Top Australian capital raises seek to create mining value

Australia-headquartered miners have been tapping the capital markets in the year to July 14 to raise a total of US$2.33 billion in capital, according to an analysis by the Northern Miner’s sister company Mining Intelligence. The financings offer the companies financial firepower to execute their respective value creation strategies. The Mining Intelligence data shows the money was raised via 36 rights offerings that attracted US$1.15 billion in capital and 81 private placements raising US$965.52 million, among other methods of capital raising.

Leading the lineup is Regis Resources (ASX: RRL), which raised about US$155 million in April and another US$348.5 million in May.

The company had in April bought a 30% stake in AngloGold Ashanti‘s (NYSE: AU) Tropicana mine for A$903 million (US$688.3 million), increasing its production base by a third.

Regis acquired the interest in Tropicana, located in the Great Victoria Desert, 330 km from Kalgoorlie, from IGO (ASX: IGO), and undertook an equity raising to fund the acquisition.

Mining at Tropicana began in 2012, and the first gold was produced in September 2013. Since then, over three million ounces have been produced from the open pit. Gold production from Tropicana for 2020 was 463,118 ounces at a cash cost of A$806 per oz. and all-in sustaining costs of A$1,171 (US$893) per ounce.

In August 2020, Regis acquired a resource and tenement package from Stone Resources Australia (ASX: SHK), which included the Ben Hur JORC-compliant mineral resource – 5.8 million tonnes grading 1.6 grams per tonne gold for 290,000 ounces. The acquisition can add further life to the company’s Duketon operations and expands the company’s Duketon Greenstone Belt exploration program.

In December 2020, Regis approved the development of a new underground mine under the current Garden Well open pit. This decision was based on a recently completed positive feasibility study on the Garden Well South underground gold project.

Regis is targeting 355,000 to 380,000 oz. of gold production this year.

The company’s equity trading in Sydney is tracking in the red, losing about 27.3% in the analysis period.

IGO (ASX: IGO) has raised the second-largest amount of capital during the first six months of 2021, bolstering the treasury by US$245.86 million in January.

The company recently announced it had closed a transformational transaction to form a new lithium joint venture with Tianqi Lithium over its Australian lithium assets in a deal valued at US$1.4 billion. According to the transaction agreement, IGO and Tianqi have formed a new lithium joint venture owned 49% by IGO and 51% by Tianqi. The company said at the time, the joint-venture was the exclusive vehicle for lithium investments outside China for IGO and Tianqi.

According to the company, the joint-venture will initially focus on the existing upstream and downstream lithium assets in Western Australia, which comprises a 51% stake in the world-class Greenbushes lithium mine. It is a joint venture with global lithium company Albemarle (NYSE: ABL) and a 100% owned and operated interest in the Kwinana lithium hydroxide refinery. Once commissioned, Kwinana will be the first fully automated lithium hydroxide refinery in Australia, producing battery-grade lithium hydroxide from high-quality spodumene concentrate from Greenbushes.

Managing director and CEO Peter Bradford said at the time the new partnership with Tianqi promised to be “truly transformational” for IGO and “delivers on our strategy focused on the clean energy revolution.”

“We are incredibly excited to commence this journey with Tianqi as we build a globally relevant lithium business delivering high quality, responsibly produced lithium products to global customers while generating strong financial outcomes for shareholders.”

The commissioning process for the first lithium hydroxide plant at Kwinana has commenced. This includes forming the owner’s commissioning team and the appointment of a lead contracting firm to complete the remaining rectification work. First lithium hydroxide is expected to be produced in the second half of 2021.

In addition, the restart and ramp-up of Greenbushes Chemical Grade Plant 2 has commenced, and the completion and commissioning of the Tailings Retreatment Project is expected in early 2022.

The stock has been hitting new 12-month highs in recent weeks as higher commodity prices for the basket of core products copper, nickel, cobalt and lithium, boosted the share price into record territory. Shares are up 33% during the coverage period.

Uranium producers have seen investment interest flare in recent months, with Paladin Energy (ASX: PDN) equity having doubled in this time.

The company raised US$99.8 million in March, followed by another US$68.74 million in April. Paladin used the total A$218.7 million equity raise to redeem its senior notes and reset its capital structure. The notes redemption removes Paladin’s legacy corporate debt providing the company with financial security, optionality on future funding structures for the Langer Heinrich mine restart, and significant benefits for the company’s uranium marketing activities.

Paladin has a plan to restart uranium production at the Langer Heinrich project in Namibia. Paladin holds 75% of that property and considers it to be the company’s core asset. Langer Heinrich is fully permitted to resume mining and uranium exports, but much work needs to be done. The project needs leach heating and mining upgrades to improve the extraction rate, a process control upgrade, thickener and pumping upgrades, and a second Hydrosorter, among other things.

The mine could be reopened at an estimated cost of US$81 million and have a mine life of 17 years. Peak production would be 5.9 million lb. uranium oxide in each of seven years. The company continues to progress the critical-path elements of its restart planning at the mine, including optimization of tailings management, stockpile and run of mine blending strategies. Work also focuses on completing the grade control dilution study, validating assumptions in the mineral resource model, and updating critical engineering documents and dynamic modelling scenario analysis.

In Australia, Paladin has two wholly-owned, advanced exploration projects — Mount Isa (the largest uranium project in Queensland) and Manyingee (another potential uranium producer) in Western Australia.

Paladin holds six mineral development licences located 15 to 80 km north and east of Mount Isa. The Valhalla, Skal and Odin deposits are the most important. Those three contain 115.7 lb. U3O8 out of the 148.3 million lb. of contained metals estimated across all the licences.

Paladin drilled 116,490 metres of diamond core, and 148,740 metres of reverse circulation holes, boosting the resource by close to 20% to 148 million contained lb. U3O8. In 2007 the company acquired an 82% stake in Summit Resources, which held the licences near Mount Isa. Then in 2018, Paladin acquired the minority shareholdings in Summit, taking its ownership to 100%.

The Mount Isa deposits have the potential to support an output of between five million and seven million lb. U3O8 a year using open-pit methods.

At Manyingee, Paladin has spent US$17.9 million on exploration and believes there is potential for an in situ recovery at a rate of up to two million lb. U3O8 per year. A successful field leaching test was carried out in 1985, and an internal scoping study has been done. The property has a resource containing an estimated 41.5 million lb. U3O8. There are indicated resources of 8.4 million tonnes grading 0.985% U3O8, and inferred resources of 5.4 million tonnes also grading 0.085% U3O8.

About 100 km south of Manyingee is the Carley Bore uranium property acquired by Paladin in 2015. It is at the advanced exploration stage and could be either a stand-alone or satellite ISR project to Manyingee.

Next on our list is a thoroughly North America-focused uranium developer, Nexgen Energy (TSX: NXE; NYSE: NXE), but with an Australian heritage and management.

The company raised US$138.67 million in March, which it is applying towards the continued development of its 100%-owned Arrow uranium deposit at the Rook I project in the southwest of Canada’s Athabasca Basin.

The Arrow deposit has an indicated resource of 256.6 million lb. U3O8 in 2.89 million tonnes grading 4.03%. These figures include a high-grade portion of 171.0 million lb. uranium oxide in 460,000 tonnes grading 17.85%. There is also an inferred resource of 91.7 million lb. of uranium oxide in 4.84 million tonnes grading 0.86%. The deposit remains open in all directions.

The prefeasibility study published in 2018 outlined a project with a pre-production cost of $1.19 billion and a mine life of nine years. The average after-tax net cash flow over that period would be $909 million.

Most recently, NexGen signed two benefit agreements with First Nations affected by the proposed development of its Rook I project.

The project is located on the traditional territory of the Buffalo River Dene Nation (BRDN) and the Birch Narrows Dene Nation (BNDN). The company has signed an impact benefit agreement with the BRDN and a mutual benefit agreement with the BNDN. The contracts were developed out of the study agreements signed in 2019.

The agreements formalized the negotiations with both communities to identify potential impacts to treaty rights and socio-economic interests. 

Company founder and CEO Leigh Curyer has over 19 years of experience in the uranium mining sector, having raised over US$650 million in equity.

He is the former CFO of Southern Cross Resources, where he led the permitting and feasibility study work on the Honeymoon in-situ leaching uranium project in South Australia. He is also the former corporate development officer at Accord Nuclear Resource Management, assessing global uranium projects for First Reserve Corporation.

Rounding out the top five companies in terms of Australian equity raises in the first half of the year is Coronado Global Resources (ASX: CRN), one of the world’s largest producers of high-quality metallurgical coal.

Shares in the company are down about 15% in the coverage period following a US$102.4 million raise in May. With operations in two of the largest and most productive metallurgical coal basins globally — Queensland’s Bowen Basin and the Central Appalachian region of the U.S. — Coronado offers a suite of coal products to a wide range of customers throughout the Asia-Pacific region, the Americas, and Europe.

In June, the company completed the biggest shipment of coal to China from an eastern U.S. port. It brought into sharp relief a stark turnaround in the fortunes of its U.S. mines after they were temporarily idled in March last year after pandemic lockdowns crushed coal demand.

The company is benefiting from a rally in prices and China’s ban on Australian coal, which in March helped boost exports from the U.S. to the Asian nation to their highest since 2013.

Met coal prices have rallied this year on strengthening global steel demand. Coronado’s average selling price across the portfolio was US$105 per tonne in the June quarter, up 11% from the previous quarter.

The bottom five entries in our top ten list comprise Pilbara Minerals (ASX: PLS), Strandline (ASX:STA), Western Areas (ASX: WSA), Ioneer (ASX: INR) and Red 5 (ASX: RED), which together raised about US$361.28 million for their respective copper, nickel, gold, silver, lithium and rare earths projects.