RESOURCES WA soil, sky and sea drive performance

With the world on the cusp of an unprecedented global transition, one well-endowed state is again proving to be the luckiest of the Lucky Country.

around them.

“We estimate the Greenbushes lithium mine, which is partly owned by IGO, partly owned by Albemarle and partly by Tianqi, is going to be selling spodumene at 32 times its cash cost this quarter,” Dermot Woods, executive director at Precision told Outperform.

“That’s the result of an amazing short squeeze in lithium – this is stuff that was selling for circa $300/t about two and a half years ago, versus as much as $6000/t in recent times. We expect prices to decline from here, so we are not chasing lithium at the moment.

“Looking at oil and gas markets globally and on the east coast, I’d be very surprised if we didn’t see a real squeeze in that market at some point.

“Further down the track you’d probably expect to see it in copper and nickel – it’s very difficult to find these deposits and even harder to actually get them online.”

Precision expects the LNG construction industry to kick off over the next few calendar years, while appetite for energy transition metals copper and nickel is expected to increase.

WA’s mineral endowment, combined with its resources- friendly jurisdiction – last year’s Fraser Institute Annual Survey of Mining Companies ranked the state #1 in the world for resources investment attractiveness – make it a compelling investment proposition.

Bigger Picture Prospect

The energy transition will be about more than mining. Western Australia’s abundance of coast, wind and sunshine put it in good stead to fuel the infrastructure its resources will be used to build.

While that future looms large, the state is also well positioned to supply a gradual energy transition, according to Woods.

“There’s opportunity in renewables, but also the blessing of cheap gas which will be the transition fuel to get there,” he says.

Mining services have also drawn attention, with Precision identifying value in the sector.

“Many of these companies are just shaking off lingering impacts of COVID costs now and as a consequence are trading at incredibly cheap valuations versus their future cash flow growth potential.”

Highlights

■ Lithium is the commodity generating the most buzz in Western Australia at the moment, but Precision believes there’s more to come for the resources sector in the state.

■ Natural Gas is considered a vital transition fuel for a greener future, while nickel and copper are likely to be in high demand in the longer term as the world looks to put together the infrastructure it needs for an energy revolution.

■ WA is well endowed with all three of these commodities, and in the most recent Fraser Institute Annual Survey of Mining Companies ranked #1 globally as a jurisdiction for resources investment attractiveness –a good place to do business.

■ The state’s mining services sector could also hold value as it shakes off the lingering impacts of COVID costs with a busy pipeline ahead.

■ Longer term, WA’s size, scale and sunshine make it a great candidate as a renewable energy hotspot in Australia and globally.

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