Coronavirus is not just a health crisis; it’s an economic one. What will the Australian mining industry look like on the other side of it?
What will the Australian mining industry look like beyond the coronavirus pandemic?
Like most other aspects of our life, it’s a fair bet it’s going to look very different. And perhaps, just perhaps, that’s not a bad thing.
Coronavirus is not just a health crisis; it is also an economic one. The lockdown that is so critical to saving lives has been a massive jolt to the global economy. Businesses have either adapted to social distancing or shut down. Workers at companies that couldn’t adapt have either been furloughed or retrenched.
At an investment level, many smaller mining and exploration companies were already underfunded, and the general feeling is it won’t be easy to raise capital in the coming months. Naturally, there is a lot of doom and gloom about. The future feels very uncertain and if the mining analysts are right, as I’m sure they mostly are, the washout of this crisis will see a raft of smaller developers, producers and explorers fail.
Yet there is room for optimism.
Economic crises bring opportunities
Every economic crisis creates opportunities and this one will be no different.
The people and companies that can see through this rough patch will inherit the good projects, and the good people, when the expected raft of smaller mining and exploration companies fail, or merge with others, or get taken over by better funded and larger companies.
Although it might be painful now, ultimately it will leave our industry stronger. Back in October last year the smaller end of Australia’s mining industry was plagued by both a capital and a skills shortage. At the time my hopeful solution to both shortages was to halve the number of companies that held Australia’s mining projects.
“How much easier would it be for investors to assess company values and therefore make positive investment decisions?” I wrote. “It would also mean there would probably be several hundred extra board members, CEOs, company secretaries, exploration managers and various other skilled senior operators available for the current raft of projects being explored, assessed, promoted, financed, developed or built.”
At the time I suggested industry needed to come up with a solution. Now, it looks like the market might have provided one.
The future of Australian mining after coronavirus
I think there’s going to be a terrific opportunity for strong, well-funded mining companies to create even stronger businesses. Maybe they might have their own project plans crimped for a while, but there are going to be terrific opportunities for them to move and pick up good people and good projects. It’s about finding and grabbing hold of good assets – financial assets, resources, reserves and people.
When will the time be right to seize those opportunities? I don’t know. What I do know is those opportunities will be taken advantage of by those who can look out two or three years and be optimistic about the future for resources.
There is no doubt the immediate future is going to be hard for many in our industry. Although coronavirus looks like it’s under better control in Australia than elsewhere around the world, it would be a stretch to say we’re out of the woods already. While this uncertainty will spell the end of many, it will come with immense opportunities for those that can stay the course.
As it inevitably does, the future will belong to the optimists.