Australia’s Commodity Outlook vis-à-vis Focused Explorer, Victory Mines Limited

Australia’s mining industry accounted for 35% of the GDP growth and ~8.5% of GDP in FY19, according to the Department of Industry, Innovation and Science. In the milieu of which, it is pertinent to mention that the resources sector accounts for around 60% of the Australian exports. The major markets for resources and energy are China followed by Japan, South Korea, Taiwan and India as shown below.

Australia’s resources and energy exports in FY19 (Value represented in AUD Billion)

Source: Department of Industry, Innovation and Science

The major commodities in link with Victory Mines Limited (ASX: VIC) are Copper, Nickel, Gold, Aluminium, Cobalt and Scandium.

To know more about the projects, please readVictory Mines' Cobalt and Scandium Projects with Market Opportunity”.

Copper: Australia is the 7th largest producer of copper as well as positioned 2nd in copper ore and concentrates exports in the world. The key copper consumers of the Australian export market are China followed the US, Germany, Japan and South Korea. As per the Department of Industry, Innovation and Science of the Australian Government, copper prices are expected to register modest growth in the coming years, courtesy to soaring consumption, constraint production and rising demand from electric vehicles (EVs). The price is likely to increase by ~1.8% a year to reach USD 5,890/tonne in 2020 and USD 6,190/tonne in 2021.

Whereas, the copper export market is expected to climb from 932,000 tonnes in FY19 to 1.0 Mt in FY21.

Nickel: Australia is the 6th largest nickel miner in the world with the commodity contributing ~USD 3.6 billion to the Australian economy via exports. The key nickel consumers of the Australian export market are China followed by the European Union, Japan and the US. In coming years, nickel consumption is expected to outpace production, leading to an increase in price to ~USD 15,800/tonne in 2020 and ~USD 16,500/tonne in 2021. Likewise, the boost in price is expected to continue, owing to an expected surge in demand from the stationary energy storage market and electric vehicles.

Whereas, nickel export market is predicted to increase by ~20% from 225 kt in FY19 to 270 kt in FY21, similarly in terms of value, it is expected to increase by ~31% from $3.6 billion in FY19 to $4.7 billion in FY21.

Gold: Australia is the 2nd largest producer of gold in the world with the key export markets being China followed by India, US and Hong Kong to mention few. As per the Department of Industry, Innovation and Science of the Australian Government, gold price is expected to surge to an average USD 1,474 per ounce in 2020, and later plummeting to an average USD 1,450 per ounce in 2021. The price settling lower may be due to investors’ restored confidence after the US-China trade agreement and potential restrain from further price increase in future. The export market is forecast to rise to 403 tonnes in FY20.

Aluminium: Australia stands at the 2nd position in terms of alumina producer and 1st as the alumina exporter. The key consumers of the Australian export market for alumina are China, US, Germany and Japan to mention few. The aluminium price is expected to fall to USD 1,700 per tonne in 2020 and further to USD 1,615 per tonne in 2021. The plunge in prices can be attributed to the slowing economic growth and dampening aluminium demand from China. Also, the return of full production of the Brazilian Alunorte refinery is expected to one of the factors resulting in a decline in the FOB Australian alumina price from USD 335 per tonne in 2019 to USD 312 per tonne in 2021.

Also, the total export value (Australian) of alumina, aluminium and bauxite is projected to decline to $14 billion in FY20 from $16 billion in FY19.

Cobalt and Scandium: Both cobalt and scandium geological potential ranked ‘High’ as per 2018 Australia’s critical minerals share and ranking. Moreover, Australia accounted for ~17% of the total world cobalt resources and stood 3rd in the production. The leading cobalt ore and concentrate importers in 2018 were China followed by Zambia and Morocco. The cobalt price spiked in 2017 and 2018 and surpassed USD 94,000 per tonne; however, the LME spot price averaged USD 33,500 per tonne in the first half of 2019, due to the falling demand. However, the price is expected to rise with battery production and so on to the take-up of EVs.

The scandium market is not that significant at this moment. However, the growing need for lightweight auto-moving parts may soar the demand and price of the commodity in the near future. Scandium ore with a grade greater than 200-300g/t is very difficult to find, making it a kind of rare metal.

Surging demand from EVs is likely to take these commodities’ price higher in the future, thereby benefiting the viability of Victory Mines’ Malamute, Husky, Galah Well and Peperill Hill projects.

Good read about other non-core assets of VICAssessing Victory Mines’ Bonaparte, Bolivian Tin and Laverton Assets and Global Scenario

Stock Price Information - The stock of VIC was trading at $ 0.001 on 7th January 2020 (AEDT 02:58 PM), with a market cap of $ 3.13 million.


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