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Focus on gold and lithium as China sets sights on copper

Westgold Gascoyne

It was gold price, lithium demand and China’s appetite for copper that dominated much of the discussion at Mines and Money Online Connect @ IMARC this week at the virtual event.

Mines and Money Online Connect saw 90 mining companies, 600-plus investors and more than 2000 participants log-on to hear mining executives and analysts discuss the next big thing for savvy investors in 2022.

Time to strike gold?

‘Frustrating’ sums up the 2021 gold price according to Commodity Discovery Fund founder and chief investment officer, Willem Middelkoop. Middelkoop spruiked gold’s glittering upside during the Mines and Money gold outlook panel discussion.

The panellists suggested that with the gold price soaring to record highs, a gold correction was inevitable. Historically, gold price is linked to market volatility and the much of new money printed in the United States.

In 2022, panellists expect plenty of market volatility and money printing, with an overinflated US dollar set to weaken in value, and subsequently drive up the price of gold. Through the Commodity Discovery Fund, Middelkoop has studied the gold price in relation to increased money supply over the past decade.

“If you look at the current graph, the gold price needs to move back toward over $US2000 ($2678), and it should move toward $US8000-$US10,000 dollars to be in line with money growth. If you look at that statistic, there is so much upside,” Middelkoop said.

“A doubling of the gold price within 12 months is easily possible.”

The need for speed

The US has the need for speed with car manufacturing adopting electric vehicles (EVs) at an accelerating rate. The rising demand for EVs, which is expected to surge to 10 per cent in global sales by 2025 according to Bloomberg New Energy Finance, will require startling quantities of lithium.

The price of lithium hydroxide continued to soar in 2021 and shows no sign of slowing down in 2022. Prices topped $US23,375 per tonne at the time of writing, which is up from a $US6300 average per tonne in the September quarter 2020.

During the Mines and Money battery metals session, Piedmont Lithium president and chief executive officer, Keith Phillips, said the EVs market is fuelling the demand for lithium hydroxide.

“I’ve always had the view that the market would speak, and the time would come, and it will,” Phillips said.

Phillips said Ford’s Blue Oval City required 125,000 tonnes per year of lithium hydroxide to service its three battery plants, which surpasses the production capacities of all lithium projects currently planned in the United States.

“Tesla has been a leader here, but LG and General Motors are making big commitments,” Philips said.

“Everyone is talking about bringing more capacity to the US, which we desperately need, and even if we all succeed, we are still going to be short, and require lots of material from outside the US.

China’s quiet copper rush

Copper was the metal of the hour during the China commodities supply and demand outlook 2022 panel at Mines and Money. Companies from Australia’s biggest trading partner are digging for strategic commodities to enhance diversification and survival in an uncertain marketplace.

Gold Mountains general manager, Maggie Huang said sourcing and developing copper mines was critical to not only Gold Mountains, but to the Chinese economy.

“We see copper as a highly strategic metal for China, we are the largest consumer in the world. We consume half of all output of copper but produce only 20 to 25 per cent of what we actually use,” Huang said.

Huang pointed out that whilst Australia and Canada represented stable and mature investment destinations in the past, “an investment is an investment,” and Chinese companies are now seeking new opportunities in other mining destinations.

As Africa and South America mature as mining destinations, Huang said emerging opportunities in Africa and South America could be more profitable and signify a more attractive investment than Australia or Canada.

As Mines and Money Online Connect @ IMARC concludes with positive outlooks on gold, lithium and copper, the mining and resources sector now sets its sights on Australia’s largest mining investment forum Mines and Money @ IMARC co-located with the International Mining and Resources Conference (IMARC) from  January 31 to February 2, 2022 at the Melbourne Showgrounds.

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