Innovation: the next key driver of value in mining
Deloitte WA Index
1 August 2016: Growth is back on the agenda for Western Australian companies as leaders sharpen their focus on innovation, following a drive to achieve operational efficiencies and reduced costs.
In the 2016 financial year, the value of Western Australian–based listed companies has grown by 1.8%, closing at AU$134.5 billion - an incredible upturn from last year where the Index shed 11.6%, driven by an overall slowdown in WA’s mining sector and unfavourable movements in commodity prices despite the listing of South32.
Releasing a special edition of the Deloitte WA Index at the Diggers & Dealers Mining Forum in Kalgoorlie today, Tim Richards, Deloitte Clients and Markets Partner, Western Australia, said the strong increase in lithium and gold prices contributed to this growth.
“The success of lithium miners has been matched only by the lustre of WA’s established gold sector, with lithium and gold companies among the top three movers in terms of market capitalisation growth,” Mr Richards said.
“Lithium was clearly the surprise package for 2016. We have seen a price increase of more than 200% as excitement continues to build around the potential for lithium batteries within electric vehicles and general power storage devices.
“While these results demonstrate early signs of recovery in the resources sector, we expect the next wave of growth and productivity to be driven by an investment in truly transformative innovation which extends beyond the recent focus on cost reduction and operational efficiency."
Gold and silver confirmed their status as safe haven assets in what proved to be another volatile year for global commodities.
“The heightened economic and political uncertainty from Brexit and the upcoming US Election saw gold prices increase strongly,” Mr Richards said. “Gold and silver were the stand out performers, showing substantial price increases of 13.0% and 18.0% during the year.”
These safe haven assets offered much needed upside opportunities for Australian investor portfolios and the gold price also benefited from global institutions increasing their allocation of gold within their portfolios during the year.
Deloitte WA Index High Growth Awards 2016
At Diggers & Dealers, Deloitte will recognise the top three movers in the WA Index top 20, in terms of market capitalisation growth, for the year ended 30 June 2016. These are:
- Galaxy Resources Limited: Increased its market capitalisation by 1567% from AU$40m to AU$662m
- Pilbara Minerals Limited: Increased its market capitalisation by 927% from AU$69m to AU$706m
- Resolute Mining Limited: Increased its market capitalisation by 331% from AU$196m to AU$843m
We will also recognise the largest three movers of the WA Index top 100, in terms of market capitalisation growth, for the year ended 30 June 2016. These are:
- General Mining Corporation Limited: Increased its market capitalisation by 3513% from AU$7m to AU$253m
- Capricorn Metals Limited: Increased its market capitalisation by 2354% from AU$3m to AU$73m
- Millennium Minerals Limited: Increased its market capitalisation by 2270% from AU$5m to AU$114m
The special edition of the Deloitte WA Index reveals crude oil prices fluctuated throughout the year, with a partial recovery from a low of below US$30/bbl in January 2016, finishing the year at US$49.98/bbl, an overall drop of 17.0% from June 2015. The commodity rebounded as supply relief was sparked by decreases in American production and wildfires destroying oil sands exports in Canada.
Iron ore reached its lowest point at US$38/tonne in December 2015 as demand slowed from China. It has now stabilised at US$54.50/tonne, with continued supply growth from major suppliers expected to restrict further price increases. Despite a stronger last quarter, nickel’s performance was poor for the year, dropping by more than 21.2% since June 2015.
It was a disappointing year for global indices with small gains only experienced by the US S&P 500 (1.7%). The FTSE 100 and All Ordinaries suffered slight decreases of 2.5% and 2.6% respectively, while the Nikkei dropped by a staggering 23.0%. Weak international demand and the aftermath of the Kumamoto earthquake have caused a slowdown in Japan’s manufacturing Industry which has driven the decrease.
In this Diggers & Dealers edition of the Deloitte WA Index, a number of emerging issues are highlighted in specialist articles:
- Powering up: is a boom in lithium production really coming?
- Where to from here? Innovation in Mining: The importance of using the right methods, tools and approaches at the right times, in order to evolve, adapt and improve.
- Advanced manufacturing – a harbinger for the mining sector: Understanding the translational potential of advanced manufacturing in the mining sector.
- Creating sustainable cost savings: How data analytics is a leading edge tool informing business process improvements to identify sustainable cost savings.
Deloitte at Diggers & Dealers
The Deloitte team will have copies of the Deloitte WA Index 2016 report and specialist articles available at the Deloitte booth (8) at Diggers & Dealers.
Deloitte is also hosting a breakfast event on Tuesday 2 August in collaboration with the Gold Industry Group. Guests will have the opportunity to network and listen to an expert panel discuss the role of innovation in the Australian mining sector and how companies are leveraging innovation in pursuit of even greater productivity gains.
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