Against the backdrop of a turbulent and uncertain global economic climate, Australia’s resources sector hosts the commodities that are both shielded from and most exposed to fallout from the rising geopolitical tensions we face today. So, what then, can we expect in the years to come?
That was the underlying question at Friday’s Pitcher Partners Annual Resources Lunch, held at the State Reception Centre in King’s Park.
Facilitated by Pitcher Partners Perth Chairman Bryan Hughes, the panel was made up of representatives from the gold, heavy rare earths, base metals and corporate advisory sectors of the Western Australian economy.
PCF Capital Group Managing Director Liam Twigger told a 350-strong room that he was sympathetic for those in the junior resources sector at the moment, where there has been a lag in new success stories.
“It’s probably the toughest market we’ve ever seen for the juniors,” Mr Twigger said.
“Right now, the funds aren’t there; there’s barely any exploration IPO’s happening, the appetite for risk is gone, the passive funds have taken over and for anyone below a $300 million market capitalisation it is very hard to get on their radar.
“So, the juniors have had to redefine themselves. The answer for them has been takeovers by the big brothers.”
Milan Jerkovic, Chairman of ASX-listed gold miner Blackham Resources, said gold continues to be one of the few commodities that thrives in otherwise detrimental markets.
“Gold is a proxy for the rest of the world. It is an unprecedented situation that we’re facing with an Australian dollar high gold price at a low exchange rate, which should last for a while,” he said.
“Other commodities, however, are struggling in an uncertain world. Of course, Donald Trump helps gold and there are investors out there that want real, physical things to hold on to, and gold is the logical answer to that.
“Where it ends, who knows? What drives the next phase of growth for us is the unknown.”
Mr Twigger echoed Mr Jerkovic’s comments, saying there has never has been a better environment for gold.
“This is the perfect market; today is the best market you’re ever going to see for gold and it’s probably going to stay like this for the next three years,” he said.
Northern Minerals Managing Director George Bauk told delegates that rare earths – the sector in which Northern Minerals operates – has become a geopolitical hot topic.
“Dysprosium prices have exploded; it’s a different world that we live in,” he said.
“We’ve raised $72 million this year and it’s all come from China, and yet the world’s screaming out for alternative supply chains.”
“The broking industry is broken. There is a lack of interface between the people with money and a story, so trying to raise money can be very difficult.”
As the global demand for lithium has dropped off despite the growing shift towards renewable technologies, Mark Bennett, Managing Director of S2 Resources, likened this transition to the evolution from the horse and carriage.
“The change is happening; however, the evolution to new technologies will be a slow grind,” he said.
“That transition from the horse and carriage to automotive vehicles to 30-40 years, and that’s what will happen this time around too.”