BHP’s Kalgoorlie Nickel Smelter Damaged in Fire

It’s estimated the fire caused AU$10 million in damages to the facility, which refines nickel from three sources as a vital part of Nickel West’s operations.

Australian miner BHP (ASX:BHP,NYSE:BHP,LSE:BLT) has had a setback in its Nickel West operations in Western Australia, after its Kalgoorlie nickel smelter was forced to close after a fire ripped through the facility on the weekend.

As reported by local media, an estimated AU$10 million in damage was caused at the facility, with the fire taking four hours to be brought under control by local fire response teams.

Conditions were described by the Kalgoorlie fire station officer as very dangerous due to the nature of the facility — though no responders or workers at the site were injured during the fire, which is understood to have started in the facility’s furnace building on Sunday (September 23) afternoon.

Operations at the facility will remain suspended while BHP assesses the damage, with workers returning to work on Monday to work on recovery. No estimate for a resumption of operations has been released.

“People have returned to work at the Kalgoorlie Smelter today and the team is working on the recovery of safe operations,” a company spokeswoman told The West Australian.

“Our first priority is the safety of all our people and returning the plant to normal operations.”

The Western Australian Department of Mines, Industry Regulation and Safety has launched an investigation into the incident.

The Kalgoorlie smelter is a junction of operations for Nickel West, with three streams of nickel concentrate coming together from concentrators at Mt Keith, Leinster and Kambalda to be processed into nickel matte, with another facility processing it further to premium-grade nickel powder and briquettes containing 99.8 percent nickel.

In the last financial year, Nickel West produced 91,000 tonnes of nickel.

Kalgoorlie is home to BHP’s Nickel West operations, which earlier this year announced it would be embarking on an expansion program that would see new mines, upgraded facilities and a focus on nickel sulfate in a bid to cater to the booming battery metals market.

The company forecasts that by Q4 2019, its sales to the battery segment will make up almost 90 percent of all nickel sales — up from less than 60 percent at the start of this year.

On the LME, nickel — which has been the most resilient of the base metals during the trade war – was trading at US$12,840 a tonne as of Tuesday (September 25).

In Sydney, BHP was trading at AU$34.50 as of market close on Wednesday (September 26) AEST, up 1.17 percent.

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

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

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Global News
ladder leading to the sky

An unprecedented increase in nickel prices pushed the London Metal Exchange to halt nickel trading.

Nickel doubled in price to hit a record level of US$100,000 per tonne before the London Metal Exchange (LME) decided to suspend trading on Tuesday (March 8).

The base metal, used mainly in stainless steel, but gathering attention for its use in electric vehicle batteries, was up an unprecedented 250 percent in two days on the back of a short squeeze.

The largest-ever move on the LME kicked off as investors' worries over supply climbed following Russia’s invasion of Ukraine. Russia is a top nickel-producing country.

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wooden blocks showing sustainability-related images

As the world continues its transition towards a sustainable future, Australia has the potential to become a major player in clean energy and climate projects.

Sustainability is changing the course of multiple industries, with significant impacts on the investment sector.

Sustainable investing is the future — a means by which one can diversify their portfolio while also promoting positive societal and environmental impacts. This is arguably most evident in the energy and carbon markets.

"We're really in the middle of a low-carbon transition right now," said Adeline Aw, vice president of environmental sustainability at Singapore's Economic Development Board, according to a recent McKinsey podcast. "What's really important is to help finance and bring to life projects that can help us remove and to avoid carbon emissions."


The global push for sustainability

In 2018, scientists published a study in the peer-reviewed Earth System Dynamics, a scientific journal focused on climate change, geology and atmospheric science. According to that study, the world was fast approaching the point of no return for reversing global warming. Another report was published later that same year by the UN International Panel on Climate Change.

The second report has been the source of much confusion on the sustainability front. Many have grimly noted that it establishes 2030 as the point at which climate change is irreversible. What it actually says is that we need to significantly lower carbon emissions by that point — otherwise, we may be unable to stabilize the planet's warming.

This does not make the need for climate action any less urgent, nor does it undermine the importance of decarbonisation. It simply establishes a critical milestone for climate initiatives. That milestone has served as the bedrock for multiple countries as they lay out their environmental goals in both the short and long term.

Australia occupies a unique niche in that with respect to decarbonizing efforts. Although it was only responsible for roughly 1 percent of global carbon emissions in 2020, Australia is home to over 10 percent of the world's species. It’s also home to Daintree, the world's oldest known rainforest. Protecting the country's unique ecosystem, especially its forests, will be critical in the fight against climate change.

Australia has made great progress in this regard, and the country is currently on track to exceed its initial 2030 target for emissions reduction by up to 9 percent.

A closer look at Australia's climate change strategies

Australia has adopted what it refers to as a technology-led approach to emissions reduction. The country's Technology Investment Roadmap is foundational to this strategy, establishing a clear process for identifying, developing and deploying sustainable technology. Australia's investments are not solely domestic in nature either.

The country has also established low-emissions technology partnerships with several key global players, including South Korea, the UK, Germany, Japan and Singapore.

Australia has also established the Emissions Reduction Fund, the Safeguarding Crediting Mechanism and Climate Active initiative to incentivise decarbonisation and sustainability in both business and industry. Finally, it has defined comprehensive systems for emissions monitoring, reporting and accountability.

As some have noted, Australia could go even further than carbon neutrality with technology that already exists. It could achieve net-negative carbon, removing more carbon from the atmosphere than it creates. To that end, researchers at the Australian National University have created the ANU Below Zero Initiative, which sets the deadline for net-zero carbon emissions in 2025.

A net-negative approach to a sustainable future

Queensland Pacific Metals (ASX:QPM) is one of the companies currently leading Australia's transition towards net-negative emissions.

Its flagship project, the Townsville Energy Chemicals Hub (TECH), will produce nickel through a proprietary process that requires no tailings dams and discharges no liquids. TECH will also leverage waste mine gas from the Bowen Basin in its production process, helping offset a major contributor to Australian emissions. Finally, the company is exploring productive uses for the residue created from nickel production, primarily silica.

Recognized as a prescribed project by the Queensland government, the TECH project is expected to reduce net emissions by 14.9 kilograms of carbon dioxide (CO2) equivalent for every kilogram of nickel produced, a total reduction of 238,000 tonnes annually. The independent sustainability consultant Minviro undertook these CO2 emissions calculations in an ISO-compliant lifecycle assessment.

Australian Mines (ASX:AUZ) is another major player in the pursuit of Australia's net-zero goals.

The Sconi project, situated just 220 kilometres northwest of Townsville, aims to deliver the most sustainable, carbon-neutral-certified nickel and cobalt in the world. Australian Mines has placed its focus on developing an end-to-end production chain, including a 2 million tonne per annum ore processing plant. Expected to begin production in 2024, Sconi has a projected lifespan of over 30 years and will primarily supply materials to LG Energy Solution (KRX:373220).

As with TECH, Sconi has been identified by the Queensland government as a prescribed project.

Australia's second largest independent producer of oil and gas, Santos (ASX:STO) operates a carbon capture and storage (CCS) project known as Moomba, alongside partner Beach Energy (ASX:BPT). Developed to capture carbon produced by the nearby Moomba gas plant, the project will, upon completion, reduce Southern Australia's annual emissions by more than 7 percent. Captured carbon will be injected into depleted gas reservoirs via pipeline and is part of a plan to develop longer-term CCS capabilities in the region.

Finally, Anglo-Swiss mining and commodity company Glencore (LSE:GLEN) is currently developing its carbon transport and storage company project, which will capture emissions from a coal-fired power plant for storage in Queensland's Surat Basin. Speaking to Reuters, a Glencore spokesperson noted that if proven sustainable, the basin could hold "very sizable" volumes of carbon.

Takeaway

There are many carbon-focused projects in Australia across multiple industries and sectors, which together have the potential to greatly reduce the country's carbon emissions, while also providing compelling opportunities for sustainable investment.

This INNSpired article is sponsored by Queensland Pacific Metals (ASX:QPM). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by Queensland Pacific Metals in order to help investors learn more about the company. Queensland Pacific Metals is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Queensland Pacific Metals and seek advice from a qualified investment advisor.

QPM:AU

Indonesia, the Philippines and Russia were the top nickel-producing countries in 2021. Interested in nickel investing? Find out which other nations made the list.

As the electric vehicle (EV) industry continues to boom, the future of nickel looks bright in the coming years, and activity in the world’s top nickel-producing countries could increase.

With demand for the commodity continuing to grow, companies and countries alike have been eager to jump on the production bandwagon.

Having said that, it’s worth keeping the top nickel-producing countries in mind. Here the Investing News Network presents the top nickel-producing countries of 2021, based on the latest data from the US Geological Survey.

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Queensland Pacific Metals

Developing a Sustainable and High-Purity Battery Materials Refinery Project



Overview

The rapid growth of the electric vehicle (EV) industry has created a strong demand for battery materials. The expected demand has been intensified by efforts from various governments to support decarbonization goals. A key element of the EV industry is nickel, which is a base metal that is mainly used in stainless steel. The nickel industry’s environmental, social and governance (ESG) credentials have recently received considerable attention as well.

Still, the most pressing issues facing the nickel industry relate to the environment –– specifically carbon emissions and environmental footprint. Even though nickel supports the EV industry and thus the green economy, current production comes largely from Indonesia. The country is the largest producer of nickel and it does not have a net-zero plan by 2050. New High Pressure Acid Leach projects being constructed in Indonesia will also require tailings dams and effluent disposal, which will leave a significant environmental footprint. As a result, companies with prospective nickel and battery material projects with strong sustainability credentials may present an exciting opportunity for investors.

Queensland Pacific Metals (ASX:QPM) is a company focused on developing its sustainable and high-purity battery materials refinery project in Townsville, Northern Queensland. The company’s fully-owned flagship Townsville Energy Chemicals Hub “TECH” project will be a modern and sustainable producer of critical metals for the lithium-ion battery and electric vehicle sector.

Queensland Pacific Metals

“We believe that the TECH Project can be a global leader in sustainable battery metal production, with our net-negative carbon emissions, zero liquids discharge and no requirement for a tailings dam. Methane emissions from coal mining in the Bowen Basin is one of Australia’s biggest contributors to carbon emissions. By working with our partners to capture the waste gas and utilise it at the TECH Project, we simultaneously reduce carbon emissions, whilst producing critical battery metals to enable the electrification of the automobile industry,” said Managing Director Dr Stephen Grocott in an interview with INN.

The company’s TECH project will process high-grade ore imported from New Caledonia to produce nickel sulfate, cobalt sulfate, high purity alumina and other by-products –– maximising the value of the underlying metals in the ore. In November 2021, an ISO-compliant Life Cycle Assessment was completed by Minviro Ltd. The assessment highlights the TECH Project as not only net-zero carbon but significantly net Carbon Negative. The Life Cycle Assessment calculated that in steady state operation, the TECH Project will reduce carbon emissions by 238,000 tonnes per annum, the equivalent of 52,000 typical

Queensland Pacific Metals is committed to environmentally sustainable production. The company has entered into an MOU signed with Transition Energy Corp. to commission the supply of waste gas that will be used to fuel the TECH project. The company has also entered into an MOU with North Queensland Gas Pipelines for the transport of the fuel.

Queensland Nickel Production

In June 2021, Queensland Pacific Metals formed strategic partnerships with LG Energy Solution and POSCO to significantly advance its project. LG is the world’s largest battery manufacturer and this partnership represented their first investment in their nickel supply chain. POSCO is one of Korea’s biggest conglomerates and one of the largest steel producers in the world that is seeking to diversify its assets. POSCO recently purchased 30 percent of a significant nickel project from First Quantum Minerals Ltd. (TSE:FM) called Ravensthorpe. The partnership involved an equity investment of US$15M by LG and POSCO in Queensland Pacific Metals, resulting in the companies becoming shareholders with respective ownership interests of 6.4 percent and 2.8 percent. As part of the partnership, the company also entered into a binding offtake agreement with LG and POSCO for almost two thirds of its nickel and cobalt production.

The company’s 290-hectare TECH project is strategically positioned 40 kilometers south of Townsville in the Lansdown eco-industrial precinct. The precinct is anticipated to become Northern Australia’s first environmentally-sustainable advanced manufacturing, processing and technology hub. Ore will be imported from New Caledonia, unloaded at the Port of Townsville and transported by road to Lansdown. QPM products will then be transported back to the Port for export to global customers.

Queensland Pacific Metals’ TECH project is well supported by all levels of government. At a State level, the TECH Project has been awarded Prescribed Project status by the Queensland Government, making it a project of state significance.

QPM is currently completing a Definitive Feasibility Study for the TECH Project, which is expected to be completed mid 2022. Subject to financing and approvals, construction could start later this year with first production in 2024.

Company Highlights

  • Queensland Pacific Metals (ASX:QPM) is developing its sustainable and high-purity battery materials refinery project in Townsville, Northern Queensland.
  • The company’s fully-owned flagship Townsville Energy Chemicals Hub “TECH” project will produce critical battery metals, including nickel sulfate, cobalt sulfate, high purity alumina and other by-products.
  • Queensland Pacific Metals’ TECH project has a minimal environmental footprint with zero liquids discharge and no requirement for a tailings dam. The project will also be net carbon-negative according to an ISO-compliant life cycle assessment.
  • The company has strategic partnerships in place with LG Energy Solution and POSCO with each party obtaining shareholder status in Queensland Pacific Metals and having signed binding offtake agreements for nickel and cobalt.
  • Queensland Pacific Metal’s TECH project is strategically positioned in the Lansdown eco-industrial precinct that is anticipated to become Northern Australia’s first environmentally-sustainable advanced manufacturing, processing and technology hub.

Key Projects

Townsville Energy Chemicals Hub “TECH” Project

Tech Hub

The Townsville Energy Chemicals Hub “TECH” project is located in the Lansdown eco-industrial precinct in Northern Queensland. The 290-hectare project has access to skilled labor, engineering services and infrastructure including port, rail, water pipeline, gas pipeline, electric transmission, fiber optic communications and solar arrays.

The company’s TECH project will process high-grade ore imported from New Caledonia to produce nickel sulfate, cobalt sulfate, high purity alumina and other by-products –– ultimately resulting in almost zero-waste products for the first time in the world. New Caledonia hosts many ore supply partners with long-established mining operations. The ore would be transported by road or rail and unloaded at the Port of Townsville. The TECH project proposes to use a patented technology called DNi Process™ to process the ore in a processing plant.

Management Team

Dr. Stephen Grocott - Managing Director and CEO

Dr. Stephen Grocott is an accomplished executive in the mining and mineral processing sector with nearly 40 years of international experience. Dr. Grocott was the chief technical development officer at Clean TeQ Holdings Limited in which he was accountable for all technical and process development. He also supported technical marketing, due diligence and project funding for the A$2B Sunrise Ni-Co-Sc Project in NSW. Dr. Grocott’s exposure to EV and battery producers combined with his world-class expertise in process and development for minerals processing and battery chemicals will underpin the progress of the company

Duane Woodbury - Chief Financial Officer

Duane Woodbury has more than 25 years of experience in listed equity markets. His experience includes involvement with many organizations in Australia and overseas. Woodbury has worked with Macquarie Bank. He has also worked with Kingsgate Consolidated Ltd. as CFO. His most recent role was CFO at Metro Mining Ltd. where he successfully procured all funding required to construct the Bauxite Hills mine. At Metro Mining Ltd., he also secured a loan from Northern Australia Infrastructure Facility (NAIF) to fund expansion initiatives. During his career, Woodbury has managed large debt and equity raisings for development and operating companies primarily in the resources sector.

Barry Sanders - Project Director

Mr Sanders has over 30 years’ experience, including 20+ years in leadership and strategy roles involving the delivery of complex industrial, power, mining and oil & gas projects throughout the Asia Pacific region. Barry is highly regarded by industry and peers for exemplary leadership across construction, commissioning and project delivery with roles at GE, John Holland, Thiess, Jacobs and Clough.

Corinne Bufnoir - General Manager New Caledonia

Mrs. Bufnoir is a geologist engineer with 20+ years’ experience in the nickel industry. Corinne has had a public-private career in areas related to strategy and resource management in lateritic nickel mining operations and has strong New Caledonian relationships and ore supply chain operating experience. Corinne's most recent role was mining counsellor to President of the New Caledonia Government. Corinne has worked for a range of New Caledonian and international organisations including country manager for Transamine Trading SA and Queensland Nickel Pty Ltd. Previously, she held senior roles with the New Caledonian Department of Industry, Mines & Energy and Goro Nickel New Caledonia

QPM:AU
Cyprium
Cyprium Metals
Cyprium Metals

Cyprium Metals Limited (ASX: CYM) (“Cyprium” or the “Company”) is pleased to announce further assay results from 28 RC holes (for 7,504m) of the Nifty West drilling program. The drilling programme targeted a lightly drilled area, up-plunge of the former underground mine in the keel area of the Nifty Syncline, below the western end of the Nifty open pit (refer to Figure 1).

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CYM:AU
Rafaella Resources Logo
Rafaella Resources Logo
Rafaella Resources Logo

Rafaella Resources Limited (ASX:RFR) (‘Rafaella’ or the ‘Company’) is pleased to announce the results of an advanced open pit pre-feasibility study (Advanced PFS) conducted at the Santa Comba Tungsten and Tin Project (“Santa Comba Project’ or the ‘Project’) in northwestern Spain. The PFS shows the Project to be economically robust, complementing the permitted underground mine and offering significant upside due to the obvious scalability.

Announcement Highlights


  • The “open pit only” Advanced PFS shows a pre-tax NPV of A$ 94.8M (US$ 67.3M) and IRR of 32.6% (Management Case). The above numbers include Inferred Resources representing 5.6% of total production*.
  • The Project is robust with rapid payback of 2.3 years post-commissioning.
  • Proven and Probable Ore Reserves are estimated to be 7.48 million tonnes at a grade of 0.15% WO3 (cut-off 0.05%) for 12,374t of contained WO3, being an increase of 63% over previous numbers.1
  • Open Pit Upside: Recently drilled additional resources have translated into a higher NPV, demonstrating the importance of size and scalability on open pit projects:
    • 90% of the open pit project area has yet to been drilled. The wider project area offers significant potential for expansion, with a near surface Exploration Target** of 25,000 to 112,000 tonnes contained WO3. 2
  • Underground Upside: The open pit is complementary to the recommissioning of the high-grade underground operation containing JORC Inferred Resources of 2,752 tonnes of contained WO3 and 662 tonnes of contained Sn with an additional Exploration Target** of between 6,000 to 12,400 tonnes of contained WO3 and 1,300 to 2,200 tonnes contained Sn.3
  • The Advanced PFS results support the Company’s application for ‘Strategic Industrial Project’ status for the Project, to facilitate an acceleration of the permitting process.

Cautionary Statements

*There is a lower level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.

** The potential quantity and grade of the Exploration Target is conceptual in nature; there has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration work will result in the estimation of a Mineral Resource.

The Advanced PFS has been prepared in accordance with JORC 2012 by Consultores Independientes en Gestión de Recursos Naturales, S.A. (CRN) and follows the 42% increase in the Mineral Resource Estimate4 reported in August 2021 (after the 2021 drill campaign) and test work that showed improved metallurgical recoveries5 from Santa Comba project ores in January 2022.

Managing Director Steven Turner said:

“The study work has been carried out to a definitive feasibility level in most areas with CAPEX and OPEX estimations having an accuracy of +/- 10-15% at the time of estimation. Further work to finalise the definitive study is mainly related to metallurgical optimisation studies, however sufficient understanding of the processing has been achieved to confirm the attractiveness of the open pit as a complementary operation to the permitted underground mine, creating a long-term integrated scalable project. The Company is now able to move to the next important development stage and commence the open pit permit application process, presenting the Project as one of strategic importance to Galicia and Spain. The integrated Santa Comba project provides the Company with a future world class tungsten operation, combining (i) a high-grade underground operation, which is highly synergistic to the recent San Finx tin and tungsten mine acquisition, with (ii) a large scale, high volume, open pit development. The Project will bring major regional investment, securing long term jobs and a responsibly operated domestic source of a critical metal, highly vulnerable to Chinese and Russian supply chain disruption.”

Tungsten Mining Strategy

Rafaella aims to be a significant supplier of tin and tungsten to Europe and North America through the development of its two Galician mines; Santa Comba and San Finx. The Company is actively seeking ways to advance both projects which have previously operated and benefit from pre-exiting permits and substantial infrastructure.

The plans for Santa Comba project to operate as an underground and open pit mine are expected to extend the Project’s mine life and support regional investment and local job creation.

Tungsten Industry

The two naturally occurring tungsten minerals, that currently support commercial extraction and processing are wolframite ((Fe,Mn)WO4) and scheelite (CaWO4). Tungsten has a unique set of physical properties; it has the highest melting point of all the elements (~3,400°C), has a density that is 19.3 times that of water, making it among the heaviest metals, has excellent electrical conductivity and its coefficient of thermal expansion is the lowest of all metals.

Tungsten is classified as a critical metal due to its importance to key industries, whilst being vulnerable to supply chain disruption. 85% of global tungsten concentrates come from China. Importantly around 20% of Europe’s current demand is met from Russian sources (Argus Media). Given geopolitical events, the risks to future supply disruptions are very real and have been the subject of increasing concern at the European Commission level. A key mitigant to this risk would be the development of domestic resources. The Santa Comba project contains such a resource.

Prices for tungsten concentrates have historically tended to follow the same trend as prices for ammonium paratungstate (APT), which is the key intermediary product in the tungsten supply chain. APT prices are quoted on the basis of metric tonne units. A metric tonne unit (MTU) is 10 kg. An MTU of tungsten trioxide (WO3) contains 7.93 kg of tungsten (W). Standard industry grade specification for tungsten concentrate is 65% WO3.


Click here for the full ASX Release

This article includes content from Rafaella Resources Limited , licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.

RFR:AU

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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