Thursday, 4 February 2016

IT'S ALL ABOUT SILVER LININGS

There has always been a lot of movement in the resources sector but recently most of the movement has been relentlessly in the wrong direction, with a slowdown in demand for most commodities. In Australia and elsewhere, this has been reflected in lower output, a number of mine closures and reductions in contracts for mining services companies.

However, with hundreds of millions of dollars in equipment and infrastructure lying idle, shareholders and other stakeholders are entitled to wonder what is being done to ensure that these valuable assets are still viable when the market recovers. Fluctuations in demand have always been part and parcel of the world economy and wise heads will want to protect their investment in times of hardship, in order that they may better profit when the sun shines once more.

Mining companies are not the only stakeholders in the resources sector. Across Australia, service companies and suppliers have seen severe reductions in their order books and, while it is clear that not all will survive, it is most important for the future of the industry that sufficient capacity and expertise is retained to provide the foundations for future growth.

So, if this is true, what can you or I do about it? 

We believe that there is something that can be done, something that can benefit investors, and producers as well as providing a lifeline for service companies - with major potential benefits and very low risk. 

It has been shown that companies that plan for reductions in output, that maintain their plant and preserve their assets, are far more likely to emerge from a recession in good shape than companies that are only interested in the short term. And, if a company is going to take a loss anyway, how much better to invest it in the future than walk away and lose it all? While it may be too late for some, those companies that remain would do well to look at cost-effective ways of maintaining the reliability and integrity of their assets as well as the surrounding infrastructure, the service companies and the cities that depend on them.

Recently, we have been discussing this potential with some of our customers and business partners, not just because we might benefit through sales of our products but also because of the enormous waste that would result if short-term losses were all that dictated the financial policies of the resources sector. As a result, we are working with our colleagues to create awareness of the cost-effectiveness of standby protection, mothballing and many other practises that can preserve our productive capacity during periods of low activity. It might be good for us, but it would definitely be better for everybody else.

As part of this programme, we have published some articles and information in the Australian press, in the latest (February) edition of Australian Mining Review there is an article on page eight and further information on page 41 and, later this month, we will be featuring in the Australian Energy Review - we'll keep you posted.

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