At last week’s RIU Explorers Conference, Westpac senior economist Justin Smirk was most striking, emphasising in several different ways why the “super cycle” was not over and China was not going away but also urging the mining crowd to keep a close eye on the US’ energy movements.

Patersons Securities senior resources analyst Simon Tonkin noted to delegates that China’s better-than-expected import-export numbers accounted for the resources market picking up in recent weeks, citing successful capital raisings by Western Areas, Kingsrose Mining and Perseus Mining.

He also cited Panoramic Resources’ stock soaring some 70% after reporting a drill result of 89m at 1.6% nickel at its Savannah North discovery as proof that “there is still hot money out there looking for the next big thing”

He said an improvement in the mid-cap space could see risk appetite return to the juniors.

However, Smirk warned not to believe anything coming out of China at the minute.

“Be cautious about any soothsayer that tells you anything about China in the next two months,” Smirk told delegates.

“It’s Lunar New Year. January-February is a moving feast in the data out of China.

“It happens at a different time every year. You can have no reading on Chinese data from January to February.

“We just go on what we know: that the Chinese economy finished on a slow point in 2013, went through the Plenum, policies are shifting towards more about development at a sustainable pace.

“There is no great pipeline for infrastructure projects coming online in China.

“They have tight housing policies at the moment – China is slowing.”

However, softening the blow, he said the key to Westpac’s short to mid-term view was slower growth in the near term from China holding down commodity prices – but uncertainty from the developing world, particularly in the US, meant we were in for a “fairly rapid growth rate” moving out into 2016-17, followed by another shock in 2018, which he said “could be a risky year”

This is about when new sources of energy will kick in and change structure balances.

“I don’t talk about it too much but think deeply about what’s going on in the US and how they’re shifting their demand for energy around – net exporter of energy by 2020, no longer an importer of oil from the Middle East by 2015-16,” Smirk told the miners.

“Who is going to be paying for a fleet to be parked in the Middle East, when all the oil that’s in the Middle East is going to Japan, China but not the US?

“The developed world has continued to reduce its demand for energy outright.

“Even though it’s still growing, we’re reducing our demand for energy because we’re becoming more efficient.

“The emerging world, however, is growing through a development phase and needs more energy every day.

“That’s holding us up – and to get that extra energy we need to pay for it – we need new technologies, new sources, new technology, fraccing, deeper oil, gas to liquids, all those things – which means the price for energy does remain higher now.”

In another warning not to believe the hype, Smirk noted that many who said the global financial crisis that “smashed” commodity prices meant the end of the super cycle had been proven wrong, because it didn’t break the trend.

“We do see this as being a phase of the boom not an end in the boom,” Smirk said.

“No one saw China coming nor truly appreciated what it meant and we ended up getting really high prices as people scrambled to adjust to this new, lasting development for raw materials.”

Tonkin noted that all mining commodities were down over the past 12 months.

The best performing were palladium, zinc and tin – the worst were silver, nickel and gold.

However, he said Patersons was bullish on gold, as “there must be a trigger for much higher gold prices”.

“These include a currency or bond crisis where investors lose confidence and are looking for another place to put their money and that may be the gold price, which would move substantially higher,” he said.

He added that fear of escalating unrest in Thailand, Argentina, Venezuela and Syria could also be a trigger, as gold was often a safe haven in times of conflict.

He attributed the recent gold price rise to the US suspending debt ceiling negotiations until 2015.

“The commodities we do like in the medium term are tin, zinc, lithium, niobium and graphite,” he said.

“The mid-caps are mostly near fair value without a further increase in the commodity prices and the small cap resources offer the biggest risk-reward for investors and are attracted to the big discoveries like Sirius and, recently, Panoramic.”

He said with 297 Australian Securities Exchange-listed mining companies with less than $1 million in the bank, Patersons believed mergers and acquisitions would continue but deal size was likely to remain low.

“We’re seeing M&A declining in deal size,” Tonkin said.

“M&A has trended down since the peak in 2007, [plunging] 41% in terms of number of deals but the average size of the deals has also dropped from about $220 million in 2012 to around $31 million in 2013.

“While it would be nice to see M&A pick up in 2014, it really would be against the trend, so I think we’ll see another year of smaller deals.

“But marrying cash with good projects will obviously benefit both parties.”