NZ looks to benefit from mining upswing
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
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.