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More investment needed in Australia's critical minerals - PwC

11th November 2022

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – A new report by PwC found that despite an increase in Australia’s critical minerals sector, the country’s current pipeline of development projects would fall well short of expected demand surge.

In its latest 'Aussie Mine' report, PwC said on Friday that factoring in project lead times, Australia needed greater exploration and pre-production activity urgently to match tomorrow’s demand growth.

“This is a once-in-a-generation opportunity, but the clock is ticking. With commodity forecasters predicting demand for some minerals will outstrip supply by 2025, Australia is at risk of missing out on the full value potential that energy transition presents,” PwC Australia national mining leader Debbie Smith said.

The report stated that if Australia was serious about maintaining, or potentially growing, its market share, the country needed to be making more early-stage investments and developing its project pipeline.

“True, exploration is increasing. But Australian company exploration budgets are still not what they should be given we’re on the cusp of a critical minerals boom. We need to be making investments now to set us up for the decades to come,” the report stated.

Furthermore, Australia needed to do more to leverage and extend its strengths, and move progressively down the value chain where there were substantial opportunities to develop value-add downstream processing industries.

Local resources companies also had to work on attracting investment from a range of capital providers, PwC said, with companies that were clearly able to communicate the merits of a project, including plans for high environmental and social governance performance and outcomes more likely to raise capital.

“We need to educate the investment and finance markets (particularly new and alternative sources of capital) on the importance of critical minerals for the energy transition. For example, lithium’s role as a battery metal for electric vehicles (EVs) is now well understood. However, markets need help to understand the potential of emerging flow/redox batteries and lesser-known parts of the periodic table,” the report stated.

PwC’s 17th annual 'Aussie Mine' report showed that critical minerals companies were taking up a bigger space in the Australian resources sector, revealing that the MT50, which is the ASX midtier mining companies, is now dominated by critical minerals companies, which make up half of the MT50’s A$150-billion value.

The Aussie Mine report found that the market capitalisation for critical minerals in the MT50 spiked 32% to A$70.3-billion at the end of June and an additional 34% to A$89.4-billion as at September, significantly overshadowing gold, which stood at A$27.1-billion, iron-ore, which stood at A$4.4-billion, and coal, which stood at A$18.9-billion.

When it comes to growth potential and outlook, lithium is trending ahead of the curve. Increased demand, combined with a lag in new supply, has resulted in record prices for spodumene concentrates, which are used to create lithium-ion batteries for electric vehicles, PwC said.

“Lithium is fast charging our midtier mining industry. While there are several new projects for lithium production underway, the 'Aussie Mine' report shows short-and long-term supply risks remain,” PwC Australia’s Aussie Mine report 2022 lead partner Marc Upcroft said.

“Long lead times and potential delays in bringing such large volumes of lithium into production will impact demand-supply balance and prices. However, this crucial junction presents enormous potential for Australian miners ready to rise to the challenge and pursue lithium production projects.

“To fully reap the rewards, Australian miners must ditch the historic ‘dig and ship’ mentality and move further down the supply chain,” Upcroft said.

“We are starting to think differently about how we can own more of the supply chain and work collaboratively to create low-emission, critical-mineral-dependent products with a value that outweighs the sum of its parts.”

Upcroft said that Australian lithium producers in particular stood to gain from this supply chain shift.

The 'Aussie Mine' report notes that 50% of global lithium production is currently Australian-sourced. By moving down the supply chain to produce materials such as battery-grade lithium hydroxide, Australia can position itself as a genuine player in battery production.

Forecasts show Australia has the potential to become a meaningful producer of lithium hydroxide by supplying 10% of global capacity in the next few years, and 20% by the end of the decade.

Meanwhile, across the MT50, the 'Aussie Mine' report revealed that total deal value increased by 18% and deal volume by a whopping 180%. Of this, critical minerals make up about two-thirds of the total deal volume, or 64%.

The report shows that scale is becoming increasingly important, with corporates seeking the benefits of diversified production portfolios, more robust balance sheets, and larger project development pipelines.

“We will need to see customers embrace exploration and project risks if we want to close the looming supply gaps. There’s intense competition for advanced projects, and there’s simply not enough of them. Early stage projects present more opportunities,” Upcroft said.

“An increase in customers making direct investments in early stage projects will really help close the supply gaps ahead. This is critically important as early-stage project funding is the hardest to raise.”

Edited by Creamer Media Reporter

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