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Investor Relations, News

How good is Diggers? – an ex-PM, the gold price, Trump and greenfields exploration

by

As far as opening days go, day one at Diggers & Dealers in Kalgoorlie-Boulder delivered in golden spades.

The sun was shining, the coffee machines withstood testing conditions and John Howard proved the most popular keynote speaker here since …. the last time an Australian Prime Minister completed a full term. Which, of course, was John Howard, a point made rather well by Diggers & Dealers’ outgoing chairman, and gold industry doyen, Nick Giorgetta. Giorgetta hands over to Jim Walker on Wednesday night.

“How good is the gold price?” Howard, channelling the current PM, asked an estimated near-record crowd of 2400 miners, bankers, brokers and media at the Goldfields Arts Centre.

“And how good is Steve Smith?” he added, in reference to his first love, cricket, and the Sunday night heroics of the former Aussie skipper against England.

The crowd loved it and lapped up everything the ex-PM threw at them.

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Howard had the crowd eating out of his hand. From his opinion on Donald Trump – praised for his great work on stimulating the US economy and having a crack at Europe over defence spending, but criticised for picking a fight with US intelligence agencies – to the Adani coal mine and his views on climate change (Howard believes ending poverty is a greater moral challenge than global warming) and the fact he disagreed with the Reserve Bank’s interest rate cut. What levers were left for the RBA to pull in the case of an unforeseen event, Howard pondered.

As one local hack later quipped, “it was like a Liberal Party fund-raiser”.

KISSING FROGS

It was the perfect start for this year’s rendition of the largest mining and investor conference in Australia.

Gold dominated the conversation.

Popular miningnews.net columnist Dryblower’s in-jest suggestion that the gold mining industry should erect a statue of Trump in Kalgoorlie-Boulder resonated with many. After all, the US-China trade wars have pushed (Aussie) dollar gold to above $2100/oz, delivering $1000/oz cash margins for many of the 24 gold companies presenting this week.

Underpinned by miners’ promises to use the record cash inflows to reward shareholders, the lure of big dividend cheques is driving many ASX-listed gold stocks higher and higher.

And the golden outlook has got the drums beating – quietly but persistently – that M&A activity is brewing. Bankers and lawyers are talking up activity levels and pointing to North American players using the weakness in our currency to partake in some of the Australian gold boom cashflow bonanza.

Consolidation in the gold sector has been talked about for a few years now but is yet to happen.

St Barbara (ASX: SBM) boss Bob Vassie, one of the more entertaining presenters, said, “we have kissed a lot of frogs”, a reference to the challenge of finding a partner both suitable and willing to form a value-creating union. In the end, St Barbara found Canadian target Atlantic Gold, a $768 million deal that attracted some surprise in the marketplace before it was completed last month.

More deals are likely, possibly based on conversations started or even continued here over the three-day talkfest.

DRILL LIKE THE WINU

Typically, yesterday’s day opening session featured industry heavyweights including Rio Tinto (ASX: RIO) and South32 (ASX: S32) with a healthy focus on exploration.

While Rio only touched on the Winu copper-gold discovery in the Paterson region in WA’s North – which, ironically, was all the delegates wanted to hear from Rio – South32 talked up its strategy of being a partner of choice for juniors looking for exploration funding support.

Simon Collins, South32’s chief development officer, marked his company’s Diggers debut by pointing out that his team had assessed 200 opportunities over the past four years.

“This approach has served us well, allowing us to be out in the market at a time when there was not a lot of risk capital being allocated,” he said. “And we now have over 20 active greenfield exploration projects in Australia, the Americas and Europe.”

Talk about kissing frogs.

One of the most successful explorers, Mark Bennett of Nova copper-nickel fame, has shifted his attention to gold in the top part of Finland, north of the Arctic Circle and close to Agnico Eagle Mining’s Kittila gold operation (Europe’s largest gold producer, with a resource of 55mt at 4.23gpt).

News yesterday that S2 Resources (ASX: S2R) had hit gold at its Aarnivalkea project during a shallow diamond drilling program – best intercepts included 5.5m at 2gpt and 6m at 5.4gpt – sent the Bennett company’s shares up as much as 12 per cent during the day.

And Cardinal Resources (ASX: CDV), one of the more advanced Africa-focused gold plays, reminded us of the 5.1 million ounces of proved and probable reserves at its Namdini project in Ghana. A feasibility study is nearing completion ahead of a potential decision to start construction early next year of a long-life mine producing around 294,000oz per year.

Closer to home, exhibitors NTM Gold (ASX: NTM) and St George Mining (ASX: SGQ) are busy drilling in the northern Goldfields, at their Redcliffe gold and Mt Alexander nickel sulphide projects, respectively.

And BHP (ASX: BHP) confirmed that, like Rio in the Paterson, it was willing to give greenfields exploration a go.

Part of the BHP Nickel West division’s efforts to find more nickel sulphide has shifted to the Seahorse project in the Madura Province along the Nullarbor. Nickel West has assembled a 26- tenement package along a strike length of 350km over an area of 13,000sqkm – almost half the size of Belgium.

“It is one of the largest independent greenfields nickel exploration projects in Australia,” Nickel West boss Eddy Haegel told delegates.

“This geological setting is similar to world-class nickel mining camps such as Voisey’s Bay in Canada and possibly the last large-scale belt of rocks available in WA that is prospective for sulphide deposits.

“It could yield very little but we are hopeful for positive results.”

DRILL AWAY

Today’s focus is likely to be three-fold:

The acquisitive Resolute Mining (ASX: RSG) and Sandfire Resources (ASX: SFR) are presenting, as are iron ore heavyweights Fortescue Metals Group (ASX: FMG) and Gina Rinehart’s Roy Hill, while Canada’s Kirkland Lake Gold (ASX: KLA) can remind us again just how much cash its stunningly high-grade Fosterville gold mine in Victoria is generating.

Last up at the podium tomorrow will be Australia’s newest big-ticket gold producer Gold Road Resources (ASX: GOR), which managed to time the start-up last month of the world-class Gruyere mine (JV with Gold Fields) to gold-priced perfection.

Peter Klinger is Cannings Purple’s Director of Media Strategy. He has provided strategic communications advice on more than $1 billion worth of corporate transactions over the past year. Peter is a former Business Editor of The West Australian and has also worked for The Times (London) and the Financial Review. Contact Peter

 Cannings Purple’s market-leading Investor Relations team is on the ground in Kalgoorlie-Boulder for the full three days of Diggers & Dealers.

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