“I don't know if we’re at the bottom, but it feels like we’re getting close. From a returns perspective, the risks look asymmetric to the upside,” says Liberum Capital mining head Michael Rawlinson of the new investment opportunities that are developing in mining investment after what he has described as a “miserable year”.
London-based Rawlinson points out that the UK mining-investment sector has lost a quarter-plus of its value, and is £100-billion down on last year.
A mere $1-billion has been raised in equity in London, compared with an average of $8-billion a year in the previous four years, and the bad deals of yesteryear have come home to roost, forcing London-listed mining majors to write off $30-billion.
He contends that the mining sector helped to bring itself down by buying when it should have sold and building when it should not have built.
He points out as positive the fact that the only CEOs to survive the latest 45%, 28-month market decline are those which did not buy and build at the top of the market.
In addition, the new CEOs have been incentivised to cut costs and desist from building and buying, which will help the industry to get back on its feet.
Hence, the opportunity now for investors to look for new starting points.
Which is why we should heed the call that Gold Fields nonexecutive chairperson Cheryl Carolus makes for the South African government to create regulatory certainty for the mining industry and for companies to strive for greater efficiency and improved safety in the period ahead.
Government, business and labour moving forward in a win-win-win fashion will give South Africa Incorporated the chance to obtain more benefit from mining as commodity markets emerge from the doldrums.