Diggers & Dealers – The Wrap Up

Diggers and Dealers 2017 is already a fading memory (which should not be construed as a comment on the impacts after-hours networking!) but there was in fact, a great deal to remember and on which to reflect as we head back to business as usual.

D&D17 was notable for a variety of reason. Perhaps most encouragingly for those who have survived through the “capital drought” of the last several years was the reappearance of brokers, analysts and financiers at the conference. This change in the mix of attendees (which has been to some extent dominated by service providers and suppliers in recent times) must surely be seen as an indicator that “money” is once again interested in the sector. The result was a return of the energy that some of us with slightly longer memories than most have generally associated with D&D. The conversation was optimistic and upbeat.

All that upside notwithstanding, I still had a number of interesting conversations around the challenges of raising capital. Perhaps the most interesting was the comment that exploration companies that have survived through the lean years are now being “punished” by the market for doing so. That line of argument holds that companies that raised cash, say five years ago to explore, but who have been frugal and husbanded their resources are being seen as not spending the cash on what it was intended for – exploration. As a result, they are now facing an even harder task to raise more.

What is increasingly evident is that the explorers have abandoned their offices and headed back into the field. A consistent topic of discussion was the ongoing difficulty in finding exploration drill rigs. Demand has spiked and now looks to have become a fixture. Moreover, while the early trend seemed to be that these were being used on brownfields and resource expansion tasks, greenfield searches are now back in vogue. The cycle has well and truly re-started.

The corollary to this is that regardless of the upswing in sentiment and the modest improvement in commodity prices, investors are still looking for projects that “stack up”. Several times I heard comments to the effect that bringing back the same old projects again and again with promises of being smarter than the previous owners was simply not enough to entice cash out of wallets. 

That said, the conference was replete with examples of what is possible with sound, engineering/science based approach to identifying and then exploiting ore bodies, even where others had been before and failed. Tight times have, I fancy returned the focus to the proper and diligent application of the principals of mineral extraction and to the basics of good business – cost management, risk management and capital application and reinvestment.

There were, of course, the mandatory “big yellow machines” on display in front of the venue and as always, they garnered a lot of attention – especially from those that don’t often get up close to these beasts. Perhaps most tellingly, though was the prominent and impressive presence of an autonomous drone, specifically designed to cater to the needs of the industry and the rugged environment that this implies. It was part of a broader emphasis on technology across the conference. 

Autonomous trucks, boggers, trains and all manner of the plant are now almost mundane. Big Data is here. The capability it offers an industry that relies so much on data analysis over sometimes very long periods, means that the further adoption of data mining has the whiff of inevitability about it. Expect even greater discussion around this at future editions of the conference.

It’s not just equipment that was being discussed, either. For the first time in almost five years, I actually had conversations with people who are short of people. Labour demand is on the rise again - the first time in my recollection since 2011. This will for the moment not bring a great deal of cost pressure, as there remains a level of excess capacity that can yet return to the industry, but it’s fair to say that the inevitable rise in cost-per-head must follow soon enough. Productivity improvement is also front of mind (see technology above!).

From a commodity perspective, gold remains king and the “rock stars” of the conference were those that had a story of sensible stewardship and financial prudence around exploration, resource management, efficient processing and cost containment – all of which add up to healthy margin. We haven’t yet returned to the days of marginal plays with minute grades, and one suspects memories are still long enough to keep these out of the game for a while yet. 

The “battery” minerals (lithium, zinc, copper, nickel, graphite, cobalt) were also well represented as changes in technology change the demand on the minerals sector. Robert Zoellick’s well-made point that renewable energy technologies are hungrier for minerals than the status quo must surely have given comfort to these and even some of the more traditional miners.

The week ended, as it always does with the Gala Dinner and the awards for Digger and Dealer of the year respectively. It would be wrong not to acknowledge, though the most impressive logistics exercise of each year – the dinner itself. A small army of wait staff, chefs and others is flown in specifically for the purpose of the event. Between Lunch on Wednesday and 6:30 that evening they dismantle the exhibits, set up tables, stage, lighting, audio-visual and all the makings of a dining room for 2,000+ guests. Meanwhile in a temporary kitchen they prepare a meal that most restaurants in the city would proudly claim. And by 2:00am they have dismantled it all and are on their return flight to Perth. Talk about blitzkrieg meets Hell’s Kitchen!

The awards went deservedly to St Barbara Mining (Digger) and Gold Road Resources (Dealer). Both have had strong years and the two awards recognise the very different requirements of the stages in the mining lifecycle. For those with one eye on social media through the event, though came a sobering message – which I noticed in the middle of the awards ceremony. On the same day, First Quantum Minerals announced the re-closure of Ravensthorpe nickel mine with the likely loss of 500 jobs. 

It’s the nature of the industry and the hallmark of those that work in it – cyclical, sometimes tenuous, but always optimistic.

That was Diggers 2017. Now back to work!