Tech and Mining: An Unlikely Alliance | Australian Markets

I’ll be handing over the reins as we speak to my colleague and Fat Tail Tech skilled, Charlie Ormond.

Charlie heads Alpha Tech Trader, an advisory service specializing in alternatives in Australia and abroad.

I assumed it will be fascinating to ask him in and get his tackle how tech is making its mark on mining.

As Charlie factors out, there’s an important convergence underway. Mining is set to collide head-on with tech within the months forward.

That spells distinctive alternatives for the following era of Aussie miners IF you’re keen to look in the suitable areas!

So with that, over to Charlie…

Regards,

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

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As somebody deeply entrenched within the US technology panorama and news cycle, I assumed it could be value your time to get a perspective from the opposite facet of the hill.

I say the ‘other side’ as a result of commodities and technology stocks are historically at reverse ends of the market.

When one is in a bull market, the opposite is normally within the doldrums.

But it wasn’t all the time that means. For a decade after the 2007 Financial Crisis, commodities and the tech market had been joined on the hip.

That optimistic correlation finally broke down because the world economies tripped by successive bear markets round COVID and inflation, as you may see under:

Now, it appears to be like like we’re shifting back into a market the place the 2 are as soon as again coupling.

The causes for this are many-fold…

You might argue that it’s simply half of the broader financial cycle.

Or possibly it indicators the beginning of the following commodity supercycle?

In my opinion, the growing demand for commodities aligns with the need to energy this tech increase.

Now, that most likely isn’t news to you; we’ve all heard of AI’s insatiable energy calls for and the essential minerals needed to assist it.

Every knowledge centre, each autonomous vehicle, and each good gadget requires these sources.

As AI continues its unimaginable growth, so will the demand for these minerals. Even for those who maintain a sceptical view of AI’s path, the trajectory of technology is simple.

So, for those who consider these two sectors might proceed strengthening their ties, then it’s important to contemplate their future… Side-by-side.

This has been on my thoughts lately as I’ve seen a constellation of news round this theme. And I consider it opens an thrilling alternative for Australian buyers.

The thought revolves round these future-facing minerals and Trump’s want to rewrite the principles of trade.

In this time of disruption, buyers should grasp that essential minerals aren’t simply commodities anymore; they’re strategic property.

Critical Minerals: Our Trump Card

The international essential minerals trade is heating up with the calls for from tech.

On one facet sits America, flush with innovation however resource-poor. On the opposite sits China, holding a full home of processing capabilities.

And there, quietly observing from the nook with a hand full of aces, is Australia — with our purple filth holding some of probably the most helpful playing cards within the deck.

In current months, we’ve seen a flurry of news surrounding Trump and essential minerals.

Since coming to workplace, Trump has continued to advertise the thought of Greenland underneath the purple, white, and blue flag. This is a pure geostrategic play to control its huge mineral wealth.

In late February, Ukraine and the US bickered over a deal to entry Ukraine’s uncommon earth minerals as cost for its defence.

February additionally noticed our own authorities attempt to make use of essential minerals as a bargaining chip to cut back the sting of metal and aluminium tariffs imposed by Trump.

In March, the Democratic Republic of Congo (DRC) supplied the US a related minerals-for-security deal. A transfer to thwart its growing home insurgency.

Also, this month, we noticed Trump invoke wartime powers to increase the manufacturing of essential minerals. Meanwhile, China continues to spice up its exploration applications to great success within the East.

These geopolitical video games don’t have an finish in sight. And now, it’s not simply mining and tech executives speaking concerning the significance of these minerals. It’s starting to enter the broader public consciousness.

I believe the following part entails greater stock costs.

That makes now a great time for speculative buyers to look at the listing of potential miners in our own yard and the US.

Investment themes to contemplate:

For buyers, these trade shifts create each peril and promise. The peril lies in market volatility round strikes like tariffs or export bans.

While the promise lies in China’s great demand or America’s determined need for allies in its evolving useful resource strategy.

Here are some components to contemplate in your hunt for uncommon earth and essential mineral stocks:

Trump Tariffs and the US Dollar:

Trump’s tariffs are distorting markets. Planes full of gold are flying into the US, and copper costs are hovering as merchants attempt to front-run tariffs anticipated from the White House.

Similar indicators are rising across the administration’s want to weaken the US greenback. This uncertainty and confusion might whipsaw trade and commodity pricing within the close to time period.

But for buyers with a view on the horizon, these modifications could possibly be a boon, finally shifting more US trade in direction of companions like Australia.

Here is a snippet of the tariffs the US imposed on China. Notice the natural graphite and lithium modifications coming.

That could possibly be a actual tailwind for our home producers, many of whom sit at multi-year lows.

Yes, presently, many home miners export to China, however trade is quickly shifting in Trump’s world.

And China is hardly a good friend of our native producers.

The China Challenge: Price Manipulation and Market Control

While America plots its trade revolution, China continues to dominate the essential minerals processing panorama. It refines almost all of the world’s uncommon earths and controls the lion’s share of lithium processing.

Just take a look at their stranglehold on international manufacturing on this realm, China is the world’s greatest producer of 30 of 44 essential minerals tracked by the US authorities.

This provides Beijing extraordinary energy to affect costs. We noticed this in full power in 2022 when China issued a directive for producers to ‘guide product prices to return to rationality’ — inflicting uncommon earth costs to plunge by more than two-thirds with their oversupply.

Their price controls and dumping practices are hardly news to anybody following the sector, however now we are able to discover new companions and saner costs. This is a big alternative for the long run.

The forecasts for minerals demand are clear. Society and our tech will need more of these essential minerals sooner or later.

The US is loudly saying that it doesn’t need it from China. It desires it from security companions it will possibly trust long time period.

Australia additionally desires to cut back its reliance on China, and the federal government is supporting this by funding and subsidising native processing plants.

I believe that’s a great alternative for early buyers.

Critical Minerals: Our Trump Card

So, what’s the strategy for buyers trying to capitalise on this convergence of technology wants and geopolitical realignment?

Look for corporations with robust authorities backing, clear partnerships with the US, and processing capabilities moderately than mere extraction.

In the short time period, demand can nonetheless come from China, whereas the federal government backing will enable them to fund their processing buildouts with out overly diluting your shares.

In the long run, strategic partnerships will guarantee strong demand for home processing within the occasion of additional splits in international trade.

While the sector might face volatility as geopolitical tensions evolve, the structural demand drivers from tech stay firmly in place.

For particular person buyers, this means alternatives in smaller, well-positioned miners that make engaging acquisition targets for bigger gamers in search of to secure their provide chains.

With many stocks trading at multi-year lows regardless of enhancing fundamentals, the risk-reward right here appears to be like engaging for these with persistence and conviction.

Regards,

Charlie Ormond,
Analyst, Crypto Capital and Alpha Tech Trader