Miners upbeat despite the prevailing headwinds

Australia's mining confidence at 5-year low: Survey
Australia mining confidence at 5-year low: Survey   

The annual gathering of the who's who in the Australian mining space kicked off on Monday in the gold mining town of Kalgoorlie, and the mood was cautiously optimistic buoyed by rising commodity prices in recent months.

While a 7 percent rise in the gold price and a more than 30 percent surge in nickel prices have encouraged the market, a report from Newport Consulting suggesting the Australian mining space could be in the doldrums for the next five years.

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More than 90 percent of mining leaders surveyed in the report aren't optimistic about their growth prospects, Managing Director of Newport Consulting David Hand told CNBC.

"Our survey respondents are telling us they need higher commodity prices, they need better demand and they need governments around the world to be friendlier as well," Hand said on the sidelines of the Diggers and Dealers conference.

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Still, Lord Mervyn King, former Bank of England Governor who delivered the keynote address at the conference, tried to sound a positive note, saying that while global growth was still relatively weak, a hard landing in China – a the biggest consumer of Australia resources – was unlikely.

"The short term indicators in China are more positive and I think more generally the developments we see in the world are likely to underpin commodity prices as people start to insure themselves against disruptions to supply," King said in a CNBC exclusive.

A bar of gold and a sample of quartz with a gold vein are arranged for a photograph at the Diggers and Dealers mining forum in Kalgoorlie, Australia.
Carla Gottgens | Bloomberg | Getty Images
A bar of gold and a sample of quartz with a gold vein are arranged for a photograph at the Diggers and Dealers mining forum in Kalgoorlie, Australia.

A theme during the conference is the move by miners to lower their cost bases to help offset the uncertainty of fluctuating commodity prices.

Australia's second biggest nickel producer, Western Areas, which has seen its shares rise 110 percent this calendar year, says being a true low-cost producer is its strategy going forward.

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"We've done a lot of hard work over the last 12 months to become the lowest cost producer in Australia, so when the price of the commodity turns, we aren't caught out," Executive Director of Western Areas David Southam told CNBC.

Meanwhile Northern Star Resources, which has recently expanded its operation through the acquisition of several divested assets, added a cheery note, announcing a significant upgrade to possible gold reserves at its recently acquired Kundana gold field near Kalgoorlie.

Managing Director Bill Beament told CNBC his company hopes reserves at its Pegasus development could top 1 million ounces.