MINERS SEE GROWTH PROSPECTS ON HORIZON

The bottom of the current mining downturn was called a few times in recent years. But industry experts are, again, putting their necks out and saying the resources sector is finally on the up.

If it is the case, many miners will be taking advantage of this opportune time to pursue acquisition and development activities.

Gold-focused Newcrest chief executive officer Sandeep Biswas told The Australian he attended the recent Bank of America Merrill Lynch mining conference in the United States. Biswas said the current industry mood was positive.

Higher gold prices, which benefit gold companies have spurred some of this optimism; however, Biswas added this hopeful sentiment was industry-wide. Biswas said he believe the positivity resulted from companies reducing burdensome debt, slashing operating costs and increasing productivity.

With greater stability and the adjustment to a subdued commodities scene, miners have felt secure enough to actively chase growth opportunities.

Even commodities like nickel, which have been given up for dead in recent years, have experienced a small resurgence in interest.

Major miner BHP Billiton recently went public with its growth plans for its Western Australia-based Nickel West operations.

At the 13th annual China Nickel Conference in Shanghai BHP, Nickel West asset president Eduard Haegel told delegates the company’s “lean” strategy has led to improvements in many areas within Nickel West.

Haegel said the restructured Nickel West business had cut A$440 million in expenses. He said the company’s tactic would involve a reduced capital outlay approach when analysing a new project’s potential. He said Nickel West was currently looking at developing some of its deposits and rebuilding its Kalgoorlie-based smelter furnace.

The resulting nickel operations would be high output, inexpensive and would remain sustainable in volatile pricing environment.
“We are creating an innovative, dynamic and low cost producer,” Haegel said.

The landscape is changing for the resources sector where focus has been redirected towards innovation, efficiency and pursuit of less capital intensive projects and operations.

GLOBAL ECONOMIC IMPACT

Most miners have insulated themselves as much as possible against global market volatility, but the situation isn’t all doom and gloom. Once the world economy settles and begins an upward trajectory, resources companies could be in for unprecedented profit margins.

China is the world’s second largest economy – accounting for a third of the world’s growth between 2000 and 2015.

The Chinese economy is undergoing a rebalancing act, according to the International Monetary Fund. The country is reshaping from an export and public investment driven economy to one that is sustained by domestic consumption and a growing services sector.

MINERS SEE GROWTH PROSPECTS ON HORIZON

Although the transition itself is expected to be a bumpy ride, the change to an economy powered by services and consumption is anticipated to benefit global growth and decrease volatility, the IMF stated in its recent Regional Economic Outlook: Asia and Pacific.

Additionally, there are some economic bright spots in emerging Asia that are experiencing steady growth and the IMF predicts this will continue if governments implement good policy.

Emerging Asia (excluding China) includes India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam. In its report, the IMF forecasts slow and steady growth throughout the next few years from 6.2 per cent in 2015 to 6.5 per cent in 2017.

With proximity to Australia, these countries could become key markets to mitigate China’s current slowdown and rebalancing act.

WHAT DOES THIS MEAN FOR MINING SERVICES?

According to the Deloitte Mining Services Index, the mining services industry may, too, have hit its rock bottom in the six months to December 2015 where the Index fell 12.03 points to 55.60.

As with the resources sector, this period was characterised by downsizing, cost cutting and profit downgrades.

However, positive markers have indicated increasing gold exploration activities, which is good news for drill and blast contractors and equipment suppliers.

The resources sector is evolving from a more short-sighted industry chasing dollar signs to an industry reshaped by cost cutting, technological research and pursuit of productivity.

In order to meet these shifting needs, the mining services sector has also pursued innovation and become more flexible. Equipment suppliers are offering technologically advanced, safer, more energy efficient and automated equipment to help keep costs low and productivity high at operations throughout Australia.

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