Critical mass: Four potential winners in the booming critical minerals space

It is being touted as Australia’s next economic boom, and the fervour for a clean energy transition implies skyrocketing demand for the basket of critical minerals essential to this transformation.

That’s where Australia, and the ASX, come in.

Some Australian stocks will be winners. Here are four I think make the grade:

Sarytogan Graphite (SGA, 22 cents)

Market capitalisation: $33 million

12-month total return: –44.3 per cent

Three-year total return: n/a

Graphite is a crucial component in lithium-ion batteries powering electric vehicles (EVs), electronic devices such as smartphones, medical equipment, and energy storage units. At present, EVs simply do not work without graphite, which makes up about 25 per cent of most EV batteries.

Moreover, according to research firm Benchmark Mineral Intelligence, demand for graphite from the battery anode segment could rise sevenfold over the next decade, driven by surging EV sales and the growing energy storage trend.

Against this backdrop, Sarytogan Graphite enters the picture. The Perth-based company is advancing its wholly owned Sarytogan Graphite Project in Kazakhstan. To be suitable for battery anodes, graphite must reach 99.95 per cent purity; in August, thermal purification work on a sample of Sarytogan graphite achieved 99.99 per cent purity.

The project contains a colossal, high‑grade inferred mineral resource of 209 million tonnes at 28.5 per cent total graphitic carbon (TGC). Sarytogan says this is triple the size and triple the grade of most other graphite projects worldwide.

The company aims to deliver a pre‑feasibility study in 2024. By then, Sarytogan would likely be entering a market crying out for alternative (non‑Chinese) sources of graphite.

The project is strategically located halfway between Chinese and European carmakers, with affordable containerised rail links both ways. With such scale, the project life would likely run for decades.

Meteoric Resources (MEI, 24.5 cents)

Market capitalisation: $475 million

12-month total return: 1,650 per cent

Three-year total return: 73.4 per cent a year

From a share price of one cent a year ago, Meteoric Resources has surged to 23 cents. The market has begun to realise what the company holds at its flagship Caldeira rare earths project in Brazil. It is now being spoken of as the world’s largest and highest‑grade resource of ionic adsorption clay (IAC) rare earths.

Moreover, IAC mineralisation is typically softer than hard‑rock rare earth deposits. This means it does not require blasting, crushing, or milling. It is closer to the surface, easier to mine, and therefore cheaper. In addition, it usually yields a high‑grade precipitate and does not produce radioactive tailings. (Rare earth ores often contain radioactive thorium and uranium.

Meteoric had already posted a maiden resource estimate for Caldeira of 409 million tonnes at a grade of 2,626 parts per million (ppm) total rare earth oxides, telling the ASX in May it is “the world’s highest-grade IAC rare earths elements deposit”. In July, the company told the ASX that the clay zone and the High-Grade REE mineralisation extended “significantly deeper,” and that its drilling had hit “ultra-high-grade” REEs. 

On the last day of August, Meteoric reported exceptionally high‑grade drilling hits just outside the Caldeira mineral resource. This indicates the deposit is larger than first thought.

Naturally, it seems clear that further drilling will extend the resource estimate. More importantly, Caldeira could provide the global economy with a viable alternative to China’s dominance of rare earth supply. This applies not only to neodymium and praseodymium, the ‘light’ magnet rare earths, but also to terbium and dysprosium, the primary ‘heavy’ magnet rare earths.

Moreover, the Brazilian state of Minas Gerais is a well‑known mining jurisdiction. The infrastructure is strong, and Meteoric is well on its way to mining in the coming years.

Vulcan Energy Resources (VUL, $3.02)

Market capitalisation: $531 million

12-month total return: –61.3 per cent

Three-year total return: 50.1 per cent a year

Vulcan Energy Resources is an Australian‑based company that has developed the world’s first and only ‘zero‑carbon lithium process.’ It plans to produce battery‑grade lithium hydroxide from deep geothermal brines pumped from wells in Germany’s Upper Rhine Valley. At the same time, it will generate a by‑product revenue stream of renewable geothermal energy, harnessed from the heat as the brines rise to the surface.

Furthermore, after Vulcan extracts the lithium and geothermal energy, the brine is reinjected back into the bedrock. This ‘closed‑loop process’ is designed to have minimal impact on the surrounding environment.

Vulcan’s project potentially hosts the largest lithium resource in Europe, and appears to be capable of producing enough lithium hydroxide for one million electric vehicles a year.

In the project’s first phase, Vulcan plans to produce 24,000 tonnes per year of lithium hydroxide monohydrate (LHM) equivalent in lithium chloride (LiCl) form. This will come from its on‑site lithium extraction optimisation plant (LEOP), commissioned in August.

Importantly, European carmaker Stellantis—owner of the Opel, Peugeot, Citroën, Fiat, and Chrysler brands—is the cornerstone customer. It is also Vulcan’s second‑largest shareholder, having invested $76 million in June 2022 for just under 8 per cent of the equity.

Moreover, Vulcan has signed additional offtake agreements with some of Europe’s largest battery, cathode, and EV producers. These include Volkswagen, LG Energy, Umicore, and Renault.

In May, Vulcan and Stellantis signed a deal for the potential use of the project’s geothermal renewable energy to supply the auto giant’s Mulhouse plant from 2026, the first project of its kind in France: earlier this year the pair signed a similar deal for the carmaker’s Russelsheim plant in Germany.

WA1 Resources (WA1, $5.15)

Market capitalisation: $447 million

12-month total return: 3,333 per cent

Three-year total return: n/a

Perth-based minerals junior WA1 Resources listed in February 2022 at 20 cents, and has rocketed to $5.15.

The company listed to raise $4.5 million to advance exploration at its flagship West Arunta iron oxide copper gold (IOCG) project, located 400 kilometres south of Halls Creek in Western Australia. In October 2022, while examining its West Arunta tenements, it discovered that the Luni prospect also hosted rare earth elements and niobium.

Niobium is mainly used as an alloy to strengthen steel for jet engines, rockets, oil rigs, turbines, and medical instruments. However, its emerging use in superconducting magnets makes it a highly sought‑after critical mineral.

Moreover, niobium is also being explored as a potential substitute for cobalt in lithium‑ion batteries. Niobium batteries can last up to ten times longer than traditional batteries, significantly reducing e‑waste. In addition, they cut both charging times and fire risks.

**”Further results in June confirmed that WA1 has found shallow, high‑grade niobium mineralisation across a large footprint. Early‑stage mineralogy indicates the niobium can be liberated easily from the ore.

The deposit remains open in all directions. This means more mineralisation is likely to be found through further drilling.

It was a spectacular discovery, and probably a globally significant source of niobium. This comes just as the metal is being recognised as a new critical battery mineral.

Moreover, drilling is ongoing, with a maiden mineral resource estimate for Luni anticipated in the first half of 2024.

At the moment, more than 90 per cent of global niobium is produced from only three mining operations — two in Brazil and one in Canada. And 80 per cent of world supply comes from one company: Companhia Brasileira de Metalurgia e Mineracao (CBMM). 

Niobium is a small market, yet very significant growth in the niobium market is expected and new niobium supply is needed to support the growth in EV batteries. WA1 appears to have found the right commodity at the right time.