THERE was a good deal of trepidation in January 2016 as analysts and executives forecast another year of nail-biting austerity. And whilst it’s not yet beer and skittles for the world’s mining sector, there were some moments of cheery illumination of which the following is a rough sketch.
1. Ivan Glasenberg: The recovery of Glencore.
Glencore’s €10.5bn swoop for 19.5% of Russian oil company, Rosneft this month signalled a return to deal-making for the Swiss-based firm which also brought the curtain down on its self-help programme.
Some 18 months earlier short traders ran Glencore’s stock down 27% using fears about runaway debt for tinder. The response from Glencore was described in November by one analyst as ‘stunning’.
Not only had the group reduced net debt to less than $17bn – far in excess of the original $1bn to $2bn sell off ambition – but it also set down the basis for a resumption of dividend payments: a $1bn payout in two halves during the 2017 financial year and a new distribution policy in 2018 in which a $1bn fixed payout from the marketing division would be supplemented with 25% of free cash from its mining assets.
That was remarkable.
2. The commodity market.
Initially imputed to restocking by the Chinese, the sudden improvement in commodity prices during the first quarter of the year actually turned into a more prolonged recovery that suggested the worst was over for the mining sector.
Yes, there have been some corrections, but coking and thermal coal prices are well off their 2015 lows, and possibly rebased, while it’s also possible to discern that the synchronous downgrade in commodity prices over the last four years was, well, not entirely that synchronous.
Vanadium, tin and zinc prices are all on the up on the basis of fundamental factors while a Bloomberg News article today lists five reasons why the correction in the gold price can only be temporary.
3. Peter Steenkamp: Debut year at Harmony.
Talk about being at the right place at the right time. Enter Peter Steenkamp who made light of fears that running Harmony Gold in the teeth of a bear market was a suicide mission.
And then the gold price did one of its characteristic changes in direction that almost no-one is able to anticipate and Harmony has all but removed debt, is producing dividends, and is talking about growth again to the tune of 500,000 ounces.
I do worry about that growth target though. Why not just make money for a while?
4. Roger Baxter: Chamber of Mines gets nasty.
Finally, after years of goading by South Africa’s Department of Mineral Resources (well, it seemed like goading), the country’s Chamber of Mines grew a pair and said enough was enough.
Roger Baxter, the chamber’s CEO, was given the mandate to speak out and how nice it was to hear an over-stressed industry telling the apparently cloth-eared government why its latest unilateral decision-making will be the ruin of us all (in South Africa).
Enough said on that one (for the time being).
5. Sébastien de Montessus: Endeavour Mining.
Onwards and upwards for Sébastien de Montessus, CEO and president of Endeavour Mining, a company with ambitions to reach 900,000 oz/year in gold production by 2020. Progress so far has been frighteningly rapid.
Endeavour is likely to approve the $307m Ity project in Côte d’Ivoire in 2017 which will have average gold production of 165,000 oz/year for the first five years.
Then there’s the $328m Houndé project in development that will extend Endeavour’s west African footprint to Burkina Faso and add an average of 190,000 oz/year to total group production.
As a proxy for the accelerated development of gold resources out of West Africa, Endeavour holds the candle for unashamed capitalism.
6. Paul Dunne: Northam Platinum.
There’s not been much to savour in South Africa’s platinum group metal industry with prices having briefly resuscitated and then wilted. Shares price also shot up, but then weakened as it became clear they had factored in an unsustainable metal price forecast.
Northam Platinum has forged on, however, edging closer to its aspirational production target of one million ounces at a time when the rest of the sector is hunkering down.
The endeavour and enterprise is much needed succour in a sadly under pressue sector.
