Noront Resources

After a tumultuous year, majority of mining industry ends 2016 on positive note

This was a year many mining investors would like to forget, and many a mining company wished they were digging up something else.

But as 2016 draws to a close there has been an unexpected rally in the price of our two largest exports, coal and iron ore.

Even though the price has eased back a little, gold has been the proverbial shining light and even base metals had a greater lustre.

The new kids on the block that seemed only to go one way, up, were the so-called tech metals like lithium and graphite.

It seems that despite a lot of media and public commentary about the end of the mining boom, the industry is not exactly on its knees.

"There is still significant activity going on in the mining industry in terms of the existing mines, and indeed the continuing search for the next mine," said analyst Scott Brimley with business consultants Ernst and Young.

"We remain a really well-endowed country, in terms of the prospects that still exist to be found, so mining is not going anywhere anytime soon."

That upbeat vibe has permeated through a sector that is familiar with the cyclical nature of mining and was ready to emerge from what one broker called a "four-year nuclear winter."

Gold soars with Brexit the wind beneath its wings

The gold industry took flight relatively early in the year as jittery investors looked for a safe haven during the global economic downturn put their money on both physical gold and gold miners.

Then came the unexpected yes vote for Britain to leave the EU, and the gold price soared.

Veteran gold analyst Doctor Sandra Close of Surbiton Associates had never seen such a price in the precious metal over a day.

"As we were watching the gold price as the Brexit votes were counted it was a wild ride.

"With the combination of the US gold price moving up, and the Aussie dollar exchange rate going down, the peak was about $1,860 per ounce that afternoon."

The previous Australia dollar record of $1,805 was set in August 2011 when the US gold price was at $US1,877 and the Australian dollar was 104 US cents.

CEO of gold miner Northern Star Resources, Bill Beament, was a bit more sanguine, declaring positioned Brexit 'a bit of a side show' with the real story being the long-term trend of the gold price holding firm.

Base metals more upbeat with zinc the best performer of 2016

It has been a difficult few years for all base metals like zinc, lead and copper, with nickel being hit particularly hard in the last few years.

But zinc has emerged as the best of the bunch with a price of $US2,240 tonne, up 60 per cent since the beginning of the year.

A lack of investment and a looming global shortage has put the strong floor under the metal and given Heron Resources the confidence to continue to develop its Woodlawn Zinc Mine in New South Wales.

Managing director Wayne Tower said the timing was right to go ahead with the development, but he thought the price needed to rise around another 30 per cent to bring now mines into production.

"Zinc has suffered a profile issue, positioned behind copper in the base metals complex," he said.

"It's not that well understood by the investor base and it really hasn't featured from a pricing point of view since 2007, only to be hit by the GFC, since then it's largely been out favour as an investment.

"Given that there hasn't been a strong price there's been no projects that have really been pushed through the development pipeline."

Iron ore price rise an unexpected but welcome fillip

From companies to investors to governments and the commentariat, the rise in the price of iron ore caught many off guard.

Massive volumes of the steel-making ingredient have been coming out of Western Australia as well as our main rival, Brazil.

But the normal supply and demand equation was thrown out the window when in one night alone it rose a spectacular 19 per cent to $US83 tonne.

That is a far cry from the $US38 it was fetching at the end of last year, and there have been warnings it is as much to do with trading machinations than true demand.

But it has bounced around in that range for a couple of months now, as of today it is worth $US74 tonne.

But market watchers and investors remain wary. Even Federal Treasurer Scott Morrison said the Government was not basing its budget around a sustained high price.

And the head of Fortescue Metals Group, Andrew Forrest, agreed.

"I think all of us, in our hearts, knew that price wasn't sustainable," he said.

"I think 2017 will have a lot of bumps in the road for the iron ore industry, the price will continue to fluctuate and there is a lot of supply still coming on from Brazil."

Coal stages a spectacular price recovery; for now

The recovery in the price of coal, both thermal and coking, has been even more spectacular than for iron ore.

Coking coal, used in steel making, went as high as $US300 a tonne, almost four times what it was fetching at the beginning of the year

The price hike for thermal coal, used in heating, was almost as spectacular, climbing from $US40 to $US100 a tonne over the course of the year.

It is the result of a combination of factors such as the cutting back on local production in China and the rising need for base load power across China, India and South East Asia.

Coal reporter with Platts International Mike Cooper gives the example of a new Japanese contract.

"A new joint venture has been formed in Japan and it's going to double the volume of thermal coal it buys for the Japanese market.

"The joint venture is between Tokyo Electric and Chubu Electric which currently buy thermal coal for their power stations of around 20 million tonnes (per annum).

"They're going to go to a volume of 50 mtpa."

Hunt for tech-metals lithium and graphite bear fruit before mining starts

Without a doubt, this year has seen so-called 'tech metals' have dominated the headlines.

Lithium and graphite in particular have been the poster children of the trend, the demand for both very much predicated on the growing need for lithium-ion and other batteries for storage of renewable energy and electric vehicles.

Adrian Griffin is the head of Lithium Australia, a company that considers itself more involved in lithium technology development.

Like many of the companies putting lithium into their exploration portfolios, the company has achieved stellar investor returns without yet turning a sod of dirt.

"Twelve months ago we were one of the few listed lithium companies listed on the ASX, today there are 50 or more.

"And if you look at our share price performance, we're up about 700 per cent over the last 12 months."

Graphite companies have not quite hit those heady heights yet, but the number of ASX listed exploration companies have risen from 10 in 2012 to 40 at the end of 2016.

Resources analyst with Patersons Securities Jason Chesters said there were a number of graphite deposits in Australia

"In addition to that, there's a whole host of project around the globe that ASX listed juniors have pegged, and are hoping to develop."