iron ore mine

Australia is an iron ore powerhouse, accounting for about 37 percent of the world's exports of the commodity. How can investors get exposure to this massive market?

It is more common than air, but invaluable to our society. We use it to build, craft and make steel and other alloys, and it shows up in everything from buildings to utensils.

Iron is one of the fundamental elements used by humans. It makes sense, then, to consider iron as an investment opportunity. The ubiquity of the metal, not just in our environment, but in our daily life, shows off its value. That value can be translated into an investor's portfolio.

When we specifically talk about iron in Australia, we are talking about the largest export in the country — it just narrowly edges out coal. Both the price and the production of iron have increased over the past five years, with most of Australia's iron being mined in Western Australia.


More than 37 percent, amounting to around 900 million tonnes, of the world's iron exports come from Australia. In this regard, Australia ranks number one globally. Its nearest rival is Brazil, with 400 million tonnes of iron exports, accounting for 16.7 percent — less than half of Australia's output.

Although the iron price is down in 2022, that's only compared to the massive highs it saw last year. Ignoring 2021's iron price spike, the iron price has not been at the levels seen currently since 2013.

The outlook is that this price trend will not continue indefinitely, and might take a few hits over the next several years. The Australian government expects price averages to drop from AU$142 per tonne in 2021 to AU$66 by 2023, and the profitability of that decline is questionable. Ultimately, the expectation is that the industry will remain solid, but will not continue to experience the exciting climb that it has, up until recently, enjoyed.

So why should investors consider iron? The short answer is that iron is here to stay. Market fluctuations are one thing — these ups and downs happen — but because of the nature of iron and how much people use and need the metal, at the end of the day, this industry is essential to our way of life.

Iron ore in Australia: Key players to consider

When looking at major players in Australian iron, three names repeatedly come up: BHP (ASX:BHP,LSE:BHP,NYSE:BHP), Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and Fortescue Metals Group (ASX:FMG).

Data for the following list was gathered from TradingView's stock screener on April 7, 2022, and the companies are listed in order of largest market cap to smallest.

1. BHP

Market cap: AU$260.25 billion; current share price: AU$51.94

Mining giant BHP's iron ore business includes integrated iron ore mines, rail and port operations in the Pilbara region of Western Australia. In addition to iron ore, the diversified Anglo-Australian company produces copper, nickel, metallurgical coal, petroleum and potash.

2. Rio Tinto

Market cap: AU$176.4 billion; current share price: AU$118.98

Diversified miner Rio Tinto produces iron ore, aluminium, copper, borates, lithium, diamonds, titanium dioxide and salt. In Western Australia, the company puts out five iron ore products; one of these is the Pilbara Blend, which the company calls "the world’s most recognised brand of iron ore."

3. Fortescue Metals Group

Market cap: AU$66.69 billion; current share price: AU$21.83

Fortescue Metals Group is based in Western Australia and has multiple operations in the Pilbara region. The company is one of the world's biggest iron ore producers, and sells its material globally, but mainly to China.

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

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

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What are the biggest iron ore companies listed on the ASX? Read on to learn more.

Like many industries, the mining industry was impacted by the pandemic, but for iron ore, the effect was slightly different.

Since 2016 the price of iron had been on a slow steady rise; however, in the spring and early summer of 2021, iron ore spiked to a high of AU$294.03. This lasted only a short while as prices plummeted to AU$131.97 in the latter half of 2021.

This was the result of demand and supply chains playing cat and mouse. In response to the pandemic, China — the world’s biggest producer of steel — began major construction to keep the economy afloat. Iron ore suppliers around the world were short-staffed and unable to keep up with the demand due to COVID-19. Large demand and short supply meant higher prices, but when the suppliers finally returned to work, the demand was no longer present. Production was also paused during the 2022 Winter Olympics in Beijing.


Below, the Investing News Network has listed the biggest iron ore companies on the ASX by market cap so far this year. Data for the top ASX Iron stocks were obtained on March 31, 2022, from TradingView's stock screener.

1. BHP

Market cap: AU$256 billion; current share price: AU$52.39

BHP Group (ASX:BHP), formerly known as BHP Billiton, is a multinational mining company with its headquarters in Melbourne, Australia. BHP is known for mining iron ore, copper, potash, coal and nickel. The company runs six iron ore mining projects out of Pilbara, Western Australia.

South Flank, which the company bills as Australia’s largest new iron development in over 50 years, began operation in 2021. It is projected that together with Mining Area C, the two plants will produce 145 million tonnes of ore per year.

2. Rio Tinto

Market cap: AU$176.15 million; current share price: AU$120.34

Rio Tinto (ASX:RIO) creates five products on the western side of Australia including Pilbara Blend, Yandicoogina and Robe Valley. Pilbara Blend products — making up over two-thirds of their iron ore portfolio — are known for consistent quality. Yandicoogina is used by many customers in East Asia and southern China; Robe Valley, with the company’s lowest iron content, is sold for more niche applications.

In partnership with NASA, Rio Tinto plans to open its first intelligent mine: Gudai-Darri, a AU$2.6 billion iron new project with autonomous transportation and drilling systems. In 2018 funding was approved and with the lifting of COVID-19 restrictions, the first production from the plant is expected by summer 2022.

3. Fortescue Metals Group

Market cap: AU$60.93 billion; current share price: AU$21.06

Established in 2003, Fortescue Metals Group (ASX:FMG) is a mining, technology and development company. Fortescue owns five mining projects in the Pilbara region of Western Australia including the Chichester, Solomon and Western Hubs. As one of the leaders in the mining and development sector for battling against climate change, one of the company’s main goals is to have zero carbon emissions by 2030.

On March 1, 2022, Fortescue bought Williams Advanced Engineering and announced the world’s very first zero-emissions infinity train. The new acquisition will be managed by Fortescue Future Industries, the mining company's green energy and technology sector. The infinity train is set to have embedded electricity regeneration to avoid the need for recharging stations, so it will be able to use electric power to bring ore to port and return.

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

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

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What is decentralised finance and what should investors know about this space in Australia? Find out here.

DeFi, short for “decentralised finance,” is a promising component of our brave new crypto world. The DeFi sector in Australia is here to stay, but what should investors know about this space?

DeFi offers an alternative to traditional financial services and institutions by bypassing banks, brokers, exchanges, and other “middlemen” which serve as financial intermediaries that regulate the markets. In effect, DeFi is evolving into a parallel financial framework that facilitates and records transactions involving financial instruments and payment mechanisms chiefly related to trading and lending operations.


The DeFi market is currently expanding at an explosive rate. According to figures released by DeFi Llama, cryptocurrency investors have put up $250 billion worth of assets as collateral in various DeFi projects, funds which are then lent out in the form of cryptocurrency loans. As more and more institutional investors enter the DeFi sector, the market is expected to expand to $800 billion by the end of 2022.

Bitcoin and Ethereum, the world’s two leading cryptocurrencies with market caps of $882 and $421 billion, respectively (as of the beginning of April), are digital assets whose ownership is documented in a public transaction ledger known as the blockchain. A traditional financial institution such as a bank, credit card provider or payment facilitator like PayPal, maintains its own private records and uses its own servers to process transactions. Cryptocurrency transactions, by contrast, are processed on the computers of a global network of users and recorded publicly (though pseudonymously) for the entire network to see.

As currently constituted, the emerging DeFi sector provides holders of cryptocurrency the ability to bypass the world’s traditional network of bank and other financial gatekeepers by means of independent, self-regulating computer programmes that rely on blockchain technology.

These decentralised applications (DApps) of blockchain technology offer a more efficient and streamlined mechanism to access financial services by creating an alternative ledger system known as “distributed ledger technology” (DLT) as opposed to VISA, PayPal, or other legacy digital payment services. By harnessing the power of blockchain, a new global ledger system has taken shape that relies on a global web of interconnected computers to record and track all transactions. Not only does DLT store such transaction data but it also identifed the parties involved in any transaction.

This allows anyone with a crypto wallet and an internet connection unlimited access to DeFi services. Users can trade currencies and move assets whenever and wherever they want and avoid antiquated and cumbersome bank transfer protocols and related fees. DeFi users are however required to pay “gas fee” charges for crypto transactions in many cases.

DeFi is thereby expanding the fundamental premise of digital money – Bitcoin and other cryptocurrencies – by allowing individuals and companies alike to execute financial transactions by means of a new and fully transparent system.

DeFi Applications

Lending platforms

The DeFi market is currently expanding at an explosive rate. According to figures released by DeFi Llama, cryptocurrency investors have put up $250 billion worth of assets as collateral in various DeFi projects, funds which are then lent out in the form of cryptocurrency loans.

Parallel to the expansion of the cryptocurrency market, DeFi will become increasingly able to provide loans via the various lending platforms that are popping up around the world. In effect, DeFi lending platforms are digital banks, taking money from cryptocurrency depositors and lending it out to borrowers.

Instead of traditional bank loans, the DeFi platforms rely on “smart contracts” – primarily the Ethereum blockchain – which uses computer code to authorize, execute and verify transactions.

Lending markets serve as one of the most intriguing and promising applications of DeFi by connecting borrowers to lenders of cryptocurrencies by means of platforms that enable individuals or companies to either borrow cryptocurrencies or provide crypto loans.

In order to obtain a loan, borrowers must put up collateral – usually ether, the crypto currency issued by Ethereum, the principal system on which all cryptocurrency applications are based. Borrowers tend to receive loans in the form of stablecoins pegged to traditional currencies like the dollar.

Alternatively, borrowers can post collateral in the form of Bitcoin, which then gets depositied in a crypto pool that is overseen by a smart contract. Should the price of Bitcoin take a precipitous fall, the smart contract automatically liquidates the collateral to protect depositors who have provided the loan funds in the form of stablecoins. Meanwhile, lenders earn money from the interest rate the platforms charge for lending out their funds.

Decentralised exchanges

Decentralised exchanges use smart contracts to enable traders to execute orders without an intermediary. Users trade directly from their wallets by exchanging one currency for another, e.g. Bitcoin for US dollars, euros for Ether, by means of the smart contracts behind the trading platform. Traders are solely responsible for managing and securing their funds and risk losing their holdings if they lose their private keys or send funds to the wrong addresses. The advantage of bypassing financial intermediaries and preserving anonymity is offset to a degree by the lack of security a bank or a centralized exchange provides.

Stablecoins

A stablecoin is a cryptocurrency pegged to the value of a non-crypto asset (i.e. the US dollar) that offers price stability which in turn provides greater security for DeFi collateralized lending. Tether is one of the leading stablecoins.

Australia: Making a splash in DeFi

Australia currently ranks 12th out of 154 countries according to the Global DeFi Adoption Index published by Chainanalysis. This index uses three metrics in its assessment of DeFi adoption: On-chain cryptocurrency value received by DeFi platforms weighted by PPP per capital; total retail value received by DeFi platforms; and individual deposits to DeFi platforms.

Australia’s DeFi sector is currently experiencing a boom led by various companies such as Synthetix (SNX), which hopes to become a decentralised version of derivatives exchange BitMEX, Maple Finance (MPL), which offers loans for crypto institutions, and newly launched Tiiik, which offers a digital wallet that allows investors to earn interest on DeFi products. Other new Australian DeFi players include Thorchain, Ren and mSTABLE.

While the DeFi sector is currently in its first develomental phase much like Bitcoin in its early days, individual investors have three main ways of investing in this evolving industry. First, one can obtain cryptocurrency-based loans; second, one can earn interest (by lending (staking) their crypto holds, looking to invest in DeFi coins. (Block Earner, for example, is an Australain fintech outfit that provides a DeFi online savings platform which pays 7 percent interest on deposits.) Third, investors can simply invest in DeFi coins in the same way that one can purchase cryptocurrencies.

Evolving market

Investors willing to take a plunge in DeFi should be aware that the underlying volatility of the cryptocurrency markets can rattle the DeFi sector in the event of sharp declines in Bitcoin, Ethereum and other cryptos. There is also the added spectre of rug pulls, a relatively rare but catastrophic form of fraud.

Rug pulls see unscrupulous DeFi developers create a new token, pair it to a leading cryptocurrency such as tether, set up a liquidity pool, and then use secret back doors encoded into the coin’s smart contract to mint millions of new coins before liquidation. This was the case in 2020 when SushiSwap developer Chef Nomi cashed in his SUSHI tokens after raising over a billion dollars in collateral finance which caused the price of SUSHI to crash to near zero.

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

Securities Disclosure: I, Harold Von Kursk, hold no direct investment interest in any company mentioned in this article.

Interested in the relationship between the gold price and the ASX? Here’s how the two interact and how you can benefit from it.

As the gold space becomes more prominent in Australia, it can be beneficial for investors to understand the unique relationship between the gold price and the ASX.

The two sources of trade are able to push and pull one another, although in general the price of gold tends to indirectly follow the movements of the ASX.

Read on for a breakdown of gold’s history in Australia and what’s currently affecting the price of gold. We’ll also explain the relationship between gold and the ASX, and how you can benefit from it as an investor.


Gold price and the ASX: The history of gold in Australia

Gold’s significance in Australia began in 1832 with James McBrien, who found traces of the yellow metal near Bathurst, New South Wales. However, for the most part, early discoveries of gold were kept under wraps, because authority figures were concerned that convicts, soldiers and public servants would abandon their work and other responsibilities to search for the metal.

That changed in 1851 when Edward Hargraves and his colleagues found gold, again near Bathurst. This time, the discovery was made public, and within a month, close to a thousand men were searching for the metal in an area called Ophir, named after the biblical story about King Solomon’s gold city.

There were more gold discoveries in the state of Victoria in 1854 following the rush in Bathurst. Tens of thousands of immigrants from around the globe headed to the Australian colony in search of the yellow metal, with Ballarat and Bendigo in Victoria becoming major gold sites.

Between 1848 and 1858, Australia’s population tripled to more than 1 million people. Gold fever then hit Coolgardie and Kalgoorlie in Western Australia in the early 1890s, when key discoveries were made in those areas.

During this time, exciting gold finds were spurring the development of inland towns, communications, transport and foreign trade. In fact, since Australia’s first recorded gold discovery, the metal has changed where and how people live within the country. Many towns were developed using wealth generated from mining gold, and Australia is also home to ghost towns that were deserted when the gold sources that kept them afloat ran out.

Even though the precious metal has made large contributions to Australia’s development, its importance declined during most of the 20th century as other metals became more prevalent and economically significant. Gold later underwent a resurgence in the 1980s and 1990s, when the use of new technology allowed lower-grade ores to be processed economically.

Today, Australia is stepping back into the spotlight as one of the most prolific gold-mining regions in the world. In terms of gold prices throughout the years, the metal has experienced a mostly upward trajectory in Australian dollars.

Gold price and the ASX: What’s moving the gold price

At the start of 2022, the gold spot price was around AU$2,500 per ounce, which is much higher than it was almost 20 years ago. In the year 2000, gold hit AU$481.68, a high at the time, and 10 years later it was still climbing, breaching the AU$1,400 mark.

The metal made more gains between 2009 and 2011 before backsliding. However, the downturn did not last long, and by 2015 gold prices were slowly ramping up again, reaching its highest in August of 2020 at AU$2,618.67.

performance of gold price from 2006 to the present

Performance of gold price from 2006 to the present.

Chart via TradingView.

While there are a variety of factors that influence the price of gold, some have more weight than others. Below is a guide on the main elements that are shifting and shaping the price of metal.

The Australian dollar

The first element supporting the yellow metal is the fact that the Australian dollar did not have the strongest year in 2020. In general, as the dollar declines, the yellow metal will see an upward price movement.

performance of gold price and Australian dollar from 2006 to the present

Performance of gold price and Australian dollar from 2006 to the present.

Chart via TradingView.

Reserve Bank of Australia

Much like with the US, interest rates have been raised in Australia as of late. In May 2022, the central bank lifted rates for the first time since 2010 by a quarter point basis, with investors expecting it to continue to increase rates at that pace.

However, following its June policy meeting, the Reserve Bank of Australia moved its cash rate by 50 basis points to 0.85 percent — its highest hike in 22 years.

Gold tends to retreat directly after rates are increased, but it is not always the case. Higher interest rates make stocks, government bonds and other investments more attractive to investors.

reserve bank of australia\u2019s interest rates from the past five years

Reserve Bank of Australia’s interest rates from the past five years.

Chart via Trading Economics.

The United States

The ongoing trade war between the US and China has affected overall global markets, and in Australia it has sent investors running towards the safe haven nature of gold. The spat between the two powerhouse countries has been ongoing for four years, causing a tariff tit-for-tat that has resulted in volatility in the markets.

These tensions have been eased slightly in recent years by the signing of a phase one trade deal in January of 2020 between the two nations, and recent talks between the leaders of both countries.

Geopolitical events

Any time global tensions rise, the price of gold will rise as well. Usually, these events only trigger a short-lived rise in precious metals like gold, as investors turn to gold for a safe investment in the face of international conflict. Most recently, the war in Ukraine has caused gold prices to shoot up.

It’s likely that gold prices will continue to be volatile depending on how the war progresses. However, if historical precedent stands true, the support for gold will be short lived and drop once tensions ease and the need for a safe haven investment goes through a correction.

performance of gold price during the 2014 crimean annexation by russia

Performance of gold price during the 2014 Crimean annexation by Russia.

Chart via TradingView.

The above chart displays the price of gold in Australian dollars during the 2014 Russian invasion of Ukraine’s Crimea peninsula. It shows how the price of gold soared during February and March, when the invasion took place. After this period, gold returned to its previous trend. Although the current events are of a much larger scale and predicting how they will develop is impossible, the past history of gold’s price during geopolitical conflict is worth considering.

Bond market and exchange rate

Another element that is currently affecting the price of gold is a dwindling 10 year government bond yield. Since 2008, 10 year yields have dipped from over 6.59 percent to a low of under 1 percent in 2020. Currently, 10 year bonds are recovering from the pandemic low and sit at 2.77 percent.

australian government 10 year bond yields since 2006

Australian government 10 year bond yields since 2006.

Chart via Market Watch.

Compared to US 10 year yields, which have fallen from 4.05 percent to 2.47 percent over the same period, it is clear that the Australian bond market has taken a larger hit. Because of this, the exchange rate for Australian and US dollars has fallen and has led gold to outperform in Australian dollars.

“The bottom line is that, while the AUD gold price is high, it’s entirely justified why it is trading above AU$2,000 per ounce. Whether it’s a faltering local economy, a fragile property market, negative yield differentials, low and falling rates or a weakening currency, there are many good reasons why astute investors typically allocate 5 to 10 percent of a diversified portfolio to gold. The strategic case for gold is as strong as ever,” the World Gold Council explains.

Gold price and the ASX: How gold affects the market

Gold’s relationship with the ASX is unique in that the metal indirectly follows the movements of the market, as opposed to resources like oil and gas. The yellow metal has the tendency to be viewed as a counter-cyclical asset, which means that its value increases during market downturns.

Due to gold’s large global presence and high intrinsic value, the precious metal is often seen as a universal currency. When the outlook of the equity market looks bleak, or corporate earnings are destined for doom, investors will flock to the precious metal.

On the flip side, when the economy, and in turn the ASX, is on the rise, investors tend to abandon the yellow metal in favour of equities.

However, this is not to say that the relationship between gold and the ASX is a negative one. It is more of a give-and-take commitment. The metal continues to have an impact on jewellery and jewellery-related products. Additionally, gold is used in dentistry, aerospace and electronics — all of which affect publicly traded companies and as a result the ASX.

This relationship between the gold price and the ASX has turned the precious metal into something of a hedge when it exists within an individual’s portfolio as a source of diversification, which is when market participants hold investments that are not related to one another.

Since gold has a history of having a negative correlation to stocks, bonds and other financial instruments, it becomes important that investors get diversified by owning a portfolio that combines gold with stocks and bonds in order to reduce both volatility and risk. While it is true that the yellow metal goes through times of volatility, its spot price has always maintained its value over the long term.

This is an updated version of an article first published by the Investing News Network in 2020.

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

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

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