*Fyi, re:- MT50
Lithium companies are reshaping Australia’s mid-tier mining landscape
It’s not just your imagination.
Rising publicity around ‘critical minerals’, ESG and battery metals is having a transformative impact on the value and make-up of Australia’s resources sector.
The proof is in the pudding as they say, and this pudding is the annual PricewaterhouseCoopers AussieMine 2021 report, which shows ‘critical minerals’ miners and explorers are now worth almost as much to the Australian mid-tier as gold producers.
Released today, the survey reflects the strength of the resources market more generally, with the 50 biggest mining companies outside the ASX 50 increasing in value by 50% to $113 billion at an average increase in market cap of 78%.
But it is the make up of that list that is most notable.
Critical minerals companies, including lithium, mineral sands and rare earths, meanwhile are knocking on the door at $35 billion, or 31% of the total value, 167% higher than 2020.
Who is new to the MT50?
With a market cap of ~$2.4 billion as of June 30, the aforementioned Deterra Royalties was the biggest new entrant to the list.
But rising lithium, rare earths, uranium and mineral sands prices drove the rest of the new boys in the PwC survey, all attached to the decarbonisation narrative in some way, shape or form.
Lithium hopeful
Liontown Resources, up 759% over FY21, entered the list at 22, with a market cap of $1.55b, ahead of established producers like gold miner
Silver Lake Resources and coal miner
New Hope.
Australian Strategic Materials (mineral sands/rare earths), Ioneer (lithium), Vulcan Energy (lithium), AVZ Minerals (lithium) and DEVELOP (mining services/copper) all entered the list for the first time.
PwC described it as an “ESG-led shake-up”, which has fundamentally altered the composition of Australia’s mid-tier mining sector.
“Time will tell the makeup of the MT50 in 2022, but we are expecting that strategic shifts in ESG, as part of the transition to a low carbon future, will continue to impact the fortunes of the MT50,” report authors said.
While operating cashflows have soared, helping big miners pay down debt, make acquisitions and invest in capex, funding from the market has also been strong for non-producing companies in the MT50.
“The market has been willing to support undeveloped critical minerals, gold and copper projects with equity funding.
A total of $468 million has been raised by the MT50 non-operating companies, and cash reserves of $829 million remain for their respective projects (as at 30 June 2021).
The exploration spend for non-operators was up by 13%,” authors said.
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*As for, How does the ASX200 calculation work exactly?
Calculations
The ASX 200 is
capitalization-weighted, meaning a company's contribution to the index is relative to its total market value i.e. share price multiplied by the number of tradeable shares.
The ASX 200 is also
float adjusted, meaning the absolute numerical contribution to the index is relative to the stock's value at the float of the stock.
Although the calculation starts with a sum of the market capitalisation of the constituent stocks, it is intended to reflect changes in share price, not market capitalisation.
Therefore, a
fudge factor called the "Divisor" is used to ensure that the index value only changes when stock prices change, not whenever market capitalisation changes.
For example, if a company increases its market capitalisation by issuing new shares, the Divisor is adjusted so that the ASX 200 index value does not change.
Eligibility
To be eligible for inclusion in the ASX 200 Index:
- Market capitalization: A stock's weight in the index is determined by the float-adjusted market capitalization of the stock. This is a function of current index shares, the latest available stock price and the Investable weight factor (IWF).
- The IWF represents the float-adjusted portion of a stock's equity capital. Therefore, any strategic holdings that are classified as either corporate, private or government holdings reduce the IWF which, in turn, results in a reduction in the float-adjusted market capital.
- Shares owned by founders, directors of the company, trusts, venture capitalists and other companies are also excluded. These are also deemed strategic holders, and are considered long-term holders of a stock's equity. Any strategic shareholdings that are greater than 5% of total issued shares are excluded from the relevant float.
- Liquidity: The trading volume in terms of dollar value and the number of transactions must exceed at least 0.025% of the sum of all eligible securities' trading volume. To ensure that no single company dominates trading, they are capped at a maximum of 15% for value, volume and transactions.
- Listing: Only stocks listed on the Australian Stock Exchange will be considered for inclusion in any of the S&P/ASX indices.
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Food for thought on the Road to the ASX 200 and Mining Manono
Frank
