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Aussie Mine 2021: Critical Mining

A deep dive analysis of Australia’s mid-tier miners

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Now in its 16th year, Aussie Mine provides industry and financial analysis on Australia's mid-tier mining sector.

The mid-tier 50 (MT50) are the largest ASX mining companies outside the ASX50.

There has been a significant shift in the makeup of the MT50. For the first time ever, the rise in the value of battery and critical minerals companies outshone gold’s performance (October 2021). While gold companies still dominate (comprising 36% of the MT50 by number and 33% by value), critical minerals companies have soared, and now represent nearly a third of the aggregate MT50 value (34% by number and 31% by value).

Battery mineral companies recorded the most significant increases in market capitalisation in FY21 (largely thanks to lithium and nickel prices). While five of the seven new entrants to the MT50 this year have critical mineral projects. And this will continue to grow, as the demand for critical minerals increases to support the infrastructure needed to achieve net zero. In short, mining is critical to a low carbon global economy.

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The MT50

The market capitalisation of the MT50 increased by 50% to a record $113 billion (as at 30 June 2021). Other than gold, the values of all mineral groups increased significantly from the heightened uncertainty of mid-2020. The market value of iron ore companies increased by 178%, reflecting the record price period during May-June 2021. Iron ore prices have subsequently halved from these record levels.

Record earnings and operating cash flows have supported a new period of growth in battery and critical minerals, gold, and energy transition metals (such as copper). This growth also provides MT50 companies with a strong platform to continue to focus on their ESG strategies and create long-term sustainable value. 

Mineral Resources Limited

Head office: Perth

Market capital ($M): 10,135

Market Capitalisation change to 2020 to 2021: 155%

Commodity: Iron Ore

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Northern Star Resources

Head office: Perth

Market capital ($M): 11,381

Market Capitalisation change to 2020 to 2021: 15%

Commodity: Gold

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Evolution Mining Limited

Head office: Sydney

Market capital ($M): 7,689

Market Capitalisation change to 2020 to 2021: -20%

Commodity: Gold

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Top trends shaping Australia’s mining industry

  • ESG is not just about the risks facing the mining industry, but also very much about the opportunities. The ultimate benefit of a well-designed and well-executed ESG strategy is an increase in shareholder value and returns, and the MT50 is largely in good shape to achieve this. 

  • The MT50 is well placed in terms of strong profits, cash flows and balance sheets, and now is the time for long-term thinking about a more sustainable future, and the investment required to get there.

  • The transition to a low carbon world will require trillions of dollars of investment, and critical minerals will play a significant role. Projected demand for many critical minerals is expected to outstrip near- and medium-term supply. This will require greater investment to facilitate development, extraction, and processing.
  • Accelerated growth in critical minerals production and processing will be necessary to deliver the global energy transition. Also, to meet the demand from renewable energy generation and storage technologies, and the electrification of transport. Over the next decade, EV production will need to increase tenfold, charging infrastructure will need to grow more than 30 times, and installed renewable power will need to triple in capacity. 
  • Australia is poised to be a global leader in the new energy economy. This is due to our natural endowment of critical minerals like lithium, nickel, copper, graphite, rare earths, and cobalt. Also, thanks to Australia’s track record as a credible and reliable exporter of commodities.

  • The drive towards net zero is one that the MT50 is beginning to embrace. Meanwhile, the Minerals Council of Australia has announced an ambition for the industry to reach net zero emissions by 2050.

  • Reducing Scope 3 emissions is a significant challenge for some mining companies. Coal and iron ore producers, for example, face a tremendous hurdle as the emissions from downstream activities associated with their products (carbon steel and electricity) presently result in substantial emissions. 

  • Battery minerals and energy transition minerals, on the other hand, have a distinct advantage in this area.

  • The MT50 has seen several transformational deals in the past few years – across gold, battery minerals and copper.

  • While the number of deals completed in 2021 was at the lowest level since 2017, the $8.3 billion value of these deals was significantly higher. In fact, we haven’t seen deal value this high since the coal and gold transactions in the 2010-12 period. Gold is again the dominant theme in deal activity, by both value and number of transactions.

  • Several Australian mid-tier miners are undergoing significant transformations, built heavily on deal activity over the past few years

  • We expect the higher level of deal activity to continue in FY22. In particular, we anticipate continued consolidation of gold companies, and interest in increased exposure to battery minerals, other critical minerals and energy transition metals.  

  • The tax and royalty contributions of miners have never been more in the public spotlight. Due to the COVID-19 pandemic, governments around the world are not only grappling with a combined health and economic crisis, but also: how to fund it. Add surging ESG expectations, and the nation’s gaze is firmly on miners to show how they are making a positive fiscal contribution to society.   

  • Our analysis suggests the MT50 are contributing, and they have a good ESG story to tell.

  • Income tax payments of the MT50 were up by more than 50% ($551 million) in the past financial year, to $1.6 billion. Additional increased tax payments look likely, as companies’ tax losses from investment spending are being used up fast. It follows miners’ investments in exploration and long-term projects that have reached commercial production. 

  • This story should be told, but our review of the MT50’s reporting suggests it's not being communicated.

  • The expectations around tax governance and transparency will only continue to increase. That bar seems to be set even higher for miners, particularly in more emissions-intense parts of the sector. The MT50 should communicate the positive contributions they make to governments. And they should embrace the increasing expectations, because their story is a good one to be told.

Contact us

Debbie Smith

National Mining Leader, PwC Australia

Tel: +61 (7) 3257 8286

Marc Upcroft

Partner, Assurance, PwC Australia

Tel: +61 2 8266 1333

Paul Bendall

Global Mining Leader, PwC Australia

Tel: +61 3 8603 3891

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