The good times may well be roling for miners in the current investment climate but they acknowledge that producing results for investors is a top priority.
While most at the WA Business News boardroom lunch agreed the current market was in a “boom”, they were not as forthcoming when the topic turned to the recent failings of Sons of Gwalia – the local gold miner that was put into administration recently – and its effects on the flow of investment capital.
Public investment in the resource sector has recently returned strongly after a fairly lean five years.
Nickel miner LionOre Australia managing director, Mark Ashley, said collapses such as that of Sons of Gwalia did not help the industry’s investment chances.
“To get investment back into our industry we need successes,” he said.
“The last thing we want to have is to have companies going under. And while that’s going to happen, you have to have successes and this is obviously one that hasn’t succeeded for whatever reason, but it doesn’t help the industry… it is a big company and they had huge market cap.”
Despite this, Mr Ashley said he had noticed investor interest in mining remained strong, particularly the return of Australian institutional interest.
The current boom should continue because of strong Chinese demand, he said.
“Nickel [demand] should continue for at least another couple of years the same with copper, zinc and other base metals,” Mr Ashley told the forum.
“But while there is that increased demand and people are making a lot of money at this moment in base metals, I think there will be available money for new explorations. I don’t think we have seen the last of the capital raisings.”
There were even suggestions that the mining industry had entered a period of structural change.
Association of Mining and Exploration Companies president and Gunson Resources managing director David Harley said that, while the boom period had slackened off a little, it was more sustainable than previous times, driven by East Asian demand.
“The China, India, even Russia, factor is a pretty important one for increasing demand for pretty much all commodities, including tin, which is coming along very strongly,” Mr Harley said.
Midwest Corporation CEO Stephen de Belle said one of the reasons investment had weakened slightly was because investors were currently full.
“I think a lot of investors are invested at the moment and they are waiting to see some results,” Mr de Belle said. “So its just natural caution on their behalf to see what they did in the past, and we have got to deliver, otherwise we can’t justify asking for more.”
How far the boom will continue is anyone’s guess but Mr Ashley said figures he recently prepared suggest there maybe a way to go yet.
“I don’t know if we have hit a peak,” he said. “In 1999 there were two [resource] IPOS that raised $8 million dollars… in 2003 there was $200 million raised – double the year before.
“We are looking at doubling it again this year get up to near $500 million in the mining industry.
“How far it’s going to go is really a matter of the success of the industry.”
