Green shoots abound in Kalgoorlie
17 August 2009
Sean Russo
THE dust has settled on Kalgoorlie, the Diggers tent and most of the bar maids have left town and I almost feel human again.
I feel very positive looking back on Diggers 2009 in a way I have not in many of the past years. In previous years it has often been that government has been to blame for industry woes. More specifically two years ago mining's answer to irrational exuberance, "Stronger for Ever", was the theme. Last year there was open hostility towards hedge funds and investors who were offending our industry by selling equities far below what they were worth. The villain was always someone on the outside of the tent and so was the solution (or the salvation). Not this year.
I don't believe most of the tosh written about "green shoots". It is a simple grab-all for "it can't get any worse (can it?) so we'd like to think it's getting better", and "winter is behind us, spring is here" (lovely image). Bad news doesn't sell advertising space at the moment and there isn't much good news so "green shoots" is the answer.
That said I do think I saw some green shoots inside the tent at Diggers 2009.
- They invited Dr Doom to speak. Nouriel Roubini was the headline act, not Pierre or Robert to bang the drum to an adoring and already convinced audience, but an economist who isn't necessarily in "our" camp. That said, we're not sure what camp he is in because he was having a bit of money each way but at least it was a somewhat balanced outlook. Anyway, who actually expected an economist to have a view! The positive is it reflects a certain maturity to invite someone to be the headline act who might not tell the punters what they want to hear.
- The chairman wasn't criticising "the government fairies at the bottom of the garden" but reflecting on how we all might have been a bit carried away with ourselves. I thought Barry Eldridge set an appropriate tone. He said on reflection he and others had been wrong to be so one-sided in their view of the commodity cycle last year and that perhaps we could learn from alternative views (hence Dr. Doom). More importantly it was an acknowledgement that we should accept no-one can predict and as an industry we need to be the best we can be, at what we do, to survive any circumstance. (Music to Noah's ears).
- CEO's were talking mines not markets. Not all but more CEOs to my recollection were talking about mines not markets, costs not commodity cycles, profits not just vision; St Barbara being a great example of a company that's had a cold shower, had a good look in the mirror and is ready to fight.
- Hedgers were out of the closet; loud and proud. In all the machismo that is Diggers in recent years talking hedging has been something better left to the women folk and city fellas who are "that way" inclined. In 2007 it was "Real Men don't Hedge". Not this year, nickel and gold producers were seen to be looking longingly at the hedge books of Catalpa and Panoramic with the open-mouthed stares normally reserved for the late night bar maids. Who wouldn't want to take a forward sale price of $AU1555/oz home with them to meet their own gold bar? And not one bad word for the CEOs of those firms. In fact they stood out as some of the only real men willing to do what was right for all stakeholders, even if brokers (in particular) will once again call their manhood into question if their hedging goes out of the money. Gold above $AU1550/oz, nickel above $US25,000/t: bring it on! As the chairman said, "no-one can predict", but some did act.
- GJ Stokes Memorial Award was given to Nick Giorgetta. A very deserving winner reflecting a move back to a better time in the mining industry when people were admired and rewarded not for what they say they will do, or they say the market will do, but for what they have done for shareholders and by extension themselves. Barry Eldridge said in introducing Nick that in 15 years as a CEO of various companies he had delivered 15 profitable years. You could see people in the tent thinking, "that's not possible". I guess it is if you look for gold in prospective low-cost environments (ie not Victoria), keep costs down, and dare I say it, you hedge. Nick's companies have hedged and at times been criticised for it. I haven't checked but I am sure he wasn't always the most profitable, due to his hedging, but he was always profitable. What a great role model for our next generation of mining CEOs. It's a shame for Lihir shareholders that their board didn't keep him when they acquired Equigold NL. Regis shareholders thank them. Congratulations to a well deserving winner and a wonderful role model.
- More young people were in attendance. It may simply reflect the reality that I am now over the twice the age I was when I attended my first mining conference but it certainly seemed I met many more young mining executives than I have in previous years. In fact a few years ago I worried where the next generation might come from. The boom has certainly opened up the industry to many of the country's best and brightest and now they have the bug I suspect many of the more entrepreneurial ones are ensnared for life. It was great to see their enthusiasm for the business but important not to be swept along by it after hours.
I am more upbeat about the industry than I have been for quite some time. The challenges we face are just as great and I am certain there will be years in the future that make last year look relatively easy, but I feel that the industry is getting back to basics and taking responsibility for its own actions and that has to be a good thing.