If you were a global money manager, you’d take one look at an asset like BHP’s (ASX:BHP) Olympic Dam and your choice about where to invest would be much easier. Stocks that produce earnings from commodity sales are probably better bets that stocks that produce earnings from American consumers.
A shift in global capital flows away from America and toward Australia could move BHP and other commodity stocks to new highs by the end of the year. But that might’ve happened anyway, given BHP’s stunning success in identifying rich ore bodies in South Australia.
We don’t know if anyone’s written history books about the world’s richest ore bodies, but if they did, they would have to take a serious look at Olympic Dam. “The gold deposit at Olympic Dam potentially is the world’s largest, BHP is expected to announce this week,” reports Cameron England in today’s Advertiser. “The company will release its resource upgrade for the copper, gold, and uranium mine as part of its annual report on Wednesday. This will detail latest estimates of the size of the mine’s deposits. The mine already sits on top of the world’s largest uranium resource and has one of the world’s largest copper and silver deposits.”
Olympic Dam could turn out to be the most valuable ore body in the world, ounce for ounce, shovel for shovel. BHP has an embarrassment of riches. Its iron-ore properties benefit from China’s growth. Its uranium resources are a real asset during an energy bull market (or Peak Oil, if you subscribe to the theory). And now, on the verge of a historic decline in the status of the US dollar as the world’s currency, BHP is announcing what could be the world’s largest gold deposit ever.
How lucky can you get?
The economic picture is not uniformly bright for Australia. But for the resource sector, the golden age is glowing nicely.
Another unintended consequence of the Bernanke cut is a rising Aussie dollar. Will parity be far away? It depends on who you ask. If you’re asking us, it will happen sooner rather than later. Commodity-based currencies not only sport a yield-advantage on the greenback right now, but you need a commodity-based currency to buy the shares of commodity producing companies.
Will new global demand for Australian assets push up interest rates? Or will it push them down? Hmmn.
Markets and Money