Western Australia’s mining industry is on the verge of a boom and the battle hardened juniors are gearing up to take advantage of it. Jim Hawtin reports on what industry veterans are expecting the much-hyped boom to bring.
DRUMS are beating to Australia’s north.
No they are not the drums of the Red Army marching towards Australia, as was feared some half a century ago, they are the beats of Asian industrial development, more specifically China and, to a lesser extent, India.
And no they are not gearing for war, but they are screaming out for commodities – mainly resources and specifically metals.
Most of the big Australian resource companies have already moved or are moving. Just look at Woodside’s estimated $25 billion deal to supply liquefied natural gas to the Chinese for the next 20 years or WMC’s five-year nickel deal with China valued at $1 billion. BHP and Rio Tinto are both also about to increase iron ore production to supply China.
Meanwhile, as Asian industrial development sends positive vibrations throughout the entire resource sector, a hungry pack of junior explorers, fuelled by investment flowing back into the Australian Stock Exchange, are sharpening their drill-bits and preparing for an assault on the WA bush in search of that elusive pay dirt.
Some say they are looking for gold, others say copper or iron ore, most say they will find nickel, some are hoping to find diamonds, a few admit to exploring for (up until recently the lowly priced) zinc, others are looking for elusive platinum group elements and the whole lot say they have the potential to find a mixed bag.
However, while the targets are different, the goals are the same – get on the ground as quick as possible and make a discovery while the going is good and the capital is flowing.
Prices in the metals sector have increased dramatically during the past year and industry commentators have started using the term boom – a word that has not been heard in mining circles for some time.
But boom is also a double-edged sword, which has drawn blood from even the most wary investor.
So, is this so-called resource boom, like any other with a down side punters should be aware of?
Spin doctors always say things are good – even when they are bad, analysts, keen to cover their behinds, mostly offer veiled warnings and commentators, well they just tend to confuse things.
Who to ask? How about the tried and tested – those veterans of the junior exploration industry who have been at the coalface of local mineral exploration, seen the booms, the busts, the droughts and still managed to come out on top.
The very ones who are now gearing up to do at it all over again.
Prospector extraordinaire and gold bull Mark Creasy, with his contagiously positive attitude, is confident the resource market’s return to favour will sustain itself for at least another five years, if not 20.
And this is not the first time the discoverer of one of the richest gold deposits in WA has predicted this particular boom.
Late last year Mr Creasy was quoted as saying: “the mining world is in the foothills of a great boom. I’m preparing myself for the first great boom of the 21st century”.
After procuring tenements over the previous bear years, Mr Creasy said he was about to increase his annual exploration spending of several million dollars on his raft of tenements.
He justifies this spending despite the past 10 or so years of bear markets.
“I’ve never lost my confidence – no way. Bear markets are when you really get moving,” Mr Creasy said.
“That’s when the fair weather sailors go away and you can pick up some good ground.”
Mr Creasy said the boom we are about to experience made “common sense”.
He said while the demand stemmed from China and India, parts of South-East Asia were looking to shift up a gear in terms of industrialisation.
However, Mr Creasy warned that while Australia was in a great position to feed this demand, the fall in exploration levels due to a Native Title-driven decline in land access in WA was a serious threat.
He suggested there were always those unknown factors such as a pandemic or a even nuclear war.
“You should never be overly confident because the future is always unknowable,” Mr Creasy said.
Another confident industry veteran, who has been quietly working away in the background for the past 30 years kicking off many successful companies along the way, is serial seed capitalist Josh Pitt.
Founder of the Golden Grove copper mine and now a mining entrepreneur with an almost cult-like following among investors, Mr Pitt has just helped with the merger between Dalrymple Resources with Lionore International which will take over management of Dalrymple’s Thunderbox Gold Mine.
He is now looking to expose the position of his numerous other interests to the upward trending market such as hot new copper float Red Metal .
Mr Pitt said while the strong metal prices were underpinned by real demand from Asia, investors turning away from property were looking to put their money back into the resource sector.
With the money flowing he said mineral discoveries were on the cards for 2004.
“I think now we will have a steady plateau-type environment where there is some serious money the juniors can spend, so you might expect discovery to follow,” Mr Pitt said.
While both Mr Creasy and Mr Pitt, are positive about the future of the juniors, one long-time player who is a little more sceptical is Jubilee executive director Kerry Harmanis.
“It looks all right for the next couple of years, it looks pretty bullish,” he said.
“But I don’t get too excited about these things because I have seen it before go up and down.”
However, with nickel prices currently trading at 13-year highs of $US5.40 a pound and a fear that many nickel stocks are overpriced, Mr Harmanis has reason to play down the outlook.
“We are currently producing nickel and are situated nicely to take advantage of the current price and stock market conditions,” he said.
A veteran of the industry, Mr Harmanis has fought many hard battles and he warns of an ‘X’ factor, having been witness to many unexpected crashes before, which he says has taught him to be quick on his feet rather than second-guess the market.
“Keep your feet on the ground, nose to the grindstone – especially when the markets are raging,” he said.
“You read these articles from analysts that suggest get out of Jubilee and get on to the next nickel play but you look at most of these things and they don’t have any substance.“People put out recommendations just because they want to make a good story.”