The Australian Securities Exchange (ASX) is very much alive to the “critical minerals” theme, as investors focus on the commodities that will be essential components in many of today’s rapidly growing ‘clean energy’ applications but will also have growing use in areas from defence to information technology to healthcare.
Not all of the prices of the critical minerals are reacting as investors might expect, in the face of opaque markets and possible Chinese manipulation; but eventually, growing demand will make itself felt. Australia – and Australian companies – are well-placed in this longer-term view, some with orebodies in Australia, and some abroad.
Here are two representatives of the latter group that I think have very bright futures in the critical minerals market.
- Jupiter Mines (JMS, 28.5 cents)
Market capitalisation: $558 million
12-month total return: 43.7%
3-year total return: 4.8% a year
Forecast FY25 (February) dividend yield: 10.5%, unfranked
Analysts’ consensus price target: 35 cents (Stock Doctor/Refinitiv, one analyst)
Manganese producer Jupiter Mines floated on the ASX in April 2018 at 40 cents a share, in a $240 million initial public offer (IPO).
The company is the biggest manganese producer on the ASX, based around the world-class Tshipi manganese mine, of which Jupiter owns 49.9%, in South Africa. Tshipi, which has been producing since 2012, is one of the world’s largest and lowest-cost manganese export operations. Based on current reserves, Tshipi has about 120 years of mine life remaining, making it one of the longest life-producing manganese mines in the world.
In its six years on the ASX, Jupiter Mines has only fleetingly traded above its issue price (the stock’s peak was 42 cents in September 2019) and as recently as March was languishing at 17 cents. That’s mainly because Jupiter’s revenues and profit have progressively fallen since FY20. (However, Jupiter has been a strong dividend payer, throwing-off more than $390 million to shareholders since 2019, based on its payout policy of paying -out at least 70% of all dividends it receives from Tshipi and other investments.)
But eventually the market started to realise that manganese is not simply an essential (but boring) ingredient in the steelmaking process and is as exciting as other “critical” minerals in terms of the future.
In particular, manganese has a big role to play in the growth of the electric vehicle (EV) market, which requires high-purity manganese sulphate monohydrate (HPMSM) to produce the batteries that power an EV. According to research firm Benchmark Mineral Intelligence, the battery demand for manganese is set to grow eight-fold this decade, from about 53,000 tonnes in 2020 to 459,000 tonnes in 2030. The beauty of manganese in this application is that its ballooning use is not only driven by the incumbent nickel-cobalt-manganese (NCM) batteries, but also, it is a major component of the newer, more efficient technologies coming down the pipeline, such as lithium-manganese-iron-phosphate (LMFP) batteries and the even more next-generation lithium-manganese-nickel-oxide (LMNO) batteries, which are yet to be commercialised.
Steelmaking will continue to be the dominant driver of manganese demand, with solid growth over the next 20 years, from 23.5 million tonnes of metal in 2022 to 29 million tonnes in 2040. New demand, growing at a much higher rate – but off a much lower base – will come from EV batteries, with Jupiter forecasting a best-case total demand scenario of 31.5 million tonnes in 2040.
At present, Tshipi produces manganese at 37% metal content, which is sold to the global steel market; that generates virtually all of the revenue. But Jupiter also stockpiles manganese that is 32% metal, because that material is not usually able to be sold to steelmakers.
However, Jupiter has big plans for this two-million-tonnes stockpile. It’s very well-suited for processing into high-purity manganese sulphate monohydrate (HPMSM), the raw material for LMFP and LMFO batteries.
LMFP is forecast to become the dominant cathode material for batteries. Benchmark Mineral Intelligence (BMI) forecast that 51% of all batteries will include manganese cathodes by 2030, with the actual proportion of Mn in the battery varying between 20% and 80%. On the back of this, the high growth in demand for battery-grade HPMSM is expected to outpace growth in supply in the second half of this decade, leading to a market shortfall as early as 2026.
Jupiter proposes to send manganese from Tshipi to a HPMSM downstream processing plant to be built in North America. A scoping study released in mid-March indicated the potential to produce 50,000 tonnes a year of HPMSM across an initial three years commencing in 2028, lifting to 100,000 tonnes a year from 2030. Jupiter will now start a pre-feasibility study (PFS) to further flesh-out the proposed venture; it hopes to complete the PFS by early 2025. At the same time, it will be looking to sign offtake agreements with vehicle makers, to underpin the economics.
In the meantime, Jupiter has the cashflow and profit that comes from its 3.5 million tonnes (in 2023) sales of 37% manganese metal. In 2023, it realised a price of US$3.54 a tonne of metal sold, compared to a cash cost of production at US$2.03 a tonne.
- Meteoric Resources (MEI, 17 cents)
Market capitalisation: $338 million
12-month total return: –20.9%
3-year total return: 48.4% a year
Forecast FY25 dividend yield: 10.5%, unfranked
Analysts’ consensus price target: 50 cents (Stock Doctor/Refinitiv, five analysts)
Meteoric Resources’ major focus is its Caldeira ionic clay rare earth project in the Brazilian state of Minas Gerais, where Meteoric could have on its hands the world’s largest and highest-grade resource of ionic adsorption clay (IAC) rare earths.
IAC mineralisation is typically softer than hard-rock rare earths deposits, meaning it does not need blasting, crushing or milling; it is closer to the surface, easier to mine and thus cheaper. It usually yields a high-grade precipitate, and it does not result in radioactive tailings (rare earth ores often contain radioactive thorium and uranium), which can bedevil some rare earths deposits.
Meteoric had already told the ASX, in May 2023, that it had “the world’s highest-grade IAC rare earths elements deposit” at Caldeira, posted a maiden resource estimate for Caldeira of 409 million tonnes at a grade of 2,626 parts per million (ppm) total rare earth oxides (TREO). In May this year, it lifted that estimate to 545 million tonnes at 2,561 ppm TREO; this month, the company boosted its estimate even further, to 619 million tonnes at 2,538 ppm TREO, with magnet REOs, or MREOs – which are used in EV motors and wind turbines – representing 23.6% of the rare earths element REE basket.
Measured and indicated resources – in which the company has more confidence – now constitute almost one-quarter of the total resource, at 171 million tonnes at 2,880ppm TREO.
The Caldeira deposit includes the neodymium/praseodymium (NdPr) duo used in EVs and wind turbines, but also the higher-value MREOs dysprosium and terbium. This pair of metals are crucial additives to high-performance neodymium-iron-boron (NdFeB) rare earth permanent magnets, used in wind turbines and EV motors. At present, terbium and dysprosium are sourced almost entirely from ionic clays in China and Myanmar, and users are desperate for a more reliable source from a more trusted jurisdiction.
Meteoric has also posted a separate resource upgrade for the adjacent Soberbo mining licence, increasing it by 150 per cent to 229 million tonnes at 2,601 ppm TREO.
The high-grade Capão do Mel deposit at Caldeira is projected to kick-off the development, with its high-grade core (defined at 36 million tonnes at 4,345ppm TREO) supporting the initial production strategy, which is based on processing feed grades higher than 4,000 ppm TREO for the first five-to-ten years, in a processing facility fully powered by hydro-electricity. More than half of the high-grade material occurs in one block that can be mined at the surface.
It looks fairly clear that Meteoric will be a near-term, low-cost supplier of critical minerals, but from here, there is a couple of years’ work in de-risking the project, signing further offtake agreements and working toward a definitive feasibility study. The company says it expects to make a final investment decision (FID) by the end of calendar-year 2025.
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