Dr Ian Gould On Ethical Investors And The Resources Industry

Dr Ian Goud, Chancellor of The University of South Australia and Keynote Speaker at The Resources Investment Symposium Broken HillDr Ian Gould is a keynote speaker at the upcoming Resources Investment Symposium and is delivering the John Collier Oration on the final day of the Symposium.

Dr Ian Gould is the Chancellor of the University of South Australia.  A geologist by profession, Dr Gould has forty years experience in the minerals industry in diverse and senior positions, mainly within the CRA and Rio Tinto Group, in which he was Group Executive for Exploration and later for Research and Development before becoming the Managing Director Australia, and then Group Managing Director for Normandy Mining Ltd. Dr Gould shared with us his views on the challenges in The Resources Sector and how these need to be addressed to maximise the opportunities we have in the future.

SYMPOSIUM: What do you see as the biggest challenges in The Australian Resources Sector right now?

DR GOULD: The biggest issue that we have in front of us is in the bulk commodities (Iron Ore and Coal) where there is a medium term over capacity problem. That effects prices and we are seeing it in iron ore and coal.  It seems to me and particularly as someone who has gone through a boom and demand scenario from Japan – we ended up with a lot of over capacity which benefited the buyer.  The dependence that we have on China is a potential problem.  A single market lays you open to all sorts of exposures.  That market could just reduce in a way that wasn’t predicted which means more opportunity for manipulation of the market if demand is from only one country.

Commodities like Iron ore and Coal are definitional products, they are not discovered they are either just rocks or ore depending on price and demand.  Base and precious metals have longer lead times, higher risk and exploration is required.  They are in a different league.  The majors are not so much into discovering metal resources that require exploration.  The juniors are pretty much broke.  There’s a real problem I believe.

The trend we are seeing to demonise resources investments is a problem.   This is something that’s gradually occurring.  It’s a big deal in terms of whether major investors are going to be willing to put their funds in if resource investments are demonised and called unethical.  I will have a lot to say on that at the conference.

That will the be the key point of my talk and it’s something that’s sneaking up on us.

SYMPOSIUM: How is the sector addressing these challenges and how will that ultimately play out for investors, companies and suppliers?

DR GOULD: What the industry is doing now generally is engaging in much cost cutting, as they should. It’s not something to criticise.  In fact, I’ve been critical in the way many companies, with the high prices have become proliferate in the way they’ve allowed their costs to go up.  The problem with cost cutting is we have capacity issues at the same time, it’s a vicious cycle.  Spreading our markets is something we are aware of too. China is so dominant.  We know there are other markets opening up, but here’s no immediate relief on the way.

Some Government’s have been good on pre competitive data acquisition and tech based surveys and putting out a lot of information that companies can use to explore.  Really being able to find covered resources is an important area. The CSIRO and others work on it , but we in Australia need more R&D in this area.  The Federal Government’s new Exploration Development Incentive scheme is welcome for the juniors.

The opportunities in the sector often mean getting ahead of the game.  If you can actually use some longer term thinking on where commodities are going to be. For example, investment in base metals and speciality metals.  They are hard to find and mined grades are declining.

You can easily see the demand for copper, zinc, lead are going up. The more cars you need the more lead you need for batteries. Every car, even hybrids have a starting battery with lead in it.  We are seeing more copper used in electronics and for transmission.  Zinc is needed to protect steel.  We’ve been aware through the iron ore boom that a lot more steel is being produced.  Zinc is used to galvanize and protect steel. Tin is used in solder for electronic equipment and devices.  These old metals have high demand for modern uses.

These things have been off the radar a little while now. The further development of our Intellectual Property and technology is exciting.  In Australia our exploration and mining based technology is world leading and we export a lot of it. There’s an opportunity to invest more in technology, to develop more technology and intellectual property in exploration and mining.  We are good at it. It’s a business in its own right as well as helping our industry find resources and cut costs.

Companies should be continuing with technology based efficiency improvements.  They need to broadly prepare for the next demand “boom”.  Boom is a bad word – but what we mean is the next cycle of demand. We need to get ahead of it and plan for what that might be, more than we have seen in the past.

We need to catalyse exploration and research. The industry should be doing everything we can by inspiring smaller companies and reinvigorating their own internal departments. Exploration for the hard to find things should be pushed. Australia is seen as a very safe country and a number of big resource developments are now in countries where things can go wrong.  There is sovereign risk in these places.  If some of these sovereign risks came to pass (for example, in Guinea and Mongolia pass, suddenly

Australia will look very much better and a safe place to invest.

We need to push the sustainability aspect of development – in particular, to confront the adverse ethics stories that are out there.  It’s something that’s gradually sneaking up on us. We need to confront that area of ethicality in the resources industry.

The South Australian Government is actively pushing copper.  They’ve got exceptional resources in the state, and they genuinely see, with copper grades falling and copper being in countries that have issues, that there are opportunities. That’s the sort of initiative we want to see happening –   Governments looking ahead and overtly supporting resources development.

The Industry should be working with Universities to train geoscientists that have the range of modern skills required and these are cross disciplinary.

SYMPOSIUM: What are you hoping to get out of coming to Broken Hill for the Resources Investment Symposium in Broken Hill.

DR GOULD: I’m happy to get my message out, particularly about the ethics issue for resources. It’s also a great opportunity to network.  I’ll enjoy that and meet up with a lot of old friends.  It’s a bit nostalgic to me and I’m looking forward to hearing what other people think.  It keeps me up to date – there’s a good component of feather duster in me now at this stage of my career,so it keeps me up to date so my comments are relevant.  The thing I’ll be pushing with my talk is confronting this growing push that anything you extract from the earth is somehow unethical and investors should be careful about getting involved. This is insidious and someone needs to call it!

Dr Ian Gould AM, Chair SAMPEG & Chancellor UniSA is attending and speaking at the Resources Investment Symposium in Broken Hill 24 -17 May 2015.

Visit the web site for more information and to register.

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Precious Metals Investment Symposium