AFR
Critical minerals stocks are now worth more than gold

Peter Ker and Vesna Poljak

Jun 13, 2023 – 8.00p

Tony Rovira was about to board a plane from Perth to Melbourne when laboratory tests of eight lithium drill holes sent shares in his company, Azure Minerals, soaring more than 40 per cent.

“I will definitely have a glass of champagne on the plane to celebrate the great work of our exploration teams,” he told The Australian Financial Review from Perth Airport on Tuesday.

They can afford the expensive champagne in Perth these days; the city is at the epicentre of a boom that has lifted the value of major, ASX-listed critical minerals companies to $86.2 billion from $8.6 billion in the past decade.

That basket of 33 major ASX-listed, critical mineral stocks is now more valuable than the 25 companies that comprise the S&P/ASX All Ordinaries Gold Index, which was worth $86.1 billion on Tuesday.

Minerals such as lithium, rare earths, graphiteand nickel have surged into focus for investors in the past 10 years as governments declared them “critical” to decarbonisation efforts and national security.

The speed and agility of Australia’s junior mining sector has made the nation a global leader on “critical minerals”, and Australian miners are now the world’s biggest producer of raw lithium, and one of the biggest producers of rare earths outside China.

The ASX is home to 88 lithium producers or explorers, meaning almost 4 per cent of the local bourse is dedicated to finding the lightest metal on the periodic table to feed the manufacturers of modern batteries and electric vehicles.

The list of 33 major critical minerals stocks – selected by The Australian Financial Review – includes fairytale stories like Pilbara Minerals′rise from a $1 million microcap to a $14 billion lithium giant that is forecast to report a $2.4 billion net profit in August.

There are stories of redemption, such as Amanda Lacaze’s rebuild of Lynas from a $111 million struggler in mid-2015 to a $7 billion company that is globally recognised as the most strategically important rare earths producer outside China.

The list also includes some of Australia’s most successful, recent initial public offerings, such as WA1 Resources, which raised $4.5 million at last year’s float but is now worth more than $250 million, buoyed by niobium and rare earths drill results near the Northern Territory-Western Australia border.

‘This is not a peak’

Despite the extraordinary amount of wealth created by the critical minerals sector, Tribeca Investment Partners portfolio manager Todd Warren said many of the stocks had come back to earth this year as electric vehicle sales had been slightly softer in China than expected.

“It is not a frothy peak in my view, not at all,” he said. “Some lithium valuations got a bit stretchy last year but a lot of that froth and bubble came out when Chinese lithium prices rolled over.

“With regard to the other [critical minerals] commodities, I would argue this is not a peak.