COLUMN-Australia’s commodity investment surges, gold and battery metals lead: Russell

Written by on November 23, 2020

(The opinions expressed listed below are these of the writer, a columnist for Reuters.)

LAUNCESTON, Australia, Nov 23 (Reuters) – For the primary yr in seven the worth of commodity initiatives being undertaken in Australia elevated, because the pure assets sector shrugged off the financial hit from the novel coronavirus pandemic.

Figures launched on Monday by the federal government confirmed a 30% leap in what it phrases “dedicated” useful resource and vitality initiatives to A$39 billion ($28.5 billion) within the 12 months to the tip of October this yr.

Whereas liquefied pure gasoline (LNG) was nonetheless the commodity drawing the lion’s share of funding cash, the report from the Division of Business, Science, Vitality and Sources additionally confirmed the expansion areas have been gold and metals related to the transition to a decrease carbon vitality future.

Australia’s funding developments are related for the worldwide commodity sector given the nation’s place because the world’s largest exporter of iron ore and LNG, and it vies with Indonesia for the title of greatest coal exporter.

It’s also the world’s third-biggest gold producer and largest web exporter of the valuable steel, and likewise ranks fifth in world copper and cobalt output, has the second-largest reserves of copper, cobalt, bauxite, and is ranked third in reserves of lithium and uncommon earths.

The report defines “dedicated” initiatives as these the place a ultimate funding determination has been taken, and amongst these LNG represents some A$20 billion, or simply over half of the A$39 billion whole.

Nevertheless, it’s value noting that the LNG ventures aren’t greenfield, or new, initiatives, slightly they’re brownfield developments largely aimed toward offering new sources of pure gasoline to current LNG crops, in an effort to exchange depleting fields.

There’s nonetheless a pipeline of potential LNG investments that the report locations within the “feasibility stage,” with a complete potential worth of A$77 billion-A$83 billion.

Nevertheless, a lot will rely in the marketplace view for LNG within the coming years, with most business analysts anticipating the present surplus to be maintained as new provide from counties equivalent to america, Russia, Canada and Mozambique outweighs rising demand, primarily in Asia and led by China.

Iron ore is the heavyweight of Australia’s commodity exports, so it’s not shocking that it additionally ranks second behind LNG within the worth of dedicated initiatives at A$7.Four billion, unfold throughout 4 developments.

Nevertheless, just like LNG, a lot of the iron ore funding is aimed toward sustaining present manufacturing ranges by growing new mines to interchange depleting reserves.

GOLD SHINES

The place cash goes to extend manufacturing is targeted on gold, in addition to minerals centered on the vitality transition.

There are 15 gold ventures on the dedicated stage, with an funding worth of A$4.Three billion, a determine that exceeds the six coal initiatives with a worth of A$3.Four billion.

The report mentioned these initiatives goal to extend Australia’s whole gold output by 182 tonnes every year, which if achieved would see the nation overtake Russia to grow to be the world’s second-largest gold producer, behind China.

Within the class the report calls “different commodities,” there was a rise to seven initiatives, from three within the prior yr, with the worth rising to A$1.7 billion.

Amongst these initiatives are two lithium refineries, a uncommon earths processing facility and a manganese improvement.

There are additionally 5 nickel and cobalt initiatives on the dedicated stage, with an funding worth of A$600 million.

Whereas the funding {dollars} flowing into the main commodities like LNG and iron ore dwarf these going into the minor metals, it’s value noting that that is the place the expansion in funding lies.

The worth of funding in “different commodities” jumped by 107% within the yr to finish October from the prior 12 months, whereas these for nickel and cobalt rose 41%, and people for gold by 41%.

A broad interpretation of the report might be that the funding in LNG and iron ore is to maintain present manufacturing ranges, however the funding in gold and the vitality transition commodities is aimed toward boosting output.

One other issue value contemplating is that the report exhibits that funding flows haven’t dried up regardless of the coronavirus pandemic, that cash remains to be out there, suggesting confidence in future demand. (Modifying by Stephen Coates)

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