Dirt Powers AI at Morgans Noosa
Everyone chased the AI boom through Silicon Valley. John Caruso learns how Australia’s been supplying the raw ingredients the whole time.
There was a period of my life, not long ago, when I fancied myself as a day trader. I had the platform, the charts, the moving averages stacked up like Christmas lights, and a conviction that I could out-think a market that had been humming along quite happily since before I was born. I lost sleep. I lost money. I developed a genuine fondness for the phrase “support and resistance,” despite having no clear idea what either was resisting.
Somewhere around 2am, staring at a candlestick pattern that apparently meant something called a “bearish engulfing,” I made the sensible decision that professionals exist for a reason. That’s when I started talking to Morgans Noosa. Letting someone qualified manage the whole business turned out to be a far better use of my evenings – and kinder to my blood pressure.
Back in my technical trading days, the big conversations were about the big Australian names, the banks, the miners, the household staples that had been paying dividends since Federation. Then Silicon Valley arrived with its hoodies and its market caps, and everyone wanted a slice of Microsoft, Google and Meta instead. Resources felt old hat. Mining felt like something your grandfather did.
Which makes what Brent Plasier told me somewhat amusing.
Brent is a Senior Private Client Adviser at Morgans Noosa, and when Andrew Stafford, Principal at the Noosa office, suggested I talk to him about how the resources sector is feeding into the AI build, I assumed I’d be filed under niche interest, low readership.
Instead, I got a lesson in irony: the AI boom, that shiniest and most Californian of stories, is being built out of the same dirt Australia has been digging up for a century.
“The AI build needs a lot of materials, copper, lithium, aluminium and everything associated with batteries. You also need NdPr, which are the magnets that go into robots and things like that,” Brent says.
NdPr, for the uninitiated, and I certainly was, stands for neodymium and praseodymium, a pair of rare-earth elements that Brent abbreviates for anyone without a chemistry degree. They go into the permanent magnets used in everything from electric motors to the robots now populating data centres worldwide.
Here’s where it gets interesting for someone who occasionally has strong opinions about our balance of trade. China refines roughly 65 per cent of the world’s lithium and controls around 80 per cent of rare-earth processing. Australia, despite sitting on a wealth of the raw material, refines about one per cent of it.
“Australia has a lot of these resources, but China does most of the refining. The opportunity now, over the next decade, when we’re building these data centres, is for us to supply a lot of this stuff,” Brent says.
It isn’t only the glamour metals either. Take tin, a commodity about as exciting as it sounds, until you learn it solders together the semiconductors inside every device we own.
“China controls a big chunk of that tin supply too, and the rest of the world realises that we need to find producers outside of China,” Brent says.
Some of that finding is already underway. Lynas is the largest producer of NdPr outside China, running its operations out of Western Australia and Malaysia. Pilbara Minerals produces hard-rock lithium and is building its own processing facilities rather than shipping the raw product offshore. Iluka Resources is constructing a government-backed rare-earths refinery at Eneabba, near Geraldton, designed to process both light and heavy rare-earth oxides onshore for the first time.
Independence Group runs its own lithium interests through a joint venture with a Chinese company, a reminder that even our own resource sector hasn’t fully extracted itself from Beijing’s orbit. Brent doesn’t treat that as a flaw so much as a fact of the current landscape, one his clients are increasingly comfortable investing around rather than waiting to see resolved.
Then there’s Rio Tinto, which took a view on all this, years before it became fashionable. The company bought its way into lithium through the Arcadium acquisition, added it to an existing base of copper and aluminium, and has been telling shareholders it’s playing a ten-year game, not a ten-week one.
“They can supply 70 per cent of what needs to go into a data centre from what they produce,” Brent says. Rio’s own recent half-year result backs him up, with copper, aluminium and lithium now making up more than half the company’s earnings, a shift its chief executive has put down directly to the data centre build. For a sense of scale, Brent offered up a detail that has stuck with me longer than any percentage.
“In a data centre, there’s the weight of a blue whale in lithium alone and then with every robot that’s built, there’ll be two to two and a half kilos of lithium in there,” Brent says. It’s an image that turns an abstract commodities market into something you can almost feel the weight of.
Governments have noticed too. In the United States, the Trump administration struck a deal with rare-earths producer MP Materials that guarantees a floor price of $110 per kilogram for NdPr oxide, a direct response to China’s habit of using its dominance to set prices, and occasionally to make a geopolitical point.
“China’s been using these commodities to influence decisions, and now everyone’s starting to get on that page,” Brent says.
Canberra has followed suit, backing several of the local processing projects Brent mentions, on the theory that a country that digs up the ingredients ought to have a hand in refining them too.
None of this makes the humble ASX resources stock suddenly as glamorous as a Nasdaq tech darling. It probably never will be, and I suspect most people involved prefer it that way. But if you want exposure to the AI story without buying into a Californian valuation that requires a leap of faith, Brent’s clients are increasingly looking at the companies, and the ETFs that bundle them, supplying the copper, lithium and rare earths this entire build depends on.
“It’s our way of playing that game,” Brent says.
As for me, my trading platform is long gone, deleted along with whatever remained of my faith in candlestick patterns. These days I leave the analysis to Brent and the team at Morgans Noosa, and I sleep considerably better for it. Somewhere out there, in a data centre I’ll never see, there’s a blue whale’s worth of lithium doing more useful work than I ever did staring at a chart at 2am. Which, at close to sixty, feels like the smartest trade I never made.
Disclaimer: The information in this article is of a general nature. Please seek professional advice tailored to your specific circumstances before making any investment decisions.
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