Monsters of Rock: The big end of town is also feeling the pinch from critical minerals price flop

Big Aussie miners feel the pinch from critical minerals prices: PwC
Lithium miners trim the fat, the saga continues
Battery nickel demand growth still impressive: Benchmark

Monsters of Rock drills deeper into the ASX’s large cap mining stocks with mining scribe Josh Chiat.

Even the big end of town is feeling the pinch from volatile (read: falling) commodity prices, with an analysis this week of Australia’s 50 top mid-tier miners showing their earnings have tumbled 37% in the past year to $18 billion.

The market cap of Australia’s top 50 miners – outside of globally ranked conglomerates like BHP, Rio Tinto, Newmont and Fortescue – was “consistent” at $139bn according to PricewaterhouseCoopers’ Aussie Mine Report.

But that was largely thanks to a 34% lift in the value of our large gold miners, whose collective market cap rose $12.8bn to $50.5bn and EBITDA climbed 47% or $2.3bn to $7.2bn.

The value of critical minerals companies in the list fell 28% to $51.7bn with EBITDA a whopping 62% lower at $3.3bn.

Despite a 56% fall in earnings to $6.4bn, coal stocks saw their market cap rise 18% to a record $24.4bn.

There were some other down-cycle indications in the numbers, partly influence by rising capex and inflation.

Capital expenditures climbed across the cohort by 41% to $14.7bn, while net cash sunk 99% to $0.1bn as gearing rose from 16% in 2023 to 20% in 2024.

Critical issue

Despite the concerns for lithium, rare earths and nickel companies facing falling commodity prices and oversupplied short-term markets, PwC thinks we’re likely to still see supply struggle to keep pace with demand.

“Beyond the short-term uncertainty, the big picture for critical minerals is clear. There is a vital link between global decarbonisation efforts and opportunities for Australian mining companies,” PwC Australia national mining leader Mark Upcroft said.

“For that reason, demand for critical minerals will continue to rise significantly to meet the need for lower carbon technologies. In fact, it will be very challenging for supply to keep pace with demand.”

Miners have some serious issues, though, when it comes to finding projects worth building.

“There is currently a significant gap between Australia’s potential and the number of projects ready for investment,” Upcroft said.

“Additionally, many of these projects lack the necessary scale, with our research indicating that few in the investable universe have a net present value (NPV) greater than $500 million.

“This suggests that numerous projects are either too small or insufficiently developed to attract substantial investment.”

That’s reflected in an 81% jump in M&A dealmaking to $27bn, with miners facing a dearth of options buying up growth assets.

Lithium miners look emaciated

The impact of the drop in critical minerals earnings has been easy to spot in the recent disclosures of ASX lithium miners.

Mineral Resources (ASX:MIN) will shut down its Bald Hill mine, only acquired last year from the administrators of collapsed Alita Resources, placing 300 jobs on the line.

A final shipment of spodumene concentrate will sail in December, taking exports from the Kambalda mine to 60,000t on a 6% Li2O equivalent basis for FY25.

That’s down from 120-145,000t previously guided for the full year. Any return to operation would take 4-6 weeks, MinRes says.

It’s the latest in a long line of bad news for MinRes and its founder Chris Ellison, who will step down as MD in 12-18 months after a controversy around undisclosed related party dealings involving the Perth billionaire.

On the lithium front it’s yet another closure. Since the start of this year we’ve seen Core Lithium (ASX:CXO) close its Finniss mine in the Northern Territory, Pilbara Minerals (ASX:PLS) announcing it would place its secondary Ngungaju plant at Pilgangoora on care and maintenance and Arcadium Lithium (ASX:LTM) will close its Mt Cattlin mine in 2025.

Liontown Resources (ASX:LTR) opened its Kathleen Valley mine near Leinster, but has chopped a third of its admin headcount in Perth and revised its mine plan, focusing on higher grade underground stopes as it ramps up to 2.8Mtpa from the end of FY27.

Around $100m in cost-savings have been identified by the Gina Rinehart and Tim Goyder backed miner, the $2bn company said on Monday.

LTR plans to produce 170,000-185,000t of SC6 equivalent spodumene concentrate in H2 FY2025 at costs of $1170-1290/t on an all in sustaining costs basis.

Goldman Sachs analysts Hugo Nicolaci, Paul Young and Isaac Brooke think Liontown is likely to need to tap more credit from offtake partner LG at those costs, with the company to become EBITDA positive from CY25 and free cash flow positive only in 2027 on the investment bank’s price deck.

“While spodumene (and soon tantalite concentrate) revenues are now coming in, with AISC guidance (at the mid-point) still marginally above breakeven at spot spodumene prices, we see growing likelihood of drawing on the additional A$100m of indebtedness optionality with LG Energy Solutions if spot prices persist (factored in to our base case),” they said.

“We continue to factor in a more conservative production ramp-up, where on our estimates LTR is EBITDA positive from ~CY25 and FCF positive in ~CY27 on our lithium/spodumene price outlook, with de-leveraging from ~FY28E.”

Nickel down but not out

But demand is still growing strongly for battery metals despite the headwinds.

Benchmark’s senior nickel analyst Jorge Uzcategui this week said battery demand for nickel was still going to triple by 2030 and grow 27% YoY in 2024. That’s despite oversupply and price chops which have prompted mass mine closures outside Indonesia this year.

“Mid and high level performance EVs will be the primary driver of battery nickel demand growth in the coming years, particularly in Western markets,” he told Benchmark Source.

“There will be growth in China, but it won’t be as pronounced as in ex-China markets.”

By 2030, 85% of battery cell production outside China will use nickel-rich chemistries.

That’s because of rising market penetration for cheaper cars which use lower-range lithium-iron-phosphate batteries.

By the end of the decade around 1.5Mt of nickel demand will come from the battery market annually, Benchmark forecasts.

The ASX 300 Metals and Mining index is down 6.3% over the past week.

Which ASX 300 Resources stocks have impressed and depressed?

Making gains 🚀

Vulcan Energy Resources (ASX:VUL) (lithium) +35.1%

Sayona Mining (ASX:SYA) (lithium) +20%

IperionX (ASX:IPX) (titanium) +8.9%

Genesis Minerals (ASX:GMD) (gold) +6.5%

Eating losses 😭

Resolute Mining (ASX:RSG) (gold) -39.9%

Patriot Battery Metals (ASX:PMT) (lithium) -15.3%

Syrah Resources (ASX:SYR) (graphite) -14.5%

Develop Global (ASX:DVP) (copper/mining services) -14.2%

Vulcan Energy was the largest resources winner in the past five trading days after announcing first production of lithium hydroxide from a pilot facility in Germany, while it also received funding for geothermal heat generation from the German government.

Resolute Mining tumbled amid reports its CEO Terry Holohan and two other senior executives are being detained in Bamako, Mali’s capital, with its military junta requesting an alleged US$160 million to settle a ‘tax dispute’ with the owner of the 11.5Moz Syama mine.