• Diggers and Dealers conference 2014 - past the bottom of the cycle?

Once again Grant Thornton has enjoyed the 2014 annual Diggers and Dealers conference in Kalgoorlie.

Whilst attendee numbers are reportedly down on peak capacity, at 1,900 attendees this year, we have been pleased and encouraged by the buoyant mood. The consensus seems to be that the bottom of the market has passed and that conditions will significantly improve this coming year. The booths were very busy with all mining companies we spoke to reporting strong interest in their projects and there were numerous compelling stories from presenting companies. A key theme was the interest in nickel.

Outstanding presentations

The conference opened with keynote speaker, Mervyn King (Lord King of Lothbury, KG, GBE, FBA), the former Governor of the Bank of England and Chairman of its Monetary Policy Committee from 2003 to 2013. Lord King gave an insightful background to the global financial crisis, but set a rather gloomy tone with discussion of further action to be done by countries around the global to rebalance the world economy. However, the mood lifted with strong presentations from Atlas Iron, Northern Star, Western Areas in particular. Strong presentations continued beyond day one with market darling Sirius Resources again attracting a large audience and MD Mark Bennett delivering another impressive presentation despite a sore nose, having walked into the wing of a plane on a pre-Diggers site visit! We also enjoyed insightful presentations by gold companies Ramelius Resources and Dacian Gold.

Gold improvements

An interesting trend in the presentations was the improvements seen across a number of gold producers in their All In Sustaining Costs (AISC). With continued pressure on the gold price, a number of companies over 2014 had seen the benefits of cutting costs really start to make a difference through the 2014FY and continuing to benefit into 2015. A couple of companies omitted their AISC, only presenting C1 costs or qualifying their “massaging” of their AISC, this was met with some lively discussions and speculation around the booths.

The Nickel charge

commenced on Monday with Mincor Resources looking to extend their success story, followed by Western Areas and Sirius Resources on Tuesday both presenting strong opportunities for the commodity. Tuesday morning had Evolution Mining living up to its name with its continued focus of using new technologies to identify opportunities, highlighted in its recently announced deal with Emmerson’s Tennant Creek project in the Northern Territory.

Adapting strategy

It is very pleasing to see that companies are continually adapting their strategy to market conditions and opportunities as they present. It is this resilience and entrepreneurial spirit that drives the industry. Results have been seen from the move in recent years to adapt to market conditions by focusing on getting an initial, albeit small, project off the ground rather than proving up large resources and then look to fund a behemoth project. Those who had smaller operating projects were able to not only increase their resource at those projects at significantly less cost, thereby extending their life of mine, but also generated cash allowing those companies to fund further exploration at other sites. A trend and model we think is likely to continue given the current financing markets.

Times still tough for many

Without a doubt the Coal sector and Greenfields explorers are continuing to do it tough, with little relief expected on the horizon, and their absence from the booths was not unexpected. Most of the presenting companies confirmed insights we are seeing from Grant Thornton’s 2014 JUMEX market research: that for those companies with advanced projects nearing BFS and development, the outlook for funding is looking a little more rosy.

So, overall, a very promising mood of confidence and enthusiasm for the sector. An uptick in deal activity is expected, with companies fortunate enough to be in a cashed up position clearly interested in picking up new projects for their portfolio, in addition to fast tracking existing projects. For juniors desperately seeking funding, prospects are improved, however there is still some way to go at the greenfields end of the market.