Two came from that aspect of mining everyone forgets in a downturn; exploration and discovery.
The third came from a sector in even more trouble than mining; banking.
Nickel and copper at the Nova discovery of Sirius Resources in the Fraser Range of Western Australia was a brilliant reminder that “diggers” as well as “dealers” created wealth in mining.
More copper and a dash of gold at the Hillside project of Rex Minerals confirms the critical role of exploration in adding a spark of life to mining as it goes through one of its cyclical downturns.
The memory of Mark Twain’s famous denial of his early death, (“greatly exaggerated,” he said) from HSBC Bank was the third act of defiance to help offset some of the grim news from the top end of mining which started with the reporting of heavy losses and rolled into threats of projects being canned.
Before the good news, a reminder of the bad news which will get worse before it gets better.
Canada’s Teck Resources started proceedings with a 65% profit cut caused largely by lower coal prices.
The British/South African Anglo American went one better with a 70% profit fall.
Rio Tinto will chime-in next week with its half-year profit expected to be down sharply, followed by BHP Billiton’s full-year result on August 22 when fireworks can be expected in the shape of a sharply lower profit, confirmation that the $30 billion Olympic Dam expansion is on hold and perhaps a few “men overboard” as blame is dispensed for the disastrous adventure in US shale gas.
The “days of reckoning” through which the mining industry is now passing were as predictable as last week’s alarm call at Grange Resources and its overly ambitious iron ore plans built on low-grade magnetite.
Why anyone is surprised by the profit falls, production cutbacks and investment pause is perhaps the biggest surprise of all.
As Rio Tinto former chief executive Leigh Clifford once famously said of mining, “they don’t call it a cyclical industry for nothing”
Well, for anyone who came into mining 10 years ago, welcome to the downward turn of the cycle.
For anyone who has been following the game for as long as Dryblower, this current low point is almost welcome because we knew it was coming, just as we know an upswing will follow – as Clifford said, the industry is cyclical.
First clue to the eventual return to more buoyant times, which are probably 12 to 18 months away, came with the Nova discovery of Sirius, a find for which prospecting legend Mark Creasy deserves fulsome praise.
It was Creasy who, at least 20 years ago, started banging on in his long-winded way about the discoveries waiting to be made in the Fraser Range, a region where major geological structures have collided.
The problem, which Creasy refused to accept as a reason to ignore the region, was the thick covering of sediments and wind-blown sand cover.
He was, and remains, a fully paid-up member of the Roy Woodall fan club, a group who sing the praises of the former Western Mining chief geologist who wrote a seminal paper titled: “peering beneath the regolith” – which is just what’s happening at the Nova discovery.
Rex is finding life somewhat easier at Hillside but the news of its latest copper/gold assays will put a spark into the South Australian mining sector as it gets ready to mourn the mothballing of the Olympic Dam expansion.
As for HSBC, well it went where no bank has been this year, reminding clients that “reports of the mining boom’s death are greatly exaggerated”
In a carefully constructed and upbeat assessment, analysts at HSBC pointed out that the boom had three stages – which Dryblower reckons is one stage short.
The HSBC list is:
- Commodity price driven, boosting incomes and investment
- An investment pick-up as easy money from the price phase is invested in new projects
- An export boost as the new production capacity hits the wharves.
Missing, perhaps because bankers never look that far down the pipeline, is phase 4: exploration and discovery, with the early stages of mining providing the greatest capacity to surprise and disappoint.
Sirius and Rex are reminders that exploration dollars are still grinding their way into the ground and more discovery news will flow as the cycle turns, the bad news is absorbed and preparations are laid for the guaranteed recovery.
This article first appeared in ILN's sister publication MiningNews.net.
