The birthplace of batteries and other rare minerals: Opportunities for Australia - Part 2

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Part 2

Earlier this year, we identified materials that are in high demand for New Energy technologies, discussed the fundamental role played by the mining section in the New Energy transition and explored the key issues facing this transition.

With Hamilton Locke acting on two recent capital raising in the critical mineral sector, we're revising our findings in our April 2022 article, outlining the trends that we expect to see in relation to future capital raisings in this sector.

Recent Rare Mineral Capital Raisings

Global Lithium Resources Limited

Hamilton Locke recently acted as counsel for the joint lead managers for Global Lithium Resources Limited's (Global Lithium) placement of approximately A$121.5 million (Global Lithium Placement). Proceeds from the Global Lithium Placement will be used for the cash costs associated with Global Lithium's acquisition of the underlying tenements and remaining 20% in the Manna Lithium Project.

Global Lithium is a lithium exploration, development and production company with a focus on two highly prospective 100%-owned Western Australian projects - the Marble Bar Lithium Project in the Pilbara region and the Manna Lithium Project in the Goldfields region. Global Lithium produces high quality and consistent lithium that is made from spodumene concentrate.¹

Lithium, unsurprisingly, is a critical component of lithium-ion batteries due its reactivity, lightness and ability to be recharged. Lithium batteries are used to power a range of devices from phones and laptops to electric vehicles (EVs). Lithium batteries are capable of storing energy created by renewable sources during high production times and releasing this stored energy according to demand if power production drops.

Mincor Resources NL

Hamilton Locke recently acted as counsel for the lead manager for Mincor Resources NL's (Mincor) placement of approximately A$55 million (Mincor Placement) in addition to a share purchase plan of an additional A$5 million. Part of the proceeds from the Mincor Placement will be used by Mincor to discover additional nickel mineralisation within its Gold Mile Development and accelerate its Kambalda Nickel Operations.

Mincor is involved in the exploration, development and production of mineral deposits. In 2020, Mincor completed a Definitive Feasibility Study, which confirmed its potential to develop a 5-year operation producing 63,000 tonnes of recovered nickel-in-concentrate through its Kambalda Nickel Operation. Mincor seeks to produce sustainable, high-grade nickel.

Nickel is a good conductor of heat and electricity. Products containing nickel have more strength at high and low temperatures and have greater corrosion resistance compared with other materials. The vast majority of nickel produced is used to manufacture stainless and heat-resistant steels though nickel is increasingly being used in lithium-ion batteries for EVs and energy storage.

According to the International Energy Agency, approximately half of the growth in demand for critical minerals like lithium or nickel will be the result of the further deployment of New Energy technologies over the next two decades and will be driven by demand for EVs and battery storage.² Lithium and nickel's critical role in relation to EVs and energy storage means these critical minerals will be crucial to the New Energy transition.

Expected Critical Minerals Capital Raisings Future Trends

These two successful capital raisings are indicative of in the increasing importance industry is placing on the acquisition and allocation of rare minerals. With several European countries already signalling future bans on the sale of new internal combustion engine vehicles and the switch by policymakers from fossil fuels to renewable energy, the demand for New Energy technologies is only expected to rise over the next few decades.

Indeed, the International Energy Association argues that, for the globe to meet the sustainable development scenarios stemming from the Paris Agreement, consumption of copper must rise 40%, nickel and cobalt production between 60 - 70%, and lithium nearly 90%.

This dramatic rise stems from the tremendous amount of rare minerals required to facilitate the clean energy transition. According to the International Energy Association, a typical electric car requires six times the amount of mineral inputs required by a conventional combustion vehicle. For its part, a turbine wind farm requires nine times more mineral resources than a gas-fired power plant. For this reason, investors agree that the demand for critical minerals, including lithium and nickel, is likely remain strong for the foreseeable future due to the baked-in needs of end-users of these materials amid a shift to EVs and more renewable energy.

We're already seeing that demand play out in Australia. According to the Commonwealth Minister for Resources, the value of lithium exports are due to increase more than 10-fold over the next two years with almost $14 billion in lithium slated for export over the course of this fiscal year. Further, in the 2022/23 budget, the Albanese government allocated $50.1 million over three years to the Critical Minerals Development Program for competitive grants to support early and mid-stage critical minerals projects. This builds on the $49.7 million committed in September 2022 to various projects already in development across the country.

In light of the above, we anticipate larger volumes and increases in the value of capital raisings in the critical minerals sector which Australian companies and ASX listed entities will be able to take advantage of with their significant experience in the sector.

Footnotes

¹Spodumene is a mineral that contains one of the highest lithium contents. SGS Minerals Services, "Hard Rock Lithium Processing": https:// www.sgs.com/-/media/sgscorp/documents/corporate/brochures/sgs-min-wa109-hard-rock-lithium-processing-en.cdn.en.pdf

²International Energy Agency, "Mineral requirements for clean energy transition": https://www.iea.org/reports/the-role-of-critical-minerals-inclean-energy-transitions/mineral-requirements-for-clean-energy-transitions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ms Chemonica Niranjan
Hamilton Locke
Australia Square
Level 42
264 George Street
Sydney
New South Wales
2000
AUSTRALIA
Tel: [phone]

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