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Mining boom 2.0 is here!

  • The last ‘boom’ started back in 2010 driven largely by commodities like iron ore and coal.
  • Record prices for commodities such as copper, gold, nickel, and lithium leading the current boom.
  • A chartbusting $1bn was spent on exploration in 4Q21 while total capital raisings broke a record in the 4th quarter totaling $3.17bn.

Australia’s mining boom 2.0 is officially here.

The country’s mining sector is blasting along in similar conditions to the resounding resources boom of 2010 on the back of record-breaking prices and highest ever exploration spend for a quarter, at the end of 2021.

According to the Association of Mining & Exploration Companies (AMEC), resource companies spent almost $1 billion on exploration in 4Q21. They also dug deep to raise a record amount of capital in the fourth quarter, increasing more than 70% to $3.17 billion compared to 4Q20.

However, while prices were blasting records prior to the Russia-Ukraine conflict, hedge funds are worried over the price surges. And the Reserve Bank of Australia (RBA) is concerned whether producers will invest in further supply at this elevated point in the cycle, unlike the previous resources boom.

So, which commodities are skyrocketing?

The nickel price briefly surpassed US$100,000 a tonne on the London Metal Exchange (LME), which suspended trading of all nickel contracts after the unprecedented and unsustainable price spike left brokers struggling to pay margin calls against unprofitable short positions.

Nickel, which is used in stainless steel production and electric vehicle (EV) batteries, soared as much as 250% in two sessions, to US$101,365 per tonne on Tuesday March 8, after closing up some 66% on March 7.

Gold keeps rallying towards an all-time high and surged 3.5% to more than $2,068 on March 8 as investors head towards the safe haven metal on growing fears about the Russia-Ukraine conflict and inflationary pressures.

US gold futures also jumped some 4% to more than $2,076 an ounce. Bullion, which is considered a safe store of value during times of geopolitical uncertainty and increasing inflation, has surged almost 13% so far this year.

Critical mineral palladium gained 2% after hitting a new high of $3,440.76/oz on March 7, while copper reached an all-time high last week but fell sharply on Monday amid reports of profit-taking sentiment.

Meanwhile, lithium carbonate prices rose to US$63,900/t in February, nearly six times the price in February 2021 when it was $US11,250/t. That’s a gain of more than 450% for the year.

Iron ore, Australia’s biggest export earner, bottomed out at around $US38/t in late 2015 with prices rising from a low of US$87/t in November 2021 to a year-to-date high of US$162.75/t for benchmark 62% iron ore fines on March 7.

The price of zinc on the LME hit a 14-year high in October and has hovered around that price of just over US$4,000/t.

And US-based Silver Institute is predicting demand for silver in 2022 to set a record of 1.112 billion ounces, surpassing the previous record in 2021 of 1.029 billion oz in 2021. However, the price is expected to remain stable at around $24/oz in 1H22.

The RBA’s Index of Commodity Prices for February indicates that the index decreased by 2.6% on a monthly average basis in Special Drawing Rights (SDR) terms, after increasing by 6.9% in January. Over the past year the index has increased by 16.7% in SDR terms but is at record highs over the long-term.

While commodity prices are on the rise across the board, the ASX200 dipped below 7000 points for the first time on Wednesday since the early stages of the Russia-Ukraine conflict, as the US and European allies began banning Russian oil imports.

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