Diggers and Dealers Mining Forum 2018 will draw a bigger crowd to Kalgoorlie-Boulder next week as mining industry figures embrace the latest upturn and take an optimistic view of the next 12 months.
Industry figures such as Association of Mining and Exploration Companies Inc chief executive officer Warren Pearce, Diggers and Dealers Mining Forum chairman Nick Giorgetta and Battery Minerals Ltd (ASX:BAT) managing director David Flanagan spoke to Proactive Investors and shared their expectations for the year ahead.
A common theme was the likely continuation of the current industry upturn, with the key figures tipping a positive flow-on effect to the economy, inflationary pressures and increased pressure to up wages for new recruits.
Diggers chairman Giorgetta said: “All the indications are that everything is going very well in the industry in just about every commodity you can think of.”
Diggers and Dealers Mining Forum chairman Nick Giorgetta
Gold and battery metals turn heads
Gold and battery minerals stand out among the 2018 Diggers presenters’ lists, although other minerals still shine brightly.
Twenty-one per cent of presenters this year are focused on gold, while 13% are firmly set on the battery minerals lithium, zinc, nickel and cobalt, and 4% on copper, 4% on zinc, 2% on iron ore, 2% on potash and 4% on other minerals.
Mining equipment, technology and services sector businesses make up a further 2% of presenters.
Giorgetta said he believed the mining industry was currently in a “good space” and the outlook for most of the commodities for the next 12 months was positive.
“Gold, the share prices (are) doing pretty well, the gold price itself is not doing as well as one would imagine but I think the Trump factor will play some part in the next six to 12 months,” he said.
“They’re all positive, all the other ones, graphite, potash, even mineral sands, they’re all looking stronger now.”
Mining industry professionals network during a Diggers dinner
Giorgetta believed battery minerals had a positive outlook.
“Lithium, zinc, copper, they are all really emerging, almost unstoppable — all the battery metals — production is going to come up, probably the prices, some of them will go up, although lithium has moved quite a bit already,” he said.
“Nickel hasn’t really reacted as much as it should but I think it will.
“Cobalt, well I think it’s still early, and everyone is looking for it, but cobalt is almost a precious metal price of $80,000, which is quite remarkable.”
AMEC chief executive Warren Pearce
Exploration a ‘pretty good ride’
AMEC’s Pearce spoke to Proactive Investors from Adelaide Airport after presenting at this week’s South Australia Resources and Energy Investment Conference.
Speaking on the state of the Australian mining industry, he said: “Broadly speaking, I think the industry’s in for a pretty good ride.
“What we’re seeing over the next 12 months is a major extension of our exploration programs that (were) running over the last 12 months.
“We’re expecting the exploration programs are really going to show out what’s going to happen in terms of projects.”
He predicted the next year could be “exceptionally busy and really very positive”.
“We’ve had a really good run of really substantive exploration expenditure — records in gold — and really across a wide range including the battery minerals space,” he said.
“Now we’re really waiting to see what those drill programs are going to uncover and then we’ll get a much better handle on how large or sustained this recovery period is going to be. If they turn up some really good discoveries it could potentially be quite large.”
Battery Minerals managing director David Flanagan
‘It feels good’
Battery Minerals managing director Flanagan told Proactive Investors people were optimistic.
“We started the calendar year really strong,” he said. “If you look at all the indexes, January-February it looked like we were off to the races.”
But Flanagan noted the industry had suffered a few setbacks since March.
“Since then I think the market has generally suffered a few little, steady sort of shocks,” the former Atlas Iron chairman said.
“The equity markets are still there, the sentiment in the physical market is still there, it’s still much better than it was if we go back four years.
“We’re seeing underinvestment generally in infrastructure and exploration and new project development and, as soon as it’s given a chance the market realises, it’s going to be short in a whole bunch of strategic commodities.
“People are by nature optimistic, and as long as they’re not dealing with global instability, they want things to happen and they will, so I see the next 12 months as just steady consolidation and growth.
“I feel we will be 15 to 20 per cent better off across the sector than where we are now. It feels good.”
Giorgetta also expressed his optimism for the upcoming period, saying: “The future is very rosy — companies have strong balance sheets, they’re out there exploring, and they’re replacing reserves.”
Delegates take in a presentation at Diggers
Hiring woes squeeze budgets
Further hiring problems are expected this financial year.
Companies are finding it difficult to find new staff, with many professionals exiting the sector during the last downturn.
Flanagan said: “Across the industry we’ve seen turnover lift in the last year, we’ve seen drilling companies finding it extremely difficult to get trained people to operate drill rigs.
“You’re already seeing a movement of people to the Pilbara here in WA.
“That’s all happening and it’s going to mean wages are probably going to kick up a bit.”
AMEC’s Pearce noted many younger miners had left the industry after the 2012 downturn and increasing wages was the only way to bring them back to the fold.
“There’s clearly going to be some inflationary pressures driven by the shortage of skills — it’s really evident it’s going to happen very early in the cycle and I think that will lead to some quite significant pressure on wages,” he said.
Giorgetta said recruitment was a big problem for miners: “It is much harder now to get the people you want.
“Everybody is aware the industry is picking up, the labour costs are running up again (but) not to the same level as it did five years ago.”
Despite Diggers delegate numbers being on the rise, Giorgetta believes fewer people are working in the industry.
“We are very concerned about the number of professionals that are in the industry — there has been a really big drop in (educational institution) enrolments,” he said.
“I push the industry to do something about it, in convincing people it is a career that they should pursue.”
‘It should be net positive’
Flanagan said while he noted wages could increase, access to capital and increased commodity prices could protect margins and cushion projects from the effects of cost gains.
“One of the things that happens when you actually get things pick up, is the price of projects, the price of people — you get increasing costs across the board but there’s increased access to capital,” he said.
“The equity markets are open more so and generally … commodities prices have run, so the margins are preserved, and (though) you’ve got increased cost of capital, this should mean that even with those negative aspects it should still be net positive.”
To view this year’s Diggers program, visit http://diggersndealers.com.au/#programme.