Care to put a price on Diggers?

Kalgoorlie’s Diggers & Dealers forum may not be for sale, officially, but the recent purchase of Cape Town’s Mining Indaba conference for $84 million puts a value of at least $24 million on Diggers, and that would be hard price for the owner, Kate Stokes, to reject.

A brief encounter with Mrs Stokes in the exhibition area at this week’s Diggers was the trigger for a fresh bout of speculation about the future of the Kalgoorlie event, which remains the unquestioned leader of the Australian mining-conference circuit.

During that fleeting conversation on Monday morning, the topic turned momentarily to the purchase of Mining Indaba by the London-based Euromoney Institutional Investor. And while Mrs Stokes avoided a direct comment there was a twinkle in her eye.

Investment decisions are rarely based on a millisecond eye movement, or a suppressed smile, but both people in that chance meeting are of an age to know that it’s often the things not said where the real message lies.

Fortunately, these observations are not an investment assessment, they are a comment on what’s happening in the mining world, its associated conference circuit, the future of a big event in the life of Kalgoorlie, and the business plans of the Stokes family.

Mining, obviously, has been through a few tough years, but there are green shoots popping up and people who have been sitting on the sidelines believe now’s a good time to think about getting back into the game

That remark is based on another conversation in Kalgoorlie this week, this one with Jonathan Shellabear, the man who was running Dominion Mining when it was sold to Kingsgate Mining for a very handsome $376 million in 2010 – enough to fund four years on the beach for Dominion’s management team.

Monday’s success of the Duketon Mining float, which delivered an instant 50 per cent profit for investors, was another tell-tale showing that mining sentiment has bottomed and now is a good time to being buying ahead of a sustained recovery.

Euromoney, one of the slickest operators in the global publishing and conference business, agrees with that view, or it would not have handed over $US78 million ($A84 million) for a conference in desperate need of a new owner and a dramatic makeover.

Diggers is not facing the same problems as Mining Indaba, an event that lost its appeal to mining companies and became government soapbox and trade fair specialising in industrial pumps, earthmoving equipment, and professional services.

For all its success, however, Diggers could do with a makeover.

Its organisers are guilty of sticking to a tired, albeit proven formula – a situation similar to a football team that has won a few premierships but faces a choice of either replacing ageing champions with speedy youngsters, or risking failure by going into next season with the same old squad.

Euromoney’s entry into the mining conference business, and its plans to grow its Mining Indaba acquisition, does three things to Diggers: it puts a price on the Kalgoorlie conference; it creates the potential for a bidding war at just the right time in the mining cycle; and it might enable Mrs Stokes to make a timely and very profitable exit from a business founded by her late husband, Geoff.

The estimated Diggers price tag of $24 million is calculated by putting a value on the head of each delegate which, in the case of Mining Indaba, is $12,000 per delegate– a number derived by dividing the $84 million sale price by 7,000, the number of delegates at this year’s Cape Town event.

Applying the same value of $12,000 per delegate to the average number of 2,000 visitors at a Diggers forum gives the $24 million price tag.

There are other ways of estimating the value of Diggers, such as cash flow from the $2,000 each full-fee delegate pays to attend, and by adding that to the price charged for companies to present and/or exhibit, but that sort of financial data is buried deep inside the event’s accounts.

What Euromoney’s purchase of Mining Indaba has done is put a clean value on the head of each delegate, and it is delegates who are the common denominator linking all conferences.

The London publisher, which has an endless list of highly specialised publications to its name and organises 600 trade conferences a year, has also made it clear that more deals will follow the purchase of the Cape Town event.

In the July 16 announcement of the deal to the London Stock Exchange, Euromoney said that it planned “to expand Mining Indaba outside of South Africa”, with the obvious locations of an expanded offering being the world’s other two major mining countries – Canada and Australia.

If the dots joining the Mining Indaba deal to the future of Diggers have been joined accurately, then the knock-on questions include the thorny annual of whether Diggers can stay in Kalgoorlie and retain its unique appeal, or whether it will be moved to Perth where a new owner could encourage it to grow.

In theory, Diggers could easily double in size, but it can’t do that in Kalgoorlie. The event has outgrown the city and its infrastructure. It’s time for a new owner to invest in growing the business, and that’s probably not something that appeals to Mrs Stokes.