Resources Rising Stars: Miners say Australia's goose is not yet cooked

A captain’s call from Federal Environment Minister Tanya Plibersek has raised concerns from the Australian mining industry it could lose its status as a leading investment destination
But miners continue to think the geology in Australia and similar locations like Canada lead the world and will stand the test of time in a competitive global market
Despite price volatility, lithium executives believe high quality resources in WA and Quebec will be the market leaders in the long term

Mining leaders at one of Australia’s longest-running conferences expressed their disappointment at a decision from the Federal Environment Minister to interject in the development of Regis Resources’ (ASX:RRL) McPhilliamys gold mine, which will not proceed after Tanya Plibersek approved an application to can its tailings storage facility under Aboriginal heritage laws.

But they’ve batted away calls that the West is going to lose out on investment to overseas jurisdictions in places like Africa, with gold, base metals and lithium bosses saying they continue to prize the security of tenure in places like WA and Canada.

Develop Global (ASX:DVP) managing director Bill Beament, the driving force who turned Northern Star Resources (ASX:NST) into one of Australia’s largest gold producers, told delegates at a Resources Rising Stars panel on the Gold Coast Plibersek’s captain’s call was a “rug pull” and “an indictment on the industry”.

AusQuest (ASX:AQD) managing director Graeme Drew added to the pile on, having earlier said that it was easier to do business in Peru than in some Australian states in a wink, wink, nudge, nudge comment.

But it came after Beament earlier said he would rather be in Australia than anywhere else, with plans to roll out a series of zinc, copper and lithium projects across New South Wales and WA over the coming years.

“I like Australia, I think you can make a lot of money,” he told the room at the Royal Pines Resort. “We’ve proved that in the gold sector and now in the critical minerals space.

“You don’t have to worry about waking up and I’m in Africa and I don’t have an asset. I just don’t invest in Africa, you just don’t know if you’ve got ownership of your mine.”

Beament later dialled back his comments on Africa, calling it “high risk, high reward”, and noting that miners could make “super profits” in its low-cost jurisdictions.

He said the attractive aspect of the Australian resources sector was its predictable land tenure, but warned “capital is fluid” and cautioned against changes to environmental laws he said could delay approvals and make it harder to operate, sending investment overseas to places with the same geology.

African lithium conundrum

At the same time, some mining bosses have raised an eyebrow at the suggestion deposits elsewhere can replace those in the West in the long term.

Patriot Battery Metals (ASX:PMT) boss Ken Brinsden, whose company put out a scoping study out on its Tier-1 Shaakichiuwaanaan hard rock lithium project in Canada last month, said inconsistent supply out of Africa could not continue to prop up the electric vehicle sector in China.

While EV penetration has continued to grow, oversupply has seen lithium chemical prices fall from over US$80,000/t in late 2022 to US$10,500/t and spodumene – the concentrate produced in WA – drop from US$8000/t to US$760/t.

“China’s the main source of of lithium raw material demand, and that’s very much been the story for the last decade or so,” Brinsden, formerly the MD of leading ASX lithium producer Pilbara Minerals (ASX:PLS), said.

“They behave in some unusual ways, and that’s what’s inspired this most recent bout of volatility.

“I’ve been very successful in defending a position around having to pay US$8,000 a tonne for their spodumene or US$80,000 a tonne for the lithium chemicals, by inspiring new sources of lithium raw material supply, a lot of it from Africa.”

Brinsden said the evidence of the current market was this was not displacing higher quality material from Australia, with research from Canaccord estimating the grade of African concentrate into China was just 2.9% Li2O against over 5% for most Aussie material.

“What I want to tell you is, do not believe what the Chinese tell you about the cost of those operations. There is no doubt in my mind that they are at the higher end of the cost curve,” Brinsden said.

“And if you’re looking for evidence as to what the structure of the market looks like today, imagine a situation where, of course, spodumene has now come off its almighty highs down to, let’s say, US$750/t.

“West Australian spodumene, the higher quality product globally, has not slowed down.

“It hasn’t slowed down in the slightest – hasn’t moved. Those tonnes are continuing to be shipped to China and to Korea, where have the tonnes fallen out of the market? They’ve fallen out domestically in China and from Africa, because they are the higher cost of supply.

“They are a flash in the pan. They don’t survive the market for the long term, and that’s why we can at least in part on the supply side, rely on the high quality mines to make money through the cycle.”

China still keen on Aussie lithium

$320m capped Wildcat Resources (ASX:WC8), backed by lithium giant Mineral Resources (ASX:MIN), is preparing to release a maiden mineral resource estimate on its Tabba Tabba lithium project in the Pilbara later this year.

After 100km of drilling and met test work in the books, the explorer is expecting to deliver a high confidence measured and indicated resource ahead of a PFS on the former tantalum mine.

MD AJ Saverimutto said offtakers remained extremely interested in new sources of supply out of Australia, with most of its inquiries continuing to come from China, Korea and Japan.

If Chinese companies are so interested in West Australian spodumene, what is the long term impact of African and Chinese lithium supply going to be?

Exec director Matthew Banks noted the lesson from the Pilbara iron ore industry was that the highest quality resources will win out long term.

“As Australians, we’ve been threatened by … iron ore coming out of Africa for 30 years, and we’re still leaders in that industry as a supplier to China. So I’m not too worried, we’ll see how history plays out, though,” he said.

Banks said with access to capital tough and lower quality mines struggling to make profits, it wouldn’t be surprising to see aggressive price moves in the future like we saw in the last lithium boom.

Saverimutto said the dive in lithium prices hadn’t changed things for the cashed-up explorer, which had ~$77m in the bank as of June 30.

“It hasn’t changed our viewpoint,” he told Stockhead. “We always wanted a quality resource, and we wanted to de-risk the project.

“So by having a quality resource, making sure the metallurgy is up to speed, and it’s de-risked, and then you can get your mining approvals, that’s the vision we had at the start of the year.”