How the Australian Dollar Impacts Mining Companies

The Australian economy — and its currency — owes its fortunes to the prolific and profitable mining sector.

The currency of Australia — the Australian dollar — is one of the most traded currencies on the planet.

Coming in at fifth globally on the foreign exchange market (FOREX), the Australian dollar is up there with the US dollar, the euro, the British pound and the Japanese yen.

As a resources-heavy economy, the Australian dollar moves with the commodities that it exports, like coal, iron ore and gold, linking it to the fortunes of its export clients. More demand for Australia’s resources equals more investment, equals a stronger economy and logically, a stronger dollar.

The land down under famously mines just about everything you can shake a stick at, and that’s reflected on the ground and in the numbers. According to government data, the mining industry makes up some 11 per cent of the Australian economy, and Australia is recognised as one of the great resources-intensive exporters — similar to Canada, Brazil and many African nations.

The value of exports to Australia is immense — 63 per cent of all export dollars come from resources exports. The continent is teeming with valuable resources, many of which Australia has the market cornered on, as the allure of a wide-open geography, stable and welcoming economy and educated workforce makes it hard to pass by as an investor.

No surprises then that the value of the Australian dollar to mining companies — or the value of mining to the Australian dollar — is closely intertwined. The industry is widely regarded, and recognised by the Reserve Bank of Australia, as having lifted Australian standards of living, wages and GDP, and having ensured the economy of the land down under remained without a recession for three decades.

It goes without saying then, that the Australian economy — and its currency — owes its fortunes to the prolific and profitable mining sector.

The value of the Australian dollar in the last few decades of the mining boom, the economic smorgasbord of wealth fueled by massive mining investment primarily in Western Australia, can therefore be seen to track the fortunes of Australia’s export markets. Up to now, that would be China, which consumed 83 per cent of Australia’s iron ore exports in 2020, though ructions this year between Australia and China could potentially see that change in a worst-case scenario.

Until — or if at all — that changes, China’s hunger for raw materials has helped prop up the Australian economy- and the dollar, keeping it strong compared to its competitors, with demand for commodities pumping resources and development into the corners of Australia.

But for all the dependency on China that Australian exporters have, the fact remains that commodities by and large are bought and sold in US dollars, meaning that for Australian miners, a weaker Australian dollar to the US dollar is very much a good thing.

Investors that play in Australian markets will have to keep an eye on where the AUD to USD conversion rate is trending, as with any currency on commodities that cross borders, exchange rates play a large role in when to buy — and when to sell.

For much of the last 30 years, the Australian dollar has been weaker against the US dollar. Its range is usually between 90 cents to 60 cents to the US dollar.

In the early 00s it dropped to the 50s, and for a two-year period between 2011 and 2013 it was often at parity or stronger than the US dollar (before falling rapidly afterwards) but for the most part the Australian dollar has been reliably around the 70 cents to a dollar mark.

With high Australian wages and higher costs of doing business in Australia, selling commodities in US dollars are a boon for domestic miners, as exchanging the greenback into local currency gives miners an extra boost for their product sold.

A low Australian dollar also makes it easier for North American investors to get into the market simply due to value for money, unlocking the mineral potential within.

As a resources-heavy economy, a lower Australian dollar makes the country more attractive for investors looking at Australia’s competitors — like Canada. Canada is another country teeming with mineral wealth and graced with a well-educated population and led by stable government, but the Canadian dollar is usually stronger than the Australian dollar. While it’s not that much stronger, it still gives Australian miners an edge. While other competitors like Brazil — with a significantly weaker currency — come with other pitfalls, like more political risk.

As mining is such a major component of the Australian economy, and almost everything mined in Australia is exported, a weaker dollar compared to the US dollar is therefore something that’s generally wanted by the industry.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Scott Tibballs, currently hold no direct investment interest in any company mentioned in this article.

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Australia took a stand against Facebook and Google earlier this year, and the move could have long-term implications for tech investors.

It was a ban that sent Australians wild and had the whole world watching.

Back in February, Facebook (NASDAQ:FB) stopped users in Australia from posting news in a week-long blackout, reacting to proposed legislation that would have forced the social media behemoth to pay publishers for content.

What prompted Facebook to "friend" Australia again, and what are the potential long-term implications of the squabble? Read on to learn what tech-focused investors in Australia should know about the situation.


Australia squares off against Facebook

On February 25 of this year, Australia's federal government passed the News Media and Digital Platforms Mandatory Bargaining Code. It was developed after extensive analysis by the Australian Competition and Consumer Commission, and is aimed at ensuring that news media businesses are fairly remunerated for their content.

It stipulates that digital platforms such as Facebook and Google (both named in the documentation) must pay news outlets whose content they feature — for example, if content is shared on Facebook or shows up in Google search results. The idea is that this will help to sustain journalism in Australia.

Unsurprisingly, Facebook and Google didn't react well to the code, which was first introduced in 2020.

Google didn't make any moves after it passed, but Facebook quickly made it impossible for Australian users to share news content, and pages for both local and international news organisations went blank — a major concern given the COVID-19 and wildfire concerns that were circulating at the time.

Australian Prime Minister Scott Morrison was scathing about Facebook's decision — which he ironically shared in a Facebook post — declaring the tech giant's actions "as arrogant as they were disappointing." He added, "These actions will only confirm the concerns that an increasing number of countries are expressing about the behaviour of BigTech companies who think they are bigger than governments and that the rules should not apply to them."

Despite strong feelings from both Australia and Facebook, the dispute was resolved fairly quickly, with the country agreeing to make four amendments to the legislation and Facebook restoring Australian's access to news.

Implications for Big Tech and news organisations

Both Australia and Facebook have claimed victory in the dispute, with a Facebook representative saying the company will be able to decide if news appears on the platform — meaning it won't automatically have to negotiate with any news businesses. Changes were also made to the arbitration process.

Tech experts have pointed out that larger news companies may ultimately benefit from the changes, but smaller ones could be pushed to the side. Major publishers that have struck agreements with tech giants, such as News Corp, Nine Entertainment (ASX:NEC,OTC Pink:NNMTF), Seven West Media (ASX:SWM) and Guardian Australia, may be able to increase their market share while smaller independent players lose out.

A business that is in full support of the laws is Microsoft (NASDAQ:MSFT). During the conflict, President Brad Smith came out loudly in favour of Australia's law, and advised that his company is willing to step up with search engine Bing should Google and/or Facebook pull out of the Australian market.

"In Australia, Prime Minister Scott Morrison has pushed forward with legislation two years in the making to redress the competitive imbalance between the tech sector and an independent press. The ideas are straightforward. Dominant tech properties like Facebook and Google will need to invest in transparency, including by explaining how they display news content," he said in a blog post.

"The United States should not object to a creative Australian proposal that strengthens democracy by requiring tech companies to support a free press. It should copy it instead."

Global reach and tech investor impact

Six months down the road from Australia's landmark legislation, it's tough to say what the long-term impact may be.

That said, market watchers do believe the country is part of a new precedent of forcing Big Tech into paying for journalism — something giants Facebook and Google are not used to.

Countries looking to pursue similar legislation include Canada, where Facebook agreed in May to pay 14 publishers to link to their articles on its COVID-19 and climate science pages, as well as other unspecified use cases. Canada is pursuing other avenues too. Meanwhile, in France, Google said it will pay publishers for news content after the country took up new EU copyright laws that make digital platforms liable for infringements.

For investors, the takeaway is perhaps that while companies like Facebook and Google may seem too big too fail, they too can fall subject to new regulations that can change how they do business. As nations around the world look to take back control from these mega companies, it's important to be aware of possible effects on their bottom lines.

Don't forget to follow @INN_Australia for real-time updates!

Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.

Queensland is the 16th most attractive jurisdiction in the world, sneaking in above BC and the Yukon in Canada, and just behind New Mexico in the US.

Queensland is one of the top three Australian jurisdictions for copper.

While it's well behind South Australia, a behemoth in the country for resources and production, Queensland hosts some 12 percent of all known Australian copper deposits, level with its southern neighbour New South Wales.

A premier mining jurisdiction globally, Queensland is ranked third out of all Australian jurisdictions for mining investment attractiveness, according to the Fraser Institute. Globally, it's ranked as the 16th most attractive jurisdiction, sneaking in above BC and the Yukon in Canada, and just behind New Mexico in the US.


The state is renowned for its mining prowess in Australia, and is known as one of the resource states, with a large chunk of its economic heft coming from the mining industry and its operations across the vast state.

Overall, mining accounts for 11.7 percent of Queensland's economy, with coal and liquefied natural gas being the primary focus of output. Together, coal, gas and mineral exports account for over 80 percent of Queensland's exports, according to the state government.

Having said that, copper plays a large role, and Queensland is home to the second biggest producer of copper in Australia in the form of Glencore's (LSE:GLEN,OTC Pink:GLCNF) Mount Isa mining complex in the northwest of the state. There, Glencore owns and operates the Enterprise and X41 mines.

Aside from Mount Isa, Glencore owns the nearby Ernest Henry copper mine. Combined, Glencore's Queensland operations produced 138,800 tonnes of copper in 2020 — accounting for a little over 10 percent of the company's global copper production. Glencore isn't listed on the ASX, but can be found on the LSE.

Besides the Mount Isa complex itself, there's also a handful of other operational mines in the northwestern portion of the state, although most of them are privately owned, such as the Capricorn copper project, which is a joint venture between EMR Capital and Lighthouse Minerals; it secured itself "prescribed project" status in 2017.

Other privately owned projects include Round Oak's Barbara project (in care and maintenance), Chinese-backed CuDECO's Rockland copper project (mothballed, CuDECO in liquidation) and Chinova's Osborne mine — which was originally set up by Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF). There's also the Balcooma mine, which Royal Gold (NASDAQ:RGLD) has copper royalties on, and the privately owned Mount Cuthbert mine.

Many of the mentioned projects ran into trouble in 2020, with the COVID-19 pandemic limiting company operations.

All in all, Queensland has 13 operational copper mines, but as can be seen many are in private hands, making investment opportunities somewhat slim. Aside from previously mentioned Glencore operations, there's Red River Resources (ASX:RVR,OTC Pink:RRRDF), which owns the Thalanga operations near Charters Towers. Red River acquired Thalanga in 2014, and has been working to develop the legacy site back into a viable investment.

From the beginning of production in 2017, the operations have a lifespan of some 10 years, according to Red River, with further development and exploration options on the table. In its most recent quarterly report, Thalanga reported output of 3,086 tonnes of copper concentrate.

The remainder of the options on the table for investors are exploration focused, such as Copper Mountain Mining (ASX:C6C,OTC Pink:CPPMF) with interests in the Eva copper project, which is — unsurprisingly — in the northwest of the state, near the town of Cloncurry. Eva is in the development phase, with a feasibility study completed in early 2020 envisaging a 15 year mine life with an annual expected output of 106 million pounds of copper equivalent.

There's also Global Energy Metals (TSXV:GEMC,OTCQB:GBLEF), which like Glencore isn't on the ASX, but has interests in the Millenium cobalt-copper-gold project and others near Mount Isa — all in the exploration stage.

Aside from that, Strategic Energy Resources (ASX:SER) acquired exploration licences from Newcrest Mining (ASX:NCM,OTC Pink:NCMGF) in May 2021 for licences around Mount Isa, and Zenith Minerals (ASX:ZNC) is exploring the Develin Creek copper-zinc project. Zenith recently divested from another copper project, Flannagans, in June 2021 by selling its interests to a private company for $450,000.

Don't forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Scott Tibballs, currently hold no direct investment interest in any company mentioned in this article.

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