Why Higher Interest Rates Aren’t Necessarily Bad for Miners

At first glance, higher interest rates are assumed to be negative for mining stocks.

The logic seems straightforward: higher rates raise the cost of capital, compress valuations and reduce risk appetite. For highly leveraged or speculative projects, that can certainly be true.

But taken more broadly - and particularly in the Australian market - interest rate rises often create conditions that are neutral to supportive for quality miners, especially producers and well-funded developers.

Understanding why requires looking beyond the headline rate move and into what higher rates actually signal.

Rate rises signal inflation persistence, not economic strength

When the RBA raises rates, it isn’t declaring the economy “too strong”. More often, it’s acknowledging that inflation risks remain unresolved.

Services inflation, wages, rents and insurance costs tend to be sticky. Until those pressures are convincingly contained, central banks are reluctant to ease.

For investors, this matters because commodities and mining assets sit firmly in the category of real assets. In environments where inflation risk lingers, capital often continues to allocate toward assets with tangible value and pricing power rather than purely long-duration growth.

This is one reason mining equities - particularly gold and bulk commodities - can remain resilient even as rates rise.

Currency dynamics quietly support Australian miners

One of the most overlooked effects of higher-for-longer global rates is the impact on the Australian dollar.

Australian miners typically:

• sell commodities priced in US dollars

• incur a large proportion of costs in Australian dollars

When global interest rates remain elevated, and Australia avoids easing too early, the AUD often stays structurally weaker than it would otherwise be.

A weaker AUD can materially improve margins in AUD terms, even if the underlying commodity price is flat. This currency leverage is a persistent tailwind for Australian producers that rarely features in headline commentary but matters greatly at the earnings level.

Capital rotation favours tangible cash flow

Higher rates also reshape equity market preferences.

As discount rates rise, valuations for speculative, long-duration growth assets - particularly early-stage tech - tend to compress. In contrast, businesses with:

• near-term cash flow

• tangible assets

• balance sheet discipline

often regain relative appeal.

This dynamic can benefit mining stocks, particularly producers and advanced developers, as investors rotate toward sectors where value is more easily underwritten and returns are less dependent on distant forecasts.

Not all miners benefit equally

It’s important to be precise.

Higher interest rates are not universally positive for the sector.

Projects that are:

• highly leveraged

• reliant on repeated capital raisings

• exposed to escalating development costs

can struggle in a higher-rate environment.

However, this is where differentiation emerges. Rate rises tend to separate disciplined operators with credible funding pathways from those reliant on sentiment alone.

For investors, that differentiation is often where opportunity lies.

Gold behaves differently to other assets

Gold deserves special mention.

Gold’s relationship with interest rates is often misunderstood. It responds less to nominal rates and more to:

• real yields

• policy credibility

• macro uncertainty

A rate hike that signals inflation risk remains unresolved -without meaningfully lifting real yields-can actually support gold prices over time, particularly in periods of geopolitical or financial uncertainty.

For gold miners, that combination of currency leverage, policy signalling and capital rotation can be constructive rather than damaging.

The takeaway

Interest rate rises are not automatically bad for miners.

In many cases, they reinforce the very conditions miners tend to operate well within: inflation persistence, favourable currency dynamics and capital rotation toward real assets and cash flow.

For investors, the question isn’t whether rates are rising - it’s which miners are positioned to benefit from the environment that creates.

And in higher-for-longer cycles, quality, discipline and clarity tend to matter more than momentum.