GOLDILOCKS ZONE
Rare-earth price downturn OK for some
CARDBOARD WARRIORS
War fatigue drone’t bother us
BALD BUCKs
MinRes needs $1.7B war chest after all
The lizard king
How often do you think about the Roman Empire?
SEP 30 2023 ISSUE 22
FROM THE editor
I was talking to a market analyst friend and it got me pretty worried. She kept throwing around the word “recession” like it was no big deal while we were chatting about how the world economy is doing right now. With everything that’s been happening around the world, it’s no surprise we’re all anxious. But when you look at the numbers, things look worse than we realise.
The current state of the economy bears similarities to the period before the GFC, with increasing bond yields, inflation, and the prospect of rate hikes. Investors are feeling uneasy due to the steady rise of the US 10-year Treasury yield.
Inflation is another primary concern for investors. Despite some fluctuations in recent months, inflation remains high in many parts of the world. The Fed and Reserve Bank of Australia have discussed the possibility of rate increases to combat rising inflation. While such rate hikes could help to curb inflation, they could also harm the stock market.
One factor causing some investors to worry is the market’s upswing, fuelled by AI hype. While many investors are excited about the potential of artificial intelligence and other new technologies, there is also a sense that the market may be overvalued. Additionally, the low volatility stability in the housing and equity markets is reminiscent of the phases leading up to the GFC.
Overall, the global economy is facing several challenges in the coming months. While there is still reason for optimism, it is essential for investors to be cautious and remain aware of the potential risks. By staying informed and making intelligent investment decisions, investors can navigate these challenges and continue to grow their portfolios over the long term.
I wonder if the global economy can handle all of this. Only time will tell, I guess.
Hale Rueben
RAMPIN’ PROBLEM
By Tom DugganChina’s dominance of the rare-earth sector is beyond doubt. In the late 1980s the nation’s then-president Deng Xiaoping noted its reserves were equivalent to the Middle East’s power in the oil sector. Since the Xiaoping era, the Red Dragon has made heavy investments in securing a massive portion of the strategic industry and putting a vice-grip on production. And if the Middle East can cut production with an objective of lower prices, the reverse can also be true – that production ramping in China could potentially have a strategic objective to keep prices down and stifle foreign investment while preserving
the nation’s own industry. According to Barrenjoey analyst Dan Morgan, prices could now be in that sweet spot for China. “If you’ve got 90% market share of magnet processing capacity, there’s a goldilocks price where you earn a return, but you don’t encourage anyone in the rest of the world to build capacity,” Morgan said. Beijing has long demonstrated its ability to weaponise supply chains to achieve political objectives, when high demand and strong supply concerns attract new players into a sector and threatening its long-held influence over the industry. A 2017 report found that China’s rare-earth reserves fell by 37 per cent between
1996 and 2009, leaving only 27 million tonnes left to mine, something which could only be maintained for 15 to 20 years, and supplies would then have to be imported from abroad before an early mark of 2040 just to match domestic demand. Reserve estimations for the world’s second largest economy are hard to judge, and figures are higher elsewhere, but China has been growing its rare-earth imports, jumping nearly 40 per cent in 2021 according to The Rare Earth Observer. And exports have declined in tune, down 4.4 per cent to 20,987 metric tonnes year-on-year through the first five months of 2023, as the nation continues to raise mining quotas.
Rare Earth Observer author and Ginger International Trade and Investment director Thomas Krümmer told Quartz that China had a raw material problem, estimating that China had less than a fifth of the world’s resources – counterbalanced by a massive processing dominance. “China depends so much on imports of rare-earth raw material from abroad, they are painfully aware that this dependency could be used against them,” Krümmer said. And there is a potential pendulum swing from efforts to preserve the nation’s processing dominance, with Krümmer believing a combination of bans on foreign investment, restrictions on technology exports, and
Ramping of Chinese rare-earth minerals output has put heavy downward pressure on global prices but take a look under the hood and see the signs the pressure is building on a long-held authority.
increased imports create an unsustainable situation. “The current stance of China in terms of rare earths will eventually destroy China’s monopoly,” he said. “Sixty years of painstaking development work down the drain.” A stark warning, and likely one that China is keenly aware of. Rare Earth Industry Association secretary-general Nabeel Mancheri has previously warned that a pricier non-Chinese rare-earth industry was a bubble ready to pop. “The problem is that the whole industry is riding on the prices of magnet materials, which is unsustainable in the longer term,” Mancheri said. And if the industry was indeed in a bubble, it was China holding the proverbial needle.
As prices fall, so does investment, and low commodity prices have led to a lack of capital across the industry, with soaring demand matched against spending cuts predicted to lead to supply gaps for rare earths, lithium, nickel, graphite, cobalt and copper. Operations outside China have continued to advance but behind pace of predicted demand, something that will likely require an influx of government investment to secure supplies of metals not just strategic to economies but also national security. China’s rivals have gotten started, but their efforts might not be enough. The bipartisan US Rare Earth Magnet Manufacturing
Production Tax Credit Act of 2023 was the latest in a growing list of domestic production incentives, and the US is looking far beyond its own borders to secure its supplies. Australia has won the North American country’s backing for critical minerals development to coordinate policies and investment to support industry growth, with the superpower declaring its intent on African resources. The Biden Administration said the US was “all in on Africa, and all in with Africa,” pledging to help countries leverage their mineral resources for economic development. But like the strategic move to forge its industry long ago, China has an early mover’s advantage in Africa. With a rich business at stake, China appears unlikely to restrict its rare-earth exports in the same
way it has done with gallium and germanium, but instead keep prices in that goldilocks zone, awaiting a shortfall to preserve its dominion.
Victorian politics bid farewell to the premier some called “Dictator” Dan Andrews as the Canadian parliament got a reminder of what a real dictator was after giving standing ovations to a World War II veteran of the Waffen-SS.
Not sure what Canada expected out of someone who described early 1940s Poland as the happiest time of his life – we all make mistakes, but it’s not too often people give a rousing applause to a Nazi volunteer.
There aren’t many mines in Victoria, so I don’t really care, but my admiration of Andrews grew after he was snapped popping off for a quick incognito cig. Vaping has made regular smoking a little bit cooler, and there’s something nice about a man who apparently used to sit aside at parties to chain-smoke and talk politics like an old-school Trotskyite.
And going older school, there’s some trend about how often men think about the Roman Empire, which apparently is often. I’m partial to a few tales of the First Triumvirate myself, but maybe some people will just never get that inherent urge to move imaginary soldiers around a map in lieu of a real war.
We also have a Gladiator sequel coming in to satisfy our Roman desires! Though it might not be as interesting as Nick Cave’s insane unmade script featuring Rusty Crowe going through time after killing his own son, one Jesus Christ.
The insanity also continues at PwC, and we’ve all got to have a laugh at some old comments from when they were up on their high horse about having a moral and ethical compass. But PwC is hardly alone when it comes to putting profit over ethics, something I do daily but on a much lower scale when I punch in the less expensive oranges at a supermarket checkout.
Speaking of insanity, I got a Philly bad taste in my mouth on hearing emotional support alligator WallyGator got turned away from a baseball game across the pond. But no bother, the social media king planning a second coming
WAR FATIGUE DRONE’T BOTHER US
By Rueben HaleUkraine’s support from its international allies is in danger of declining, with Russia tipped to take advantage. But advanced drone technology from Australia’s SYPAQ Systems is combatting the war fatigue threat, proving crucial to the defender’s campaign against the Russian army.
The SYPAQ -developed Corvo Precision Payload Delivery System offers a dependable unmanned aircraft system with advanced guidance, navigation and control systems. Best of all, its IKEA-like packaging makes it easy for soldiers to assemble with minimal tools on the battlefield.
SYPAQ Managing Director David Vicino said the company did not expect to create a cardboard drone when it was founded more than three decades ago.
SYPAQ’s remarkable technology and engineering capabilities has earned the company national recognition, with the drone manufacturer being selected as the winner among over 700 entries for the AFR Boss Most Innovative Companies Awards. Cardboard drones are affordable, lightweight and environmentally friendly. But they may not be as durable in harsh weather or high-impact situations, so reinforcement is recommended.
ABOUT SYPAQ
SYPAQ is an engineering and systems integration company that offers expert management and technology consulting services, along with software application development and support services. The manufacturer provides end-to-end integrated solutions to global industries such as defence, aerospace, information and communications technology, government and private enterprise. Its core business includes providing management and technology consulting services, systems integration and managed service provision. The company’s skilled diverse staff continually refine its methodologies to provide top service at costeffective rates. SYPAQ is proudly independent of vendors and suppliers, keeping clients’ confidence.
PAC JV cleared for milestone development
The Port of Ashburton Consortium joint venture between CZR Resources, CSL Australia, and Strike Resources has received conditional support for its proposed iron export facility after a project definition review from the Pilbara Ports Authority
Support is still subject to approvals but has cleared the way for a milestone Development Application and completion of a Definitive Feasibility Study.
New designs in a superior Eastern Quay location further support lowcost, long-term, sustainable export operations and inclusion of lower grade ore will be included in a study being finalised for completion next month.
Kingsland grabs gallium
As it continues to advance a large-scale graphite discovery in the Northern Territory, Kingsland Minerals’ (ASX:KNG) drill core analysis for 40 elements has revealed thick intercepts holding significant levels of prized gallium. Four intercepts ranged from 150 to 266 metres thick, boasting gallium levels from 15 to 21.1 grams per tonne, offering a significant potential value-add production.
DMC measures its lithium
DMC Mining’s (ASX:DMM) Talon Ridge project is situated in Fraser Range tenements, with over a thousand square kilometers of land holdings. The project has potential for both lithiumcaesium-tantalum and niobiumyttrium-fluorin-bearing granites. DMC Mining is currently exploring a 27.5-kilometre anomalous lithium zone within the area, which has previously yielded world-class deposits.
Meteoric metallurgy
Meteoric Resources (ASX:MEI) confirmed a rare-earth ionic clay deposit in its Brazilian Caldeira project. The project has now been recognised as truly world-class. Assertive ionic behaviour and high extractions were recorded. The company discovered a thick, high-grade intercept of heavy rare earth, initiating a 60,000-meter air-core-drilling program to define resources across three regional prospects.
Cavalier returns record quarry
Deep-ground-penetrating radar surveys at Ella’s Rock lithiumgold-nickel exploration project have returned fruit for Cavalier Resources (ASX:CVR) in the form of 277 untested dyke-like anomalies, a number that Ultramag Geophysics thought likely to be a world record for a survey of that size.
Cavalier sees an exceptional correlation between existing anomalies, trace elements and the survey’s interpretation.
EV samples quality grades
EV Resources (ASX:EVR) has gotten an early high-grade look at its la Cienaga copper-gold project in central Arizona after systematic sampling came back with enviable average values. Average grades came in at 0.88% copper, 2.51 grams-per-tonne gold, and 5.61gpt silver from 119 samples. Excitingly, there are already more than 4000 metres of historic underground workings at the Eagle Zone.
Forrestania spods hopes
Follow-up drilling at the South Iron Cap East prospect has intersected spodumene-bearing pegmatite in multiple drill holes as Forrestania Resources (ASX:FRS) continues to home in on ore-grade mineralisation at its namesake project in Western Australia’s south. The results extended lithium mineralisation at the prospect, with the pegmatite remaining open down dip and along strike along the 100km greenstone belt.
MarketOpen RADAR
By Amanda EllisMinRes needs Bald war chest
A court decision has paved the way for Delta Lithium investor Mineral Resources to drop a timely $1.3 billion cornerstone investment into the company bringing with it ambitious plans for its lithium market consolidation and clear runway for it to buy Bald Hill lithium mine from Alita Resources’ liquidator.
Mining industry veteran Chris Ellison’s plans to consolidate lithium major Mineral Resources’ (ASX:MIN) lithium assets and put Bald Hill lithium dollars in Australian hands have gained momentum this week.
A Supreme Court decision on Wednesday will allow liquidation of the lithium and tantalum mine’s owner, Singapore-listed Alita Resources (SGX:40F).
Liquidation of Alita will help clear the way for MinRes to buy its 26.5 million tonne mine in the Eastern Goldfields for a possible price tag of several hundreds of millions of dollars.
September when: Equity about-face
Ahead of the decision, MinRes revealed on Tuesday it would capital raise after all, tapping the US bond market for $1.3 billion. On Friday, the company upped the figure to $1.7 billion.
MinRes’ bond-raise effectively reverses the Australian major’s decision four weeks ago “not … to raise equity”.
The Australian company will offer US$850 million ($1.3 billion) of senior unsecured notes to qualified institutional buyers in the US. Fitch Ratings expected the bonds would fuel growth capital expenditure for about two to three years.
Shareholders are hopeful the cap-raise will pay for MinRes to acquire assets or construct plants.
Potential upside
Ellison has acknowledged lithium assets will play a role in helping ensure enough production of the electric car batteries input to ensure a transition to clean energy.
Earlier this month, Mt Marion lithium mine jointowner MinRes told the market its proposed acquisition of Bald Hill mine in the Eastern Goldfields carried the promise of local royalties, taxes and profits for the Australian public.
The Ellison outfit’s purchase price for the hardrock mine is subject to a number of conditions, including a mine valuation. Fitch has tipped potential upside from MinRes establishing an operational record in
commercial lithium-battery-chemicals production, achieving a spodumene concentrate price of about US$2,480 ($1,592) in the financial year 2024 and US$1,040 ($1620) by FY26.
The markets analyst predicted plenty of upside from an increase in commercial lithium-battery chemicals production from 17,000 tonnes in FY24 to 67,000 tonnes in FY26.
MinRes has forecast its Mt Marion asset in the Goldfields and Wodgina mine in the Pilbara will produce about 400,000 tonnes of spodumeneshipped guidance (SC6) equivalent in FY24.
Sector consolidation
Iron ore and lithium player MinRes has multiple asset pick-ups planned, becoming the largest shareholder in lithium development company Delta Lithium (ASX:DLI).
Two weeks ago, MinRes founder and Managing Director Ellison joined the Delta board in a nod to the company’s 17.44 per cent stake in the Western
Australian company. Delta owns the 13 million tonne Mt Ida spodumene project 100km northwest of Menzies, and the prospective Yinnetharra spodumene exploration project 120km northeast of Gascoyne Junction.
Ahead of MinRes’s successful Delta mission, outgoing executive chairman, geologist David Flanagan, predicted in May “there’s going to be consolidation in the (lithium) sector”.
Among other proposed transactions are US giant Albemarle (NYSE: ALB) $6.6 billion takeover bid for Liontown Resources (ASX: LTR) which has been complicated by Gina Rinehart’s Hancock Prospecting’s in the lithium asset holder. Liontown has the undeveloped Buldania lithium project 80km from Bald Hill and the $951 million Kathleen Valley underground lithium mine 60km from Leinster.
Key issues
Fitch has tipped potential MinRes value-downgrades from any major mining service contract losses and net-leveling of earnings-before-interest-taxdepreciation-and-amortisation beyond 3x levels.
