19/02/2018 - 14:17

Buzz builds over battery metals

19/02/2018 - 14:17

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SPECIAL REPORT: The strength of the battery metals industry is helping drive the state’s junior resources sector.

Adrian Byass says Plymouth’s joint venture with Spanish construction company Sacyr has been a success. Photos: Attila Csaszar

The annual RIU Explorers Conference is a handy barometer of Western Australia’s junior mining sector.

Now in its 17th year, the conference, which was held in Perth this week, was extended to a three-day event to cater for excess demand from mining companies wanting to present at the function.

One of the key drivers in the industry is the strong demand for battery metals such as lithium, graphite and nickel.

The managing director of graphite hopeful Battery Minerals, David Flanagan, who rode the iron ore boom with Atlas Iron, is enthusiastic about the battery metals space.

“I think that it’s at the perfect point in the curve; I haven’t been this excited about the junior resources sector for nearly 10 years,” Mr Flanagan said.

“The juniors are out there drilling, they’re making discoveries and they’re going to be able to continue to provide clean energy.”

(click here to read a full PDF version of this special report)

Growth in the battery market has surged in recent years as their versatility has increased – from mobile phones to electric vehicles and large-scale residential power storage.

London-based minerals consultancy Roskill is forecasting an average annual growth rate of 14 per cent in the lithium-ion battery market until 2025.

David Flanagan is confident about the future of the battery metals market.

One local junior miner seeking to take advantage of this growth is Plymouth Minerals, which is in the midst of a rebranding, and in a clear sign of the direction the company is heading will soon be known as Infinity Lithium.

Plymouth is developing a joint venture lithium project in Spain that could have an annual output of 15,000 tonnes per annum.

“Since we have earned an interest in the San Jose project, and will be a majority owner this year, we needed to rebrand the company, so people were aware of the change and the importance,” managing director Adrian Byass told Business News.

“It’s about taking opportunities and we’re really happy that we’ve been able to latch onto something so good.”

Plymouth’s partner in the joint venture is Spanish construction company Sacyr, which has a market capitalisation of €1.3 billion ($2 billion).

Mr Byass said strong partnerships could bring plenty of value.

“Partnerships are a really critical thing for junior companies; my take on the market is there is access to risk capital,” he said

“But it really is beneficial to have a very strong partner.

“The best thing for us is to deal with strong local partners so you don’t have to take as much money from the stock market in Australia.”

Mr Byass said while Sachyr did not have mining expertise, the Spanish company could leverage its construction and engineering skills.

“They don’t have the technical expertise; we’ve got a really good market and a really good industry here in Western Australia and we can take that to other parts of the world,” he said

Mr Byass said there were a number of challenges working in Spain, however.

“You have to be comfortable with time zones, language and ultimately cultural variations,” Mr Byass said, adding that his outlook on the battery metals market is bullish.

“It’s something that people want and they need, and when you have something that people want and need then you’re pretty comfortable.

“We haven’t seen a story like this, which is so obvious and undeniable, since 15 years ago with the re-industrialisation of China.

“Change is happening, the question is how big does it get and in what time frame?”

Meanwhile, Battery Minerals is aiming for commissioning at its Montepuez project in Mozambique in November, with annual production of between 45,000 and 50,000 tonnes of graphite flake concentrate.

Mr Flanagan said a key differentiator for the company was time to market.

“There are 65 companies out there who have got graphite, so how do you distinguish yourself from your peers as an investment proposition,” he said.

“It’s not easy because there are so many good graphite companies out there.

“We’ve worked pretty hard and we think we’re doing okay at that, and for us that means short time to production, so we’re going to start construction in the next couple of months and be commissioning by November and shipping in February.”

Peter Muccilli says the battery market should influence nickel prices

Nickel

Another commodity used in the production of lithium-ion batteries is nickel, with some cathode variations comprising more than 70 per cent nickel.

This is tipped to influence the nickel price positively as demand for high-grade nickel increases.

Management consultancy McKinsey & Company is forecasting growth in demand from 2 million metric tonnes to 2.51mt by 2025, outstripping supply.

Mincor Resources managing director Peter Muccilli said the growth in energy storage devices (ESDs) would affect the nickel industry.

“With the predicted growth in ESDs, there is a significant new market that is likely to disrupt the current supply-demand paradigm for nickel, resulting in an improved price outlook,” he said.

Mincor was forced to wind-up its nickel operation at Kambalda in February 2016 when the Australian nickel price reached a 14-year low.

Mr Muccilli said although the nickel mines were being placed on care and maintenance, the company had a significant nickel option that was awaiting a price recovery.

Mincor completed a $10 million capital raising earlier this year to fund its nickel exploration, while also developing gold with an aim to begin production in the March quarter.

“We saw the opportunity to accelerate our nickel exploration with the aim to rebuilding quality reserve in the district,” Mr Muccilli told Business News.

“The company is also on target to commence gold mining in the March quarter, subject to board approvals.

“Our proposed gold development, and associated cash flows are expected to keep funding our nickel strategy over the longer term.”

Mr Muccilli said he was buoyant about the current state of the junior sector.

“Junior explorers with solid exploration plays are getting support from the market,” he said.

“There is increased activity of drilling companies, demand for geologists and associated support services.”

Another company on a similar path is Panoramic Resources, which is raising $21 million to restart its Savannah nickel project.

Capital

Hartleys head of corporate finance Dale Bryan said there were a number of factors at play in the resources industry.

“I’d say the biggest single driver overall is strong broad-based global growth,” he said

“However, the battery space has definitely been a key thematic also; we’ve seen that go from something that was on the fringes to something that’s very mainstream now.

“Additionally, as investors make money in the battery space, that money flows to investment into other commodities.”

Although markets have been strong in recent times, Mr Bryan said valuations remained reasonable.

“Valuations are still good across the board; when we look at companies we see a lot of good value opportunities, and funds are still very actively looking for new opportunities and investment in the space,” he said

“What we haven’t seen is valuations get silly and it’s nothing like back in the boom days.”

The annual IPO Watch Australia report, conducted by professional services firm HLB Mann Judd, also revealed a robust local mining industry.

Resources stocks accounted for 32 of the 110 new initial public offers completed on the ASX in 2017, with 21 of those from WA.

HLB partner Marcus Ohm said a strong second half of the year had contributed to an overall total of $332 million being raised by the mining industry, up from $183 million in 2016.

Small-cap resources companies accounted for $307 million of the total, further highlighting the strength in the junior sector.

The best performing stock from all IPOs in 2017 was local cobalt and nickel explorer Ardea Resources, which finished the year at $1.90 after listing at 20 cents – a return of 850 per cent.

The report said 2018 appeared likely to build on last year’s success, with 37 companies having already applied for listing on the ASX, compared with 23 last year.

Nine of the proposed listings are from the resources industry.

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