Be Patient, Metals Will See A Comeback: Key Takeaways From Australia’s Largest Mining Convention
Editor's Note: In our evolving coverage of our first Australian conference, we have made changes to this recap article. A previous version highlighted Genex Power and Metro Mining, both of which have been removed in this updated version. We have since added features on Mayur Resources and PolarX Ltd.
(Kitco News) - If you think that weak gold prices have stalled mining activity and lowered appetites for precious metals all around the world, think again.
Kitco News’ own Daniela Cambone has just returned from the Noosa Mining & Exploration Investment Conference, the pre-eminent gathering of mining professionals in Australia, where she interviewed mining executives, as well as veteran analysts in the metals space.
With gold trading range-bound and struggling to break past the key $1,300 an ounce resistance level, it was a surprise to see such strong, positive sentiment from a packed conference.
While North American investors have been lukewarm towards the precious metals, with some having jumped to cryptos and marijuana stocks, their counterparts down under have taken a positive, longer term outlook. As one guest explained, time horizon changes your perspective when investing in metals.
With fears of a trade war inching closer to reality and geopolitical tensions flaring up in the Middle East on the back of a potential war with Iran, one thing is clear – Australian miners are ready for global uncertainty to drive up gold prices.
Here is a selection of the video interviews with the experts:
In case you had any doubt, trade wars are no joke and will have real implications on the global economy, says Brian Sheahan, Executive Chairman of Morgans, an Australian brokerage firm.
“I think the observation so far is that there’s a lot of talk, a lot of posturing, probably a lot less action, so it’s been good. Obviously, as any sensible person would say, a trade war would not be good for the global economy,” Sheahan said.
Sheahan said that although a recession is not yet in sight, investors should be wary of several indicators, especially once the yield curve gets down to about a 0.5 difference.Highlands Pacific: Electric Vehicles Are The Catalyst For The Next Base Metals Boom
Electric vehicles provide more than just the next generation of transport; the industry will spawn a rush of demand into base metals like copper and cobalt, according to Craig Lennon, managing director of Highlands Pacific (ASX: HIG).
Lennon said that demand for cobalt “is definitely around electric vehicles and the growth that’s going to bring on.”
Peter Harold, director of Panoramic Resources (ASX: PAN), shares the same sentiment as many of the investors in Australia; he is long-term bullish on metals and is ignoring the short-term noise caused by global protectionist policies.
“The outlook is very good. Yes, the trade wars is going to create some noise, but fundamentally, longer-term, we just think we’re in the right spot,” he said.
Like Lennon, Harold believes that electric vehicles are the major driver, pun unintended, of a base metals rally in coming years.
The U.S., not Saudi Arabia or Russia, will be the leader in energy production, thanks to a combination of technological advancements and good luck, said David Prentice, managing director of Brookside Energy (ASX: BRK).
“Fundamentally, it’s a story about technology and technological improvements in drilling techniques,” he said.
The other side of the story is that the U.S. harbors geological advantages in holding oil and gas reserves. With the advent of fracking and shale extraction, this advantage has been compounded in recent years.
Most junior miners would jump at the opportunity to be bought out, but not Mayur Resources (ASX: MRL). When offered a buyout from a private equity firm, managing director Paul Mulder stuck to his guns and turned it down, opting to continue operating in Papua New Guinea on his own terms.
But why Papua New Guinea? Mulder told Kitco News that the country is on the verge of a population boom and that minerals will soon be in ample demand.
“We see an opportunity with Papua New Guinea to make a real difference, it isn’t something that’s going to happen overnight,” he said.
Duncan Hughes of Gold Road Resources (ASX: GOR) said that investors should buy miners with low all-in sustaining costs, minerals that are simple to mine and process, and that operates in a safe jurisdiction like North America or Australia.
“As an investor, I’d like to look for upside as well, so I’d like to see exploration upside there too,” he added.
During hard times, consumers’ wallets will feel lighter, but we will still need energy. That’s why, according to Richard Cottee, CEO and managing director of Central Petroleum (ASX: CTP), investors would be wise to get in on natural gas if they want to recession-proof their portfolio.
“The one thing that’s interesting about recessions, is that it doesn’t actually change your energy consumption,” Cottee said.
Besides copper being a long-term winner due to the electric car boom, technical indicators point to a short-term rally too, according to Nick Mather, CEO and managing director of DGR Global (ASX: DGR).
“If you look at the price graph, and if you look at where copper demand is going, it’s going to break out,” Mather said.
Labor problems in Chile, resource grades coming down, and increasing mining costs all contribute to Mather’s bullish sentiment on copper.
Like its neighbor Yukon, Alaska is on the verge of a mining and exploration boom and is seeing more Australian miners get involved.
That’s why PolarX (ASX: PXX), a high grade copper and gold explorer based in Australia, is setting up shop the coldest U.S. state, despite the harsh climate.
“Drilling in winter is difficult. We would typically, in our exploration phase, restrict our drilling activities to the May to October period,” said Frazer Tabeart, managing director of PolarX.
Tin has been living in the other base metals’ shadow for too long, says one CEO.
Russell Clark, CEO of Kasbah Resources (ASX: KAS), calls tin the “forgotten EV” metal that is just as vital as the other base metals in the electric vehicle story.
“People talk about cars and windmills and all those things, but they all need to be joined, and that’s why the copper story is so strong, but you need tin to join it all together in the form of solder,” Clark said.