I mean, I suppose the only frustration for, you know,
people like me when you have these generalists coming into
the space, I mean, it's great on the way in, but they don't like
commodity investing is they they hate the space.
And so, you know, the moment that something wobbles or goes a
little bit wrong, like they sell and sell hard and get out
because they. Never wanted to be there.
Exactly right, Exactly right. All right, money miners, we are
a man and a half down with Trevor being a good son,
supporting his mother up in Singapore for her birthday.
But we have Sammy Berege to more than make up for it.
Sammy, what a start to the year it's been.
First two weeks. It's it was enough to drag you
away from the ashes. You know, the 5th test like the
headlines. You know, the first couple of
weeks a year, you just want didn't know what was going to
happen next between Iran and gold going through the roof.
And then now Trump wants Greenland.
And then you throw some, you know, threatened criminal
charges at the chairman and the Fed all mixed up together.
It's yeah, been a pretty good start for hard assets like
commodities. Yeah, Yeah, it has.
And to, to put it in a bit more context, I mean your, your
returns last year were outstanding across the the two
funds that you kind of managed. So it's not as if we're in the
in, you know, that the very bottom and seen a kind of bounce
out of nothing. A lot of fundies in the the
natural resources space had had pretty decent 2020 fives, but
it's a real continuation of the theme, right?
Yeah, it is. It's, you know, just set like
the December quarter last year was quite strong for the entire
sector. And yeah, it's a lot of those
themes just keeping on going. Whereas I suppose the one
observation in January is that because the sector has moved so
hard and so fast, it's capturing, capturing the
attention of of generalists and investment advisors and, and
various other asset allocators who are underweight the space.
And that underweight is hurting their relative returns.
And so, you know, the level of inquiry, you know, just in
January for, you know, getting more money or putting money to
work in the space has been quite acute.
So, you know, that can lead to a bit of frothiness.
So it's, you know, it can be a double edged sword, but still
that's what's happening at the moment.
How far along in that process do you think we are?
I think pretty early stage, there was some interesting sort
of recommendations coming out in December about, you know, big
banks advising their, you know, high net worth clients that they
should add, you know, another percent or or so to their, to
gold, for example, is part of their, their asset allocation.
And, and across, you know, Europe and the US.
Like what that means in terms of gold demand is, is quite
staggering. So, you know, if people are
looking to, you know, primarily gold, but also secondary, the
other commodities as alternative stores of value to, you know,
Fiat currency, well, that process is in, it is in it's
infancy. And again, it can lead to
frothiness, but I think we're, you know, we're closer to the
beginning than the end of of that process.
Yeah, you see a lot of top investors around the world
talking about a 6020 twenty types of portfolios where the
allocation to gold is, is unlike anything we've seen in in the
last 100 years. But it still seems as if we're
pretty far away from that actually happening.
Yeah, I mean, again, you know, these people aren't idiots.
They don't want to be buying the top.
So, you know, if prices start running away too quickly, I
suspect they'll hold back. But that that latent demand, I
think is still there. So, you know, you'll end up with
higher lows and higher highs as dips continue to be bought, you
know, until some point that the macro changes.
But yeah, I don't think it's changing, you know, materially
anytime soon. So when you when you think about
this period in history and, and what commodities are doing what,
what other period do do you reflect most on?
I know the the 70s is is 1 you've spoken about, but what
what sort of matches and what doesn't match with with that
error? Yeah, it's a, it's a, it's a
good point. And you know, everybody wants to
sort of find the analogy to give themselves a little bit more
conviction in, in forecasting what's going to happen next.
And I think the, the environment we are now is certainly has
stronger similarities with the 70s than the last commodity
boom, which was obviously China demand LED.
Whereas in the 70s, you know, there was a, an energy crisis, a
shortage of oil that was, you know, geopolitically lead and
then that, you know, was very inflationary.
And then that flowed into, into a lot of other hard assets
around the world. So, you know, today we've got
China and, and the US competing over, you know, various metals.
You know, certainly the, the US has built up huge inventories of
copper over the last 12 months. They're discussing, you know,
building strategic reserves of, of rare earths.
And I think there'll be more metals added to that.
So they're the echoes that we get.
It's more a a sort of a restriction of flow of
commodities around that's driving prices as opposed to a a
traditional sort of demand LED deficit.
That said, I mean going into 2026, I mean demand does look a
little bit better than it did in 2025.
So that's helpful. But that sort of de
globalization trade and and you know, restocking event by
countries around the world as they look to secure their own
commodities, that's really something to watch to determine
sort of the trajectory of metals prices on the way forward.
Yeah, when when we think about how wild the the past year and
the past couple weeks have been, the the 70s are really
interesting example because oil jumps about four times in in one
year. I think in 1973, over the
decade, gold I think was up 20X from being pegged.
Silver goes from like 8 bucks to to to 50 bucks.
So these are these are crazy movements in the in the meadows.
Yeah. And it's, and then you think,
well, you know what, what brought that bull market to an
end because it went, you know, more or less for eight years.
I mean, there were some spikes along the way.
And it ended when I think Paul Volcker, you know, took up
chairmanship of the Fed and then he hiked interest rates to
something like 20% to combat inflation.
And that's snuffed out the market.
And, and that was that, whereas today, with the amount of debt
sloshing around the world, if any Fed chairman tried to do
anything like that, like it would cause massive, massive
issues. So, you know, pulling that
interest rate lever is, is going to be much more difficult.
And, and obviously, you know, Trump's railing hard against
against any suggestion that that could take place.
So it's not clear what's going to bring sort of this sort of
scenario to an end. I mean, you know, commodity
prices go high enough, you end up with, you know, supply,
sorry, price induced demand destruction.
Like people just can't afford to use the, the commodities for,
for all applications. So that brings demand down a
little bit. But again, you know, we're, I
think we're at the more much closer to the beginning of this
this, you know, rally than than the end.
Yeah, yeah. Well, love him or loathe him,
Elon Musk was tweeting, I think the other day that the silver
rally is not good, given the, the kind of industries he works
in as well, how much silver is used as, as one of the top
conductors in, in the world and humanoids and anything else they
want to build battery related. So there's very real kind of
consequences on, on that kind of front.
If, if we look to, to Asia kind of getting a bit closer to home
from, from the US now it's interesting to see some of the
data and you flag some of the PMI data, which in, in simple
terms, I think people can think of as a lead indicator
potentially on, on metals demand, commodities demand.
What are you sort of sniffing out from there?
I think it's, we're finally starting to see a bit of
traction of the stimulus efforts over 2025 sort of flow into the,
the real, you know, the real world.
And, and, and that's reflected in those PMI numbers for, for
Asia. So for March of 25, you know,
you had the big sort of, you know, hissy fit over Trump's
imposition of tariffs in April. You know, that did impact the US
demand. It did impact Chinese demand for
commodities. The Chinese were very selective
in how they chose to stimulate their economy to just can't try
and keep things on an even queue, you know, more focused on
consumer electronics E VS manufacturing basically.
And bit by bit that stimulus appears to have been, you know,
effective now and we're starting to see Pmis turn positive.
But the other factor, which is a, you know, different from the
last commodities boom is that the delta in Chinese demand
seems to be flowing through their exports.
So it's basically rest of world demand as you know as expressed
through Chinese exports, which is the area that's surprising to
the upside. So you know, this commodities
rally at the moment feels much more broad based from a demand
point of view than you know the very China centric rally that we
had through the 2000s which is which is interesting.
Yeah, yeah. I mean steel, steel is what
comes to my mind like the the the amount that China's
exporting in steel has a bunch of ramifications.
But firstly, it tells you what the demand overseas is like and,
and secondly, what it's doing to any other domestic steelmaking
Bluescope here in Australia, the bits that they do produce here
and the the Europeans just begging for, for tariff and
subsidy type protection for their their industry.
Where, where does that kind of go like yet I don't think you're
too far off the mark in thinking that part of this is, is
deliberate from, from the Chinese and how they think about
it. Or is it all just property
market collapsing? I think, I think it's a bit of a
bit of both like the, you know, the Chinese construction and
property markets been, you know, has been horrible for years now.
It's not doesn't look like it's going to get any help either.
But at the same time, like you've had legit growth through,
you know, Vietnam, Indonesia, you know, the ASEAN nations in
general. And you know, they, they do
have, you know, they're drawing more, more steel into those
countries. And so, you know, I think it's,
it's just, you know, the that sort of population base, which
when you include India is actually much bigger than China.
You know, they've their growth has been quite rapid for a long
time, but finally it's starting to compound off a, off a
reasonable base and is and is moving the needle a little bit
more. But just on the steel exports,
there was a very interesting headline in I think it was,
yeah, first week of January around China requiring any steel
exports to get sort of, you know, federal government
approval before, you know, before they're if they're
allowed to export steel out of the country.
Now that's been, you know, sort of a rubber stamping effort to
date. But as the world becomes more
reliant on China for steel because their exports are a
bigger part of of rest of world demand, if they were to slam the
brakes on those steel exports, it would, you know, it would be
ruinous for, you know, construction costs around the
world because, you know, the China exports is having such a
big influence on setting the price.
And we can see, you know, the amount of leverage they have in
the rare earth market. You know, there is potential for
something similar in steel and possibly an aluminium.
So you know this weaponization of commodities could spread and
not say it will, but you know the the mechanisms are there for
it to do so. So on on the back of that has
has your thinking, I mean, I remember having you in this room
and about six months ago we we were speaking about the all the
checks that our government had been writing to traffic EUR the
Glen cause of the world here in Australia for their downstream
metals processing mainly in the base metal space.
And that has all come off the back of the the weaponization of
of this. And it's always a bit murky
because then you're giving money to traffic Euro Glencoe.
It's not exactly a stand up Australian producer.
But you've if if you are of the view that you need to have some
sort of industry and they're the only ones left, what do you kind
of do is so has your thinking on that changed at all?
No, no, I think if anything, it's probably a subset of that
speech by the Canadian PM, Mark Carney, which is, you know, gone
sort of viral over the last couple of days saying, you know,
it's a, we're seeing a change in the, you know, the the world
order and, you know, all these grandiose arm waving statements.
But, you know, if globalization does start to reverse and you
can no longer rely on the free flow of commodities and goods
around the world. And so we go back to an
environment where, you know, countries have to be, you know,
to a much greater extent, self-sufficient.
That's massively inflationary for for metals prices because we
can't compete with, you know, the refining costs, not the
mining like we do mining reasonably well, but the
refining costs we we just can't compete with because our power
prices are too high and going higher.
So yeah, I think that theme, if anything, is strengthening.
So do we just have to be smarter with with who we pick as
partners? Yeah, definitely.
And I think I, you know, I think you need to be realistic about
the value of these industries because I think it was one of
the economists saw Kevonik, I think his name is, you know,
came out the other day said, oh, you know, manufacturing jobs
aren't any more important than any other jobs.
And on a superficial level, he is right.
I mean, it's, it's just dollars and cents.
However, the, the benefits or the fringe benefits that you get
from a big manufacturing industry, you know, do help
lower prices or do facilitate other activities in the economy.
And for example, take the power station in New South Wales and
produces I think maybe FIF, no, a bit more than that, maybe 20%
of NSW power like that was built sort of hand in glove with their
with the Tomago aluminium refinery.
So it produces power at a very low price.
And yes, it supports that refinery going into production
and making money, but it also supports cheap power prices for
the rest of the for the rest of NSW and, and for a very long
time, like that sort of symbiosis helped Australia
become a very low power and power country.
And, and that helps our manufacturing.
So, you know, if that manufacturing dies, then also
the demand for those big base load power generation also dies.
But that means we end up with, you know, high power costs, you
know, flowing through the rest of the economy, which is a, you
know, a bad thing. Yeah, OK.
If we if we change tack now, there's a bunch of medals, a lot
of them are breaking through all time high semis.
So I want to go through them because not all the, the the
reasons are alike. Some of them are performing
strongly for for quite varying reasons.
So Copper, I want to start with what, what are you making of
this incredible rally we're seeing there and, and what's got
us to this point? Well, yeah, I think as as
touched on earlier like that, the big, big stockpiling by the
US of copper has been a a major driver of the of the rally to
date. Even copper inventories around
the world have actually been increasing while the price has
been increasing. So that's a bit counter
intuitive. I think the prices are where
they are because there's a little bit of concern in the
copper market that those inventories that are within the
US won't be allowed to flow back out to the rest of the world.
Should the sort of LMA price rise above the COMEX price,
which would then incentivize the flow of copper out of the US.
Now if that doesn't happen, yeah, it's throws back to what
we're just just discussing and that, you know, countries is
sort of each country for themselves.
But you know, I think that is a bit of a risk to the downside
for. I mean, if assuming that, sorry,
assuming the copper does flow out, that's a risk to the
downside of those prices. But I think it's $6.
You're also going to see it $6 a pound that is see an increase in
scrap supply. So I, I reckon cop is looking
pretty full up here. Where it pulls back to I I'm not
sure. I think it probably remains
quite elevated because you know, whilst there has been a, a big
inventory build last year and you know, maybe that's got a
little bit of a head of itself, you know, looking in to 272829
like that structural deficit is, is well and truly there.
So, you know, that's, you know, probably a little bit wary, but
in the short term, but longer term, you know, things still
look pretty good. Yeah, yeah, 22 follow-ups, the
first one and I have almost no experience in this.
So I'm curious to to hear what you think.
But I've heard with the the inventories that over the past
20 years there's been a real change in in where the
inventories are held. So it's much harder these days
to actually surmise what the global state of inventories is.
Is this off base or does that sound broadly right?
I think. It is, it is difficult, but
there is also, you know, with a big, big liquid market like
copper, it is worth the while of the various sort of commodity
consultants and banks and analysts etcetera, to, you know,
try and put some numbers to that as best they can.
So I, you know, I'd, I'd be surprised if that there's any,
you know, if the, if the rounding errors in these numbers
undermine the, you know, the premise that inventories
actually have increased a bit around the world.
But yeah, I mean, that remains to be seen.
Yeah. And the second follow up is
TCRCS. They've been a huge gift to the
copper miners that we know here. I mean, given given their money
as opposed to the other way around, how long does that
continue? I think for a while, I mean the
shortage of copper concentrate doesn't look like it's going
away unless you start to see refineries shut down and sort of
you know reduce that supply demand mismatch, you know by
shutting refineries. And then that should allow the
balance of them to get some more pricing power in terms of their
TCRC negotiations. Certainly you know, I don't
think any anyones building any more copper refineries anytime
soon. So I mean it should you know
slowly correct itself, but I don't think it's going to be a
near term event. It'll take time for the, the
copper concentrate supply to bit by bit, you know move in excess
of of smelting capacity and at some and at that point you start
to see a normalization of TCRC's.
Yeah, yeah. And at this point in the cycle,
are there preferred ways for you to to play the copper?
Do you, do you like some of the juniors at the moment?
Are you safe in some of the producers or do you think like
copper is such a richly valued place to be at the moment?
It's, it's a good question. I mean, you know, if, if a
commodity price falls, you know, doesn't really matter what your
exposure is. I mean, everything, you know,
falls a, a reasonable amount, regardless of sort of, you know,
where it's trading for, for fair value.
But I think that the, you know, the, the top tier or the, you
know, better quality development stories are probably where the
value exists in the market today.
So, you know, the developers never really price in spot at
all. So there is certainly there's
discounts to to spot available there.
And you know, because of the shortage of, you know, large.
And when I say large, I mean sort of 50,000 tonne and above
copper projects in desirable jurisdictions.
I think if you know, any development story that falls
into that basket is, is an M and a candidate.
And so that's, you know, probably where we'd prefer to
look. Do you do you spend much time
looking at the overseas names? Yeah.
I mean there's, there's not much
left of a of a copper industry in, in Australia due to all, all
the M&A and you know sand fires, you know sits there as as being
pretty richly priced as a result.
And, you know, a long way below that there is a sort of a
growing group of, of, of smaller producers trying to get up and
running. And, you know, they, they've
had, you know, had various struggles over the years because
they've, they've been higher cost.
But yeah, their, their margins would be looking much better
now. So you know, there might be some
some opportunities there, but you know, you just always need
to balance that risk and reward with those guys.
All right, next commodity uranium, Uranium has been on an
upward trend again and everyone is bullish in in the space
again. Interestingly, spot has been
buying quite a bit again. So I think they're at over £70
million locked up in the in the vaults.
They're never to be seen again. So yeah, interesting dynamics
with the the term and the spot pricing that we're seeing.
A lot of the the miners once again are being priced very,
very kind of richly. So what do you make of the whole
space? I think uranium is or is
enjoying some tailwinds as being a bit of a proxy to the the AI
data center build out and the power requirements that that
will that needs. And so every time you know, the
all the big tech stocks in the US have a bit of a sell off will
you know, the uranium stocks usually go with it.
So that's annoying and it doesn't have anything to do with
the fundamental supply demand story.
It's just something to be aware of as as noise you're going to
have the uranium market has to contend with.
But I think that, you know, it doesn't make any sense for the
spot price to be below the term price.
You know, if the term market's where all the volume is, you
know, why wouldn't you go and soak up pounds in the spot
market until, you know, until such a point you get to the to
the term price. So I think that's, you know,
that's probably the first move that we're going to see.
And certainly the, the split, sorry, the spot ETF buying will
help that happen. But beyond that, yeah, I mean,
it's, you know, the, the deficits, you know, are looming
and, you know, those reactors or these new reactors, you know, do
need to start contracting, you know, a long time ahead when
they're actually starting to to Commission.
And, you know, there's still a few years away.
But I suppose a sort of shorter term, you know, these Japanese
reactors continuing to restart and, and other existing reactors
around the world all prolonging their life is probably where
the, you know, the incremental sort of fundamental demand is
coming from. But still today, like, I mean,
we saw with Paladin's quarterly report just a couple of days
ago, like even at $85 a pound and, and yeah, sure, the achieve
Paladin's achieved price was a bit below that, they're still
not making any money. So, you know, for big waves of
new supply to come on, you know, the price doesn't appear to be
high enough just yet. Yeah, it's remarkable how many
all in sustainings, all in costs.
We can see at half the realized cross money doesn't drop to the
bottom line. And on the on the macro, it was
interesting to see Mertz, the the leader of Germany or the
Chancellor acknowledge finally that it was a mistake to turn
off the the reactors. So a bit more of that rhetoric
around the world. I think we'll, we'll be saying.
Yeah, definitely. I mean, it's nice that he
finally came out and said so, but yeah, it was an absolute
disaster both for Germany and the environment as well.
But anyway, Greenpeace can go pat themselves on the back
because they were championing championing that initiative for
years. One more question on the the
uranium discussion more broadly is the US view.
So they've been quite strategic in how they've gone about
certain projects, certain metals, rare earths last year
for instance. Do you see them doing something
similar in the uranium space, picking a national champion?
I think it's, I think it's quite possible.
Certainly, you know, in the when you go through the list of
medals the US seems most concerned about, they've already
underwritten the price for rare earths.
I think uraniums quite high up there on the list and so. 20% of
their their electricity. It's huge.
Yeah, and, and obviously the demand for, you know, more and
more and more power generation. I mean, Trump just wants to
saturate the country with as much generation as he can to as
a means of, of stimulating, you know, GDP growth.
So, yeah, it's it's very difficult to sort of forecast,
you know, what that what shape that might take.
But underwriting an increase in domestic uranium production in
the USI think is, you know, is a sensible bet.
Like I, you know, I just wouldn't be surprised if they do
it. And I think there's maybe a
little bit of expectation in prices that that's going to take
place. But yeah, you know, we wait and
see, but I think that makes a lot of sense.
Are there are there any names in the uranium space you you're
holding at the moment you think are still quite cheap or you're
more likely to trim in this kind of environment?
It's all, I mean I think most of the you know, the more liquid
names with the exception of you know, things like Kamiko which
traded a big premium to the rest of the market are pricing in
more or less spot. But a lot of people as a lot of
the sort of the the brokers and banks don't have forecasts going
material materially above where we are at the moment.
So that's where the opportunity is.
I mean, if you take a view that, you know, uranium is going to go
to 150, well, you know, things look cheap, but you know, that
requires you stepping away from consensus by by a fair degree.
So I think there's there's still more to play out in terms of
what the US is going to do and what that will mean for prices.
And that's probably keeping, you know, keeping our holdings as is
for the for the near term. But yeah, if any of that
changes, well, you know, we'll change our mind.
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Now back to Sammy. OK, Next up, gold.
We might be one or two slips away from gold breaking through
5000 US bucks, which is barely believable.
Even saying the word sounds kind of funny.
How do you how do you sort of take into account everything
we've kind of seen like this latest kick up from sort of 4400
where it kind of consolidated for, for a while has been pretty
electrifying again on the back of geopolitics and the like.
So how are you sort of chewing it all up and and digesting
this? Yeah, it's, it's really, it's
really difficult as a, as a manager to try and you know, you
know, manage your, your exposures to this appropriately
because on the one hand we, I mean, we do have a big gold
exposure and you know, that becomes bigger as you, your gold
holdings, you know, rally. And I think undoubtedly we've
had a confluence of quite positive events for gold over
over the last or sorry the first couple of weeks of the year.
And so that's probably added a little bit of froth to, you
know, over and above the, the underlying support for gold,
which is a bit of skepticism that around the, the value of
U.S. dollar and dollars and, and just government debt levels
globally. But every time anyone sold, you
know, their gold exposures over the last 18 months, two years,
it's been the wrong thing to do. So, you know, I I must admit,
like the melt up in price we've had over the last couple of
weeks does feel a bit like October last year, after which,
you know, things got a bit overboard.
There were stories about, you know, people lining up in Martin
Place to buy physical gold and you know, sure enough, the price
rolled over by, you know, a couple 100 bucks an ounce
straight after that. But here we are back at all time
highs and the drivers, I think for a high gold price still
remain very much in place. So, yeah, I mean, we just again,
you know, anything that's looking a little bit frothy or
we, we see, you know, or foresee risks to production and
downgrades, we'd, you know, probably be trimming those as as
as you know, where we see that that opportunity.
But, you know, I think the value in the gold market at the moment
still sits with the the developers.
And that's because I think a lot of a lot of people in the market
are sort of slow to, you know, run numbers to what, you know,
what a development proposition might be worth.
And you know, I've did this recently the, you know, you take
your generic, you know, 100,000 oz producer.
Oh, sorry, yeah, 100,100 thousand ounce per annum
project. So you need about 1,000,000
ounces in reserve or to to achieve that, you know, I assume
$300 million for for CapEx and you know, even a pretty
conservative cost of about 3000 bucks an ounce.
Well, you're going to end up with AMPV for that project of
1.41 point $5 billion, you know, but that's not what these
development projects are being valued at us.
It's nowhere, nowhere near it. So, you know, even if the gold
price was to pull back, you know, a couple 100 bucks an
ounce, I think these, you know, projects that look like they're
able to be permitted, you know, no fatal flaws.
They will, you know, endure in terms of their share price.
And and you know what, we should continue to outperform on the
upside even, you know, even in a bit of a pullback.
And you're expecting some of the producers to to jump on these
opportunities? Yeah, definitely.
I mean, there's one of the reasons that I suppose
generalist investors hate commodities is because it's an
industry of depleting assets and modeling that is is difficult is
different to modeling an industrial company and it just.
Doesn't look as good when you don't have the terminal value
that goes on. Yeah.
You know, you got to replace your resources and reserves, but
for producing companies that's becoming cheaper and cheaper.
I mean, the margins of of some of these gold companies now
start starting to look like software companies.
I mean on the back of the envelope looking at Capricorn,
which you know, one of the lower cost producers, like they're my
EBITDA margins are like, you know, high 70s, you know,
possibly touching 80% today with a spot price move.
I mean, that's, that's like a software company.
But so the CapEx hurdle to replace those reserves because
CapEx and costs aren't going up anywhere near as much as the
gold price is, you know, it's becoming smaller and smaller.
And so that lends itself to to M&A if they don't, you know,
have the resources themselves. And interestingly with, with the
Capricorn example, they've been very disciplined about not
recutting the, the ore body and and changing the assumptions
going into that. Do you think we've seen sort of
discipline across the board from the from the producers there?
Yeah, I think to to the extent possible, I think you have.
I still feel that throughout the mining industry in general, like
the scars of the last commodity boom are still present and the
memory is still there where, you know, people just let costs run,
you know, unchecked because, you know, revenue, the revenue line
was growing so much. Whereas this time round by and
large, I think cost discipline is much better and margins are
you know, they are increasing. Whereas you know, in, in
previous cycles you sort of saw, you know, the, you know, 90th
percentile of costs almost tracked the commodity price or,
or the gold price specifically, you know, almost in parallel.
Whereas more recently gold price you know, has gone sort of
exponential and costs are, are reasonably stable at the moment.
So you know those margins are increasing and you know to your
point that that cost control is much better.
Yeah, you said Scars of the Last Boom and I couldn't help but
think of Rio Tinto. And I haven't actually spoken on
the show about Rio and and Glencore because it's, it's just
such a big deal and it's it's hard for a lot of people and
it's not that meaningful for a lot of people at the smaller end
of the market to have a strong view on this one way or another.
But are there sort of ramifications of this type of
deal or are there little caveats to it that you think are kind of
interesting for for investors or or speculators to kind of think
about? Yeah, I think probably the the
one factor that will jump to particularly institutional
investors minds very quickly is what the index ramifications are
for such a merger. Because if you know BH PS
waiting in the, you know, all small or the ASX 200 I suppose
is is monstrous. And so it demands attention for
people who are benchmarked against that index.
If something similar was, you know, if Rio and Glencore were
to get together, you're going to end up with a similar scenario
because it would be a bigger company than than BHP.
So yeah, that's certainly one, one part of it.
But from an operational point of view, I suspect the cultures are
quite different between the two. I mean, you know, Rio's got, you
know, has a has a finger in the pie and sort of in terms of
African developments via SIM. And do you know how they go
operating in the in the DRC with Glencor's copper mines?
There is a bit of an open question.
I mean Glencore seems to do OK, but it is it is tough.
Very hard to see Rio operate in the DRC.
Yeah, I'm not sure. I'm not sure how, you know,
they're very sort of straight laced approach is going to going
to work in in that country on a number of fronts.
But and then there's another question of what happens to the
coal assets that Glencore's got, you know, do they get spun out
as a sort of a, you know, Spinco to try and clean up Glencore to
make it a little bit more palatable to the Rio investor
base? I mean, all these are, you know,
quite sort of open-ended questions, but there'd be some
huge fees on the line for the for the bankers on this merger.
So I'm sure they'll find a way to solve those problems as best
they can. Yeah, yeah, life changing fees I
think in this one. A couple of the other medals
I'm, I'm keen to, to touch on PGMS.
They've really been working and one for us here in Australia
because it's just not that much exposure on, on the ASX.
And that's part of the, the charm, if you like, of, of PGMS
because it's South Africa, it's it's Russia, it's these parts of
the world. Have have you played this in, in
any way and do you have a strong view on it?
No, we haven't. I was.
I was getting. Closer and closer to just buying
the physical last year and I didn't pull the trigger, which
is, you know, one of many mistakes that we made a good
year for, for many mistakes. I reckon.
Oh yeah, yeah. But I mean, you know.
You can always be better and you know, should always, you know,
go through and you know, work out what you know why you didn't
or or whatever to try and not avoid making that mistake again.
But I think for for the for the, the platinum group elements once
again, like similar to what our discussion about copper is that
it it the move in price seems to be investor LED rather than
demand LED. It had probably, I think
probably had some quite tangible foundations in that, you know,
people came to the view that internal combustion engines are
going to be around for a lot longer than, you know, what we
might have thought three or four years ago.
And so that means the, you know, PGE demand for the catalytic
converters is, is going to be a bit more enduring.
And then, you know, OK, so we need, you know, we're going to
need this stuff for a bit longer.
And for a long time, you know, platinum was trading, you know,
well below the cost curve for some of those South African
mines. And then the investors have sort
of piled on top of that thematic and push prices quite a long
way. You know, where does it end?
I'm not quite sure. You know, picking sentiment or
second guessing sentiment can be quite difficult sometimes.
But, you know, that's my understanding of what's
transpired to date. Yeah, Yeah.
And and how? About tin, this is 1 We do have
a small little view into here in Australia down in in Tassie with
with some rich history as well. But the tin market has been
electric to the to start this year.
And there's yeah, there's a whole bunch of different reasons
why there's lots happening in the in the small pockets that
produce tin around the world. And there seems to be a lot of
attention on it. I think you've got a bit of
exposure from from what I kind of know down in, in, in Tassie.
But how are you thinking about it?
I mean this is one has. A bit of a more sort of solid
foundation to it to my think. I mean, there's, you know, the
demand through electronics and data center building out is, you
know, it's quite tangible. It's difficult for investors to
move the tin price around because it's, it's a, you know,
it's not a particularly liquid market.
It's hard for big financial flows to come and to come and go
like, you know, like copper, for example.
And then on supply side, like through, you know, Cambodia,
Southeast Asia and India and sorry, Burma, I think is the
other other countries, you know, had their supply disrupted.
I mean, you know, that looks like it's going to be long, you
know, long lasting. And I think there was another,
there was a one of the larger tin mines just in on the border
between DRC and Uganda. Yeah, that's the one.
So Alpha Men's mine. In in the DRC, Yeah, yeah,
that's the one. And I mean.
That I think that knocked out something like 5% of global
supply or something like that. So I was, you know, when you've
got a tight market and all of a sudden somebody pinches, you
know, knocks out 5%, will buyers tend to start to get very
nervous and and they will start building, you know, building
inventory to protect themselves against further price rises.
But, you know, that just leads to the price moving anyway.
So it's, yeah, it's a, you know, positive feedback loop that the
metal's in at the moment. Yeah.
A nice little project down. In Tasmania seems seems a bit
easier to manage than yeah, some of the more eclectic parts of
the world. That's right.
Yeah. So aluminium is one of the other
ones. And this is a a whole supply
chain. There's lots to it.
There's the the books that play as alumina aluminium, but it's
it's been kind of hot as well to to start the year.
It's had people talking about it.
And we've got a bit of insight into it in Australia with the
various parts of the supply chain that we see in Australia.
I know MMI was a company a couple of years ago that we'd
we'd spoken about, but are you saying pockets of value in in
the in the chain? Yeah, definitely.
And I think that it's. You know, the rally and copper
price is probably shown thrown aluminium into sharper focus
because there is a, you know, a substitution trade there sort of
at the margins. But also the ratio of copper to
aluminium, which usually sits around I think 3.7 to 4 times as
has blown out as as copper as rallied.
So you know that starts to look show aluminium as being cheap.
But again, on a sort of a longer term view, the, the interesting
story with aluminium is, is that, you know, for a long time
or for the last decade, your new aluminium capacity has come from
China, you know, with, with very cheap power.
Because you know, aluminium is basically just congealed
electricity. Whereas China's now has put a
45,000,000 tonne per annum cap on their capacity and they
certainly appear to be sticking to that.
So begs the question, I mean, as demand grows, where is your
spare? You know, where, where is your
additional aluminium going to come from?
And most people point to Indonesia and you know, the
potential for them to do, you know, something similar as
they've done with nickel with aluminium.
But Morgan Stanley shot up to Indonesia in in January and, and
their takeaways were that the the power generation is just not
there to really accelerate their aluminium production growth
anytime in the next two to three years.
Like it's, it's going to take a take a while.
So, you know, incremental supply from Indonesia, but nothing
much. But at the same time you've
seen, you know, S 32 shut down their smelter in Mozambique
because of high power prices. An open question, what happens
to the rest of or what's left of Australian aluminium production
due to high power prices again and problems at Brazil?
Yeah, as well. Yeah.
So it's it's really struggling and.
You know, again, because the world's been reliant on China
for so long for it's, it's, it's refining industry there.
We could end up in a world where, you know, aluminium
prices need to move to such a point that you can produce it
profitably at 100 and 3000 and $40 per MW hour.
Whereas I think the, the Tomago refinery in New South Wales,
they're power contracts that are about to roll off.
They're closer to $50 per MW hour.
And yes, I mean if, if that if they're the sort of projects
that need to be sustained. Well, the aluminium price is
going to have to move quite a long way to sort of balance
supply and demand. And just the last point on that
and it, it applies to copper and it definitely applies to
aluminium is as opposed to other other much niche markets like
lithium, which is more or less about 100, sorry 1.5 million
tonne market, you can bring on decent chunks of supply.
So if you know Wodgina was to turn like the rest of their
trains on, I think you add you know maybe 5 to 7% of of global
supply there pretty quickly because it's a small market.
Whereas with copper, which is a 26,000,000 tonne per annum
market, or aluminium, which I think is around about a 60
million tonne per annum market, it's much harder for the supply
side to catch up. And so you end up with a sort of
an iron ore scenario from the last commodity boom where, you
know, you've got to build, you know, significant infrastructure
before that supply hits the market.
In aluminium's case, you're going to have to build more
power plants for that supplier to before that supply comes on.
So that just means that the rally, you know, should last for
for a while longer than you know, for them for some of these
niche commodities. Yeah, you measure these things
in years. Instead of instead of months, I
want to say going to an Illumina plant is right up on the on the
list. It's just the, the amount of
energy that goes into it. The, the, the process is, is
fascinating. And to your point on Indonesia,
I mean, you, you made the the sort of link with with nickel
and what we saw there with Morawali and the other
industrial parks, they, they solved the energy problem that
that nickel process is not short of energy demands either.
And they just square off a a big plot of land and fit it all in
there. So you'd have to imagine that's
something that just takes time to work out if they're serious
about this or they can solve it. Yeah, definitely.
Yeah, I mean, they've built, built in, they can knock up coal
power plants reasonably quickly there, Although I suspect the
like there has been some environmental carnage, you know,
in Indonesia recently. I think that of of a few people
that died due to floods late last year, you know, which were
tied to, you know, mining industry and and the palm oil
industry as well. Not, you know, looking after
their or rehabilitating their land as as as as as well as they
should have. So, you know, it's not a
complete free for all, but it still takes time.
And, you know, it's still, you still need to secure the
additional coal supply for those power plants.
You know, that's becoming a little bit more difficult now.
So yeah, again, it is certainly much more likely also will
happen. Like I think definitely it's a
matter of when rather than if, but it's still, you know, a few
years away at least it seems. Yeah, yeah.
All right. Sammy, a couple, a couple kind
of general ones to to finish off, I'm pretty curious to hear
you, you manage two different funds, one sort of targets the
smaller end of the market and the other the slightly larger
end of the market. But how do you how do you think
about these differently in this in this type of market when,
when everything's kind of working and what you're, what
you're targeting, what you're avoiding and these sorts of
things? I think as much as possible, we.
Try and we just try and do what we tell our investors we're
going to do. So you know, the larger fund
that that that myself and you and run is called the strategic
natural resources trust like that is being sold from
inception as being a a lower beta way to enjoy commodities
exposure. And so, you know, we, we don't
take as as big as swings. We we're in probably later
stage, you know, companies that have, you know, a fairway down
the D risking path. And so, you know, the returns
for that one should be more reliable or be it, you know, we
had a, we had a decent year last year, whereas the micro
resources trust, which I run, I mean, that's more, you know,
feel the wind in your hair type thing.
I will take, you know, bigger swings.
We'll go into earlier stage investments and and you know,
that worked last year. So we, you know, just ticked
over 100% return for that one. And you know, hopefully we do
something similar again this year, but the returns will be
more volatile for that sort of product.
But we're we're candid about that.
And you know, some investors, you know, are happy to take
that, you know that risk and and hopefully the return that comes
with it. Yeah, huge, huge year last year
and I can't. Believe we haven't had you in on
the on the show with the amount of times we've had you on I'm
I'm curious to. Hear the the.
Benchmark there right now because this is a for a lot of
fund managers. You've kind of touched on this,
but like gold for instance, if we look at the ASX 300, I think
it's like 2020% of the it's getting up there the the market
now so and and that's just gold like resources beyond that is at
at another number of percent. I don't know what the exact
number is, but if you're, if you're one of those fundies that
doesn't like to plant resources, you're, you're between a rock
and a hard place, aren't you? 100% and.
Like last year I felt sorry for calendar 25, the small resources
index was up 70%. You know, that's it's crazy.
Yeah, it was an on an absolute tear.
So if you are sensitive to the small ords index, which you know
a large number of funds are and you don't have any resources,
well, it's going to really hurt. And so you're, you're forced to
cover that underweight. Now, if you've got some resource
investing experience, then yeah, great.
But if you don't or you're sort of groping around in in the dark
there, but you've got to solve that problem somehow because
otherwise you're going to end up, you know, underneath your
benchmark and you and you're not going to get paid.
So it just made it all. The outcome for that is that
more money should be flowing into the space as as time goes
on. Yeah.
And in a world in which the. The ASX 10, ASX 20 are so richly
valued like the banks, the con banks of the world at 25 times
earnings, it becomes a real tough one for for the Super
funds, all these Aussie fund managers to kind of play Yeah,
it does and I mean I. Suppose the only frustration
for, you know, people like me and the rest of the commodity
sort of fund managers that that apply our trade is that when you
have these generalists coming into the space, I mean, it's
great on the way in, but they don't like commodity investing
as they they hate the space, if to be frank.
And so, you know, the moment that something wobbles or goes a
little bit wrong, like they sell and sell hard and, and get out
because they, you know, they never wanted to be there.
Exactly. Right, exactly.
Right, but and that's fair enough, that's fair enough, but
it does make for a an inefficient market where you
know, a small wrinkle. Can, you know, present us a
buying opportunity, I suppose if, you know, the problem is not
as great as as what a given share price reaction might
imply, but you know, that's what makes a market.
So, you know, we take the other side of that reasonably
regularly. Yeah, yeah, totally.
Last one. Because I know you're a busy man
and you've got to shoot Sammy, but humanoid robots, I know you
like to, to see what the latest is.
And you, you write about them fairly regularly.
And the advancements, particularly in some of the
Chinese ones, has been pretty astounding.
Now you can you can see a lot from a a YouTube promo video and
maybe there's a bit more than meets the eye with with some of
these, but some of the stuff you do see is pretty, pretty
outstanding. So how do you think about this
or when when are you thinking about buying your first one?
I I reckon. By 20-30 I suspect I'll probably
have one in the house and I won't be alone.
I certainly won't be a first adopter, but I might be a fast
follower. How much do you think you'd be
paying? At that point in time.
Well, that unitary or the humanoid robot from Unitary,
which is sort of the price I've been tracking of the, you know,
of all of them for a while now. That's down to $13,500 per unit.
Is that, is that US? Yeah.
That's US. US, yeah.
But for context, in September 2024 when I first looked at
that, that same unit was 90,000 US.
So, you know, it's fallen in price by what circa 80% in a,
you know, say a year and a half at while the functionality of
these things has been getting better and better and better.
It's like a like the solar chart that.
Just got cheaper and cheaper and cheaper.
Except this sounds a lot more complex than the PV.
Yeah. And I think the challenge for
the functionality. Of them is that, you know,
unlike the large language models that all the ChatGPT and all
that stuff used for learning and training, the Internet's just
full of text and speech, etcetera.
So to learn to learn the language is there's a massive
data set there. A same data set doesn't exist
for how humans move around the home, how you sort of open a, a
washing machine and, and fill it full of clothes, how you fold a
shirt and all this sort of stuff.
So these training models need to be built from scratch and that
is that's probably the, the rate determining step for the
adoption of these robots is and, and how competent they become
around the house. But it will be, it will be
solved. And whoever solves it first is
going to be able to roll it into their robots and then put them
into, you know, invite various environments, industrial as well
as residential. And that will accelerate the
learning even more so as, as that feedback mechanism starts
to starts to sort of roll. And then, you know, the, the,
the functionality of these things should go, you know,
exponential. And if you really want to get
hyperbolic about it, you can, you know, go down Elon's sort of
rabbit hole where he reckons that, you know, there won't be
any surgeons in whatever it is 5 or 10 years time because the
robots will learn to do that job so quickly and, and, and better
than humans can. So, you know, he's obviously
talking his own book, but it's it's not, you know, it's not
completely beyond the realms of of possibility that something
like that could happen. And in 20-30, will you?
Be will will the average person in Perth be jumping into an an
Uber or DD or whatever that is drivers?
I think the. Technology will definitely be
there. I think in in Perth and and
Australia in general is regulation which holds these
things back. I mean, clearly you can already
jump into driverless cabs in, you know, many cities in the US.
You can't do it here yet, but it's coming for sure.
All right. As always, fantastic.
To chat Sammy, thanks for making the time for us and I'm sure the
the listeners have taken a whole bunch from your your views as
always. Absolute pleasure Jodie.
Anytime, always. Enjoy a a chat with you guys and
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