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Australia’s resource industry is a key part of the country’s economy. How did it rise to prominence, and how can investors get involved?
If you’re reading this, chances are you’ve seen some of the buzz around Australia as a destination for resource investment and potential profit.
Australia ranks as the 13th largest economy in the world, due in no small part to its mineral largess. Between 2020 and 2021, mining contributed an impressive AU$217 billion to Australia’s economy, an increase of 3.8 percent from the previous year.
The country is a global mining hotspot, and its abundant natural resources and government incentives have attracted some of the mining industry’s biggest names: BHP (ASX:BHP,LSE:BHP,NYSE:BHP), Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and Newcrest Mining (ASX:NCM,OTC Pink:NCMGF) all have major operations in Australia.
Nearly half of the companies trading on the Sydney-based Australian Securities Exchange (ASX) — the primary stock exchange in Australia — are listed in the basic materials and energy sectors.
The state of Western Australia is the world’s premier mining jurisdiction according to the Fraser Institute’s Annual Survey of Mining Companies for 2021. Four other Australian states and territories rank in the top 20 mining jurisdictions in the world: South Australia (10th), Northern Territory (14th), Queensland (18th) and Tasmania (20th).
Australia has been a plentiful provider of diverse commodities in the resource investment space for over a century; if you’re curious about exploring it for yourself, here’s a quick guide on the origins of the country’s resource industry, the current landscape for mining investment and future opportunities.
Australia investing: The beginning
European settlers first arrived in Australia in the 1780s, and by the 1790s, whale oil and baleen (whalebone) had become the colony’s first major exports.
When the 1820s rolled around, the economy grew exponentially through fine wool production. By the 1830s, wool had overtaken whale oil as the colony’s biggest export, with New South Wales replacing Germany as Britain’s primary supplier by 1850.
1851 saw the beginning of a major gold rush in Australia, causing the area’s population to surge from 430,000 to a whopping 1.7 million by 1871. In 1901, Australia’s first federal government was formed, and for the next 30 years, agricultural goods remained one of the country’s biggest exports, with wheat and dairy products being added to the roster.
The UK was Australia’s biggest export destination by the early 1960s, but it had begun to enhance its relationship with its European neighbours. At the same time, Australia was working to strengthen its ties with Asia, and by 1966/1967, Japan had become the country’s biggest export destination.
While Australia’s economic roots were formed in the agricultural sector, the 1970s brought a surge of mineral and fuel exports, driven specifically by iron ore and coal.
Fast forward to 2013/2014, and iron ore, coal and natural gas had become the country’s top three exports, with rural commodities falling to the wayside.
During this transitional period, Australia’s trading relationship with the UK further waned as Japan and China became the country’s two primary export destinations. China eventually overtook Japan as Australia’s leading export partner in 2009/2010, and according to a report from Australia’s Department of Foreign Affairs and Trade, the UK made up only 1.4 percent of Australia’s exports by 2013/2014.
Australia investing: Current opportunities
Today, Australia’s mining industry is comprised of more than 350 operating mines producing 19 different mineral commodities in significant amounts. Gold mines are the most common operations, and according to the US Geological Survey, the country is the world’s second largest gold producer.
While Australia’s major gold rush took place over a century and a half ago, current industry trends show that there is still much to be explored and discovered. You can find a number of gold investment opportunities to consider in the Investing News Network’s (INN) Best Gold Stocks on the ASX article.
Along with precious metals, Australia’s most valuable mineral exports include base metals, battery metals and energy resources. The country leads the world in iron ore production, and is also an important source of global aluminium, nickel and copper supply.
Western Australia is the only nickel-mining jurisdiction within Australia, and accounts for 7 percent of the world’s production of the mineral. BHP and Glencore (LSE:GLEN,OTC Pink:GLCNF) both have nickel-mining operations in the state. Other important nickel stocks for investors to watch include IGO (ASX:IGO) and Mincor Resources (ASX:MCR,OTC Pink:MCRZF). Those interested in learning more about nickel opportunities should check out INN’s article Nickel Stocks in Western Australia.
Australia is second only to Chile when it comes to copper reserves, and the red metal reigns supreme in South Australia, which is home to one of the world’s largest copper-producing mine, BHP’s Olympic Dam. Other copper operations in South Australia are OZ Minerals’ (ASX:OZL,OTC Pink:OZMLF) Prominent Hill and Carrapateena mines. INN’s Copper Stocks in South Australia and Copper in Australia articles offer investors further insight on what to know about the base metal in the country.
Aside from that, Australia is abundant in energy resources such as natural gas and uranium. With more than a dozen basins that yield natural gas, Australia hosts significant reserves. Natural gas is the country’s third most valuable resource export, as per the most recent data from the Department of Foreign Affairs and Trade, earning more than AU$47 billion for the economy. BHP and Woodside Energy Group (ASX:WDS) are the biggest natural gas producers in the country.
Uranium is another important sector in Australia’s resource industry. The country is the fourth largest uranium producer globally and hosts more than one-quarter of the world’s known uranium resources. Both of the country’s two producing uranium mines are in South Australia: BHP’s Olympic Dam mine, the largest-known uranium deposit in the world; and the Four Mile mine owned by Quasar Resources.
In recent years, Australia has also come to dominate the global lithium industry and is well-positioned to capitalise on the rapidly growing electric vehicle market. Increased demand for lithium has proved positive for ASX-listed lithium stocks. The nation ranks second in the world for lithium reserves behind Chile, but when it comes to annual lithium production, Australia’s output is more than twice as high.
Australia’s largest lithium mine is Greenbushes, which is majority controlled by China’s Tianqi Lithium (SZSE:002466). Greenbushes is the largest hard-rock lithium operation in the world. In 2021, Greenbushes accounted for 40 percent of the country’s total lithium production. Tianqi owns a 51 percent stake in Talison Lithium, which operates the mine, while major producer Albemarle (NYSE:ALB) owns a 49 percent stake in Talison via its acquisition of Rockwood Holdings.
Rare earths are another important commodity segment for technology, and Australia is set up to take advantage of opportunities in this market too. The country holds the fifth largest-known rare earths reserves in the world, and rare earths production in Australia has been rising over the last few years.
Northern Minerals (ASX:NTU) opened Australia’s first heavy rare earths mine, Browns Range, in 2018, producing heavy rare earths products such as dysprosium, which is used in permanent magnet technology. Lynas (ASX:LYC,OTC Pink:LYSCF) operates the Mount Weld mine and concentration plant in Western Australia, and in 2019, the company announced plans to boost production to 10,500 tonnes per year of neodymium-praseodymium products by 2025.
Other rare earths projects in the country include Australian Strategic Metals’ (ASX:ASM) Dubbo project in Central New South Wales, Arafura Resources’ (ASX:ARU,OTC Pink:ARAFF) Nolans project in the Northern Territory as well as Hastings Technology Metals’ (ASX:HAS) Yangibana project in Western Australia.
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