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Resources not blown

off course (yet)

by market headwinds

t has been a torrid three when the market inevitably turns again.
Imonths for financial mar- It is a similar situation at Paydirt’s own Africa Down Under, of
kets, national economies which the majority of this edition is dedicated to previewing. The con-
and everyday people with ference was understandably quiet in 2020 and 2021 with the hard
inflation and market pressures placing enormous stress on all parts border preventing international delegates attending. The bounce
of the global economy. back this year is set to be strong. We have already received confir-
Resources companies have not been immune with share and mation of attendance from the mining ministers of Ghana, Nigeria,
commodity prices taking a beating in the last three months. Strange- Zimbabwe and Gabon and expect to welcome many others in the
ly though, resources executives seem largely unperturbed by the five weeks before the conference starts.
downturn with many of the companies I have spoken to recently The contrasting fortunes of mining and the wider economy are
upbeat about the medium and long term, even if the short term sug- even stronger when it comes to African resources stories. Typically,
gests things could get worse. you would expect to see investment in higher-risk jurisdictions shriv-
Just how detached sentiment in the resources sector is from the el as investor risk appetite decreases but there is a strong sense this
rest of the global economy is demonstrated by the conference sea- won’t happen in this cycle because of that dry development pipeline.
son we are entering. Africa remains the most geologically attractive continent in the
This issue reaches you on the first day of Diggers & Dealers, the world. Investors have seen the likes of Tietto Minerals Ltd in Cote
largest mining industry conference in Australia. d’Ivoire, Sandfire Resources Ltd in Botswana, Ionic Rare Earths
If share and commodity price performance were to be reflected in Ltd in Uganda and Sovereign Metals Ltd in Malawi rapidly advance
attendance at Diggers, you would expect one of the lowest turnouts projects from discovery to PFS level in less than two years, demon-
in years. However, from all reports and anecdotal evidence – the strating the large-scale opportunities which can still be found on the
scarcity of flights and accommodation, the amount of side event in- African continent.
vitations being received – it appears the forum is set for one of its With the metals supply/demand imbalance set to return in the sec-
biggest years ever. ond half of this decade, the world’s miners and consumers are once
Some of this can be accounted for by the opening of borders. Dig- again looking at Africa to offer solutions, which – if done properly
gers 2022 will be the first in three years to welcome interstate and – will create wealth and prosperity for the continent and financial
international delegates and there will be plenty of brokers, bankers success for the Australian companies already there.
and financiers eager to ensure they are present and not missing the Not that every company is outperforming and late July saw an-
next major discovery or corporate deal. other gold company enter administration with Wiluna Mining Cor-
But I think the main reason Diggers numbers are still strong is that poration Ltd seemingly accepting defeat on redevelopment of its
the industry has made sure it is well insulated against the worst of namesake gold operation in WA.
the global downturn. Unlike previous booms when companies wast- I don’t know the Wiluna Mining management well and admit I
ed cash on ill-fitting corporate deals, overly ambitious expansions haven’t followed its most recent efforts to get the mine profitable,
and lavish marketing campaigns, they have been wiser this time but the latest chapter in the Wiluna story doesn’t come as a surprise.
around. Despite the share price corrections and shrinking margins, In 17 years covering the industry I’ve witnessed numerous com-
few of the mid-tier miners in Australia are in any real financial trouble panies and management teams attempt to make money out of the
and appear equipped to ride out the storm. notoriously tricky Wiluna orebody and they have all failed, no matter
At the junior end, explorers took advantage of the market condi- the gold price, the market sentiment or the strategies involved.
tions in FY2021 to raise big licks of cash. In previous booms, ex- Any number of mine plans and tactics have been employed but
plorers were more content to a raise small amounts in the hope of the outcome has remained the same, the metallurgical properties of
achieving the company-making discovery without diluting share- the refractory ore making it almost impossible to guarantee recover-
holders. ies and therefore enough ounces to make the operation work.
The problem is, there are few projects which are found, drilled We often hear companies describe their operations as “cycle-
out and then developed within one commodity cycle. Companies proof”, meaning the quality of the asset is such that it will make
who don’t raise enough may find themselves with a good discovery money in any part of the commodity cycle. Wiluna has shown itself
but no means of advancing because the market is shut for capital “cycle-proof” as well. Unfortunately, in this case, it has proven to be
raisings. unable to make money in any part of the cycle.
This time around, many explorers have recognised the need to
have enough cash to see them through the downturn. That means
the exploration stories which would usually stall during a market
trough are still moving forward, ready to move into development dominic@paydirt.com.au @DominicPiper

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