There’s plenty of money for mining projects and here’s where it’s going
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The world’s biggest mining financiers think investors have been not paying enough attention to the quality of projects, but this is beginning to change.
This week, the big players are at the International Mining and Resources Conference (IMARC) in Melbourne.
One panel of speakers argued investors were looking to high-quality projects generally, and specifically to copper.
Campbell Olsen, CEO of Arete Partners, was one of the panel’s members. His firm takes a hands-on approach to its assets, arguing only structural and operational improvements create value.
“There are a lot of companies that have low-quality assets that don’t stack up that are still being promoted. And the investment industry is waking up to that,” he said.
“We concentrate on the high-end, with high-purity.”
At first glance it may seem puzzling why investors would want copper projects, given prices are down 10 per cent in 2019 while other commodities such as gold and iron ore have witnessed solid growth.
But Jason Chang from EMR Capital said,”everyone is chasing good cooper, and we are seeing some exciting opportunities out there.”
One ASX small cap that has excited investors is Stavely Minerals (ASX:SVY), which made a 40 per cent copper hit in late September and spiked from under 25c to nearly $1.30 yesterday.
Globally there are larger projects which are about to kick into full swing. Ecuador is about to ship the first copper cargo from its El Mirador copper mine — one of the world’s largest.
In Canada, Ludin Gold’s Frute del Norte mine will start in two weeks time.
Another catalyst for a rise in copper prices could be the protests in Chile, the world’s largest producer. Any supply shortages would inevitably filter through to the demand side.
But analysts have warned any rise in prices could be offset by long-term investor distrust of the developing world as an investment destination which could be an outcome if tensions escalate further.
The panel was skeptical about battery metals. Peter Rozenauers from Orion Resources Group noted that investors were still rushing to spend money on them.
But the demand side of the equation is unknown. There are various estimates about the world’s need for battery metals (particularly lithium) and electric vehicles but much of them are long term.
In June, Bloomberg predicted electric vehicles would account for 60 per cent of vehicles by 2040 but only 4 per cent in 2023. Right now, it is only 0.2 per cent in Australia and in China (the market with the highest adoption) only 5 per cent.
But the last week’s blockades of lithium projects in Chile, one of the world’s largest players, have led to suggestions prices could rise just as for copper particularly if protests break out in other Latin American nations.
Arguably the best summation of the situation came from Office of the Chief Scientist manager of resource economics David Thurtell.
“Some application markets are still small, and it is difficult to predict how quickly they will grow and how the technology will evolve,” he said
“Consumption growth is expected to be strong, but it is hard to predict when. This will lead to market imbalances, potentially with undersupplies in markets.”