slr caused a stir at diggers & dealers

August 04, 2009

Diggers and Dealers, Day One: Friedland And Fortescue Are No Shows, But Plenty Of Chinese Are Working The Floor This Year.

By Susie Boeckmann / www.minesite.com

Diggers and Dealers opened its doors for registration and people began arriving from 7am onwards. Buses ran all around Kalgoorlie stopping for anyone who looked as if they were a delegate. The Kalgoorlie Times carried a special edition highlighting the conference, featuring companies most likely to make the headlines this week. The Goldfields Centre was packed out early with around 1,750 delegates, and later more people without entrance tickets who stayed all day in the car park catching up with their colleagues and friends.

The main theatre was buzzing as Barry Eldridge, the Chairman of Diggers and Dealers, opened the event with a speech reminding the delegates of the difficulties of the past year, of how commodity prices dropped off and funding dried up for the mining industry. He put great emphasis on the benefits of Chinese customers who basically opened their cheque books when all others had closed theirs.

He then introduced Professor Nouriel Roubini (otherwise known as ‘Dr Doom’ for predicting the US housing bubble and credit crunch way before anyone else). It was a fascinating speech which described all the events that have caused the recession for the US, Europe and to a lesser extent Asia. Will there be deflation or inflation? How far will the US dollar fall? When will growth return and the consumer spend again?

Roubini praised the Fed for throwing “every weapon possible, bazookas, guns, missiles” at the problem, and preparing to spend US$12 trillion in the US alone on fiscal stimulus. He also said that he sees a light at the end of the tunnel at the end of this year but that “green shoots are full of yellow weeds”. He also said that he fears that recession could return in the second half of next year. He was more optimistic about the Australian dollar, and about the resources sector being held up by China for the time being. The carry trade is returning, Australia still has a housing problem, and banks may need to increase reserves, but the outlook is a lot better than it was at the end of last year.

Commodities could rise against currencies, continued Professor Roubini. Oil could rise as supply worries from various countries emerge, but if it rises too fast this will carry the immense risk of causing a double dip recession. Emerging markets such as China and India should show growth before the US. But he added that he fears that commodities prices and equities have risen too high to be sustained at present. Gold should rise when inflationary pressures come in. The Professor spoke for 53 minutes and took many questions. Everyone was spellbound and he left a lot of food for thought,

Next to present was Ivanhoe Mines, and there was disappointment as the charismatic Robert Friedland was due to speak but was a no show. Rumour had it that he was in meetings with the Mongolian Government. Ivanhoe Australia has reported significant discoveries of copper, gold, and the highest grading molybdenum-rhenium deposit in the world. On the subject of no shows, it was also noted that Fortescue Metals is not presenting this year.

But there are several Chinese and Asians present, which has not happened before. It was also surprising to hear some Australians conversing to them in their language. We talked to some of them and they were very thoroughly examining each company on show. It has to be said that most Australian companies seem to have visited China or are actively in talks with many Chinese entities, either big or small. A lot of offtake and funding deals have already been completed.

Among the standout companies, Apex minerals seems to be making good progress in becoming a mid tier gold producer, after overcoming several glitches over the last year. The company is now increasing production to 150,000 ounces for the December 2009 quarter. Apex recently spun off its nickel assets into Croesus Mining, soon to be renamed Sirius Resources.

Mincor gave a good presentation, and there seems to be quite a lot of interest in this company and comment that it has been ignored in the recent past. It’s WA based and is Australia’s third biggest nickel producer by volume. Mincor is cashed up, debt free, and pays regular dividends. It also has good exploration prospects, boasts cash costs at multi-year lows, and nickel grades at multi-year highs.

Meanwhile, Silver Lake caused quite a stir both as a newish gold company, since it’s only been on the scene since autumn 2007, and because it had a 31 kilo bar (100 ounce) on its stand. The company is set to deliver strong cashflow from mining its 1.5 million ounce resource base. It also claims to have the highest grades of any West Australian gold mine.

We talked to Chris Davis of Energy Minerals Australia (EMA) which is a Uranium company 250 kilometres from Kalgoorlie. EMA has just raised A$12 million and will shortly start a scoping study. It has very high grades of non JORC proven uranium and aims to produce 1,000 tons per year. This area was owned by the Japanese in the 1990’s but they walked away when the uranium price dropped through the floor. EMA has won a lawsuit over tenancy claims, but an appeal is pending which is an irritant that needs to be resolved. When it is, this could be a very interesting uranium play.

Sino Gold continues to make good progress. This ASX and Hong Kong-listed company is the leading international gold exploration and mining company in China. Sino Gold’s reserves total 5.1 million ounces, and resources total 8.2 million ounces. The company is targeting annual gold production of 400,000 ounces per year. This looks to be a pretty good value gold play.

We also checked out the Flinders mines stand. These guys used to be looking for diamonds, but when they started drilling they discovered iron ore and now hope to be shipping high grade magnetite within six months.

Time for a break with the Nex Metals cocktail party in the marquee – good food and wine. John Jones of Troy kindly drove us to Michael Kiernon’s ‘sausage sizzle’ bash at Flanagans. He was a very good host. He told us all about his new company called Stirling Resources which will be only controlled by him and his family. He has some new projects and is reorganising The Davyhurst mine which used to be Monarch Gold. This will be managed by Bruce Maluish who used to head Mathilda Minerals, which folded about a year ago. Then we were on to the Palace which was heaving with people and where there was a lot of ‘booty shaking’ as well. Several alcoves appeared to be witnessing some devious action with the skimpies! Time to think of tomorrow.