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Professionals Fyson & Associates

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08 9021 5187

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The difference in one year – Diggers & Dealers Recap

18 Aug 2016 Kalgoorlie 0 Comment

At the start of the month I attended the Diggers and Dealers forum in Kalgoorlie and what a difference a year can make. We have been saying for some months now that all the indicators are that our market is poised to break out of its down cycle, and to say that was supported by the presentations at D&D is an understatement.

There were 59 presentations, with gold miners dominant but also with encouraging presentations from nickel, zinc, rare earths, lithium and uranium miners.

The overriding picture from the presentations is that the Eastern Goldfields region in particular is producing some substantial new mineable deposits and as drilling gets deeper some stunning new intersections around known gold resources some greater than 1000 g per ton!!!

Most producers have an all in production cost of between $800 and $1200 per ounce with the majority close to $1000, so making a clear return of $600 – $800 per ounce at the current gold price. Most are debt free and have substantial cash and bullion in the bank and huge net cash flow surpluses, Evolution mining reported a cash flow surplus of $428 million last year and Regis $233 million to name just two!

Most have announced substantial increases in their exploration budgets and with new techniques and technology there is every reason to expect the industry to continue to discover new reserves. The other encouraging aspect is the vast area over which these deposits are being found, being right across our 1000 km x 1000 km Eastern Goldfields region as well as into the Pilbara.

The other aspects that were discussed were the likely longevity of improved commodity prices, and the general view is that gold is likely to remain strong for the foreseeable future as there is a lot of global fiscal uncertainty, including that created by the Brexit vote which saw a spike in the gold price. Battery technology development is also underwriting the lithium rare earths and nickel markets. It was pointed out in one paper that a lithium battery uses more nickel than lithium which I was not aware of!

All the miners have been very active in driving costs down, and with the righting of the labour market with the reduced Pilbara employment nickel producers have not been letting the grass grow under their feet, with two reporting that they are cash flow positive even at these low nickel prices and Mincor adding gold to its exploration targets with encouraging results, which augurs well for Kambalda.

Confidence is back, the shadow of the Pilbara has passed and it’s now down to long term business development by the miners and the mining support industry throughout the Eastern Goldfields and we are seeing this evidenced in increased enquiry for commercial industrial property so hang in there for the next strong growth period of this forever resilient city.

 

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