The JMP Report with Chris Hagan

What we’ve been reading this week

2023 Board & Executive Remuneration Report is now available

The annual Report has found that executives at some of Australia’s largest listed companies have recorded average pay rises more than double the rate of inflation over the past year.

The 2023 Board & Executive Remuneration Report has found senior executives at some of Australia’s largest listed companies have recorded average pay rises of more than double the rate of inflation over the past year.

The annual Report produced by McGuirk Management Consultants in conjunction with the Governance Institute surveyed 1167 boards from across the public, private and not-for-profit sectors, including 226 listed companies. It also draws on publicly available data.

It highlighted significant remuneration increases across ASX 200 companies with 42% of ASX board directors and 71% of ASX senior executives receiving a pay rise in the last 12 months.

Governance Institute CEO, Megan Motto, said it’s an indication that a tight labour market and the rising cost of living is playing out at the executive level.

‘These are significant increases off the back of several years of relatively small rises in fixed pay for executives,’ Ms Motto said.

‘With AGM season looming, boards will need to have a strong narrative around their remuneration policies to stand up to shareholder scrutiny and manage reputation risks.’

The remuneration of company secretaries was one such growth area with an average remuneration bump of 11%. Specifically, for ASX 200 companies, this increase was higher at 13%, and 24% when looking at company secretaries of large, listed companies.

Risk managers also received an average remuneration increase for the last year with a 15% increase, which Ms Motto said signals a growing demand for governance and risk roles.

‘These skills too are in hot demand. There are currently around 2500 jobs being advertised nationally for the role of ‘risk manager’. This is even though there is no actual job classification with this title.’ Ms Motto said.

‘Remuneration is a key factor for candidates, and with roles like Company Secretary now on the skills shortage list, it’s not surprising we’re seeing some really big jumps in base salaries.’

Higher bonuses (the potential maximum bonuses that can be offered) were also provided to these professions with risk managers from ASX 200 companies able to receive up to 45% of their fixed salary in bonuses. Likewise, General Counsel & Company Secretaires received an overall average increase of 49%.

The survey results come soon after the recent decision by the Fair Work Commission to increase the minimum wage by 5.75%, demonstrating the impacts of inflationary pressures in the economy.

Ms Motto believes the annual Report is an important piece of information for boards and executives.

‘We are proud to partner with McGuirk Management Consultants to provide this data to our members each year as it provides important information that they can use when looking at remuneration within their own organisations and boards.’

Governance Institute members will receive an abridged version of this year’s Board & Executive Remuneration survey. 

If you did not participate in the survey and would like to purchase the full reports, please contact our partner McGuirk Management Consultants on terrymcguirk@internode.on.net or 0411 722 388.

 

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Is OPEC OVER? – Katusa’s Investment Insights

By Marin Katusa

 

The U.S.’s Bold Push to Become the First Electro-State

The country that controls the global refined lithium supply will be the superpower of the 21^st century.
 
And it’s only a matter of time before that country emerges.
 
Right now, 96% of lithium is mined in just four countries: Australia, Chile, Argentina, and China.
 
But that’s deceptive. Because the countries that have the lithium don’t necessarily own the lithium.
 
You see, China is never content with its own resources. And it is rapidly moving to corner the global lithium market—in a bid to become the only powerful electro-state in the world.
 
To get there, China has systematically steamrolled its way into the other three major lithium mining countries.

·  The second-largest lithium reserve in the world, located in Australia, is underwritten by Ganfeng Lithium, a Chinese company.

·  Greenbushes, the largest hard rock lithium reserve in the world and also in Australia, is majority-owned by a Chinese lithium company.

That same company paid $4 billion to become the second-largest shareholder in SQM, the largest lithium producer in Chile.
 
In 2021, Chinese companies bought three major lithium mines in Argentina in deals worth $1.3 billion.
 
No corner of the earth is safe from China’s grasp.
 
Out of the eleven lithium projects in Africa, seven are already partially or wholly owned by China.
 

“It’s not fear of the Chinese getting there first. They are there first. It’s already happened.” – Critical Metals Executive Director Russell Fryer

 
Around the world, China now controls the supply of lithium—which means it can set the price.
 
But here’s the most dangerous part: China can also control who has access to lithium.
 
No country can transition to renewables, or EVs, or utility-scale energy storage, or distributed power grids, without access to mass-mined lithium.
 
Most of the U.S.’s lithium supply is currently imported from Argentina and Chile. Those are the same sources that are getting bought out and taken over by China.
 
Which means China finally has what it needs to make the lightest metal on the planet a very heavy weapon.
 

Mined in America

 
The United States used to have a strong grip on the global lithium supply.
 
In 1996, the U.S. produced over a quarter of the world’s lithium. A quarter century later, it’s at less than 1%.
 
The grand total of lithium mines producing in the U.S. now? One.
 
The actual production number is so embarrassing it’s withheld on U.S. Geological Survey reports.
 
Meanwhile, lithium has transitioned from barely-used metal to vital energy component.
 
But it’s estimated that the solitary Silver Lake mine, located in Nevada, produces enough lithium for about 80,000 EVs.
 
That’s less than 1% of what the U.S. will need by 2030—for EVs alone.
 
And that doesn’t even include the demand from utility-scale battery storage to make the switch to renewables.

·  In other words, Silver Lake is a puddle. The United States desperately needs an ocean.

Fortunately, the U.S. is #5 in the world in lithium reserves. And that number is quickly rising as exploration locates more economic lithium.
 
There’s plenty of lithium at home, and nowhere else to turn. So the U.S. government is enlisting every weapon in its arsenal to stimulate domestic production.
 
In 2022, Congress invoked the Defense Production Act—originally intended to help the U.S. win wars—to get the industry moving again.
 
The Act provides huge tax incentives to critical mineral miners and battery manufacturers. Tesla alone estimates the credits are worth $1 billion+ per year.

But there’s a catch.
 
To qualify, at least 40% of battery components have to be extracted or processed either in the United States or in one of twenty free-trade countries.
 
That ramps up to 100% by 2029.
 
The law also requires evidence that zero lithium has been “extracted, processed, or recycled by a foreign entity of concern.” (In other words, “China.”)
 
But not just Chinese-mined lithium…

·  Australia mines half of the world’s lithium—and ships 90% of that to China for processing. All off-limits to U.S. manufacturers starting at the end of 2023.

Car manufacturers have only a single option left if they want to do business in the U.S.: identifying a source of local lithium.
 
By backing car manufacturers into that corner, the U.S. government has knowingly kicked off a new Lithium Rush.
 
And this one’s going to put every Gold Rush to shame.
 

The Winner Takes It ALL

 
You see, the subsidies from the Defense Production Act are worth $10,000 or more per car.
 
Manufacturers are desperate to get their hands on those subsidies. Because noncompliant manufacturers will have to charge $10,000 more for the same car.
 
Whichever manufacturer is the first to produce a 100% Made-in-the-USA EV will dominate the entire market.
 
And there’s simply no way that U.S. car manufacturers that don’t qualify for the credits can stay alive. So there’s nothing they won’t do to get their hands on U.S.-mined lithium.
 
Now, that includes outright purchasing lithium mines to keep competitors from snatching them up first. For example, General Motors has invested $650 million to develop a mine in Nevada.
 
It’s literal vertical integration—and it’s making lithium mines the hottest commodity on the market.
 
Even Chinese car manufacturers are stepping into the market themselves, upping competition for mines.
 

“Chinese companies… have realized how much lithium they’re going to need… and [are] going after some of the most promising junior projects in development.”
– Seth Goldstein, Senior Equity Analyst at Morningstar

 
Over the next year, we’re going to watch the world’s biggest game of King of the Hill unfold—with the highest stakes.
 
I’m going to tell you about a little-known mine in a few days…
 
Located in the United States, that has all the hallmarks of a prime buyout target.
 
America is about to strike back for energy security and independence. Hard.
 
You won’t want to miss it.

 

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China gives green light to nuclear reactor that burns thorium – a fuel that could power the country for 20,000 years

Stephen Chen

It has several advantages over uranium reactors, including safety, reduced waste, better fuel efficiency and suitability for use in arid landlocked areas

The tech is expected to strengthen China’s energy security as the nation has abundant thorium reserves

Molten salt reactors can be built in areas far from large bodies of water, such as the Gobi Desert. Photo: TNS

China’s nuclear safety watchdog has issued an operational permit for the nation’s first thorium reactor, marking a significant milestone in the country’s pursuit of advanced nuclear technologies.

The reactor, a two-megawatt liquid-fuelled thorium molten salt reactor (MSR), is located in the Gobi Desert city of Wuwei in Gansu province and is operated by the Shanghai Institute of Applied Physics of the Chinese Academy of Sciences.

The permit, issued by the National Nuclear Safety Administration on June 7, allows the Shanghai Institute to operate the reactor for 10 years and it will start by testing operations.

The permit specifies that the Shanghai Institute is responsible for the safety of the reactor and must comply with all relevant laws, regulations and technical standards.

Thorium MSRs are a type of advanced nuclear technology that use liquid fuels, typically molten salts, as both a fuel and a coolant. They offer several potential advantages over traditional uranium reactors, including increased safety, reduced waste and improved fuel efficiency.

Thorium is also a more abundant resource compared with uranium, and China has significant thorium reserves.

The reactor is a significant achievement for China’s nuclear energy sector, according to experts in China’s nuclear industry who asked not to be named because they were not authorised to speak to the media. They said it showed the country’s progress in developing and deploying advanced nuclear technologies and positioned China as a potential leader in thorium reactor technology.

The Shanghai Institute has also launched a follow-up project – a small-scale modular thorium molten salt reactor research facility – at the same desert site to advance the technology and address technical challenges, according to information on the institute’s website.

Small-scale modular reactors offer several benefits, including flexibility, enhanced safety features and cost-effectiveness, according to the institute.

The large-scale use of thorium reactor technology has the potential to enhance China’s global competitiveness in the energy sector. It could strengthen China’s energy security, position the country as a leader in advanced nuclear technologies and contribute to environmental sustainability.

However, a number of technical, regulatory and economic challenges will have to be overcome if the reactors are to be deployed successfully on a large scale, according to industry experts.

Previous attempts failed

The project was launched in 2011, but construction did not start until 2018.

Its ground breaking ceremony made national headlines because the construction contractor hired Taoist monks to pray for heavenly blessings for the hi-tech project.

The reactor was expected to take six years to build, but scientists and engineers completed the work in about three years afte r the work went more smoothly than expected.

It took environmental authorities more than two years to confirm that the facility met the highest safety standards, according to the permit.

China is not the first country to build a thorium reactor, but no previous attempts went beyond the experimental stage.

Oak Ridge National Laboratory (ORNL) in the United States conducted the Molten-Salt Reactor Experiment from 1965 to 1969, successfully showing the feasibility of a thorium MSR. However, it did not progress to commercial use because of a combination of factors, including limited funding and shifting priorities.

Another early thorium MSR project, also conducted by the ORNL in the 1950s, was the Aircraft Reactor Experiment, which aimed to develop a compact, portable reactor for potential use in aircraft. But the project faced technical challenges, including issues with fuel containment and corrosion, which ultimately led to its discontinuation.

India has also been pursuing thorium-based nuclear technologies, including MSRs. The Indian Molten Salt Breeder Reactor project, initiated in the 1980s, aimed to develop a thorium-based breeder reactor.

However, the project has faced challenges related to materials compatibility, fuel reprocessing and overall system complexity and has not progressed to commercial-scale use.

Going critical

According to the information provided in the permit, the thorium MSR will undergo test operations after the initial loading of fuel.

The test includes the first approach to criticality, the point at which a nuclear reaction becomes self-sustaining. This is a crucial step in the reactor’s start-up process and involves carefully controlled conditions to ensure a safe progression towards a self-sustaining state.

Another test involves intentionally taking the reactor out of operation or reducing its power level below 90 per cent of its maximum capacity. It is important to have control over this process to ensure that the reactor is operating within safe limits and that any changes or adjustments are approved and monitored.

A test report should be submitted to the National Nuclear Safety Administration within two months of completing all the experiments specified in the testing plan, according to the permit.

From uranium to thorium

China is believed to have one of the largest thorium reserves in the world. The exact size of those reserves has not been publicly disclosed, but it is estimated to be enough to meet the country’s total energy needs for more than 20,000 years.

The abundance of the resource makes it an attractive option for China. If molten salt reactors prove to be successful and viable for commercial deployment, they could help expand China’s nuclear energy supply to inland cities.

One of the advantages of thorium MSRs is their flexibility in terms of location.

The use of molten salts as both a fuel and a coolant allows for more efficient heat transfer and potentially eliminates the need for large quantities of water, which is a significant advantage in areas where water resources are limited.

By using thorium MSRs, China could potentially establish nuclear power plants in cities far from coastal areas. This could help diversify the country’s energy mix, reduce dependence on fossil fuels and meet the growing energy demand from inland regions.

While China has made progress in the development and implementation of thorium MSR technology, several nuclear experts noted this did not necessarily mean all technological challenges had been overcome.

Developing and deploying new nuclear technologies, including thorium MSRs, can be expensive. The launch of the Shanghai Institute’s small-scale modular thorium molten salt reactor project indicates China is interested in further reducing the cost of the technology, they said.

These reactors are typically built in a factory and then transported to the site for installation. They can be installed in many types of environments, including remote or off-grid areas. Their smaller size enables easier scalability, allowing for incremental capacity additions based on energy demand.

This modular approach to building and installation can potentially reduce construction costs and project timelines. The ability to manufacture components in a factory setting and transport them to the site can streamline the construction process and improve cost efficiency.

China reportedly plans to sell small thorium reactors to other countries as part of the Belt and Road Initiative, Beijing’s global infrastructure plan.

They can provide a nuclear entry point for countries or regions with smaller energy demands or limited grid infrastructure. Their smaller capacity and modular nature makes them more accessible and financially viable for these markets.

 

I hope you have enjoyed this week’s report, if you would like to open a trading account, please do not hesitate to reach out.

Regards,

Chris Hagan.