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The Mining Outlook According to RIU
Author: Sonia Tuner, Sales and Marketing Manager
Published: 14th March, 2023
The RIU Explorers conference this year saw a packed full house of over 1800 delegates and 200 exhibitors in the Esplanade Hotel, Fremantle. Both exhibitors and attendees there had a pretty bullish outlook, despite the repeated doom and gloom in the media in regards to interest rate rises and the looming recession.
The conference highlighted the rising star that is Lithium in the metal world, and it seemed to me that for once the Lithium and battery minerals exhibitors were equal to that of gold. Whilst COVID stalled IPOs, but not as much as M&A’s, the Lithium and battery minerals companies still performed better in the IPO space. There were a recorded 3,500 deals over the past 10 years and we are seeing more and more frequent capital raises with the average deal size being $16 million.
There is a little bit of good news for gold and that was the increased activity due to West Africa opening up. This region is no longer as big a risk as once perceived, with a lot of good news stories and activity from miners such as West African and others that have made this jurisdiction a mining gold boom.
Exploration spend did suffer from 2020 onwards and this was due to tendency for companies looking for mergers or acquisitions rather than exploring themselves. Once again Lithium out performed gold in the exploration stakes, however overall we have still not got back to the exploration spending boom of 2012. Another point to note is that we do see that the size of mines are decreasing, with a trend emerging to get smaller, more agile mines up and running, rather than wait for the larger more complex projects. This probably plays out in the sheer number of mining companies presenting and exhibiting this year that were at record numbers.
Another big talking point was with the cost of labour, the challenges in supply chain and the increase in interest rates, how the market was handling the increase in costs to get a mine up and running. And whilst there was a nod that costs were on the up, they were actually much slower in Australia than anywhere else.
However, the sobering number for Aussie miners was that generally the overspend on builds in Australia was tracking at 19%. This indicates the need for better management and tracking of cost controls as we enter this even more uncertain time with the media reports on recession.
One new trend that was highlighted at the conference is that that mining to a margin is becoming more popular. This is mainly due to inflation reasons as we are expecting that margins will become impacted and that cash generation is going to become harder. Therefore the management of cashflow and reporting of margins on the project will become critical for the shareholders.
All in all the insights from the RIU conference were not as much doom and gloom as the overall day to day media, and some real positive and promising highlights to what was a busy and good 3 days. Looking forward at the year, we are expecting many miners to look at tightening their margins as we brace for the possibility of a recession as well as further increasing interest rates. Investing in more automated processes and maximising productivity through software may help miners alleviate some of the pressures of the rising costs and allow miners to get to the other side of the upcoming recession in good shape.
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