Kirkland Boosts Production Guidance, Fosterville Mineral Reserves

Kirkland Lake Gold has boosted its 2019 production guidance on the back of strengthening mineral reserves at its Fosterville gold mine.

Kirkland Lake Gold (ASX:KLA,TSX:KL,NYSE:KL) has revised and boosted its 2019 production guidance on the back of strengthening mineral reserves at its Fosterville gold mine.

The company says the potential to hit a million ounces in 2019 is there, with production guidance now being shifted to a range of 920,000 to 1 million ounces.

Three-year production guidance has also been revised, with 2020’s range growing to 930,000 to 1.01 million ounces, and 2021 sitting at 995,000 to 1.05 million ounces.

Mineral reserves have also increased, notably at Fosterville in Victoria, where reserves increased 60 percent, or 1.02 million ounces, hitting 2.72 million ounces at 31 grams per tonne (g/t).

This is up from the previous reserve level of 1.7 million ounces at 23.1 g/t. The average grade of Fosterville’s mineral reserves also blossomed by 34 percent.

Additionally, mineral reserves at the Macassa mine in Canada saw growth of 11 percent, to 2.25 million ounces at 21.9 g/t, from 2.03 million ounces at 21 g/t. Consolidated mineral reserves grew by 24 percent, or 1.1 million tonnes.

“Looking at our mineral reserves in more detail, the 24 percent increase in consolidated mineral reserves is a testament to the effectiveness of the infill drilling programs at Fosterville and Macassa,” Kirkland Lake President and CEO Tony Makuch said in a statement.

“At Fosterville, there is considerable potential for further mineral reserve growth at a number of areas, including the Swan Zone, other parts of the Lower Phoenix system, Harrier and a number of other targets, like Robbin’s Hill, where early exploration results demonstrate the potential for attractive economic orebodies,” he continued.

Also affected by the increase in target production were Kirkland Lake’s operating costs per ounce sold, which are now docketed at $300 to $320 per ounce vs. the previous $360 to $380 range.

All-in sustaining costs per ounce sold have also improved to a range of $520 to $560, as opposed to the prior range of $630 to $680.

Kirkland Lake’s share price had jumped 8.97 percent by the end of trading on Friday (February 22), closing on the ASX at AU$51.75.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

Featured
Global News
blocks saying "hodl" with coins
Andrey_Popov / Shutterstock

"Buy the dip and hold on for dear life, as the crypto kids say — HODL," said Frank Holmes of US Global Investors.

Frank Holmes: Gold Advice as Price Falls — Buy the Dip and HODL youtu.be

The gold price has tumbled since last week's US Federal Reserve meeting, which saw the central bank raise rates by 50 basis points for the first time since 2000 in an effort to combat inflation.

Speaking to the Investing News Network, Frank Holmes, CEO and chief investment officer at US Global Investors (NASDAQ:GROW), pointed out that the yellow metal's decline is a buying opportunity.

"Buy the dip and hold on for dear life, as the crypto kids say — HODL," he said. HODL is a term that originated in the cryptocurrency community, although it’s since gained mainstream usage through popular memes.

read more Show less
mining cart in a tunnel

Driven by foreign investment, mining has become one of Argentina's fastest-growing sectors; Australian companies make up a particularly large segment of this industry.

Mining in Argentina has become one of the fastest-growing sectors in the nation’s economy. Argentina’s ample and comparatively underexplored gold and precious metals resources are a valuable opportunity, and will likely drive considerable growth in the country’s mining sector in the coming years.

In comparison to its neighbour Chile, Argentina’s mining sector has a lot of room to grow. Attractive incentives, including favourable mining policies, competitive mining investment laws and mineral-rich geology, have been seen as positive steps towards a strong Argentinian mining industry.

Mining giants are definitely attracted. Barrick Gold (TSX:ABX,NYSE:GOLD) has staked a claim in Argentina alongside its partner Shandong Gold Mining (HKEX:1787), extending the life of the country's largest gold mine, Valadero, with a US$75 million investment. On the other hand, Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), the second largest metals and mining company in the world, recently acquired the Rincon lithium project. Formerly owned by Rincon Mining, the undeveloped lithium brine project is situated in Argentina's Salta province. It represents the latest in a series of acquisitions and developments in the region by Australian businesses.


Mining in Argentina: A brief history 

Unlike other regions, Argentina's mining sector doesn’t have a particularly long history. A 2016 study released by KPMG International notes that the Argentina mining sector's first significant milestone was the 1813 enactment of the Mining Promotion Law. Designed to encourage exploration, research and production of the country's extensive mineral wealth, this law ultimately laid the foundation for modern-day Argentina's welcoming attitude towards mining.

Argentina went on to adopt the Argentine Mining Code in 1887, a regulatory framework that established state ownership of the country's subsoil while still allowing for private exploration. The fledgling industry developed slowly over the next several years. Although it received some benefits due to increased demand and mineral prices during the First and Second World Wars, this was not enough to inspire significant growth.

It was not until near the end of the 20th century that the sector began to flourish. Constitutional reform in 1994 shifted ownership of natural resources from state to province, while a new regulatory framework attracted considerable investment from both Canada and Australia. Notably, from 1990 to 1999, joint production of minerals increased by 104 percent. During this period, the gross domestic product of Argentina's mining industry grew at a rate of between 5 and 7 percent per annum.

Mining in Argentina soon became the primary target of foreign direct investments. The production of common metals such as steel and aluminium were the primary beneficiaries of this surge of investment.

Unfortunately, growth soon slowed to the point of stagnation, the result of several factors. First, the country's mining code was unnecessarily complex and cumbersome to navigate. Second, socioeconomic strife created more risk than some investors were willing to accept. And finally, the introduction of controversial legislation such as the 2002 Glacier Protection Law alienated the mining sector, leading to multiple high-profile exits.

Mining in Argentina: The revitalization

In 2017, Argentina further deepened its trade relationship with Australia, signing a memorandum of understanding that saw the two countries collaborate on building education, research and capacity across multiple sectors. This agreement, which placed particular emphasis on mining, established a strong foundation for any Australian company looking to conduct exploration or production in the country. The 2019 election of a new president only further moved the dial, with President Alberto Fernández swearing to revise the country's mining code and reconsider its Glacier Protection Law.

Moreover, as the world has continued the push for cleaner energy and carbon neutrality, demand for battery materials such as copper and lithium — both of which are abundant throughout the country — has sharply increased.

Because Argentina is currently at the heart of a global lithium rush, it's easy to forget the fact that it also houses significant mineral wealth in both gold and precious metals. These ample, comparatively underexplored resources represent an incredibly valuable opportunity. It is likely that, alongside lithium, they will drive considerable growth in the country's mining sector.

Political instability in Chile may also contribute to Argentina's rise, as investors seek an alternative to its well-developed mining sector. Ultimately, Argentina has set a goal of US$10 billion in mining exports by 2030.

Mining in Argentina: ASX gold companies

Australian mining and exploration companies have a significant presence in Argentina and exert considerable influence over the country's mining industry.

Challenger Exploration (ASX:CEL) has also established itself in the gold-rich province of San Juan with the Hualilan project. Consisting of 15 mining leases and an exploration licence application over 26 square kilometres, Hualilan contains a high-grade historical resource of 627,000 ounces of gold that remains open in all directions.

The company has had nine rigs drilling at the project for almost a year, and is due to release its maiden resource estimate shortly. The project will use the same rail shipping methods as the highly successful Josemaria copper project, recently acquired by Lundin Mining (TSX:LUN,NASDAQ:LUMI).

Another ASX-listed explorer in Argentina, E2 Metals (ASX:E2M), which has the El Rosillo and Conserrat projects in Patagonia, counts Eric Sprott as one of its largest shareholders. This follows his decision to cornerstone a capital raise in March 2022. Sprott is a well-recognized investor with a strong history in mining.

When referring to its efforts to promote mining efforts, San Juan’s mining ministry said, “It has become a state policy. We provide the fiscal conditions, social licences and the legal certainty schemes necessary for the full development of mining. Our territory concentrates 50 percent of the country’s mining potential.”

Finally, Austral Gold (ASX:AGLD,OTC Pink:AGLDF) in 2019 acquired a 100 percent interest in the Casposo silver-gold mine through a share purchase agreement with Troy Resources (ASX:TRY). A combination open-pit and underground mine, Casposo began production in 2011. It is currently undergoing care and maintenance, and a reopening date has yet to be announced.

Takeaway

Despite a troubled political history, Argentina is incredibly well-positioned to turn this around, and the country maintains a strong relationship with Australian mining companies. Favourable mining policies and competitive mining investment laws, combined with mineral-rich geology, have the potential to greatly strengthen the country's mining industry.

This INNSpired article is sponsored by Challenger Exploration (ASX:CEL). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Challenger Exploration in order to help investors learn more about the company. Challenger Exploration is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Challenger Exploration and seek advice from a qualified investment advisor.

Related Articles Around the Web
CEL:AU
iphone with laptop and stock charts
Olya Kobruseva / Pexels

"My fear is that I do think you still have a little bit more downside in gold ... but this (level) is going to be the best buying opportunity," said Gareth Soloway of InTheMoneyStocks.com.

Gareth Soloway: Stock Market Slippage Explained, Gold's Next Buying Level youtu.be

With major indexes in the red and volatility running high, market participants are looking for answers about what's happening and what may be next.

"Really what's going on here is you now have a Fed that's tightening, and we know that," Gareth Soloway of InTheMoneyStocks.com told the Investing News Network.

"Next week we'll see probably a 50 basis point rate hike, (and) the market is now pricing in further rate hikes for the rest of the year — and a potential slowdown in the economy because of that."

read more Show less

Interested in gold in Australia? Here's a brief overview of what investors should know about where the yellow metal is found in the country.

With gold in focus due to Russia's invasion of Ukraine, some experts are expecting its price to reach all-time highs as investors seek traditionally safe-haven investments.

If you’re interested in investing in gold right now, you may want to turn your attention to Australia, which is currently the second largest gold-producing country in the world.

Read on for a breakdown of gold in Australia, including a look at how each state and territory contributes.


Gold in Australia: Australia's place in the world

As mentioned, Australia is currently the second largest gold-producing country globally, just behind China. Gold production in the country reached a high of 330 tonnes in 2021, up from 328 tonnes the previous year.

“There are three countries that combine the rule of law with significant gold production: Canada, the US and Australia. Outside of these three, there’s not much gold, or there’s not much protection for individual investors and companies,” Kevin McElligott, managing director of Australia at Franco-Nevada (TSX:FNV,NYSE:FNV), explained to the Investing News Network in a 2019 email interview.

According to the Office of the Chief Economist, Australian gold mine production is forecast to rise at an average annual rate of 8 percent from 2020 to 2021 and 2022 to 2023. Anticipated production of 374 tonnes by 2022 to 2023 will be propelled by both production from new mines and existing mine expansions.

Western Australia is the centre of gold exploration activity in the country, accounting for 70 percent, or AU$1.07 billion, of total gold exploration expenditure. In 2022, the Fraser Institute named Western Australia the best mining jurisdiction in the world. Its Pilbara region is a big part of why the state is attracting attention.

In recent years, Pilbara exploration activity has seen renewed interest and helped increase the country’s consistent gold output. Covering more than half a million square kilometres, the region has attracted major miners like Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and BHP (ASX:BHP,NYSE:BHP,LSE:BHP).

Western Australia accounts for the bulk of the country's gold output, and the geology of the Pilbara Craton has been compared to South Africa’s Kaapvaal Craton and Witwatersrand Basin. Witwatersrand is home to the Earth’s largest known gold reserves and is responsible for over 40 percent of worldwide gold production.

Both the Pilbara and Witwatersrand are similar in age and composition, sitting on top of the Archean granite-greenstone basement. The Pilbara area hosts numerous small mesothermal gold deposits containing conglomerate gold — mineralization known to hold large, high-grade gold nuggets.

Gold in Australia: Production by region

Click through the links below to learn more about gold mining in Australia's states and territories. The data used is from Geoscience Australia, and the 2018 gold production numbers are the latest available.

Gold in Australia: Western Australia

As mentioned, Western Australia is a gold powerhouse, and its output stands well above that of its fellow Australian states and territories, measuring at 211 tonnes in 2018.

Gold in Australia: New South Wales

New South Wales has a long history with gold, being the home of the first Australian gold rush in the mid-1800s, which helped kickstart the then-colony’s burgeoning economy. Gold found in Central New South Wales triggered an obsession with mining that burned for decades. In 2018, the state's production was 39 tonnes.

Gold in Australia: Queensland

Queensland may be best known for its coal exports, but the state is dotted with active mines, with a modest collection that produce gold. It put out 18 tonnes of the yellow metal in 2018.

Gold in Australia: Northern Territory

The Northern Territory produced only 15 tonnes of gold in 2018, but over its lifetime more than 20 million ounces have been pulled out of the ground in the region. The Pine Creek, Tennant Creek and Tanami goldfields are the primarily places where this metal has been extracted.

Gold in Australia: Victoria

Victoria also has a strong gold-mining history, although today it's a smaller-scale producer. In 2018, 13 of the 315 tonnes of gold mined in Australia came from Victoria from seven active mines — most of which are located within regions known for vast historical output of the yellow metal

Gold in Australia: South Australia

South Australia isn't a major gold miner, although it accounts for over a quarter of the country’s gold resources — in 2018, just 8 tonnes of gold were mined in the state. However, the area has potential, with a major geological region — the Gawler Craton — identified by the government and mineral explorers as being of extreme interest.

Gold in Australia: Tasmania

Tasmania is geologically diverse with a number of major operating mines, but it is not a significant gold producer. Its output of the precious metal clocked in at only 1 tonne in 2018.

This is an updated version of an article originally published by the Investing News Network in 2019.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Matthew Flood, currently hold no direct investment interest in any company mentioned in this article.

disintegrating us dollar bill
SERSOLL / Shutterstock

"This is your barterability, this is your wealth preservation ... you have to be prepared to be as independent and self-sufficient as possible," said Lynette Zang of ITM Trading.

Lynette Zang: We're Facing a Hyperinflationary Depression, What to Own Now youtu.be

All eyes are on the US Federal Reserve as the central bank makes an effort to tame inflation.

Will it be successful? Lynette Zang, chief market analyst at ITM Trading, doesn't think a turnaround is in store.

"I'm sorry," she told the Investing News Network, when asked what's next. "(We're headed into) a hyperinflationary depression, because they have to burn off all of this debt — and this is a global issue."

read more Show less
Maiden RC Drill Program Commences at Korhogo Project
Mako Gold: Exploring High-Grade Gold Deposits in Côte d'Ivoire
Mako Gold: Exploring High-Grade Gold Deposits in Côte d'Ivoire

Mako Gold Limited (“Mako” or “the Company”; ASX:MKG) is pleased to advise that it has commenced a 2,000m maiden RC drilling program at the Korhogo Nord Permit which, with the Ouangolodougou Permit constitute the Korhogo Project1 . The permits collectively cover 296km2 hosting 17km of faulted greenstone granite contact as shown in Figure 1. Both permits are 100% owned by Mako and are readily accessible from the Mako Field Office.


HIGHLIGHTS

  • 2,000m maiden Reverse Circulation (RC) drill program commenced on first high-priority target at Korhogo – Mako’s second project, in a previously undrilled land package
  • Primary target is a 2km-long +20ppb gold anomaly with high-grade cores over 60ppb gold coincident with faulted greenstone-granite contact
  • Additional targets identified for further exploration including auger and follow up RC drill testing
  • The 100% Mako owned Korhogo Project has no previously recorded drilling and covers 296km2 of prospective tenure located within 15-30 km of Barrick’s 4.9Moz Tongon Gold Mine
  • Exploration at Korhogo is on strategy for Mako -ensuring the Company continues to target discoveries on greenfield exploration projects, whilst moving its flagship Napié Project towards a Mineral Resource Estimate (MRE).
  • Drilling completed at the Gogbala Prospect on the Napié Project where a MRE is on-track for June 2022

Mako’s Managing Director, Peter Ledwidge commented:

“Mako is in the privileged position to be able to commence a maiden drilling campaign on its second project, whilst finalising its MRE on its flagship Napié Project. This leverages the core skillset of the management team; namely making discoveries on highly prospective greenfield projects in West Africa. The commencement of drilling at Korhogo marks an important milestone in the growth of the Company as we progress to the drilling phase on the project. Our previous work at Korhogo has culminated in the identification of several high-priority targets. We are pleased to commence drilling on the first target, a 2km-long +20ppb gold auger anomaly with high grade cores over 60ppb Au, coincident with a faulted greenstone/ granite contact. We look forward to announcing results from drilling at Korhogo as well as Napié, where we have completed our drilling ahead of the upcoming MRE

Korhogo is located in a fertile greenstone belt that hosts Barrick Gold’s 4.9Moz Tongon gold mine and Montage Gold’s 4.5Moz Kone gold deposit, both in Côte d’Ivoire, as well as Endeavour’s 2.7Moz Wahgnion gold mine just across the border in Burkina Faso (Figure 5).

Previous work completed by Mako includes airborne magnetics/ radiometric geophysics, soil geochemical sampling, and the recent 11,000m auger drilling program1 . Interpretation of the results on these previous programs has identified several high-priority targets. The maiden drilling program will focus on the first target, a 2km-long +20ppb gold auger anomaly with high grade cores over 60ppb gold, coincident with the faulted greenstone/ granite contact shown in Figure 2.

Drilling has commenced on the first of four fences of heel to toe RC holes (where the bottom of one hole when projected to surface is the collar of the next hole), covering approximately 900m of the highest auger anomalies (Figure 3).


Click here for the full ASX Release

This article includes content from Mako Gold, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.

MKG:AU
hydrogen symbol with globe

Wondering about the future of hydrogen in Australia? Here's an overview of investing in hydrogen in the country.

Hydrogen has long been touted as the most important clean energy source of the future. However, 99 percent of hydrogen produced today is derived from power generated by coal or gas.

Thanks to technological advances and massive new investments made by the public and private sector, the industry is now making the critical transition towards clean "green" hydrogen — in other words, hydrogen that is produced via zero-carbon and low-carbon energy sources.

Australia, like most western nations, is determined to decarbonise its economy as part of the global transition toward renewables. Many industries now face strict targets for reducing emissions as part of the drive to lessen the carbon footprint left by Australia's steel and coal industries.


Although hydrogen is generally seen as a long-term investment play given the many years it takes to build new plants and add capacity in the market, last year saw investors rush to get in on the ground floor of the rapidly expanding Australian green energy market as smaller players began to make their mark.

In 2021, the ASX hydrogen sector saw some exponential gains in the share prices of several up-and-coming players, including Province Resources (ASX:PRL), Pure Hydrogen (ASX:PH2), Sparc Technologies (ASX:SPN), Environmental Clean Technologies (ASX:ECT) and QEM (ASX:QEM). These five companies led the way in driving interest in the kind of opportunity that the Australian hydrogen industry represents, both in the short and long term. Several key public/private partnerships also played a role in stimulating market interest.

Hydrogen investing in Australia: What is hydrogen and how is it used?

Hydrogen is the most abundant element on Earth. It is a colourless gas that can be burned to generate electricity, or alternatively can be combined with oxygen atoms in fuel cells. Hydrogen can be produced in gas or liquid form, and has the ability to replace fossil fuels in household heating, transportation and industrial manufacturing processes like steelmaking, which consumes massive amounts of power.

As a fuel, the great advantage of hydrogen is that it produces no carbon emissions, only water as a by-product. First discovered 250 years ago by English physicist Henry Cavendish, hydrogen was initially used in combination with oxygen to power internal combustion engines, hydrogen gas blowpipes and hydrogen gas lamps. It was later used in the construction of hydrogen-lifted airships and German Zeppelins until passenger service was abandoned after the tragic 1937 explosion of the Hindenburg Zeppelin in New Jersey, which killed 36 people.

Currently, the hydrogen market is valued at over US$100 billion, with the material being used widely as an industrial chemical, mainly by the petroleum industry for the production of ammonia, a principal ingredient in the manufacturing of nitrate fertiliser.

There is also growing demand for hydrogen by companies anxious to harness its properties as an effective means of storing power. But none of these applications for hydrogen compare to its extraordinary potential as a viable clean energy fuel for transportation ― particularly in trucks, airplanes and ships.

These essential means of transportation are difficult to decarbonise due to the weight of batteries and their inability to hold sufficient charge for long-haul trips. Hydrogen, however, offers a much lighter alternative as a clean-burning fuel that would go a long way to eliminating carbon emissions in the transport sector.

Hydrogen investing in Australia: Big players and government investment 

Aside from the smaller-cap companies mentioned above, several major Australian energy companies, including Fortescue Metals Group (ASX:FMG,OTCQX:FSUMF), Origin Energy (ASX:ORG,OTC Pink:OGFGF) and Wesfarmers (ASX:WES,OTC Pink:WFAFF), are now rapidly expanding their investment in the hydrogen sector.

Clearly, if hydrogen is now in the process of realizing its potential as a replacement for oil- and coal-generated electricity, the leading steel, coal and gas producers may be well-positioned to bring about this shift in the energy mix. They possess the requisite financial might and technological/engineering expertise to become dominant players in the hydrogen sector as they assume their role in the transition from fossil fuels to renewable energy.

Aiding this growth in Australia's hydrogen industry is government support. The EU, for example, paid nearly half of the US$23 million cost of Shell’s (LSE:SHEL,NYSE:SHEL) Rhineland project, while Queensland has partnered with Fortescue on a AU$1 billion hydrogen project in Gladstone.

Last year alone saw a doubling in the number of newly announced large-scale hydrogen projects to over 500, as per a Hydrogen Council report. Nearly 75 percent of these long-term plant, port and pipeline projects are expected to be completed by the end of the decade, with 40 percent already funded or under construction.

Meanwhile, the Australian government is in the process of investing AU$1.4 billion in its domestic hydrogen industry as part of a growing global drive towards net-zero emissions. Australia's National Hydrogen Strategy intends to grow this industry and position Australia as a major player by 2030.

Aside from that, Australian Prime Minister Scott Morrison has set out an Australian technology roadmap that intends to pour a total of AU$20 billion into clean hydrogen, energy storage, low-emission steel and aluminium, carbon capture and storage and solar.

In June 2021, Morrison announced a joint hydrogen development program with Germany under which Australia will gain access to highly advanced German hydrogen technology, strengthening Australia's ambitions of becoming a leading hydrogen exporter. This will help Australia build up its capacity to export significant quantities of hydrogen to Germany as part of the European country's policy to reduce reliance on fossil fuels.

Australia will also be partnering with Japan (to develop new hydrogen fuel cell technology and establish the world's first clean liquefied hydrogen export pilot project), Singapore (to accelerate low-emission technologies) and Korea (to collaborate on hydrogen supply chain research and low- and zero-emission technology).

Hydrogen investing in Australia: Long-term outlook

The promise of Australia's hydrogen market is strong — indeed, the Australian Renewable Energy Agency believes the space could be worth up to AU$10 billion annually by 2040, at which time the country would be putting out over 3 million tonnes of renewable hydrogen on a yearly basis.

But putting matters into perspective, proposed long-term investments in transitioning towards hydrogen are still dwarfed by Big Oil's average annual expenditure on developing new fields.

In today's early stages, investors looking to enter Australia's hydrogen space have plenty of choices, whether they want to start with the larger players or try their hand at determining which earlier-stage stocks will be successful.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Harold Von Kursk, currently hold no direct investment interest in any company mentioned in this article.

electric vehicle plugged into a charging station

What happened in the battery metals market in Australia in the first quarter of 2022? Find out here.

In the last few years, Australia has been positioning itself to take advantage of the green energy transition taking place globally, with plenty of projects focused on battery metals on the horizon.

Prices for raw materials essential to electric vehicle batteries have been on the rise since 2021, with many ASX mining companies in the lithium, cobalt and graphite sectors also posting gains year-to-date.

Here, the Investing News Network looks at what happened so far in 2022 and what could be ahead for Australia’s battery metals market in the second quarter.


Australia battery metals market: Price strength remains

The COVID-19 pandemic brought supply chain problems and uncertainty, disrupting markets globally. Two years later, the world continues to fight the pandemic, and a new set of lockdown measures in China is putting pressure on markets.

However, the economic recovery that started in 2021 as countries reopened will continue in 2022, but at a slower pace, with the overall outlook for Australia’s mineral exports remaining firm.

For battery metals, the first quarter of the year was strong, with lithium and cobalt seeing healthy price environments throughout the period.

Lithium has seen its price increase more than 126 percent year-to-date, with prices climbing more than 480 percent year-on-year, according to Benchmark Mineral Intelligence data.

The main demand driver for lithium and cobalt is the electric vehicle industry, which had a stellar 2021 worldwide, particularly in the US and Europe, but also in Australia. In 2021, sales in the country tripled between 2020 and 2021, jumping from 6,900 electric vehicles sold to 20,665. These sales have also led to an increase in market share from 0.78 percent to 2 percent, according to the Electric Vehicle Council of Australia.

As sales of electric vehicles climb, automakers have been looking for ways to secure supply of raw materials. That’s why it comes as no surprise that in Q1, Australian junior miners Liontown Resources (ASX:LTR) and Core Lithium (ASX:CXO) inked lithium deals with Elon Musk’s Tesla (NASDAQ:TSLA).

In fact, Musk recently said that the “fundamental limiting factor” for EV adoption globally is battery production, and more specifically lithium. With demand for battery metals expected to soar throughout the coming decades, all eyes are on where the supply to meet the needs of the growing EV industry will come from.

Australia hosts the world’s largest lithium mine, Greenbushes, and is also home to key producers, including Pilbara Minerals (ASX:PLS), Allkem (ASX:ALK) and Mineral Resources (ASX:MRL).

In Q4 2021, Australian spodumene concentrate output rose by 33 percent year-on-year, and further capacity coming on stream in 2022 is expected to result in greater increases in production.

In February, Perth-based Pilbara Minerals posted its first half year profit of AU$114 million on the back of a strong lithium market, with shipments of spodumene concentrate reaching 170,228 dry metric tonnes (dmt), compared with 114,239 dmt a year ago.

“The result reflects continued improvement in lithium market conditions over the period, which has continued its strong momentum into the current half,” the company said in a statement.

Pilbara Minerals, which owns the lithium-tantalum Pilgangoora operation, has partnerships with Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460), General Lithium, Great Wall Motor Company (OTC Pink:GWLLF,HKEX:2333), POSCO (NYSE:PKX), CATL (SZSE:300750) and Yibin Tianyi.

Mineral Resources, in a joint venture with Ganfeng, saw Mt Marion’s spodumene concentrate total 207,000 tonnes in the second half of 2021. Meanwhile, the company’s Wodgina asset, which Mineral Resources is developing with Albemarle (NYSE:ALB), is expected to see its first spodumene production in the third quarter of 2022.

Greenbushes, which is operated by Talison Lithium, a joint venture between Albemarle and Tianqi-IGO (ASX:IGO), has three plants in operation that produced a total of 526,300 tonnes of spodumene concentrate in the second half of 2021.

Expansions in the next couple of years are expected to come primarily from South America, where a number of key producers, including Albemarle, SQM (NYSE:SQM) and Livent (NYSE:LTHM), have committed to increase supply.

Benchmark Mineral Intelligence senior analyst Daisy Jennings-Gray pointed out that while some lithium assets have been accelerated, potentially bringing extra supply to market in 2022, the project pipeline still faces delays, which underpins the widening deficit.

Going forward, based on current project announcements, Benchmark Mineral Intelligence expects this deficit to widen over the next couple of years as demand continues to outstrip supply. “However, a number of disruptors, such as novel technology breakthroughs, could ease this imbalance,” Jennings-Gray told INN.

Australia, the biggest lithium exporter in the world, is also eyeing the next step in the supply chain — with the production ramp up of two refineries expected between 2022 and 2023. In fact, the Office of the Chief Economist forecasts: "By 2024, Australia may have around 10 percent of global lithium hydroxide refining capacity, rising to 19 percent of global lithium refining by 2027."

Australia battery metals market: Cobalt hit by Russia-Ukraine war

Cobalt, another key battery metal, also experienced a spike in prices in 2021, doubling in value on the back of surging demand for electric vehicles.

During the first three months of 2022, cobalt's performance was mostly as expected, with strong demand continuing from battery markets and tight conditions persisting, Harry Fisher of CRU Group told the Investing News Network (INN).

“Russia’s invasion of Ukraine was of course the key shock which has tightened the screws further on the market,” he said. Russia is the world’s second largest producer of cobalt, with output reaching 7,600 tonnes in 2021, according to the US Geological Survey.

Availability of cobalt has been tight due to supply chain and logistical constraints since the second quarter of 2021, with the Russia-Ukraine conflict putting further pressure on supply.

“Downstream users, especially in Europe, are diversifying away from Russian material, considering logistical and payment challenges and the sustainability of doing business with companies based in Russia, even though there are no explicit sanctions on Russian cobalt or other battery metals, lithium and nickel,” Alice Yu of S&P Global Market Intelligence said.

Australia is currently the third-largest cobalt producing country in the world, after Russia and far behind leading producer the Democratic Republic of Congo.

There are currently four cobalt producing companies operational in Australia: Glencore (LSE:GLEN), BHP (ASX:BHP,LSE:BHP,NYSE:BHP), First Quantum Minerals (TSX:FM) and IGO, with Glencore being the dominant producer in the Australian market and the only company producing refined material. Moreover, there are a few cobalt companies developing projects that could help supply the battery market.

“There is expected to be significant growth in consumption, especially for cobalt chemicals, driven by growth in the battery sector and increased EV manufacturing,” according to a report by the OCE. “Mined cobalt production is expected to more than double by 2030 to meet the increase in demand, however this will require significant additional mine capacity to come online over that period.”

In the first quarter of the 2022 calendar year, Glencore made news headlines when it signed a cobalt supply agreement with US carmaker General Motors (NYSE:GM). The Anglo-Swiss company will provide GM with cobalt from its Murrin Murrin mine in Australia.

In other news, India and the Australian government announced that they will jointly put in $6 million for lithium and cobalt mine exploration in Australia over the next six months. During that period, due diligence processes and further investment decisions are expected to be made.

Australia battery metals market: What’s on the horizon

As the next three months of the calendar year unfold, investors interested in battery metals in Australia wonder what might be ahead for the country.

“Australia’s national export income and stock market will likely be jolted higher in Q2 and for the rest of the year, with the luckily commodity-rich country tipped to come out on top while the world braces for the big three Rs: record inflation, rising interest rates and a possible recession,” Jessica Amir, Australian Market Strategist at Saxo Markets, said.

Prices for lithium hit all-time highs in 2021 and are expected to continue to show strength as demand outstrips supply in the foreseeable future.

“Strong demand is currently resulting in shortages of spodumene, lithium hydroxide and lithium carbonate, which is pushing spot prices for all three commodities to record levels,” according to the Office of the Chief Economist. “Contract prices for spodumene are expected to increase strongly in 2022, driven by rising EV production and short term supply issues.”

This year, prices for spodumene are forecast to rise to an average US$1,300 per tonne, up from around US$660/tonne in 2021, while lithium hydroxide is expected to rise from US$17,970/tonne in 2021 to US$27,000/tonne in 2022.

In terms of Australia’s lithium production, output is projected to more than triple in the next five years, rising from 224,000 tonnes of lithium carbonate equivalent (LCE) in 2020 to 2021 to 692,000 tonnes of LCE in 2026 to 2027.

Meanwhile, Australia’s lithium export earnings are forecast to rise from AU$1 billion in 2020 to 2021 to AU$6.7 billion by 2027 (in real terms), as lithium hydroxide production rises. A further five lithium hydroxide refining operations are projected to start operations in the country by then.

Looking over to lithium stocks' performances, Saxo's Amir believes that in the long run, they are generally expected to be key beneficiaries of increasing demand for green energy. More directly, the ramp up in production of electric vehicles, driven by increased consumer uptake and government green subsidies, would have a hand in driving up lithium prices.

Despite this general trend, the analyst also believes that investors will need to look out for potential pitfalls when investing in lithium stocks.

“Often, the devil is in the details, and like all other commodities, location is key to determining whether a lithium producer holds supercharged prospects — factors such as mining geography, proximity to customers and mining majors are important things to look out for,” she said.

For cobalt, prices are expected to remain high in the next three months.

“They may start to adjust down slightly later this year if supply chains can start to normalize, although we are not anticipating a significant fall,” Fisher said. “Overall, the market is expected to be more balanced than in 2021 with further supply additions.”

A key trend investors continue to be interested in is the increased use of cobalt-free cathodes. Lithium-iron-phosphate (LFP) cathodes have been gaining market share, particularly in standard-range vehicles. In fact, Tesla said it used this type of cathode in nearly half of the models it produced in Q1.

“LFP has built market share in China through 2021 due to the popularity of mini EV models such as the Hongguang Mini ― but nickel-cobalt-manganese cathodes will hold ground for longer-range, larger and higher-performance vehicles,” Fisher said. “We expect that cobalt demand will remain robust for this reason despite LFP’s recent performance.”

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Top News