Upbeat message delivered at mining conference
New Zealand is part of the global mining industry facing strong headwinds with projects halted and widespead layoffs, but there are glimmers of hope, delegates at a conference in Nelson heard today.
Several hundred representatives of the New Zealand and Australian mining industries have gathered in Nelson for the New Zealand branch of the Australasian Institute of Mining and Metallurgy annual conference.
Security was tight at the entrance to the Rutherford Hotel this morning, but there were no signs of any protest.
A strong message from one of the keynote speakers was the need to operate an "open and transparent industry", which was crucial to gaining social licenses, general manager of New Zealand Petroleum and Minerals David Binnie said.
"They are hard to gain, and easy to lose.
"The industry has to meet the expectations of New Zealanders," he said.
Corporate adviser and investment banker Tony Haworth warned of a series of orange and red lights ahead which stand to have a significant impact on the industry, particularly in areas of exploration, production, explorer perceptions, access to capital, the regulatory environment, and government investment in new data.
Mr Binnie said that while New Zealand has been in the "too hard basket" for international investors, and that raising finance continues to be a huge challenge for the industry, there were bright spots on the horizon.
New Zealand stood to gain from renewed interest from Australians seeking to escape a tougher environment and the return of skilled workers.
The mining boom in Australia had "ended with a thud", delegates heard.
AusIMM president Geoff Sharrock, who opened today's conference with the Tas McKee memorial address, said 2013 would be a "very challenging year" for the industry.
Tasman Joseph McKee was a Nelson-born geologist and co-founder of the former Fruitgrowers Chemical Company at Mapua.
"We could all do with a bit of inspiration. There is change and uncertainty but the minerals sector is still strong and remains an important employer," Mr Sharrock said.
He said the industry faced strong cost pressures and it needed to look to former leaders such as Tas McKee for what he might do in this climate: Remain positive and focus on opportunities.
The downturn had resulted in suspended projects and large job losses, which had led to professionals seeking to upskill themselves with further education.
Mr Haworth said in his review of the New Zealand mining industry that the past 12 months had been tough and led to a "bloodbath" over falling commodity prices, especially as China's GDP growth had slowed.
Key New Zealand mineral export prices had plummeted and global mineral exploration budgets had reached new record levels of $US20 billion.
Access to capital and its allocation was the "number one risk factor" for the industry, Mr Haworth said.
"Resource nationalism" and maintaining licences to operate remained key risks. He said the need to communicate and demonstrate that the industry's value went beyond shareholder return was critical.
Mr Haworth said that in New Zealand production statistics were subdued. Gold had declined last year and coal production was flat. Ironsand was also in decline but aggregate and sand production showed signs of being on the rise.
"The upside is the domestic market with the Christchurch rebuild kicking in."
Oceanagold's Reefton mine was facing "care and maintenance", or being put out of use until the outlook improved, Mr Haworth said.
He said the mining industry in New Zealand contributed $1.4 billion to GDP in 2010 which was around 50 per cent of the $2.7b contributed by the oil and gas industry.
Internationally, the world average in the mining sector was 6.4 per cent of GDP.
"In the current climate expenditure on investment is going to be challenging.
"Ongoing investment and promoting pure mineral potential will determine the future," Mr Haworth said.
However, positive signs for the industry included a 30 per cent increase in mineral exploration spending to $47 million, new projects, and aspects of regulatory change which were easing the pathway for growth and development. Processing times for permits had dropped and the new Crown Minerals Act was expected to lead to further efficiencies, delegates heard.
Mr Binnie said that while the global commodity cycle continued its downward trend, and it was clear that raising finance remained a huge challenge, he expected the "short cycle trough" to soon bottom out.
"There is significant potential for future. The market is tough but I'm hopeful for the future.
He said plenty was being done in New Zealand to attract new investors and there had been significant progress made to engage iwi and local authority.
"The impacts of this industry last for generations. We want success for them, and for us now," Mr Binnie said.
The conference continues this week.
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