Mining Matters: The Diggers & Dealers Mining Forum 2024

Introduction

Australia’s largest mining conference, the Diggers & Dealers Mining Forum , returns today for its 33rd year, with over 2,000 delegates expected to attend the sessions in Kalgoorlie over three days.

The Forum will feature 66 presentations from global and locally headquartered mining and exploration companies and is expected to spotlight several key themes, including an increased focus on sustainability and environmental regulation, how geopolitical factors are influencing the industry and global supply chains, as well as emerging investment trends.

The last 12 months have demonstrated just how complex the industry has become and how it is critical for both miners and government to focus on maintaining the global competitiveness of the Australian metals and mining sector. The role played by Chinese capital in developing new and low-cost sources of key commodities such as iron ore, nickel and more recently lithium, has come into sharp focus.  

This year’s keynote presenter, Hon Kim Beazley AC, is better placed than many to speak to the global dimension of the mining sector. He is expected to speak on the rising importance of metals and mining in achieving not only global decarbonisation objectives, but also national security and prosperity, as a wave of ‘resource nationalism’ grips the world. 

While lithium dominated the 2023 conference, it seems the ‘lithium winter’ has now arrived, with slower than expected EV-uptake globally tempering demand for the battery metal and consequently investor enthusiasm. On the other hand, those who maintained the faith in the ‘barbarous relic’ could well feel vindicated, as gold is regaining prominence as a store of wealth in uncertain times. Gold mining and exploration companies dominate the presentation line-up in 2024. 

Our team in Kalgoorlie will be covering the major announcements from Diggers & Dealers. Watch out for our daily take on events, including highlights of the previous day’s presentations and our thoughts on key industry trends and regulatory developments, delivered each morning until Thursday this week. 

• 08/08/2024 By - Lauren ShaveTHE ROLE OF MINING IN CLOSING THE GAP Western Australia’s resources sector achieved sales on production valued at $248 billion in 2023 .  Much of Australia's mineral-rich land overlaps with areas recognised under native title claims or agreements. According to current estimates, more than 60 per cent of Australian resources projects, including exploration and extraction, operate on land covered by a native title claim or determination. Undeniably, First Nations people are key stakeholders for many mineral explorers and producers. But this has not always been reflected in the agreements facilitating mining projects. In some cases, native title rights have been negotiated away for very little return, or ignored altogether, leaving the native title holders to pursue compensation through the lengthy and uncertain Federal Court process. The Productivity Commission’s most recent Closing the Gap data released on 6 March 2024 confirms that there are still significant challenges when it comes to reducing disparities between Indigenous Australians and non-Indigenous Australians (see here). These are complex issues and government will need to lead, but it begs the question whether there is more the mining industry can, or should, be doing via engagement with native title parties. Prime Minister Anthony Albanese recognised this in his address to the Garma Festival on 3 August 2024 , saying: 

Day Three Highlights

With the curtain closing on yet another eventful conference, Diggers & Dealers announced record numbers with 2,800 delegates in attendance over the three days. 

The highlight of Day 3 of Diggers was undoubtedly the annual awards ceremony at the WesTrac Gala Dinner. Digger of the Year went to Emerald Resources NL for its bumper year, with the Cambodian gold miner producing 114,000oz at all in sustaining costs of US$818/oz. Being on time and on budget (during COVID-19) is certainly paying off. 

Dealer of the Year went to Azure Minerals, with Tony Rovira accepting the award after overseeing the delivery of the Andover Lithium Project to acquirers SQM and Hancock. Tony pointed out that it would ordinarily be a bidder standing on stage rather than the target, but Azure shareholders were certainly big winners given the way the lithium market has moved since the deal was completed. 

WA1 Resources was awarded Emerging Company of the Year for its Luni niobium discovery in the West Arunta region of WA. Despite being well off its highs, the WA1 share price increase still says it all. 

THE ROUND UP

The key trends from the first two days of the Forum continued to be on display as Diggers & Dealers drew to a close. The recent performance of Western Australia’s gold producers was the early topic of discussion, with presentations from Ramelius and Spartan Resources - best demonstrated by a share price chart delivered by Spartan Resources showing its rather impressive relative performance to competing WA gold miners since April this year. Mark Zeptner emphasised Ramelius’ record gold production for FY24 and strong underlying cash flows, while raising concerns regarding the time it took the Takeovers Panel to determine Ramelius’ application relating to the Westgold - Karora merger.

Ken Brisden likened Patriot Battery Minerals’ Shaakichiuwaanaan project in Quebec to Greenbushes and noted that the decreasing cost of battery cells (and electric vehicles) would drive the next wave of lithium demand. WA lithium producers will likely have to navigate challenging conditions in this market, operating without significant government assistance. Mines and Petroleum Minister David Michael indicated lithium royalty relief may not be immediately forthcoming as he noted “royalty relief is not a silver bullet for worldwide (battery metal) demand not hitting where we thought it would be ”.

Atlas Iron founder David Flanagan suggested the Simandou development in Guinea - dubbed the ‘Pilbara killer’ - could instead be a Pilbara saviour by providing a high-grade source of ore for blending with lower grade ore and facilitating lower grade mining in the WA region for a longer period.

On the conference floor we continued to hear many discussions over the potential of alternative funding pathways (including joint ventures, strategic partnerships and offtake arrangements) for explorers seeking to move into the development phase, particularly where expected capital costs far exceed the market capitalisation of the aspiring producer. 

THE ROLE OF MINING IN CLOSING THE GAP

Western Australia’s resources sector achieved sales on production valued at $248 billion in 2023 .  Much of Australia's mineral-rich land overlaps with areas recognised under native title claims or agreements. According to current estimates, more than 60 per cent of Australian resources projects, including exploration and extraction, operate on land covered by a native title claim or determination. 

Undeniably, First Nations people are key stakeholders for many mineral explorers and producers. But this has not always been reflected in the agreements facilitating mining projects. In some cases, native title rights have been negotiated away for very little return, or ignored altogether, leaving the native title holders to pursue compensation through the lengthy and uncertain Federal Court process. 

The Productivity Commission’s most recent Closing the Gap data released on 6 March 2024 confirms that there are still significant challenges when it comes to reducing disparities between Indigenous Australians and non-Indigenous Australians (see here). These are complex issues and government will need to lead, but it begs the question whether there is more the mining industry can, or should, be doing via engagement with native title parties. 

Prime Minister Anthony Albanese recognised this in his address to the Garma Festival on 3 August 2024 , saying: 

Mining companies cannot afford to roll out the same old formula when engaging with native title parties due to:

• The importance of ESG considerations for mining companies.

• The growing expectation of ‘free, prior and informed consent’ (FPIC) as the baseline for negotiation with native title parties.

• The evolution of new commercial models of indigenous agreement making in the clean energy space.

• A well-developed (and in some cases, hard-earned) awareness on the part of First Nations stakeholders of their negotiating position.

Royalties alone are unlikely to satisfy Traditional Owner aspirations, especially if the goal is to de-risk and future-proof the project. Early engagement is key. The consistent message from native title parties to mining companies is that there is no point turning up to negotiations today wanting to start mining tomorrow. This can be avoided by building sufficient time into the negotiation process to develop a mutually respectful relationship for the long term. Proponents can expect a negotiation protocol agreement with funding obligations to be required before negotiations begin in earnest. Demonstrating a willingness to invest in the community at the outset also goes a long way to establishing trust. 

Transparency in relation to the project plan is another feature that native title parties will look for in negotiations. Gone are the days of simply bartering over a royalty figure. Valuations will need to be undertaken, and monetary consideration is not all that is expected. Native title parties want to be given the time and opportunity to explain what would make the deal worthwhile from their perspective. Increasingly, this may include some or all of the following: 

• Funding for community development projects that will continue to provide benefits for future generations, in areas such as infrastructure, health and education.

• Opportunities for Aboriginal businesses to get involved in the project directly or indirectly, including through seed funding, partnerships and joint ventures.

• Capacity-building through specific training and skill development prior to the project launching to empower Aboriginal participation in the project.

• Employment and training quotas to ensure Aboriginal participation in the project.

• Cultural recognition and ongoing consultation and management of Aboriginal heritage.

• Some form of equity in the project.   

The possibilities for fruitful relationships between mining companies and native title parties are limited only by the parties’ willingness to take the time to understand each other and explore commercial solutions, acknowledging that sometimes this will take curiosity and creativity. This is both a challenge and an opportunity for mining companies. Doing this right makes good business sense and may yet make a meaningful contribution to closing the gap.

• 05/08/2024 By - Justin MannoliniCRITICAL MINERALS - ARE WE TOO LATE TO THE PARTY? The 2023 Diggers & Dealers Mining Forum was notable for its focus on the new wave of so-called critical minerals. The mood may be different this year, with lithium pricing under pressure, uncertainty over the outlook for platinum-group elements and continued volatility in the key rare earth markets. State and federal governments have been looking at various initiatives to support the sector and encourage downstream processing as part of its Future Made in Australia policy , decided as part of the Federal Budget, the Critical Minerals Production Tax Incentive (you can find our article on this here). We are not alone, with many Western countries, most notably the US through the Inflation Reduction Act , acting aggressively to develop alternatives to the well-entrenched supply chain centred on Chinese downstream value-adding. But as a nation, are we simply too late to this party? Despite having considerable identified resources in nearly all of Australia’s 31 identified critical minerals, lead times for the development of new projects continue to extend and private sector finance for the development of large-scale projects continues to be elusive. This is likely to leave the Federal Government, through agencies such as Export Finance Australia, Northern Australia Infrastructure Facility and the newly minted National Reconstruction Fund, as lenders of last resort, at a time when public debt is already at record highs. As the Productivity Commission and other experts have pointed out, our comparative advantage in mineral extraction does not translate automatically into downstream or even midstream processing. The litany of failed or stalled developments in this domain (including Albemarle’s recent decision to halt the expansion of its Kemerton lithium hydroxide plant) provide ample evidence of this. Perhaps what is really required is a ‘back to basics’ approach to creating a positive environment for our metals and mining sector. On the wish-list for industry would be reform (not duplication) of environmental approvals, development of sensible energy policy, support for skills development and a greater focus on STEM education schools and other institutions, and perhaps a reconsideration of the relationship between the industry and first nations people, who are key stakeholders in the development of mines in areas covered by the indigenous estate.One thing is for sure: if we consider decarbonisation as a process of replacing ‘molecules with electrons’, mining represents a key piece of the puzzle. No doubt Diggers & Dealers will provide the ideal forum for our critical minerals aspirants to plead the case for both investor and policy-making support.

DAY TWO HIGHLIGHTS

The tone of the conference was more upbeat today, with equities markets stabilising somewhat overnight, and the auditorium full for a varied array of presentations across the commodity spectrum, albeit with gold still the stand-out.

Diggers has traditionally been the time and place to announce exploration breakthroughs and big corporate deals, but this year’s Forum has delivered relatively few of either.  Instead, the focus of many presenters has shifted from geology to engineering, as several exploration success stories from the past few years navigate the difficult transition to development and production.

Kristen Pelc’s presentation on behalf of Fortescue had the house packed, as delegates heard how the miner - a self-confessed large Scope 3 emitter of CO2 - planned to transition not just to net zero but ‘real zero’.

Attendees were also reminded that lithium is not the only commodity that will benefit from the transition to clean energy, with manganese, vanadium, rare earths and uranium all having a critical role to play at various points of the clean energy value chain.

THE ROUND UP

Gold continued to shine on Day 2 of the Forum. The benefits of regional gold consolidation were very much the focus of the day with presentations from Catalyst, Genesis Minerals and Red 5 all highlighting the plethora of organic growth opportunities on offer following periods of intense corporate activity. Even Kambalda nickel stalwart Ed Ainscough was emphasising the gold potential of Lunnon Metals’ landholding.

On the subject of gold, the extraordinary quality of De Grey’s Hemi discovery was again highlighted, with Glenn Jardine’s presentation charting the growth of the company’s 12.7Moz resource which has redefined investors’ views of the gold potential of the Pilbara. 

Delegates were also reassured that lithium may be ‘resting’, but it is far from dead, thanks to positive presentations from industry pioneers Liontown and Pilbara Minerals, both of whom provided upbeat assessments not only of their projects but the long-term positive fundamentals for battery minerals.  The shift in focus from exploration to development (or in Pilbara’s case, expansion) may not be as sexy as a bonanza grade drill hole result, but is perhaps indicative of the maturation and increased sophistication of the metals and mining sector in Australia. 

Recent market volatility is proving particularly frustrating for small-cap companies seeking to advance potentially significant projects. As a result, one thematic we heard on multiple occasions is that the asset level JV and partnering structure is emerging as the most achievable (and least dilutionary) method for smaller companies to develop large projects, particularly for non-LME commodities where traditional debt finance is not available.  Chalice Mining’s strategic tie-up with Mitsubishi perhaps provides a template for the way forward here. 

On a similar note, several presenters emphasised the importance of the ‘Three P’s’ (or a multiple thereof) for any aspiring miner: People, Projects and Partnerships. There has been considerable discussion about the potential for miners to partner with stakeholders such as traditional owners and contractors, to expedite the pathway to production and achieve more sustainable and profitable operations over the long term.

Interestingly, very few presentations seemed to focus on renewable energy or the ‘green mining’ thematic that was notable last year (with the exception of Gold Fields’ Michael Fraser). Have we already passed peak ESG in metals and mining?

Deglobalisation and mining - how scarcity and security concerns will drive cross-border M&A

Capital markets will need to operate against a noisy background in the current financial year, with elections in key markets (including the US and Australia), continued anxiety over inflation and interest rates, and rising geopolitical and military tensions across Europe, the Middle East and Asia.

Should more stable macroeconomic conditions begin to emerge, it is reasonable to expect M&A activity to increase. In the mining space, strategic acquirers will look to deploy the considerable financial firepower built over several years of strong commodity prices to rebuild their production pipelines, depleted thanks to a COVID-19-induced slump in exploration and development expenditure. Medium term supply crunches for a number of key commodities, including copper, loom large: BHP’s tilt at Anglo American might be seen as the outworking of this dynamic.

Equally, however, the same scarcity and security concerns causing ripples through the markets are likely to drive cross-border M&A activity. As countries increasingly prioritise self-sufficiency and regional stability over global integration, companies in the metals and mining sector are expected to respond by realigning their operations to mitigate risks and capitalise on emerging opportunities.

First, the disruption of global supply chains, exacerbated by recent geopolitical tensions and the COVID-19 pandemic, has highlighted the vulnerability of companies and countries, relying on distant and complex networks for essential raw materials. Companies are seeking to secure more localised and resilient supply chains, which often necessitates strategic M&A to gain control over domestic and regional sources of key minerals. Some Australian targets have benefited from this dynamic in recent years (For example, Azure Minerals sale to SQM / Hancock).

Second, national governments (particularly the United States) are increasingly enacting policies to protect critical industries and ensure access to strategic resources. This protectionist stance, which would be turbo-charged by a Trump victory in the US Presidential elections in November, encourages not only domestic consolidation and investment, but also cross-border deals that align with geopolitical interests. Companies are thus incentivised to engage in transactions that enhance their geopolitical positioning and comply with regulatory frameworks aimed at reducing dependence on foreign sources.

Lastly, the global push towards green technologies and renewable energy is driving demand for specific metals such as lithium, cobalt, and nickel, essential for batteries and other clean energy applications. The quest for resource security in this competitive landscape will continue to prompt companies to pursue mergers, acquisitions and joint ventures to secure access to these high-demand minerals.

In short, while it may seem counter-intuitive, deglobalisation is likely to fundamentally reshape the metals and mining sector, propelling a wave of corporate deal activity as companies adapt to a world where localised control, geopolitical strategy and resource security are paramount.

Day One Highlights

The focus was on the enduring appeal of gold as well as the challenges facing the mining industry more broadly.

Keynote: former Deputy Prime Minister Kim Beazley delivered the address, touching on defence, rare earths and the mining industry's key supporting role for Australia's future economic growth.

Downturn in lithium and nickel: these once-booming battery metals have faced challenges, with mine closures and job losses impacting the industry. The global stock plunges in Australia and in Japan on Monday dominated conversation throughout the afternoon, as delegates braced for further selloffs and the risk of a US recession. 

Political spotlight: Opposition Leader Peter Dutton was in attendance, acknowledging the national importance of the Western Australian mining industry.

The Round Up

Keynote speaker Kim Beazley AC left delegates in no doubt as to the global significance of the Western Australian mining industry, emphasising the geopolitical implications of recent policy decisions and the importance of nuclear submarines to Australia’s defence capability - like having a ‘panther in our backyard’ in Mr Beazley’s memorable description. Mr Beazley also advocated for the Australian Government to secure the supply of rare earths from Iluka Resources' rare earths refinery at Eneabba, to take steps to level the playing field with China’s dominance of the rare earths market.

Delegates needed no reminder that the industry outlook depends on global conditions, as the ASX dived 3.7% on Monday - a development that hung heavily over the booths. By mid-afternoon the usual first day optimism and enthusiasm faded as thoughts turned to the possibility of a recession in the US and the alarming decline in the Japanese economy with the Nikkei 225 down 12% on Monday and by 25% since early July.

That said, Kalgoorlie still loves a gold story. The enduring appeal and consistent strong performance were also evident on day one: gold exploration and production remained a central theme. Simon Jessup from Northern Star Resources and Darren Stralow from Bellevue Gold gave well attended and well received presentations on behalf of the prominent producers. Wayne Bramwell of Westgold Resources observed that it was ‘day one’ for the company following its merger with Karora. Marc Ducler of Astral Resources relished the opportunity to inform the conference of its nearby exploration projects (and his own close links with Kalgoorlie).  

Otherwise, John Welborn presented for Fenix Resources on the company’s recent strong share price performance and the growth opportunities associated with unlocking value embedded in iron ore assets in Mid-West WA.

Numbers of attendees seemed strong, but anecdotally delegate numbers from Melbourne and Sydney were down.

Mining finance outside the world of equity - what do ‘diggers’ need to consider?

Mining and metals are always facing big challenges and there are plenty to choose from today. 

Although gold’s still a winner and longer-term global trends such as the energy transition offer reassurance for other key metals, there is always going to be pushing and pulling along the way. For a miner needing to source finance, when unfavourable pricing dynamics appear, it can sometimes make equity dilution too hard or when the share market gets bent out of shape like it did today, investors can dive for cover, at least for the short term. 

So, miners need to be able to look at alternatives. 

This is why we’ve had clients and colleagues in the junior to mid space asking us questions about potential pitfalls for the kinds of financing available in that environment. 

A few things need careful thought. 

'Regular' debt finance: a term sheet may be in your inbox that says it’s for ‘debt’ - but it’s not normally only debt that’s on offer. Lenders for this sort of deal accept that the exit for their investment may be less than clear. So yes, borrowing money from them instead of raising equity is going to cost you.  

The term sheet will ask for options/warrants, capitalised upfront fees, convertible features (more on this below) as well as tight covenants and very regular and detailed reporting. The consequences for breaching will be costly. These deals are also nearly always secured, so you’ll need to make sure the pathway is clear for any incoming lender looking to refinance the debt later.

These lenders are motivated to move quickly, but it’s important to remember they still act responsibly. There is usually a robust technical and legal due diligence process to get through before the money is available. Get prepared for due diligence early and build a buffer into your timetable, your negotiating strength is at its best when time isn’t running out. 

Offtake prepay, royalty debt finance and metal streaming: these arrangements can provide upfront capital but great care should be taken during the structuring phase. These arrangements are called all kinds of things, but they usually are still debt and need to be treated as that. All the above points need to be considered and more. 

The effects of commodity price volatility, counterparty risk, dilution of future cash flows, preserving optionality to transact with concurrent financiers and stakeholders all need careful thought.

Convertible Debt: this involves most of the issues already outlined above as well as the potential for regulatory complexity. Having the right lawyers is useful in making sure the funding isn’t delayed or stopped because the ASX Listing Rules, the Corporations Act or FIRB has got in the way. 

For example, is the convertible note ‘appropriate and equitable’ in the eyes of the ASX? Would the ASX accept that your placement capacity lines up with the conversion clause you’ve agreed? Is the 20% takeover threshold an issue? These points, and others, need thought.

These types of deals are going to be a necessary part of mining finance at each and every point in the cycle. To make them work, it’s just a case of keeping the right sets of eyes on the key pitfalls from the time you get the term sheet to the date you make the drawdown.

CRITICAL MINERALS - ARE WE TOO LATE TO THE PARTY?

The 2023 Diggers & Dealers Mining Forum was notable for its focus on the new wave of so-called critical minerals. The mood may be different this year, with lithium pricing under pressure, uncertainty over the outlook for platinum-group elements and continued volatility in the key rare earth markets. 

State and federal governments have been looking at various initiatives to support the sector and encourage downstream processing as part of its Future Made in Australia policy , decided as part of the Federal Budget, the Critical Minerals Production Tax Incentive (you can find our article on this here). We are not alone, with many Western countries, most notably the US through the Inflation Reduction Act , acting aggressively to develop alternatives to the well-entrenched supply chain centred on Chinese downstream value-adding. 

But as a nation, are we simply too late to this party? Despite having considerable identified resources in nearly all of Australia’s 31 identified critical minerals, lead times for the development of new projects continue to extend and private sector finance for the development of large-scale projects continues to be elusive. This is likely to leave the Federal Government, through agencies such as Export Finance Australia, Northern Australia Infrastructure Facility and the newly minted National Reconstruction Fund, as lenders of last resort, at a time when public debt is already at record highs. As the Productivity Commission and other experts have pointed out, our comparative advantage in mineral extraction does not translate automatically into downstream or even midstream processing. The litany of failed or stalled developments in this domain (including Albemarle’s recent decision to halt the expansion of its Kemerton lithium hydroxide plant) provide ample evidence of this. 

Perhaps what is really required is a ‘back to basics’ approach to creating a positive environment for our metals and mining sector. On the wish-list for industry would be reform (not duplication) of environmental approvals, development of sensible energy policy, support for skills development and a greater focus on STEM education schools and other institutions, and perhaps a reconsideration of the relationship between the industry and first nations people, who are key stakeholders in the development of mines in areas covered by the indigenous estate.

One thing is for sure: if we consider decarbonisation as a process of replacing ‘molecules with electrons’, mining represents a key piece of the puzzle. No doubt Diggers & Dealers will provide the ideal forum for our critical minerals aspirants to plead the case for both investor and policy-making support.