Australian Resources & Investment Aug 2022

VOLUME 16 NUMBER 4 | 2022

Australian Resources & Investment WHY M&AS ARE ON THE RISE

A SANTOS SOLUTION TO THE ENERGY CRISIS

PILBARA MINERALS

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More than a mining company

AUSTRALIA’S NEXT NICKEL PLAYERS

HOW BHP BEATS THE COST CRUNCH

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AUSTRALIAN RESOURCES & INVESTMENT

COMMENT

Upstream, downstream and ‘midstream’

TOM PARKER Tom.Parker@primecreative.com.au

T

One mining company is becoming more than just an expert at the mine face, establishing itself ‘midstream’ and downstream to further evolve and connect the lithium supply chain. Is this the way of the future?

he uniformity of a supply chain is critical to market regularity, and companies that vertically integrate themselves can often reduce costs and improve their commercial stability.

More and more mining companies are establishing themselves downstream, enabling them to not only handle ore extraction but also capitalise on mineral processing opportunities further up the value chain.

Then there’s Pilbara Minerals, which is also exploring a ‘midstream’ venture.

In June, Pilbara Minerals signed a binding memorandum of understanding (MoU) with Australian technology company Calix to support the development of a new lithium chemicals product.

The MoU paves the way for Pilbara Minerals and Calix to form a joint venture (JV) and develop a demonstration plant at the Pilgangoora project in Western Australia, with the aim of producing lithium salts via an innovative refining process.

If successfully developed and proven, the new process could mean shipping spodumene concentrate is a thing of the past, with the higher-grade lithium salts product to take its place.

The Calix JV complements Pilbara Minerals’ downstream partnership with POSCO, whereby the company has a stake in a lithium hydroxide conversion facility in South Korea.

Establishing a presence in South Korea positions Pilbara Minerals at the doorstep of a ballooning battery market, furthering its relationships and product in the process.

While Pilbara Minerals is moving up the value chain, there’s also the potential for original equipment manufacturers (OEMs) to consolidate ownership closer to the source.

Elon Musk has indicated Tesla is open to buying a mining company amid soaring lithium prices and supply fears later in the decade.

“It’s not out of the question,” Musk told the recent 2022 FT Future of the Car conference in London.

“We will address whatever limitations are on accelerating the world’s transition to sustainable energy. It’s not that we wish to buy mining companies, but if that’s the only way to accelerate the transition, then we will do that.”

Whether its upstream, downstream or in-between, if it means unifying the supply chain then it will benefit the industry and the market as a whole.

To complement a featured profile of Pilbara Minerals, in the August edition of Australian Resources & Investment we also chat to PricewaterhouseCoopers (PwC) Australia partner Marc Upcroft about the rise of mergers and acquisitions in the mining sector.

We tackle the gas crisis from two angles, considering remedies for international predicaments and those in Australia. Santos chief executive officer Kevin Gallagher offers his input as well.

Elsewhere, we shine a light on nickel’s next players in Australia and showcase the likes of emerging iron ore miner Hawsons Iron and leading drilling services company Mitchell Services.

Tom Parker Editor

CHIEF EXECUTIVE OFFICER JOHN MURPHY CHIEF OPERATING OFFICER CHRISTINE CLANCY EDITOR TOM PARKER Email: tom.parker@primecreative.com.au MANAGING EDITOR PAUL HAYES Tel: (03) 9690 8766 Email: paul.hayes@primecreative.com.au CLIENT SUCCESS MANAGER JUSTINE NARDONE Tel: (03) 9690 8766 Email: justine.nardone@primecreative.com.au SALES MANAGER JONATHAN DUCKETT Mob: 0498 091 027 Email: jonathan.duckett@primecreative.com.au BUSINESS DEVELOPMENT MANAGER ROB O’BRYAN Mob: 0411 067 795 Email: rob.obryan@primecreative.com.au SALES ADMINISTRATOR EMMA JAMES Tel: (02) 9439 7227 Mob: 0414 217 190 Email: emma.james@primecreative.com.au DESIGN PRODUCTION MANAGER MICHELLE WESTON michelle.weston@primecreative.com.au ART DIRECTOR BLAKE STOREY blake.storey@primecreative.com.au GRAPHIC DESIGNERS KERRY PERT, AISLING MCCOMISKEY FRONT COVER IMAGE CREDIT: Pilbara Minerals SUBSCRIPTION RATES Australia (surface mail) $120.00 (incl GST) Overseas A$149.00 For subscriptions enquiries please contact (03) 9690 8766 subscriptions@primecreative.com.au PRIME CREATIVE MEDIA 11-15 Buckhurst St, South Melbourne, VIC 3205, Australia www.primecreative.com.au © Copyright Prime Creative Media, 2021 All rights reserved. No part of the publication may be reproduced or copied in any form or by any means without the written permission of the ­publisher.

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W W W. A U S T R A L I A N R E S O U R C E S A N D I N V E S T M E N T. C O M . A U

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CONTENTS

I N T H I S I S SU E T H E F E AT H E R S T O N E R E P O R T

8

What’s next for resources sector dividends?

NICKEL

36

Australia’s next nickel players

18

BHP F E AT U R E D

12

Analysis with Regina Meani

14

A lithium trailblazer with the world at its feet

18

Why M&As are on the rise

40

How BHP beats the cost crunch

IRON ORE

42

Is this the world’s most promising iron ore project?

MINING SERVICES

OIL AND GAS

22

A Santos solution to Australia’s energy crisis

44

Mitchell Services is at the top of its game

26

Could Australia hold the key to Europe’s gas crisis?

46

Flipping the electric switch

FOLLOW THE LE ADERS MINING SERVICES

30

Pit lake planning critical to sustainable mining

48

The latest executive movements in the resources sector

EVENTS GOLD

34

Gold as an inflation hedge

30 –4–

50

What’s happening in the resources industry?

22

A SMALL STEP ON OUR PATH TO CHANGE

FROM 2021, ALL CASTROL PRODUCTS WE SELL IN AUSTRALIA ARE

COMMITTED TO CARBON NEUTRALITY IN ACCORDANCE WITH PAS 2060** A SMALL STEP TOWARDS A MORE SUSTAINABLE FUTURE

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in accordance with PAS 2060, see www.castrol.com/cneutral for more information.

The C02e emissions are calculated in accordance with the Greenhouse Gas Protocol’s Product Life Cycle Standard and includes life cycle emissions. The demonstration of carbon neutrality will be assured by an Independent Third-Party and certified to BSI’s PAS 2060 carbon neutral specification. See www.castrol.com/cneutral for more information.

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T H E F E AT H E R S T O N E R E P O R T

THE

Featherstone REPORT

WHAT’S NEXT FOR RESOURCES SECTOR DIVIDENDS?

BY TONY FEATHER STONE

Large mining stocks are a key source of income for investors who live off their portfolio’s yield.

A

dividend bonanza from big resources companies is imminent. Soaring commodity prices and resources sector earnings will create a deluge of dividends in coming months.

Ausbil, an asset manager, predicts 33 per cent of our share market’s total dividend from the 2021–22 (FY22) will come from just three stocks: BHP, Rio Tinto and Fortescue Metals Group.

More than 30 per cent of total dividend from FY22 is set to come from BHP, Rio Tinto and Fortescue Metals Group.

–8–

By comparison, the big four banks – traditional portfolio mainstays for income investors – will contribute about 22 per cent of the market’s total dividend.

As Australian Resources & Investment goes to press, most ASX-listed companies will have yet to report their full-year profits from FY22.

When earnings are announced in August, the resources sector will likely be awash with attractive fully franked dividends.

Forecasts from Morningstar, an investment researcher, have BHP yielding 10.6 per cent in FY22 (before franking).

Rio Tinto will yield about 12 per cent at its current price in FY22 and Fortescue Metals Group will yield 10 per cent, accordingto the forecasts.

Energy has become another dividend standout. Woodside Energy Group is expected to yield 13.3 per cent in FY22.

AUSTRALIAN RESOURCES & INVESTMENT

Brokers speculate that Woodside could announce an off-market share buyback, given the strength of its balance sheet after its merger with BHP Petroleum.

Net yields of 10–12 per cent from the market’s four largest resources stocks (BHP, Rio Tinto, Fortescue and Woodside) compare to an average 4 per cent unfranked yield across the market.

As investors fret about dividend cuts in industrial companies as the economy slows, or flat dividends from banks, resources sector dividends are booming.

CAN HIGH YIELD L AST? Dividend investors should ask: is this as good as it gets in resources sector yields? Or worse, are soaring yields a dividend trap rather than an opportunity?

Start with FY22 dividends. Soaring commodity prices this year have boosted earnings from the big miners, which in turn will drive sharply higher dividends. BHP’s dividend-per-share jumps from $4.03 in FY22 to $4.22 on Morningstar forecasts.

Commodity prices leapt this year largely on supply-related fears. Russia’s war in Ukraine and supply chain disruption from COVID-19 fuelled production challenges in mining.

Soaring commodity prices, including copper, are set to drive high dividends from FY22.

At the time of writing (mid-July), the RBA Index of Commodity Prices had gained just over 50 per cent since January 2021. The Index has eased slightly in the past few months but remains near record levels.

Dividend bears argue that such high commodity prices cannot last. As central banks worldwide lift interest rates to tame surging inflation, the risk of global recession is rising. If that happens, commodities prices will weaken, as they did in the first half of July 2022.

China’s policy of COVID-19 elimination remains a major handbrake on its economic growth. Eurozone growth is spluttering due to the war in Ukraine and US recession seems inevitable given the expected pace and size of rate rises there.

Moreover, pandemic-related supply challenges should lessen this year and next as infection rates fall. The bears argue improved supply in some commodities will take more steam off hot commodity prices, affecting resources sector earnings and dividends.

The short-term outlook for minerals demand and supply suggests the RBA Index of Commodity Prices will head lower in coming months. And that we are probably at “peak dividends” for now from the market’s largest mining and energy stocks.

Ausbil believes resources sector dividends peaked in FY22. It expects a slightly lower contribution from the sector to the market’s aggregate dividend in the 2022–23 financial year (FY23), but resources stocks sustain a key position in the Ausbil Active Dividend Income Fund, a well-performing managed fund that invests in Australian equities for income.

Another star fund manager in dividend investing, Plato Investment Management, remains positive on the dividend outlook for large-cap resources stocks. Plato

said if commodity prices remain at elevated levels, resources stocks should continue to pay large dividends.

Plato argued that if commodity prices retreat a little in FY23, dividends in the resources sector can remain elevated because the market’s largest resources companies are more disciplined on capital expenditure and better able to return funds to shareholders.

Dividends from the largest resources stocks might stabilise or ease in FY23, but it’s hard for income investors who need higher yield to avoid the sector.

The outlook for dividends (across all sectors) in Australia remains positive, Plato said. According to Plato’s model of dividendcut probability, the average stock on the ASX has a one-in-five chance of a dividend cut, which is in line with historical averages.

That will please income investors who live off their portfolio’s yield and have watched the value of their equity and debt investments tumble. Higher dividends are a rare bright spot as global equity markets are lashed by fears of rising inflation and interest rates.

B E YO N D F Y 2 3 ?

In the near term, I expect dividends from the market’s largest resources stocks to remain elevated, though not at their FY22 peak level.

The caveat, of course, is commodity prices.

All bets are off if commodity prices tumble due to growing fears global recession and some demand destruction for minerals.

Longer term, I am optimistic on resources sector dividends for three reasons. First, I expect commodity prices to remain elevated (on average) mostly due to supply issues.

Underinvestment in fossil fuel projects and commodities such as copper have created supply constraints that cannot be resolved quickly.

–9–

T H E F E AT H E R S T O N E R E P O R T

The market’s focus on environmental, social and governance (ESG) factors has made it harder to fund some new products or expand on existing ones. Unlike the previous demand-driven commodity boom, this one will be supply driven.

The second reason for my optimism is balance sheets. Many large-cap companies, including in the resources sector, have repaired their balance sheets through equity capital raisings. They’ve emerged from COVID-19 in excellent financial shape.

Not having to use earnings to pay down debt means large resources companies, on average, can pay higher dividends.

The third reason is discipline. I’ve covered sharemarkets for more than three decades and cannot recall when large-cap resources companies were as disciplined on capital expenditure as they are now.

Of course, that’s not true of all resources companies, but the best run and governed ones understand the benefits of capital

Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines.

The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs. Before acting on information in this article consider its appropriateness and accuracy, regarding your objectives, financial situation and needs.

Do further research of your own and/ or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at July 14, 2022.

expenditure discipline and returning surplus funds to shareholders through higher dividends, special dividends or launching share buybacks.

B E WA R E D I V I D E N D T R A P S Although yields are attractive, never buy stocks in the resources sector – or any industry – only for their dividend. What matters is the total return (capital growth and dividend). It’s pointless buying a resources stock for its yield if the share price falls sharply in the next 12 months.

Understand the risks of dividend investing in the resources sector. Commodity prices are hard to forecast and can be volatile.

Conservative investors should consider if it’s better to sacrifice some yield by investing in sectors with more defensive earnings.

It’s worth noting resources sector yields are inflated after price falls this year (though that is true of most sectors). For investors, the yield depends on the price at which the

shares were bought. Those who bought at higher prices face lower dividend yield.

Moreover, BHP has a one-year total return of minus 12 per cent. Rio Tinto is down 19 per cent and Fortescue is off 16 per cent.

Although high dividends and attractive yield attract attention, investors are sitting on paper losses on their resources shares (from a total-return perspective) over 12 months.

Finally, when it comes to yield, treat every stock on its merits. BHP, for example, is more diversified than Rio and Fortescue, which depend more on iron ore. BHP’s diversification is a benefit for conservative income investors who want less dividend risk.

For most income investors, dividend investing in the resources sector is best served by a handful of the sector’s largest stocks. Resources dividends are probably as good as they get for now and are likely to ease in FY23 and FY24. But that’s still a lot better than most sectors today.

While resources dividends have been strong, they are likely to ease in FY23 and FY24.

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F E AT U R E D

— ANALYSIS — WITH REGINA MEANI NdPr: The symbols of our future NEODYMIUM AND PRASEODYMIUM (NdPr) are two of the world’s most soughtafter rare earth elements.

As an independent product it can be used for permanent magnet materials as well as a non-ferrous metal alloy additive.

The neodymium magnet made from praseodymium alloy is one of the most powerful and widely used rare earth magnets. The magnets are three times stronger, and one-tenth the size of conventional magnets.

The products gained from the NdPr mix are a crucial part of our renewable energy future. Every electric vehicle (EV) drivetrain requires up to 2kg of NdPr oxide, whereas a three-megawatt (MW) direct drive wind turbine uses 600kg.

NdPr is used in air-conditioning units and to create strong metals for use in aircraft engines. Praseodymium is a component of a special type of glass, used to make visors to protect welders and glassmakers.

The neodymium oxide and praseodymium oxide prices in recent years.

– 12 –

Neodymium is used to create strong magnets in small volumes for smartphones and microphones and is an essential ingredient in the ever-growing high-tech industry.

These metals are geopolitically critical, as currently China produces 85 per cent of the world’s NdPr output.

Global supply chains under duress from the COVID-19 pandemic have been further strained by the Russia–Ukraine war and achieving secure access to raw commodities and magnets has never been more important.

From their low points in June 2020, the prices for neodymium and praseodymium increased fourfold until they peaked together in February this year. Prices dipped into April losing around 18.5 per cent before rallying some 6 per cent.

At this stage, it’s difficult to determine whether the prices have corrected enough of the 2020–2022 upswing and there may be more price volatility and potential weakness as the prices rebalance.

The upward trend is expected to resume further down the track.

There are several local companies mining for rare earths. Arafura Resources looks set to become a major Australian player with its Nolans project in Northern Territory.

The project not only includes the mine but a processing plant comprising beneficiation, extraction and separation plants. The on-site mineral resources have the potential to supply a significant proportion of global NdPr demand.

Between 2006–12, Arafura’s price experienced pronounced swings from around $0.19 up to the peak price around $1.95 in 2007. It wasn’t until late-2012 that the price broke down from this range and fell to a low point of $0.03 in 2014.

AUSTRALIAN RESOURCES & INVESTMENT

Arafura’s stock has the potential to rise towards $0.75-0.80 and possibly higher.

Lynas’ recent price momentum exhibits similarities to the 2018–19 oscillation phase.

From here the price recovered forming a base through until January 2021 when the stock surged higher in line with the NdPr prices.

Most recently and again in line with the NdPr prices, the price has halted and pulled back. This action may continue to influence the price with support located in the $0.19–0.24 range.

Oscillations may develop in the $0.24–0.34 zone ahead of a resumption of the upward path through $0.35 for a test of higher barriers in the $0.45–0.55 area. Beyond this the stock has the

potential to rise towards $0.75-0.80 and possibly higher.

One of the smaller rare earths players is Australian Rare Earths, which is focused on developing its Koppamurra project.

Koppamurra contains significant quantities of NdPr, often referred to as light rare earths, as well as terbium and dysprosium, known as heavy rare earths.

These four elements combine to make up the majority of global demand.

Terbium and dysprosium are added to NdPr to retain their magnetic properties at elevated temperatures.

Listing on the ASX in July 2021, the price for Australian Rare Earths rose quickly in its first few months. Starting from a low of $0.40, the price peaked at $1.35 in mid-August 2021.

Overbought conditions saw the price stall, pullback and oscillate on a downward slope even though rare earths prices continued to gain ground.

Following the rare earths peak and subsequent decline in February this year, Australian Rare Earths’ price began a steeper sell-off falling to a new low, which became a pivotal turning point, at $0.30 on June 14, 2022.

A reversal phase has developed but the price needs to break its downward trend through $0.50 for the potential to head towards $0.60–0.65 and possibly beyond its peak zone in the $1.20–1.35 range.

Lynas Rare Earths has one of the world’s largest single rare earths processing plants in Malaysia. The company’s Mt Weld mine in Western Australia boasts deposits of neodymium, praseodymium, lanthanum, cerium and mixed heavy rare earths.

The rare earth oxides are mined and initially processed at the Mt Weld concentration plant before being shipped to Gebeng, Malaysia, where the concentrate is separated and processed into high-quality rare earth materials.

Lynas’ 2025 growth strategy aims to expand the company’s industrial footprint with a planned rare earths processing facility in Kalgoorlie.

Lynas’ share price formed a strong base from early 2014 until mid-2017 which propelled the price to initially reach resistance in the $2.90-3.10 range in 2018 and 2019. The price oscillated down to support at $1.75 with a market related plunge to $1.00 in March 2020.

From here, the price rose strongly in line with rare earths’ prices, powering through previous resistance to achieve the next barrier zone in the $11.50-12.50 area.

The ensuing pause coincided with a correction in the rare earths price. In the Lynas chart above-left, the momentum exhibits similarities to the 2018–2019 oscillation phase and suggests the price may continue to swing between $8.00–10.00 with the possibility that wider swings may develop before the phase is completed.

It is important to note that the price swings need not be as deep or for the same length of time as experienced in 2018– 2020. Once the upswing has resumed, the price may head towards and retackle the peak area between $23.00–26.00 and potentially beyond.

– 13 –

F E AT U R E D

Pilbara Minerals managing director and chief executive officer Dale Henderson.

A lithium trailblazer with the world at its feet

– 14 –

Under the leadership of new managing director and chief executive officer Dale Henderson, Pilbara Minerals is becoming one of the world’s most important lithium companies. So what’s next?

AUSTRALIAN RESOURCES & INVESTMENT

P

ilbara Minerals is a mining company at its core, but every technological advancement sees it growing into something more.

The lithium miner has established commercial partnerships with the primary goal of further evolving and connecting the lithium supply chain. Its recent joint venture (JV) with Calix is a key example of this.

In June, Pilbara Minerals signed a binding memorandum of understanding (MoU) with the technology company to support the development of a new ‘midstream’ lithium chemicals opportunity.

The MoU paves the way for Pilbara Minerals and Calix to form a JV and develop a demonstration plant at the Pilgangoora project in Western Australia, with the aim of producing lithium salts via an innovative refining process.

If successfully developed and proven, the new process could mean spodumene concentrate could be replaced by a highergrade lithium salts product.

The Calix JV was initiated under the leadership of former Pilbara Minerals managing director and chief executive officer (CEO) Ken Brinsden, but Brinsden’s successor has an equally – if not more – important role to bring the project to life.

I know where all the broom cupboards are.

I know the background to a lot of the reasons for all the choices we’ve made, and I know all the customers.

And there couldn’t be a more capable person to carry the torch.

Pilbara Minerals’ chief operating officer from 2017 until his appointment as CEO in June, Dale Henderson was promoted following a wide-ranging and thorough search process that commenced in February.

The company said Henderson was selected given his “strong lithium industry experience, outstanding leadership skills, strong cultural values and work ethic”.

Henderson told Australian Resources & Investment that he has experienced several “baptisms of fire” throughout his career, with his work in the Middle East with Occidental Petroleum particularly challenging.

Prior to joining Pilbara Minerals, Henderson held senior leadership roles with Fortescue Metals Group (FMG) in mine operations and project development. This proved a seminal experience. “(FMG) was quite the environment when I was there in terms of both a growth challenge quickly followed by a cost-down challenge to get the debt down and survive a downturn in the iron ore market,” he said.

“I was present during both of those chapters, so they were very formative (for me) and for many of the people who were part of the business during those periods.”

Pilbara Minerals hopes to boost Pilgangoora’s production capacity to one million tonnes per annum and beyond.

– 15 –

F E AT U R E D

Henderson said these experiences positioned him well to support the materialisation of Pilbara Minerals from explorer into producer.

“It was a combination of those things that set me up to be very useful for Pilbara, where they needed a combination of someone who can convert the designs into a physical asset that is successful and bring that operating expertise,” he said.

“That was no small task, and big credit to the team who made that all successful.”

“What’s followed in my time with Pilbara has been building out some of the corporate aspects that we’ve had to achieve,” he said.

“We’ve done various debt refinancing, various new offtake agreements, the downstream JV with POSCO and, being a small executive team, I’ve been knee deep in all of that.”

After successfully commencing plant commissioning in the second quarter of 2018, Pilbara Minerals shipped its first

It was four-and-a-half years’ worth of work in consummating that joint venture and what it means for Pilbara and our shareholders is we’re a part owner in a lithium chemical conversion plant in South Korea.

When Henderson was appointed as Pilbara Minerals’ chief operating officer in September 2017, Pilgangoora was still in its early stages of development.

This meant Henderson had the opportunity to be a key player in various projects and responsibilities across different areas of the business in order to elevate Pilgangoora into production.

Pilbara Minerals has several projects in the works to extend its capacity beyond just a miner.

– 16 –

spodumene concentrate from Pilgangoora in October of that year.

Henderson said being present during such a formative period for the company enabled him to commence the CEO role with knowledge and understanding of the company’s journey to this point, and how those experiences will propel it into the future.

“Taking the CEO baton forward – it’s a step up in role, as you’d expect – but in many ways I have some confidence in doing that given that history and given it’s coming up to five years that I’ve been with the business,” he said.

“I know where all the broom cupboards are. I know the background to a lot of the reasons for all the choices we’ve made, and I know all the customers.

“All of those things put me in good stead to give it a red-hot crack and do the best I can as the new custodian of the CEO role for this next chapter.”

Alongside the Calix JV, which has the additional backing of a $20 million grant from the Australian Government as part of the Modern Manufacturing Initiative (MMI), Pilbara Minerals is also advancing its downstream JV with POSCO. Having completed the JV in April, the two will share interest (Pilbara Minerals 18 per cent, POSCO 82 per cent) in a 43,000-tonneper-annum (tpa) lithium hydroxide conversion facility in Gwangyang, South Korea.

Major construction on the facility was planned to commence from the June quarter of 2022, with construction of the first train of the conversion facility to be completed by mid-2023 and the second train to be completed approximately three months later.

Production is set to commence from the second half of 2023, and Pilbara Minerals will supply 315,000tpa of its spodumene concentrate product from Pilgangoora for processing at the facility.

“We’re really proud of our involvement with POSCO,” Henderson said. “It was four-and-a-half years’ worth of work in

AUSTRALIAN RESOURCES & INVESTMENT

consummating that joint venture, and what it means for Pilbara and our shareholders is we’re a part owner in a lithium chemical conversion plant in South Korea.

“That domicile is a great place to be setting up. That’s the doorstep of the existing battery makers – LG Chem, SK Innovation, and the like.

“Then to be partnered with POSCO, who’s a giant globally, but certainly a giant in South Korea, and they’re very progressive in battery materials. So we think it’s a bit of a slam dunk in terms of a partner and a project to be a participator in.”

In late June, Pilbara Minerals made a final investment decision (FID) to increase the project’s production capacity from 580,000 to 680,000tpa of spodumene concentrate (P680 project).

Henderson said this expansion speaks to the staged growth profile Pilbara Minerals has always contemplated for Pilgangoora, with the aim of eventually boosting capacity to one million tonnes per annum – and potentially beyond.

Another FID planned in 2022 aims to add a further 100,000tpa of capacity, bringing the project to a 780,000tpa production profile.

“We have another FID contemplated for late in the year which will be the next step up to the (one) million tonnes per annum – or the P1000 (project), as we call it,” Henderson said. “(The recent FID) was really in two parts. One was the piece which gave us the 100,000tpa, the other part was pre-investment in the combined crushing and ore sorting facility which is sized for that P1000.

“So a big part of the capex (capital expenditure) is attributed to that investment

and we’re keen to get that going and done because that basically lays out some of the infrastructure for that ultimate expansion.”

The P680 project will require the construction of both a primary rejection-heavy media separation circuit and an integrated crushing and ore sorting facility, at a total capital investment of $297.5 million.

This includes $50 million of pre-investment capital to support future expansions of the processing capacity.

Commissioning of the primary rejectionheavy media separation circuit is expected to commence from the September quarter of 2023, with the additional production capacity to follow three months later.

At the time of writing (mid-July), lithium carbonate and hydroxide prices were trading 376 and 359 per cent higher, respectively, than a year prior according to leading lithium consultancy Benchmark Mineral Intelligence.

However, some analysts have forecast supply surpluses in the coming years. The Bank of America recently suggested this could occur as early as 2023, while Credit Suisse said it could occur by 2025.

Goldman Sachs has also been bearish about the commodity’s outlook, suggesting there had been “a surge in investor capital into supply investment tied to the long-term EV (electric vehicle) demand story, essentially trading a spot-driven commodity as a forwardlooking equity”.

“That fundamental mis-pricing has in turn generated an outsized supply response well ahead of the demand trend,” the company said.

When asked about lithium’s outlook, Henderson said the commodity’s strong

pricing and lack of supply coming to market made for a positive short-term outlook.

He said demand was also looking strong in the short-term due to the continued evolution in EV technologies and rising EV sales.

The mid-term, however, is more complex. “(The mid-term) is where new supply will be coming to the table,” he said.

“The question is, at that point in time, what has the demand picture evolved to? And that’s really hard to (predict).

“Many commentators are projecting very strong demand and strong demand outstripping supply. It’s hard to disagree with that when you look at the rate of investment and you look at the challenge that raw materials have in terms of bringing things to market successfully.

“So, mid-term, I still feel fairly positive around that but the thing which puts it beyond doubt is making sure that, as a supplier, we’re a low-cost producer. And that’s of course a key focus for us.

“As we move through our expansion and optimise that facility again, we will be well down the cost curve and so whenever those inevitable market cycles emerge, we will weather those storms and won’t be positioned on the right-hand side of that cost curve.”

With a credentialed new CEO, a proactive approach to cost management, and several new projects in the works that extend the company’s capacity beyond just a miner, Pilbara Minerals is well placed to not only capitalise on the current lithium rush but also solidify itself if any future headwinds do occur.

Over to you, Henderson.

Pilgangoora at night.

– 17 –

F E AT U R E D

A deal frenzy: Why M&As are on the rise As the mining industry posted a record financial result in 2021, mergers and acquisitions were up in number and value. Australian Resources & Investment chats to PwC Australia partner Marc Upcroft to understand why.

A

ccording to PricewaterhouseCoopers (PwC), ‘critical minerals’ is the mining industry’s most pressing concern in the near-term, with imminent supply shortfalls in some of the most important materials for the renewable energy transition.

“If the mining industry does not rapidly scale up its discovery and delivery of critical minerals, the prospects of energy transition at scale will be jeopardised,” PwC global mining leader Paul A Bennell said in the firm’s ‘Mine 2022’ report.

Mine 2022 examines the performance of the world’s top 40 mining companies in 2021, while unpacking the most pressing trends facing the global mining industry.

Alongside critical minerals, Mine 2022 highlighted the record-breaking financial performance of the world’s top miners in 2021 and examined whether this will remain in the future amid heightened cost pressures.

Mergers and acquisitions (M&As) also made an appearance in the report, with gold driving increased deal activity in 2021 while critical minerals companies also jostled for position in the constant pursuit of growth and expansion.

In 2021, the number of deals among the top 40 mining companies grew by 60 per cent from 2020.

– 18 –

PwC explores environmental, social and governance (ESG) as the final theme of Mine 2022, a concept growing in stature within the global mining industry and one that will increasingly influence investor sentiment into the future.

In the first of a two-part series, Australian Resources & Investment will explore financial performance and M&As in detail, pondering the sector’s continued economic success and the risks that may quell this momentum.

TOP 40 MINERS Every year, PwC ranks the world’s top 40 mining companies through the aggregation of public information such as annual reports and financial reports available to shareholders.

The rankings also express PwC’s point of view on topics affecting the industry, developed through interactions with its clients and other leaders in the sector.

While majors BHP, Rio Tinto and Vale maintained their 2021 grip at the top of the list – at one two and three, respectively, in 2022 – Glencore rose from eighth spot to fourth, while US-focused

Freeport-McRoRan made its way into the top 10, rising from 11th to sixth on the list.

Other strong performers included Tianqi Lithium Corporation, a part owner of the Kwinana lithium hydroxide processing plant in Western Australia, which rose 22 places to 15th on the list. Canada’s Teck Resources rose 10 spots to 22nd, and US potash miner The Mosaic Company jumped 15 places to 23rd in the rankings.

On the other side of the coin, Fortescue Metals Group fell from fourth to 10th, China Molybdenum Co. dropped from 15th to 20th, while gold miners Newcrest Mining (25th), Agnico Eagle Mines (27th) and Shandong Gold Mining Co. (28th) were also casualties, falling seven, 10 and nine places, respectively.

PwC derives its Mine 2022 trends from the top 40 miners, so expect to see a few big names littered throughout this editorial.

MINING’S FINANCIAL FUTURE The last few years have been financially kind to the global mining industry, with the sector scaling the economic highs of 2020 to post an even stronger 2021.

AUSTRALIAN RESOURCES & INVESTMENT

PwC found year-on-year (YoY) revenues for the world’s top 40 mining companies to be up 32 per cent and net profits to be up 127 per cent in 2021 when compared to the previous 12 months. This was a record performance from mining’s top echelon.

Company profits closely aligned with increases in commodity price, with coal, copper and iron ore prices experiencing sizeable jumps (54, 50 and 59 per cent average increases in 2021, respectively).

PwC Australia partner Marc Upcroft called this a key takeaway from Mine 2022.

“It’s interesting when you look at the financial returns – particularly the increase in profitability. It’s really focused on pricing and across three commodities,” he told Australian Resources & Investment.

“Coal revenue was 77 per cent higher (from 2020), copper revenue was 47 per cent higher and iron ore revenue was 43 per cent higher, and those three commodities alone represented an increase of $165 billion in revenue.”

Upcroft said that in the 20 years that PwC had been compiling the report, it has only seen higher returns on equity in two years – 2006 and 2007 – when commodity prices sky-rocketed and the supply response couldn’t keep up.

According to the Australian Bureau of Agricultural and Resource Economics and Sciences’ (ABARES) Australian Mineral Statistics, the 2006–07 period was a time of strong economic growth for China.

This contributed to iron ore export earnings increasing by 21 per cent to $15.5 billion when compared to 2005–06.

Australian Mineral Statistics also found increased copper prices (up 62 per cent) and zinc prices (up 73 per cent) were strong economic drivers in 2006–07.

While the top 40 mining companies have enjoyed more buoyant market conditions than ever before, the question is whether this will continue in the current world of rising inflation – a reality which is already driving rising costs for many miners.

Upcroft believes inflation naturally poses an economic threat but he expects financial performances to remain strong.

Every year, PwC ranks the world’s top 40 mining companies.

“When you look at the financial credentials of the mining industry, the sector is in a pretty strong place as a whole,” he said.

“Profitability and margins are high, balance sheets are strong and there’s low debt in the cycle of things.”

Mine 2022 found capital expenditure (capex) in the top 40 mining companies increased by 18 per cent from 2020 to 2021, with a further 14 per cent jump forecast from 2021 to 2022. This will amount to a predicted $US82 billion ($121 billion) in capex in the 2022 calendar year.

Upcroft said the mining industry had gone through a conservative capex phase in recent years, with the investment community advising mining companies to go easy on growth to maximise shareholder returns.

However, this sentiment is changing.

“We’re at a phase now where we’re expecting more growth projects, so I think capex is going to increase both in terms of increase in growth projects, but also the cost of those growth projects are increasing,” Upcroft said.

“So you’ve got both impacts at play there, and that’s going to be a huge challenge for mining companies to navigate.”

As company’s grow and expand, Upcroft said share prices are in for a rollercoaster ride amid sustained investor apprehension.

“While global supply-chain pressures are understood … and while cost pressures are understood by the market as being largely out of the control of mining companies, investors still tend to be unforgiving on negative surprises,” he said.

“So it’s going to be a bit of a bumpy ride for mining companies and share prices as they embark on this journey of trying to manage something that’s pretty hard to manage.”

DEALS The value of deals among the top 40 mining companies tripled in 2021 compared 2020, while the number of deals grew by 60 per cent.

Gold was a key player in the M&A space, making up 70 per cent of total deal value.

Valued at $US10 billion ($14.7 billion), the ‘merger of equals’ of Canadian gold miners Agnico Eagle and Kirkland Lake Gold was a noteworthy transaction.

The merger saw Agnico Eagle assume possession of the Fosterville gold mine in Victoria, which is considered one of the highest-grade and lowest-cost gold operations in the world.

Newcrest Mining’s $US2.8 billion ($4.1 billion) acquisition of Canadian-focused Pretium Resources was another notable deal, providing the major Australian gold miner with a potential Tier 1 gold mine in the Brucejack operation in British Columbia.

– 19 –

F E AT U R E D

PwC ranked BHP, Rio Tinto and Vale as the top three mining companies in 2021.

– 20 –

Upcroft said the increased proportion of deals in 2021 can be partially put down to a slowdown in recent years.

“Similar to mining companies being cautioned on capex, they’ve been cautioned on deal activity as well,” he said. “So we’ve gone through a period over the last two or three years where large transactions have probably been shut down before they’ve got out the boardroom.”

Upcroft wasn’t surprised to see the gold industry be a prominent M&A participant, and it’s something he expects will continue into the near future.

“When you look at the deals that happened last year, they were really goldfocused … which is partly a consolidation phase,” Upcroft said. “And we think that consolidation phase will continue over the next few years, both at the large end of the gold sector and also the smaller end.”

“When you look at the number of companies focused on gold (deals), it’s an ongoing cycle in terms of the sizing of those groups.

“There’s power in becoming a larger gold company – you’re in a little bit more control

AUSTRALIAN RESOURCES & INVESTMENT

of what you do – but then there can also be a lot of extra value that can come from being narrowly focused on a couple of assets.

“So it is (about) getting that balance right across the gold industry.”

Genesis Minerals is a recent example of a gold miner looking to consolidate, with its acquisition of Dacian Gold expanding the company’s footprint in the Leonora region of WA. Announced in early July, Genesis said the Dacian acquisition would combine its organic growth and high-grade resources with Dacian’s large-scale milling infrastructure at Mt Morgans.

The combined group will have approximately 4.5 million ounces of resources in the Leonora district, with a focus on growth through exploration and a pathway to production through the existing milling solution.

Dacian suspended mining at Mt Morgans in June amid rising cost pressures.

The number of critical minerals deals among the top 40 mining companies jumped fivefold in 2021 when compared to 2020, while the total value of the transactions doubled.

Rio Tinto’s $US825 million ($1.2 billion) acquisition of the Rincon lithium project in Argentina, first announced in December 2021, was a notable critical minerals M&A. Rincon is a large undeveloped lithium brine project that has the potential to be a longlife, scaleable resource capable of producing battery-grade lithium carbonate.

In October 2021, South32 announced its intention to acquire Sumitomo’s 45 per cent stake in the Sierra Gorda copper mine in Chile for an initial upfront cash consideration of $US1.55 billion ($2.28 billion). The deal was completed in February 2022.

Given the current interest in the sector, Upcroft forecasts a continued uptick in critical minerals transactions. He said M&As could also be a vehicle for mining companies not currently exposed to critical minerals and want to get involved.

Vertical integration is also becoming a prominent stimulator of M&As in the critical minerals space.

“Customers (may) want to get direct ownership to the material at mine source, and whether that’s through offtake arrangements or through equity transactions, it’s just

going to be interesting to see how that unfolds,” Upcroft said.

“When you’re talking about gaps in supply, and you’re talking about an electric vehicle (EV) manufacturer that relies on that product being there to be able to produce their product and grow themselves, it becomes a pretty significant issue for them to want to directly manage.”

While the global mining industry is facing operational costs on an increased scale, wellrun companies will continue to enjoy positive margins into the future.

The financial risks facing the sector remains a cause for concern but not a cause for panic, and Upcroft said as long as the sector was supported from an investor, lender and government point of view, prospects remain strong.

“Mining companies are in good shape financially and, together with investors, lenders and government help, that’s an environment for supporting the right growth projects,” he said.

“Margins are falling but they will still be pretty high, so (if you) manage costs we’ll still see margins in the right space.”

Gold was a key player in the M&A space, making up 70 per cent of total deal value in 2021.

– 21 –

OIL & GAS

Santos is developing its 1.7-million-tonne-perannum Moomba CCS project in South Australia.

A Santos solution to the energy crisis Australian Resources & Investment unpacks the country’s ongoing energy crisis, highlighting a Santos project that could support future shortages, while also showcasing the future of sustainable gas production.

A

sk anyone on the east of Australia about the weather this winter and you’ll likely get the same answer.

“Freezing.”

Eastern Australia endured its coldest start to winter in decades in 2022, which aggravated an energy market already strained by shortages brought on by the Russia–Ukraine war.

Melbourne experienced its coldest first two weeks of June since 1949, with temperatures failing to push past 15°C, while Canberra’s temperature didn’t get above 13°C in the first two weeks of winter, the first time that happened in the nation’s capital in almost six decades.

Dubbo, in regional New South Wales, endured its coldest first two weeks of June since 1921.

Demand for natural gas has skyrocketed amid this cold snap, and supply has been unable to keep pace.

Speaking at a Melbourne Mining Club luncheon in early June, Santos chief executive officer Kevin Gallagher said the leading oil and gas company only had limited spot market gas capacity at the time, with most of its supply tied up in long-term contracts.

– 22 –

“All I’ve got available right now over and above what I’m producing today is 15 wells in the Cooper Basin we’re looking to connect as quickly as we can, which will bring very little gas into the market, and it really replaces natural decline in our current producing wells,” he said.

On June 1, the Australian Energy Market Operation (AEMO) triggered the Gas Supply Guarantee (GSG) mechanism for the time since it was introduced in 2017.

According to AEMO, the GSG mechanism comprises new ways to “identify, assess and confirm a potential gas supply shortfall” and “processes to communicate with industry and to call for a response to a shortfall”.

By mid-June, the semi-governmental body suspended the National Electricity Market (NEM) for the first time since its inception in 1998 – another indicator of the historic energy squeeze.

“AEMO has taken this step because it has become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers in accordance with the NER (National Electricity Rules),” the company said in a statement.

AUSTRALIAN RESOURCES & INVESTMENT

AEMO chief executive officer Daniel Westerman said suspending the market would “simplify operations during significant outages across the energy supply chain”.

Not only has the local energy market been strained by spiking demand, but AEMO said many generation units had undergone planned maintenance, around 3000 megawatts’ worth of coal-fired power generation had been out of action, while there had also been periods of low wind and solar output.

Prime Minister Anthony Albanese and Federal Climate Change and Energy Minister Chris Bowen have been repeatedly questioned as to whether extending the life of coal-fired plants would be an antidote to the energy crisis.

But that hasn’t been an option in their eyes, with renewable energy at the heart of the new government’s future energy strategy.

Albanese has even said Australia can be a “renewable energy superpower”, with the Labor Government’s plan spurring $76 billion of investment and creating more than 604,000 jobs.

While a commitment to a renewable energy future might be the best path forward, it’s still an underdeveloped industry

that doesn’t yet have the capacity to respond to major energy shortages alone.

And that’s where fossil fuels can be an important subsidiary in the green energy transition.

“We’re seeing this globally right now,” Gallagher said. “This (the energy crisis) is a global phenomenon driven by … Western countries putting in place policies over the last decade or so that slowed down development of new resources.

“If you shut down one side of the equation and you have nothing to replace it, this is what you’re going to see.

“The global gas supply will (then) have to come from the Middle East ... or Russia.

You’ll be dependent on those countries – that’s where all the gas reserves are.”

Santos’ Narrabri coal-seam gas project in NSW is waiting in the wings to support the energy crunch. The project is said to be able to support up to 50 per cent of the state’s gas needs once up and running.

More than one million family homes, and approximately 33,000 businesses and 300,000 jobs in NSW, rely on natural gas as a source of energy.

However, Narrabri, which was first developed by Eastern Star Gas before Santos bought the project in 2011, is still

navigating regulatory approvals before it can come onstream.

“We’ve got most of the approvals (for Narrabri) in place and we’re going through the last stages of that process,” Gallagher said. “But we’ve still got to follow that process and I would anticipate even the last couple of approvals that we need to get, we’ll get legal challenges and we’ll have to go through the legal review process.”

In mid-June, Federal Resources Minister Madeleine King offered her support for Narrabri, suggesting the project would be important as part of the renewable energy transition.

“If Narrabri meets all the environmental standards, and by all accounts it does, then it makes sense for it to go ahead,” King said in her first interview with the Sydney Morning Herald and The Age since taking office.

“It is an important gas reserve that will help the population of New South Wales address a future power crisis. It avoids a crisis, is what it does, because it means more gas closer to your systems.”

King was sympathetic towards public concerns regarding Australia’s climate inaction in the past, but said gas would be an important part of the transition away from coal given its better sustainability profile.

Santos’ Gladstone liquefied natural gas (GLNG) project in Queensland.

– 23 –

OIL & GAS

Santos’ Darwin LNG project in Northern Territory.

“Everyone needs to understand, especially I think in some of the southern states, that right now when you flick on your light switch or have your dishwasher running or turn on your telly, for the most part that moves a turbine in a coal-fired generator. You’re using more coal, which is high in emissions,” she said.

“While the government is now bringing in an energy plan which will get working on renewables, and that’s our very determined ambition, gas is the transition fuel that is able to bring down emissions in the short term.”

Carbon capture and storage (CCS) is coming to the fore as part of efforts to make natural gas a cleaner and more suitable energy source alongside the renewable energy transition. Gallagher said CCA was a “proven technology for low-cost, large-scale emissions reduction”.

According to Geoscience Australia, while technologies such as renewable energy, improved energy efficiency and fuel switching aim to prevent the creation of CO2 emissions, CCS complements these measures by addressing emissions that currently cannot be avoided.

CCS involves capturing, transporting and storing CO2 before it enters the atmosphere.

Once captured, CO2 is injected deep underground where it is permanently stored.

– 24 –

Gallagher said CCS would eliminate Scope 1, 2 and 3 emissions, but also enable more affordable production of hydrogen, which is considered an important resource for a green economy.

“In 2050, under the IEA’s (International Energy Agency) net-zero scenario, about half the world’s gas production would be used to make hydrogen and about 40 per cent of the world’s hydrogen would be made from natural gas,” he said.

“We know CCS works, it’s been done before and there are now 27 commercial projects operating around the world today.

“Most of these are in the United States, which has a policy framework that strongly incentivises CCS, including through tax credits and an investment by the Department of Energy of more than $US10 billion to accelerate CCS, direct air capture and industrial emissions reduction.”

Chevron’s Gorgon liquefied natural gas (LNG) project in Western Australia is the biggest CCS project in the world. At Gorgon, naturally occurring CO2 is taken from offshore gas reservoirs and injected into a giant sandstone formation 2km beneath Barrow Island, where it remains permanently trapped.

Gallagher said Gorgon had successfully stored six million tonnes of CO2 since the CCS project commenced in 2019.

In partnership with Beach Energy, Santos is building its own 1.7-million-tonne-perannum CCS project at Moomba in South Australia’s Cooper Basin, which Gallagher said could support even more tonnage.

“The exciting thing about the Cooper Basin is that there is storage capacity for up to 20 million tonnes of CO2 per year for up to 50 years,” he said.

“Not only will our Moomba project be one of the biggest in the world, it will be one of the lowest cost, at around $US24 per tonne.”

The project is estimated to cost $220 million, with Santos and Beach Energy aiming to bring it online in 2024.

Santos has also partnered with the CSIRO to trial and potentially develop what the company hopes is the lowest-cost direct air capture technology in the world at Moomba.

The collaboration will focus on developing CSIRO’s carbon assist technology, which removes CO2 directly from the atmosphere and higher-concentration post-combustion scenarios, to then be permanently stored as part of a CCS project or used to make carbon-based products.

Gallagher said this had the potential to not only negate emissions from gas production, but other emissions from elsewhere in the economy, including sectors that manufacture everyday products such as fertilisers, cement, steel and polymers.

AUSTRALIAN RESOURCES & INVESTMENT

Santos also has its Bayu-Undan CCS project in the pipeline, which has the potential to store up to 10 million tonnes of CO2 per annum.

Located in the Timor Sea, north-west of Santos’ Darwin LNG project, Bayu-Undan would enable the company to store 2.3 million tonnes of CO2 from its Barossa gas project, which is targeting first production in the first half of 2025.

Without a shift to renewable energy, climate change will continue affecting global ecosystems and potentially make the world unliveable for future generations.

However, as green technologies evolve, natural gas still has an important role to play, not only providing a solution when a cold snap hits but also reducing the reliance on other carbonintensive energy sources.

Through its Moomba and Bayu-Undan CCS projects, there’s no doubt Santos is wellintended. It’s now a matter of bringing these online and solidifying its commitment to emissions reduction.

Carbon capture and storage removes CO2 from the atmosphere and stores it permanently underground.

Finding a better way for our shareholders We have introduced a new capital management strategy, including a dividend policy and on-market share buy-back.

See announcements

ASX:MSV | mitchellservices.com.au

– 25 –

OIL & GAS

Could Australia hold the key to Europe’s gas crisis?

As Europe combats severe natural gas shortages and looks to diversify its imports amid the Russia–Ukraine war, could Australia be the reliable, geopolitically-safe supplier it needs?

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or decades, energy trade agreements between Russia and Europe have been driven by geopolitics as each side seeks to exploit oil and gas for political influence.

However, as a major player in the global energy market, Russia has the upper hand in this game and is adopting its position of power for political leverage amid the Ukraine crisis.

Given Russia is home to the world’s largest gas reserves and is the secondlargest global producer of natural gas behind the US, it is uniquely placed to control prices and threaten the welfare of the European Union (EU), which is at the mercy of Russian gas supply.

Russia has a wide-reaching gas export pipeline network with transit routes via Belarus and Ukraine and transit routes directly into Europe.

These pipelines include Nord Stream, Blue Stream, and TurkStream.

In 2021, Russia completed Nord Stream 2, a 1200km pipeline under the Baltic Sea taking gas from the Russian coast near St

– 26 –

Petersburg to Lubmin in Germany. However, the German Government made a decision not to approve its certification in the wake of the Russian invasion of Ukraine.

As European domestic natural gas production has declined over time, its dependence on Russia has increased. In 2021, Russian natural gas accounted for 45 per cent of imports and almost 40 per cent of EU gas demand, equivalent to 155 billion cubic metres.

European fears of a severe winter gas shortage are driven by the risk of a largescale supply disruption precipitated

by Russian gas producers.

National-security specialists have long recommended that the EU reduce its dependence on Russian imports at any cost; however, the delay in gas diversification now places the EU in a vulnerable position ahead of what could be a turbulent winter.

Policy-makers in the region are now scrambling to fill underground storage with natural gas supplies to provide households with enough fuel to keep the

lights on and homes warm before the cold returns. But the push for the EU to diversify its natural gas dependency presents Australia with profound opportunities to step in at this critical time.

R U S S I A’ S P O L I T I C A L I N F L U E N C E OV E R E U R O P E In response to Russia’s invasion of Ukraine and the ‘gas-for-roubles’ payment dispute, the EU joined the US in imposing sweeping financial sanctions on Russia.

Germany’s regulator also refused to give Nord Stream 2 an operating licence given Russia’s state-backed energy giant, Gazprom, owns a 50 per cent stake in the pipeline and all of the gas that would pass through it.

The licence refusal stems from concerns from the US, UK, Poland, Ukraine and Germany that the pipeline would give Russia even more of a stranglehold over gas supplies to Europe.

Due to the non-compliance with the new Russian-imposed payment scheme to pay for natural gas in roubles, Moscow

AUSTRALIAN RESOURCES & INVESTMENT

A 3D render of the Nord Stream 2 gas pipeline in Europe.

has suspended all natural gas deliveries to Poland, Bulgaria, Finland, Denmark and the Netherlands, and has halved natural gas deliveries to Italy and Slovakia.

Russia also recently cut natural gas flows to 40 per cent of Nord Stream 1’s total pipeline capacity to Germany, citing the delay in the return of equipment being serviced by Germany’s Siemens Energy.

Nord Stream 1 is the world’s longest sub-sea pipeline, transporting 55 billion cubic metres of gas a year from Russia to Germany under the Baltic Sea. German Economy Minister Robert Habeck has rejected claims that Western sanctions were to blame and cited Russia’s supply curbs as a “political decision” designed to instil insecurity within the region and ramp up gas prices. As a result of the cut, natural gas prices have indeed risen, encouraging the German Government to prompt its citizens to conserve energy.

While pipeline maintenance is expected every summer when gas demand is lower, there is an underlying concern that Russia may not turn its taps back on, cutting off gas supplies to Europe entirely.

This would ultimately heighten the existing gas crisis that has prompted emergency measures from governments and painfully high bills for consumers.

Given most German homes rely on Russian gas for heating, supplies being suddenly cut overnight would have the

As Europe seeks to diversify its natural gas imports, Australia has an opportunity to fill the demand gap. potential to tip Germany into a recession, hitting the economy by €193 billion in the second half of this year.

The abrupt end of Russian gas imports would also impact the German labour force by approximately 5.6 million jobs. This would then ultimately require the government and regulator to step in as the distributor of natural gas, and the rest of Europe will be affected given Germany’s geographical location in the middle of the EU. However, one has to question whether this decision would serve Russia’s best interest given it would negatively impact its export revenues.

With Western countries cutting ties with Russian trade and oil, Russia is in the process of re-routing its energy exports towards countries from the BRICS group of emerging economies: Brazil, Russia, India, China and South Africa.

To weather the sanctions, Russia is attempting to forge closer ties with Asia, seeking to supplant the markets it lost in the row with the EU and the US. EUROPE’S RESPONSE AS R U S S I A C U T S G A S S U P P LY Since Russia’s invasion of Ukraine in February 2022, Germany has reduced its dependence on Russian gas by 20 per cent in a gradual effort to stop using Russian gas altogether.

– 27 –

OIL & GAS

The European Union is at the mercy of Russian gas supply.

Instead, Germany is leaning on its other main suppliers of natural gas, Norway and the Netherlands, who provided 31 per cent and 13 per cent, respectively, of Germany’s gas imports in 2021.

The German Government has also given the go-ahead for the country’s first liquified natural gas (LNG) terminal to be built at Wilhelmshaven.

More broadly, Europe has announced plans to cut 90 per cent of its Russian oil imports and two-thirds of its Russian gas imports by the end of the year. EU governments are also buying gas on the spot market and attempting to secure alternative sources, including importing LNG from the US and elsewhere.

However, Europe has limited infrastructure to receive LNG shipments and a fire at a key US export depot in Freeport, Texas, undercut US gas export capacity and highlighted Europe’s vulnerable position.

With the Biden administration promising to help Europe secure more natural gas from US exporters, this also presents an opportunity for Australia.

C A N AU S T R A L I A S T E P I N ?

In 2021, Australia exported 80.9 million tonnes of LNG, equivalent to almost three quarters of the volume of gas the EU imported from Russia in that year.

As Europe seeks to diversify its natural gas imports, Australia has an opportunity to fill the demand gap. This could include bringing on additional LNG trains in Darwin.

– 28 –

The Russia– Europe geopolitical divide will fundamentally change future energy markets and while Australia is positioned to step in over the long term, it will not singlehandedly solve the problem any time soon.

The second train at Woodside’s Pluto and Scarborough fields could add five million tonnes per annum.

Santos’ Narrabri coal-seam gas project in NSW is an emerging project that could be turned to down the track. The project is said to be able to support up to 50 per cent of NSW’s gas needs once up and running.

However, Narrabri, which was first developed by Eastern Star Gas before Santos bought the project in 2011, must navigate regulatory approvals before it can come onstream.

Federal Resources Minister Madeleine King offered support for Narrabri in June, suggesting it would be an important subsidiary as Australia’s renewable energy transition continues to mature.

While Australia won’t be able to immediately expand its gas production or build a pipeline connected to Europe in the short term, Europe’s energy challenge extends beyond keeping households warm this winter.

Securing alternative and reliable energy supplies is a long-term game, giving Australia time to advance its economic and security interests.

However, at least 75 per cent of Australia’s LNG is sold via long-term contracts linked to the oil price and Australia can’t supply more to Europe without breaking these contracts. The government can only intervene in gas exports when the local market doesn’t have enough supply, and that only concerns the east coast since WA, home to two-thirds of exports, has its own unique market.

AUSTRALIAN RESOURCES & INVESTMENT

Woodside’s Scarborough project could support future European gas shortages.

On the west coast, what is not exported via contract is kept in the state under its 15 per cent domestic gas reservation policy, mandated for domestic use only.

Furthermore, as approximately a third of LNG developed on the east coast is shipped, any gas we could supply to Europe would impact Australia’s existing struggling system and manufacturers. This may become feasible

as renewable energy replaces gas on the electricity grid; however, it is unlikely in the next 10 years.

The Russia–Europe geopolitical divide will fundamentally change future energy markets, and while Australia is positioned to step in over the longterm, it will not single-handedly solve the problem any time soon.

Alexandra Colalillo is an economist and manager at a multinational professional services firm in Western Australia. A key part of Alexandra’s role involves assisting global and mid-tier mining companies respond to risk, fluctuating economic conditions and building strategies to minimise financial and operational uncertainty. She also hosts her own economics podcast, The Shady Economist, designed to break down topical Australian economics and geopolitics. Alexandra writes about the local, national, regional, and international economy as it relates to the mining and oil and gas sector.

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MINING SERVICES

Pit lake planning critical to a sustainable mine site

Mining companies should consider the commercial and community opportunities of pit lake planning.

Pit design and data collection are the key to building sustainable pit lakes in the mining industry.

F

or Claire Linklater, planning for sustainable mining pit lakes is not only about risk management.

It’s also an opportunity to help communities after a mine closes.

Dr Linklater is a geochemist and principal consultant at SRK Consulting. Over more than three decades, she’s interpreted and modelled geochemical data, assessed acid rock drainage, predicted water quality at mines and advised on closure planning.

“Few issues in mine closure are as important as pit lake planning and monitoring,” she told Australian Resources & Investment. “More open-cut mines in Australia are expected to close this decade and next. The legacy will be an increase in pit lakes around this country.”

Operating mines in Western Australia range from one or two hectares in area

– 30 –

and a few metres deep, to modern pits that are several hundred hectares in area and hundreds of metres deep.

The Super Pit in Kalgoorlie, for example, is more than 600m deep, 1.5km wide and about 4km (about 600 hectares) long.

Pit lakes form when open-cut operations stop and dewatering (groundwater removal) ceases. The remaining pit fills with ground, surface and rain water.

Governments often prefer mining companies to backfill pits with waste rock, tailings or other suitable waste. But this is not always possible or too costly, and a pit lake is allowed to form.

Dr Linklater said mining companies have increased their focus on pit lakes in mineclosure planning.

“Companies know water quality in pit lakes can deteriorate over time and,

if released, could potentially harm the surrounding community, wildlife and vegetation,” she said.

“Companies also know sustainable pit lakes can be achieved through an early focus on mine-closure planning and pit design.

For existing pit lakes, the key is regular data collection to test water quality modelling – and good community engagement.”

U N D E R S TA N D T H E R I S K S During mining operations, pit water management is closely monitored for safety, regulatory and economic reasons.

Dr Linklater said similar focus is needed to develop and monitor pit lakes, and identify beneficial outcomes to help communities after mine closure.

In many cases, the water sits at the base of a deep pit and never rises to a level where

AUSTRALIAN RESOURCES & INVESTMENT

it would discharge to groundwater or spill over the pit crest. In arid areas of Australia, the dry climate and high evaporation rates reduces these risks.

But in wetter areas, the lake water may rise above the local water table, causing release to groundwater, or may even spill from the pit, and may impact nearby receptors such as groundwater supply bores, surface waterways, flora or fauna.

Other factors that could cause pit lakes to overflow include intense rainfall events or unstable pit walls.

Such releases are manageable if pit lake water quality is acceptable, or if there are long distances between the lake

and local receptors (which could allow significant dilution of any contaminants as the outflow mixes with other water types downstream of the pit).

However, in geologies with high sulphide content, acidic and metalliferous reaction products can form on exposed pit walls.

These products can wash down into the pit lake and adversely affect water quality, especially if combined with evapoconcentration. If this acidic metalliferous water is released, and receptors are nearby, the damage to local flora, fauna and communities can be considerable.

Problems range from animals and birds drinking contaminated water to loss

of vegetation. Accumulation of elevated heavy metal concentrations in waterways near pit lakes can also cause health problems in local communities.

“Sustainable pit lakes are integral to successful closure planning for open pit mines,” Dr Linklater said. “If pit design and water quality are poor – and the risk of water overflow is high – mining companies face significant financial and reputational risks.”

Hypersalinity is another threat. In areas with low rainfall and high evaporation, saline groundwater entering a pit lake can evapo concentrate, forming a brine. Over time, salinity in the pit lake increases. High evaporation from the pit lake, and low lake

Companies also know sustainable pit lakes can be achieved through an early focus on mine closure planning and pit design. For existing pit lakes, the key is regular data collection to test water quality modelling – and good community engagement.

Some pit lakes have been used for aquaculture.

Others have been used for irrigation.

– 31 –

MINING SERVICES

Pit lakes form when open-cut operations stop and dewatering ceases.

water levels may draw groundwater water from the surrounding aquifers. This causes a fall in groundwater levels and may damage the surrounding habitat.

Dr Linklater said climate change is compounding the challenge of designing pit lakes and modelling water quality.

“Higher frequency of intense rainfall events increases the risk of water outflow from some pit lakes. At the same time, climate change will increase hypersalinity risks at some pit lakes as temperatures rise,” she said.

BEST PRACTICE IN PIT LAKE PLANNING 1. Plan early: Develop processes to identify water quality and pit lake risks. Ensure planning is integrated into the mine closure strategy at the start.

2. Pit assessment: Understand which rocks are exposed on pit walls, pit characterisation and geologies that influence pit risks.

Consider if final pit design can ensure sulphide rocks are not exposed on the pit wall surface, above the expected water level.

3. Water balance: Model likely water inflows and outflows of a pit lake.

Understand how they could change over time and the risk of contaminated pit lake outflows and impacts on local groundwater levels.

– 32 –

An important response is a greater focus on data collection to test water quality prediction models and refine them if needed.

“Mining companies are doing more work on modelling water quality,” Dr Linklater said. “The challenge now is to invest in data collection and have an agile approach to modelling as the climate changes.”

CONSIDER OPPORTUNITIES Dr Linklater said pit lake planning and monitoring have mostly focused on risk management. That work needs to continue,

4. Linkages: Conduct source pathway receptor analysis to identify linkages between pit lakes, pit lake overflow and the surrounding habitat. Determine if those receptors are close to the pit lake. Identify all transmission pathways (e.g. surface water and groundwater).

5. Receptor analysis: This includes analysis of flora, fauna, or even groundwater or bore water. Which animals or birds might use the pit lake or be affected by its outflow?

Are there Indigenous communities near the pit lake that could be impacted? Is there a nearby waterway that the local community uses for fishing or recreation? Identify primary and secondary receptors.

6. Monitoring: Develop a plan to monitor pit lake quality and implement monitoring points for surface water and groundwater.

but mining companies should also consider commercial and community opportunities from successful pit lake developments.

“Sustainable pit lakes can leave a positive legacy for remote communities,” Dr Linklater said. “We should think carefully about how these lakes, some of which could be quite large, can help remote communities and the environment.”

Some pit lakes have been used for aquaculture, others for irrigation (where the water has less salinity). Wildlife conservation has also featured through the construction of wetlands around some pit lakes. Recreation and tourism opportunities have emerged at larger pit lakes with good water quality.

“Pit lakes are potentially a valuable water source,” Dr Linklater said. “By engaging and collaborating with communities, government and other stakeholders, companies can maximise the value of pit lakes.

“But that relies on sound planning and monitoring that ensures the long-term sustainability of pit lakes.”

SRK Consulting is a leading, independent international consultancy that advises clients mainly in the earth and water resource industries. Its mining services range from exploration to mine closure. SRK experts are leaders in fields such as due diligence, technical studies, mine waste and water management, permitting, and mine rehabilitation. To learn more about SRK Consulting, visit www.srk.com

Determine the frequency of monitoring and aim to collect more water quality data to test and refine modelling.

7. Plan for climate change: Consider how greater variability in weather, an increase in extreme weather events, and hotter temperatures could increase the risk of water overflow at acid pit lakes – or hypersalinity that damages groundwater.

Ensure modelling is agile and able to incorporate climate volatility.

8. Think long-term: It can take decades before the water in a pit lake rises to a steady-state level, and the final amount of aerially exposed sulphide rock wall is known.

Be prepared to invest in years or decades of monitoring pit lake quality and the stability of pit lake walls, as water levels rise, or as salinity increases.

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GOLD

GOLD AS AN INFLATION HEDGE Higher nominal interest rates and a stronger dollar pose threats to gold’s performance for the rest of 2022.

While gold is set to face headwinds for the rest of 2022, its strategic and tactical role will likely remain relevant to investors. Andrew Naylor, World Gold Council regional chief executive officer APAC (ex China), tells us more.

R

ising prices are preoccupying policymakers worldwide. The Reserve Bank of Australia is expecting Australian inflation to reach 7 per cent by the end of the year. And Australia isn’t unique – inflation is a serious concern worldwide.

As the global economy and financial markets begin to recover from the COVID-19 pandemic, a chief concern for many is the somewhat novel situation of ‘high’ inflation.

This is particularly true in the US, where investors have been used to low levels of inflation for more than three decades.

Although the output gap and unemployment remain high, the quick economic recovery has left many areas of supply-tight. Commodity prices are reflecting this situation, as are shipping rates and business inventory data.

The causes have been written about extensively – as financial markets and the wider global economy recover from the pandemic, pent up demand and supplychain crunches have led to rising commodity prices. This has had a knock-on effect in other areas of the economy, pushing up prices more broadly.

Compounding this are large increases in worldwide government debt and indications

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that central banks are accepting of higher inflation. This suggests, on balance, that inflation risks are skewed to the upside.

It is often said that gold can protect purchasing power, and is used as a hedge against inflation. World Gold Council research has analysed this in detail.

Gold isn’t the only hedge against inflation, but with a compound annualised growth rate of 8.1 per cent (from 1971–2020) it can protect portfolios from its impact, particularly if inflation is sustained.

Although gold can perform well in inflationary environments, interest rates are a headwind. When interest rates go up, so does the opportunity cost of holding gold. When it comes to drivers of gold’s performance, 2022 could be characterised as a bit of a tug-of-war between inflation and interest rates.

We recently published our outlook for the gold market for the second half of 2022.

Gold finished the first half of the year 0.6 per cent higher, closing at $US1817 ($2627) per ounce. The gold price initially rallied as the Ukraine war unfolded and investors sought high-quality, liquid hedges amid increased geopolitical uncertainty.

But gold gave back some of those early gains as investors shifted their focus to

Gold will face two key headwinds during the second half of 2022: higher nominal interest rates and a potentially stronger dollar.

AUSTRALIAN RESOURCES & INVESTMENT

monetary policy and higher bond yields. By midMay, the gold price had stabilised in response to the tug-of-war between rising interest rates and a highrisk environment.

This was a combination of persistently high inflation and likely support from the extended conflict in Ukraine and its potential knock-off effects on global growth.

Looking ahead, we believe there are three key themes in the second half of this year: monetary policy uncertainty driving up volatility, lingering inflation, and the interest rate picture.

M O N E TA R Y P O L I C Y U N C E R TA I N T Y R A M P S U P VO L AT I L I T Y Most central banks were expected to lift policy rates this year, but many have stepped up their actions in response to persistently high inflation.

At the time of writing (mid-July), the Fed had hiked its funding rate to 1.5–1.75 per cent, the Bank of England had increased its base rate five times since November 2021, to 1.25 per cent, and the Swiss National Bank had hiked rates for the first time in 15 years. Although the European Central Bank hadn’t raised rates yet, it indicated it was prepared to do so.

These actions have had major impact on financial markets, including gold. Historical analysis shows gold has underperformed in the months before a Fed tightening cycle, only to significantly outperform in the months following the first rate hike.

Contrastingly, US equities had their strongest performance ahead of a tightening cycle but delivered softer returns thereafter.

I N F L AT I O N M AY L I N G E R E VEN IF IT PE AKS Inflation remains at historically high levels, and while investors expect inflation to cool down

eventually, we believe it will remain high for a couple of reasons.

Lingering commodity-related supply-chain disruptions from the pandemic and the Ukraine war have caused a surge in key energy and commodity prices. Secondly, tight labour markets, causing concerns that wages/labour costs may rise further.

Gold has historically performed well amid high inflation. In years when inflation was higher than 3 per cent, gold’s price increased an average of 14 per cent, and in periods where the US Consumer Price Index averaged over 5 per cent on a year-on-year basis – currently at approximately 8 per cent – gold increased by an average of nearly 25 per cent.

AMID OPPOSING FORCES, RE AL R AT E S W I L L L I K E LY R E M A I N L O W Despite forthcoming rate hikes by various central banks, nominal rates will remain low from a historical perspective.

This is important for gold since its short- and medium-term performance tends to respond to real rates, which combine two important drivers of gold performance: “opportunity cost” and “risk and uncertainty”.

In conclusion, gold will face two key headwinds during the second half of 2022: higher nominal interest rates and a potentially stronger dollar.

However, the negative effect from these drivers may be offset by more supportive factors: • High, persistent inflation with gold playing catch-up to other commodities • Market volatility linked to shifts in monetary policy and geopolitics • The need for effective hedges In this context, gold’s strategic and tactical role will likely remain relevant to investors, particularly while uncertainty stays elevated.

Andrew Naylor joined the World Gold Council in 2016 and since 2020 has led our regional office in Singapore. Originally part of the central banks and public policy team, Andrew was responsible for our Islamic finance initiative, culminating in the launch of the AAOIFI Shari’ah Standard on Gold.

Andrew started his career at international consultancy firm Cicero Group advising financial institutions on foreign investment and trade policy in Asia, and the global regulatory reform agenda. In this role, he provided economic and political commentary for global broadcasters including the BBC, Bloomberg, CNBC and China Central TV.

With a compound annual growth rate of 8.1 per cent, gold can protect portfolios from the impact of inflation.

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NICKEL

AUSTRALIA’S NEXT NICKEL PLAYERS Future demand projections mean more nickel projects will need to come onstream.

Australian Resources & Investment highlights four emerging local operations that can support the cause.

D

espite its June quarter price regression, nickel has a strong long-term outlook as electric vehicle (EV) technologies continue to evolve and sales increase.

“We’re only in the foothills of the electric vehicle story,” revered metals analyst and Macquarie Bank commodities consultant Jim Lennon said at a 121 Mining Investment event in late-May. Nickel cobalt aluminium (NCA) and nickel manganese cobalt (NMC) lithium-ion batteries are two of the most commonly used batteries in the EV manufacturing process.

NCAs and NMCs contain 80 per cent and 33 per cent nickel, respectively, while newer formulations of NMCs contain up to 80 per cent.

While nickel is becoming more and more fundamental to the EV story, the commodity’s short-term outlook is more bearish, primarily because of the COVID situation in China – a country that has been constantly in and out of lockdown.

Lennon said these COVID lockdowns had resulted in a dip in EV sales in China, while sales in Europe had plateaued.

“China’s (EV sales numbers) in April and May fell very sharply because nobody could get out to buy a car,” Lennon said.

– 36 –

Nickel is becoming more and more fundamental to the EV story.

“Europe is the other dominant market, but (sales have) been static for the last year and the reason for that is supply constraints – the European EV makers cannot increase supply fast enough to meet the demand.

“You’ve got the microchip shortage and you’ve got the steel-harness shortage because a lot of that was made in Ukraine.

(So) you’ve got all sorts of supply issues starting to limit the ability of the European market to grow in the short run.”

Volkswagen Group announced in April that it had halted production several times at various factories in Germany, including its Zwickau and Dresden EV plants, due to a lack of microchips. The original equipment manufacturer (OEM) also flagged that while the shortage will ease in 2022 and 2023,

semiconductor supplies wouldn’t normalise until 2024.

Looking further down the track, however, the nickel narrative is more positive.

Lennon forecast an average growth rate in the global EV market of just under 30 per cent per year from 2020–30, with total sales (including trucks and buses) to reach 38.9 million units by 2030. By comparison, a record 6.6 million EVs were sold in 2021.

Lennon said that not only will EV sales continue to increase, but he expects the nickel content in EV batteries to do the same.

“The trend in the (EV) market is towards higher nickel because that increases the energy density of the battery, increases

AUSTRALIAN RESOURCES & INVESTMENT

the range between charging, and towards no nickel (lithium iron phosphate) which is for urban vehicles where there’s plenty of charging points and drivers aren’t too concerned about the range,” he said.

Lennon expects EV batteries to be consuming at least 1.36 million tonnes (t) of nickel by 2030. By comparison, EV batteries consumed 300,000–400,000t of the base metal in 2021.

There are several Australian mining companies developing new nickel projects to support the battery metal’s growing demand.

While the likes of Nickel West (BHP), Nova (IGO) and Murrin Murrin (Glencore) may immediately come to mind when talking about Australia’s established nickel producers, the names Kambalda, Savannah, Odysseus and Black Swan will be heard more and more in the future.

So who makes up nickel’s next wave, and what are these companies all about?

MINCOR RESOURCES Mincor Resources is focused on reestablishing sustainable high-grade nickel

We’re only in the foothills of the electric vehicle story. production from its Kambalda project in Western Australia.

Between 2001–16, Kambalda became a trusted nickel producer before it was placed on care and maintenance due to historically low nickel prices.

In March 2019, Mincor and BHP renewed a long-standing relationship between the companies in the form of an ore tolling and offtake agreement. This enabled Mincor the right to process up to 600,000 tonnes per annum (tpa) of nickel sulphide ore at BHP’s Kambalda nickel concentrator once the Kambalda operations were up and running.

Mincor made a final investment decision (FID) to restart the mine in September 2020, before sending the first parcel of Kambalda ore to BHP’s nearby concentrator in February 2022.

Mincor received $25.3 million from BHP Nickel West in June 2022, marking the company’s first payment for nickel concentrate since restarting Kambalda.

“Receipt of first nickel sales is yet another outstanding achievement for the company as we complete our return to the global ranks of nickel producers,” Mincor managing director David Southam said.

“We are also particularly pleased that we have achieved this milestone, including the development of two underground mines, below our peak funding estimate.

“This is a tremendous result in one of the most challenging operational environments in recent memory and is testament to the dedication and efforts of our people and our contracting and operating partners, such as BHP.” Mincor delivered the Kambalda restart for a $98 million peak funding outlay, below the disclosed budget of $107 million.

There are several Australian mining companies developing new nickel projects.

– 37 –

NICKEL

Kambalda nickel production is expected to peak at over 16,000tpa in the 2022–23 financial year (FY23).

PA N O R A M I C R E S O U R C E S Panoramic Resources initially operated its Savannah nickel-copper-cobalt project in WA between 2004 and 2016, when it was placed on care and maintenance due to low nickel prices.

The mine was recommissioned in 2018 following the discovery of the Savannah North orebody, before operations were temporarily suspended in April 2020 due to COVID-related disruptions.

Panoramic Resources recommenced operations at Savannah in July 2021, producing first nickel-copper-cobalt concentrate in October 2021 and delivering its first shipment in December 2021.

This saw a 10,865t, $US14.8 million ($21.7 million) shipment of nickelcopper-cobalt concentrate depart the Wyndham port for delivery to offtake partner Jinchuan in China.

By June 2022, Panoramic had delivered its fourth shipment of nickel-copper-cobalt concentrate, with 10,489t attracting a

Panoramic Resources’ Savannah project in Western Australia.

– 38 –

Receipt of first nickel sales is yet another outstanding achievement for (Mincor) as we complete our return to the global ranks of nickel producers. $US18.1 million ($26.5 million) payment from Jinchuan.

“Our concentrate production is tracking to plan as operations continue to ramp up at Savannah,” Panoramic managing director and chief executive Victor Rajasooriar said.

“As an unhedged producer, we participate fully in commodity price moves and the pricing received on the fourth shipment is one of the best we’ve had since production resumed.”

Savannah has annual production guidance for FY23 of 6600–7100t of nickel, 4100–4500t of copper and 400–500t of cobalt. Panoramic hopes to achieve nameplate production at Savannah in FY24.

I G O/ W E S T E R N A R E A S IGO completed its acquisition of Western Areas in June, representing a “logical consolidation” of key nickel assets in WA. In doing so, IGO complemented its Nova operation with the Forrestania mine, regarded as one of the country’s highest-grade nickel mines, as well as the Cosmos operation.

Cosmos includes the emerging Odysseus mine, which is on track to deliver first concentrate in the December quarter of 2022.

Prior to its acquisition, Western Areas produced first ore from Odysseus in October 2021, which was stockpiled as the company completed construction of its concentrator complex.

Odysseus is expected to produce nickel in concentrate for 10 years from its planned commencement in FY23, with IGO suggesting its strong balance sheet would help de-risk and fund Odysseus’ continued development.

AUSTRALIAN RESOURCES & INVESTMENT

EV sales are expected to reach 38.9 million units by 2030, up from 6.6 million units in 2021.

IGO also inherited Western Areas’ Mt Goode deposit within the Cosmos operation, with an ongoing scoping study evaluating the possibility of underground and open-pit mining at the prospect.

The development of Mt Goode’s prefeasibility study will be a key priority for IGO in the near-term.

POSEIDON NICKEL Poseidon Nickel’s Black Swan project in WA is poised to become another important piece in the global nickel puzzle.

On care and maintenance since February 2009, Black Swan boasts a 2.2-million-tonne-per-annum (Mtpa) processing plant, and a disseminated mineral resource estimate of 28.9 million tonnes at 0.63 per cent nickel containing 181,000 tonnes of nickel at a 0.4 per cent cut-off grade.

Poseidon Nickel has been advancing a ‘fill the mill’ strategy as it looks to leverage off of Black Swan’s existing infrastructure and large resource base.

In mid-July, the company said it was making good progress on Black Swan’s bankable feasibility study, which is predicated on a 1.1Mtpa base case restart scenario to produce a smelter-grade concentrate.

“The recently announced Black Swan disseminated mineral resource update, together with the previously announced high-grade underground resources update,

The recently announced Black Swan disseminated mineral resource update, together with the previously announced high-grade underground resources update, means total resources are now just over 206,000t contained nickel. means total resources are now just over 206,000t contained nickel,” Poseidon Nickel managing director and chief executive officer Peter Harold said.

“The mineral composition of the Black Swan disseminated resource is primarily serpentinite and talc-carbonate ore types, with varying levels of talc content.

“As the quantity and distribution of talc can impact the concentrate quality and nickel recovery, we have undertaken significant metallurgical test work on the different ore types at Black Swan to determine the most suitable route to market for our nickel concentrate.”

Harold said the test work demonstrated the potential of producing a mixed hydroxide precipitate for downstream processing predominantly into the growing battery market.

Poseidon is currently engaged with Pure Battery Technologies about supplying such feed to their proposed Kalgoorlie battery material refinery.

Initially developing a 1.1Mtpa option at Black Swan, Poseidon Nickel has also included a 2.2Mtpa throughput scenario into its feasibility studies, which would maximise the plant capacity.

– 39 –

BHP

HOW BHP BEATS THE COST CRUNCH BHP wouldn’t be the towering mining beast it is today if it didn’t have a few tricks up its sleeve, and one initiative is proving particularly vital amid the cost crunch.

T

he BHP Operating System (BOS) is a global program of work designed to shape the major miner’s future and assist it with its continuous improvement journey.

BOS delivered the company approximately $US1.3 billion ($1.91 billion) of combined cost savings and revenue uplift in the 2021–22 financial year (FY22).

“This is a result of the BOS principles and practices, focused on our target to deliver our production commitments and increase margins on every single tonne,” BHP chief technical officer Laura Tyler said at the BofA SmartMine 2022 conference in late June.

A cornerstone of BHP’s 10-year safety and productivity strategy, BOS is a platform that has allowed the company to standardise its world-class manufacturing systems and processes, make significant progress towards eliminating fatalities, all the while driving down costs.

BHP approaches BOS in two ways. Its top-down approach sees the company build a digital twin for each of its assets to model improvement. The bottom-up approach creates 80,000 problem solvers across BHP’s global business with the aim to boost safety and productivity.

– 40 –

As Tyler puts it, BOS offers a holistic mindset to operational structure, empowering employees from the ground up.

“We’ve been working on the BHP Operating System since 2017,” she said.

“Our goal was to create a way of working that makes improvements central to everyone’s role in the pursuit of operational excellence, taking inspiration from the leading car makers such as Toyota and the Toyota method.

“It (BOS) builds on foundations that we’ve built over the previous decades, including 1SAP implementation … increasing digitisation, implementation of centres of excellence, and our move to the cloud more recently.”

BHP deployed 1SAP in 2013, as the major miner aimed to standardise its practices and foster performance transparency.

At the time of 1SAP’s implementation, the company, known as BHP Billiton at the time, said “(with 1SAP), we are now using common world-class business processes, standard metrics and reports that are supported by robust data”.

1SAP has been a key driver of BOS, which continues to fortify BHP in difficult times.

“It (BOS) marks a fundamental shift in leadership, organisational capability and employee empowerment and it is our most important lever to build organisational resilience and grow value,” Tyler said.

“Together with the power of data and technology, BOS is making us safer, more reliable and more productive.”

Tyler said BOS had led to more efficient maintenance practices, with the company’s Minerals Americas and Minerals Australia divisions key forerunners in its rollout.

AUSTRALIAN RESOURCES & INVESTMENT

About 12,000 maintenance activities are completed via the BOS app per month, with more than 2000 improvement ideas submitted each month.

Tyler said BHP’s Newman iron ore operation in Western Australia had benefited from BOS, with an excavator project extending the average equipment life by 40 per cent and delivered an availability uplift of 2 per cent.

The outcome was 3.5 years of extra life for the equipment, achieving capital productivity through the deferral of $US80 million ($117.4 million) over five years.

BOS has also enabled BHP to build leadership capacity in its employees. In the 2020–21 financial year, the company harnessed the BOS learning and development academies to train 166 BOS coaches.

This training focused on three core areas: leading and coaching, integrating technical capability and driving transformation by embedding the BOS. This enabled the BOS coaches to impart the system’s principles on its employees, further fostering company improvement.

BHP is confident its investment in digital technology will see the company continue to drive organisational transformation. In fact, BHP has several projects in the works that are helping it turn a profit.

One such project is the efficiencyincreasing, primary sulphide leaching technology BHP is rolling out at its South American copper assets. These chalcopyrite leach projects are still in their early days, but Tyler said the company has already achieved encouraging results.

“Chalcopyrite leach has the potential to increase copper recoveries in primary sulphide ore and significantly reduce cycle times,” she said.

“Our work in this space has demonstrated that our leaching technology has the potential to double copper recoveries in primary sulphides from the current mid-30s percentile.”

BHP is also looking at chloride leaching technology as a way of boosting operational efficiency, and has already enjoyed success with this at its Spence copper mine in northern Chile.

The Spence chloride leaching venture saw recoveries increase by 10 per cent compared to 2017 levels and BHP is hoping for similar increases when it launches the project at its Escondida copper operation in the next year or two.

BHP chief technical officer Laura Tyler. Credit: BHP

“If successful, given the volume of throughput at Escondida, this should drive significant increases in value through to the bottom line,” Tyler said.

Tyler was encouraged by a recent visit to Escondida, where BOS routines had been put in place and were running smoothly, making improvement initiatives all the more powerful.

“No project gets through just because it looks good,” Tyler said.

BHP applies BOS to every endeavour, ensuring its projects have the best opportunity to deliver in both profit and return.

“We set a minimum return of 10 times NPV (net present value) over cost,” Tyler said.

“In a company the size of BHP, even the smallest innovations that can be rolled out quickly will have significant global impact.

“We are confident that our investment in digital technology and innovation, linked with the automation we are putting in place, will follow a path of increasing returns.”

BHP’s Escondida copper operation in Chile. Credit: BHP

– 41 –

IRON ORE

Is this the world’s most promising iron ore project?

Australian Resources & Investment chats to Hawsons Iron managing director Bryan Granzien about the company’s bright ‘green steel’ future.

Hawsons Iron is developing a 20-million-tonneper-annum iron ore project in NSW.

H

awsons Iron has achieved several key milestones in recent months en route to developing its namesake project near Broken Hill in New South Wales.

The Hawsons Iron project is gaining global attention for its Hawsons Supergrade product which, at 70 per cent iron (Fe), is poised to be one of the highest-grade Fe products on the seaborne market.

Newly appointed chair Dave Woodall announced the Hawsons Iron board’s endorsement of the larger of the two development options for the project in midJune, paving the way for a project double its size from what had initially been planned.

The company will solely focus on developing the 20-million-tonne-perannum (Mtpa) option it initially outlined in February, in place of the previously proposed 10Mtpa pathway.

Hawsons Iron managing director Bryan Granzien said electing to pursue the 20Mtpa option was a “very logical” decision for the emerging miner.

– 42 –

“We looked at it from the point of view of a large corporate or large mining company evaluating this project – they would be looking at 20Mtpa without a doubt,” Granzien told Australian Resources & Investment.

“We’ve got 484 million tonnes of concentrate confirmed with potentially more to come, so why would we restrict ourselves to 10Mtpa?”

In late July, Hawsons Iron upgraded the project’s mineral resource to 3.95 billion tonnes at a 12.2 per cent DTR (magnetite recovery rate) for 484 million tonnes (Mt) of concentrate (54Mt measured, 193Mt indicated and 239Mt inferred).

The upgrade was the result of the company’s 2021–22 infill drilling campaign, with a further upgrade expected in the September quarter to report on results from outstanding drilling samples.

Granzien said scale was an important consideration in the decision-making process.

“In my experience in mining, scale is very important,” he said. “Your fixed costs are

spread over more volume so normally it would make sense and this project lends itself to that sort of magnitude.

“The transport option (that underpinned the 10Mtpa pathway) still needed a fair bit of work and was limited by rail capacity, which was not a good way to go forward on a project of this scale.”

As part of the 10Mtpa option, the final mineral concentrate would have been transported from the project via slurry pipeline to a rail head site near Broken Hill. It would have then been dewatered and transported on existing rail to Port Pirie in South Australia, which would have required a port upgrade.

The 20Mtpa option, on the other hand, involves the construction of an underground slurry pipeline connecting the project with a new port at Myponie Point in SA. Underpinning the decision to go ahead with the 20Mtpa option was the execution of a non-binding memorandum of understanding (MoU) with Flinders Ports.

AUSTRALIAN RESOURCES & INVESTMENT

As part of this agreement, Flinders Ports will finance, construct, own and operate the Myponie Point port, reducing Hawsons Iron’s capital requirements in the process.

While Hawsons has been engaged in discussions with Flinders Ports since 2017 – when the PFS was completed – the partnership recently gained significant momentum.

“When we demonstrated to them (Flinders Ports) why 20Mtpa was now a good option for us and why we’d identified Myponie Point, that scale was exactly what they were looking for to underwrite future developments in that transport corridor,” Granzien said.

“That’s what kicked off our discussions at a more enthusiastic and detailed level. And that progressed very quickly to, ‘This is a great fit for both of us, let’s do an MoU and let’s work through a process to consolidate that’.”

Since the Hawsons Iron–Flinders Ports MoU was executed, the two companies have set a timeline through to the development of formal documentation and a legally binding agreement, which will be subject to a successful capital raise.

Hawsons also has signed a two-year option agreement to purchase three contiguous parcels of land suitable for developing an export facility for the Hawsons Iron project at Myponie Point.

“Now that we have identified our port location, planning and detailed design work can continue on the deep-water port facility and the underground slurry pipeline from Broken Hill, including all approvals and land access agreements along the 392km pipeline route.”

“We’re setting up all the mechanisms to be able to communicate and have conversations with the many stakeholders right across that slurry pipeline from the mine to the new port.”

While the 20Mtpa option has proven to be the best development pathway, accommodating greater capacity and a new transport pathway would naturally necessitate a review of the existing schedule.

Much of the reconfiguration derives from the design, approval and construction of the underground slurry pipeline, which replaces the initial rail option.

Granzien said Hawsons and its consultants were actively engaged with the necessary stakeholders ahead of the expected release of the bankable feasibility study (BFS) in December 2022.

Hawsons Iron’s mineral resource boasts 484 million tonnes of concentrate.

“While we’re working together as a wider team, our consultants are working on their specific areas … because there are significant interfaces between the different parts of the BFS,” he said.

“Whether it’s engineering at the mine, the slurry pipeline, the port, the environmental

With our high-grade material, we’re fundamental to leading, with others, that decarbonisation process. approvals process, access to landholders – all of these things need to come together, and our consultants need to work together to say, ‘If we do this, that’s going to impact on my schedule and my timeline’.”

Like any greenfield project, Hawsons Iron will need to overcome obstacles between now and first production. But with a project

of Hawsons Iron’s potential, future demand shouldn’t be a concern.

The ‘green steel’ transition is in full swing, so there’s confidence buyers will be there. As far as Hawsons Iron is concerned, it’s a matter of when, not if.

“There’s not a lot of large-scale magnetite production which you need for green steel and not a lot of high-grade products to reduce carbon in steelmaking,” Granzien said.

“And there’s not many projects of our scale emerging in the near term.

“We clearly understand – and many analysts have forecasted – a shortfall in magnetite supply, in high-grade material to help with that green steel evolution.

“And so our product will be in high demand, not only towards green steel, but most steelmakers now have strategies on moving to lower and ultimately neutral carbon.”

Granzien said steelmakers’ net-zero ambitions will necessitate a significant technological change, which will require significant investment on their behalf.

Hawsons Iron can be an important partner in this transition.

“With our high-grade material, we’re fundamental to leading, with others, that decarbonisation process,” he said.

“And it’s not just about producing green steel, it’s about producing green products out of that steelmaking process, like cars, for example. Car manufacturers are very serious about their ESG (environmental, social and governance) credentials and that includes carbon-neutral or low-carbon suppliers.”

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MINING SERVICES

Paying dividends: Mitchell Services is at the top of its game

Demand for drilling services has jumped in the wake of high commodity prices.

Mitchell Services has announced several financial initiatives to capitalise on recent successes and reward shareholders who have been there over the journey.

So what’s in store?

A

s Australia’s leading provider of drilling services across a variety of commodities and drilling types, Mitchell Services’ client base is brimming with big names.

With 90 per cent of its revenue derived from Tier 1 miners, Mitchell Services has supported the likes of Anglo American, Agnico Eagle, Newmont, Newcrest, Glencore, South32 and Evolution Mining, among many others, on their drilling journeys – a testament to the company’s consistent, highquality service over the years.

Demand for Mitchell Services’ drilling services has risen even further in the wake of high commodity prices, and as the company continues to evolve it has announced several financial initiatives as it embarks on the 2022–23 financial year (FY23).

The ASX-listed company has a buyback underway and has announced a dividend policy in FY23 to reward shareholders.

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Mitchell Services plans to declare an interim dividend with its half-year results (expected February 2023) and a final dividend alongside its full-year results (expected August 2023), with the 75 per cent dividend aligning with each sixmonth period.

With a current fleet of at least 100 drill rigs, Mitchell Services chief executive officer Andrew Elf said the “heavy lifting” had been done regarding the company’s capital investments and now was the time to shift the focus.

“We don’t need or want to keep spending on capital equipment, and we can certainly pull back that capital spending in the next couple of years,” he told Australian Resources & Investment.

“We’ve invested heavily to have the worldclass fleet that we do and it’s now time to put that fleet to work – use it, generate cash, reduce debt, and reward the shareholders.

“Our shareholders have been very supportive in our growth from a handful of rigs and staff back in early 2014 to 100 rigs and over 700 staff today. And it’s time to give something back to them.”

As part of Mitchell Services’ ongoing fleet management, it has sold two older surface rigs to support an onmarket buyback, which it said were purchased at the bottom of the market for a combined $400,000 in 2014. The combined selling price for the two rigs in the current climate after many years of operation was $2.5 million.

Shares purchased as part of Mitchell Services’ buyback will cost no more than five per cent above the volume-weighted average price (VWAP) of the company’s shares from five days prior to the purchase, while the number of shares will not exceed 10 per cent of the company’s fully paid ordinary shares at the time.

AUSTRALIAN RESOURCES & INVESTMENT

We’ve invested heavily to have the worldclass fleet that we do and it’s now time to put that fleet to work – use it, generate cash, reduce debt, and reward the shareholders.

Proceeds from any future rig sales (if any) will go towards buybacks, with earnings to drive dividends for its shareholders.

Mr Elf said that while Mitchell Services’ balance sheet was strong, the company aims to solidify it further, with aspirations to reduce its debt profile from $40 million to $15 million by the end of the 2023–24 financial year (FY24).

Capitalising on the surge in demand is one way to slash debt, and because Mitchell Services pre-ordered new drill rigs before the latest commodity boom, the company has avoided the supply-chain constraints and long lead times currently plaguing much of the Australian mining sector.

At the time of writing (mid-July), Mitchell Services had booked all 12 new LF160 drill rigs since announcing its organic growth strategy in August 2021, which Mr Elf said had been a well-timed investment by the company.

“The investment we made with our organic growth strategy – pre-ordering drill rigs and upgrading technology ahead of supply constraints and interest rate increases – has positioned us well,” he said. “(This has been driven by) a few wise heads on the board. (Executive chair) Nathan Mitchell is a major shareholder and has been in the drilling industry since he could walk.

Ninety per cent of Mitchell Services’ revenue stems from Tier 1 mining companies.

“Scott Tumbridge (executive director) was the founder of Deepcore Drilling and Peter Miller (non-executive director) was the founder of Drill Torque. Between those three, there is over a hundred years of experience and a very strong knowledge of the industry.”

While rising commodity prices are driving increased demand, utilisation and opportunity for growth in the mining sector, this is coinciding with decreasing grades and reserves worldwide, creating a perfect storm for Mitchell Services.

Mr Elf said three commodities were driving increased drilling demand.

“Gold is always gold … and the precious metal represents circa 60 per cent of our revenue,” he said.

“The demand for copper is high, and there’s decreasing grades and reserves in the transition to a new economy while metallurgical coal for steelmaking is driving demand for drilling as well.”

“We operate all across Australia. Fifty per cent of the business is surface drilling and 50 per cent is underground drilling so Mitchell Services can support a diverse range of drilling programs.”

While Mitchell Services will continue to expand its client base, which not only supports Tier 1 companies but also mid-tier miners and juniors, its key focus in the nearterm is to attract greater investment and support shareholders who support it.

“It’s a good time to invest in the company,” Mr Elf said. “We’ve got a worldclass fleet, a strong client base and revenue earnings will continue to grow into 2023.

“We’re going to be focused on capital returns the next couple of years. The equity price is low versus our net tangible assets and the equity price is low versus traditional models.

“It is a compelling investment opportunity for those who may be interested.”

Mitchell Services’ key focus in the near-term is to attract greater investment and support shareholders.

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MINING SERVICES

FLIPPING THE ELECTRIC SWITCH The Boltec M Battery is among the most advanced fully mechanised rock bolting machines in its size class.

As a leading productivity partner for the mining sector, Epiroc understands that much of the industry’s future lies in the use of battery-electric vehicles.

F

rom the moment Epiroc launched its first battery-driven product – the Scooptram ST7 Battery – in May 2016, the Swedish company has been a pioneer in the electrification movement.

Epiroc’s electrified solutions product and sales support lead Brett Kenley said it best himself.

“We are leading the charge towards sustainability in mining through electric battery-driven, zero-emission equipment,” he said.

“A power change that changes everything.”

So what are the benefits of an electric vehicle fleet? According to Epiroc, three advantages stand out.

“A battery-driven electric fleet provides a powerful opportunity to lessen the environmental footprint and create a healthier work environment,” Kenley said.

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“Electric battery-powered machinery brings savings on energy bills, maintenance, ventilation, cooling, and personnel health. “(And) electric battery-powered machines are reliable, robust, highly productive and great-performing.”

The Scooptram ST7 Battery was just the start of Epiroc’s battery-powered journey to a more sustainable future.

Not a company to rest on its laurels, Epiroc has since has evolved its battery-electric vehicle (BEV) range to include underground trucks and drills, with a battery-operated surface drill rig also in the pipeline, having recently commenced trials in Sweden.

In 2017, the company started development of a battery platform involving scalable, modular architecture that could be used across its product range, from the smallest to largest machines.

Then in November 2018, Epiroc unveiled its second-generation BEV range, including a number of larger machines that appealed to a broader market, particularly the Australian mining industry.

Providing BEVs was one thing, but supporting the transition to electrified machines was another, especially for a mining industry that had long been diesel-dependent.

When Epiroc rolled out its Batteries as a Service (BaaS) business model to remove the obstacles that come with a transition to the technology, it provided an ‘instant technology leap’ to battery-electric machinery.

BaaS moves the upfront costs of batteries from capital expenditure to operational expenditure, with the responsibility assumed by the original equipment manufacturer (OEM).

AUSTRALIAN RESOURCES & INVESTMENT

“A key component to the success of this offering is the flexibility it allows our customers,” Epiroc Canada product manager – Rocvolt Shawn Samuels said soon after BaaS was launched.

“We take ownership of the battery itself and automatically replace and update the units as needed, which means the mine site can breathe easier and continue to focus on heightened production.”

With BaaS, Epiroc monitors clients’ battery performance and replaces the batteries when needed, ensuring BEVs have the required capacity at all times, along with the flexibility to install the latest technology when available.

In July 2020, Epiroc announced its first BaaS customer, with major miner Vale taking on 10 Epiroc BEVs for two of its Canadian mine sites.

Epiroc’s BEV range today boasts the Scooptram ST14 and ST18 battery loaders.

With an 18-tonne capacity, the ST18 has excellent digging ability and higher lifting, making it the perfect companion for Epiroc’s mine trucks.

In December 2021, Epiroc joined forces with a major gold miner to convert one of its panel caves into an integrated semiautonomous operation.

The Scooptram ST18 has been a key part of this, with the loader going through several stages to be ready for automated operation.

A spokesperson for the gold miner said Epiroc had been pivotal in supporting its workforce through the transformation.

Capable of 24–7 production across seven drives of the panel cave and with further expansions to come, the project highlights

We are leading the charge towards sustainability in mining through electric battery-driven, zero-emission equipment.

Epiroc’s ability to deliver a fully-developed autonomous system for a mining operation.

Epiroc said they are also working on a larger loader, the Scooptram ST2X, which will be battery operated only.

The OEM’s BEV range also includes the Minetruck MT42 Battery. The MT42 is known for its speed up inclines, accelerating dump cycles and increasing overall productivity.

And the advantages of going electric in underground mining extend beyond the machines themselves.

Given one of the most significant expenditures of underground operations is traditionally related to ventilation from the use of diesel engines, electric machinery means costs can be significantly reduced.

“Diesel-free equipment allows you to fundamentally change the design of the mining infrastructure to lower operating costs and boost productivity,” Kenley said.

“Cool-running electric equipment also opens the door to new, more efficient ways of mining underground.”

Epiroc also has a Minetruck MT2200 in the works, which is a next generation version of its MT2010. This is set to become available with a battery option in 2024.

Then there’s Epiroc’s mining and exploration (M&E) drilling fleet, which includes the Boomer E2 Battery zeroemission face drill rig, which has an onboard charger, large battery and powerful motor to enable long tramming distances.

The M&E drilling fleet also includes the Boltec M Battery, which is among the most advanced and productive fully mechanised rock bolting machines in its size class.

In early July, Epiroc announced it was trialling the first-ever battery-electric surface drill rig in collaboration with Swedish construction company Skanska.

The rig’s design is based on Epiroc’s renowned SmartROC T35 surface drill rig.

The SmartROC T35 E will harness Epiroc’s vast experience in the development of underground battery rigs, with Skanska to test the rig at a quarry near Stockholm, Sweden. Following the trial, Epiroc will announce when the SmartROC T35 E will be available to the market.

As Epiroc continues its battery-powered electrification journey, the OEM aims to offer its complete fleet of underground mining equipment as battery-electric versions by 2025, and its full fleet for surface operations as battery-powered versions by 2030.

Epiroc’s Scooptram ST14 battery loader.

– 47 –

FOLLOW THE LE ADERS

FOLLOW THE LEADERS

THE LATEST EXECUTIVE APPOINTMENTS Keep up to date with the latest executive movements across the mining sector, featuring BCI Minerals, Australian Strategic Materials and Wiluna Mining Corporation.

BCI Minerals managing director and chief executive officer (CEO) Alwyn Vorster will step down from his position by the end of 2022, after more than six years in the role.

Vorster was CEO of Iron Ore Holdings for four years until BCI purchased the company in 2014, before being appointed as BCI CEO in May 2016.

He has led the company through a period of great change, including the development of the flagship Mardie salt and potash project from acquisition to commencement of construction.

“It has been a privilege leading BCI’s progress, from iron ore exploration to our current flagship Mardie salt and potash project,” Vorster said in a statement.

“During the transition period, I look forward to working with the BCI team to manage this period of industry headwinds.

“I am confident that we have created the building blocks for BCI to have a successful future and am grateful for the support provided by our major shareholders, the board and BCI’s employees, and other important stakeholders.”

Mardie is a potential Tier 1 project located in the Pilbara region of Western Australia. Main construction of Mardie

– 48 –

commenced in early 2022.

David Woodall has stepped down as managing director and CEO of Australian Strategic Materials (ASM).

ASM chair Ian Gandel thanked Woodall for his contribution, particularly in laying the foundations for the company to take advantage of the global demand for critical minerals.

During Woodall’s tenure, ASM has delivered a strong optimisation study for the Dubbo project in NSW, acquired innovative metallisation technology, constructed its first metals plant in South Korea, and signed an engineering, procurement and construction definition contract with Hyundai Engineering.

Woodall will be replaced by ASM chief operating officer Rowena Smith, a highly experienced mining executive. In her first year with ASM, Smith led the Dubbo project team, which included work for the optimisation study released in December 2021. She also led the construction and commissioning of the Korean metals plant.

Smith has almost 30 years of global mining experience in various senior roles at companies such as South32, Rio Tinto and BHP for Nickel West.

Smith’s skills and experience in

global operations and major projects, along with her achievements at ASM will enable her to lead the Company through its next phase.

In July, Wiluna Mining Corporation announced Milan Jerkovic had stepped down as executive chair, with Rowan Johnston appointed interim non-executive chair in his place.

Michael Monaghan has been appointed as acting CEO and will be supported by Robert Ryan as acting chief operating officer along with general manager – operations Jon Pluckhahn and his on-site team.

It comes as the company looks to reset its mine plan to take advantage of the 5.5-million-ounce gold resource at the Wiluna gold operation in Western Australia.

“With the new flotation plant producing saleable concentrate and operating at a higher-than-name-plate capacity and improved specifications, the question of metallurgy has been answered,” interim chair Rowan Johnston said.

“The gold is there, it can be extracted and recovered. With most of the upfront capital expenditure on the WilTails project already spent and its commissioning

AUSTRALIAN RESOURCES & INVESTMENT

currently being targeted for October 2022, we will have a further revenue stream coming online.”

Alistair Cowden resigned as executive chair of Firefinch in mid-July after three and a half years at the company. Brett Fraser was appointed chair in his place.

It comes after Michael Anderson left his position as managing director in lateJune, which saw Cowden appointed the role of executive chair. Recently appointed directors Liz Wall and Naomi Scott also recently resigned.

Firefinch is advancing its Morila gold mine in Mali, which produced 13,300 ounces (oz) of gold in the second quarter of 2022, falling short of the 17,000– 20,000oz guidance it had aimed for.

Firefinch said the underperformance was due to poor equipment availability, which comes as Economic Community of West African States (ECOWAS) sanctions were imposed on Mali, restricting the movement of goods in the process.

Austral Resources recently announced the company and CEO Steve Tambanis had mutually agreed to not renew his contract. Dan Jauncey will remain as executive director and take on the CEO role in Tambanis’ place.

Tambanis joined Austral in July 2021 and has made a significant contribution to the commencement of mining at Anthill and initiation of Austral’s exploration and development strategy.

“Steve’s record as chief executive officer of Austral Resources during the period has been exemplary,” Jauncey said.

“The aggressive commitment to mine life extension with over $10 million dedicated to an extensive exploration and the drilling program is a testament to his work with the team.”

Red River Resources managing director and CEO Mel Palancian has stepped down for personal reasons, although he will temporarily remain in the role to ensure an orderly transition to his replacement.

In his past seven years at Red River, Palancian helped transform the company from a developer and explorer into a multi-asset and multicommodity producer.

Red River chair Brett Fletcher said there had been many challenges over the past few years, not least operating across three states during COVID restrictions.

“Mel’s experience and leadership has

been pivotal to providing the company with a platform for growth over the coming decades,” he said.

Palancian said he was proud of the progress that the team had made, with the development and commencement of production at Thalanga and the subsequent acquisition and development of Hillgrove, both in Queensland.

Hawsons Iron has appointed of Andre du Preez as project director of its namesake iron ore project in New South Wales, freeing up managing director Bryan Granzien to increase his focus on corporate affairs. du Preez will be responsible for the successful completion of the Hawsons Iron bankable feasibility study (BFS), construction and operation of the mine.

With 30 years’ experience in the resources sector, du Preez has a successful track record of evaluating and delivering major capital projects for toptier multinational companies.

From 2011–20, du Preez worked at New Hope Corporation, where for the last five years he was the project development manager responsible for the coal miner’s $6 billion portfolio of projects.

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EVENTS

AU S T R A L I A N B U L K H A N D L I N G AWA R D S | M E L B O U R N E | AU G U S T 2 5

The Australian Bulk Handling Awards return in 2022, welcoming the sector’s esteemed and emerging to come together and celebrate the outstanding achievements from across the last two years.

With prior events postponed, finalists from both 2020 and 2021 will be recognised at the 2022 event.

Awards to be announced include Supplier of the Year, Bulk Handling Facility of the Year, Best Practice in Safety, and Dust Control Technology, Application or Practice.

Taking place on August 25, the gala dinner will coincide with the Australian Bulk Handling Expo in Melbourne – a three-day event that encompasses the entire bulk solids handling industry.

The Australian Bulk Handling Expo is supported by the Australian Society for Bulk Solids Handling (ASBSH), which will host an industry conference, while the trade expo will showcase the latest in bulk materials handling equipment and technologies.

• bulkhandlingawards.com.au MINES A ND MONEY ONLINE CONNECT | ONLINE | AU G U S T 3 0 – S E P T E M B E R 1

Mines and Money’s online event is a perfect opportunity for miners, investors, financiers, and industry professionals to network in a virtual space.

In this online format, attendees will be able to hear market analysis, compare investment opportunities, share knowledge, discuss, debate, and do business. Those working across the globe will have the opportunity to log in from anywhere and attend keynote presentations, panel discussions and pitch battles.

Over 100 mining companies have confirmed their attendance, including Deep Yellow, Altamira Gold, and CMC Metals, while the event is set to host more than 2000 virtual meetings across the three days, with 450 qualified investors in attendance.

Investor networks from around the world will be present, including from London, Australia, and Hong Kong.

Those who wish to attend can book online and work with Mines and Money’s investor concierge team to help schedule meetings to get the most for the event.

• minesandmoney.com/online L I T H I U M , B AT T E RY A N D E N E R G Y M E TA L S C O N F E R E N C E | P E R T H A N D O N L I N E | S E P T E M B E R 14–1 5

Following successful annual iterations from 2018–21, the Lithium Battery and Energy Metals Conference is back for its fifth year in 2022.

Showcasing the latest research, developments and innovative technologies relating to lithium and its expanding market, the conference delves into the current and future challenges impacting the industry, such as the supply and demand of commodities and

– 50 –

environmental, social and governance (ESG).

Hear from and network with over 250 industry professionals, including financiers, investors, end-users, consultants, mining/ process engineers, geologists, researchers and more.

Keynote speakers include IGO chief operating officer Matt Dusci, BloombergNEF head of metals and mining Kwasi Ampofo, Hatch global lithium director Greg Sheehan and more.

Other presenters include representatives from Lynas Rare Earths, Evolution Mining, Talison Lithium, as well as the CSIRO, Murdoch and Curtin universities.

• ausimm.com/conferences-and-events/lithium N S W M I N I N G A N D E X P L O R AT I O N C O N F E R E N C E | O R A N G E | O C T O B E R 1 2 –1 3

The NSW Mining and Exploration Conference is returning to Orange in October for its eighth edition of the event.

The conference aims to reconnect the industry, facilitating discussion around the current opportunities and challenges in the state, while exploring the latest projects. It’s regarded as the key meeting place for the NSW minerals industry.

Key themes to be covered in 2022 include critical minerals forecasts, current market outlook, government perspective and recent challenges for the industry including skills shortages, scarcity of drill rigs, and delays for laboratory assays and accommodation shortages.

Speakers for the event include Legacy Minerals managing director Chris Byrne, Hawsons Iron managing director Bryan Granzien, Rimfire Pacific Mining geology manager Dr Peter Crowhurst and Australian Institute of Geoscientists director Dale Sims.

• informa.com.au/event/conference/resources/nsw-miningexploration-conference I N T E R N AT I O N A L M I N I N G A N D R E S O U R C E S C O N F E R E N C E ( I M A R C) | S Y D N E Y | N OV E M B E R 2 – 4

The eighth IMARC comes to Sydney from November 2–4 after being relocated from Melbourne.

A vivid showcase of all the elements that make the mining industry great, IMARC is where the most influential people in the sector come together to share ideas and inspiration, with groundbreaking technology and world-class content on display.

Learn from more than 450 mining leaders and resource experts throughout six concurrent conferences with a program covering the entire mining value chain.

The likes of BHP, Newcrest Mining, Agnico Eagle and Core Lithium will be presenting at the event, along with original equipment manufacturers such as Caterpillar, Epiroc and FLSmidth.

For those who registered for the previous event dates, the tickets will have automatically transferred to the new dates.

• imarcglobal.com

Australian Resources & Investment is the country’s premier journal dedicated to providing cutting-edge insights into resource developments in Australia and around the world. Special feature articles include the best minds in the industry and examine investment, exploration and extraction, recruitment, engineering and mine management.

Subscribe to Australian Resources & Investment to stay up to date with the latest news on ASX-listed mining stocks and commodity prices.

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