A glut of supply and an economic slowdown in China and major industrial nations have severely depressed precious metal and commodity prices, while global oil prices recently hit 13-year lows. The Post’s Cam McGrath sat down with Richard Stanger, president of the Cambodian Association for Mining and Exploration Companies (CAMEC), to discuss the impact on companies exploring for minerals and petroleum in Cambodia.

Two years ago, there was a lot of optimism in the extractive industries. What changed and how has this affected companies operating in the sector?

Precious metals and bulk commodities like iron ore, copper and nickel are very low, while oil and gas prices are way down. Pretty much no one in the world is spending money on exploration right now. Raising money for exploration, due to the long-term and high-risk nature of the business, is pretty much impossible.

It’s really tough. I’ve been in this industry since the 1980s and haven’t seen anything like it. You’d think there would have been some sort of an uptake, but there isn’t. Right now, inventories of most things are down so we would expect prices to go up fairly soon, but that might not happen because there is a whole lot more supply for most things, because when we had booming prices everybody built mines and drilled for oil.

All the big companies have reduced their costs. Weatherford, probably the biggest consulting firm to the oil and gas industry, reduced its staff by 14,000, then dropped another 6,000 – so 20,000 people are off their payroll. BHP and Rio Tinto and all the other mining companies have done the same. Anglo American is selling off nearly 70 per cent of their assets.

How is this affecting exploration firms operating in Cambodia?

They’re finding it difficult to raise money, but some are managing. If you look at the main players here, Geopacific raised about A$24 million [US$18.4 million] from a couple of funds in the last 12 months. They still have money in the bank and they’re still pretty active. I think they had five drilling machines running. They have a fantastic deposit.

Renaissance have done a deal with Emerald, who are coming in to fund a bankable feasibility study and also some exploration. Angkor Gold had some Chinese groups funding their exploration, and India’s Mesco has come in to develop their Phum Syarung gold mine. Mekong Minerals have renewed licenses and will be back exploring again very soon.

KrisEnergy have renegotiated their production sharing agreement with the government, but it’s taken so long that oil and gas prices are now so low, so there is a question on whether they will produce now or leave it till later. With the other oil and gas players, there’s not really that much going on.

Given these challenges, was it a wise move for the government in January to revoke the licences of a Malaysian company it said was not doing enough to explore its offshore oil concession?

I think it was probably a decision by both sides. They don’t want to pay the rental fees too, because they are quite substantial.

Do you expect anyone will bid on these licences?

No one. The oil and gas exploration industry is completely dead and nobody is spending on exploration.

So how important then is it for the industry that Mesco take the country’s first royalty-generating gold mine (Phum Syarung) into production?

It will be a bit of a milestone. It’s a high-profile project and everyone’s watching. It’s taken two and a half years, and once licensed it’ll take another 8-12 months to get the thing into production. But all the boxes are ticked and everything’s been done properly according to world standards. It is a great experience for the rest of the industry and for the government as well.

Many of the Western firms operating in Cambodia are listed companies and regularly report their activities. But what do we know about the dozens of mostly Asian mining companies that operate around the country, some already apparently in production?

CAMEC represents pretty much all the Western mining companies operating in Cambodia, but as far as everyone else is concerned, I really can’t comment as we don’t have that much contact with Chinese, Korean or other companies.

I can’t say they operate under the table – I don’t really know, because we don’t have much interaction with them. At the end of the day, we just continue doing what we’re doing, which is operating under international standards.

What do you see as the economic potential for Cambodia’s extractive industries?

Cambodia has the potential for significant mineral resources and definitely there’s oil and gas offshore. Currently, about 30 per cent of the country’s GDP is agriculture. If you add mining and oil to the mix, it could be significant and – particularly if prices recover and you get oil and gas flowing – it could be 20 to 30 per cent of GDP.

This interview has been edited for length and clarity.