Editor/publisher John Chadwick and others of the team are just back from the SME meeting in Denver last week and the PDAC this week. Neither were as strong as last year but, importantly, the PDAC was not awash with doom and gloom. It was attended by both optimists and those with a little less joyous view of the future. We also have considered comment from SRK on Indaba from the beginning of February.
As Lawrie Williams reported on Mineweb, PDAC “was better attended than some had feared and seemed a little more upbeat in tone than some would consider justified by the global economic situation. Despite all the doom and gloom affecting the industry, attendance on the first day was strong and exhibit space was fully booked, although there were one or two empty booths for companies which just decided not to come, or which had not survived the recent fallout.
“Mining and mineral exploration have always been the place for optimists and it seems there are plenty still around. Perhaps that was because the gold mining and exploration sector largely dominates the event and some gold miners are recording excellent returns and stock price growth, as the yellow metal has outperformed virtually every other industrial sector worldwide. In a series of talks on prospects for the global mining sector though, speakers were a little more sanguine about the prospects for the world economy over the next couple of years, and in mining in particular.”
Talking about Indaba, SRK Consulting partner Roger Dixon noted that “despite the grip of the global financial crisis, and tumbling prices of many commodities, the mood of miners and explorers in Africa was not defeatist.” He said that there was certainly a dark mood among the London investment community but at the same time there were people eagerly on the look-out for opportunities.
“Delegates at the event – who included high-level representatives of mining and investment groups – were quite positive about the future, despite the uncertainties,” said Dixon, who has spent the last 38 years on mines and in mining consulting.
The gold sector in particular was upbeat on the strength of its rallying price levels. “At home in South Africa we’ve got two exciting mines being developed: Gold One’s Modder East project, which is set to list on the Australian Stock Exchange, and Great Basin Gold’s Burnstone project. They are showing what can be done even in trying times,” he said.
The relative stability of the South African economy has been a positive factor in the current climate, thanks largely to the momentum of the country’s infrastructural spending. “The fact remains, of course, that we are a commodity-based economy, so we cannot avoid feeling the effects of the downturn, which will probably be more severe from the second quarter onwards,” said Dixon.
The sense of uncertainty in global markets, however, is making investors more fastidious about the way they go into new projects and how they manage the risk factors. The tendency is to want to cut out the middle man in these deals, and for investors to get directly involved in projects.
“In particular, those looking for mineral opportunities are wanting a very stringent due diligence process to assess the value and viability of potential investments,” he said, “so there is good demand for independent services from consulting engineers like SRK.”
There is a danger, however, that the global crisis might lead certain countries to retreat behind more restrictive policies, as their mining sectors shrink and jobs are lost. “We might already be seeing this in countries like Democratic Republic of Congo, which face retrenchments and unemployment on a vast scale as global demand for their commodities falters,” said Dixon.
Most troubling for the immediate prospects of the mineral industry are the slowing economies of China and India, which are major consumers of Africa’s commodities. “It is clear that the current efforts to bail out the banking sector in the US and Europe won’t solve the problem,” he said. “Growth in China and India are vital for the recovery of mining production and the viability of new projects, and for this growth to take place there needs to be more consumer spending among developed countries in the northern hemisphere.”
The mining fraternity might be best described as a boxer in the early stages of a bout, said Dixon. “We’ve survived the first three rounds,” he quipped, “but now we need to get out there and get our act together for the next seven.”
