Monsters of Rock: BHP's Tesla nickel deal, lithium steps into the limelight and another iron ore record

Australians have a habit of getting a little cocky when they are onto a winner.

And no it isn’t the celebratory back-slapping that followed the news Brisbane would host the 2032 Olympics (which no one else wanted) that has our eyebrows raised today.

It is the absolute jocks at the normally dweeby ABS, who referred to our massive $40 billion export haul in June as “Paydirt“.

That was unsurprisingly led by iron ore, with Australia figuratively mooning its Chinese trade partners/enemies as the industry raked in a record $17.6 billion in sales, most of that to China.

That wasn’t even the biggest news of the day for the majors, with BHP’s niche Nickel West division stealing the show as it announced a long rumoured offtake deal with Elon Musk’s Tesla.

The arrangement is a publicity win for BHP, which was up more than 3%. Due to its newfound association with batteries, nickel is a PR winner at a time when BHP is trying to jettison its exposure to petroleum and coal.

Major quarterly reports were broadly positive, with materials gaining 2.19% for the day, only behind Energy among the 11 major market sectors as the ASX200 heaped on 1.06%.

OROCOBRE (ASX:ORE), GALAXY RESOURCES (ASX:GXY) & PILBARA MINERALS (ASX:PLS)

Australia’s lithium big 3 were up in lockstep again today as merging Orocobre and Galaxy Resources reported strong quarterly results and price forecasts for the re-emerging EV battery ingredient.

Product from Orocobre’s Olaroz brine project in Argentina saw a sharp rise in prices, up 45% QoQ to US$8476/t, driving a 22% increase in sales revenue to US$21.6 million.

Orocobre also saw gross margins of 52%, or US$4371 for every tonne of lithium carbonate sold, with prices expected to be higher again at US$9000/t FOB in the December half.

At 3300t it produced about 31% more lithium carbonate than in the June 2020 quarter, with revenue up 245%.

Galaxy meanwhile produced a record quarter at its Mt Cattlin mine in Ravensthorpe, mining and processing 63,321 dry metric tonnes of lithium concentrate with cash costs down 17% to US$328/t.

Demand for product is so strong Galaxy was able to auction off an un-contracted shipment of 15,000t of 5.8% concentrate in mid-July.

Galaxy says demand is outpacing the introduction of new supply.

“Lithium demand is strong across the international lithium-ion battery supply chain and many independent lithium demand forecasts have been raised as EV sales have exceeded earlier forecasts,” the company wrote.

“Europe and China continue to lead this trend with 2021 YTD EV sales rising 224% and 153% year-on-year respectively.

“Supply side tightness in raw materials is expected to continue despite supply forecasts revised upwards in response to accelerated EV sales growth. Australian spodumene producers also lifted utilisation rates and exports to China benefiting from higher prices in the period.

“The market is set to face structural supply and demand issues from this year with the absence of significant supply-side developments to supplement current and near-term supply.

“As a result, chemical availability poses a major bottleneck risk to battery production which is also expanding rapidly in response to EV growth.”

LYNAS RARE EARTHS (ASX:LYC) & AUSTRALIAN STRATEGIC MATERIALS (ASX:ASM)

The world’s biggest rare earths producer outside China, Lynas was awarded a $14.8 million grant as part of the Australian government’s Modern Manufacturing Initiative for a new refining process.

The grant will underwrite around half of the cost to implement the process at its new $500 million refinery in Kalgoorlie-Boulder.

Lynas promises to produce an industry first higher purity rare earths carbonate to feed its Malaysian and proposed US rare earths plants.

“We’re excited to bring this world-first Rare Earth carbonate refining process to Kalgoorlie with the support of the Australian government. Its commercialisation is the culmination of significant research and development by our inhouse team,” Lynas MD Amanda Lacaze said.

“In keeping with our commitment to the efficient use of industry capital, this process has been designed to treat our own Mt Weld concentrate and concentrate from 3rd party feedstock as other projects come on line in the future.”

Australian Strategic Materials (ASX:ASM) saw a second straight day of solid gains after announcing a US$250 million equity investment in its Dubbo rare earths project from South Korean private equity on Wednesday.

NORTHERN STAR RESOURCES (ASX:NST)

Despite Australian dollar gold prices in the mid $2400s, Northern Star has moved 32% south over the past year as it battles negative sentiment and the process of bedding down its mega merger with Saracen Mineral Holdings.

Australia’s second biggest gold miner popped back today with news it had met guidance with a record 1.6Moz of gold produced at AISC of $1483/oz in FY21, as well as the $400 million cash sale of its Kundana gold mines to Evolution Mining (ASX:EVN).

The Super Pit owner will be closely watched tomorrow as well, with new managing director Stuart Tonkin due to present at the company’s annual investor strategy day tomorrow.

Northern Star Resources share price today:

ILUKA RESOURCES (ASX:ILU)

Mineral sands giant Iluka is seeing big price increases for zircon, with demand from Chinese tile manufacturers back to pre-pandemic levels.

Zircon prices increased US$70/t in the second quarter and another US$125/t on July 1, after achieving a weighted average price of US$1321/t across the first half.

First half rutile prices also 2% higher at US$1224/t.

Zircon, rutile and synthetic rutile sales from Iluka’s mines in Australia and Sierra Leone were up 89% on the same period in 2020 across the first half to 242,300t, with revenue increasing 61.1% from $456.6m in H12020 to $735.6m in H12021.