Southern mining companies have provided many of the industry highlights during the past year but, overall, the sector has seen a downturn in several critical areas.
While gold prices have enjoyed a stellar year with near 20% gains, topping at a record $US1400 ($NZ1847) in recent weeks, overall the New Zealand mining sector has seen flat or falling exploration expenditure and declines in overall exports, coal and aggregate use.
The annual New Zealand branch conference of the Australasian Institute of Mining and Metallurgy (AusIMM) in Auckland was not all doom and gloom for the near 300 delegates, but the industry did not have a lot of developments or expansion to report.
Some of the more positive news was that exploration expenditure levels for many companies appear set to be repeated in the next financial year.
That was crucial for the future, AusIMM chairman Cam Wylie said.
"New Zealand is very much in line with the rest of the world. The Aussies have said it's been like 'driving off a cliff' for exploration [funding] and starting new projects."
Mr Wylie predicted "incremental growth" in the year ahead in New Zealand, on the back of rising demand for gold, coal and the "sleeping giant" of ironsand.
Geologist-turned-investment banker Tony Haworth, of Campbell MacPherson, delivered his overview of New Zealand's mining sector, co-authored by consultant geologist Richard Barker, describing the sector as "being in a state of flux".
The pair noted mining sector turnover value was down 10% to $1.8 billion for the past year, with a 22% decline in non-metals (aggregates) and 6% in coal. State-owned enterprise Solid Energy saw a 5% decline in tonnage to 3.8 million tonnes, while gold held steady at 300,000oz produced by Oceana Gold, 110,000oz from Newmont Waihi and 20,000oz from smaller alluvial extractors.
Exploration was down 17% at $28.7 million, Mr Haworth said.
"There has been reduced spending on property permits, suggesting a move away from grass-roots projects."
It was positive that mergers and acquisitions during the year were up 14%, but the actual value of those transactions was down 53%.
"The wealthier players have mopped up, while the weaker ones have had to merge to survive," Mr Haworth said. The theme of "regulatory risk and reward" cropped up several times.
Mr Haworth said New Zealand's being "resource rich" had created a balancing act for international investors as they accepted or rejected the effects on mining of regulatory regimes in different countries.
"Major investors in mining companies prefer to work in countries with clear and effective guidelines," he said.
Issues arising from the Resource Management Act and legislative review of the Crown Minerals Act, the foreshore and seabed, conservation and land rights all combined to push New Zealand into only the top 46% of countries for mineral investment, compared with the top 15% for petroleum-related investment, Mr Haworth said.
"Uncertainty is a key factor holding back investment ... environmental regulation, enforcement and which areas will be protected as national parks," he said.
Mr Wylie disagreed, in that all those in the sector were well schooled on their obligations for environmental standards and operators such as Oceana Gold and L&M knew they were expected to "work to a high level of responsibility".
Mr Haworth suggested the Government look at initiating a Ministry of Energy and Resources, streamline regulations and have a minerals strategy, which would include minimising private and fragmented ownership of areas that might contain minerals of high value.
Oceana Gold vice-president of corporate and investor relations Darren Klinck said the company had spent about $12 million on exploration during the past financial year and was expecting to maintain "a similar level" in the year ahead, about half of which would be committed again to its Reefton open-pit operation.
"We're expecting our exploration spend to continue through 2011 and into 2012," he said.
L&M Group chairman Greg Hogan updated the delegates on recent mergers and asset sales, worth tens of millions of dollars, saying its southern lignite holdings in Southland and Otago were now its main focus.
L&M was looking for new partners and had not decided what type of lignite product to produce, but Mr Hogan expected an announcement in a year's time on its decision.
He said the Earnscleugh gold-mining operation in Central Otago was expected to reach its full commercial potential by the first quarter of next year.
- Reporter Simon Hartley is a guest of AusIMM during the conference.
