Monsters of Rock: Miners get their groove back on hump day
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Damaging Covid case numbers out of Sydney were not enough to keep a good stock market down on Wednesday, with miners returning to glory after a couple days down in the dumps.
All of the big diversified miners were in the green today including South32, which will cop a US$700m+ impairment charge on its Illawarra coal operations but otherwise posted strong results across its alumina, aluminium, manganese ore, nickel, silver, lead and zinc assets.
Ian Gandel’s Australian Strategic Materials (ASX:ASM) was the biggest mid or large cap winner, climbing more than 10% on news it had secured a monster US$250 million investment from South Korean capital for its Dubbo rare earths project.
The materials sector was up a tick over 1%.
Rare earths hopeful ASM exited a trading halt to announce a “conditional exclusive framework agreement” with a consortium of South Korean private equity investors, who would be investing US$250m ($340m) to take a 20% equity stake in the company’s Dubbo project in New South Wales.
Dubbo contains an ore reserve of 18.9Mt at 1.85% zirconium oxide and 0.735% total rare earths oxides, good for a 20 year mine life.
The deal has a whole range of other flow-on benefits, with the private equity investors Cerritos Holdings, Kamur Partners and ACE Equity Partners agreeing a ten year offtake arrangement to take up to 2800tpa of neodymium-iron-boron alloy from ASM’s proposed Korean Metals Plant which is under construction in Ochang.
They are planning to form a separate fund to establish a magnet manufacturing business in South Korea.
“In opening a financing pathway for the Dubbo Project, this Agreement heralds an exciting new phase in ASM’s growth and puts us one step closer to executing our ‘mine to metal’ strategy,” ASM MD David Woodall said today.
“We are delighted our new South Korean partners have recognised the mutual value of the strategic investment opportunity represented by our integrated manufacturing capability that offers a new, cleaner source of critical metals and alloys to a rapidly expanding market. Cementing our ties with South Korea’s advanced manufacturing sector represents an incredible opportunity to create value from our Dubbo Project.”
The $4 billion mega merger of Galaxy Resources and Orocobre is set to create one of the world’s most significant lithium companies.
Coming as the market turns for the battery mineral, the marriage will create a single mid to large cap offering with exposure to both hard rock lithium production in WA and brine in South America.
Prices Orocobre has received for its Olaroz lithium carbonate are up 170% over the past nine months alone, rising 45% in the June Quarter to $8476/t.
The meeting to approve the scheme of arrangement is set out for August 6 in Perth.
Pilbara Minerals was also up around 5% on a good day for lithium stocks not named Piedmont.
The quality of Rio Tinto’s community relations over the past few decades has left plenty to be desired and the big iron ore miner is continuing to clean the skeletons from its closet.
Today the company announced it had reached an agreement with members of the Bougainville community in PNG to identify and assess legacy impacts of the Panguna copper mine, which closed in 1989 when Rio suspended operations after 17 years amid an uprising against the mine and civil war.
ASX-listed BCL was transferred for nothing into the hands of the Autonomous Bougainville Government and PNG Government in 2016 by Rio, which accepted a complaint brought through the Human Rights Law Centre by 156 villagers from around the mine to the Australian OECD National Contact Point.
They said Rio had a responsibility to remediate the harm caused during the mine’s operations.
“Operations at Panguna ceased in 1989 and we’ve not had access to the mine since that time. Stakeholders have raised concerns about impacts to water, land and health and this process will provide all parties with a clearer understanding of these important matters, so that together we can consider the right way forward,” Rio CEO Jakub Stausholm said.
“We take this seriously and are committed to identifying and assessing any involvement we may have had in adverse impacts in line with our external human rights and environmental commitments and internal policies and standards.”
BHP spinoff South32 (ASX:S32) was hit with a US$728 million impairment charge after revealing it had been unsuccessful in getting approval from the NSW Independent Planning Commission for an extension of its Illawarra metallurgical coal mine.
But it wasn’t all bad news for big coal miners with Coronado one of the top mid caps today.
The company made a net loss of $226 million in FY2020 as the pandemic and China’s coal import ban hammered Aussie producers, but it is likely to report better trading conditions this year on the back of increasing prices.
Each US$10/t lift to benchmark hard coking coal prices contributes around US$100 million to Coronado’s annual adjusted EBITDA, and with Coronado also boasting operations in the US it has some exposure to the crazy premiums China has been paying for non-Australian coking coal.