Mining is showing signs of life after the post-boom downturn, but there is still a long way to go in the up-cycle with some bumps and humps to negotiate. Most industry forecasters agree that there are positive signs with more optimism, slowly improving commodity prices, slight share market recovery, increasing capital flow and some M&A activity.

In order to take full advantage of the improvement and to make the next downturn a little less painful, it is important that mining companies and suppliers learn from mistakes made in the last boom, particularly in terms of the need for supply value rather than supply quantity. This, however, is easier said than done as the industry generally has not learned from mistakes made during cycles.

It is also important that governments play a supportive role to the industry across the board, rather than trying to milk what they can. Most, if not all, governments made policy decisions to get more from the industry at a time it could least afford it - as the boom was coming to an end. This exacerbated the decline and reduced the competitiveness of the industry as well as its appeal to investors.

While Newport Consulting’s latest Mining Business Outlook Report focuses on Australia, the same findings apply to the industry across the Asia Pacific and around the world. The report projects a positive outlook for the next 12 months, with 43% of mining leaders optimistic about their prospects for the year ahead, which is more than double the 16% who gave the same answer a year ago. It confirmed the gap between optimistic and pessimistic leaders is closing, dropping from 93% to 55%.

The report also identified an increase in capex, with 27% of companies planning to increase theirs in the next 12 months, in some cases by up to 15%. There is also a significant drop in companies reducing staff. It was the first time in three years that sentiment took an upturn.

Newport Consulting’s managing director David Hand said it was not just a “flicker of life” but a “distinct positive shift in sentiment and outlook”. He said, “Companies are spending again, have more confidence in stabilisation of prices, and have prioritised growth strategies.”

The report includes comments from Gina Rinehart, who said Australia’s mining industry had to act during the decline to ensure it remained competitive internationally. “We also need to significantly and urgently cut the government-imposed regulations, approvals, permits, licences and compliance cost burdens that are placed on Australia’s resource industry. Yet little is happening.

“Without this, we will continue to see declines in exploration and investment, instead of growth, and suffer the consequences that reduced exploration and investment brings, including the negative effect on our standards of living. The time to act is now before further opportunities are lost.”

Further evidence of some sort of industry recovery comes from developing markets focused company Capital Drilling which has won a number of new exploration contracts and states: “Recent increases in the gold price along with increased capital markets activity in the mining sector give the group an encouraging outlook.”

The third quarter edition of The ASIA Miner includes further evidence of recovery, particularly in Mongolia where the agreement to proceed with the Oyu Tolgoi underground project is the starting gun to resume the country’s development as well as a positive sign for the industry globally.

To better equip the industry for recovery and a smoother path ahead, it is vital that things are done differently because the same old methods no longer cut the mustard. Technology is an important tool in this process and the comprehensive Best of Germany supplement outlines many ways in which German companies can support future growth.

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Sylwia Pryzbyla, Editor

Sylwia Pryzbyla
Editor, ASIA Miner and Australian Editor, E&MJ
[email protected]

Sylwia Pryzbyla has more than two decades of experience in media and publishing industries.