Virtually every developed country has identified a list of “critical minerals,” those that it considers critical for their strategic uses in modern technology, defence applications and the energy transition, such as in electric vehicle batteries and renewable energy.
There are slightly different tweaks in the lists, but they are generally speaking, the same. Australia has 31 minerals on its list, including some that are groupings, such as the platinum group metals (PGMs) and the rare earths metals (there are 17 of them). The Australian government updated its list in December 2023.
Australia’s army of mineral explorers did not really need the government to list metals that it thinks they should be looking for – they were already doing that. Here’s a look at three different scenarios where some serious work has been done on bringing fresh new deposits of critical minerals toward production, into markets that are clamouring for them.
Any of these stocks could rise in price quite significantly; but I am talking about highly prospective situations. You should do your own research on these stocks.
- Taiton Resources (T88, 15 cents)
Market capitalisation: $23 million
12-month total return: –11.8%
Three-year total return: n/a
Analysts’ consensus price target: n/a
Mineral explorer Taiton Resources has a portfolio of possible projects, but the one that looks most like being brought to production is its Kingsgate project in the New England region of New South Wales, which Taiton acquired in January 2024.
The Kingsgate project covers what was historically a significant and high-grade producer of tin, molybdenum and bismuth, between the early 1880s and late 1920s. Over that period, Kingsgate produced an estimated 300,000 tonnes of tin and 450 tonnes of molybdenum respectively, as well as 200 tonnes of bismuth.
The tin and the bismuth – and there is tungsten there, too – are not to be sniffed at, but Taiton is particularly interested in the molybdenum, which was recently added to the Australian government’s “critical minerals” list.
Molybdenum is an irreplaceable component within the production of steel and stainless steel. Most molybdenum is used in making steel alloys, to increase strength, hardness, electrical conductivity and resistance to corrosion and wear. These ‘moly steel’ alloys are used in parts of engines; other alloys are used in heating elements, drills and saw blades. Molybdenum disulphide is used as a lubricant additive. Other uses for molybdenum include catalysts for the petroleum industry, inks for circuit boards, pigments and electrodes.
But it’s the “clean energy” uses that are attracting interest: molybdenum is being used to develop next-generation energy storage devices, such as supercapacitors and batteries. The biggest potential for supercapacitors’ applications are in hybrid transportation. Molybdenum will also play a huge role in renewable energy with uses in wind turbines, solar panels and hydrogen production.
The project was owned by a formerly listed company called Auzex, which did plenty of exploration, completed a feasibility study and also, in 2007, conducted trial mining, leaving a stockpile of high-grade molybdenum and bismuth material. Taiton will look to build on this work to fast-track Kingsgate toward a production story, firstly building-out an idea of the resource.
The molybdenum is found in mineralised quartz pipes and Taiton is also looking at mining high-grade quartz at Kingsgate.
Taiton also appears to have significant molybdenum mineralisation at its Highway project in South Australia, the only exploration project in the world looking for a primary molybdenum deposit. The Highway ground also hosts gold, silver, copper, lead and zinc (it is within the mineral province that hosts BHP’s famous Olympic Dam mine). The company also owns the Challenger West gold project in South Australia and the Lake Barlee gold prospect in Western Australia.
The market will be closely watching Taiton’s work in expanding the existing work done at Kingsgate –including the feasibility study – and in establishing a maiden molybdenum resource. Given that there has been trial mining done, and the mined material was high-grade, Taiton has every reason to feel confident, in an environment of an expected rising molybdenum price, that this project could become a mine quite soon.
- Boab Metals (BML 10 cents)
Market capitalisation: $23 million
12-month total return: –33.3%
Three-year total return: –38.7% a year
Analysts’ consensus price target: 44 cents (Stock Doctor/Refinitiv, one analyst)
Lead does not get the publicity that its base metal cousins, copper and nickel attract, and it is not considered particularly exotic, but humble lead is one of the most-used metals worldwide, in applications ranging from battery storage to healthcare, and cable sheathing to sound insulation. Lead is viewed as a crucial input to solar and wind power, healthcare, battery production, the marine sector, and a range of aeronautics, space, and defence applications. Advanced lead batteries are an important part of the complex eco-system required to deliver widescale electrification and deep decarbonisation. It’s not a constituent of Australia’s “critical minerals” list, but lead will continue to play an essential role in the energy transition.
Boab Metals is developing the Sorby Hills lead-silver-zinc project, of which it owns 75%, near Kununurra in Western Australia. Chinese company Henan Yuguang Gold and Lead, which is Asia’s largest electrolytic lead producer and China’s largest silver producer, owns the rest. The project – intended to be developed as an open-pit mine – is one of the largest undeveloped lead, silver and zinc deposits in Australia.
In January 2023, Boab released a definitive feasibility study (DFS) for Sorby Hills, which spoke of an initial eight-and-a-half-year processing period, during which 18.3 million tonnes of ore would be mined and processed to deliver an average 103,000 tonnes a year of concentrate containing 64,000 tonnes a year of payable lead and 2 million ounces a year of payable silver. The DFS’ numbers were underpinned by ore reserves of 15.2 million tonnes at 3.5% lead and 39 g/t silver, and a large, well-defined mineral resource of 47.3 million tonnes at 3.1% lead, 35g/t silver and 0.4% zinc. Operating costs are expected to be covered by the historically non-volatile lead price, with the operating margin highly leveraged to the silver price.
Last month, Boab Metals announced results of the front-end engineering and design (FEED) study for Sorby Hills, which augments and enhances the Sorby Hills Definitive Feasibility Study released by the Company in January 2023. Assuming spot pricing for lead, silver, the US$/A$ exchange rate and benchmark lead treatment and silver refining charges results in a net present value (NPV) for the project of $596 million, a pre-tax internal rate of return (IRR) of 47%, $1 billion in operating cash flow a year and average annual EBITDA of $160 million.
Boab estimates that Sorby Hills has 543,000 payable tonnes of lead, capable of generating a total of $1.79 billion in revenue, and 17.2 million payable ounces of silver, for $692 million in revenue. The project is now advancing toward a final investment decision (FID), but Boab has given no timeline on the expected date of the FID decision. Many may consider lead boring, but this looks an exciting project.
- Australian Vanadium (AVL, 1.6 cents)
Market capitalisation: $138 million
12-month total return: –51.5%
3-year total return: –10.1% a year
Analysts’ consensus price target: 8 cents (Stock Doctor/Refinitiv, one analyst)
Vanadium is a metal that does not get much publicity, but in its vanadium pentoxide form, it is used mostly in the steel sector, and also in in the form of titanium-aluminium-vanadium alloys for aircraft engines, aerospace cabin frameworks, missiles, steam turbine blades, rocket engine shells, etc. Vanadium also appears to have a stellar future as a raw material for long-duration storage batteries, in the form of vanadium redox flow batteries (VRFBs) – which use vanadium as an electrolyte – and which are considered to be the most efficient battery technology suitable for utility-scale renewable energy storage for both wind and solar. Demand for high-purity vanadium from the aerospace industry is also surging.
For these reasons, vanadium is on the Australian government’s critical minerals list, as it is for the United States, the European Union (EU), Canada, Australia, Japan, Brazil, South Africa, India and the UK
In February, two companies that had adjoining projects on the same vanadium orebody at Gabanintha – located south of Meekatharra in the Mid-West region of Western Australia – merged, creating the leading ASX listed vanadium company. Australian Vanadium absorbed Technology Metals, to form a globally strategic asset.
Now that the merged entity has consolidated the AVL and TMT projects into one project on the contiguous orebody, the updated mineral resource estimate (MRE) for the combined project stands at 395.4 million tonnes at 0.77% vanadium pentoxide, with the high-grade portion of that checking in at 173.2 million tonnes at 1.09% vanadium pentoxide.
Work on the feasibility study is ongoing, but the target is early mine-life cash flow derived from high-grade areas of the orebody. The plan is for Gabanintha to be mined by open pit for at least 25 years. Annual production is projected to be at a rate of 11,200 tonnes of high-purity vanadium pentoxide along with iron ore as a by-product.
Tenindewa, near Geraldton in Western Australia, remains the preferred location for the downstream processing plant; that was AVL’s plan. AVL produced its first high-purity vanadium electrolyte for use in vanadium flow batteries at its recently commissioned electrolyte manufacturing facility in March.
Australian Vanadium has been awarded “lead agency status” by the WA state government in 2020 and $49 million in Australian government grants under the Modern Manufacturing Initiative, in recognition of the project’s strategic importance as a battery metal project.
AVL’s 100% owned renewable energy and energy storage subsidiary, VSUN Energy, is focused on developing the Australian market for Vanadium Flow Batteries for long duration energy storage. AVL’s vertical integration strategy incorporates processing vanadium into high-purity oxides, manufacturing vanadium electrolytes and working with VSUN Energy as it develops projects based on renewable energy generation and VFB energy storage.
Like most of its “critical mineral” peers, the demand picture for vanadium is growing strongly: Demand for vanadium is forecast to grow at a compound annual growth rate of 12% between 2023 and 2030, driven by energy storage, which, by 2030, is expected to be roughly the size of the existing steel-driven demand. Only 2.2 percentage points of that growth rate to 2023 comes from the steel market – the rest is expected to be batteries. Vanadium’s use in batteries has grown from 1% of the market two years ago to more than 10% today.
Australian Vanadium stresses that vanadium demand from the steel industry is enough to support its AVL scale project – intended to produce 6,300 tonnes of vanadium a year for the first three years – with the energy storage-linked demand growth as upside. The global vanadium market is currently dominated by China, Russia and South Africa, and the developed nations are very keen to see new sources, and preferably from more reliable suppliers aligned with the west – Gabanintha is expected to be the next primary producer of vanadium to come to market globally. There are currently just three primary vanadium producers in the world, and AVL expects to be the fourth.
Into this growing demand picture, the AVL project is likely to be the next primary producer of vanadium to come to the market globally, initially, in the lowest fifth of global projects in terms of costs. AVL will need to raise significant funds to build the project and get it to production – but in its favour, it is the most advanced primary vanadium development project in the world, with a world-class feasibility study. Watch this space.
Broker Shaw and Partners has a price target on AVL of 8 cents.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
