Crossing Borders: Why Aussie Investors Should Look | Australian Markets

I would like you to put your self within the footwear of somebody working within the useful resource sector.

I don’t imply a high-end desk job, however somebody with boots on the ground.

Now think about the place you would possibly finish up…

Chances are, you’re most likely in an remoted, desolate and uncomfortable spot!

You see, mines are inclined to exist the place no one needs to stay. That’s most likely a good factor.

Many initiatives exist in Canada’s frigid, icy north.

Or Australia’s sizzling, barren outback, the place even the flies can’t tolerate the heat!

While Canada and Australia are at reverse ends of the Earth (and the temperature spectrum), now we have a good bit in common with our Commonwealth brethren…

Resources are a staple for the Canadian financial system, identical to Australia.

But right here again, there are variations… Each nation performs host to a very totally different set of commodities.

As you most likely know, the Australian market is closely pegged to iron ore, coal, and natural fuel. Gold and even lithium additionally make a sizeable contribution.

Meanwhile, Canadian stocks are more leveraged to copper, zinc, silver, uranium, and crude oil.

And these variations are why Aussie useful resource traders ought to pay close consideration to the Canadian market.

Why the Coming Boom Won’t Look Like the Last

Each useful resource growth tends to be marked by one key commodity… Nickel booms, silver squeezes, oil embargoes, and gold rushes.

And during the last useful resource growth, iron ore was king.

That positioned Australia’s useful resource sector in pole place.

Don’t get me mistaken—Canada did properly, too, however because of our locational benefit in Asia and big iron ore reserves, the Australian market was the place to invest.

Here’s a chart (from the RBA) evaluating the Terms of Trade (TOT) between Australia (pink) and Canada (blue) over these growth years:

Economists like to make use of the ‘TOT’ to measure a nation’s general health… Simply, it’s the ratio of a nation’s export costs to import costs.

While Canada’s financial system carried out properly, Australia’s concentrated iron ore business threw its phrases of trade into overdrive within the early 2000s.

And that catapulted the financial system in opposition to its resource-exporting rival, Canada, producing a deep pool of alternative for Aussie traders.

But will Australia repeat this outperformance?

China’s infrastructure surge drove the final commodity growth, which demanded heaps of iron ore. But this time, demand drivers are much less seen and arriving from a number of sources.

Here’s one instance…

Earlier within the yr, OpenAI CEO Sam Altman revealed plans to invest $500 billion in AI infrastructure, equal to Ireland’s GDP!

Dubbed the ‘Stargate Project,’ Altman set an formidable deadline—simply 4 years to finish the entire project.

But why the push?

As chances are you’ll know, US tech is in an ‘AI’ arms race in opposition to China… Fueling what may grow to be a international capex growth.

An occasion that may require big volumes of natural assets.

But this time it gained’t be iron ore.

Conductive metals like silver, copper, aluminium, and varied essential minerals. These could possibly be the ‘iron ore’ like performers of the early 2000s.

It’s only one side of why the NEXT commodity surge may look a lot totally different from the final.

And why Investors need a international focus

Don’t get me mistaken, if larger commodity costs arrive, the Australian market will do properly. But don’t count on it to OWN the cycle prefer it did final time.

The distribution of key uncooked supplies fueling this growth is NOT concentrated in Australia.

And that’s why you’ll need a international focus to faucet into this chance.

Take copper…

According to the Australian Department of Industry, copper export earnings are forecast to achieve $15.3 billion over 2024–25.

Significant. However, that solely represents about one-tenth of the worth of its iron ore exports, which is anticipated to achieve $138 billion over the identical period.

So, why not add some Canadian Stocks?

Over at my two paid advisory companies, our determination to look past the ASX has enabled us to bank some tidy wins in an general lacklustre junior mining market.

Our copper-gold developer, Filo Mining [TSX: FIL], was acquired by BHP and Lundin Mining final yr and acquired a sizeable premium on our opening price. That was a Canadian-owned company.

We additionally banked a fast 130% revenue late final yr on one other Canadian copper explorer, Aldebaran Resources [TSX-V: ALDE].

Meanwhile, one other Canadian copper-gold play sits within the portfolio with round a 180% revenue from our authentic entry.

In truth, most of our exploration hits have come from TSX-listed firms!

You can discover what explorers I’m recommending to readers right here.

But the important thing level is that this…

By diversifying into a totally different market, we’ve expanded our alternatives.

This provides us entry to initiatives that offer superior scale or grade to these in Australia, particularly when copper, zinc, silver, platinum, or crude oil alternatives.

Access to worldwide markets can also be simple. Most broker companies embody the Canadian market of their listing of international exchanges.

However, as a useful resource investor, I recommend specializing in simply two exchanges, the ASX and TSX.

That ought to offer you wonderful protection throughout the total spectrum of commodity alternatives.

Until subsequent time.

Regards,

James Cooper,
Editor, Mining: Phase One and Diggers and Drillers