Investors at this week’s RIU Sydney Resources Round-up have been told that there is a promising outlook for base metals and battery metals as new market dynamics emerge.
Hundreds of investors attended the presentations and visited the exhibition halls on the opening sessions on Tuesday afternoon while attendance today is even stronger.
The presentation hall has been filled for the keynotes and company presentations while there is a strong level of enquiry at the exhibitor booths.
The event at the Sofitel Sydney Wentworth continues tomorrow.
Westpac Institutional Bank director – economics Justin Smirk in his address today said that there was a more positive long-term outlook for base metals, and particularly copper, while gold would remain a safe haven.
He forecast that after a generally positive period in resources, 2019 would not be quite so buoyant.\
More sustainable growth
For most resources there would be a slight downward trend but, he said this was nothing to be too concerned about as it reflected changing global market conditions and a period of more sustainable growth.
The changing market dynamics included slowing economic growth in most major economies, including the US and China, as well as the transition to a consumer society in China.
Previous growth in infrastructure development saw strong demand for the bulk commodities such as iron ore and met coal.
Shift in China’s dynamics
Smirk said the shift to services-based growth in China rather than industrial was seeing increased demand for other metals while the impending electric vehicle revolution was also changing dynamics.
Bellevue Gold’s managing director Steve Parsons addresses investors.
In his opening address yesterday, Austex Daily Unique Research executive director Rob Murdoch said that the Australian market had risen sharply in the first few months of 2019, however, in the past week there had been a correction.
Best sectors this year
“Rare earths, tin, manganese and coal have done well in the first quarter while cobalt has been the poorest performer, reflecting changing commodity prices in the period, with cobalt off by 60%.”
He said that in the past 12 months the real winners in the resources sector had been the less sexy resources of iron ore, coal and oil & gas, and agreed that base metals and battery metals had bright futures.
Majors up 6.8% on average
Austex statistics showed that the major miners were up 6.8% on average in the past 12 months while other sectors had not performed so well.
In the sector with companies having a market cap between $10 million and $50 million, among the best performers were Black Rock Mining Ltd (ASX:BKT), Verdant Minerals Ltd (ASX:VRM) and Ausmex Mining Group Ltd (ASX:AMG).
Murdoch said there were not too many winners in the juniors section below $10 million market cap as there was much more risk.
Only 774 listed resource companies
Interestingly, he said that the total number of listed resource companies at the end of April was 774, which was the lowest number since 2015.
The exhibitor booths have attracted strong interest.
He also explained that IPOs were not working to date in 2019 with most new listings lower that their listing price while the average enterprise value of juniors had fallen over the past four years.
This was due to a number of factors, including the post conglomerate gold ‘boom’, battery metals volatility, complex laterite deposits and the need to develop downstream markets and users.
The first quarter of 2019 was the worst capital raising quarter in four years but on a more promising front, the exploration spend has been steadily improving since 2016.
Increase in exploration spend
Reflecting the importance that many investors place on exploration, he said there had been a noticeable upward trend in share prices of those companies that spent more in this regard.
Statistics showed that in recent months the number of announcements had been increasing but was still lower than in previous years.
After rising for three years, there has been a noticeable dip in the average cash held by juniors over the last two quarters.