Market Outlook 2018 – Wrap Up

Market Outlook 2018 – Wrap Up

More than 500 people came to hear the insights on the year ahead from Hartley’s chairman Ian Parker, PCF Capital Group’s managing director Liam Twigger, IGO non-executive director Debra Bakker and South32 head of corporate development Simon Collins.

The overwhelming sentiment was a great year ahead.  When it comes down to what investors should be looking for, Parker’s advice is the three P’s- People, Projects and Price.

With good times anticipated he added a fourth P for those looking for project investment – ‘Promotion’.

“You can have a really good project and really good people. There is no point having people did holes all day if there is no one out there telling the story.”

While a wide range of topics were discussed including TSX v’s ASX, Bitcoin and the vibrancy of the of WA’s junior market, some key themes emerged.

Investment – a wall of money

Parker set the scene for the discussion saying the ‘green shoots’ of investment 18 months ago has become a ‘Tsunami’.

“The momentum is quite extraordinary,” he said, with the WA Broker reporting around 30-40 percent of investment portfolios going into resources stocks.

“I’ve been through three of four booms and busts and it hard to remember a time it has been more exciting.”

Twigger says the IPO market is a key barometer for risk. While only 3 IPO’s were undertaken in in 2016 and 18 in 2017, he said brokers are anticipating IPO’s will head back to around pre-2010 levels of around 30-40 IPOs for 2018.

He puts this down to investors making money out of the small gold stocks and the lithium plays and strong investment from North America, with recent deals for Pilbara Minerals and Altura Mining good examples.

“The market is well positioned and there is a pile of money out there.”

Debra Bakker says 10 years ago money was also flowing from China for the steel market, but more recently little has been forth coming.

“We are seeing a lot more money in Hong Kong and Shanghai and that money is approved and ready to go.”

But she says for IGO it is not just about interest in the stock. There is also a “revolving door of Chinese and Japanese battery and car makers interested in securing the offtake” that miners can potentially give them.

What to look out for?

All agreed the commodities to watch are all base metals (a sentiment supported by the fact all base metals increased in value on the day of the event).

Parker says while Western Australian’s love affair with gold will continue, it is the battery commodities that are generating the most excitement, including lithium, cobalt, graphite, nickel and zinc, with a price at 10 year highs. Lead too is also seeing a resurgence.

Liam puts this down to “a triple adrenaline shot” of a strong market, synchronised global growth at around 3 per cent and a global passion for technology and technology related metals.

“It is all sweeping towards commodities and to what Western Australia does well.

“There is a wall of money coming into the market,” he said.

Exploration – a rising tide

As the mining tide rises, the appetite for exploration is back on globally.

Collins says South32 recognised the need to build exploration capability from the outset and the company has “kissed lots of frogs and turned over lots of rocks looking for the next opportunity” literally looking at hundreds of projects – focused on copper, zinc, nickel sulphite and all the associated metals.

From this work South32 is now building a range of exploration opportunities geographically in Australia, the Americas and Alaska.

According to Collins, South32’s 2017 strategic investment in Arizona Mining in North America, “probably the most exciting zinc project for some time” was not a one off.

“We are not there to make a quick buck. We look at this deposit and see a lot of parallels to the Cannington Mine (North West Queensland), which is part of the South32 portfolio and we like what we see,” he said.

“We are looking to put down a few more flags in North America.”

South32 is also investing in several Australian exploration projects through its strategic alliance agreement with AusQuest Limited (ASX:AQD), recently announcing additional funding for four new exploration opportunities.

“We get the first look at the projects that they (AusQuest) deliver and we have recently put together a similar alliance with a private group in Queensland to look at some concept targets undercover there.

“We have a range of options and alternatives there spending US$30 million this year, with the appetite to spend more on good projects.”