Materials

Macquarie Conference 2024: Bullish on copper and uranium

Tue 14 May 24, 1:35pm (AEST)
Mining pit Kalgoorlie
Source: Mining pit Kalgoorlie

Key Points

  • Copper and uranium were a dominant theme at the Macquarie Conference 2024.
  • There is cautious optimism that lithium prices have bottomed out.
  • Macquarie's preferred resources exposures include LTM, MIN, SFR, NST, PMT, PDN and BOE.

Just as copper and uranium have been the stars of the resources sector in 2024, they were a dominant feature of the Macquarie Conference in 2024. If the presentations were anything to go by, the outlook remains positive for these resources in particular - though there was cautious optimism for lithium.

In this wire, I’ll explore the key highlights.

The outlook for resources

Some of the key themes included:

  • Attractive long-term demand fundamentals, particularly for copper and uranium

  • Security of supply in rare earths, uranium and lithium sectors

  • The competitiveness of Australian projects (labour costs are a concern)

  • The view that lithium prices have reached a bottom

  • Gold prices remain high due to use in hedging strategies

Challenges with supply appear unlikely to go away any time soon, with Macquarie analysts noting, “While the long-term market for new energy materials is not going away, mining approvals here and overseas are compounding supply deficits with delays and costs making it harder and harder to deliver projects on time and on budget (notably in copper).”

Macquarie is seeing spiking M&A activity, with BHP’s proposed takeover of Anglo American just one example of companies turning outwards to grow their pipelines and product bases, particularly into copper. (As of today, Anglo American rejected the $64 billion takeover bid).

On the whole, views on copper and uranium were particularly optimistic.

“The copper price is up 18% since the start of CY24, reflecting improving underlying demand and supply disappointments. Grade decline and challenges accessing power and water present headwinds to copper volume growth,” said Macquarie analysts.

The uranium story focused on the deficit in supply amidst growing demand, but analysts also highlighted “the impact of a ban on Russian uranium and enrichment driving a bifurcated market, and the potential for nuclear as an energy solution for the increasing power demands of data centres (driven by the uptake of AI).” (Uranium – yet another beneficiary of the AI boom).

Macquarie’s preferred picks in the resources sector

And what analysts found interesting based on the presentations at the Macquarie Conference.

Lithium exposure

Arcadium Lithium (ASX: LTM)

  • LTM sells directly into Western OEMs allowing them to match growth with demand. This allows risk reduction and offers upside protection for OEMs to secure volumes.

  • LTM’s value add by converting brine to lithium hydroxide and other specialty lithium products in the US, Japan and China helps keep customers ‘sticky’.

  • The ability to utilise the Direct Lithium Extraction (DLE) technology in subsequent growth projects allows flexibility in sourcing raw materials for different customers.

  • LTM’s Argentina operations have not been impacted by water and royalty policies or rulings on new projects.

  • Key risks to Macquarie’s forecast: Movements in lithium prices and variation in Macquarie’s assumptions related to production and costs.

Arcadium 1 year prices 14.5.24
Arcadium 6 month share performance. Source: Market Index

Mineral Resources (ASX: MIN)

  • The haul road sell-down is an asset turnover strategy seeking to unlock cash for growth and staff retention. Analysts tip MIN being able to focus on ~30% ROE growth delivering projects 30-40% cheaper than peers if it is able to execute on this.

  • The QLD move will be an indicator of MIN’s ability to extend its cost advantage.

  • MIN retains an upstream focus on lithium.

  • Key risks to Macquarie’s forecast: pricing movements along with timing of project ramp-ups are risks to valuation and outlook.

MIN 1 year shares 14.5.24
Mineral Resources 1 year share performance. Source: Market Index

Base metals/copper exposure

Sandfire Resources (ASX: SFR)

  • Focus on growing reserves and resources close to operations to add value.

  • Focus on paying down debt. The Motheo expansion is tipped to support higher cash generation.

  • Priority focus is on organic growth, such as Black Butte but analysts suggest if it turned to inorganic growth, SFR could look at boutique sized copper assets.

  • Key risks to Macquarie’s forecast: Movements in copper and zinc prices, along with any variances in the assumptions Macquarie has made regarding production and costs.

SFR performance 14.5.24
Sandfire Resources 1 year share performance. Source: Market Index

Gold exposure

Northern Star Resources (ASX: NST)

  • NST is on track for its five-year plan to grow production to 2.0Mozpa.

  • Labour costs have been a challenge but the softer nickel and lithium sectors have caused some labour market softening in WA.

  • Returns on certain projects can be partially underpinned via hedging, with NST’s hedge book currently totalling ~2Moz at an average price of $3,094/oz.

  • Key risks to Macquarie’s forecast: Gold price movements and variation in operation costs could affect earnings. The KCGM mill expansion is important to the outlook.

NST 1 year performance
Northern Star Resources 1 year share performance. Source: Market Index

Lithium

Patriot Battery Metals (ASX: PMT)

  • Infill drilling has been finished at CV5 and PMT is awaiting assay results. It expects a maiden resource from CV13.

  • Initial studies for Corvette will focus on an open pit, with the option to add an underground.

  • Corvette will be developed to combine the resource with downstream processing capabilities in order to capture downstream margins and rent in the North American EV value chain.

  • Key risks to Macquarie’s forecasts: Movements in spodumene prices, along with any variances in Macquarie’s assumptions for mining inventory. It’s worth noting PMT hasn’t defined a maiden reserve for the Corvette project.

PMT performance 14.5.24
Patriot Battery Metals 1 year share performance. Source: Market Index

Uranium

Paladin Energy (ASX: PDN)

  • Exploration potential at Langer Heinrich which could see the life of the mine extended beyond 17 years.

  • The balance sheet is healthy and PDN is able to manage working capital while ramping up production.

  • Key risks to Macquarie’s forecast: Movements in uranium prices and timing to ramp-up production could affect outlook.

PDN performance 14.5.24
Paladin Energy 1 year share performance. Source: Market Index

Boss Energy (ASX: BOE)

  • Material upside at the Honeymoon operation (which recently saw first production). Exploration and resource conversion success could lift the production rate to the 3.3mlb pa export license levels.

  • BOE is largely uncontracted, with only 2 sales agreements, leaving it open to benefit from higher contracting pieces longer term.

  • Key risks to Macquarie’s forecast: Movements in uranium prices and timing to ramp-up production could affect outlook.

Boss performance 14.5.24
Boss Energy 1 year share performance. Source: Market Index

 

Written By

Sara Allen

Content Editor

Sara is a Content Editor at Livewire Markets and Market Index. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and Macquarie Group. She also holds a degree in psychology which drives a continued fascination with how human behaviour drives and is driven by investments and market activity.

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