News and views on the ground at Diggers & Dealers in Kalgoorlie

CNBC is at the annual Diggers & Dealers conference in Kalgoorlie, talking to the big resources players and visiting even bigger mines.

Stay with us for the best of Australia's premier mining conference.

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Why nickel miners may get a break this year

Nickel prices have surged some 25 percent this year and hit a near-12-month high this week, but global output is still robust in what has been a low-price cycle, Western Areas MD Dan Lougher says.

"What we were hoping in the last 18 months was for some production to come offline...but [there's been] nothing really serious," he says.

Nickel prices hit a 13-year low in February, before Philippines shut mines on environmental concerns, setting off the recent rally. The country is the largest nickel shipper to China, after Indonesia in 2014 banned the export of unprocessed metal ores in order to boost its own downstream commodities processing industry.

Still, there may be some respite for prices with analysts predicting a supply deficit this year - the first in five years, Lougher indicates.

Meanwhile, Western Areas will continue to focus on cost reduction, he says.

"We can't control [foreign exchange], we can't control the price; we just control grade and production cost," Lougher adds.

The company operates nickel mines in Western Australia. The metal is used in battery production.

St Barbara is breathing easy now, after turning around its business from near-collapse just two years ago.

The Australian-listed gold miner's share price has rocketed more than 537 percent since the end of July 2015, and the company capped the fiscal year off with record gold production in the 2016 financial year.

While other gold miners have been growing aggressively through M&A, St Barbara has been focusing on paying down debt, a hangover from its decision to merge with Allied Gold in 2012.

But St Barbara's MD and CEO Bob Vassie tells CNBC exclusively that the tide has turned and it's time to look for deals again, although with high valuations any deal would likely have to be scrip-based.

In a heady period for the Australian gold sector, Vassie says it's important for gold miners "not to do anything too silly" with the cash that's out there.

St Barbara posted record gold production of 386,564 ounces of gold in the 2016 financial year, smashing its guidance of up to 384,000 oz, and is benefiting from strong margins. The company's all in cash costs are at around A$800/oz, giving it margins of around A$1000 considering the strong Australian gold price.

The stock was at A$3.22 on August 1.

Evolution Mining is taking a break after pursuing an aggressive growth strategy over the past 12 months.

Australia's second-largest listed gold miner has added three assets to its portfolio since 2015 and is now producing 800,000 ounces of gold per year, so it's time for a breather, Executive Chairman Jake Klein says

"We're done for now. We're very happy with what we've bought," he says

Australian gold miners are getting a big boost from the strong gold price and the soft Australian dollar, which is translating to an Australian dollar gold price above $1700/oz. With Evolution's all-in sustaining cash costs at $1014/oz, its margins are currently sitting around $600/oz.

Evolution's share price has run up 189 since end-July 2015 - ending August 1 at A$2.89 - alongside other miners, and Klein says the rise in gold miners' share prices are justified.

He says the structural transition in the local gold industry, from one dominant producer to many smaller ones, as well as a big drop in costs, means Australia is a great place to be a miner once more.

The rare earths industry is still recovering its bubble, Lynas's managing director Amanda Lacaze tells CNBC.

"The rare earths in 2011 absolutely had a bubble, prices were 10 times what they are today," Lacaze says. That bubble burst when China dropped a decades-old quota limiting exports, a move that weighed on prices.

Lynas, the only rare earths producer outside China, had been a market darling during the bubble years, with its share price hitting $2.55 in April 2011. More recently, though, the stock has been hovering around 8 cents with negligible volume.

Lacaze, who joined Lynas in 2014 from telco giant Telstra on a turnaround mission, adds that the industry is "gradually remediating itself," noting the many uses for rare earths.

Rare earths are a group of minerals used in products raning from smartphones to cars.

Simich: I've been around too long to talk downturns

Sandfire Resources MD and CEO Karl Simich reckons he's been at 28 D&D conferences - this year is being celebrated as the event's 25th anniversary - so has somehow lost three years in translation.

But by any count, he's had a long stint in the resources sector - too long to worry about copper's downturn.

"I've been in this business for 30 years. We go through cycles, the pendulum moves, it goes from being strong demand scenarios where supply can't quite catch up and you see those burgeoning commodity prices," he tells CNBC.

"Then you get to stages where supply catches up and it maybe temporarily overtakes demand. But the world continues to grow, it modernizes, it industrializes, it urbanizes, and because of that, there's a constant growth for raw materials."

As for gold, long experience has told him to make hay while the sun shines.

"Don't waste your time," is Simich's advice for miners enjoying record Aussie dollar gold prices and soaring stocks. "We see a number of companies at the moment that've moved quickly and that's good for them but they've got to keep the momentum up."

Sandfire owns the copper and gold mine DeGrussa in W.A.

This tongue-twister may be common parlance before long

Pilbara Minerals MD and CEO Ken Brindsen has big plans for the Pilgangoora project, which could exploit what's potentially the world's second-largest hard-rock lithium deposit.

Although work is not due to start on the project until 2017, Brinsden, who joined Pilbara from Atlas Iron in January, can see the way demand for lithium is heading, and he likes it. (For a hint, check out what Elon Musk is building in the Nevada desert.)

"There's really exciting change going on globally, lots of disruptions in the way we use transport and store energy, and the lithium-ion batteries are really central to that so there's huge demand growth through the lithium-ion supply chain," Brinsden tells CNBC.

"And Pilgangoora is, we would say, going to be a really important part of the supply solution."

Northern Star Resources MD Bill Beament had his mind on more than just D&D on Monday; Northern Star announced the sale of its Plutonic gold mine in W.A. to Canda's Billabong Gold.

Beament tells CNBC the sale is part of a new three-year plan designed to simplify the miner's business model to concentrate of three or four "concentrated hubs of north of 200,000 ounces per annum production."

"You can only spread your wings so far," he says of the management time it takes to oversee five mines.

Shares of Dacian Gold have surged 753 percent in the past 12 months, and the miner isn't even producing any gold yet.

Dacian is in its feasibility stage, with the view to start construction on its Mount Morgans mine in 2017.

Dacian's Chairman Rohan Williams tells CNBC the company plans to start production in early 2018 after a 12-month build, with significant scope to extend the mine life from its current seven years if drilling results are successful.

Williams believes the run up in Dacian's share price, as well as the high level of financing interest, reflects how significant the project will be, with Mount Morgans expected to produce 200,000 ounces of gold per year.

Gold Road Resources is waiting on a feasibility study, then it's all systems go on its Gruyere gold mine next year, CEO and MD Ian Murray says.

Murray tells CNBC a final investment decision will be made after the feasibility study is published in December.

Gold Road is currently planning a 1.9 kilometer-long, 350 meter-deep open pit gold mine, with the potential to go underground, in a project that could be the third-biggest gold mine ever built in Western Australia, if current drilling returns successful results.

Gruyere is expected to produce 300,000 ounces per year of gold.

CNBC took a trip out to see the site. The project is mostly bushland and drill holes, with about 15 to 20 workers on site at any given time, but this workforce will grow to up to 650 during the construction period, with plans fora processing plant, accommodation, and an air strip to be built alongside the mine.

Saracen Minerals' MD Raleigh Finlayson says the upbeat atmosphere at D&D, and in the industry in general, shouldn't be a surprise.

Finlayson notes that gold equities have done "fantastically well," with prices getting a boost from the Australian dollar gold price, currently sitting around $1775, which means the gold miners operating Down Under are locking in margins of around A$700.

Saracen runs two mines in Western Australia - Carosue Dam and Thunderbox - and Finlayson says he's confident on mines' future potential.

On the back of Thunkderbox, Saracen recently doubled its 2017 production expectations to 300,000 ounces per annum - a move that saw it promoted to the ASX 200 - and Finlayson says that development at the mine is three-quarters ahead of where he expected to be at this point, as well as under budget.

"We picked it beautifully as far as timing," he says.

As for rumors that the company could be a takeover target, Finlayson says the best defense is to "keep the share price going up."

It's already rocketed, up 181 percent year-to-date and 345 percent since August 2015, closing on Friday at $1.71. In a July 20 note, RBC Capital Markets put a price target of $1.80 on the stock, with an upside scenario taking it to $2.

Finlayson says Aussie miners were coming off a low base, and have only just caught up to their North American peers when it comes to share prices.

CNBC


Mining news


  • Reuters reports that OZ Minerals has signed a heads of agreement with Cassini Resources to earn up to 70 percent of the West Musgrave project, with a 3 million initial commitment to fund a scoping study. If the company elects to proceed, it'll commit $15 million towards further study and $4 million in regional exploration costs, to earn 51 percent of the project.
  • Dow Jones reports that Regis Reources has said it will more than double its full-year dividend for the year to end-June, citing strong cash flow and profits from its Western Australia gold mines. It'll pay a final dividend of 9 Australian cents per share, taking the FY payout to 13 Australian cents a share, up from 6 Australian cents in the previous fiscal year.
  • Ballarat's White Rock Minerals has appointed Matthew Gill as MD and CEO, according to an announcement from the company.