Australia’s Paydirt, Issue 330
Diggers & Dealers, to which we dedicate much of this edition, is usually a good measure of the state of Australia’s mining industry and where it is headed.
The problem this year was the barometer reading was so blurred nobody came out of the week with any authoritative take.
There were a few things we could definitively confirm. The critical minerals space is oversupplied with juniors holding projects that are going nowhere under current commodity prices. Gold miners are enjoying increased revenue but are still struggling to keep margins intact. Gold explorers continue to be shunned by investors who have little appetite for risk. Companies of all sizes are growing increasingly frustrated with the pace of permitting.
If these were the standards of Diggers, then it is up to the curious to pick out the exceptions.
In the critical minerals space, WA1 Resources Ltd sits well above the morass of explorers.
That the company came away with the Best Emerging Company award was a surprise to no one. It appears the junior has a genuine world-class niobium discovery on its hands in its Luni deposit, something to rival all four of the existing operations around the globe.
Even here, however, WA1 will do well to avoid the familiar traps we have seen in lithium, rare earths and even potash in recent years.
The headline numbers are obviously impressive, but the issue is with understanding what world-class might mean in a global context. Although many will try, nobody can claim to be an expert on the niobium market, its structure, supply/demand fundamentals or even project specifics.
The last five years have seen the story play out time and again. A lithium, or rare earths, or potash deposit is discovered with headline numbers which make it appear a lock-in for development. However, as the project is advanced, the project developers realise breaking into new markets is not as easy as selling copper on the LME or gold to the Perth Mint.
Discovery is only the start of the process and having enjoyed a run to a $1 billion market cap, WA1 will find the hard work of proving the value of a niche commodity requires much more than defining resources, drawing pit shells and designing a plant.
This is not to sound meanspirited. I think Luni is a genuinely exciting discovery, all the more so because it has been made by a relatively young executive team in a part of Western Australia previously devoid of exploration success.
It is just the shot in the arm WA’s exploration industry needed, but there is a long road ahead to prove it is more than a geological success.
One of the reasons WA1 stands out is due to the acute lack of exploration success elsewhere in the State.
New gold discoveries have all but disappeared. After years of juniors concentrating on critical minerals exploration and punters preferring established miners, the development pipeline is not just thin, it is barren.
I have never seen a situation like this in nearly 20 years covering the sector and there is little evidence the trend is about to be broken.
The gold price is rampant but that only pushes equity investors towards the established miners. Why take a punt on exploration when the producers are growing and paying dividends.
Accentuating the explorers’ difficulties are the problems with permitting, a regular talking point under the big top at Diggers.
The Cook Government in WA is throwing money at the problem, but it so far has done little to alleviate the backlog of permits awaiting approval.
For some companies this is a convenient excuse. I speak to plenty who use the cover of permitting to disguise the fact they have little worth exploring and no money to do it. However, for those with targets and cash to spend on them, the frustrations are increasing.
Part of the problem is anti-mining interest groups are increasingly weaponising the system to deliberately slow approvals. Governments are aware they need to do more to speed up the process but equally, all the will in the world is worth nothing if their regulatory framework leaves gaps for legal challenges from politically motivated actors.
In a modern world where outrage, dissent and protest are readily deployed by groups across the political spectrum, approvals reform needs to be rock solid, otherwise it could ultimately lead to even greater delays.
So, there you have it. My assessment of the “mood” at Diggers & Dealers. It may make for grim reading but having experienced similar cycles before, I remain convinced the next upswing is only ever just around the corner.