Aussie miners shrug off Trump

Summary: Nothing is set in concrete with the US tariff war, as it's still evolving, but it could produce more winners than losers for Australian investors anyway.

Key take-out: Across much of the US, Australian companies have been more active than ever in acquiring assets and developing projects in the hope of cashing in on a continued revival of the US economy.

The threat of a global trade war ignited by US President Donald Trump's proposal to increase tariffs on steel and aluminium has shaken the commodities sector, but there's another group of potential winners waiting to be discovered as investors worry about the losses some companies might suffer.

In what's shaping up as a bad news/good news situation, the early focus has been on mining and mineral processing companies selling material to the US. Rio Tinto's aluminium smelters in Canada are a prime target, along with local steel maker BlueScope.

But on the flipside of the threat to US imports, and speculation of a rolling tit-for-tat exchange of tariffs with Europe and China, there is a small group of Australian mining companies learning to call America home.

Sandfire Resources, best known as the owner of a copper mine in Western Australia, is mapping out a future that includes the development of a copper mine in Montana, a northern state nearing America's west coast.

Paringa Resources is more advanced than Sandfire. It is getting closer to starting coal production at a new mine called Poplar Grove in Kentucky, in the northern part of America's east coast.

Oil Search, an Australian-listed oil and gas producer with its best assets in Papua New Guinea, last year made a $US400 million acquisition of oil assets in Alaska, a state off the north coast of the USA.

Across much of the US, Australian companies have been more active than ever in acquiring assets and developing mining and oil projects in the hope of cashing in on a continued revival of the US economy.

Lithium, the metal dubbed the white petroleum thanks to its use in the batteries that power electric vehicles, has been attracting small Australian explorers such as Piedmont Lithium, which is exploring a lithium deposit in the US State of North Carolina.

ASX-listed OceanaGold, which started life at the Macraes mine in New Zealand, has moved into the US through the acquisition of the Haile gold mine in South Carolina. It has also made two strategic investments in other companies exposed to US gold – NuLegacy and Gold Standard – which have assets in the home of US gold, Nevada.

Nova Minerals, another small Australian explorer, is active at several gold prospects in Alaska, as is PolarX, while Dateline Resources has set up camp in Colorado.

When considering the increasing number of mining and oil companies which have moved to the US, or are planning such a move, the key point is that what's happening in the tariff debate is producing potential winners and potential losers, and no one knows exactly how the situation will play out.

Rio Tinto, the ASX-listed company hit hardest by the threat of punitive tariffs on aluminium shipped across the border from Canada, might not be a loser when the dust settles. That is because US lawmakers from the same party as the President are deeply disturbed by what he has proposed, plus, there is the overlooked point that Rio Tinto has copper and boron interests in the US.

Australia's other big miner, BHP, is also facing an interesting set of decisions when considering its US assets. Right now, there is a sale process underway for BHP's oil and gas assets located in onshore shale tenements while it considers opportunities to expand its offshore US oil assets.

The situation at BHP could become as interesting as that faced by Rio Tinto. While some investors expect a full exit from US shale and a return of capital from the sale, BHP management is open to the idea of an asset swap, onshore for offshore, which might deepen its exposure to the US.

Volatile is the best word to describe what's happening in the US today as President Trump seeks to reword trade deals he considers unfair, even if they are with long-term allies.

It was his sudden move last week which disturbed financial markets and led to a series of what could eventually be viewed as an exchange of hollow threats and counter threats such as the European President Jean-Claude Juncker singling out Levi Jeans and Harley Davidson motorbikes, and Trump saying he could tax European cars because so few American cars are sold in Europe.

It doesn't take too much deep thinking to appreciate that a specific tariff on jeans and motorbikes is nonsense, much like Trump's comparison of US and European cars – everyone knows the Europeans produce vehicles that are infinitely superior to those made in the US, which is why Americans buy them.

Cool heads are likely to hose down the hot rhetoric of the past few days, which is when investors should get a clearer picture of the situation that has been created by Trump. He is trying to manufacture a climate for a deal which will strengthen the US economy, perhaps at the expense of trading partners, but with a watering down for countries regarded as friends of the US.

Canada and Australia, for example, would be likely to dodge the worst effects of Trump's proposed new tariff wall, especially when US lawmakers consider how these friendly countries are being forced into closer economic ties with the primary target of the tariffs, China.

But even as the main game is thrashed out at a government-to-government level, there is an entirely new crop of Australian companies that have identified the opportunities being presented by Trump's breaking down of old barriers to mining and oil project development, including less onerous environmental protection obligations.

Australia, once a prime destination for explorers, is becoming less attractive thanks to a tough federal and state approvals process.

Paringa's coal mine in Kentucky is an example of how easy it is to get a mine into production when the approvals framework is encouraging, whereas India's Adani Group is an example of how hard it has become to develop a new coal mine in Australia.

It was once a country that did not welcome miners and oil explorers, but now the US is one of the world's most attractive destinations – a country with a richly-mineralised geology, and a government that wants more mining to offset imports.