Nickel the new gold in Kalgoorlie

Gold is no longer all that glitters in this outback mining hub, thanks to a modern-day industrial revolution thousands of kilometres away in China.

Ever since Irish prospector Paddy Hannan and two friends first found gold in 1893 and sparked an Australian gold rush, gold has dominated Kalgoorlie's landscape.

But this year, a new manganese or nickel find is just as likely to turn heads at any one of the dozen or so saloons and brothels that line the streets of the West Australian city as the discovery of a new gold vein.

"Gold is not what China needs," Shaw Stockbroking analyst Ted Laske said. "They want the materials needed to make modern toasters, ovens, cars and other conveniences."

Much of the 300 tonnes or so of gold mined each year in Australia comes from the rich lodes around Kalgoorlie, which some claim to be the richest gold-bearing land in the world.

Only South Africa and the United States mine more gold.

But that means little to the new industrial miners.

"Simply put, our business is growing on the steel business in China," said Michael Kiernan, managing director of Consolidated Minerals, whose shares have risen 57 per cent so far this year, compared with a 9 per cent rise in the broader market.

Consolidated Minerals mines manganese, the price of which has risen 63 per cent in the past year, while the price of its chromite is up by a third.

While an electronic billboard atop the Palace Hotel, a favourite miners' drinking spot, still displays the latest gold prices from New York - around US$438 ($630) an ounce - they are preceded by the London Metal Exchange's nickel price.

Across the street at the Exchange Hotel, near-naked barmaids talk of the big-tipping zinc miners shooting billiards and drinking champagne.

"Investors are lining up for the small miners of industrial metals, while the small-capped gold miners are struggling," said Laske.

Kerry Harmanis, executive chairman of Jubilee Mines, sees more money in nickel - used to make stainless steel - than gold.

"Our nickel is worth two or three ounces of gold," Harmanis said, referring to the higher profits from the metal given lower mining costs compared with gold and the present high prices.

Nickel prices have raced above US$14,000 ($20,000) a tonne this year to their highest levels in around 15 years through strong sales to China, where steel-making is on the rise.

Inco, the world's number-two miner, has acquired slightly more than 10 per cent of Heron Resources with an eye to building a A$1.4 billion ($1.5 billion) nickel project using Heron's local properties in Kalgoorlie.

Fellow mining giant BHP Billiton holds just under 10 per cent of Heron.

Iron ore, the basic ingredient in steel-making, is another darling among investors after miners this year won an unprecedented 71.5 per cent price rise.

- REUTERS