The Investing News Network takes a look at Australia mining trends for 2020, with a macro view of the issues that came to the fore.
Click here to read the previous Australia mining trends article.
When looking back at the main trends for mining in 2020, the impact of the coronavirus pandemic is front and center for commodities and markets across the board.
For Australia, resources and energy exports are weathering the COVID-19 pandemic well, despite adverse impacts on a number of metals.
Overall, government data shows that resources and energy exports reached a record AU$290 billion from 2019 to 2020, supported by strong prices for gold and iron ore.
Here the Investing News Network (INN) recaps the main Australia mining trends in 2020.
Australia mining trends 2020: The year in perspective
The coronavirus pandemic started to spread around the world early in 2020, with China being the initial epicenter of the virus. Australia also had to fight the battle against the pandemic, taking actions and implementing policies to contain COVID-19.
“I think given the chaotic year we all had, and after an initial status quo in the first months of COVID-19, many were surprised with how resilient the sector is,” Paola Rojas of Synergy Resource Capital told INN.
“We had some definite lows (such as Altura Mining’s receivership), but the year overall ended in an unexpected high note,” she added.
One trend seen in the Australian market has been capital raisings for listed firms, which according to Rojas continued to gain momentum, with some reporting even doubling figures compared to 2019.
According to advisory firm BDO, cash inflows to Australia’s mineral and petroleum exploration sector surged by 51 percent to a two year high in the three months to September 30. Furthermore, 63 percent of the 642 explorers on the ASX managed to raise money through equity or debt during the period.
“Now, in the private company arena, things haven’t been as rosy,” Rojas explained. “They had to endure longer due diligence periods, particularly considering that site visits have become harder (if not impossible for some locations).”
Looking over at how commodities performed in 2020, the year was a two part tale — most markets plummeted in the first half of the year on the back of the pandemic’s impact, while the second half brought a recovery for many metals. In fact, gold hit an all-time high of above US$2,000 per ounce and copper surpassed the US$8,000 per tonne mark on the London Metal Exchange.
“Gold became certainly the leading lady of the 2020 movie, with copper following not far behind,” Rojas said. “Some amazing stories came to be — probably the frontrunner for me is Chalice Mining (ASX:CHN,OTCQB:CGMLF) with their world-class discovery at Julimar, near Perth, Western Australia.”
She added, “It doesn’t happen as often as we’d like, but when it does it makes everything right again … and that’s why we love this business.”
Australia mining trends 2020: Quarterly highlights
Here’s a look at some of the trends seen in Australian mining in 2020, quarter by quarter.
January to March: COVID-19 spreads
The first quarter of the year was marked by the coronavirus pandemic, which hit markets across the globe. Back in early days of 2020, US/China trade tensions and the coronavirus outbreak were weighing on world economic growth and industrial production, but growth was expected to rise slowly.
Prices for oil crashed, with base metals also receiving a hit as lockdowns and containment measures were put in place. Meanwhile, iron ore prices remained at high levels during the period on the back of supply disruptions seen in 2019.
April to June: Commodities outlook improves
“After 11 years of growth, the world is facing a COVID-19-induced downturn of a breadth and scale that now seems likely to be much larger than assumed (in March),” the Australian government’s Office of the Chief Economist (OCE) said back in June.
“The previous major global downturn — the global financial crisis — affected resource and energy commodities dramatically, but China’s infrastructure drive and a weaker Australian dollar helped provide Australia with a lifeline of sorts,” its statement continues.
As economic stimulus hopes started to increase, the outlook for commodities during the second half of 2020 was one of recovery. In fact, the OCE estimated that higher export volumes and a lower-than-expected Australian dollar would offset the impact of generally weaker prices.
July to September: Gold, iron ore make moves
During the June to September period, the world saw commodities continue to rebound, as China recovered and demand for metals from the Asian country increased. Iron ore prices hit a six year high, while gold also reached an all-time high surpassing the US$2,000 per ounce mark.
For Australia, the OCE believes resources and energy exports are likely to remain a major source of support to the economy as it recovers from the largest global contraction since World War II.
September to December: Vaccine hopes build
With the launch of vaccine rollouts around the world in the fourth quarter of the year, hopes of an economic recovery continued during the last few months of the year. Uncertainty still remains high, but the outlook for Australia’s resource sector is optimistic.
Another trend during the period was the escalation of trade tensions between China and Australia. Tensions began earlier in the year, after Canberra backed calls for an international investigation into the spread of the COVID-19 pandemic from China.
The Asian country imports 60 percent of iron ore from Australia, which is the world’s top producer. Coal exports to China could also suffer, while other products, including barley, sugar, red wine, timber and potentially copper, are being caught up in the disputes.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.