The global mining sector is beginning to post a resurgence from the doldrums of the past two years and on the face of it New Zealand's established miners are starting to ride those coat tails.
Many commodity prices have taken a turn for the better and global GDP growth is looking positive - a point made by several speakers at last week's annual AusIMM New Zealand Mining Conference in Christchurch.
In a sense, the conference mirrored the industry perfectly, numbers attending this year were up on what was a poor showing in Wellington last year, but well short of headier times when attendees ran to 350 or more.
There was plenty of good news - the country's largest gold producer OceanaGold Corporation (TSX & ASX: OGC) was bullish on the medium term outlook for its New Zealand operations and Trans-Tasman Resources has been granted marine consent for its seabed iron sands mining proposals by the Environmental Protection Authority; albeit there are High Court challenges to come.
Even coal miner Bathurst Resources is beginning to square away its problems, landing another coal supply contract and taking over key Solid Energy assets on the West Coast and North Island, some of which come with customers.
However, there was one overriding question repeatedly being asked at the conference – “Where are the junior explorers?”
In recent months Evolution Mining has stepped away from of its Puhipuhi epithermal gold-silver project in Northland and Newcrest Mining pulled out of a joint venture project in the southern Coromandel. The pair of Australian-listed companies were understood, but not confirmed, to have taken part in $6 M-$7 M worth of exploration.
Without junior exploration companies testing new ground the likelihood of new finds in New Zealand decreases hugely.
Campbell McPherson director Tony Haworth lay the problem firmly at the feet of the NZX, in not attracting companies to its new small companies board.
“There was just one IPO this year, which just isn't good enough. NZX tried to bring a new small companies market but it just didn't work.” Haworth said NZ exploration spending was still low, noting in 2014 it was about $10 M, then had leapt to $37 M and last year topped $44 M.
In both 2012 and 2013 it had topped almost $50 M annually. Permitting agency New Zealand Petroleum & Minerals (NZP&M) national manager minerals Ilana Miller said there had been an upswing in both exploration expenditure on exploration permits and in exploration on current mining permits, brownfields, for 2016.
NZP&M has a data acquisition budget, with just over $6 M allocated to the programme. It was spending $4.8 M on aeromagnetic airborne surveys; which to date cover about 1/3 of the country, $700,000 is being spent on geochemical analysis of soil and a further $700,000 on minerals data improvements and prospectivity analysis.
Tony Haworth said globally the sector had bottomed out at the end of 2015 and the overall commodity price index had since risen 37% and global mining share prices had more than doubled in that period.
“Gold's monthly average price has shown increased volatility, but otherwise it remains solid.” Haworth said. Gold production in NZ last year declined 22% and silver 36%, with OceanaGold having closed its Reefton operation, and a 2 Mt pit slump interrupting processing at Waihi, while alluvial production rose 10% to 47,000oz.
On coal, Haworth said production declined 15% to 2.9 Mt, exports dropped 13% to 1.2 Mt and domestic coal was down 16% to 1.7 Mt.
“However, new owners and improving coal prices may breathe life back into the sector.”
Bathurst Resources Richard Tacon was candid in his review of operations. “The last two years have been survival, it was known we were running out of money.”
By the time Bathurst had beaten legal challenges to consents for its West Coast operations on the Denniston Plateau, global coal prices had tanked and Bathurst was in survival mode, selling thermal coal domestically in the South Island to generate razor thin cashflows.
Solid Energy's break-up gave it the opportunity for Bathurst to buy key assets from the dying State owned enterprise and, in a joint venture with customer and fishing group Tally's, the pair paid $46 M, plus $8 M adjustments, for West Coast and North Island assets. Key to that was buying processing infrastructure adjacent to the Denniston Plateau.
Tacon was bullish on Bathurst's future, but did not believe coal production would hit the annual 2.2 Mt Solid Energy had in better days. He was pleased to tell delegates Bathurst now had no debt, $4 M cash and $15 M working capital.
The recently revived coal prices had him estimating all mines would be operating with a profit margin ranging from $US25/tonne to beyond $US30/t.
“Green minerals” was a catch cry for many at the conference. They now include rare earth minerals which have in recent weeks spiked in price as global producer China finds less, which are a crucial and very expensive component for the home and electric car sector and the public's need for long-life batteries.
There's no small irony in the fact rare earth minerals are essential for the new generation batteries to help green the energy sector and cut vehicle emissions.
CRL Energy chairman Alan (ALAN) Broome was upbeat on several metal fronts, including tin, zinc, iron ore, tungsten, nickel, gold and hard coking coal.
“If there's excitement in the sector it will attract more capital,” Broome.
He also highlighted rising prices for copper, noting new electric cars required three times more copper in their construction than conventional vehicles, with e-car production expected to step up from production of a few hundred thousand to 20 M in coming years.
“We're not on the verge of recovery it is recovering, and strongly. Not to the halcyon days of 2006-07 but there will be strong demand for the next five or six years,” Broome said.
On the question of New Zealand's role, Broome said that came down to how the country's mineral prospectivity was sold to would-be exploration companies. Two of the biggest positives from the conference was an inaugural, two day pre-conference forum focussing on Otago - a format likely to be repeated next year.
The other was the release of more details on the formation of the Government funded New Zealand Institute of Minerals to Materials, with up to $12 M over four years. The institute is focussing on further processing of rare earth and other minerals from the West Coast and identifying new materials to sell to manufacturers.
The three first targets were new carbon fibres, powder for 3D printing and magnets, the latter for the emerging big capacity battery market.
The conference should be considered a success and the industry can tentatively look forward to improvements over the next 12 months, but always with an eye on the disclaimer of questions around China's actual growth achievements and relations between North Korea and the US.
*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.