purity lithium carbonate at scale with meaningful ESG benefits”, Lake boss Steve Promnitz said in a recent ASX announcement.
The company is adapting a more environmentally friendly “ion exchange” direct extraction process to the lithium industry, using project technology partner Lilac Solutions which has agreed a ~US$50m funding deal to take a maximum 25% stake in the project based on performance milestones.
In August Lake received an EoI from the UK’s Export Credit Agency to fund 70% of Kachi, most recently costed at US$540 million, with Canada also keen to come on board.
Market Cap: $769.63 million
% Change: 123.33%
Grange Resources has operated the Savage River iron ore mine in Tasmania for more than 50 years. Without a doubt 2021 was the best of the lot.
Savage River produces processed magnetite pellets grading well above even the premium 65% index that Vale’s high grade Caracas ores receive from Chinese steelmakers.
When iron ore prices hit all time records of US$237/t in May, Grange and its largely Chinese major shareholders were laughing all the way to the bank.
Grange received average prices of US$228.52/t for the March quarter ($297.66/t Australian), more than double its $113/t cost base.
The June quarter was even more absurd, as Grange sold 653,000t of pellets at US$287.15/t ($373.72/t) against falling operating costs of $90.16/t.
That meant Grange made a headline margin of US$207.63 on every tonne shipped, more than the average price of the benchmark 62% fines index in the three months to June 30.
The other benefit of Grange’s Savage River mine is its future proofed nature. High grade iron ore like Grange’s will be required to supply modern steelmaking technologies that eschew coking coal for green fuels like hydrogen.
Those massive premiums shielded Grange from the iron ore price’s rapid decline through the second half of the year, helping it bank $554.60 million in cash and trade receivables of $21.45m as of September 30.
That healthy cash position led to not one but two dividend announcements this year, a 2c payout on the annual results and a sneaky 10c a share special divvie announced just before Christmas.
Market Cap: $881.4 million
% Change: 1150%
Want to know just how wild the ride has been for lithium stocks in 2021? Sayona Mining started the year as a literal penny stock, trading at just 1c with almost 7 billion shares on issue.
The Quebec lithium explorer is now worth ~$880 million after a series of major announcements this year, starting with a $15.5 million investment from fellow North American lithium stock Piedmont (ASX:PLL) in January.
That was just the start of the transformation.
Sayona raised around $200 million after that point for a series of developments, including a deal to buy 60% of the “world class” Moblan project for US$86.5 million and a 75-25 JV with Piedmont to purchase the previously operating North American Lithium business in Quebec from the previous owner’s administrators.
Sayona plans to begin spodumene production from its Abitibi hub in 2023.
Market Cap: $512.52 million
% Change: 82.14%
Nickel prices hit their highest level in seven years in November, trading above US$21,000/t, before dropping off in December amid news Tsingshan had produced battery quality nickel out of its cheap Indonesian laterite mines.
Those price moves have seen nickel stocks rerate on the back of rising EV sales projections out to 2030. Western carmakers are believed to be favouring higher energy density batteries that contain more nickel.
Panoramic shut its flagship Savannah nickel mine when Covid struck in early 2020, but expects to send off the first shipment of nickel-copper-cobalt concentrate from its Savannah mine in the Kimberley since then before the end of the year.
Nickel’s fortunes and Panoramic’s efforts to revive Savannah have excited investors, who may also be pricing in a takeover.
IGO (ASX:IGO) failed with a bid to purchase Panoramic for $312M in IGO shares back in 2019, but could be back in the market after offering $1.1 billion to take over Western Areas (ASX:WSA), which owns 19.9% of PAN.
Andrew Forrest’s Wyloo Metals and BHP’s reborn Nickel West division could also be hungry to swallow up some WA nickel plays after duking it out for most of the year over $600 million Canadian nickel explorer Noront Resources.
Market Cap: $586.2 million
% change: 623.53%
When Venturex Resources boss Bill Beament arrived on the Diggers and Dealers stage in August for the first time since leaving his 160-bagger gold miner Northern Star Resources (ASX:NST), many people’s attention was drawn to one important detail.
Yes, the impeccably groomed and polished Kalgoorlie mining engineer turned resources suit had shed the cocoon of his corporate image and taken a page out of the Steve Jobs/Elon Musk playbook.
His modus operandi, turning the copper junior he now led into an underground mining services provider focused on the decarbonisation of the world.
Billy the Kid also declared he was getting out of gold because it wasn’t green, a signal copper and other battery metals like the copper and zinc at the renamed DEVELOP Global’s Sulphur Springs deposit in the Pilbara, where the company sunk $10 million worth of drilling in the second half of the year.
Bellevue Gold’s proposed “green and gold” mine near Leinster is green enough, though. DEVELOP announced it would be tendering for the underground contract there, where former Northern Star executive Darren Stralow recently took the reins as CEO.
Speculation is DEVELOP will be keen on the underground mining contract at Liontown’s Kathleen Valley lithium mine as well. All up, have investors bought in to Beament’s new energy mantra?
In racing terms, Beament is yet to miss a place and investors are keen to back a horse in form.
Market Cap: $851.1 million
% Change: 200%
Core Lithium will become the newest Australian lithium producer late next year when the company opens the Finniss mine, the first commercial lithium mine in Australia outside of WA.
Finniss is located near Darwin in the Northern Territory, where Core started construction in October.
The $89 million first stage of Finniss is expected to be one of just two mines to start or recommence production in 2022 alongside MinRes (ASX:MIN) and Albemarle’s Wodgina mine in the Pilbara, producing 197,000tpa of spodumene concentrate.
75,000t will be delivered annually to Chinese lithium giant Ganfeng, which tipped $34 million into CXO in exchange for equity and the offtake deal.
Market Cap: $564.8m
% Change: 255.17%
Neometals has laid low in the Australian market since selling its 13.8% stake in the Mt Marion JV in 2019 for $104 million, an impeccably timed deal right before the lithium price nosedived due to market oversupply.
The company made another $30 million off that deal by selling its share of offtake this year, but it is Neometals’ work in battery recycling and metals recovery that has investors excited.
Neometals and its half-owned German subsidiary Primobius commissioned its lithium ion battery recycling plant with SMS Group in October, with demonstration trials processing spent EV cells starting last month.
The Hilchenbrach site in Germany hit commercial scale production on December 20, with commercial operations to start in the March quarter, pending board approval, and Neometals and SMS plotting studies on a full scale 20,000tpa plant.
At the same time, Neometals is progressing work streams on a lithium refinery in Portugal, its Barrambie titanium-vanadium project in WA and a vanadium recovery project processing high-grade vanadium from slag in Scandinavia.
Neometals has a sizeable war chest as well with $83.5 million in the bank as of September 30, leaving it well placed to make an acquisition and fund developments.
Syrah sat just shy of the half-a-billion-dollar mark at the start of the start of the year, but is still worth a fraction of what it was back in 2018 when graphite was running hot.
Graphite prices have crept up this year, with Syrah restarting the Balama operation in Mozambique in February that it mothballed at the onset of the pandemic in 2020 amid flagging prices.
But it is downstream where Syrah is arguably garnering more attention from money men, as one of a number of companies aiming to become graphite anode producers and capture the natural uplift in revenue from moving up the value chain.
Syrah is deep in the testing phase for its proposed 10,000tpa Vidalia active anode material plant in the USA, where six months of detailed engineering has been completed.
Not everyone captures the attention and adoration of the market, and underperformers can be harshly punished.
While it may seem like all boats are floating on a rising tide right now, mining is a difficult game and there are plenty of resources firms who have suffered the wrath of investors this year.
These six companies have dropped below the $500 million threshold, mutating from monsters to mice.
Market Cap: $392m
% Change: -57.14%
Resolute has seen its position as the headline African gold stock on the ASX usurped by the upstart West African Resources (ASX:WAF) this year, having lost half its value in 2021 alone and more than three quarters of its market cap since hitting $2 a share in August 2019.
A non-cash impairment of US$165-175 million related to the Syama mine in Mali that drove a more than US$200 million after-tax loss was a major culprit.
While it is an experienced operator in West Africa, Resolute also got a reminder of the tough political risks involved in mining there when its Bibiani mining lease was unexpectedly terminated by the Ghanaian Government, scuttling its sale to Chifeng Jilong Gold Mining Co. in March.
The lease was restored a month later and the mine traded to the Canadian listed Asante Gold Corporation in August for US$90 million, but Resolute has largely traded below 50c a share since.
Market Cap: $487.5 million
% Change: -13.51%
There is no shortage of battery anode stocks now on the ASX, but the response of the market has been a mixed bag.
For most stocks in the emerging space there have been peaks and troughs in 2021, none starker than Magnis Energy (ASX:MNS). It did not quite match the criteria for this list, having become a monster midway through the year only to see its MC fall back below the $500 million mark after some critical reporting in The Oz.
Talga does, though.
The Swedish graphite and anode stock has been incredibly volatile in 2021, skyrocketing ahead of an offtake MoU with Taiwan’s Long Time Technology in mid November before falling just as fast.
It led some market observers, like Far East Capital’s Warwick Grigor, to question the value of offtake MoUs for companies who remain years away from getting their product to market.
“First, the product has to perform technically, then the commercial arrangements need to be negotiated. Talga still has to finish its qualification facility first (i.e. pilot plant),” he said in a note in Novmeber. “Next, it has to build a US$484m production facility. Nothing is a fate accompli.
“Yet, the market obviously thinks it is great news, judging by the jump in the share price in the two weeks before the announcement, from around $1.52 to $2.22 the day before the release; a 46% increase.
“It has subsequently fallen by 20%. Buy on rumour and sell on news. Maybe someone got an early signal. Imagine what the share price will do if it ever gets a mining licence granted from the Swedish authorities.”
Talga subsequently returned to favour in December with news of high grade drilling results from its Vittangi project in Sweden and an expansion of another MoU with Japan’s Mitsui.
The deal grants Mitsui the non-exclusive right to negotiate and enter into relevant binding agreements prior to the MoU expiry date on August 31, 2022.
Market Cap: $398.7 million
% Change: -31.48%
Mining and exploration markets shot through the roof this year but mining services firms have been a little out of favour with investors.
Macmahon says it has $5-9 billion of work in its order book with $1.4-1.5b in revenue and $95-105m in EBITDA due in FY2022, with extensions to its Tropicana and Telfer contracts, and wins at King of the Hills, Gwalia (snatched off Byrnecut no less) and Warrawoona in the bag.
But Macmahon has always been one of the more vulnerable contractors to negative sentiment and concerns about WA contractors and their exposure to labour and cost pressures behind Mark McGowan’s impenetrable hard border have weighed on the stock class.
Macmahon famously survived a “lowball” $174m takeover bid from a stalking CIMIC back in 2017 in the aftermath of the mining bust by hitching its wagon to Indonesia’s PT Amman Mineral Nusa Tenggara, now a 44.3% owner of the contractor.
Macmahon holds a long-term contract an Tenggara’s Batu Hijau copper-gold mine in Indonesia.
Among other large contracting firms NRW Holdings (ASX:NWH) suffered a 46% reduction in its share price, though not enough to drop below our $500 million threshold.
$5.6 billion capped CIMIC (ASX:CIM), owner of the Thiess contracting business, was similarly timid, with a 27% loss for shareholders and Perenti (ASX:PRN), the merged Ausdrill-Barminco business, also suffered a 40% hit, reducing its market cap to ~$600 million.
New listing DRA Global (ASX:DRA) is down 16.25%, but SRG Global (ASX:SRG) and driller DDH1 (ASX:DDH) have been resilient and are both trading around 25% higher.
Market Cap: $421 million
% Change: -34.85%
It has not been a good year for Jupiter, prompting a shareholder revolt led by US coal and iron ore group AMCI to roll former BHP boss and chairman Brian Gilbertson and managing director Priyank Thapliyal off the manganese miner’s board.
The battle was messy. Thapliyal claimed it was an attempt by the Americans to secure board control by stealth, while AMCI argued Thaplyal had been unable to arrest the falling share price and grow the company.
The mutineers won out.
Jupiter still made a $27.5 million profit after tax on income from its share of the Tshipi manganese mine in South Africa, but its yields have fallen sharply in recent years as the prices paid for its manganese ore, not entirely within Jupiter’s control, have dropped and shipping rates have increased.
The company paid out $78.4m in the first half of FY2020, a yield of 11.9%, but saw that fall to $9.8m in the first half of the 2022 financial year, or 2.1%.
Currently chiefless Jupiter dropped out of the ASX 300 group of companies for the first time since its $240 million listing in 2018.
Jupiter demerged its iron ore assets in WA this year into Juno Minerals this year, which has been working through major tenders on its Mt Mason hematite project, but put off an investment decision after the iron ore price fell in the second half of the year.
Market Cap:$422.2 million
% Change: -45.2%
Andromeda metals owns the Great White Kaolin project over in South Australia, where it is currently in the process of consuming its joint venture partner Minotaur Exploration (ASX:MEP) in a merger.
What is its planned halloysite-kaolin product used for? Among other things, high grade porcelain, nanotechnology, hydrogen storage, carbon capture, with research ongoing into new applications like slow-release fertilisers and construction.
Andromeda’s stock ran up from around 5c to 45c in March on the back of an offtake deal, transforming the company from a struggling explorer to a market darling.
The company has since trended down, but expects to be able to push ahead with construction next year once its mining proposal and environmental approvals come through.
Market Cap: $484.3 million
% change: -56.5%
The biggest mid-cap casualty of iron ore’s price collapse in the second half of the year, Mt Gibson was looking on the up in May when prices climbed to a record high of over US$230/t.
Its development decision turned out to be poorly timed. The company spent much of the good times in the first half of the year stripping waste at its new Shine mine in the Mid-West and the extension of the high grade Koolan Island pit in WA’s north.
Mt Gibson made the decision to suspend Shine, a replacement for its exhausted Extension Hill mine, in October.
At 1.5Mtpa and breakeven costs of $65-70/t, Shine looked to be a goer early in the year. But it only made a couple of shipments as skyrocketing freight rates and tumbling iron ore prices made Mt Gibson one of around five junior iron ore miners to board up operations.
Having traded as high as $1.01 in early 2021, MGX shaved half of its value as the bear market set in, sliding to 40c in early December. It is still operating the Koolan Island mine, which delivers a premium 65% DSO product that draws prices and margins over the top of benchmark rates and is set to ship 2Mt in 2021-22.
At Stockhead, we tell it like it is. While Firefinch and Lake Resources are Stockhead advertisers, they did not sponsor this article.
Mining
Mining
Mining
Get the latest Stockhead news delivered free to your inbox.
