A big looming capital markets shift and rare earths dilemma headline: What we learnt at Diggers & Dealers 2024

Almost 3000 delegates from around Australia — from stockbrokers and financial analysts to drillers and contractors — descended on Kalgoorlie this week for the nation’s premier mining summit, Diggers & Dealers. This is what dominated their discussions. Market jitters favour minnows On the sidelines at Diggers on Monday morning (Day 1) there was no shortage of chatter about the share market. On Friday — the final trading day before the conference kicked off — the Australian share market tumbled to close out its worst day since March last year, amid growing concerns the global economy is slowing at a faster rate than previously thought. The benchmark S&P/ASX200 on Friday closed 2.1 per cent lower, the biggest one-day fall since March 2023. The bloodshedding then accelerated on Monday with S&P/ASX200 index losing a further 3.7 per cent. The share market decline has since stabilised but there was a strong belief among the brokers and analysts at the conference that impacts from the shock could change the shape of capital raisings and deals for months to come. Despite a record gold price run, juniors hunting for the precious metal have been relatively starved of capital with an investment preference towards producers persist. But Canaccord Genuity senior mining analyst Paul Howard says gold safe haven’s status during market turmoil means capital will likely finally trickle down to explorers. “When there’s general market volatility and the gold price is high more money is spent on gold,” he told The Nightly. “We’ve seen capital flowing in at the bigger end of town, and I think that’s all been soaked up, I think it will next have to trickle down through the mid tiers and into the junior space.” Rare earths at a crossroads The geopolitical importance for Australia to have a strong domestic supply of rare earth elements was emphasised from the get-go of the conference with an impassioned keynote speech by former Federal Labor leader and Australian ambassador to the US, Kim Beazley. Mr Beazley went as far to say that providing our closest security ally, the US, with a steady stream of rare earths — used in the magnets that enable precision missiles and other high-tech military equipment — will be essential for Australia’s “survival”. But how the nascent rare earths industry in Australia navigates a monopolistic control of the market by China was up for considerable debate. Mr Beazley believes the Federal Government should step in to buy rare earths offtake from domestic producers to counter China’s price distortion. “I think we need to practise 100 per cent China’s (model), that means the (Australian) Government needs to buy processed materials and stockpile it,” he said. “So we can, as the Chinese do, we play the same game.” But Amanda Lacaze, the chief of Australia’s only rare earths producer Lynas Rare Earths, was not entirely convinced. She reckons the taxpayer money is better spent on upgrading ageing infrastructure — like in the surrounds of Lynas’ $800m cracking and leaching plant near Kalgoorlie — to make Australia more naturally competitive. “What do I lie awake in bed at night dreaming about? Uninterruptible power, and plenty of it at low costs, at low prices in Kalgoorlie, absolute top of my list,” she said. Tough choices on lithium At the 2023 iteration of Diggers, lithium was the in-flavour mineral. A seemingly endless pool of capital ready was ready to be thrown at every lithium hopeful in sight and there was a palpable sense it would soon dethrone gold as the ex-iron ore bedrock commodity of WA’s mining industry. The State Government was a fervent supporter of the lithium industry thanks to the exponential growth in royalties it was set to inherit on top of the feel-good factor about the commodity’s role in decarbonisation. But how times have changed in just 12 months. The price has tanked and now the Government is under pressure to provide support to an industry segment it thought not long ago would be a money spinner. Tony Ottaviano, the boss of Australia’s newest lithium miner Liontown Resources, called for the State Government to consider imminently lending a helping hand to spodumene concentrate producers, suggesting royalty relief as a potential option. “If we’re hovering around the $870 (US dollar per tonne) mark, then maybe the Government should respond sooner rather than later, we don’t want to leave it to the last minute like they did with nickel ... we saw what happened,” he said on Tuesday. A day later, WA Mines Minister David Michael poured cold water on that suggestion, but he’ll have to prepare for a big industry backlash if the lithium dominoes start to topple. Since the start of the month, US giant Albemarle has slashed 300 jobs at its Kemerton lithium hydroxide refinery in WA and question marks loom over the future of Arcadium Lithium’s Mt Cattlin mine near Ravensthorpe. Niobium and uranium Amid the early-week market carnage, the reaction to Tuesday’s announcement by St George Mining exemplified the incredible level of investor interest in niobium. St George’s share price surged to 20 per cent in morning trade after pressing go on a $21.3 million capital raise to buy the Araxa niobium project in Brazil next door to the world’s largest producing mine of the commodity. Niobium — used in alloys to improve the strength of stainless steel — was a barely a footnote at last year’s Diggers. But the rapid emergence of WA1 Resources has put the rare earth-adjacent metal onto the investor map. WA1’s Luni deposit niobium find in the remote West Arunta region of eastern WA sent its share price soaring from below 15¢ in October 2022 to above $20 by last month. WA1’s rapid ascent led it to take out the Emerging Company Award at the Diggers gala dinner on Wednesday. Mr Howard said he witnessed considerable investor interest in finding the next niobium hotshot at Diggers this year and it overshadowed any talk about another recently-hyped commodity — uranium. “On uranium, there wasn’t as many conversations (compared with niobium), because it sort of come off a little bit last the last few months there wasn’t a hell of a lot of conversation.” Of what conversation there was about uranium at Diggers, most of it was coloured with a political lens thanks to the Federal Opposition Leader Peter Dutton riding into town. Mr Dutton, speaking at the conference on Monday, lashed the WA Labor Government for its continued ban on uranium mining, saying it could shield the State from losing thousands of jobs. “Why would we be stopping ourselves from earning additional income for our country, creating extra jobs? We could help take WA to the next level,” he said. “I just don’t understand the government’s reluctance here. It’s ideologically based, and we’re going to do ourselves out of thousands of jobs.” The Super Pit is here to stay Kalgoorlie is the mecca of WA mining and the iconic Super Pit is the economic jewel of the town. Many analysts and journalists started their 2024 Diggers with a trip to the Northern Star Resources mine on Sunday. Citi analyst Kate McCuctheon noted the life of asset plan for the Kalgoorlie Consolidated Gold Mines operation, which the Super Pit is at the heart of, goes on for 60 years with “exploration targets in all directions”. “The site geos like Mt Percy to the north given lack of drilling, while the engineers cite new discovery Hercules,” she said of the site tour in a note to clients. The life of the Super Pit itself has been extended until least 2034. Northern Star continues to drill underground at the Super Pit and is investing $1.5 billion to upgrade the nearby Fimiston mill to significantly boost output from 13 million tonnes of ore per year to 27 million tonnes. Stuart Tonkin, the boss of Northern Star, told analysts and journalists following the site tour that the huge mill upgrade was essentially “insured” by two huge mounds of stockpiled ore on the perimeter of the Super Pit. “We’ve got $6 billion worth of margin in that stockpile at current gold prices,” he said. “That stockpile was our insurance policy for the $1.5b mill expansion.”