Hamilton Locke was delighted to return as legal sponsor at the RIU Explorers Conference in Fremantle last week with Partner Jeremy Newman providing his tips and tricks for navigating the ASX in 2024.
Our team identified the following five key themes during the RIU Explorers Conference for 2024 and beyond:
1. Commodity prices – a long-term outlook
Commodity prices were a major theme of discussion. Most lithium and nickel explorers are facing extreme challenges as a result of the downturn in prices, which many predicted will continue to remain low in 2024.
There was more positivity on copper prices, although ASX exposure for junior explorers remains fairly limited. In other jurisdictions, we have seen FireFly Metals recently acquire a copper-gold project in Canada and commence a significant drilling program – could copper be the next commodity to attract interest in Canada?
The market has been somewhat taken by surprise by Indonesian nickel miners’ ability to quickly and cost effectively build new mines and processing facilities, including the rapid development of HPAL technology which has opened up the processing of laterite deposits. The resulting market surplus has driven nickel prices down and is severely impacting the higher cost Australian and Canadian nickel producers.
Given the importance of nickel to the battery mineral sector, and the environmental and social issues linked to Indonesian nickel players, there were several calls for the Australian Government to step-in and support the industry. Just last week, the Australian Government responded by placing nickel on the critical minerals list, giving some companies access to Government funding, and the Western Australian Government has proposed a 50% rebate (repayable) on the Government nickel royalty. However, given the supply flood and continued ramp-up of Indonesian production, it would appear that there are still challenging times ahead for Australian nickel companies.
Despite the depressed lithium prices, exhibitors remained positive about the medium to long-term outlook for lithium prices for those companies at the right end of the cost curve, with both nickel and lithium being crucial for global decarbonization and the world’s efforts to reach net zero by 2050. Exhibitors noted the increasing pressure on producers by vehicle manufacturers to provide information and commitments in respect of carbon footprints, particularly in the European vehicle market.
2. Gold shoots – positivity for the gold sector
There was a general theme of positivity towards gold at the conference this year.
With gold prices at all-time highs, particularly in Australian dollar terms, there continues to be a positive outlook on gold projects with investors returning to their safe-haven commodity. This is partly due to macro conditions, with US debt and global conflicts/uncertainty playing a key role.
With the US looking like it is beginning to bring inflation under control, the US Federal Reserve is anticipated to announce interest rate cuts from mid-2024 with analysts expecting this to result in continuing higher gold prices throughout the course of 2024.
Overall, there was a positive outlook by a number of gold presenters and companies like De Grey Mining and West African Resources appear to be well placed to take advantage of the sentiment and price.
3. Consolidation and increased M&A activity
Tight capital markets and commodity prices are creating ideal conditions for a wave of consolidation activity in the mining sector.
With explorers facing difficulties in raising capital to advance their exploration projects, and the sheer number of junior exploration companies that have listed in the last three years, we expect to see a continued wave of M&A activity in the junior mining sector this year.
There are a number of companies looking for opportunities to consolidate, with non-core asset sales, mineral sharing arrangements and joint ventures all being topics of interest at the conference.
4. Inflation Reduction Act
Sentiment among conference attendees was that the Inflation Reduction Act (IRA), which was passed by the US Congress in August 2022 and makes provision for US$369bn worth of funding to accelerate the US transition to net zero, will present both challenges and opportunities for the Australian minerals sector.
In terms of opportunities, the IRA has the potential to significantly increase demand for minerals on the US critical minerals list (including aluminum, cobalt, graphite, lithium, magnesium, manganese, nickel and vanadium, among others). This is compounded by the fact that the IRA is simultaneously making it difficult for corporations wishing to sell their products into the US from sourcing Chinese manufactured products as part of the supply chain. As such, companies are looking to new supply chains, particularly through Canada and Australia, countries with whom the US has Free Trade Agreements.
However, there remains some uncertainty as to the approach a Trump-led Republican party, which is continuing to gain momentum in the race to be elected later this year, might take to the IRA. Further, in a world that competes for global talent, the significant dollar investment in renewables by the US under the IRA is also creating challenges as it risks diverting Australian talent into US entities cashed up because of the incentives in the IRA – hampering Australia’s own critical minerals processing efforts.
5. Uranium – moving the dial
With the ongoing discussions around climate change, renewables and the global push for decarbonization, the uranium price, mostly flat for a decade, has been on a run in the last
6-9 months.
Industry consensus appears to be that renewables alone will be insufficient to meet the world’s power requirements to achieve net-zero by 2050 and uranium, as arguably the lowest carbon fuel source, can be a crucial component of the energy transition. As the public becomes more knowledgeable, the environmental and social opposition to uranium projects appears to be softening as well.
It remains to be seen whether rising uranium prices and more positive sentiment will lead to government policy barriers, and red-tape, being relaxed such that the development of uranium projects becomes viable in Western Australia.
As the mining and resource sector continues to evolve, reach out to our experienced team for practical advice.
