Australia’s critical minerals list isn’t a particularly thrilling read, but it’s an important one. Put together by the Australian Government, it features 26 commodities — from lithium and cobalt to helium and rare earths — deemed essential for modern technologies, economies, and national security.
They play starring roles in mobile phones, computers, fibre optics, semiconductors, and banknotes, plus numberless other products spanning defence, aerospace, telecommunications, health care, and — of course — green energy.
Indeed, to work in the critical minerals sector is to work at some sort of cutting edge. It is to be a champion of the preservation of Life As We Know It; it is to be faced with a heavy challenge, but a worthy one nonetheless.
“I think it’s huge,” says Dean de Largie, Managing Director of Australian Critical Minerals (ASX:ACM), when asked about the role of such things in an ever-changing world.
“I think it’s bigger than most people really imagine. The demand is going to be very difficult to manage.”
“I think it’s bigger than most people really imagine”
In its pre-IPO days, ACM was looking to be “a significant player” in the kaolin space and had compiled a portfolio of high-purity projects initially developed by what are now ACM’s wholly owned subsidiaries.
“Years ago, when junior kaolin companies were hitting the boards and getting great investor response, we put a huge kaolin package together,” de Largie says.
“Then, as investment sentiment was swinging to the green energy sector, we developed the assets we currently hold in the Pilbara and the midwest of Western Australia.”
In addition to the extensive kaolin tenements in WA’s southwest, ACM owns the Cooletha and Shaw projects in the Pilbara and holds a 51% earn-in option at the Rankin Dome Project near Southern Cross.
Now, freshly on the other side of an ASX listing in July, the company has its arms open to a much broader set of commodities, and de Largie — together with Chairman Michael Wright and Non-Executive Director Gary Brabham — is asking the obvious question: How much of those commodities does ACM have?
Beverley, Kondinin and Kojonup
ACM’s kaolin tenements, located between Perth and Albany, include the Beverley, Kondinin and Kojonup projects. Though they’ve taken a back seat in the context of green energy hype, they’ve not been forgotten.
“Kaolin was our initial focus prior to becoming public, and currently the market’s not giving kaolin companies much love,” de Largie says.
“But what’s interesting is that some of our kaolin areas, although they’re good quality kaolin, they’re likely to be interesting targets for rare earths as well. We will be reviewing our kaolin projects for rare earths as we progress our work programs.”
When it comes to rare earths, however, Rankin Dome is the star of ACM’s show. Held under a joint venture with Kula Gold (ASX:KGD), the project was recently subject to a 249-hole auger drilling program as well as a 6-hole reverse circulation (RC) campaign totalling 900m.
While both sought to better define a previously discovered rare earth anomaly, the auger program was as much a re-do as anything else. The existing auger lines, de Largie explains, had a variety of orientations, which made it difficult to determine the actual orientation of the anomaly.
“No matter which way I tried to model it, it didn’t quite fit,” he says.
“To remove any bias, I covered the area with a 100m-by-100m grid. That takes any orientation bias out of the modelling, and from there I’ll be able to make the right decisions on where we drill and at what orientation.”
Already, ACM has seen “some nice clays” in the area, which has been pegged for additional work, including bringing the 100-by-100 grid down to more narrow spacing.
“East of that grid auger program, we’ve done a small 6-hole RC program, and it was reasonably obvious that we expected bedrock close to surface there. That’s why I didn’t worry about any auger work, I just drilled straight into the intrusive,” de Largie says.
“We’ve drilled some reasonably deep holes through that particular area to give us an answer to the question of whether we’re dealing with a hard rock-hosted rare earth property or clay-hosted.”
“We’ve drilled some reasonably deep holes through that particular area to give us an answer to the question of whether we’re dealing with a hard rock-hosted rare earth property or clay-hosted”
Cooletha and Shaw
Much further to the north — around 200km north of Newman — is the Cooletha Project, which de Largie says is notable for its variety of opportunities. The project covers more than 100 square km of land prospective for lithium and tantalum, plus another 100 square km prospective for iron ore. But with several pegmatite swarms stretching across the 30km width of the tenements, the focus is predominantly on lithium.
Australian Critical Minerals has so far collected 251 rock samples to verify targets already identified through desktop studies. Trace element ratios from geochemical analysis are expected to help guide the company to areas that might be “more highly fractionated”.
“You hear people talk about how ‘the sweet spot in pegmatites is X kilometres from the source’, and that’s all based on the fractionation processes that occur when these pegmatites form,” de Largie says.
“So we’ll get the geochemistry from that and we’ll make some decisions about where we go next.”
Even further north, 68km west of Marble Bar, sits the 90 square km Shaw Project. Originally drilled by Anaconda Australia in the 1970s, the small number of shallow holes that hit the targeted unconformity returned some promising gold grades.
“There are some great grades of gold at surface, half-ounce gold in this unconformity. But we’re not chasing that,” de Largie says.
“We’re chasing — at Shaw — the banded iron formation, and there are potentially some other opportunities to do with the unconformity hosting other minerals, like rare earths. So we’ll be looking at that as well.”
‘In the land of the giants’
The preference for iron ore over gold is partly due to the location of not just Shaw, but also Cooletha. As far as popular jurisdictions go, the Pilbara is one of the more densely populated, and it hosts players ranging from the smallest micro-cap juniors to the world’s very biggest mining behemoths.
“We’re in the land of the giants with these two projects. We’re surrounded by Atlas Iron, which is Hancock Prospecting. We’re surrounded by BHP, FMG, Rio Tinto,” de Largie says.
“So it’s a very easy situation for us to define an inferred resource, and if it’s of a grade that the majors are interested in, it’d be an easy offtake agreement. We could probably sell that material for $1 or $2 a tonne. If we’re looking at several hundred million tonnes, that’s a pretty significant transaction for a little junior that floated at an $8.5 million market cap.”
“if it’s of a grade that the majors are interested in, it’d be an easy offtake agreement.”
It’s a popular strategy, and one that makes good sense. After all, why would a potentially cash-strapped junior spend a fortune building processing facilities when so many already exist?
The other factor is that iron ore has always been risky for junior players.
“You’re dealing with huge ore bodies, expensive infrastructure, and extended time frames,” de Largie explains.
“That’s why it’s risky for a junior to try and develop iron ore resources, irrespective of the grade, because the infrastructure costs are so high. It’s a much more sensible idea to find a resource and allow established producers to purchase it, or you have an offtake agreement.”
But it’s also a matter of finding the right suitor: an appropriate ‘major’ with a balance sheet sufficient to take on and develop the resource.
“Having 300 million tonnes of iron, for example, sounds very exciting to a junior. It’s a great resource, very valuable. But to the major iron ore players, like BHP, it’s not exciting to them, it’s a rounding error,” de Largie adds.
“So you have to look at the mid-tier iron ore producers like FMG and Roy Hill, which would likely have the appetite for the size of resource we expect to define.”
A prudent strategy though it might be, it’s not as if de Largie and the rest of the ACM team are married to it. The company may only have three staff, but their combined experience is not to be sneezed at.
“Both Gary Brabham and Michael Wright have had lots of production experience. Michael, especially, has built huge mines, both in Australia and Indonesia. So we’ve got the right board to be able to do that. We’ll see how the projects stack up and then decide what we’re going to do.”
The road ahead
Indeed, de Largie isn’t getting ahead of himself. The name of the game, for now at least, is to get the numbers right and develop a resource.
“Get it up to at least an inferred resource and then go knock on their doors,” he says.
“And as soon as we deliver some lithium results at Cooletha, I think the major lithium producers will start to follow our progress more closely given the size and quality of our tenure and the potential size of any resource we develop.”
Either way, de Largie is anticipating that this will all translate to “a serious re-rate” of ACM’s share price over the next 12 months.
“I’d like to have some significant numbers on the board in terms of our rare earths and lithium, and I’d like to have the numbers that would make it obvious that our market cap will be jumping significantly. I won’t say the sort of numbers I think they’ll probably go to, but I think there will probably be a couple of re-rates in that process,” he explains.
“Because, realistically, the green energy sector really isn’t developed enough at the moment to take on the production of energy without fossil fuels. So, just on that basis, there will be huge demand for green energy minerals and, hence, any company with a resource will be expected to achieve an incredible re-rate of their market capitalisation on that basis.”
Australian Critical Minerals certainly presents an interesting investment prospect. It’s true that the company has built for itself a strategy rooted in strong demand for important commodities. It’s true, also, that the company has an impressive collection of assets in enviable regions, and the human expertise to make those assets sing. How it all shakes down in the high-pressure chamber of real life is, of course, the risk as it relates to reward.
Write to Oliver Gray at Mining.com.au
Images: Australian Critical Minerals