5 reasons to be confident about Australia's mining sector

 

At a time when many businesses and entire sectors of the economy are struggling and losing profit and investors, Australian mining companies have bucked the trend and remained successful and profitable, despite the challenges.

If you're considering investing in gold mining companies or other Aussie miners, here are five compelling reasons why the sector offers comparative stability in uncertain times. As always, it's important to do your research and decide what investments are right for you.

 

1. Australia's largest sector

 

Mining is the single largest sector of the Australian economy by GDP share, contributing 10.4% of national GDP from 2019 to 2020, according to ABS data. It's also a major employer, with more than a quarter of a million Australians working in the sector and that figure growing by 21.4% in the five years to 2020.

 

2. Production increased in 2020

 

While most industries reported losses in production and profits, Australia's mining sector was in the black last year. Total output increased by 1.1% in 2020, which might sound modest, but compares to a decline of 10.3% in construction, 23.2% in administration and 43.4% in accommodation and food services.

The resilience of mining operations is clear, even when dealing with the restrictions and supply shortages of a major pandemic. Certain resources performed even better than the average – particularly gold and iron ore, with Australia expected to overtake China as the world's top gold producer in 2021.

 

3. Exports continue to grow

 

Coronavirus certainly had an impact on international trade, but it wasn't all negative. Australian mining exports recorded positive growth in volume and value overall in 2020, particularly for sought-after iron ore. With Brazil struggling to serve the global demand, Australia increased its share to account for 68% of iron ore exports worldwide.

 

4. Government support

 

With mining being such a strong pillar of the Australian economy, the government goes out of its way to support the sector, even as far as bending some of the rules. This includes giving foreign investors a longer timeframe to make their applications, encouraging larger investments.

 

5. Technological innovation

 

Mining is a high-tech business that adopts as many new technologies as operators can afford to. With mining companies being high-paying customers, much of the country's research and development is dedicated to improving the productivity and safety of mines.

Mines also make extensive use of existing technologies, such as automation. The uptake of these systems was accelerated by the pandemic to keep mines operating through staff shortages, and these investments will continue to pay off.


Resources & Energy Group (ASX: REZ)

Barclay Pearce Capital client Resources & Energy Group (ASX: REZ) is a gold explorer, developer and producer, with projects in Western Australia and Queensland. ​REZ is focused on developing highly prospective and low-risk Australian mining regions.

REZ

Resources & Energy was formed in 2005, and has operated as a gold exploration and development company since 2015.

 

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