Can royalties help Australia’s critical minerals lift off? – by Clyde Russell (Reuters – February 12, 2024)

LAUNCESTON, Australia, Feb 12 (Reuters) – A consistent contradiction in Australia’s mining sector is that while there is a pressing need for new mines to be developed to provide raw materials for the energy transition, the capital to do so is hard to find.

The relatively easy part is getting an exploration permit, doing some initial drilling and proving up a resource. The hard part is then raising the finance to develop the mine from exploration to production.

Despite the expected strong demand for critical minerals such as lithium, cobalt and rare earths, junior mining companies are struggling under the traditional model of raising equity and debt financing. There are several reasons for this, including the higher cost of debt given the sharp increase in interest rates in recent years, and while rates may have peaked, they aren’t expected to drop rapidly in coming years.

Equity financing is also tricky, given potential investors generally want relatively quick returns and are really looking for mines that are close to production, rather than those still years out from first shipments.

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