The pubs in Kalgoorlie were heaving with thirsty brokers, analysts and executives this week as the mining fraternity gathered for the industry’s biggest annual event: the Diggers and Dealers conference. But while it might have been hard to tell, this year’s edition of the notoriously debauched conference in the West Australian outpost took place against a highly unusual backdrop: the mining business is once again booming despite a global pandemic and worldwide recession.
Over the past eight months the global economy has soured significantly with the COVID-19 threat forcing many major cities into lockdown. But at Diggers and Dealers, that felt like a distant nightmare as optimism in the mining sector for virtually every mineral commodity reached levels unseen for more than a decade.
Attendance was only down slightly due to travel restrictions, the pubs were full and the drinking was heavy. Even the scantily clad “skimpy” barmaids were present (although the windows of pubs they appeared in were blacked out with plastic sheets so they couldn’t be seen by the outside world).
The Diggers and Dealers forum was started in 1992 with the express aim of connecting miners with money for expansion and to drive mergers and acquisitions. Much of the activity, infamously, takes place away from the conference itself in various watering holes around the frontier mining town.
At any one moment there could have been billions of dollars of net worth crowding the front bars of the iconic Exchange and Palace Hotels.
The more dignified formal event was held two months later than usual from Monday to Wednesday at the Goldfields Art Centre in the heart of the historic gold mining town and this year’s forum attracted about 1950 delegates.
That was about 450 less than last year largely due to interstate and international travel restrictions. Yet aside from temperature checks and an abundance of hand sanitiser the pandemic was a mere afterthought.
As one attendee put it: “It’s about the diggers, and it’s about the dealers” and those miners celebrating a good year were treated to a rockstar reception.
The headline act of this year’s forum was gold, the price of which has been surging. Northern Star Resources chairman Bill Beament and Saracen Minerals managing director Raleigh Finlayson presented on Monday morning less than a week after they announced a blockbuster $16 billion merger between their two gold mining companies.
That announcement earned them the forum’s ‘dealers award’ and prompted a consistent theme of consolidation over the three days. The gold price hit a record $US2075 ($2873) an ounce in August and has remained around $US1900 ever since.
Beament said he expected the price to ‘kick’ again as the COVID health response transitions into an economic response. Other miners, such as Gold Road Resources boss Duncan Gibbs, predicted a strengthening Aussie dollar would “take some of the juice” out of any potential price jump.
One of the hottest bits of property being shopped around was ASX-listed IGO’s 30 per cent stake in AngloGold Ashanti’s Tropicana mine 330 kilometres north east of Kalgoorlie. IGO is conducting a review of its stake and has already received unsolicited offers.
Smaller miners and exploration-focused companies showing promising results were also lauded. De Grey Mining’s share price has rocketed 2440 per cent since January to $1.27 after its Hemi discovery south of Port Hedland started shaping up as one of the biggest in recent memory.
Gold is exciting but iron ore, the nation’s biggest export and a key source of tax revenue, is much more important. Thanks to supply disruptions in Brazil and sustained demand from China, the sector is defying the global COVID downturn with prices hovering around $US120 a tonne, sending share prices of major miners such as Fortescue Metals and the fortunes of billionaires, such as Andrew Forrest and Gina Rinehart, soaring.
Producers were quick to dismiss fears there was any danger of it becoming the next commodity to fall within the crosshairs of China amid growing Sino-Australian trade tensions after news it had banned the import of Australian thermal coal.
“I don’t think we can become complacent about it but there is a very strong trading relationship that has been built over many decades,” Fortescue Metals Group CEO Elizabeth Gaines said.
Junior Kimberley iron ore producer Mount Gibson Iron chief executive Peter Kerr said his business had not seen any blowback from the political tensions and he was confident demand would remain strong.
“The fundamentals of coal supply and iron ore supply are quite strong … with iron ore, China needs seaborne iron ore [because] the quantity of iron ore within China itself is not major,” he said.
I’d have to say I think we are probably far closer to those matters than perhaps you would be if you were based somewhere else in the world.Fortescue CEO Elizabeth Gaines on Rio Tinto
Tensions started bubbling over into agriculture and mining commodities after Prime Minister Scott Morrison called for an independent international inquiry into the COVID-19 outbreak that began in China. On Friday, Chinese cotton mills were told to stop using Australian cotton.
FMG’s biggest customers are Chinese and when asked about whether there should be an inquiry, Gaines said there was merit in looking at how many countries responded to the pandemic, not just China.
“A review that looks at how different countries have dealt with it and where’s best practice makes a lot of sense but that’s on a global basis I don’t think it’s specific to one particular area,” she said.
In his keynote speech to the forum on Monday WA Premier Mark McGowan levelled a thinly veiled swipe at the Morrison government for its handling of the China relationship. “We should always protect our interests, that isn’t in question, but is it in our interest to be reckless with trading relationships that fund the nation?” he said.
Rio the villain
Rio Tinto’s shocking destruction of ancient caves at Juukan Gorge was another key topic of discussion. Miners are being forced to rethink how they deal with the traditional owners of the lands on which they operate. Many were happy to throw the iron ore giant under the bus for the scandal.
When asked whether Fortescue executives know about major Indigenous heritage sites that could face destruction, Gaines spruiked the fact that the company calls Perth home. “We report to our board regularly on heritage management, I’m across it,” she said.
“I’d have to say I think we are probably far closer to those matters than perhaps you would be if you were based somewhere else in the world.”
Rio Tinto’s board lost three executives over the Juukan Gorge destruction including its chief executive Jean-Sebastien Jacques. One of the biggest criticisms was that top executives and board members are London-based and had little knowledge of the Pilbara where Rio generated most of its income.
Major changes to Aboriginal heritage laws are being discussed and the state government is seeking feedback on a bill that would remove the process Rio Tinto used to gain legal approval to destroy the gorge.
IGO chief executive and Association of Mining and Exploration Companies president Peter Bradford said Rio’s actions had shaken up that consultation. “The ability to get an industry view in shaping that legislation to make sure it is a better outcome for all parties has been made more challenging by what’s happened at Juukan Gorge,” he said.
The Musk effect
The long-promised electric vehicle boom might actually be around the corner if the nickel producers presenting at the conference were to be believed.
Those companies were buoyed by recent comments by Tesla founder Elon Musk for nickel miners to produce good quality, sustainable nickel and lots of it.
“His call for nickel miners to grow, and to grow quickly, offers real evidence of the place that nickel has as a strategic battery metal going forward,” BHP’s Nickel West president Eddy Haegel said.
While COVID-19’s presence wasn’t physically being felt the hard border that has helped keep it out of WA was a hot topic among presenting companies, some of whom presented via video link because they couldn’t enter the state.
As the first-ever sitting politician to deliver a Diggers and Dealers speech (a fact that raised eyebrows amongst delegates) McGowan’s keynote speech resembled an election campaign launch and he engaged in heavy promotion of the border closure as the saviour of the industry.
Some companies agreed while others lamented the growing impact it was having on their business and their ability to hire workers.
Saracen’s Finlayson said he was happy with the borders being shut.
“As much as what you say it would be great to get back and talk to shareholders again, the flipside is if we open up too soon and start getting cases or, God forbid, we start getting cases in a regional place like Kalgoorlie or one of our mine sites we will very quickly regret it,” he said.
Roy Hill chief executive Barry Fitzgerald said he hoped as COVID-19 test result times shrunk the border policy could be revisited.
Evolution Mining chairman Jake Klein, who fronted a press conference via video call, said the sooner the borders were lifted, the better.
WA Energy Minister Bill Johnston defended the policy.
“In Western Australia, you’re allowed to have a beer standing up in the pub, you [can’t] do that in Sydney. In Western Australia you can go to a live music concert, you can’t do that in Melbourne,” he said.
At Diggers and Dealers the industry was standing up with beer in hand, toasting some of the most promising conditions since that last mining boom.
“Kalgoorlie and the Goldfields have got a real buzz about them at the moment, Chamber of Minerals and Energy chief executive Paul Everingham said.
“Gold is going well … nickel is back in the game, rare earths are bouncing along, battery minerals are starting to come back and of course there’s iron ore.
“It’s the most optimistic I’ve seen it in past four or five years,” he said.
Source: Thanks smh.com