NZ looks to ben­e­fit from min­ing upswing

Otago Daily Times - - Business & Money -

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 this week’s New Zealand branch of the Aus­tralian In­sti­tute of Min­ing and Me­tal­lurgy an­nual con­fer­ence in Christchurch, which at­tracted 220 del­e­gates.

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 from the con­fer­ence, the coun­try’s largest gold pro­ducer Oceana Gold was bullish on the medium term out­look for its New Zealand op­er­a­tions and Trans Tas­man Re­sources has been granted marine con­sent for its seabed min­ing pro­pos­als by the En­vi­ron­men­tal Pro­tec­tion Au­thor­ity; al­beit there are eight 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 in the 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 its Puhipuhi ep­ither­mal gold­sil­ver project in North­land and Newcrest Min­ing pulled out of a joint ven­ture project in the south­ern Coro­man­del in Hau­raki. The pair of Aus­tralian­listed com­pa­nies were un­der­stood, but not con­firmed, to have taken part in $6 mil­lion to $7 mil­lion 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 laid the blame firmly at the feet of the NZX, in not at­tract­ing com­pa­nies to its new small com­pa­nies board.

‘‘There was just one IPO (ini­tial pub­lic of­fer­ing) this year, which just isn’t good enough.

‘‘NZX tried to bring a new small com­pa­nies mar­ket but it just didn’t work,’’

He said New Zealand ex­plo­ration spend­ing was still ‘‘low’’, not­ing in 2014 it was about $10 mil­lion, then had leapt to

$37 mil­lion and last year topped $44 mil­lion.

In both 2012 and 2013 it had topped al­most $50 mil­lion an­nu­ally.

Gov­ern­ment per­mit­ting agency New Zealand Petroleum & Min­er­als (NZPM) 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 the

2016 year.

NZPM has a data ac­qui­si­tion bud­get, with just over $6 mil­lion al­lo­cated to the pro­gramme.

It was spend­ing $4.8 mil­lion on aero­mag­netic air­borne sur­veys, which to date cover about onethird 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.

Mr 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,’’ Mr Ha­worth said.

In New Zealand gold pro­duc­tion last year de­clined 22% and sil­ver 36%. Oceana Gold closed its Reefton op­er­a­tion and a 2 mil­lion­tonne pit slump in­ter­rupted pro­cess­ing at Waihi. Al­lu­vial pro­duc­tion rose 10% to 47,000oz.

On the ques­tion of coal, Mr Ha­worth said pro­duc­tion de­clined 15% to 2.9 mil­lion tonnes, ex­ports dropped 13% to 1.2 mil­lion tonnes and do­mes­tic coal was down 16% to 1.7 mil­lion tonnes.

‘‘How­ever, new own­ers and im­prov­ing coal prices may breathe life back into the sec­tor,’’ Mr Ha­worth said.

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,’’ he told del­e­gates.

By the time Bathurst had beaten le­gal chal­lenges to con­sents for its West Coast op­er­a­tions on the Den­nis­ton plateau above West­port, global coal prices had tanked and Bathurst was in sur­vival mode, sell­ing ther­mal coal do­mes­ti­cally in the South Is­land to gen­er­ate ra­zor­thin cash­flows.

Solid En­ergy’s break­up gave Bathurst the op­por­tu­nity to buy key as­sets from the dy­ing sta­te­owned en­ter­prise and in a joint ven­ture with cus­tomer and fish­ing group Tal­ley’s, the pair paid $46 mil­lion, plus $8 mil­lion ad­just­ments, for some West Coast and North Is­land as­sets.

Key to that was buy­ing pro­cess­ing in­fra­struc­ture ad­ja­cent to the Den­nis­ton plateau.

Mr Ta­con was bullish on Bathurst’s fu­ture, but did not be­lieve coal pro­duc­tion would hit the an­nual 2.2 mil­lion tonnes Solid En­ergy had in bet­ter days.

He was pleased to be able to tell del­e­gates Bathurst now had no debt, $4 mil­lion cash and

$15 mil­lion work­ing cap­i­tal ‘‘as of to­day’’.

The re­cently re­vived coal prices had him es­ti­mat­ing all mines would be op­er­at­ing with a profit mar­gin rang­ing from $US25 to be­yond $US30.

‘‘Green min­er­als’’ was a catchcry for many at the con­fer­ence.

They are the rare earth min­er­als which have in re­cent weeks spiked in price as global pro­ducer China finds less. They are a cru­cial and very ex­pen­sive com­po­nent for the home and electric car sec­tor and the pub­lic’s need for long­life bat­ter­ies.

There’s no small irony in the fact rare earth min­er­als are es­sen­tial for the new and next gen­er­a­tion bat­ter­ies re­quired to help green the en­ergy sec­tor and cut ve­hi­cle emis­sions and en­vi­ron­men­tal­ists will have to de­cide if rare earth ex­trac­tion is ac­cept­able to achieve those aims.

CRL En­ergy chair­man 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,’’ Mr Broome said.

He also high­lighted ris­ing prices for cop­per, not­ing new electric cars re­quired three times more cop­per in their con­struc­tion than con­ven­tional ve­hi­cles. E­car pro­duc­tion was ex­pected to step up from pro­duc­tion of a few hun­dred thou­sand to 20 mil­lion in com­ing years.

‘‘We’re not on the verge of re­cov­ery. It is re­cov­er­ing, and strongly.

‘‘Not to the hal­cyon days of 2006­07 but there will be strong de­mand for the next five or six years,’’ Mr Broome said.

On the ques­tion of New Zealand’s role, Mr Broome said that came down to how the coun­try’s min­eral prospec­tiv­ity was sold to would­be ex­plo­ration com­pa­nies.

Two of the big­gest pos­i­tives from the con­fer­ence was an in­au­gu­ral, two­day pre­con­fer­ence fo­rum fo­cus­ing on Otago — a for­mat likely to be re­peated next year.

The other was the re­lease of more de­tails on the for­ma­tion of the gov­ern­ment­funded New Zealand In­sti­tute of Min­er­als to Ma­te­ri­als, with up to $12 mil­lion over four years.

The in­sti­tute is fo­cus­ing on fur­ther pro­cess­ing of rare earth min­er­als from the West Coast and iden­ti­fy­ing new ma­te­ri­als to sell to man­u­fac­tur­ers. The three first tar­gets are 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 United States.


Go­ing un­der­ground . . . Rare earth min­er­als, re­cently re­la­belled ‘‘green min­er­als’’, are be­com­ing in­creas­ingly sought af­ter for the new gen­er­a­tion of home and electric car bat­ter­ies.

Iron ore . . . Global prices are com­ing off rock bot­tom of late 2015.

Raw cop­per ore . . . Cop­per is cru­cial to the man­u­fac­tur­ing of new gen­er­a­tion electric cars.

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