Mining industry hit hard by COVID-19 as explorers suspend operations
Numerous ASX explorers and miners have had to suspend or scale back operations as a result of COVID-19.
While the newspaper headlines and television news cameras have focused on the thousands of workers in retail and services industries losing their jobs, the effects of the COVID-19 crisis have been creeping largely unnoticed through the ranks of the small cap miners.
The numbers of employees affected are, of course, far less dramatic than the closure of a large retail chain, and companies are reporting no health issues yet, but the disruption comes at a time when Australia is placing greater reliance on its resources sector to sustain the country’s standard of living.
For all the companies announcing over the past week, the safety and health of their workforce is cited as being paramount.
Faced with not only with the consequences of the virus itself, resource company managers have to deal with border closures (and in Western Australian, restrictions between regions of that state), the dangers to health of fly-in, fly-out, the proximity often required by workers in mines, and the need to protect the health of an Aboriginal communities.
The overall challenged was sketched by Hammer Metals (ASX: HMX) managing director Daniel Thomas when announcing suspension of drilling at the company’s Bronzewing South gold project.
“The impact of COVID-19 presents a unique challenge for the mining industry and in particular for junior explorers,” he said.
“The location and spread of our activities and workforce adds complexity with attempting to maintain social distancing within a mobile team.”
Mr Thomas assed that travel restrictions made operating even more complicated.
Western Australia’s internal lockdowns
Apart from the border controls announced by states and the Northern Territory, WA — where 120,000 mining and energy workers are employed — has internal restrictions.
WA Premier Mark McGowan is allowing only essential travel between the state’s regions, meaning any movement between any two of Perth, the Kimberley, the Pilbara, Gascoyne, Mid-West, Wheatbelt, Goldfields-Esperance, South West, Great Southern and Peel regions.
A specific case showing how this impacts a company is with evolving rare earths producer Northern Minerals (ASX: NTU).
Last Wednesday Northern Minerals revealed operations at its Browns Range project have been suspended.
The company said travel restrictions would cause growing difficulty in moving people to and from Browns Range in WA’s east Kimberley.
The recent directives by the WA Government to protect the vulnerable residents of Aboriginal communities, many of which are located within the Kimberley region, is an additional factor in the decision to suspend operations.
“We have a close relationship with the residents of Broome, Halls Creek and Ringer Soak and our continued operation and movements of goods and personnel through these communities poses too high a risk,” the company explained.
Growing concern about FIFO
There were also reports during the week that central Queensland mine workers are boycotting shifts after thousands of fly-in, fly-out (FIFO) workers continue to move through work camps and mine sites.
While Queensland has closed its borders, the state has exempted FIFO workers in mining and other industries.
One miner told reporters that thousands of men each week were coming in each week from Townsville, Brisbane, and the Gold Coast, and then returning to those areas – all of which have COVID-19 cases.
The companies calling in sick
One of the companies that has announced in past days it is impacted by the COVID-19 crisis includes Newmont Corporation, which suspended exploration work at its Tanami gold project after the Northern Territory’s borders were closed.
Less attention was paid to the fact that its drilling contractor Swick Mining Services (ASX: SWK) had to cease drilling at Tanami.
Swick has also idled two rigs on a project in Spain and one working at the Fosterville gold project in Victoria.
As part of these suspensions, Swick has withdrawn its earnings guidance.
Flinders Mines (ASX: FMS) claims the new international and domestic travel restrictions will “impact a significant range of activities and interaction with potential international off-takers, financiers and other relevant partners” for its Pilbara iron ore project.
Flinders has been working on the project for 18 years and was close to transitioning to mining.
Consolidated Tin Mines (ASX: CSD) has put its two main zinc projects on care and maintenance and stood down most of its staff without pay. The company says when work resumes, it will require a reduced workforce.
Talisman Mining (ASX: TLM), which is targeting the Lachlan Fold Belt in NSW, has suspended field operations at its Lachlan copper and gold project and postponed drilling at its Lucknow gold operation until it sees greater certainty regarding the spread of COVID-19.
The Lucknow deposit was discovered in 1851 making it one of Australia’s earliest gold mines —producing 400,000oz at about 100 grams per tonne.
Heron Resources (ASX: HRR) has declared force majeure on all existing supply contracts as it suspends operations at its Woodlawn zinc mine south of Goulburn, NSW.
Meanwhile, Trigg Mining (ASX: TMG) has suspended all field work at its sulphate of potash project at Lake Throssell in WA to comply with both state government travel restrictions and a request from the Ngaanyatjarra people.
Australian projects overseas also hit
In addition to domestic restrictions, may foreign governments have slammed restrictions on international projects, which has impacted many ASX-listed explorers and miners with overseas assets.
Far (ASX: FAR) had been planning a new drilling operation offshore from Gambia later this year but the closure of the Gambia and Senegal borders have caused the company to suspend exploration spending and conserve cash.
Jupiter Mines (ASX: JMS) has to comply with the 21-day national shutdown ordered in South Africa but it will maintain some staff mainly to continue the essential work of dewatering its Tshipi Borwa manganese mine.
Also in South Africa, Orion Minerals (ASX: ORN) has closed down its Prieska copper-zinc project and sent staff and contractors home until further notice.
Champion Iron (ASX: CIA) is reducing iron ore production at its Bloom Lake mine as Quebec’s provincial government has ordered only minimal operations until mid-April.
Azure Minerals (ASX: AZS) has suspended all drilling at its Gregors copper prospect in Mexico as crews would otherwise need to travel and to observe safe distancing.
A drilling contractor in Alaska decided it was safer to shut down work so Nova Minerals (ASX: NVA) has suspended work at its Estelle gold project in Alaska.
Raising money — but at a discount
Veteran mining analyst and financier Warwick Grigor at Far East Capital said that companies are still prepared to go to the market for new equity even though they are being forced to deal at much lower prices than two months ago.
“I have seen more than one email from financial groups telling their clients to get ready for what could be a great season for cheap placements,” he said.
He cites the cases of Bellevue Gold (ASX: BGL) raising $26.5 million at $0.30 a share, compared to the $0.50-0.60 range the stock was trading at in January.
Chesser Resources (ASX: CHZ) went into a trading halt seeking almost $1.7 million at $0.04, in contrast to the $0.11 level in February.