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Welcome to the largest Paydirt issue

of the year as we preview this year’s

Diggers & Dealers forum, set to take

place in Kalgoorlie on August 1-3

his edition arrives at a tempestuous time for the sector. Glob- pushing the base level cost of production higher, even before infla-
Tal capital markets are straining under the dual threat of in- tionary pressures are taken into account.
flation and recession and the Australian resources sector itself Although the Australian industry is far from immune from this
is battling massive cost escalation, a shallow labour pool and trend, our domestic miners, developers and explorers are at a
fluctuating commodity prices. distinct advantage in this new world because they are further ad-
It is undoubtedly the biggest challenge to the resources sector vanced than so many international competitors.
since the 2008/09 GFC but the levers pulling the world economy While the rest of the global resources sector slashed their ex-
– and indeed the mining sector – are distinctly different this time ploration departments, Australian miners invested in the drill bit. At
around. the same time, several juniors made potentially major discoveries,
In that last major crisis, the mining sector was only superficially fuelling investor interest in a sector which is usually the first to be
wounded. The credit crunch caused plenty of short-term pain but abandoned when markets turn.
metals prices soared in the immediate aftermath of the crash, as The result has been record exploration spending and a pipeline
the world’s governments chose quantitative easing as their pre- of new projects with enough momentum to see them through the
ferred escape plan and spent trillions on infrastructure projects. current market malaise.
This time around, the result could be similar, though for different On the operational front, Australian miners are able to manage
reasons. their cost structures better because they are beginning to see the
Since the economic shock created by COVID, we have seen an- benefits of their push towards renewables and other new technolo-
other round of financial doping by governments and metals prices gies. As energy prices increase, our operators are investing further
headed north as a result. There has since been a disconnect be- in wind, solar and battery storage technology to keep cash costs
tween financial markets, commodities markets in particular, and lower.
general life. Above all, Australia has once again drawn the lucky commodity
In the latter half of 2020 through most of 2021, while the world card. In the 1870s it was gold, the 1960s it was nickel, the 1970s
was struggling under the day-to-day demands of the “new normal” and 2000s it was iron ore and the 2010s it was gas. In the 2020s
COVID had brought, markets were flying, and mining companies and beyond, the trump card will be the battery minerals, and Aus-
were leading the charge. tralia has an entire hand full of them.
The narrative has now turned but while capital markets are in a Regardless of macroeconomic circumstances, demand for
deep trough, the miners may not be dragged down for long. lithium, nickel and all the other battery-related minerals is sure to
Commodities are still in high demand. Those metals traditionally rise in coming decades and Australia is perfectly placed to supply
linked to general economic growth – iron ore and copper particu- them.
larly – will have their wobbles but this financial crisis is being largely While we have had our trade tiffs with Japan and now China,
driven by spiralling raw material prices, not the credit bubble which Australia’s post-war period has been defined by its geopolitical
defined the GFC. stability. And, in an age when end-users are demanding good en-
Steel demand may drop, pulling iron ore and metallurgical coal vironmental and social performance above all else, Australian min-
with it, but every other commodity, from alumina to zinc, is likely to ers are well ahead of their international competitors.
experience strong fundamentals because regardless of demand, We may be in for a short period of pain, several companies may
there is still a supply imbalance. fall victim to the straitened times, but the long-term outlook for Aus-
The reasons are ironically of the industry’s own, unintentional, tralian mining is strong and every digger and every dealer knows it.
making.
Years of underinvestment in exploration and development has
meant the world’s orebodies – whether copper, nickel, gold or any
other metal – are becoming exhausted. Lower grades and deeper
levels require more energy, more water and more complications, dominic@paydirt.com.au @DominicPiper

Page 4 JULY 2022 aUSTRaLIa’S PaYDIRT