Despite a number of market shifts felt deeply by Australia’s mining industry this year, the overall value of the sector remains robust, according to a report this week by consulting firm PwC Australia.
The firm’s 19th annual Aussie Mine report found the total market value of Australia’s mid-tier 50 mining companies (MT50) has remained steady at $139 billion in 2024 — a sign of its resilience even in the face of difficult macroeconomic conditions.
Indeed, critical minerals like nickel and lithium have had a rough trot. In mid-May, nickel was trading at almost US$22,000 ($34,056) per tonne, but has since sunk to US$15,765 per tonne. Likewise, the price of lithium has dropped from more than US$69,000 since the start of 2023 to just over US$10,000 — a drop of around 85% in less than two years.
“The record high gold prices have provided a significant boost, but the sector must navigate the volatility in critical minerals with strategic foresight,” says PwC Australia’s National Mining Leader Marc Upcroft.
“Lower lithium and coal prices have significantly impacted revenues and earnings, reversing the four-year trend of annual increases.”
It’s partly for this underwhelming performance by critical minerals that revenue generated by Australia’s MT50 companies dropped 10% to $52.2 billion in the 2024 financial year. Pre-tax earnings also fell 37% to $18 billion, while margins dropped from 50% to 34%.
Combined with a 41% increase in spending to $14.7 billion, it’s perhaps little wonder that cash on hand among MT50 companies has all but vanished — dropping 99% to $100 million.
However, these figures might have been even more damning if it weren’t for the influence of gold-focused companies, which now account for almost 50% of operating cashflows generated by MT50 companies.
The price of gold has soared this year, driven largely by growing geopolitical tensions that have pushed investors towards safe-haven assets, like precious metals. Since the start of this year, gold has climbed almost 32% to US$2,565.32 an ounce.
But beyond the short-term uncertainty in critical minerals, the big picture remains clear.
“There is a vital link between global decarbonisation efforts and opportunities for Australian mining companies,” Upcroft says.
“For that reason, demand for critical minerals will continue to rise significantly to meet the need for lower carbon technologies. In fact, it will be very challenging for supply to keep pace with demand.”
PwC’s analysis finds that while Australia is endowed with the metals essential for decarbonisation, less than a fifth of the country’s current critical minerals projects are considered investment-worthy.
“This suggests that numerous projects are either too small or insufficiently developed to attract substantial investment“
Many of these projects, Upcroft noted, lack the necessary scale. Of those projects deemed investable, few have a net present value greater than $500 million.
“This suggests that numerous projects are either too small or insufficiently developed to attract substantial investment,” Upcroft explains.
The answer? Collaboration and innovation.
This would likely involve enticing private capital by making efforts to address commodity price fluctuations and volume risks, as well as developing mining project “clusters” to aggregate reserves and resources.
“There is an opportunity to generate $171 billion in gross domestic product and create almost 330,000 jobs by 2040, if we make critical choices to align our policy settings to market needs,” Upcroft says.
“By addressing these strategic imperatives collaboratively, Australian mining companies are well-positioned to navigate the evolving global economy and achieve sustained growth.”
Write to Oliver Gray at Mining.com.au
Images: iStock
