Picture; Bloomberg
The ASX has experienced considerable disruptions this year as a result of sharp drops in nickel and lithium prices, attributed to an oversupply in the market and apprehensions regarding diminishing demand for electric vehicles.
Fortescue Metals, led by Andrew Forrest, has halted a substantial nickel project, South32 is reassessing the feasibility of itsColombian nickel operation, Core Lithium has temporarily ceased mining activities, and Liontown Resources' bankers withdrew a $760 million debt facility.
As an indication of the gravity of the crisis, Federal Resources Minister Madeline King is scheduled to engage in urgent discussions with prominent stakeholders in the sector potentially leading to government aid.
The surge in mergers and acquisitions within Australia's mining industry is set to continue for an extended period, driven by companies rushing to enhance their involvement in the wealth generated by the energy transition.
This trend follows a decade of limited investment in new resource projects, during which miners prioritised cash flow and shareholder returns over pursuing growth.
Greenbushes, Australia’s biggest lithium mine reduces production.
IGO Limited recently confirmed that there is a probables light reduction in production at the Greenbushes mine in Western Australia over the next five months. This adjustment is attributed to the mine owners placing orders for a lower volume than initially anticipated.
Greenbushes stands as the largest lithium mine in Australia, boasting the highest local grade, positioning it as the most profitable domestic entity and one of the premier assets globally.
Greenbushes is majority-owned (51%) by a partnership betweenIGO and Tianqi, with the remaining 49% owned by Albemarle, a company listed on the New York Stock Exchange.
The primary focus of Greenbushes' owners is on manufacturing battery-grade lithium chemicals rather than intermediate products like spodumene concentrate, which is typically sold by Australian miners.
Due to subdued electric vehicle sales, demand for battery-grade lithium chemicals has been lower than expected, leading Albemarle and Tianqi to reduce their orders for lithium from Greenbushes.
M&A activity in the industry.
Industry analysts view the current selloff as a potential opportunity for figures like Rinehart and Mineral Resources to increase their involvement in the critical minerals sector.
Hancock Prospecting, led by Gina Rinehart, has partnered with the Chilean lithium leader SQM to acquire Azure Minerals, a lithium and nickel mining company listed on the ASX, for a total of $1.7 billion.
Rinehart also acquired a 19.99% stake in Liontown the previous year, thwarting a takeover attempt by US chemicals company Albemarle.
Another transaction involving Pilbara gold explorer, NovoResources, has entered into a joint venture with SQM. Under the agreement, SQM will invest A$10 million to acquire a 75% stake in five of Novo's promising lithium-nickel tenements.
In the most recent quarterly Explorers Report by BDO, Australian stocks with a focus on lithium obtained a collective capital of $430million. Notably, this surpasses gold-related stocks, which had been the frontrunners for four consecutive quarters until the period concluding inSeptember 2023.
The report also mentioned that the market was mainly dominated by lithium and gold, with more than half relating to battery metals.
Equity remained the predominant source of investment, constituting 68% of total funds raised, while debt and other funds represented 24% and 8%, respectively.
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