All questions

Year in review

i Commodity prices and demand

In financial year 2022, Australian resources set a new export revenue record of A$413 billion, contributing 69 per cent of Australia's total export revenue. New records were recorded for coal (A$112.8 billion) and aluminium, alumina and bauxite (A$14.4 billion) and copper (A$12.5 billion), consistent with higher prices for those commodities. Iron ore and gold (A$133.8 billion and A$25.8 billion respectively) continued to be significant trade contributors (although recorded slightly lower export revenue compared to previous years).5 Forecast increased demand for battery minerals (including lithium, copper and critical minerals) has supported investment in those sectors (targeting anticipated increases in government investment in renewables and low-emissions technologies).

Australia's production of seaborne coal and iron ore is generally of a high grade and quality, allowing producers to realise a price premium.

ii Access to capital

While there was an increase in IPO activity and secondary capital raisings in the Australian mining sector in 2021 and the first half of the 2022, the combination of rising interest rates and inflation made capital markets more challenging as the year progressed, and this trend continued throughout 2023.

Debt funding for greenfield mining projects continues to be challenging, although there have been a number of successful project financings for Australian gold developments and, as noted below (Section VII), a number of strategic minerals projects have received Australian government financial support (in conjunction with private capital). As a result, the smaller miners continue to assess the viability of non-traditional financing arrangements, such as metals streaming, private royalties and other forms of innovative financing. Offtake partners have also been a source of debt and equity funding for greenfield development projects (particularly in the lithium space). As noted below (Section VII), government financing via the NAIF (and other Australian government funding sources) has been a source of debt financing for a number of mining projects in northern Australia.

For major miners, increased cash flow from existing operations has allowed capital expenditure to be funded from retained earnings, although those miners have also had to navigate competing demands from shareholders for available cash to be returned to shareholders via dividends and share buy-backs.

Private equity funds continue to show interest in the Australian mining sector and have been linked to a number of potential M&A transactions within the sector; the number of mining projects acquired or funded by specialist mining private equity funds has increased, particularly in the coal and gold sectors.

iii Corporate consolidation in the mining sector

Major multinational miners continue to look for opportunities to divest assets that are considered non-core to their global portfolio and opportunities to expand their exposure to minerals that are critical to clean energy developments. In 2023, there were a number of material consolidation transactions in the lithium and battery mineral sector involving major global and Australian mining companies, reflecting a focus of major mining companies (and their investors) increasing their exposure to battery minerals and critical minerals. Recent significant mining M&A transactions in the Australian mining sector include: IGO's acquisition of a 24.99 per cent indirect interest in the Greenbushes Lithium Mining and Processing Operations and a 49 per cent indirect interest in the Kwinana Hydroxide Plant (US$1.4 billion); IGO's divestment of a 30 per cent interest in the Tropicana Gold Mine (A$903 million) and acquisition of Western Areas Limited via a scheme of arrangement (US$1.08 billion); the demerger of Iluka's Mining Area C royalty to establish Deterra Royalties and demerger of its Sierra Rutile business; BHP Mitsui's sale of an 80 per cent interest in BHP Mitsui Coal (US$1.35 billion); South32's acquisition of 45 per cent interest in the Sierra Gorda Copper mine (US$2.05 billion) and the sale of a non-core royalty portfolio (US$200 million); the sale of Barrick's 50 per cent interest in the Kalgoorlie Superpit to Saracen Mineral Holdings Limited (and the subsequent sale of Newmont's 50 per cent interest to Northern Star Resources Limited; Wesfarmers' acquisition of Kidman Resources Ltd (A$800 million); Rio Tinto's divestment of its Queensland coal assets to Glencore (US$1.7 billion), EMR Capital/Adaro Energy (US$2.25 billion) and Whitehaven Coal (US$200 million); Wesfarmers' divestment of its 40 per cent interest in the Bengalla Joint Venture to New Hope Corporation (A$860 million); and South32's acquisition of a 50 per cent interest in the Eagle Downs Joint Venture. Mineral Resources and Hancock Prospecting also announced a legally binding agreement to jointly investigate the potential to develop a new iron ore export facility at the port of Port Hedland. Herbert Smith Freehills acted for either the buyer, the seller, a potential buyer or key stakeholder in relation to each of these transactions.