Australian Resources & Investment June 2022

VOLUME 16 NUMBER 3 | 2022

Australian Resources & Investment RED 5 REACHES THE GOLDEN SUMMIT

THE COMMODITY CRYSTAL BALL

INSPIRING THE GREAT NET-ZERO PURSUIT

THE RISE OF URANIUM

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Australia’s time to shine?

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COMMENT

Where to from here?

TOM PARKER Tom.Parker@primecreative.com.au

N

CHIEF EXECUTIVE OFFICER JOHN MURPHY PUBLISHER CHRISTINE CLANCY

Commodities have endured a wild ride to start 2022, so what can we expect of the year’s second half? We enlist some expert analysts to give us a detailed forecast.

o one could have anticipated the events of early 2022, let alone the global ramifications of a single country’s misdemeanour.

Russia’s invasion of Ukraine has not only upended two prominent players in the commodities world, but destabilised an interconnected global economy.

As Russia incurred widespread economic sanctions, the country’s trade was crippled, halting the world’s supply of many commodities and energy minerals.

The very global ecosystem that’s underpinned by import–export rudiments was disrupted, benefiting some producers and hindering others.

So where to from here?

In the June issue of Australian Resources & Investment, my first as editor of the magazine, we chat to PricewaterhouseCoopers (PwC) and Fitch Solutions to gain their commodity forecasts for the next six months and beyond.

We explore the future of nickel, lithium, gold, iron ore and coal, and investigate the unique stimulants that drive performance and change in these sectors.

Uranium is one commodity that has – for lack of a better word – benefited from the Russia–Ukraine conflict, with prices surging above $US60 ($86) per pound in early March.

Belgium chose to keep two nuclear reactors that had previously been slated for early closure in operation, while Finland opened Europe’s first new nuclear power plant in 15 years.

Europe can no longer rely on Russia for its energy minerals, so what does that mean for alternate energy sources? And what does that mean for uranium?

In our ‘featured’ section, we spotlight Red 5’s story, and how it is placed to become Australia’s next mid-tier gold miner. With the company’s new standalone King of the Hills mining and processing operation poised to produce first gold in the June quarter of 2022, another 4.7 million tonnes per annum of gold-rich ore is about to come onstream.

Our expert contributor Tony Featherstone highlights the initial public offerings (IPOs) to come out of the resources sector to start 2022, analysing the key trends and notable successes.

Elsewhere, economist Alexandra Colalillo looks at Australia’s move to increase the cash rate and what this means for commodities. Was this the right move? What would Colalillo have done differently? She provides her detailed analysis from page 36.

AngloGold Ashanti has been at the forefront of sustainability in the gold sector since 2008. In our ‘gold’ section, AngloGold chief executive officer Alberto Calderon offers his net-zero insights and explains why the precious metal remains a reliable investment option moving forward.

To round out the June issue of Australian Resources & Investment, we take a closer look at zinc as a commodity and shine a spotlight on the unassuming safe haven of the investment world.

Tom Parker Editor

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: Shutterstock 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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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

Mining companies dominate IPO volumes

14

F E AT U R E D

12 14 18 22

Analysis with Regina Meani Is it uranium’s time to shine?

Red 5 reaches the golden summit The commodity crystal ball

MINING SERVICES

26

Integrated mine closure planning opens up opportunity

GOLD

30

Inspiring the great net-zero pursuit

34

The social and economic contribution of gold mining

ECONOMIC OUTLOOK

36

Is a higher cash rate the right policy response?

COMMODIT Y SPOTLIGHT

42 44

CRITICAL MINERALS

40

How Australia can refine its critical minerals approach

Zinc finds its green slipstream

FOLLOW THE LE ADERS

48

the resources sector

Diamonds as a safe haven

MINING SERVICES

46

Leading the way in automation, digitalisation and electrification

The latest executive movements in

EVENTS

50

What’s happening in the resources industry?

30 –4–

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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

MINING COMPANIES DOMINATE IPO VOLUMES

BY TONY FEATHER STONE

The resources sector is outperforming in a slowing market for new listings.

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 May 4 2022

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AUSTRALIAN RESOURCES & INVESTMENT

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nitial public offerings (IPOs) of resource companies have been a highlight on ASX this year, with stronger commodity prices providing a tailwind for new listings.

Australian Resources & Investment analysis has identified 25 mining, energy, metal or chemical-related listings on the ASX so far in 2022 (to May 6).

These IPOs have raised a combined total of $343.3 million, and their collective market capitalisation at listing was just over $1 billion.

For context, at the time of writing there had been 39 listings so far this year on the ASX across all sectors. By listings volume and value, resource IPOs are dominating the activity.

Resource companies raised an average of $13.5 million per listing. The average capitalisation upon listing was $41.5 million; however, those figures are skewed by the listing of Chrysos Corporation, the year’s largest IPO with a $183.5 million raising, REASONS FOR IPO STRENGTH Three factors explain the strong performance of mining IPOs so far this year.

First, commodity prices rallied 49 per cent been January 2021 and end March 2022,

according to the Reserve Bank Index of Commodity Prices. The index has surged past its 2011 peak.

Second, higher commodity prices have underpinned resource-sector outperformance.

The S&P/ASX 200 Resources Index has a yearto-date total return, including dividends, of 15.4% over one year (according to S&P Dow Jones Indices to April 29). The ASX 200 index has returned 1.4% in that period.

Third, the underperformance of tech and other growth sectors has dampened listing volumes outside of resources. There have been only four information technology listings on ASX so far this year, and only three biotech/healthcare listings.

These and other factors suggest the resources sector will dominate listings (by volume, at least) on the ASX this year.

In early May 2022, about 20 companies had upcoming listings on the ASX – most were resource companies.

High volumes of resource-company listings – and strong share-price performance of several recent listings – is good news for founders seeking to raise capital.

It’s been a tough market for junior miners to raise IPO capital and list in the past few years.

Higher share market volatility is the enemy of IPOs.

The question is whether the healthy start for resource listings in 2022 can continue.

At the time of writing, several commodity prices had retreated from their high earlier this year. Global equity markets weakened as inflation and interest-rate fears rose.

Higher share market volatility is the enemy of IPOs. When market conditions sour, investor risk appetite diminishes.

Junior mining IPOs flourish when conditions are buoyant and investors willing to back speculative ventures.

It is thus likely that resource IPO volumes and the size of capital raisings will weaken in the second and possibly third quarters of 2022, before the traditionally strong fourth quarter as vendors seek to list companies before Christmas.

However, there were few signs of a slowdown in resource IPOs in early May. Only a handful of resource companies that sought admission to the ASX had withdrawn or extended their offer because they could not secure enough capital or shareholders.

IPO HIGHLIGHTS The main IPO highlight so far this year is Chrysos Corporation, a provider of assay technologies and services for the global mining industry.

Chrysos had an indicative market capitalisation (post-IPO proceeds) of $637 million. It is the largest IPO this year and is a much-needed addition to listed miningtechnology companies on the ASX. Before Chrysos, SensOre had been this year’s largest mining listing by value.

SensOre is using company-developed technology to explore gold and other projects in Western Australia.

The company was capitalised at $60 million upon its ASX listing in February, and shares in SensOre rallied from an offer price of $0.85 to $0.93, but traded near the offer price in early May. NICO Resources rallied. The company, which is developing the Wingellina nickel– cobalt project in WA, raised $12 million and listed in January. Its $0.20 offered shares soared to $1.87 within months of listing, and they traded at $1.48 in early May. Among gold floats, Felix Gold raised $10 million and listed on the ASX in January. The Brisbane-based company plans to identify and acquire large-scale gold exploration prospects in the world-class Tintina Gold Province of Alaska. Felix’s $0.20 issued shares traded at $0.15.5 in early May. Far East Gold, developing copper and gold projects in Indonesia and Australia, has been another strong performer this year, raising $11.7 million and listing on the ASX in March. Its $0.20 issued shares traded at

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

million-ounce Bullabulling Gold Mine, is 26km kilometres west of Coolgardie in WA’s goldfields. Belararox’s $0.20 issued shares traded at $0.81 in early May. Many Peaks Gold raised $5.5 million and listed on ASX in mid-March. The company is focused on gold and gold–copper exploration in the southern part of the Yarrol Geological Province in Queensland. Many Peaks has secured options to acquire, in two tranches, a 100% interest in two exploration permits.

Its $0.20 issued shares traded at $0.53 in early May after positive drilling progress and a good quarterly update.

Resource companies have raised an average of $13.5 million per listing so far this year.

The main IPO highlight so far this year is Chrysos Corporation, a provider of assay technologies and services for the global mining industry. Chrysos had an indicative market capitalisation (post-IPO proceeds) of $637 million. It is largest IPO this year and is a much-needed addition to listed mining-technology companies on the ASX. $0.38 in early May after a promising update from mapping and rock sampling at its Woyla Project in Indonesia.

Haranga Resources raised $6.5 million and listed on the ASX in January. Haranga has interest in gold projects in Cote d’Ivoire and Burkina Faso, and a uranium project in Senegal. Haranga said its Issia gold project in Cote d’Ivoire was in a prolific geological gold province with similarities to adjacent, welldefined gold deposits.

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The company’s $0.20 issued shares traded at $0.22 in early May, having been as high as $0.29.

Belararox has been another standout, raising $5 million through its IPO and listing on the ASX in January. The Perth company has the Belara metals project and the Bullabulling gold and nickel project. Belara is in central New South Wales, approximately 50km east of Dubbo. Bullabulling, an early-stage gold and nickel project that surrounds the three-

OIL AND GAS Energy IPOs have also featured on the ASX, as higher oil and gas prices encourage investor interest. Fewer oil and gas companies have had recent IPOs due to the underperformance of energy stocks (before 2021).

Finder Energy Holdings raised $15 million through its IPO and listed on the ASX in April.

The Perth-based company has exploration permits in hydrocarbon basins in the North West Shelf of Australia and the UK North Sea. Shares in Finder, issued at $0.20, traded at $0.25 in May. Top End Energy raised $6.4 million through an IPO for its April listing. It holds interests in hydrocarbon and helium exploration projects in Queensland and the Northern Territory. Top End shares rallied from a $0.20 issue price to $0.28 in early May. Among lithium companies, Lithium Plus Minerals raised $10 million in its IPO and listed on the ASX in late April with a $27.4 million capitalisation. Lithium Plus is exploring 19 granted exploration licences and has three exploration licences under application in the NT. The company has delivered strong early returns, with its $0.25 issued shares trading at $0.98 in early May amid strong market interest in that metal.

Lithium explorer Oceana Lithium, which has projects in Brazil and Australia, was expected to list on the ASX in late May. CHEMICALS In April, Noble Helium listed on the ASX after raising $10 million through its IPO. Noble is exploring for helium in Tanzania and aims to develop a commercially viable green helium source. Its $0.20 issued shares traded at $0.27 in Mary.

ChemX Materials raised $8 million and listed on the ASX in January. The company has entered into an agreement to acquire HiPurA, the owner of an innovative High Purity Alumina (HPA) processing technology. ChemX said global demand for HPA was being driven by demand for lithium-ion batteries. Its $0.20 issued shares were $0.24 in early May.

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F E AT U R E D

— ANALYSIS — WITH REGINA MEANI Kupfernickel: The Devil’s copper WE TAKE A TRIP DOWN memory lane to unpack nickel’s origins and explore the current state of play for the commodity.

Nickel’s origins can be traced back to 3500BC, but it was Swedish chemist Axel Cronstedt who identified and isolated nickel as an element in 1751.

Prior to this, miners in 15th century Germany found a brown-red ore they believed to contain copper. They called it Kupfernickel, or Devil’s copper, because they couldn’t recover copper from it.

Today, 68% of nickel production is used to produce stainless steel, but in recent years the growing demand for batteries, especially for use in electric vehicles, has seen the commodity establish a base to support rising prices.

The history of nickel shows that it is common for it to experience large price

swings. The price gained over 600% over a 12-month period in 1987–88, and between late 2001 and the end of 2003 the price rose 283% to pause and consolidate before continuing higher in late 2005 until it reached its peak in 2007, adding another 373%.

From early 2012, the price began building a base with a low point around US$7700 achieved in February 2016.

The price began rising steadily within a volatile fashion to complete the base in January 2021.

Oscillating within an upward path, it wasn’t until early 2022 that the price catapulted higher in frenzied trading.

It appears that unprecedented low trading volumes triggered a liquidity crisis. Nickel futures screamed to a high at US$100,000 in early March amid a

Nickel’s history shows it’s common for it to experience large price swings.

– 12 –

short squeeze. This occurred because one of the world’s top producers, China’s Tsingshan Holding Group, had to hedge its short position in the metal.

Returning to the London cash price, we find that it took off in January this year to gain more than 135% in three months. But if we use the low in March 2020, we find that the metal rose over 336% within the two years to March 2022.

Taken in perspective of the metal’s history, the gains seen recently are not uncharacteristic and the short squeeze provided the final impulse.

It must be mentioned that the global uncertainty due to the ongoing Russia–Ukraine conflict has had a significant impact on commodity prices and more volatility can be expected in the nickel price.

The indications suggest the recent drop back in price from the March high at US$48,220 to US$27,712 in early May is likely to continue and may result in a similar experience to that in 2004–05, when the price pulled back and consolidated before continuing higher.

It is difficult to determine the length of the phase at this time, but its development and the deepness of the pullback will provide some indications.

Support for the metal is located in the US$25,000–30,000 range, but we cannot rule out a deeper pullback towards the US$20,000 area.

Beyond this, if the similarity to the 2004–05 experience continues, then the pause action may prove to be halfway breather in the upswing with the prospect of significantly higher prices in the medium-to-longer term.

GME Resources’ NiWest project is appraised as one of the largest and highest quality undeveloped nickel–

AUSTRALIAN RESOURCES & INVESTMENT

GME Resources’ share price has closely tracked the nickel price. cobalt resources in Australia. The project is located in the West Australian nickel belt, adjacent to Glencore’s Murrin Murrin nickel–cobalt operation.

The share price for GME Resources has closely tracked nickel. The stock rose in line with the nickel price between 2003 and 2007, with the swings becoming more compact from 2009 as the price developed an extended base.

From the beginning of 2022, however,

the price has moved up strongly again in line with nickel in what may be an attempt to complete the base.

This may be delayed as the price pauses beneath resistance from $0.13 up to $0.18. Support during the pause phase is located above $0.09 and in the case of a deeper pullback in the $0.06–0.07 area.

Once the pause is completed in conjunction with the base, with a confirmation rise through $0.23, the

Legend Mining’s share price has rallied strongly but remains hampered by resistance.

stock would gain the potential to head towards $0.35 and then $0.50 and potentially higher. A drop below $0.06 could return the price to its previous compact range.

Legend Mining is focused on its Rockford Project, which is located in the highly prospective Fraser Range district of WA. The project has an area totalling over 3000km2, with exploration primarily for magmatic nickel, copper and cobalt.

There is also zinc, copper and silver in the volcanogenic massive sulphide style, and tropicana style structurally controlled gold mineralisation.

From the end of 2010, the price for Legend has moved ahead of the nickel price, finding a low point in June 2014 at $0.06 and completing the first stage of its base in December 2017. The price continued to follow a volatile upward path, taking it to $0.66 by mid-2018, where it pulled back to support above $0.03 to then surge higher to reach a high point at $0.21 in April 2020.

The price became overheated at this point and fell into decline. The downswing steepened in 2021 until the price found a turning point at $0.48 in December 2021.

The price has rallied strongly but remains hampered by resistance in the $0.10–0.12 area. The shortterm momentum has diverged, suggesting the price may need to consolidate under the barrier.

Support is located around $0.06 and then, more importantly, in the $0.04.5–$0.05 area. A breakaway through $0.12 would suggest a rise towards $0.14–0.15 and then $0.20, but potentially towards $0.50.

Another company of note is Jervois Mining, which aims to become the leading global supplier of responsibly sourced cobalt and nickel materials for the battery and chemicals markets, and to provide a secure, reliable supply to customers in the face of geopolitical risks.

In March this year the share price broke a long-term downtrend drawn from the late 1990s, confirming the upward path from the lows in mid-2013 in doing so.

The price has pulled back from resistance around $1.00 with support in the region of $0.70, with the possibility of dropping back towards $0.60 before the upswing resumes towards its barriers which extend to $1.50 and $2.00, but with the prospect of higher prices.

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F E AT U R E D

IS IT URANIUM’S TIME TO SHINE? Early March saw uranium futures shoot above $US60/lb for the first time since 2011.

I

Unstable geopolitical forces have caused countries to consider the viability of nuclear power. And with the world’s largest uranium resources, Australia could be a major beneficiary.

f there’s anything to learn from the commodity world in recent months, it’s the importance of supply diversity and security.

This has become more and more pertinent in a uranium industry recently affected by supply disruptions and changing global priorities in the wake of the ongoing Russia–Ukraine conflict.

Hosting almost one-third of the world’s uranium resources – and with geopolitical stability to boot – Australia has the potential to significantly grow its uranium presence and several local companies, including Boss Energy, Vimy Resources and Toro Energy, are vying to do just that.

Kazakhstan, which currently accounts for more than 40 per cent of the world’s uranium production, was rocked by deadly protests in

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January as citizens voiced their discontent with the government and growing economic inequality in the country.

The uranium price surged as a result amid concerns the unrest would quell the country’s output.

Then, in early March, after hovering just below $US45 per pound (lb) for almost a month, uranium futures shot above $US60/lb for the first time since 2011.

The Russia–Ukraine conflict has resulted in widespread economic sanctions being placed on Russia, crippling its trade and quelling the world’s supply of many commodities and energy minerals. Given Russia is a prominent producer of fossil fuels, whether coal, natural gas or crude oil, countries and jurisdictions reliant on the country for energy resources had to look elsewhere.

As Europe moved away from Russian gas, Belgium chose to keep two nuclear reactors in operation that had previously been slated for early closure.

In mid-March, Finland opened Europe’s first new nuclear power plant in 15 years, commencing test production from the reactor. Once fully operational, Olkiluoto 3 is expected to provide 14 per cent of Finland’s electricity demand.

Uranium is the main fuel for nuclear reactors. Once the mineral is mined it goes through a refining and enrichment process before it is loaded into a nuclear reactor.

While conventional uranium mining methods involve the excavation of open-pit or underground mines, according to the World Nuclear Association more than half of the

AUSTRALIAN RESOURCES & INVESTMENT

The Olympic Dam mine in South Australia is one of two uranium mines currently active in Australia.

world’s uranium operations now implement a process called in-situ leaching (ISL).

Involving no major ground disturbance, this process sees oxygen-injected water (or another oxidising solution) circulated through the uranium ore, extracting the uranium.

After the uranium solution is pumped to the surface, it is then separated, filtered and dried to create a uranium oxide concentrate, commonly known as ‘yellowcake’.

Uranium One used ISL at the Honeymoon uranium project in South Australia when it first operated the mine from 2011–13, and Boss Energy will do so again when it looks to restart the project in the coming years.

However, there will be something different about Honeymoon this time around. Boss will use ion exchange as a processing technique rather than the solvent extraction method used previously.

Boss managing director and chief executive officer Duncan Craib said this was a huge bonus for the project.

“Ion exchange accounts for about 60 per cent of the world’s supply of uranium,” he told Australian Resources & Investment. “It’s the most commonly used method of production.

“All of the Kazakhstan operations use ion exchange. (Projects) in Wyoming in the US use the technique and it’s basically a very efficient, cheaper method of processing.”

In a world of increased inflationary pressures, reducing Honeymoon’s processing cost will go a long way to solidifying the reviving project. And Boss has a few other advantages on its side.

Ion exchange accounts for about 60 per cent of the world’s supply of uranium. It’s the most commonly used method of production. All of the Kazakhstan operations use ion exchange. (Projects) in Wyoming in the US use the technique and it’s basically a very efficient, cheaper method of processing.

“We’re in a very fortunate position that we have sunk infrastructure cost of $170 million from when the mine was first constructed,” Craib said. “It would cost significantly more to do that today.

“The plant that was constructed was really well done. If anything, I think they may have over-capitalised.”

The Honeymoon restart has an upfront capital requirement of $US80 million, which takes into account refurbishing the existing plant to cater for ion exchange processing.

Given the initial capital cost for many new mining projects can be in excess of $US200 million, having much of Honeymoon’s infrastructure already in place is a huge plus for Boss.

Craib said Honeymoon’s prospects were also benefited by the project’s permitting, along with an active export licence.

“You can only get a Federal Governmentendorsed export licence … if all your other permits are in good order,” he said.

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F E AT U R E D

Commodity disruptions caused by the Russia–Ukraine conflict have prompted more European countries to consider nuclear power.

“And uranium mining is arguably one of the most stringent or well-regulated forms of mining in Australia. It’s quite an arduous process and there are many permits to get because of the geopolitical sensitivity of the commodity.”

Having launched an over-subscribed $125 million equity raise in March, Boss is fully funded through to production at Honeymoon, allowing the company to make strategic decisions regarding the project’s financial future. “(Being fully funded to production) means that we’re not being forced to enter into offtake agreements to underpin debt financing,” Craib said.

“We believe the market’s going to further strengthen – the commodity price – and having that belief we want to be in a position that we can take advantage of that. As the market begins to move, we can enter into higher price contracts.

“If we had gone with the other option of focusing on a 100 per cent debt arrangement, then we would have to sign up significant

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portions of our production profile into offtake agreements at an existing price.”

Honeymoon also has a 1.25-millionpound stockpile of uranium oxide (U308) at the ready, which Craib said strongly positioned Boss heading into offtake negotiations.

“The strategic inventory gives us a stronger negotiation position, with fuel buyers when we enter into offtake agreements because they in effect have greater confidence in our ability to deliver,” Craib said.

“For a fuel buyer to sign up an offtake with a development or restart company, they would need some reassurance that we would be able to deliver and start producing.

“With us, the fact that we’re a restart project and have previously produced is a big tick; (as is) the fact that we have strategic inventory that can supplement or feed into a contract if there is any hiccup during that ramp-up period.

“That gives them enormous confidence that we’ll be able to deliver and meet our contractual obligations.”

While Boss has an open policy regarding its offtake strategy – meaning it could sell all around the world – there are some key jurisdictions on which the company is focused.

“Our target market would likely be Europe and the US, but not to, say, South Korea and Japan,” Craib said. “We can trade with whomever; we’ve got experience on entering into offtakes with a multitude of countries, but it would appear most of our discussions are currently with North America and Europe.

“The type of contracting that we would look to enter into would be market-related offtake agreements where we have a floor and a ceiling, the floor would protect you against the downside. The contracts will be of different pricing mechanisms and different durations.

“As the market begins to pick up, as it’s doing, we would be looking to layer in those market-related contracts. It’s very difficult to cherry pick the top of the market but these market-related contracts give you the ability to grow with the market.

AUSTRALIAN RESOURCES & INVESTMENT

“That’s the way the industry is heading – away from fixed-price contracts towards market-related contracts.”

While Australia has never generated its own nuclear power – something unlikely to change any time soon – the energy source is enjoying a resurgence overseas.

According to the International Energy Agency (IEA), global nuclear power generation grew by 3.5 per cent in 2021 compared with 2020, rebounding from an almost four per cent drop in 2020.

The IEA has forecast nuclear power generation to grow by an average of one per cent between 2022 and 2024, predictions that were published prior to the commencement of the Russia–Ukraine conflict.

Craib believes that while recent geopolitical crises have played a role in accelerating uranium’s recovery, some underlying themes have remained all along. “(Uranium) demand exceeds primary production and there’s been a drawdown on inventory levels,” he said. “So the world needs new uranium mines to be developed and new uranium resources to be discovered.

“The growing awareness globally (from the Russia–Ukraine conflict) has reinforced the need for new reactors and it’s likely to lead to an increase in uranium demand in the near term as reactor timelines are extended.”

Craib said recent events have also highlighted the importance of geopolitical security and sourcing supply from safe and stable jurisdictions.

“You can also look at the geographic and corporate diversification of nuclear fuel supply,” he said. “Recent events have highlighted the importance of securing supply sources with minimal geopolitical risk.

“That’s where Australia is in such a strong position. We really are a geopolitically stable country, and particularly for mining.

“Then South Australia – where Honeymoon is located – is the premier uranium state. The only operating uranium mines in Australia are in South Australia, being Olympic Dam and the Heathgate Resources operation.”

Another aspiring Australian uranium producer, Vimy Resources, has been developing its Mulga Rock and Alligator River uranium projects in Western Australia and the Northern Territory, respectively.

Vimy successfully raised $17 million in March, enabling the company to be fully funded into 2023 when it hopes to have completed Mulga Rock’s bankable feasibility study.

Soon after, the explorer announced a $658 merger agreement with Deep Yellow to create

a global uranium company with footprints in Australia and Namibia.

Deep Yellow is currently developing its Tumas project in the southern African nation, which could produce 2.5 million pounds of U308 per annum over a 11.5-year mine life.

Mulga Rock has a potential annual production capacity of 3.5 million pounds of U308 over its own 15-year mine life.

Vimy managing director and chief executive officer Steven Michael said the merger strongly positioned Mulga Rock moving forward.

“This merger de-risks and underpins our path to development at Mulga Rock,” he said in a statement.

“The combined financial, processing and operating strengths of both companies will enable greater optimisation and the delivery of Mulga Rock, as well as an established exploration team that can unlock considerable value at Alligator River.”

Following the necessary approval process, Vimy and Deep Yellow aim to complete the merger in July.

In early May, Vimy announced that a resource extension drilling program at Alligator River’s Angularli deposit would commence in June, the first exploration to have occurred at the prospect since 2018.

The 19-hole diamond drilling program will target extensions to the existing resource and potentially highlight new deposits at Angularli North, South and West.

Toro Energy is another company looking to bring a uranium project on-stream, with its Wiluna project in WA boasting four deposits.

In early May, Toro completed a pit reoptimisation study on its Lake Maitland prospect, which validated the deposit as a standalone uranium-vanadium operation.

The study found a 50 per cent increase in potential uranium production for Lake Maitland and identified the deposit as the preferred resource for the Wiluna project. It also identified the potential production of 12.2 million pounds of vanadium oxide (V2O5) .

Lake Maitland now has a possible 35.2 million tonnes (Mt) of ore to be mined, up from the 13.2Mt determined prior. The study also increased Lake Maitland’s forecast mine life from 10.1 years to 17.6 years.

Toro executive chair Richard Homsany said the findings successfully repositioned Lake Maitland as an operation for the future.

“The re-optimisation of the Lake Maitland pit is a very significant step towards realising the true value and potential of our 100 per cent-owned Wiluna uranium project,” he said.

“These results have materially elevated, at a scoping study level, the potential ore to be mined and U308 to be produced at Lake Maitland.”

While Australia may not warm to nuclear power any time soon, its next wave of uranium producers have a unique opportunity to establish themselves in a growing international nuclear market. Add in geopolitical stability, and Australia might be an ideal uranium breeding ground.

Boss Energy was aiming to make a final investment decision regarding the restart of its Honeymoon project at the time of writing in May 2022

Boss Energy’s Honeymoon uranium project in Western Australia.

– 17 –

F E AT U R E D

Red 5 reaches the golden summit

Image: Tony McDonough

Red 5 recommenced underground mining at King of the Hills in April.

Once a Philippines-focused gold miner, Red 5 is eager to ascend the Australian gold mining mountain, and its new King of the Hills operation could be the ticket it needs to get there.

R

ed 5 is poised to produce first gold from its new standalone King of the Hills mining and processing operation in the June quarter of 2022, a journey that’s been years in the making.

First opened in May 1990, King of the Hills has long been a trusted asset, with the likes of Mount Edon Gold Mines, Sons of Gwalia and St Barbara among its previous owners.

Red 5, previously a Philippines-focused gold miner, acquired the Western Australian operation from Saracen Mineral Holdings in 2017. The company purchased the Darlot gold project from Gold Fields in the same breath, and suddenly its Eastern Goldfields aspirations were gathering steam.

“In 2017, we came across a great opportunity to be able to combine Darlot

– 18 –

and King of the Hills as a standalone production centre,” Red 5 managing director Mark Williams told Australian Resources & Investment.

“Fortunately, they were being sold at similar times but by separate vendors, so entrepreneurially we saw the opportunity to be able to combine them. They both had aspects that were complementary of each other, and once we’d done that essentially the strategy was to fill the mill at Darlot.

“That was October 2017, and we haven’t looked back since. We’ve been able to add tonnes and grade and it was a year into restarting the King of the Hills mine that we identified these great intercepts.”

Red 5 commenced a 30,000m drill program at King of the Hills in October 2018, and as

hole after hole hit continuous, high-grade mineralisation, the company’s belief in the resource grew.

“We ended up with 200–300m at somewhere between 1.5–2g intercepts … and so we said, ‘Hang on, we might have something here’, and turned the drill around and did the same in the other direction.

“We ended up with 500–600m, something like 2–3 football fields of grade that was, on average, somewhere between 1.5–2g.”

As Red 5 crunched the numbers, it realised King of the Hills had the potential to be bulk mined, a method lending to a higher ore production profile.

“Back in the day, King of the Hills had been mined as a bulk open pit off and on during the ’90s for something like 15 years

AUSTRALIAN RESOURCES & INVESTMENT

Red 5 has contracted Macmahon to carry out mining services at King of the Hills.

Image: Tony McDonough

and had mined 1.6 million ounces as a bulk opportunity,” Williams said.

“So we said, ‘Can we turn the clock back to 2004 and pick up exactly where Sons of Gwalia had left off?’, and that kickstarted a new journey for the project.

“We finished the pre-feasibility study; the final feasibility study was completed in September 2020. And, remarkably, at the conclusion of the feasibility study we found King of the Hills to be the eighth largest endowed gold mine in Australia with 2.4 million ounces of reserves.”

Confident in King of the Hills’ potential, Red 5 launched a $125 million equity raise at the advent of the COVID pandemic. With King of the Hills still not fully proven in the public eye, this move was a gamble, but one that would eventually pay off.

“We’re in a really fortunate position because of a decision the board and management took in 2020,” Williams said. “We raised the equity portion – $125 million – in March 2020, which was quite an unconventional approach because at that stage we were halfway through the feasibility study.

“Convention is that you finish a feasibility study and then go through the debt portion, raise the equity, and then have the financial investment decision. But we raised the equity halfway through the feasibility study, and we did that for a number of reasons.”

Red 5’s conviction was underpinned by its clarity of the project.

It’s a 4.7 million-tonne processing plant that has more upside. It’s built for scalability and one eye on the future, and we’ve been able to deliver on time and budget, which is quite miraculous given the state of the world.

“We’d just announced a 4.1 million-ounce resource – we knew there was lots of gold at King of the Hills. It’s a brownfield site; there’s 1.6 million ounces that’s been depleted from the open pit, 400,000 ounces in the underground, so there’s been two million ounces depleted.

“All of the key parameters were known … and it was a supercharged gold price at the time. We were also on the eve of the COVID lockdown and the future was quite uncertain.

“So we took a bold decision to raise the equity and it really has paid off because that allowed us to engage our construction manager Warren (King), who worked handin-hand with a study manager and also

a processing plant manager. And for the next six months we developed a really solid feasibility study.”

With the money raised, Red 5 commenced construction on King of the Hills in October 2020, soon after the project’s feasibility study was published.

Williams said this could never have happened if the equity raise hadn’t occurred when it did.

Red 5’s bold move paid off in other ways, too.

“The environment enabled us to have fixed-price contracts, which shielded us from subsequent inflationary cost pressures,” Williams said.

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F E AT U R E D

We’ve got some great targets, some low-hanging fruit to be able to increase the resource base in the underground. It’s been mined for eight years, both by us and St Barbara, and is open in all directions.

“With our processing plant manager, we were able to cherry pick all the key items – such as the SAG (semi-autogenous grinding) mill, the screens, the crusher – in 2020.

So the budget number of $226 million is a 2020 price.

“If we were to do that in today’s climate, we haven’t calculated it but I’m sure the cost would start with a three, not a two.”

To maximise King of the Hills’ potential, Red 5 not only sourced the processing plant’s necessary components ahead of time, but also ensured they were scalable.

The company also considered the plant’s operating.

“It’s a 4.7 million-tonne processing plant that has more upside,” Williams said. “It’s built for scalability and one eye on the future, and we’ve been able to deliver on time and

– 20 –

budget, which is quite miraculous given the state of the world.

“From the feasibility study, the plant’s processing costs were less than $12 per tonne, which gives us a strategic advantage over other producers within the region.

“Why we’re able to produce it so low is, one, the sheer economies of scale. Two, the metallurgical properties of the ore are very favourable – it’s free milling, there’s high recoveries and there’s low power consumption for the rock.

“Thirdly, we’re in close proximity to and have tapped into APA’s Goldfields gas pipeline, so we’ve got a lower cost of power than we otherwise would have.”

Red 5’s initial goal is to achieve a nameplate production of 4.7 million tonnes per annum (Mtpa) of ore at King of the Hills,

which will be delivered across a 16-year mine life. From there, the company will be pushing to elevate the project above 5Mtpa.

In early February, Red 5 announced its mining contractor Macmahon had commenced open-pit mining at King of the Hills. Underground mining recommenced in April, while the company has advanced many other late-stage objectives.

Commissioning of the crushing circuit, gas pipeline and power station have been completed, while the run-of-mine pad has been loaded with stockpiles, with both recently mined and historical ore.

At the time of writing (mid-May), the SAG mill was being commissioned and ore processing had commenced.

Processing would initially focus on lowgrade development ore sourced primarily

AUSTRALIAN RESOURCES & INVESTMENT

Image: Tony McDonough

from the King of the Hills open pit and existing stockpiles.

Williams said Red 5’s goal for the June quarter was to achieve the “safe, efficient and successful” ramp up of the processing plant’s commissioning and to pour first gold. From there, it’s about elevating the asset to reach its full potential.

“Once we’ve got the first gold bar, then we need to produce more gold,” Williams said.

“In the September and December quarters (we’re aiming for) a successful ramp up of the underground and open-pit mines. “(Then) next calendar year, we’re forecast to generate positive cash flow which we will use to expand exploration activities, where we’ve got a really strong organic pipeline.”

In the four-and-a-half years that Red 5 has owned King of the Hills and Darlot,

it has accumulated a strong tenement package. Williams said there were plenty of opportunities to expand the current resource.

“We’ve got some great targets, some low-hanging fruit to be able to increase the resource base in the underground,” he said.

“It’s been mined for eight years, both by us and St Barbara, and is open in all directions.

“We also have our satellite open pits in close proximity to King of the Hills and also some great targets at Darlot, including Ockerburry, Cables and Mission.”

Red 5’s Darlot exploration strategy is to establish long-term satellite ore feed for the King of the Hills processing hub, mined from the Darlot underground mine and surrounding deposits.

Red 5 contracted Redpath Australia to accelerate mine development at Darlot in October 2021, focusing on the Burswood, Pedersen, Middle Waters South, and Thompson mining areas.

Williams said Red 5 was delighted with Redpath’s performance so far as the company looks to further solidify Darlot.

“We have a significant resource base of 1.3 million ounces at Darlot and we needed to accelerate development to access these new mining areas. Redpath has started on time, and they’ve hit all their targets,” Williams said.

“This gives us access to new stopes, which are more reliable than the remnant stopes that we have been mining over the

past 12–18 months. It also gives us access to new ore tonnes that we can process economically at King of the Hills.”

Red 5’s ideal scenario is to have the Darlot and King of the Hills open-pit and underground mines operating in unison, feeding the 4.7Mtpa King of the Hills processing plant at the same time.

Until now, Red 5 has fed mined ore from the two projects into Darlot’s 0.83Mtpa processing plant. This facility will be progressively scaled down and cease operation before the end of the 2021–22 financial year.

“We will process the ore tonnes together, so they will be comingled,” Williams said.

“We know that works because the strategy when we purchased the assets was to have the trucks going from King of the Hills to Darlot, which was successful. And we’ve processed the ores together at Darlot, so we know they are compatible.

“So out of the 4.7Mtpa, we’re looking at 3Mtpa from the King of the Hills open pit, 1Mtpa from the King of the Hills underground and about 500,000–700,000 tonnes per annum at Darlot.”

Through King of the Hills, Red 5 is realising its goal of becoming a mid-tier Australian gold producer. And given the operation’s potential, the company won’t be content on finding a comfortable slipstream.

King of the Hills is an asset brimming with opportunity and discovery. It will be fascinating to see what Red 5 makes of it.

Red 5 purchased the King of the Hills and Darlot gold projects in 2017.

Image: Tony McDonough

King of the Hills at night.

– 21 –

F E AT U R E D

THE COMMODITY CRYSTAL BALL: HOW WILL THE REST OF 2022 PAN OUT? Australian Resources & Investment chats to PwC and Fitch Solutions about what can be expected of commodities in the second half of the year.

Fitch Solutions believes gold will maintain its lustre during the second half of 2022.

– 22 –

AUSTRALIAN RESOURCES & INVESTMENT

I

f we thought 2021 was a year of surprises in the commodities world, no one could have anticipated the events of early 2022.

Even before Russia invaded Ukraine on February 24, a move that sent global markets into a spin, dwindling supplies sent nickel prices to 10-year highs in January.

Aluminium prices reached their highest point since 2008 in early February, with falling inventories a growing concern.

Lithium joined the party as well, with the price of spodumene concentrate surging by 45.5 per cent in January, according to price reporting agency Benchmark Mineral Intelligence (BMI).

Then the Russia–Ukraine conflict began and countries and jurisdictions across the world imposed sanctions on Russia, which had a significant ripple effect on global commodities.

The London Metal Exchange (LME) halted nickel trading on March 9 as market panic saw prices momentarily race beyond $US100,000 ($143,811) per tonne.

A week earlier, aluminium prices soared beyond the January peak to reach record highs as Western sanctions prompted the world’s three biggest container lines to suspend cargo shipments in and out of Russia.

This came at a time where aluminium inventories were already low; in fact, Reuters reported that aluminium stocks in LMEregistered warehouses had more than halved in the 12 months prior to March 2022.

While the Russia–Ukraine conflict has taken much of the spotlight, common commodity trends have sustained in the background.

“Those longer-term themes are continuing,” PricewaterhouseCoopers (PwC)

Australia partner Marc Upcroft told Australian Resources & Investment.

“Everything we were talking about last year in terms of what’s happening in the sector continues despite what those shortterm impacts are.

“Those trends around decarbonisation, the change in energy mix is continuing, governments investing in new infrastructure and renewal of infrastructure is continuing.

The global economy is still doing relatively well, that’s continuing.

“All of those trends that are supportive of commodities and the mining sector generally are still there.”

Considering the Russia–Ukraine backdrop and the prevailing trends sustaining regardless of heightened geopolitics, what can be made of commodities as the second half of 2022 commences?

– 23 –

F E AT U R E D

Today there is a heightened awareness around energy security, both in terms of availability and affordability. Coal is one of those energy sources that is easy to adjust quickly because you can put it on the boat and ship it somewhere provided you’ve got the right facilities on the other end.

Iron ore’s outlook largely hinges on the situation in China at a given time.

Australian Resources & Investment chatted to Upcroft, PwC national mining leader Debbie Smith, and Fitch Solutions’ senior commodities analyst Sabrin Chowdhury to gain their commodity forecasts for the next six months and beyond.

W H AT S H O U L D W E E X P E C T O F N I C K E L? Nickel cobalt aluminium (NCA) and nickel manganese cobalt (NMC) lithium-ion batteries are two of the most commonly used batteries in the electric vehicle (EV) manufacturing process. NCAs and NMCs contain 80 per cent and 33 per cent nickel, respectively, while newer formulations of NMCs are containing up to 80 per cent nickel.

According to the International Energy Agency (IEA), global EV sales increased from 2.2 million cars in 2019, making up just 2.5 per cent of global car sales, to 6.6 million cars in 2021, representing close to nine per cent of the global car market.

– 24 –

Combine nickel’s rising importance in lithium-ion batteries with escalating global EV demand and it’s a perfect storm for the base metal going forward.

“Nickel is definitely a metal with a very bright demand outlook from the EV industry and the green transition,” Chowdhury told Australian Resources & Investment. “So the outlook for nickel is very positive now and for the second half of this year.”

At the time of writing (mid-May), threemonth nickel price on the LME was hovering around $US30,000 ($43,143) per tonne. While the commodity has retreated from its March highs, that price is still more than 50 per cent higher year-on-year (YoY).

Despite this, however, Chowdhury expects nickel to cool a touch.

“Our outlook for the entire of 2022 is that (nickel) prices would average around $US27,000 ($38,829)–27,500 ($39,548) a tonne so we do expect some more consolidation for nickel given the huge spike in nickel prices following the LME instance,” she said.

“Russia accounts for 10 per cent of global nickel production and 25 per cent of refined nickel production, so there is obviously a threat to supply and there could be supply disruptions going forward if Russia decides to withhold its nickel, etcetera.

“But prices reaching to the February, March levels? That’s not sustainable. It doesn’t reflect the true picture of what’s going on in the market.”

Chowdhury remains pragmatic about nickel, though she doesn’t foresee the commodity regressing to pre-2022 levels of below $US20,000 ($28,762) per tonne any time soon.

W H AT A B O U T L I T H I U M? According to BMI, at the time of writing the price for lithium carbonate was up 432 per cent YoY and up 126.7 per cent since the beginning of 2022.

Lithium hydroxide had risen even further, increasing by 461 per cent YoY and 144 per cent for the year to date.

AUSTRALIAN RESOURCES & INVESTMENT

The primary lithium resource in Australia is spodumene concentrate, which is converted by international customers into lithium carbonate or lithium hydroxide for batteries.

While Australia is a prominent global producer of spodumene and has new projects restarting or coming on stream for the first time, this won’t be enough to abet the commodity’s supply squeeze in the short term.

“The demand outlook for lithium is very strong going forward, and the supply of lithium is still quite tight,” Chowdhury said.

“Many miners are investing in lithium projects and there are new players emerging in the lithium market, but it will take quite some time for supply to match up with demand. So lithium prices will continue to remain elevated for a time to come.

“We won’t see the huge spike that we saw in the last 2–3 years in the lithium market again, because there will be a better balance of supply and demand. But prices will not fall back to pre-2020 levels at least.”

The Australian Government’s Resources and Energy Quarterly documented the lithium slide of 2019.

Reporting on the September quarter of 2019, the Resources and Energy Quarterly found the lithium hydroxide price fell 33 per cent YoY – from $US18,000 ($25,886) per tonne in 2018 to approximately $US12,000 ($17,257) per tonne in 2019. This came amid strong supply and slower EV growth.

WILL GOLD REMAIN A TRUSTED ASSET? The gold price jumped in the wake of the Russia–Ukraine conflict, breaching $US2000 ($2876) per ounce in the second week of March.

Investors flocked to the commodity as a safe-haven asset, seeing it as a hedge in the face of uncertainty.

However, gold regressed below $US1900 ($2732) per ounce to start May, which coincided with the US Federal Reserve (the Fed) raising interest rates by 50 basis points amid rising inflation. US Treasury yields rose and a firm US dollar (USD) pressured demand for the greenback-priced bullion.

Upcroft said investors took a liking to alternate safe havens in the wake of the rate hike.

“The increase in the US dollar. This seems to be taking a lot more of the share of geopolitical risk rather than gold, which is interesting,” he said.

“But I suspect that as we continue through 2022, there’s still going to be uncertainty and I think that’s still going to be

supportive of gold prices.”

Chowdhury believes gold will keep its charm as we enter the latter half of 2022.

“Gold will always remain a strong investment option,” she said. “Gold thrives on uncertainty and, as you’ve seen, there is no end to uncertainty in 2022.

“So even though gold saw a bit of a setback due to the Fed hiking rates and the stronger USD, gold still remains … above preCOVID levels.

“Due to uncertainty with the Russian invasion of Ukraine, also uncertainty in China, investors still feel the need for gold as a safe haven asset so there is still significant demand for gold.

“Our forecast for gold for this year is (average) $US1900 per ounce. We see a slight dip next year provided that some uncertainty in the global economy fades away.”

W H AT S H O U L D W E M A K E OF IRON ORE? From an analytical point of view, iron ore is a tough nut to crack, with sustained uncertainty in China plaguing consistent demand growth.

Just as there’s signs of infrastructure and construction stimulus, China plunges into lockdown and steel mills are closed.

Smith said a holistic view was required to understand the iron ore market.

“You’ve got to look at what’s happening in the construction and infrastructure space, not just what’s immediately happening in the steel mills,” she said.

“The China lockdown has had an impact, but if you assume that’s a point in time and that global economic growth is going to continue, it should still be fairly solid.

“Iron ore miners, like any other miners, are putting a lot of focus into how they decarbonise their operations. So investment will continue on their side in how they get a lower-emission product.”

According to Mysteel, at the time of writing 62 per cent Australian iron ore fines were trading at $US130.7 ($188) per tonne at the Chinese port of Qingdao. This came as China imported 86.06 million tonnes of iron ore for the month of April, a 12.7 per cent YoY drop.

Chowdhury said that despite the momentary drop in iron ore demand, there’s nothing to say this won’t return.

“We do not expect any increases in iron ore and steel prices (in the short term) ... but they shouldn’t collapse because the Chinese Government’s monetary and fiscal policies are set to remain expansionary throughout this year at the very least,” she said.

“Usually when the Chinese Government

wants to stimulate the economy, they do it mainly through the construction sector; and the construction sector is the major consumer of these ferrous metals.

“Iron ore’s around $US130-plus a tonne, which is still way above pre-COVID levels.

“Our iron ore forecast for this year is $US120 ($173) a tonne. We hold onto that because we have expectations for demand stabilisation later this year from China.”

W H AT ’ S T H E F U T U R E O F C OA L? At the time of writing, Newcastle coal futures were trading above $US370 ($532) per tonne, its highest level since the record highs of early March.

This comes as the European Union (EU) steers away from Russian energy sources, including the country’s coal and natural gas.

According to Wood Mackenzie, Russian coal accounts for roughly 30 per cent of European metallurgical coal imports and more than 60 per cent of European thermal coal imports.

Upcroft said it was difficult to put an accurate finger on coal, given the everchanging geopolitical environment. “(Coal prices will remain elevated) to the extent that energy security is a major theme in pockets of the world,” he said.

“We’ve got to see how Europe responds to their energy needs and their desire to manage the risk in Europe because that’s a significant balancing feature of the global situation.

“Today there is a heightened awareness around energy security, both in terms of availability and affordability.

“Coal is one of those energy sources that is easy to adjust quickly because you can put it on the boat and ship it somewhere provided you’ve got the right facilities on the other end.

“So I think that’s been supportive of coal and I think it’s heightening the ongoing role coal will play going forward despite that longer term trend away from fossil fuels to other energy sources.”

Smith said coal’s importance into the future would hinge on the energy transition at a point in time, something that will naturally shift as the pursuit for decarbonisation intensifies.

“I guess the thematic is coal has a role to play in the energy transition, it’s just that role will be different to what it is now,” she said. “For the next 12–24 months, energy security is a dominant feature of what’s going to influence the coal price.”

– 25 –

MINING SERVICES

Integrated mine closure planning opens up opportunity An integrated approach helps companies, communities and the environment.

M

ining companies are incorporating integrated mine closure costings into their planning to better manage closure liability. But more can be done from the onset of mine development to mitigate potential mine closure risks and reduce ongoing and end-of-mine costs.

That is the view of Ray Mayne, principal environmental scientist at SRK Consulting, who has advised numerous mines on closure related projects in South Africa and other parts of Africa.

“Integrated mine closure planning is vital,” Mayne told Australian Resources & Investment. “There are long-term opportunities for companies that actively address mine closure aspects. And there’s the potential for costly risks and ‘unknowns’ for companies that do not adopt good international practices in this area.”

Integrated mine closure is a dynamic, interactive process that recognises environmental, social and

– 26 –

governance (ESG) factors from mine planning through the life of mine (LOM). The process recognises that mine closure planning is an integral part of a mine’s core business – and central to its stakeholder relationships.

Done proactively and where possible, integrated mine closure planning can guide progressive rehabilitation strategies while a mine is operating. The goal: address impacts and reduce existing closure liabilities during mine life, and better understand and ultimately manage overall liability.

Effective mine closure planning can also provide consistent and transparent engagement with stakeholders, engage communities, and hopefully build early stakeholder support for closure decisions.

“It’s not just about cost savings,” Mayne said. “Closure planning is also about reducing the risk of future challenges when there are no quick

or cheap fixes. Fundamentally, it’s about mine closure practices aiming to protect the future of communities and the environment.”

Discussion on mine closure planning is timely. Greater focus on current ESG reporting is requiring companies to have a deeper understanding of mine closure liabilities that affect company value.

“Increasingly, investors and stakeholders want to know the position of companies on mine closure issues,” Mayne said. “They want to know whether their approach and liability cost is appropriate.”

Governments, too, are focusing more on mine closure planning.

Taxpayers and regulators don’t want to be paying

More can be done from the onset of mine development to mitigate potential closure risks.

AUSTRALIAN RESOURCES & INVESTMENT

Before mine closure.

mine-rehabilitation bills for years or decades if a mining company becomes insolvent or closes prematurely due to a poor commodity market.

Nor do communities want failed mine closures that damage the environment and risk public health and safety.

“There has been a recent shift from Australian regulators to include more comprehensive closure planning and costing into mining applications, with a focus on progressive rehabilitation,” Danielle Kyan, a principal mine closure consultant with 18 years’ expertise in closure costing and closure related projects, said.

Queensland’s Mined Land Rehabilitation Policy includes progressive rehabilitation and closure plan (PRC) requirements. Introduced in 2019, the PRC requires mines that have a site-specific environmental authority (EA) to plan for how and when activities will be carried out to maximise progressive rehabilitation of the land.

The regulation requires progressive rehabilitation milestones to be incorporated into a PRC plan at mine-lease application.

“This is starting a shift for mine planning engineers to think about the closure requirements and final landforms in initial design phases,” Kyan said.

The New South Wales Government has implemented reforms to strengthen operational rehabilitation requirements for mines in that state – and is shifting to new regulations following industry consultation.

This could include requirements for rehabilitation management plans, annual rehabilitation reports and forward-works programs.

After mine closure.

The Western Australian government is incentivising rehabilitation by reducing mining rehabilitation fund (MRF) contributions on land considered “under rehabilitation” and rehabilitated land.

“Around Australia, governments are introducing reforms that put more onus on companies to plan for mine closure and report on progressive rehabilitation,” Kyan said. “Mining companies must be prepared for this change.”

O B S TAC L E S Mayne said many mining companies were increasingly focused on closure planning and progressive site rehabilitation, while the accuracy of closure planning has vastly improved due to advances in geographic information system (GIS) technology and digitisation.

Jason Beltran, a senior mine closure consultant, said further change was needed.

“Some companies only consider closure costs they can see and easily plan for,” he told Australian Resources & Investment. “They are potentially unaware of the complexities of ‘hidden costs’ such as site monitoring, humanresource management or the social impact of mine closure.”

Closures can have significant socioeconomic impacts. Locals can lose jobs and, in many instances, there are few work alternatives. Regional communities can struggle to maintain services as people leave.

Health and wellbeing can suffer.

“It’s important for companies to address socioeconomic transitioning as part of the closure vision and strategy, as the closure period for a mine approaches – and

Closure planning is also about reducing the risk of future challenges when there are no quick or cheap fixes.

Fundamentally, it’s about mine closure practices aiming to protect the future of communities and the environment.

– 27 –

MINING SERVICES

Mine closure planning and implementation should be viewed as an opportunity, not a cost.

to work with communities and manage expectations,” Mayne said. “Stakeholder engagement on this issue is critical.”

The timing of closure costs is another issue. These costs have historically been regarded as an end-of-mine expense. They weren’t seen as a material cost to include in the early stages of mining-project evaluation.

By including closure costs at the end of a project, they were often insignificant to a project’s net present value (NPV).

“In the last few years, we’ve seen a shift in this thinking across the mining industry,” Kyan said. “During project due diligence, and even at the scoping stage of project evaluation, more questions are being asked about how much a mine closure will cost, and what effect that will have on a project’s NPV.” Mining incentives have been another obstacle to effective closure planning.

Internal key performance indicators (KPIs) traditionally focus on lowering production costs to drive profit. That reduces incentives to invest in progressive rehabilitation, which is a cost.

“We’re starting to see more companies introduce KPIs around mine closure and progressive rehabilitation targets,” Kyan said. “That’s created more buy-in from site managers on implementation of closure planning, and also on costing progressive rehabilitation into life-of-mine planning.”

Regulatory uncertainty is another factor.

According to Kyan, much mine closure planning is still “open-ended” despite recent regulatory developments.

“The concern is that the bar will be constantly moved and thus site rework will continually be needed,” she said. “There are also concerns about sterilising future resources (making them inaccessible for future use) or having to redo rehabilitation works if landforms have to be extended or even moved.”

G O O D P R AC T I C E Mayne said mine closure planning should ideally be discussed and addressed during scoping and pre-feasibility studies – and

– 28 –

considered throughout a mine’s development phases.

“This way, companies can appropriately plan their mining expansions, create and profile mining landforms, such as wastestorage facilities, in the most practical and efficient way,” he said.

Regular interaction between mine closure teams and appropriate project stakeholders from the start can reduce risks, while Mayne said transparency in mine closure cost estimation and planning is key.

“Closure-related planning requires integration and input from various disciplines within companies, and from company stakeholders,” he said. “Addressing closure issues in isolation will not yield optimal results. An open approach serves companies well with stakeholders.”

Kyan suggested mine closure teams should raise awareness of the benefits of

SEVEN IDEAS FOR MINE CLOSURE PLANNING AND IMPLEMENTATION 1. Know what’s at stake: Good closure planning can enhance financial performance and reputation. Poor planning can create a costly rehabilitation problem for years.

2. Start early: Plan mine closure at the start of projects, where possible.

3. Engage stakeholders: Mine closure planning requires a multidisciplinary approach within companies and an inclusive, communicative approach with affected communities is important, to listen to their needs as a mine approaches closure.

4. Governance: Mining closure planning and reporting of progressive rehabilitation should be discussed at board level, as part of risk-management oversight.

integrated closure planning within their organisation.

“Effective mine closure planning provides opportunities to work final landforms into mine planning and thus reduce long-term costs and risks,” she said. “It saves money.

Most of all, well considered site-specific and integrated mine closure planning enhances corporate reputation and long-term organisation sustainability.”

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 5. Legal obligations: Management teams should stay informed of ongoing regulatory changes and industry approaches in mine closure planning and progressive rehabilitation opportunities and requirements. Understanding the impacts of obligations around issues such as socioeconomic transitioning is vital.

6. Progressive rehabilitation: Defining closure costing can provide opportunities for progressive rehabilitation when the mine is operating. This ongoing work to rehabilitate sites can potentially reduce future closure liabilities and risks.

7. Opportunity focused: Mine closure planning and implementation should be viewed as an opportunity, not a cost.

Effective planning can improve existing rehabilitation approaches, reduce costs and help communities. The environment can benefit through better preservation of topsoil and integration of rehabilitated landforms.

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GOLD

ANGLOGOLD ASHANTI: INSPIRING THE GREAT NET-ZERO PURSUIT Image: Tony McDonough AngloGold Ashanti’s greenhouse gas emissions have dropped by 69 per cent since 2008.

As a true champion of sustainability, AngloGold Ashanti is setting a strong example that other mining companies – and wider society – can follow.

I

n 2008, AngloGold Ashanti set itself emissions reduction targets long before it was fashionable to do so.

The company committed to a 30 per cent reduction in greenhouse gas (GHG) emissions by 2022. While its didn’t see consistent gains until 2015, AngloGold’s emissions intensity has dropped by approximately 69 per cent since then.

This has been achieved by different measures, including improving electrical power generation at mines in Tanzania and Guinea, installing heat pumps in South Africa, and completing the Eastern Goldfields pipeline to the Sunrise Dam and Tropicana gold mines in Western Australia.

– 30 –

This latter development gave the two mines access to natural gas, which means they no longer have to rely on diesel fuel and liquefied natural gas (LNG) as power sources.

In October 2021, AngloGold committed collectively with members of the International Council on Mining and Metals (ICMM) to a goal of net-zero Scope 1 and Scope 2 GHG emissions by 2050 or sooner.

AngloGold Ashanti chief executive officer Alberto Calderon said it was encouraging to see the wider gold industry banding together for the greater environmental cause. And there’s more where that came from.

“Small as the gold industry is in the global context, we’ve seized the urgency of reducing our environmental footprint,” he said at a Melbourne Mining Club luncheon earlier this year. “Dramatic changes in the industry’s power consumption by 2030 are expected to almost halve emissions among WGC (World Gold Council) members.

“That’s not wishful thinking; the reduction will come through decarbonisation of national power grids, changes in production profiles of mines – notably the continued tapering of energyintensive production from South Africa – and changes in power sources for those that remain.”

AUSTRALIAN RESOURCES & INVESTMENT

Image: Tony McDonough AngloGold Ashanti’s Tropicana joint venture in Western Australia.

The gold industry might be small in the worldwide context, but it remains an important contributor to global economies.

In November 2021, the WGC released a report indicating that 2020 saw its member companies contribute $US37.9 billion ($53.3 billion) to the gross domestic product (GDP) of the countries in which they operate.

WGC member companies paid $US8.7 billion ($12.2 billion) in wages and $US7.6 billion ($10.7 billion) in tax payments, while a significant contribution of $US26 billion ($36.6 billion) was made through in-country procurement. It is estimated this created $US21.6 billion ($30.4 billion) in indirect value to local suppliers.

Gold is facing more competitors in the investment world, with cryptocurrencies posing a particular threat to the commodity.

However, crypto is more volatile and less dependable as a safe haven asset.

This has been highlighted by the ongoing Russia–Ukraine conflict and economic turmoil that’s come with it.

In Australia, inflation rose to levels not seen since the introduction of the Goods and Services Tax (GST) in 2000, while a similar hike has been experienced in the US. Worldwide sanctions imposed on Russia in light of its invasion of Ukraine have crippled the country’s economy. Russian citizens’ bank accounts have been frozen, depriving many people of their only source of income.

Analysts tipped the current geopolitical crisis to be the perfect storm for crypto: a stable digital asset that won’t lose its value.

But it seems cryptocurrencies haven’t received that message.

At the time of writing (mid-May), Bitcoin was down 13 per cent on the month and the Russia–Ukraine war had lasted more than 10 weeks at that point. Ether was down 15 per cent across the same timeframe, while other cryptocurrencies such as Dogecoin, Waves and Binance Coin had also cooled.

Some analysts have suggested that crypto is still too volatile to be relied upon as a safe haven asset when compared to gold. “(Bitcoin) does not yet have a track record as a safe haven,” Perth Mint manager for listed products and investment research Jordan Eliseo said.

“Gold, on the other hand, has an arguably unparalleled track record as a safe-haven asset, both in periods of higher inflation (gold has averaged returns of approximately 15 per cent per annum in years inflation has averaged more than three per cent), and in periods equity markets sell off.”

A reliable asset to turn to in uncertain times, gold also has a much lower carbon footprint than cryptocurrency.

According to Our World in Data, Bitcoin emits an estimated 114 million tonnes (Mt) of CO2 per year, while Ethereum – a blockchain-based software platform which houses its own cryptocurrency – contributes 63Mt of CO2 emissions per year.

In contrast, the world’s listed gold companies emit a combined 78Mt of CO2 per year and, within that, AngloGold contributes 2.3Mt of CO2 emissions per year.

“Contrary to conventional wisdom, including gold in a multi-asset portfolio actually reduces the portfolio’s overall carbon footprint,” Calderon said.

Gold is increasingly used in a wide range of technological applications, from cell phones and medical testing kits to vehicle air bags.

It is the ultimate recycled asset, with virtually all the gold mined to date still in existence in one form or another.

– 31 –

Image: Tony McDonough

GOLD

Responsible gold mining should be championed; not only because it provides the world with a treasured financial asset that has been used by mankind for millennia, but because in the present day it supports true social and economic value.

AngloGold Ashanti’s Sunrise Dam gold mine in Western Australia.

“A modelling exercise by the WGC found that introducing 10 per cent gold in a portfolio of 70 per cent equities and 30 per cent bonds (reducing the other asset holdings by equal amounts) lowered the emissions intensity of the portfolio by seven per cent. A 20 per cent holding lowered it by 17 per cent.

“Interestingly, but not surprisingly, crypto is 15 times more carbon-intensive than producing the equivalent value of gold.

“That’s a big carbon footprint to produce a financial asset which in turn generates very little social benefit – no taxes, no salaries, no local supply chain benefit, and no infrastructure.”

As AngloGold continues to advance its low-emissions ambitions, the company will this year lay out a new 2030 emissions reduction target and continue to explore further measures to decarbonise.

– 32 –

Calderon said the company was “pretty confident” it can reduce its Australian emissions by 50 per cent by 2030, and harnessing the energy transition will play a big part.

“It’s renewables,” he said. “This first push is fundamentally power. After 2030, it’s going to be truck electrification, but initially, power will be a key driver.

“In some places you can do it better than others. But across the board, it’s going to be all about substituting electricity, either for renewables or for hydro.”

As AngloGold looks to sustainable power generation to reduce its carbon footprint, the company understands it has a higher obligation to address its Scope 3 emissions.

Scope 3 emissions are those generated in the supply chain and are derived from assets not owned or controlled by the organisation in question. Calderon describes Scope 3 as the proverbial “elephant in the room”.

“If you do a great job on (Scope) 1 or 2, you do nothing,” he said. “I think the world needs to look at (Scope) 1, 2 and 3, and mining companies, even though it’s not their sole responsibility, they have to work with their clients in addressing this because if not, nothing is done.”

Calderon said the gold industry was in a strong position when it comes to Scope 3 emissions, and it’s the likes of BHP, Rio Tinto and Vale that have the largest carbon footprints in the supply chain.

A WGC report, ‘Gold and Climate Change: Current and Future Impacts in 2019’, found a large proportion of the gold industry’s Scope 3 emissions were attributed to upstream activities.

Purchased goods and services utilised by reporting gold mining and refining companies (ie the main materials and inputs supplied for use in the process of gold production) made up 21 per cent of total upstream Scope 3 emissions.

AUSTRALIAN RESOURCES & INVESTMENT

Image: Tony McDonough

In 2022, AngloGold Ashanti will lay out a new 2030 emissions reduction target.

The WGC also considered the Scope 3 contributions of waste, transportation, capital goods, and business and employee travel as part of the report.

In contrast, the WGC found the gold industry’s downstream Scope 3 emissions to actually be very small, suggesting they made up less than one per cent of gold’s annual GHG emissions at the time.

“Refining and recycling is immaterial, contributing a miniscule proportion of gold’s total annual emissions,” the report stated.

Image: Tony McDonough

The gold industry is an important contributor to global economies.

“The minimal level of GHG emissions associated with gold in storage or circulation has significant implications when we consider how investors and wider stakeholders might perceive gold in relation to climate-related risks.”

The WGC said the findings could also influence how gold is perceived in climate change mitigation.

Net-zero ambitions are critical to a sustainable future, but a responsible mining company is not just one that’s eager to decarbonise. Most gold miners understand the wider ecosystem and the

influence their practices have on society more broadly.

“Gold is a unique precious metal which has emotional, cultural, functional and financial value,” Calderon said.

“It is purchased around the world for a range of different reasons, influenced by utility, sociocultural factors, local market conditions and macro-economic drivers.

“Gold is increasingly used in a wide range of technological applications, from cell phones and medical testing kits to vehicle air bags. It is the ultimate recycled asset, with virtually all the gold mined to date still in existence in one form or another.

“However, as long as there is gold in the ground and it is so highly valued, it will be mined. This is especially true in developing countries, where gold resources are recognised as a critical source of economic opportunity and growth.”

Gold’s contribution doesn’t stop there.

“Responsible gold miners create jobs for nationals, help build infrastructure and support local communities. They also pay sizeable taxes,” Calderon continued.

“Responsible gold mining should be championed; not only because it provides the world with a treasured financial asset that has been used by mankind for millennia, but because in the present day it supports true social and economic value.”

– 33 –

GOLD

The social and economic importance of gold mining A solar plant at the Granny Smith gold mine in Western Australia.

Image: Gold Fields

R

Andrew Naylor, World Gold Council regional chief executive officer APAC (ex China), examines the positive effects of gold mining.

esponsible investing is growing.

Investors and consumers increasingly care about the impact of their investments and consumption.

According to the Responsible Investment Association Australasia, more than $2.8 trillion in assets is managed with a least one responsible investing approach.

With greater importance attached to sustainability, it is important our industry works to not just ensure the highest environmental, social and governance (ESG) standards are met, but that the economic and societal contributions are fully understood.

Gold mining occurs on every continent except Antarctica, often in remote and impoverished areas. What is clear from World Gold Council research is that a gold mine, when operated responsibly and in the context of a well-governed regulatory regime, can deliver significant and lasting benefits to host countries and communities.

– 34 –

There are a number of key areas where gold mining makes a very significant contribution to social and economic development. In a recent report, we analysed the impact of our members’ operations globally.

W E L L PA I D L O C A L J O B S I N T H E C O U N T R I E S O F O P E R AT I O N This includes direct and indirect employment.

The number of jobs varies depending on the phase of the mine and production levels, as well as the size and type of mine, but the employment impact can be significant.

Responsible gold miners recognise the mutual benefits of integrating as much as possible into the local economy, using local people and local supply chains.

This supports their “licence to operate” and enables the host community to benefit from both direct and indirect employment associated with the mine.

VA L UA B L E TA X R E V E N U E S I N T H E C O U N T R I E S O F O P E R AT I O N Gold mining companies make significant contributions to host government revenues, and in many low-income countries these taxes and royalties constitute a significant proportion of the national tax base.

Major gold mining companies have been at the forefront of the implementation of the Extractives Industries Transparency Initiative (EITI), a global standard promoting revenue transparency and accountability.

S U S TA I N E D B E N E F I T S F O R LOCAL COMMUNITIES In addition to the benefits associated with employment and tax revenues, many gold mining companies act as partners for development. This includes community investment initiatives, helping to improve public services, local education, healthcare and infrastructure.

AUSTRALIAN RESOURCES & INVESTMENT

Gold mining companies make significant contributions to host government revenues.

Andrew Naylor

H I G H LY R E G U L AT E D A N D W I T H I N S T R I C T G OV E R N M E N T C O N T R O L S Large-scale gold mining takes place with the approval of a host government. In most places a multi-year environment and social impact assessment is undertaken before a mine can be constructed.

These are rightly thorough and demanding, and include a broad range of considerations such as water management, biodiversity, tailings, and Indigenous rights. They are reviewed by regulators and subject to government approval.

COUNTRIES AND COMMUNITIES BENEFIT M O R E N O W T H A N I N T H E PA S T Companies are now acutely aware that operating responsibly is synonymous with good business. The expectations are that the benefits of the industry are shared equitably among different stakeholders.

C O M PA N I E S O P E R AT E T O H I G H E S G S TA N DA R D S This is not just the right thing to do in an ethical sense, but also a critical business practice underpinning longterm operational and financial performance.

The World Gold Council, working with its members, launched the Responsible Gold Mining Principles (RGMPs), a framework of 51 principles speaking to all material ESG issues for the gold mining sector.

Conformance with the RGMPs is obligatory for World Gold Council members, and a number of other gold mining companies have decided to implement the RGMPs to demonstrate to their stakeholders that they are mining responsibly.

A C R E D I B L E PAT H WAY T O N E T-Z E R O E M I S S I O N S Estimates from 2019 suggest that large-scale gold mining’s share of total global carbon emissions was 0.2%. Virtually all emissions occur within the mining process itself, and the majority of these are associated with the generation or purchase of power.

If the gold mining sector decarbonises, the entirety of the gold supply chain will be almost fully decarbonised.

There are plenty of opportunities to use energy more efficiently and from renewable sources, and gold miners have a credible and cost-effective plan to reach net-zero by 2050, in alignment with the Paris Agreement.

A U N I Q U E A N D VA L U E D M E TA L While gold mining is a major driver for socioeconomic development, it contributes positively as an asset class.

Gold is also a source of global financial stability as a reserve asset. It enhances institutional and household financial portfolios – it can be a source of returns, is highly liquid, and when owned outright is without credit risk.

Although gold has financial utility, about seven per cent of annual demand comes from the technology sector – it is used in high-end electronics and medical devises, for example.

It is clear that gold has huge importance to society, both in terms of the economic and social development as a result of its production. But it is also as an asset class in itself. As long as gold is in the ground and it is so highly valued, it will be mined.

What is critical is that the way it is mined is a “driver for development”. Responsible gold miners create jobs, help build infrastructure, and support local communities in Australia and around the world.

Andrew 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.

CONTRIBUTION OF WORLD GOLD COUNCIL MEMBERS IN AUSTRALIA IN 2020 • • • • •

Salaries and benefits – $724m Taxes and royalties – $1.115b Number of employees – 6038 Indirect labour multiplier – 3x In-country payments to suppliers – $3003 (96% of total payments to suppliers)

The World Gold Council’s report on the social and economic contribution of gold mining can be found at www.goldhub.com

– 35 –

ECONOMIC OUTLOOK

Increased cash rate: How will this affect commodity prices?

Economist Alexandra Colalillo examines the question of whether a higher cash rate is the right policy response to a negative supply shock.

S

upply chains affected during the COVID pandemic are now further disrupted by the Russia–Ukraine conflict, representing one of the greatest worldwide economic shocks since the global financial crisis (GFC).

This negative supply shock has been further exacerbated by various sanctions on Russian energy imports by several countries, including Canada, the UK and the US. The conflict has also seen some energy-producing companies making the decision to cease operations in Russia.

Reduced supplies of energy, metals and agricultural commodities, paired with a stronger-than-expected rebound in demand, has placed upward pressure on output prices for commodities and commodity derivatives (eg higher prices for crude and petroleum derivatives such as ethanol and polyester have increased prices of palm oil and cotton) in all

In March, Brent crude oil prices increased by 55 percent to average $US116 per barrel.

– 36 –

countries, including Australia.

In developed and developing economies, rising commodity prices will ultimately weigh on growth, further complicating policy decisions facing central banks. It therefore makes sense to pose the question: is the tighter monetary approach (ie higher cash rate) adopted by Australia in an effort to reduce prices the right policy response?

Focusing on the energy market specifically, there are three key features that make addressing the current negative supply shock difficult relative to previous episodes.

First, there is less room to substitute away from most-affected energy commodities – gas and coal – as price increases are systemic across all fuels and, as a by-product, this has also increased production costs of other commodities.

Second, gross domestic product (GDP) stemming from energy consumption has fallen

since the 1970s and consumers may therefore be less sensitive to relative price changes in the short term.

Finally, policy responses have prioritised energy subsidies and tax breaks, rather than focusing on the underlying imbalance between demand and supply.

I N F L AT I O N A R Y I M PAC T S ON COMMODITIES In response to supply disruptions, energy prices (in US dollar terms) experienced the largest 23-month increase since the 1973 oil-price hike. Specifically, there have been broad-based increases across all fuels.

In March 2022, Brent crude oil prices experienced a 55 percent increase in the time since December 2021, averaging $US116 ($165) per barrel, before easing in April following announcements of significant releases of oil from US strategic inventories and other

AUSTRALIAN RESOURCES & INVESTMENT

Modern economies are far less reliant on the direct use of oil than they used to be as we have become more efficient at using greener technology and economies have shifted from industry to services which use less energy. Rising oil prices should therefore be less of a drag on economic growth than in the past.

International Energy Agency (IEA) members.

Natural gas prices in Europe also reached an all-time high in March 2022 due to fears of import disruptions from Russia. US natural gas prices rose by almost a third in March relative to December 2021, in part reflecting increased demand for US exports of liquefied natural gas.

Coal prices also reached an all-time high in March due to increased demand as a substitute for natural gas in electricity generation.

Most non-energy prices have also increased since the beginning of the calendar year, with a particular focus on fertilisers, nickel, wheat and oilseeds. Among agricultural commodities, wheat prices saw a very steep increase, almost 30 per cent higher in March compared to December 2021.

Due to production shortfalls in South America and disruptions to Ukraine’s sunflower seed oil exports, edible oil prices have spiked sharply in 2022. And due to the

surge in natural gas and coal prices, fertiliser prices have spiked in the first quarter of 2022, as both are key inputs into fertiliser production.

The S&P Metals & Mining Index, which includes constituent producers of gold, steel and precious metals, rose 13 per cent in the first quarter of 2022. Specifically, nickel prices rose 35 percent and iron ore and aluminium prices saw large increases due to Russian supply restrictions.

According to the World Bank, commodity prices are expected to remain high in the medium term and significantly higher in 2022 than in 2021. The price of Brent crude oil is projected to increase by 42% in 2022 from 2021, its highest level since 2013, averaging $US100 ($142) per barrel.

Similarly, non-energy prices are expected to increase by approximately 20 per cent in 2022, with the largest increases in commodities where Russia or Ukraine is a key exporter.

The duration of supply shocks, however, is heavily dependent on the continuance of the conflict in Ukraine, a longer-term conflict with the West, and the severity of disruptions to commodity flows.

I S AU S T R A L I A A D O P T I N G T H E R I G H T A P P R OAC H? Policy-makers are now taking various actions to alleviate price volatility in response to inflationary pressures. We have a situation where customer demand across the global economy is exceeding the capacity of

Mackay’s Port of Hay Point terminal, which exports coal from Queensland’s Bowen Basin.

– 37 –

ECONOMIC OUTLOOK

In Australia, the short-term priority should support households facing higher energy and food prices and reducing global supply chain reliance. businesses to provide goods and services and, as a result, rising competition for these goods and services is placing upward pressure on prices.

In May, the Reserve Bank of Australia (RBA) increased the cash rate by 25 basis points to 0.35 per cent in an effort to address headline consumer price index (CPI), which is now exceeding the target 2–3 per cent band threshold at 5.1 percent (0.5 percentage points higher than economists expected).

Even core underlying inflation, which excludes extreme price movements, clocked in at 3.7 per cent for the trimmed mean and 3.2 per cent for the weighted mean – 0.5 percentage points higher than forecasted predictions.

WHY DID THE RBA INCREASE T H E C A S H R AT E ?

The impact of the cash rate hike will ultimately dampen consumer demand and increase the cost of borrowing, designed to negate inflationary pressures. Further, the US Federal Reserve hiked rates again in May by half a percentage point to a range of 0.75–1 per cent.

If Australia did not follow suit, global investors would shift towards countries with higher interest rates (eg the US), which would cut the value of the Australian dollar and push up the prices of

– 38 –

imports, further increasing inflation.

However, is this the right monetary policy decision amid the current economic situation? Three key factors suggest otherwise.

First, what distinguishes the current situation from other economic shocks is the fact that inflation is not driven as much by domestic Australian demand as it is by global supply-chain disruptions due to the pandemic and the geopolitical conflict. Increasing the cash rate in an effort to dampen demand is therefore unlikely to have a material effect on global prices, particularly commodity prices.

This is particularly the case given negative supply shocks are likely to prevail in the medium term. According to the Treasury, Australia’s border closure has permanently reduced the size of the post-pandemic workforce, estimating population growth to 2030–31 will reduce by 1.5 million people.

In turn, annual growth is set to slow below two per cent over the next 20 years assuming the current pace of

technological progress is maintained.

Suppressing domestic demand may therefore not achieve the desired effect and only further decrease employment and economic growth.

Second, if economic and wage growth remains mild and unemployment begins to increase while inflation persists, there is a risk of future ‘stagflation’. Two major supply shocks in the 1970s (both involving oil) led to stagflation and contributed to the weakened post-World War II financial order.

However, modern economies are far less reliant on the direct use of oil than they used to be as we have become more efficient at using greener technology and economies have shifted from industry to services which use less energy. Rising oil prices should therefore be less of a drag on economic growth than in the past.

Despite this situation, there is still a risk that raising the cash rate will prematurely depress economic activity at an unfavourable time, and as negative supply shocks perpetuate, decisions about how much to tighten monetary policy and for how long will become more difficult over time.

Third, while Australia’s seasonally adjusted wage price index rose by 2.3 per cent in the final quarter of 2021,

AUSTRALIAN RESOURCES & INVESTMENT

after a 2.2 per cent increase in the third quarter, it’s well behind inflationary figures and increasing at a slower rate due to public sector wage caps, the modest size of minimum wage and award increases, and enterprise agreements that lock in pay rises for several years.

If wages don’t follow suit with inflation, a rising cost of living would place downward pressure on demand regardless of whether tighter monetary measures are implemented.

In addition, to compensate for the effects of higher inflation on purchasing power, workers may then seek large wage increases. In turn, higher wage growth raises costs, leading firms to raise

prices further and/or reduce the number of workers they employ.

In response to negative supply shocks, recent global policy responses have generally favoured trade restrictions, price controls and subsidies, which are likely to exacerbate shortages.

In Australia, the short-term priority should support households facing higher energy and food prices and reducing global supply chain reliance. In the longer term, the focus can pivot to energy efficiency improvements, the facilitation of new investment in netzero sources, and the promotion of efficient food production.

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 & gas sector.

Wages are not keeping up with high inflation numbers.

– 39 –

CRITICAL MINERALS

HOW AUSTRALIA CAN REFINE ITS CRITICAL MINERALS APPROACH Australia is rapidly realising its critical minerals opportunity, but there are several initiatives that could help expedite the mission.

C

ritical minerals play an important role in sustaining the financial wellbeing of the world’s major and emerging economies. They are used in the manufacturing of mobile phones, flat-screen monitors, wind turbines, electric cars, solar panels, and many other applications.

While demand for critical minerals is projected to grow due to rapid deployment of clean-energy technologies, they are currently at risk of geological scarcity, geopolitical issues and trade policy.

So what is Australia’s critical minerals approach and how can the nation better harness its existing infrastructure to realise the opportunity? Australian Resources & Investment explores several initiatives that could expedite the quest.

– 40 –

extract additional minerals as co-products to contribute to the global critical minerals supply.

Take, for example Olympic Dam, Australia’s largest copper mine. Its ores include critical minerals such as cobalt and tellurium, along with the host mineral, copper, which is economically assisted by uranium and gold.

If Olympic Dam could extract all of the critical minerals from its ore streams, it could significantly add to its gross resource value and become a prominent contributor to the global critical mineral demand.

Nevertheless, there are many challenges in extracting these critical minerals. For example, rare earth elements often have low variations in density with their gangue

Copyright © 2019 Rio Tinto

Rio Tinto’s Kennecott copper operation in Utah, which has just started producing tellurium.

OPPORTUNISTIC CO-PRODUCTION As the largest mining company in the world, the lion’s share of BHP’s revenue come from its iron ore operations.

When considering the US Geology Survey’s 2022 list of critical minerals, nickel, zinc and cobalt are the only critical minerals the company currently produces.

BHP produces nickel from its Nickel West operations in Western Australia, along with cobalt as a co-product. Zinc is produced as a co-product from the company’s Olympic Dam operations in South Australia.

Tackling small, technically challenging, diverse and imperfect markets to mine critical minerals might not suit BHP’s business model or its shareholders’ interests.

However, the company has the potential to

AUSTRALIAN RESOURCES & INVESTMENT

– the commercially worthless material that surrounds a mineral – and can be difficult to extract as a result.

Employing additional extraction techniques downstream could unlock critical minerals previously considered inaccessible. It might take some imagination but could serve as another viable stream for Australia’s critical minerals future.

This takes us to the next point.

THE ROLE OF SMELTERS AND REFINERIES The production of critical minerals relies on smelters or refineries, and it is often more cost-effective to retrofit existing facilities than to build new dedicated facilities. This offers an opportunity for smelters and refineries to produce more critical minerals as co-products.

Olympic Dam is an example of a facility at which latent capacity exists to produce critical minerals, but where a combination of business focus and advances in technology are required to unlock the capacity.

In January 2022, Rio Tinto announced the construction of the first module of a commercial scale scandium demonstration plant at its Fer et Titane metallurgical complex in Sorel-Tracy, Quebec, Canada.

Rio Tinto invested $US6 million ($8.4 million) into the building of the module, with an initial capacity to produce three tonnes of the critical mineral scandium oxide per year, which would make up approximately 20 per cent of the current global market.

In May, Rio Tinto produced its first batch of high-purity scandium oxide from the plant and became the first North American producer of the critical mineral, which is used in solid oxide fuel cells and in aluminium alloys.

In the same month Rio Tinto announced its Kennecott copper operation in the US state of Utah had started producing tellurium, a critical mineral used in solar panels. A $US2.9 million circuit was built at the Kennecott refinery to achieve this copper co-product, which will enable Rio Tinto to produce approximately 20 tonnes of tellurium per year.

This is evidence of how smelters and refineries can be manoeuvred to co-produce alternate minerals and could be an inspired way of supplementing Australia’s critical minerals strategy.

MINE WASTE AND ABANDONED MINES COULD OFFER A SOLUTION Lack of government policy, financial incentive or techno-economic barriers at a company level mean critical minerals are currently discarded to tailings storage facilities. Their

A large proportion of the world's gallium is produced from red mud – a form of industrial waste.

retrospective recovery will be attractive only if the value of metal-contained tailings exceeds the costs of extraction and processing.

The extent to which critical minerals exist in historic mine tailings and other waste streams is also subject to a great deal of uncertainty.

In the past, miners did not necessarily assay for minerals that held no value, and historic records are often incomplete.

However, more and more resources are being committed to tailings investigation.

In April, Geoscience Australia teamed up with the University of Queensland, RMIT University and the Geological Survey of Queensland to develop a national database of mine waste sites across the country and the minerals that could potentially be present.

The Atlas of Australian Mine Waste from the Australian Government’s $225 million Exploring for the Future program highlights new opportunities to recover valuable minerals – a concept known as secondary prospectivity.

In December 2021, Cobalt Blue established a Memorandum of Understanding with the Queensland Government to explore opportunities in the recovery of cobalt (as well as any co-existing base and precious metals) from mine waste.

This forms part of the Queensland Government’s $13 million New Economy Minerals Initiative and involves Cobalt Blue conducting testwork to evaluate minerals processing options in the recovery of target metals.

The statistics from the past 20 years show the proportion of mine-waste-derived metals is nominal.

Therefore, the best approach could be multifold – both encouraging mines and smelters to extract these minerals as a byproduct to the existing commodities and exploring potential mine-waste-extraction opportunities.

THE 2022 CRITICAL MINERALS STRATEGY In March this year, Federal Minister for Resources and Water Keith Pitt announced the 2022 Critical Minerals Strategy, which is committed to growing critical-mineral production and expanding on-shore downstream processing.

The strategy’s major objective is to provide stable supplies through securing investments and offtake agreements, enhancing sovereign capability and enabling the creation of regional jobs and growth. With the hope to position Australia as a “global critical minerals powerhouse by 2030”, the strategy will involve strengthening engagement with key countries such as the US, India, Japan, Korea, the UK, and European Union members.

This strategy is well placed to complement other major initiatives, such as the Global Resources Strategy (via diversifying markets), Modern Manufacturing Strategy (via criticalminerals processing) and the Technology Investment Roadmap (via low emissions technologies).

Australia’s large critical-mineral endowment and high environmental, social and governance (ESG) standards mean the sector can respond to market expectation and demand. We have the potential to meet the future needs of our key trading partners.

With the strategy in place, and the capital to support it, it’s now about optimising the implementation phase. The critical minerals are there to find.

Mohan Yellishetty is an Associate Professor in Resources Engineering in the Department of Civil Engineering at Monash University and co-founder of the Critical Minerals Consortium.

He’s been recognised as one of the leading experts in the area of sustainable mineral resources.

Dr David Whittle is a Research Fellow in the Department of Civil Engineering at Monash University and a Co-founder of the Critical Minerals Consortium.

– 41 –

COMMODIT Y SPOTLIGHT

ZINC FINDS ITS GREEN SLIPSTREAM

Zinc is important in preventing solar panel corrosion.

Long used to galvanise steel, zinc is becoming more and more important in the global renewable energy transition. We take a closer look at the commodity and spotlight its green future.

I

t may not attract the same fanfare as other battery metals such as lithium, nickel and cobalt, but zinc is proving to be an equally important commodity in the world’s net-zero pursuit.

While lithium-ion batteries are the most common rechargeable battery on the market and are serving a critical purpose in the global electric vehicle (EV) movement, zinc-ion batteries have entered the fray as a potential lithium-ion alternative.

Lithium-ion batteries are recognised for their high energy density, meaning the system can store a large proportion of energy in a small amount of mass. This is why they’ve become so popular in the EV market, where weight is an important consideration.

As technology progresses, zinc-ion batteries are also packing a punch, demonstrating competitive energy storage capabilities. They are also manufactured in a similar way to lithium-ion batteries, reducing the need for separate manufacturing facilities.

– 42 –

The safety of lithium-ion batteries has been questioned, given they contain flammable electrolytes and can ignite if exposed to high temperatures. By contrast, the zincion alternative uses water as an electrolyte, making them an inherently safer option.

While lithium-ion batteries may remain the most popular rechargeable battery in the nearterm, there are increasing concerns the supply of lithium raw materials is failing to keep up with demand. And this is being reflected in lithium prices.

According to price reporting agency Benchmark Mineral Intelligence (BMI), at the time of writing (mid-May) the price for lithium carbonate was up 432 per cent yearon-year (YoY) and up 126.7 per cent since the beginning of 2022. Lithium hydroxide had risen even further, increasing by 461 per cent YoY and 144 per cent for the year to date.

In Australia, the primary lithium resource is spodumene concentrate, which is converted by international customers into lithium carbonate or lithium hydroxide for batteries.

As lithium prices rise so too does the pressure to develop lithium-ion alternatives, and given the manufacturing infrastructure needed to create a zinc-ion battery is much the same, there’s a rising case for this emerging technology.

The zinc-air battery is also proving itself as a potential lithium-ion alternative.

Zinc-air batteries generate electricity through a chemical reaction between oxygen and zinc, and are recognised for their high energy density, and safety and environmental benefits.

Stewart Dickson, managing director and chief executive officer of ASX-listed resources company Variscan Mines, told Australian Resources & Investment that there is another important application for the commodity.

“Zinc usage for solar energy is expected to double by 2040,” he said. “Only zinc coatings can offer the low-cost corrosion protection for solar panels that are required to have a working life of over 30 years to be economic.”

AUSTRALIAN RESOURCES & INVESTMENT

The demand for solar panels is only going to increase as the renewable energy transition further intensifies, and corrosion protection will remain a critical consideration as durability comes into question. This is where zinc holds the key.

Zinc has a bright future; however, Dickson believes there could also be supply concerns for this commodity, which has led to spiking prices.

“Inventories have reached extremely low levels as demand rises, while output of refined zinc has fallen dramatically largely due to high energy costs in Europe, which has led to refineries mothballing production,” he said.

“Zinc prices have risen substantially over the recent period. Having touched on multidecade highs, some of its gains have been lost more recently due to concerns over a global slowdown. Our view is that this is a temporary pause as structural demand remains strong.”

Benchmark zinc on the London Metal Exchange reached a record high price of $US4896 ($7050) per tonne (t) on March 8.

This was only a momentary jump, however, as the commodity traded above $US4000 ($5760)/t for all of April on the LME, something not seen since 2006 when a similar zinc deficit was experienced.

In early April, Fitch Solutions revised its 2022 zinc price forecast from $US2900 ($4176)/t up to $US3500 ($5040)/t citing the high energy prices in Europe. The commodity analyst echoed Dickson’s concerns about zinc production.

“Global refined zinc output remains pressured, as major producers Nyrstar and Glencore have announced production curtailments on the back of the energy crisis in Europe,” Fitch said in its report.

“Most recently, in March 2022, Nyrstar restarted the Auby zinc smelter in France, but stressed that high electricity prices still

Despite the current squeeze, Fitch Solutions forecasts an uptick in zinc supply later this year.

Zinc usage for solar energy is expected to double by 2040. Only zinc coatings can offer the low-cost corrosion protection for solar panels that are required to have a working life of over 30 years to be economic.

hindered the smelter’s full production, and the restart of the smelter is more due to government subsidies.”

Regardless, Fitch sees some light at the end of the tunnel.

“We do expect strong growth in zinc mine supply resulting from expansions and restarts in key producers, including Peru, Australia and Canada, will eventually boost downstream refined zinc production later in the year,” the analyst said.

“Indeed, this has already started to play out with an increase in zinc treatment and refining charges in China, as a result of better ore availability.”

Variscan is developing its Novales-Udias and Guajaraz zinc projects in Spain as it looks to become a player in the global energy transition.

Stewart said the company had clear objectives to seek early small-scale production opportunities from the two projects and define a regionally significant resource akin to the nearby Reocin mine.

One of the largest known zinc-lead deposits in Europe, Reocin was closed in 2003 after almost 150 years of continuous exploitation.

Variscan also holds a net-smelter royalty on exploration ground adjacent to the Woodlawn zinc-copper project in New South Wales.

Develop purchased Woodlawn in February after its previous owner Heron Resources entered voluntary administration in July 2021. The company aims to conduct an aggressive underground drilling program to grow Woodlawn’s inventory, targeting extensions to known mineralised zones.

Woodlawn produced 13.8 million tonnes of 19.7 per cent zinc equivalent from 1978 until 1998. Heron took on the project in 2017.

Other Australian zinc prospects looking to join the likes of McArthur River, Golden Grove and Glencore’s Mount Isa assets in production include BPM Minerals’ Hawkins lead-zinc project in Western Australia, Boab Metals’ Sorby Hills leadsilver-zinc joint venture project in WA, and Eastern Metals’ Browns Reef base metal deposit in NSW. Stewart said that despite the immediate supply concerns, he remained bullish about zinc’s future.

“Supply will remain a concern as higher energy costs have the real potential to be a new normal; markets will need to adjust and (so will) new projects,” he said.

“Future focus will be on efficiency and profitability of projects rather than scale … and value creation will triumph over volume production. Additionally, expect to see drive for re-localisation of metal supply, especially in Europe.”

– 43 –

COMMODIT Y SPOTLIGHT

DIAMONDS: THE UNASSUMING SAFE HAVEN

The rarity of blue diamonds makes them a striking investment.

The closure of the Argyle diamond mine saw a drastic drop in the global supply of pink diamonds, but Australian yellow and blue diamonds might be the next big investment.

W

hen the Rio Tinto’s Argyle diamond mine stopped operating November 2020, it took 90 per cent of the world’s pink diamond supply with it.

Although its impacts were felt around the world, the closure itself was not a shock, according to diamond specialist Eric Kariuki.

“Rio Tinto is ASX-listed, and they announced how much is left,” Kariuki told Australian Resources & Investment.

“We knew the closure was coming for a while so there’s been a lot of exploring over the years, but no other diamond mine has been found in Australia that can replace it.”

The Argyle mine wasn’t the only diamond deposit in the country, though it was the largest.

– 44 –

Lucapa Diamond Company acquired the Merlin project in the Northern Territory back in May 2021.

The NT has the second highest deposits of known diamond resources in Australia, according to the Territory Economic Reconstruction Commission’s final report in December 2020.

However, new diamond mines can take more than a decade to reach a consumer sale stage. And there’s no guarantee a mine will result in pink diamonds.

“If you do find a mine, it could be another five to seven years of construction before production can even begin, and then another decade before anything comes out of the ground,” Kariuki said.

“And if Argyle is anything to go by, there’s a less-than-one-per-cent chance of any pink diamonds.”

Although prospects may sound dire, those keen to invest in coloured diamonds don’t need to worry too much. As always, pink diamonds are dominating, but the popularity and price of yellow diamonds is on the rise. If the Australian market continues to produce more, investors could see some strong returns.

“My job is to look at which diamonds will return the best investments for my clients and I’m watching the yellow diamonds very closely,” Kariuki said. “They’re still tracking at about 3.5 per cent.”

India Bore Diamond Holding’s Ellendale mine in Western Australia was once famous

AUSTRALIAN RESOURCES & INVESTMENT

for its fancy yellow diamonds and with production slated to re-start before the end of 2022, the annual growth of yellow diamonds should see a steady increase. The fact any diamonds coming from Ellendale will be Australian diamonds will add confidence to this growth.

“People value Australian diamonds more than diamonds sourced from elsewhere,” Kariuki said.

“Australian diamonds are good quality and are ethically sourced. Those two factors produce the right ingredients for a very good investment portfolio.”

Argyle held the monopoly on most coloured diamonds in Australia, including red, champagne and violet, but most of the intense yellow diamonds are found in South Africa. The deeper the hue of the diamond, the more valuable it is, and those who don’t want to wait for production at Ellendale to start up again could turn their attention there.

South African mines are also known for their blue diamonds. April 2022 saw the world’s largest blue diamond, the De Beers Cullinan Blue, sell for an astonishing $80 million.

The 15.1-carat diamond was unearthed in 2021 at South Africa’s Cullinan mine and the estimated sale price stood at $48 million.

However, those not willing to fork out that much for a diamond shouldn’t be put off from investing. Diamond auctions rarely represent real market conditions, as few meet the rarity in colour and size that the De Beers example did. However, investors can nonetheless expect to see prices rise for the blue gems.

“This sets a precedent for what will come next,” Kariuki said. “As an investor, I see the results of this and I know I have a limited window to collect as many (blue diamonds) as I can before the new carat price filters through the market.”

Natural blue diamonds can only be found in a handful of mines in the world, and only a few are discovered each year. The rarity of blue diamonds makes them a striking investment.

Formed beneath the earth’s surface over billions of years, blue diamonds are not colour-treated, instead attaining their hues from traces of boron in their carbon composition. These blue gems can be found in a variety of colours, from faint blue to fancy vivid blue. The De Beers Cullinan Blue is a fancy vivid blue diamond Blue diamonds could be found at Argyle when it was still in operation; however, it has been said that for every 25 million carats of diamonds extracted, only a single blue

The Argyle diamond mine in Western Australia.

diamond is found. With Australia one of only three countries where blue diamonds can be found, the price fetched for the De Beers Cullinan Blue is less of a surprise.

“A sale like this creates a new trend for that colour diamond,” Kariuki said.

Kariuki encouraged investing in diamonds due to their safety and security.

As geopolitical disruptions continue to affect the global economic landscape, investors want to put their money into something that won’t move.

This type of thinking was especially evident during the global financial crisis (GFC), as prices of pink and blue diamonds remained steady. These fancycoloured diamonds are an alternative asset that are stable performers in a market downturn and are attractive investments to diversify a portfolio.

It is unclear when, if ever, the retail prices of diamonds will decrease. Demand for diamond jewellery rose 21 per cent globally in 2021, well above pre-pandemic levels, with no

sign of stopping. The Russia–Ukraine conflict has also made the market more volatile, especially after sanctions were placed on a Russian company that supplies 30 per cent of the world’s diamonds.

With these sanctions in place, the origin of diamonds is becoming more important, and investors are seeking to ensure their acquisitions are coming from ethically sourced places.

Investors want safety and security, and they don’t want their money to sit in the bank collecting dust. Diamonds are a growth asset and can do well when sold into a secondary market.

While the world might have lost a staple of the diamond mining industry when Argyle closed, investment opportunities are steady.

Diamonds are inflation-proof, physical assets that are good choices for those keen to keep a hold of their investments instead of rows of stocks on a computer screen.

These small gems can hold big opportunities for those who want them.

People value Australian diamonds more than diamonds sourced from elsewhere. Australian diamonds are good quality and are ethically sourced. Those two factors produce the right ingredients for a very good investment portfolio.

– 45 –

MINING SERVICES

Leading the way in automation, digitalisation and electrification Epiroc’s Scooptram ST1030 machines can be converted from diesel to battery-electric.

Harnessing new technologies and constant innovation, Epiroc has become a spearhead in the mining industry’s push for decarbonisation.

E

piroc’s recent successes prove why the company is one of the mining industry’s most versatile original equipment manufacturers (OEMs).

The company enjoyed a record bill of orders in the first quarter of 2022, with much of that driven by its automation, digitalisation and electrification solutions.

Given the company’s history extends all the way back to 1873 – when it was founded as Atlas in Stockholm, Sweden – this is no small feat.

Orders at the start of 2022 increased by 29 per cent compared to the first quarter of 2021, with 77 per cent of these sales coming via the

– 46 –

mining industry and the remaining 23 per cent stemming from Epiroc’s infrastructure customers.

Epiroc’s strong performance has coincided with a prospering mining sector. According to the Australian Government’s Resources and Energy Quarterly for the March quarter of 2022, the country’s resource and energy export earnings are forecast to hit a record $425 billion for the 2021–22 financial year.

“The global mining market remained very active in the quarter, in Australia and most parts of the world,” Epiroc spokesperson Ola Kinnander told Australian Resources & Investment.

“Part of the reason for this is the overall high minerals prices, which is driving demand among the mining houses for equipment and services.

“We won many large and mid-sized orders, including several for our solutions within automation, digitalisation and electrification, which customers are more and more interested in.”

Automation, digitalisation and electrification are three key components to mining’s low-emissions future. They are also core to improved safety and productivity – two other fundamental considerations for the industry.

AUSTRALIAN RESOURCES & INVESTMENT

Kinnander said a behaviour shift was occurring in the sector.

“Customers are increasingly realising the significant benefits that come with these new technologies, in the form of better safety, increased productivity, lower total cost of operations, and reduced emissions,” he said.

“The COVID-19 pandemic has also further increased the interest in automation.”

COVID-induced labour shortages have quelled the Australian mining industry for more than two years now, while extended border closures in Western Australia have restricted travel of personnel.

These factors bolstered the case for automated machinery and technologies, enabling mining companies and contractors to sustain operations without relying solely on manpower.

Epiroc enjoyed a 22 per cent increase in orders for tools and attachments in the first quarter of the year. This comprises rock drilling tools and hydraulic attachments connected to machines used for drilling, deconstruction, recycling, and rock excavation.

Kinnander said certain buying behaviours showed Epiroc customers are being more proactive about the current supply chain disruptions and associated long lead times, with greater demand for componentry.

In April, Epiroc entered into partnerships with SSAB and BluVein to further enhance its support of the mining industry’s green transition.

Epiroc has teamed up with SSAB to secure fossil-fuel-free steel for use in the manufacturing of its mining equipment.

Delivering the first steel made of hydrogen-reduced iron in 2021, SSAB aims to provide fossil-fuel-free steel to the market on a commercial-scale during 2026.

“SSAB is the first in the world with a new technology to make fossil-fuel-free steel, and we have an agreement with them to buy that steel,” Kinnander said.

“Initially we will use this steel for a prototype underground machine and will increase the usage of it over time.”

Epiroc president and chief executive officer Helena Hedblom said the company’s partnership with SSAB supported its net-zero objectives.

“Sustainability is integrated in everything we do, and we are committed to halving our CO2 emissions by 2030,” she said in a statement.

“This exciting partnership with SSAB will support us and our customers on the journey to reach our very ambitious climate goals.

“It is clear that our innovation agenda goes hand-in-hand with our customers’ sustainability agenda.”

Epiroc and BluVein entered into a Memorandum of Understanding (MoU) to fast-track the development of the BluVein dynamic charging solution for deployment across the global mining industry.

The MoU is focused on the BluVein underground solution (BluVein1) and will develop and test the viability of its patented slotted electric rail system.

This system uses an enclosed electrified e-rail system mounted above or beside the mining vehicle along with the BluVein hammer that connects the electric vehicle to the rail.

In January, Epiroc launched Mobius for Drills, a new system to assist with mine automation and connectivity.

The system provides power for driving an electric vehicle, typically a mine truck, and charging the truck’s batteries while it is hauling a load up the ramp and out of an underground mine.

As part of its contribution to the collaboration, Epiroc will provide the firstever diesel-to-battery converted Minetruck MT42 underground truck for pilot testing on BluVein’s slotted electric rail system.

The Swedish company believes this is a vital component of the infrastructure needed to fully electrify mining operations.

In late April, Epiroc bolstered its Australian electrification ambitions after entering into an agreement to acquire JTMEC, a Perth-based electrification solutions provider for both underground and surface mines.

JTMEC’s offerings include highvoltage installation and maintenance work, transformer servicing and testing, engineering design, feasibility studies, and training.

The company also manufactures electrical products including substations and mine chargers and is currently providing services for Australian mining operations such as Olympic Dam, Dargues gold mine, DeGrussa copper mine and Northparkes.

Epiroc said it expected to complete the acquisition in the second quarter of 2022.

“Battery electrification represents the future in the mining industry, and the strong team at JTMEC is playing an important role in enabling this vital transformation,” Hedblom said.

“This acquisition will further strengthen our ability to support mining customers on their electrification journey toward less emissions, improved work conditions, and higher productivity.”

When Hedblom first announced Epiroc’s 2030 sustainability goals in July 2020, she indicated the company couldn’t achieve its climate targets without tackling the challenge holistically.

“Since the majority of the CO2 emissions occur in the use phase of our products, it is crucial that we not only limit our own emissions in operations and transport but also take on the greater challenge to reduce emissions when the products are in use,” she said at the time.

“We are working together with our customers to reduce the impact on climate.”

With a record bill of orders and a strong suite of automation, digitalisation and electrification solutions to boot, it seems like that holistic approach is paying off.

– 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 Fortescue Metals Group, Mineral Resources and Liontown Resources.

Fortescue Metals Group has made several executive changes as the company continues to advance its green transformation.

With Elizabeth Gaines concluding her tenure as Fortescue’s chief executive officer (CEO) in August 2022, company cofounder Andrew Forrest will be appointed executive chair. He will specifically oversee the iron ore business for an interim period.

Gaines will remain on the Fortescue board as a non-executive director and will become Global Brand Ambassador for Fortescue Future Industries (FFI).

The major miner has also announced that former president and CEO of General Electric (GE) Europe, Dr Mark Hutchinson, will join FFI in July 2022, initially as director of projects before transitioning to the role of FFI CEO by the end of 2022.

Hutchinson spent 24 years at GE, where he led the company in China and was most recently president and CEO of GE Europe.

Current FFI CEO Julie Shuttleworth will continue her role during the transition process before eventually moving into a senior executive leadership role at the company.

Other appointments include Li Yifei as a Fortescue board director, former AGL Energy CEO Andrew Vesey

– 48 –

as FFI’s head of energy transitions projects, Dr Jalal Bagherli as co-chair of Fortescue subsidiary Williams Advanced Engineering, and Christiaan Heyning as head of decarbonisation.

Zimi Meka has joined Mineral Resources (MinRes) as an independent non-executive director, who is currently the CEO of consulting and engineering firm, Ausenco.

Meka has more than 35 years’ experience in the design, construction and operation of mineral processing plants, and has grown Ausenco from its inception into a well-respected global business of more than 3000 employees across 14 countries.

MinRes chair James McClements said Meka would be a valued addition to the company.

“On behalf of my fellow directors, I am delighted to welcome Zimi to the MinRes family,” he said.

“His significant commercial and engineering experience, and ability to deliver innovative solutions to the resources industry will be of significant value to MinRes. His appointment will broaden and strengthen the board as we continue to execute our growth strategy.”

Liontown Resources has appointed highly experienced mining engineer Shane McLeay as an independent nonexecutive director.

With more than 25 years’ experience, McLeay has a strong track record in starting and operating mines of varying scale, through project management, team creation and overseeing operational ramp-up to steady-state production.

McLeay’s expertise in underground mining and in adopting innovative technology-led solutions will be extremely valuable in the development and operation of Liontown’s Kathleen Valley lithium project in Western Australia.

“We are delighted that Shane has agreed to join the Liontown board at an exciting and very important time in the development of the Kathleen Valley lithium project,” Liontown chair Tim Goyder said.

“He will bring the latest and most innovative thinking in mine development and operations to Kathleen Valley, and we are very much looking forward to having him join our team.”

Former CEO of Kirkland Lake Gold, Tony Makuch, has joined the Karora Resources team as a special advisor.

AUSTRALIAN RESOURCES & INVESTMENT

During his time at Kirkland Lake, Makuch led the company’s transformation, boosting its annual gold production from 315,000 ounces to more than 1.4 million ounces. Kirkland Lake’s market capitalisation jumped from $1 billion to $13 billion in the process.

The new appointment comes as Karora looks to increase the gold production from its integrated Beta Hunt gold mine and Higginsville gold operations in Western Australia to between 185,000–205,000 ounces by 2024.

Karora CEO and chair Paul A Huet was thrilled to have someone of Makuch’s ilk join the company.

“I am thrilled to welcome Tony to the Karora team,” he said.

“Tony has a strong track record of growing mining companies, as demonstrated during his extremely successful tenure leading Kirkland Lake as CEO from 2016 until its merger with Agnico in early 2022.”

Gold and lithium explorer Kairos Minerals has appointed Peter Turner as its new managing director and Klaus Echof as its non-executive chair.

With more than 25 years’ experience in the resources sector, Turner has worked

for the likes of Perseus Mining, Placer Dome Asia Pacific, Delta Gold, and Goldbelt Resources, and led exploration projects in Western Australia, Africa, the Middle East and South-East Asia.

Eckhof was the founder and executive chair of AVZ Minerals, a company focused on developing the Manono project, one of the world’s largest undeveloped lithium deposits located in the Democratic Republic of Congo (DRC).

At the time of writing (mid-May), AVZ had a market capitalisation of $2.75 billion.

Turner and Eckhof will play important roles in the continued development of Kairos’ Mt York and Roe Hills projects in Western Australia.

“With an already substantial resource base at Mt York, we will apply smart exploration with the aim of growing the resource significantly. It is a large mineralised system in a tier-one location,” Turner said.

“We are equally excited by the lithium potential of Kairos’ Roe Hills project in what is a highly prospective place for find fertile LCT (lithium-caesium-tantalum) pegmatites. We have a huge land holding with promising lithium-in-soil anomalies waiting to be drilled.”

Genesis Minerals has welcomed three leading executives to the company, including chief commercial officer Morgan Ball, corporate development officer Troy Irvin, and general manager – projects and operations Lee Stephens.

Ball was formerly the chief financial officer of Saracen Mineral Holdings, where he was integral in financing the company’s 50 per cent acquisition of the Kalgoorlie Super Pit in 2019.

Irvin was previously employed in an identical role at Saracen, while Stephens spent more than 12 years as a general manager at the company, initially focusing on the Carasue Dam mine followed by the Thunderbox mine.

Genesis managing director Raleigh Finlayson said the three were fantastic additions to the company.

“We are building a team of leading industry specialists as part of our strategy to establish a substantial gold business,” Finlayson said.

“Morgan and Troy are highly respected in their fields, with extensive experience in the resources industry and capital markets. Lee has extensive operating and development experience, with a track record of delivering consistent production and tight cost control.”

– 49 –

EVENTS

QUEENSL A ND M INING A ND ENGINEER ING E X H I B I T I O N | M AC K AY | J U LY 1 9 –2 1

The Queensland Mining and Engineering Exhibition (QME) is a key place for the industry to come together to be inspired, innovate and connect over three days. It connects leading suppliers and technical experts with those seeking better efficiency and productivity, and increased optimisation for their business and site.

QME will feature over 250 suppliers, and a free seminar series will give attendees the opportunity to hear from industry professionals who will address the current needs of the industry. With live demonstrations and topical presentations, QME will be the ultimate destination for the Queensland mining industry.

• queenslandminingexpo.com.au D I G G E R S & D E A L E R S | K A L G O O R L I E | AU G U S T 1–3

In 2022, Diggers & Dealers is celebrating its 31st year as a leading Australian mining investment event.

Diggers & Dealers combines corporate presentations by listed mining and exploration companies, alongside a large exhibition area housing more than 150 exhibitors from the sector.

Delegates include miners, explorers, brokers, bankers, investors, financiers and mining service industries from around the world.

The event provides a unique opportunity for industry professionals to meet and network, visit regional mine sites, engage with media, raise finance, invest in projects and engage with the resources sector at an executive level.

An entertainment program ensures that delegates experience the best of the style and hospitality of Kalgoorlie, the unofficial gold mining capital of Australia.

• diggersndealers.com.au 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.

– 50 –

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 KGL Resources, 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 wanting 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 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) | M E L B O U R N E | O C T O B E R 1 7–2 2

The eighth IMARC comes to Melbourne Showgrounds in Victoria from October 17–22 after being postponed from its previous dates in January and February.

Isuzu, Newtrax Technologies, Murray Engineering and Australasian Metals have confirmed their support and participation in the event, in addition to major sponsors Caterpillar, Toronto Stock Exchange and Sandvik.

The IMARC team continues to build content and themes to attract global leaders from across the mining, investment, and METS communities across the value chain.

Leading into October 2022, chief executive officers who were due to speak at the conference at the end of January will take part in a series of virtual interviews and keynote presentations as part of a brand new IMARC Insights series.

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

• imarcglobal.com

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MAKING SEN WORLD AROSE OF THE UND US

ENT | VOLUM

resource developments in Australia and

RCES & INVEST M

to providing cutting-edge insights into

THE NEX T BIG RAR EARTHS PLAY E ERS

16 NUM BER

CREATIN G A CUR OUT OF ESGRENCY

@xylemanz

WE SOLVE

YOUR WATER CHALLENGES SUBMERSIBLE

SLURRY PUMPS FOR

HEADACHE SUMPS Less sediment, less downtime, less trouble.

Slurry sumps can be a constant hassle. Pumps wear hard and fast, and the sumps fill up with sediment.

Cantilever pumps are often not up to the task. We know, because that’s when we are called in.

The advanced CFD design of Flygt slurry pumps ensures exceptional levels of abrasion resistance.

In addition, we provide an array of measures that keeps sumps clean, even with the heaviest slurries.

SALES - SERVICE - RENTAL

13 19 14 | xylem.com/au | solve@xylem.com