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Professionals Fyson & Associates

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World events and their impact on the Goldfields

21 Jul 2016 Kalgoorlie 0 Comment

The saying, ‘May you live in interesting times’, is regarded as a curse and often attributed to being of ancient Chinese origin but is not actually Chinese or even particularly old but still quite appropriate at the moment with the series of events sweeping the World.

We have the on-going turmoil in the Middle East, the failed Coup d’état in Turkey and the purges currently in progress, the nomination of Donald Trump as the next Republican President of the US and his equally unpopular opponent Hillary Clinton, Britain’s decision to pull out of the EU and a complete change in the UK leadership team, China’s aggressive position in the South China Sea, North Korea firing test missiles into the Sea of Japan and Russia in danger of being chucked out of the Olympics. Not sure where the last one fits into the scheme of things!!

How is all this likely to affect us?

Gold is likely to remain strong for the foreseeable future as when times are uncertain the safe haven investment is Gold.

It is currently around A$1800 an ounce and with most of our mines operating at around A$1000 all up cost the margins are excellent. There has been a strong rebound in exploration and with that will come new deposits as well as older mines brought back on stream as the higher price and lower costs, following to wind back in the Pilbara, make the lower grade deposits economical to mine.

We expect the resurgence of gold to be long term and to permeate through the whole region as gold is found in commercial quantities throughout the Eastern Goldfields and Yilgarn and through to the Murchison and beyond.

The effect on nickel is not so clear.

Nickel is a consumer metal used extensively in stainless steel and other nickel allows.

World trade in consumer goods is likely to be flat with the financial turmoil in so many markets but the sustained low price of nickel has had an effect on mine production and stock piles have fallen by 100,000 tons in the last year and at the time of writing the nickel price has risen and is now sitting at around A$14,300 a ton, up from a 2016 low of A$10,900 in January, a 31% increase with the LME 90 day price predicting a further increase.

I do not know at what figure companies like Mincor need to reopen production but suspect it may have to increase by another 50% to around A$20,000 and demonstrate stability for this to happen.

I’m certain we will learn more at Diggers and Dealers at the end of this month.

Our other commodities like rare earths, copper, zinc, iron ore, lithium and uranium are less likely to be as directly affected so all in all we are in a pretty good position.We should see this being reflected in reducing residential and commercial vacancy rates and increased sales but there is not much evidence of this happening yet, but now the Federal Election is behind us we cannot be very far off an improving market.

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