ASX companies stand to win as Western governments ramp up intervention in critical minerals markets

There has been a mind-boggling array of critical/strategic metal incentives and policy interventions announced in recent times by the non-China governments of the world, including those contained in this week’s Federal Budget.

The intent of all of the measures is clear – the non-China world is intent on breaking Beijing’s (and Russia’s) grip on the metals essential to their economies, as well as ensuring an ex-China/Russia supply chain is in place for the commodities essential in the battle against global warming.

Canberra’s $7 billion commitment to a 10 per cent production tax incentive applies to 31 critical minerals. A nice figure but it doesn’t start until FY2027 and has a 10-year shelf life. What’s more, it’s all about downstream processing.

So in terms of an impact on market values in the here and now, it is a bit of a non-event, although junior copper developer Coda (ASX:COD) makes the point that it does incentivise investment in projects like its Elizabeth Creek copper-cobalt project in South Australia.

“Elizabeth Creek is projected to come online during the effective period and has always been envisioned as a downstream project, with a hydrometallurgical processing plant capable of producing battery-grade cobalt sulphate,” Coda said.

For more immediate value uplift from government incentives and policy interventions, the two standouts of late have been Joe Biden’s wall of tariff increases on critical minerals and his signing of a ban on enriched uranium from Russia.

Macquarie had a run through of the US tariff increases and came away with the clear conclusion that long-unloved graphite (the anode side of batteries) was a clear winner.

The tariff rate on natural graphite – and it has to be natural, not the filthy synthetic stuff in which China specialises – will be set at 25% in 2026 from the current zero protection level. Macquarie reckons it could directly increases prices.

So maybe Syrah (SYR) will have its day in the sun from its Madagascar mining/US downstream processing base. It is not going to hurt investor interest either in a bunch of graphite juniors like Kingsland (KNG) and Black Rock (BKT), among others.

The US ban of Russian enriched uranium is an easy thing to sign into law, but doing it in way that does not threaten the growth in nuclear power’s potency in the global warming challenge is another thing.

But the intent of the US, and Europe, is clear. Russia’s uranium, whether it is enriched or not, is no longer welcome. And that has to be a good thing for the ASX uranium stocks in the long run.

The US and its allies have earmarked $US4.2 billion to establish a “resilient global uranium supply market free from Russian influence”. It will require a bigger spend than that, and will no doubt sponsor a new wave of uranium developments and expansions by ASX players.

EQ Resources:

Talking about government support in strategic metals, tungsten producer EQ Resources (EQR) has received a serious helping hand for its growth ambitions from the Queensland government.

The government’s Critical Minerals and Battery Technology Fund is providing EQR with a $20 million 3-year loan facility to double capacity and to get moving underground at its Mt Carbine mine which is an easy drive from Port Douglas.

The funding is not a gift, it’s a loan facility as announced, with a 10% coupon to boot.

But it averts any need for EQR to go down a highly dilutive equity raise route which is a good thing. Having said that, market conditions have turned in favour of tungsten producers anyway.

The Chinese price had put on 20% from the start of the year to last week, and it has popped 6% higher since to $US345/$US365 a metric tonne unit (10kg), as the stuff is priced.

China has a grip on 80% of the market apparently hit supply constraints. In that situation, it would want to keep perhaps the most critical of metals in-country.

Tungsten has the highest melting point of all metals (3410°C), and being the hardest of all metals, it has wide-ranging uses in the aerospace and defence industries, mining equipment, construction and the automotive industry, among others.

Assuming GDP-type growth in consumption, a supply gap is forecast to open up in the back half of the decade. Sounds like copper, uranium, zinc etc.

The Western World hates its dependence on China for supplies which is why Mt Carbine is getting the government support it is. Along Group 6 Metals (G6M) which has returned the King Island mine back in to production, Australia is doing the heavy lifting for the ex-China world.

It is apt then Mt Carbine, which is a historic tungsten producer, took its name from the racehorse Carbine which among other victories, won the Melbourne Cup in record time in 1890 carrying 24kg more than the second placegetter.

EQR last traded at 5.5c for a $102m which doesn’t seem a lot for a company on a pathway to becoming the biggest tungsten producer ex-China from Mt Carbine and its recently acquired operation in Spain.

It is stating the obvious that if Chinese supplies do get held back for the domestic market, the tungsten price could do anything.

Patriot Battery Metals:

Nice work by Patriot Battery Metals (ASX:PMT) boss Ken Brinsden of former Pilbara (ASX:PLS) fame in reminding the market that Patriot’s Corvette lithium project in Quebec is something special.

The reminder came in the form of a batch of infill drilling results from the key CV5 pegmatite at Corvette which already has a mineral resource estimate of 109.2Mt at 1.42% lithium.

Being infill, the holes won’t add much to the updated MRE for CV5 planned for the September quarter (there will also be a maiden MRE for the new CV13 pegmatite discovery), but they did go to the quality of Corvette.

The hits reported included 122.5m at 1.42%, including 35.8m at 2.15%, and 71.4m at 1.57% in another hole, including 14.2m at 3.15% lithium.

The widths are matched at some lithium deposits in WA but not the grade, which is right up there with the fabled Greenbushes joint venture in the state between Tianqi/IGO/Albemarle.

Patriot popped 9.4% higher in Thursday’s market to 87.5c, recovering the ground and more lost on Wednesday on news that Patriot and Albemarle would end their strategic alliance on a possible downstream lithium processing facility in Quebec or the US off the back off Corvette’s development as the spodumene concentrate supplier.

It was an alliance struck in August last year which was cemented with Albemarle taking a 4.9% placement in Patriot, giving it the funds to continue its aggressive drilling programs at Corvette.

The assumption at the time was that Albemarle would make Patriot its own at some point. But last years’ lithium price rout has forced Albemarle to pull its head in on ambitions to grow beyond what it already has on its books.

As mentioned, Patriot was initially sold off on the Albemarle news, only to strongly rebound on Thursday. The reason for that is simple enough. Patriot is now considered to be “in play’’ as discoveries like Corvette are few and far between.

What’s more, it is on the doorstep of the North American battery supply chain with walk up access to government incentives of all kinds from both the Canadian and US governments.

So others known to have been snooping around Patriot before Albemarle seemingly closed the door last August will be busy rethinking their strategy to secure the biggest, and what could well be the best, lithium project in North America.

The list of likely lookers is a long one and includes the likes of Rio Tinto, Mineral Resources and Gina Rinehart.