Monsters of Rock: What headwinds? Aussie explorers are spending as much as they ever have
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All around the country all you hear about are funding problems, cost escalation, approval delays and cost of living crises.
But that hasn’t seen Australian mining and exploration companies stick their wallets back in their pockets, as the sector spent more than it ever had for a June quarter in 2023.
Powered by record spending looking for new copper deposits, stats from the venerable Australian Bureau of Statistics show Australian exploration expenditure hit $1.0699 billion in June, up $8m on the previous record in 2012 during the tail end of the mining boom.
Only the $1.1 billion spent in September last year eclipsed it, with explorers spending $176 million hunting copper in the three months to June 30.
That’s a record and little surprise given a rush of copper IPOs in recent times and grand hopes the price will surge as demand from the energy transition outpaces supply increases globally.
Plenty of dosh was splashed, logically on lithium and rare earths drilling. They are still captured in the ABS’ ‘other’ category.
“This is off the back of record copper expenditure in both New South Wales and South Australia, with $24.0m (up 15% quarter on quarter) and $43.9m (up 33%) respectively,” Association of Mining and Exploration Companies CEO Warren Pearce noted.
“New South Wales mineral exploration rose 25% to $97.9m, recording the state’s highest levels of mineral exploration expenditure to date”.
“While Western Australian mineral exploration rose quarter on quarter to $648.5m, it did not quite reach the high of June 2022 ($674.8m). However, investment in ‘other minerals’ exploration recorded its highest expenditure at $127.1m an increase of 21%.”
South Australian exploration rose 15% thanks to copper. It is the home of the Gawler Craton, where BHP (ASX:BHP) just bought out OZ Minerals and plans to develop the new Oak Dam mine near its world-class Olympic Dam mine and smelter.
In Queensland, exploration lifted 29% QoQ to $147.8m, thanks largely to 35% and 30% increases in copper and gold drilling to $44.8m and $23.9m respectively.
There has been a rush of copper and gold IPOs in the Sunshine State of late, such as Austral Resources (ASX:AR1) and True North Copper (ASX:TNC), which have been looking to revive the jurisdiction’s forgotten precious and base metals fields.
It wasn’t all down to inflation as well. Metres drilled rose 16.8% QoQ to 2840.5km, with greenfields drilling up an impressive 30.1%.
At $282.8m, drilling for base metals copper, lead, zinc, nickel, cobalt and silver rose to their highest level on record. All are essential ingredients for EVs and/or renewables.
Drilling for ‘other’ metals, largely lithium and rare earths, rose to a record $172.8m.
After over a month on sidelines while it waded through the fallout of what was a pretty tough bit of news from the Malian Government, Leo Lithium (ASX:LLL) returned to trade with an ever-loving thud today.
The developer of the Goulamina mine in Mali, the first major spodumene project to be developed on the African continent has staved off the inevitable for a few weeks now.
It crashed hard on return to trade today, falling 50% to 57c.
The long and short of it is the new Malian Mines Minister wasn’t on board with Leo’s plan to sell DSO lithium from Goulamina in its early days.
It means that guidance is gone. At the same time, the Malian Government has been going about adjusting its Mining Code in a move that could see as much as 35% of future projects wind up in the hands of a free-carried govt and local owners.
That’s not in play at this point for Leo and its JV partner, China’s Ganfeng, but the partners in Mali Lithium BV, the Goulamina JV company, could cede 10% as a free carried interest along with another 10% at market prices.
Initial documents have been provided to the Malian Government for the process of getting that free carried interest away.
But there are some other nasties. Leo and Ganfeng could see as much as US$45-50m in unplanned import duties and taxes in government actions “not consistent” with the exemptions it previously had for importing equipment. The number fell within a sensitivity analysis on capital costs completed as part of the DFS, Leo said.
The JV has so far paid US$4m with another US$16.1m expected this quarter.
Finally, while Leo will remain the operator of the 500,000tpa Goulamina mine, Ganfeng will move to a 55% ownership stake by sole-funding US$137.2m of Goulamina’s capital costs rather than taking equity in Leo, knocking Leo’s economic interest in the project down to 45%.
The agreement, which was executed yesterday, will see Stage 2 capacity for the project lifted to 500,000tpa, taking its eventual output to 1Mtpa, with the parties to study a co-investment in downstream processing in Europe or another region close to West Africa, an amended offtake agreement for Stage 2 to include the potential hydroxide and an Australian exploration JV.
The company however, said construction of the mine and concentrator at Goulamina remains on track.
Chairman Rick Crabb and MD Simon Hay hosted a call with analysts today, but it was not enough to stem the bleeding as investors reacted to the cavalcade of issues raised in the morning’s announcement.
Despite the additional import duties and the halt to the DSO plans, intended to cover some of the capital costs, Leo MD Simon Hay said the JV remained ‘fully funded’.
“We’re starting our investment on community projects, we’re employing hundreds of locals, and the government is also very aware of the need to facilitate future investment into the country,” Hay said.
“So from that big picture perspective, I think we’ll find a solution that’s mutually beneficial for for all parties or stakeholders.
“And we’ll continue to discuss and negotiate on the outstanding matters and hopefully we get resolution. As I said, DSO is not completely off the table, discussions continue, and exonerations on the customs duties, those discussions continue as well.”
LLL was an outlier today. Led by Liontown’s 9% gain on news it planned to accept a $3 per share takeover from Albemarle, the materials sector rose 1.92% as strong Chinese economic data and lithium enthusiasm stoked a hot resources investing day.