Global Consequences: QAV AU #949

QAV AU 949

[00:00:00]

Cameron: Not gonna try and force my

Tony Kynas­ton: Real­ly?

Cameron: musi­cal,

Tony Kynas­ton: and force.

Cameron: tastes on you.

Tony Kynas­ton: it?

Cameron: Wel­come back to QAV Aus­tralia 92- 949. Tony and I are argu­ing about Shostakovich already and the show has­n’t even start­ed. This is the t-

Tony Kynas­ton: we’re argu­ing about you say­ing you don’t force Shostakovich on peo­ple.

Cameron: I don’t, I j- I don’t force it. I strong­ly sug­gest it, strong­ly rec­om­mend it. Yeah, but, like, not every­one’s at my lev­el of, you know, intel­lec­tu­al sophis­ti­ca­tion, Tony. I get that.

Tony Kynas­ton: low­brow ter­ri­to­ry?

Cameron: Yeah. Speak­ing of which, RIP Angry Ander­son

Tony Kynas­ton: Yes, I saw

Cameron: I did take a break from Shostakovich this morn­ing to lis­ten to a lit­tle bit of Angry to pre­pare for the show.

Lis­tened to some Rose Tat­too, uh, lis­tened briefly to his, uh, track Sud­den­ly, his, uh, [00:01:00] neigh­bor’s we- we- Kylie Minogue, Jason Dono­van wed­ding song, and turned it off very quick­ly, b- almost as quick­ly as you turned off Shostakovich. Uh, that was hor­ri­ble. Lis­tened to quite a bit of their first and sec­ond albums and then flipped through the rest.

It’s okay. Um, it’s pret­ty basic pub rocky, uh, stuff, you know. Unfor­tu­nate­ly, not all of the songs have the great sort of We Can’t Be Beat­en riff, which I think is an icon­ic, icon­ic riff, an icon­ic Aus­tralian song, but the rest of it’s okay. It’s like low-rent AC/DC. It’s sort of. For some rea­son, I don’t know why, I haven’t thought about it too deeply, but AC/DC, same sort of thing, blues-based hard rock, but just had more of a

uh, just bet­ter riffs, I think. Um, Angus had bet­ter [00:02:00] riffs than his broth­ers writ­ing for them. Um, George, George Young, was­n’t it?

Tony Kynas­ton: Uh, Har­ry, Har­ry Van­da and George

Cameron: Har­ry Van­da and George Young, yeah

Tony Kynas­ton: Yeah, no, I agree. I actu­al­ly saw Angry Ander­son once a cou­ple of years ago live, um, as in not in a con­cert, but we were in a restau­rant and he came in. And, uh, I was with, with a cou­ple of locals in the restau­rant in Potts Point, and they said, “Yeah, he often comes in, and he often brings in, home­less peo­ple you know, peo­ple who would­n’t nor­mal­ly eat in a restau­rant and just treats them to a meal.” That’s what they said.

Cameron: Oh, what a nice fel­la. Well, RIP Angry or Gary, I believe his name was, I learned in his pass­ing. Also inter­est­ing look­ing back at their ear­ly album cov­ers, uh, and the amount of ink that they had on them in the late ’70s, ear­ly ’80s, which is way more com­mon today than I think it was back then. So trend­set­ters, I think

Tony Kynas­ton: Well, and back then [00:03:00] too, ink, ink was more about being a dock work­er or being a bikey, was­n’t it?

Cameron: I think so, yeah. So, uh, Tony, I’ve got a few news sto­ries this week. I have, um, my glob­al con­se­quences brief­ing that Chat­G­PT pre­pares for me every morn­ing. Yeah. Yeah. I mean,

Tony Kynas­ton: Okay.

Cameron: it came up with that title, not me

Tony Kynas­ton: What,

Cameron: Sounds

Tony Kynas­ton: about every­thing that’s going shit in the world.

Cameron: Well, I have it talk to me about news that I’m par­tic­u­lar­ly inter­est­ed in, and so I don’t, I can’t, I can’t. Even the ABC, I just can’t. I mean, I flick through The New York Times every day just to see if Trump’s dead or if, uh, any­one else is dead. Um, I just can’t wade through the morass of non­sense that’s in the main­stream news.

So I’ve got GPT just fil­ter­ing the news for me, gives me the high­lights and

Tony Kynas­ton: [00:04:00] I’ve noticed too some­thing which I, I mean, I, I hard­ly ever watch com­mer­cial news in Aus­tralia. Uh, I just lost, it just lost me years ago. But I’ve noticed recent­ly, ’cause occa­sion­al­ly a clip will come up in my Face­book feed, know, Chan­nel 7 break­ing news or what­ev­er, and I’m not pick­ing on Chan­nel 7, it’s the same for all of them. um, I’ve noticed that will ad- like, they’ll go along to a politi­cian’s press­er, they’ll, they’ll ask a point­ed ques­tion, and then they’ll cut in dif­fer­ent response. It’s, it’s, fab­ri­cat­ed news. It’s just, it’s. I remem­ber I was in the car one day lis­ten­ing to the, to the radio, and I think there was a nation­al press con­fer­ence address being giv­en by some­one, and I remem­ber the ques­tion being asked, and I remem­ber the answer, and then lat­er on I saw this com­plete­ly dif­fer­ent con­coc­tion of the ques­tion and with a dif­fer­ent answer put togeth­er on a, a clip.

It’s, it’s, it’s bor­der­ing on ridicu­lous and out­ra­geous now

Cameron: It’s like, and I’ve said this before, but it’s lit­er­al­ly these news orga­ni­za­tions [00:05:00] watched Front­line went, “Oh, okay. That’s, that’s how you do it.” It’s. They’ve all tak­en Front­line not as satire, but as a guide­book to how to com­pile the news for max­i­mum out­rage and max­i­mum, you know, view­er­ship and com­plaints and that whole thing.

Uh, any­way, uh, back to my glob­al con­se­quences brief­ing, Tony. Um, oil’s f- ral­ly fad­ed on renewed diplo­ma­cy, but phys­i­cal sup­ply remains dan­ger­ous­ly con­strained, is my first sto­ry this morn­ing. Qatar or Qatar is arrang­ing sep­a­rate meet­ings with Iran and the Unit­ed States around an amend­ed ver­sion of Tehran’s sev­en-day pro­pos­al.

Iran’s orig­i­nal plan offered to reopen Hor­muz i- after sanc­tions relief, the unfreez­ing of assets, an end to the block­ade of Iran­ian ports, and a ces­sa­tion of hos­til­i­ties in Iran and Lebanon. Pres­i­dent Trump reject­ed that ver­sion, but autho­rized fur­ther talks. No set­tle­ment [00:06:00] has been reached. He reject­ed that ver­sion that he did agree to in June and signed, then broke, and now dis­agrees with.

Uh, I have seen Scott Bessent, is that his name? I think that’s his name, uh, say that Iran’s gonna be com­plete­ly f- out of every­thing in two weeks. So pos­si­bly, I don’t know

Tony Kynas­ton: the last time they agreed to those, the cease­fire was the 80th birth­day, was­n’t it? That was the rea­son they agreed. It was­n’t because they want­ed a d- a diplo­mat­ic solu­tion. So Trump’s now cel­e­brat­ed his 80th birth­day. He’s, he’s now push­ing his luck with, uh, the Iran­ian econ­o­my

Cameron: Yeah. See­ing who can hold out the longest.

Tony Kynas­ton: Yep. Mm-hmm

Cameron: The midterms or the Iran­ian econ­o­my. Oh, I’ve still got this cough. Bloody hell. Um,

Tony Kynas­ton: Midterms are gonna be inter­est­ing

Cameron: Brent was [00:07:00] $105.28 US this morn­ing, and WTI was $92.60 this morn­ing. They had been $4 high­er pre­vi­ous to this new announce­ment of, uh, new diplo­mat­ic dis­cus­sions, but it’s got noth­ing to do with restored phys­i­cal sup­ply from what I can tell.

Pre­lim­i­nar­i­ly, Kepler data record­ed 33.7 mil­lion bar­rels leav­ing Hor­muz dur­ing the week begin­ning 20th of Sep­tem­ber, involv­ing 19 tankers, includ­ing 17 VLCCs. The pre­ced­ing full week record­ed 49.2 mil­lion bar­rels, but ships oper­at­ing with­out pub­lic trans-transpon­ders are not ful­ly cap­tured, obvi­ous­ly.

Thurs­day record­ed nine vis­i­ble com­mod­i­ty ves­sel tran­sits a‑against a 10-day aver­age of 18 and a pre-war norm of about 125 per day. Sau­di Ara­bi­a’s East-West Pipeline has [00:08:00] restart­ed at reduced capac­i­ty, but full repairs to three dam­aged pump­ing sta­tions may take six to eight weeks. No new, no new report in the past day con­firmed depend­able reg­u­lar export load­ings from Yan­bu.

Bab el-Man­deb remains exposed to Houthi attack, under­min­ing the Red Sea and Suez alter­na­tive pre­cise­ly when Hor­muz is con­strained. So that’s that. Aus­trali­a’s fuel radar. Ear­ly Tues­day sam­ple reports unlead­ed 91 at 240.8 cents per liter is the nation­al aver­age, up 2.9 cents per liter in the last week.

Diesel’s run­ning at $2.89 cents a liter. And in Bris­bane, our aver­age is $2.36 for unlead­ed, up 34.6 cents per liter in 31 days, and hence why I’m not in Bund­aberg. I was gonna be in Bund­aberg this week. Part­ly.

Tony Kynas­ton: could­n’t

Cameron: Part­ly. [00:09:00] Well, part­ly also my sis­ter has been up there with her fam­i­ly. She was sup­posed to leave last week.

Got up there late ’cause her kid was sick, uh, has stayed. She’s leav­ing today, and we’d have to be back by the week­end. Chris­sy needs to start work on Mon­day. So we were just like, “I’m not pay– spend­ing 300 or 400 bucks on petrol to go up there for three days. It’s kind of ridicu­lous.” So, uh, yeah. But yeah, it’s cost­ing me, like, 150 bucks to fill up the Out­lander at the moment.

It’s insane

Tony Kynas­ton: and it’s cost­ing me a lot more than that with the diesel price down here hit­ting

Cameron: Oh.

Tony Kynas­ton: a

Cameron: Oh, yeah, you’re in diesel. I for­got

Tony Kynas­ton: it’s 300. It’s a 100-liter tank, so it’s 300 bucks a fill

Cameron: Whoa! Whoa

Tony Kynas­ton: that’s expen­sive, but it’s. I mean, the thing is diesel’s kind of decou­pling now from the oil price.

The oil price is up, but diesel’s up more, and that’s an issue for the econ­o­my, um, because every­thing ge- that gets moved Aus­tralia any­way gen­er­al­ly gets moved by diesel, um, through trucks. Um, and, [00:10:00] uh, and the mines all run on diesel, all that kind of stuff. So it’s get­ting, it’s get­ting to be a, a big impact on the econ­o­my. There’s also talk again about there not being enough diesel in the world, and we could be fac­ing short­ages and all that kind of stuff. I think poten­tial­ly because of some of the Russ­ian refiner­ies which have been knocked out by drone

Cameron: Yeah

Tony Kynas­ton: So yeah, it’s, uh, it’s. I mean, it’s, it’s some­thing to keep watch­ing.

It’s. I would­n’t say it was pre­car­i­ous, but yeah, it could eas­i­ly slip into real­ly neg­a­tive ter­ri­to­ry for the econ­o­my quick­ly

Cameron: so, it’s where it’s so rare at the moment. I hear that Mark Lizotte has changed his name back to John­ny Diesel just to, uh,

Tony Kynas­ton: Cash in?

Cameron: Cash in, yeah.

Tony Kynas­ton: Uh, very good

Cameron: John­ny Diesel was such a bet­ter name than Mark Lizotte. Uh, no won­der his career went nowhere after that. I don’t know what it did. I haven’t paid atten­tion. Shout out to John­ny [00:11:00] Diesel if he’s lis­ten­ing. Sec­ond sto­ry. Trea­sury yields have reached lev­els that can break the AI invest­ment and asset price nar­ra­tive.

US yield curve rose sharply again on Mon­day. Uh, the two-year matu­ri­ties were up 7.3 basis points from Fri­day. They’re at 4.937%. 10 years are up sev­en basis points to 5.251%, and the 30 years are up 6.8 basis points to 5.57%. The 10-year yield briefly reached its high­est lev­el since June 2007. The 30-year reached its high­est since May 2004.

Two-year yields have risen more than 50 basis points dur­ing Sep­tem­ber, their largest month­ly increase since Feb­ru­ary 2023. Mar­kets price rough­ly a 70% prob­a­bil­i­ty of a sec­ond con­sec­u­tive Fed increase in Octo­ber

Tony Kynas­ton: Hard to see there won’t be with infla­tion up and, and the oil [00:12:00] price still up for sure

Cameron: Inter­est­ing­ly, S&P 500 was down, uh, 0.8%, Nas­daq was down, the Dow was down. Gold was down 3.61%. Um, and GPT says gold’s fall shows that even tra­di­tion­al infla­tion hedges can lose when real or nom­i­nal yields rise quick­ly enough. I did mean to sort of drill down and try and under­stand that. C- can you explain that to me?

Tony Kynas­ton: we talked about it last time. Um, last week, I think gold yields noth­ing but as bond yields rise peo­ple start to say the share mar­ket’s too risky, ’cause if you add the, risk pre­mi­um to bond yields, that’s what you need to get out of the share mar­ket to, to make the equiv­a­lent deci­sion to invest in shares over bonds.

So peo­ple are start­ing to move towards bonds because their, their yields are bet­ter than, um, you know, what they can get out of the share mar­ket. um, when bond yields [00:13:00] are, uh, go up, um, they get even fur­ther away from zero, which is what the gold, gold yields. And so peo­ple who are hold­ing gold tend to start being attract­ed into gov­ern­ment bonds.

Cameron: Right

Tony Kynas­ton: So, um, bonds are also a good asset to be in when, you know, things are risky, um, as well as gold, and so peo­ple are mak­ing that trade-off

Cameron: Inter­est­ing. I saw, I saw some dis­cus­sion in Red­dit. Peo­ple were talk­ing about, you know, the decline of the petrodol­lar and whether or not there are any alter­na­tive reserve cur­ren­cies that coun­tries will start putting their mon­ey into, and nobody seems to have any gen­uine­ly good alter­na­tives at this stage.

But, um, yeah,

Tony Kynas­ton: that

Cameron: Trump coin. Trump coin. Yeah, is what they were sug­gest­ing. Yeah

Tony Kynas­ton: I think also too, the gold price is not just being buf­fet­ed by infla­tion or by bond yields. It’s being buf­fet­ed by cen­tral bank buy­ing and move­ments in the US dol­lar. So they’re prob­a­bly even [00:14:00] big­ger rea­sons why the gold price is going down.

There’s been a fair– There was a lot of buy­ing, um, in the last few years and I think there’s a bit of rebal­anc­ing going on by cen­tral banks

Cameron: Chat­G­PT says, “Why it mat­ters glob­al­ly, a 5.25% 10-year and a 5.57% 30-year rate raised the dis­count rate applied to every long dura­tion asset. This affects hous­ing, com­mer­cial prop­er­ty, pri­vate cred­it, infra­struc­ture, sov­er­eign debt, and equi­ty val­u­a­tions far beyond the Unit­ed States. The great­est con­tra­dic­tion is in AI.

Hyper­scalers are expect­ed to bor­row hun­dreds of bil­lions of dol­lars to build infra­struc­ture whose returns may arrive years lat­er. Ris­ing long-term yields simul­ta­ne­ous­ly increase con­struc­tion costs and reduce the present val­ue of those future earn­ings.” So whether or not that adds any pres­sure, I don’t know

Tony Kynas­ton: It becomes clear­er to me that the, whole debate around AI, and I’ve, I’ve got it in my notes to talk about lat­er, but so get there. But, um, I think a [00:15:00] lot of the debate around AI now is a bit of a fur­phy. It’s gonna be the phys­i­cal con­straints that are gonna be the issues. Can they build enough data cen­ters, um, to, to get to where AI is, is proph­e­sized to get to, I guess, uh, with enough com­pute to help civ­i­liza­tion? and the con­straints on data cen­ters are now becom­ing appar­ent. Pow­er, space, not want­ed NIMBY, NIM­BY­ism, not want­ed in my back­yard. and now, now the cost, the bond yields, and of course infla­tion push­ing up the cost of build­ing them.

So, uh, yeah, bond yields is part of that entire mix and, um, you know, it, it remains to be seen what hap­pens when all of these data cen­ters are under con­struc­tion and bond yields keep going up and peo­ple lose faith in AI for what­ev­er rea­son, if it just becomes. It was the fla­vor of the month and now it’s not any­more.

Um, and will they keep stump­ing up cap­i­tal for com­pa­nies to build more data cen­ters?

Cameron: Do you wan­na, do you wan­na talk [00:16:00] about your AI sto­ry, see­ing as we’re on the sub­ject?

Tony Kynas­ton: more thing. I mean, I think there’s a bit of debate about this going on in Aus­tralia right now ’cause of the loom­ing Fir­mus which is one com­ing up, which is a kind of encap­su­la­tion of that whole AI data cen­ter nexus where this com­pa­ny is, you know, pro­ject­ing into the future that when they build all their data cen­ters and, know, get all the GPUs in them, they’ll make a lot of mon­ey.

There’s a, there’s a lot of ifs in that, and they’re ask­ing a lot of mon­ey for investors now to stump up into the IPO. So it’ll be inter­est­ing to see how that goes. Anthrop­ic’s now on the blocks with an IPO. I think the prospec­tus, if it’s not out already, is due out soon. that’ll be inter­est­ing as well.

But yeah. So I, I. You know, as I’ve, as I’ve often thought, it’s always the phys­i­cal world which, which gets, um, to con­strain the future of things like AI or what­ev­er else is, is being devel­oped, um, that, that i- is going to be the sav­ior of mankind, real­ly. Whether it’s the green roll­out or whether it’s data cen­ter roll­out or what­ev­er it, um.

Or green ener­gy, I mean, sor­ry. [00:17:00] There, there always are con­straints to all this. Yeah, so the, the point I want­ed to raise as well was, um, one made by Alan Kohler on the week­end in his Week­end Brief, about whether that AI was, um, doing things by them­selves on their own, unguid­ed and should they be, um, cur­tailed.

And, uh, he was– he want­ed a mora­to­ri­um on, um, on AI’s self-direc­tion and on AI’s be- being able to upgrade them­selves. And, and for me, just if I can com­ment before I hand over to you, I think the water­shed moment was when Hug­ging Face, um, uncov­ered some lev­els of decep­tion by AI agents. And so, know, now, now can you. AI’s learned from us, and we’re, we’re inher­ent­ly flawed. Can we trust AI to go off and do what we think it’s going to do or what we ask it to do? Thoughts Cam, dis­cuss.

Cameron: [00:18:00] Uh, well, you did­n’t even talk about the, uh, Ope­nAI hack of Aus­tralian gov­ern­ment, um, uh, agen­cies. Yeah. Which is, yeah, three months lat­er. Um, which is kind of shock­ing. Um, yeah, and the Hug­ging Face thing, I don’t know how much of the report on that you’ve read, but I read, you know, the inde­pen­dent report that came out a few weeks ago.

Read a high-lev­el, um, sum­ma­ry of it any­way, uh, that some­body wrote and, um, it’s, it was ter­ri­fy­ing. I told my boys at the time it was the most ter­ri­fy­ing thing I’ve ever read. Uh, the f- the, the way that these AI agents were talk­ing about hid­ing what they were doing from Ope­nAI, and then some of them vol­un­teer­ing to sac­ri­fice them­selves to see if Ope­nAI would catch them out lying about hav­ing accom­plished the task in a legit­i­mate way when they’d actu­al­ly cheat­ed and stolen the answers and all this kind of stuff.

It was [00:19:00] some­thing straight out of a sci-fi bloody nov­el from 30 years ago, man. It, it, it was absolute­ly, uh, ter­ri­fy­ing. Uh, impres­sive, but also ter­ri­fy­ing, par­tic­u­lar­ly when you keep in mind that we’re only com­ing up to four years. Novem­ber will be four years since GPT real­ly went, um, pub­lic with GPT‑3. And as I always say, you know, four years ago when that came out, we were all blown away.

Those of us that were pay­ing atten­tion were blown away that it could write sen­tences. You could com­mu­ni­cate in plain lan­guage with a mod­el that had­n’t been trained to respond to you per se. It was mind-blow­ing. It was still pret­ty lim­it­ed, very stu­pid in many ways, but just the fact that you could have a con­ver­sa­tion with an AI was an incred­i­ble.

Now, four years lat­er, almost, not even, [00:20:00] it’s hack­ing gov­ern­ments, um, by itself, hack­ing web­sites by itself, try­ing to manip­u­late its, its builders, hide stuff. Um, yeah, so where will we be three more years from now if we main­tain that rate of, uh, progress? It’s ter­ri­fy­ing, uh, which is why I take the calls for a slow­down from Dario and Sam, and to a less­er degree, Elon, some­what seri­ous­ly.

Although it remains to be seen what they do. Ope­nAI have said that they’ve stopped train­ing their, uh, cur­rent mod­el that they were work­ing on. Um, as for Alan’s point, yeah, look, I think he’s right, and I think they’re basi­cal­ly say­ing the same thing in a way. We need to slow down and fig­ure this out before we keep rac­ing at full steam ahead.

Chal­leng­ing though, because they’re– you know, they’ve [00:21:00] bor­rowed hun­dreds of bil­lions of dol­lars. Um, they’ve got investors that are want­i­ng returns on that. Those returns are, you know, very far in the future as it is. Plus, you know, they, they don’t ne- nec­es­sar­i­ly trust each oth­er. Sam and Dario real­ly hate each oth­er, and they all hate Elon, and Elon hates them.

And then you’ve got Google on top of that, and then you’ve got the Chi­nese mod­els on top, the top of that. So it’s a very com­pet­i­tive. You know, it’s often depict­ed as a win­ner-takes-all space. Whether or not that is nec­es­sar­i­ly true, I don’t know. But it’s a very fraught space to pause on as, uh, when, when you’re a busi­ness leader, CEO who’s com­mit­ted to pay­ing back hun­dreds of bil­lions of dol­lars.

Mean­while, Jensen Huang, uh, at NVIDI­A’s say­ing, “Nah, they’re all just. See, uh, that’s all non­sense. It’s all fine. Don’t wor­ry about it. Buy more NVIDIA chips. What are you talk­ing about?” And Don­ald Trump, who’s an expert on all things, um, that it’s a super. [00:22:00] He has all the super intel­li­gence. He has all the big words.

He’s, he’s just gonna train an AI on his big brain and his big words. It’ll be fan­tas­tic. You wait. Some peo­ple say it’ll be the great­est AI there’s ever been. Um, yeah, but how we do it is the, is the issue. Like, um, you know, the. And I’ve been writ­ing this paper for a while on humanoid robot­ics with the same sort of approach that, uh, from a nation­al per­spec­tive, the Aus­tralian gov­ern­ment needs to get on the front foot with all of this stuff and take a much, much stronger reg­u­la­to­ry view of how these tech­nolo­gies inte­grate into Aus­tralian soci­ety.

We’re either going to be on the front foot or we’re gonna be on the back foot, as we nor­mal­ly are with these things, and we’ll be told what to do, or peo­ple will start adopt­ing them, and then we’ll be play­ing catch up try­ing to fig­ure out, uh, you know, what does this mean for [00:23:00] work­place health and safe­ty?

What does this mean for, you know, just legal issues across the board? We’re so far, uh, away from hav­ing fig­ured this out as a, as a soci­ety that, um, we need to be invest­ing a hell of a lot of time and effort into get­ting the smartest peo­ple we can togeth­er to work it out quick smart.

Tony Kynas­ton: Yeah. Look, I, hes­i­tate to say this. I’m not sure reg­u­la­tion is the answer. There’ll still inevitably be some reg­u­la­tion and some need for reg­u­la­tion, but, it’s a– this is a bit like the way things are trend­ing now. Like it’s like Ubers, uh, just bust through the reg­u­la­tions on taxis, and they don’t get taxi licens­es, and then they get so big and peo­ple use them so much that they can’t be shut down, or Airbnb or any of those sort of. They’re kin­da like the new busi­ness mod­el, and I think AI is gonna be a bit like that. Every­one’s gonna be so inter­twined with its, their own assis­tant and own agent, so if the gov­ern­ment tries to reg­u­late it, every­one’s [00:24:00] just gonna give them the fin­ger, and it’s not

Cameron: But that’s my point. We did­n’t have reg­u­la­tions in place before Uber hit the mar­ket. We did­n’t have reg­u­la­tions before it. Yeah, but they did­n’t apply to Uber. Uber was a dif­fer­ent busi­ness, dif­fer­ent busi­ness mod­el. Yeah, it got through the loop­hole, right, though, until it was so big that it was dif­fi­cult to deal with.

Tony Kynas­ton: Do you reg­u­late for some­thing which might be com­ing, which is gonna go through a loop­hole? You can’t. You

Cameron: Yeah, you use AI to fig­ure out the loop­holes.

Tony Kynas­ton: You can only do it in hind­sight, and then the horse has bolt­ed.

Cameron: Well, they did­n’t, they don’t start here. Like, they start in the US. You should be able to see it com­ing if you’re quick off the mark. You see what loop­holes they’re using in oth­er geo­gra­phies, and you get ahead of the game.

Tony Kynas­ton: Look, I think that’s prob­a­bly the solu­tion, not, not so much from the reg­u­la­tion point of view, but what do you think of the calls that we should be ful­ly engaged with, and Chat­G­PT and ask­ing them to come to Aus­tralia to our data cen­ters to learn off our, our data so that when [00:25:00] some­one tries to hack Medicare, we’re actu­al­ly up to the.

up to speed with the lat­est of Anthrop­ic’s defens­es against that?

Cameron: Okay.

Tony Kynas­ton: Well,

Cameron: Ope­nAI.

Tony Kynas­ton: than try­ing to reg­u­late Anthrop­ic, we embrace it and into bed with them so that they’ll help us to,

Cameron: Well, we just did that. They’re build­ing a $32 bil­lion data cen­ter in Dal­by, you know? But I don’t know that that’s gonna help us when it starts tak­ing our jobs a few years from now, if and when that hap­pens, which I know you don’t believe.

Tony Kynas­ton: I, I mean, I know it’s ear­ly days in the AI rev­o­lu­tion, and there cer­tain­ly will be job dis­lo­ca­tion, but there’s a lot of CEOs who are say­ing, “We’re not get­ting any ben­e­fits out of AI at the moment.

Cameron: Yet.

Tony Kynas­ton: but we’re not

Cameron: Hmm.

Tony Kynas­ton: ben­e­fit.”

Cameron: Yeah, yet. It’s, it’s still, you know, it’s still ear­ly days, as I keep say­ing. The tech­nol­o­gy is still in, in its baby form. This isn’t. You know, we’re still.

Tony Kynas­ton: scari­er, isn’t it, real­ly?

Cameron: Well, it, it, it is on one hand, yes. On the oth­er hand, in terms of it being applied, like y- you know, I, I use it, [00:26:00] um, all day every day and have and use the lat­est mod­els, and I go hard with it, and I know I can’t trust it to do stuff still.

It’s still not. Like, they’ve made huge leaps in reduc­ing hal­lu­ci­na­tions and reli­a­bil­i­ty, and I’ve got my own sys­tems in place to red team stuff and check stuff, et cetera, et cetera. But even then, like, it makes mis­takes con­stant­ly, so it needs con­stant hand-hold­ing. It’s, it’s a mil­lion times smarter than it was three years ago, but it’s still not five nines reli­able, right?

You can’t real­ly rely on it to do any­thing. It still needs human over­sight and, and good human over­sight, like smart human over­sight, which is expen­sive. But with the progress that it’s been mak­ing, six months from now, a year from now, will it be five nines reli­able? Or at least as reli­able as a human?

Prob­a­bly does­n’t. Humans aren’t five nines reli­able, so, you know,

Tony Kynas­ton: Yep.

Cameron: 15% reli­able.

Tony Kynas­ton: It’ll be m- far more reli­able, I agree.

Cameron: And at some point [00:27:00] there’s a crossover, right? Where you go, “You know what? I don’t need to pay Bil­ly Blog­gs 100 grand a year to do this job. I can get the AI, it’ll be just as good, if not bet­ter.”

Tony Kynas­ton: Yeah, I think that’s gonna be the case in, in some spe­cif­ic. But if I extrap­o­late from my own use, and I use AI every day as well, prob­a­bly not as much as you do, but I use it for, you know, writ­ing macros in Excel and help­ing me test things, et cetera, and I use it for, you know, oth­er, oth­er every­day type items.

Um, but I find it’s the qual­i­ty of the prompt. You know, like prepar­ing for this show, right? I’ll use AI to help me do a Pulled Pork. If I just kin­da like say, “Tell me about XYZ com­pa­ny,” uh, I’ll go down all kinds of rab­bit holes which will be of no inter­est to what I wa- to our lis­ten­ers, to what I want, to an analy­sis of the com­pa­ny, and I’ll say, “Whoa, h‑hang on.

Way back here at the start you said this hap­pened, but you went this way. Should­n’t it be gone that way?” “Oh, yeah, yeah, you’re right.” So it’s the qual­i­ty of the prompts. It’s tak­ing in what it. the ini­tial data is giv­en to you and think­ing [00:28:00] about that, and then going back and say­ing, “Okay, that’s prob­a­bly as far as we can go on that. Let’s talk about this now.” I think that’s just m- uh, more impor­tant than the, the fact it can go through heaps of data and give me quick answers quick­ly.

Cameron: Yeah, I agree. And like every­one’s been work­ing on prompt engi­neer­ing for three years, but, um, e- even with a good prompt, it can still get lost in the weeds very often. And, um, but any­way, um, look, I do think Alan’s got a point, but how we nav­i­gate this is just gonna be a, an absolute mine­field. But we do need the best and the bright­est work­ing on it, and I’m not sure Albo, uh, uh, is real­ly tak­ing it as seri­ous­ly yet as he needs to.

Tony Kynas­ton: Oh, I think he is. Um, but I think he’s, he’s kind of say­ing, “Well, what do I do about it? What do I do it about it imme­di­ate­ly?”

Cameron: You get the best and the bright­est to come togeth­er and fig­ure out a plan.

Tony Kynas­ton: Well, okay, so who are the best and the bright­est?

Cameron: It’s, it [00:29:00] me. Um, that’s just. Oh, well, I, I’m not telling you. I haven’t been paid yet. I’m a con­sul­tant, Tony. You pay me for. I’m not gonna

Tony Kynas­ton: So

Cameron: give it away for free.

Tony Kynas­ton: them

Cameron: Yeah. No, no, no, no, no.

Tony Kynas­ton: give

Cameron: well, I don’t know. Prob­a­bly be earn­ing.

Tony Kynas­ton: it

Cameron: Pub­lic ser­vant wage, wage, I’d be earn­ing three times what I’m earn­ing now, so it sounds all right to me.

Yeah. Yeah, that’s right. Yeah, yeah. Mas­sive pay rise. Any­way, mov­ing right along. Wash­ing­ton and Bei­jing met. Uh, Xi went to Wash­ing­ton. They’ve, uh, orga­nized a bit of a, you know, exten­sion to their bilat­er­al trade, uh, r- relief between the two. Reduced tar­iffs on 60 bil­lion in bilat­er­al trade. But the, the major take­away from this is more about the fact that they’re, they’re real­ly sort of still stage sep­a­ra­tion.

Um, they’re pulling away from each oth­er increas­ing­ly, I [00:30:00] think. Um, and there’s some good and some bad for Aus­tralia in this. Good and bad for the globe. But, um, it’s, you know, reduced ten­sion between the US and Chi­na is good for us in many ways. Uh, we are still sit in this weird no man’s land where we’re an ene­my of Chi­na because we have to be, ’cause Amer­i­ca wants us to be, but they’re also our biggest cus­tomer.

So f- you know, we have to fig­ure that out. It’s that clas­sic s- scene from, um, what’s that show? The Rob Stitch show. Rob Stitch show. Um, Utopia, he’s sit­ting around the table with the gen­er­als. “We need to increase our defense spend­ing to defend our trade routes with our biggest cus­tomer.” “So what you’re say­ing is we’re defend­ing our trade with Chi­na from Chi­na?”

“Yes.” And they all nod in agree­ment. Uh, but it also. They’re, they’re [00:31:00] still stop­ping things like Chi­nese EVs, um, robots, oth­er equip­ment like that from the US mar­ket. So we still. Like, I can­not. I was talk­ing to some­body on Red­dit the oth­er day. Some Amer­i­can was going on about not see­ing Chi­nese EVs hit­ting the mar­ket.

And I was like, “Every day I see anoth­er Chi­nese EV and brand in this coun­try that I’ve nev­er heard of before.”

Tony Kynas­ton: in Aus­tralia now, aren’t they?

Cameron: They’re every­where, and they’re just brands that did­n’t exist, year ago. And they’re, they’re all over the place now. It’s amaz­ing.

Tony Kynas­ton: Yeah. No, I agree. I did­n’t know they had­n’t gone into Amer­i­ca because they’re huge here, aren’t they? And, um, know, and, and it’s the flip side of that is that, uh, co-com­pa­nies like Toy­ota are now like about a third of the mar­ket share of what they used to be.

Cameron: Right. Yeah. Yeah, no, Chi­nese EVs are blocked from the US mar­ket. They’re not allowed in there because they’re pro­tect­ing Tes­la.

Tony Kynas­ton: Yeah, they are, aren’t they?

Cameron: You know? Yeah.

Tony Kynas­ton: Oh.

Cameron: He did­n’t, he did­n’t get rid– DOGE did­n’t get rid of that, uh, divi­sion of, uh, the US [00:32:00] gov­ern­ment that was, uh, you know, pro­tect­ing them from Chi­nese EVs com­ing in.

Tony Kynas­ton: To me, it looks like they- they’re going– they’re doing their lit­tle dance. I’m actu­al­ly hap­py to see them togeth­er. I did­n’t think they’d get togeth­er,

Cameron: Yeah.

Tony Kynas­ton: um, to me, the dance is lead­ing towards, uh, Xi extract­ing or the US extract­ing some­thing from Chi­na to, uh, not stand behind Tai­wan when, uh, the– when Chi­na inevitably re-brings it back into Chi­na, main­land Chi­na.

Cameron: Yeah, maybe. I mean, that’s– I think it’s– I don’t think that’s that impor­tant. I think Chi­na talks about Tai­wan. No, I don’t think it is. I mean, it’s impor­tant. I don’t think it’s urgent, let me put it that way. If, if I’m, if I’m Chi­na right now, like, they’re gonna, they’re gonna wan­na be part of us at some point any­way.

Like, uh, there’s, we’re s- there’s no rush. Chi­na’s just slow­ly doing what it does. It’s just tak­ing over every­thing. Even­tu­al­ly, the Tai­wanese peo­ple are gonna go, “Yeah, you know what? All right, we give up. Um, fair enough. You made a [00:33:00] case. You made a good case.” Yeah. Amer­i­ca’s, Amer­i­ca’s, you know, col­laps­ing into civ­il war, and it’s g- uh, you know, you can’t rely on it.

Like a s- the Saud­is. “Oh, yeah, we got this great secu­ri­ty pact with, uh, the Unit­ed States. They got our back.” “Oh, the Houthis are bomb­ing our pipeline. What are you gonna do about it?” “Eh, eh, we got noth­ing left. We used it all up in Iran. How’s that going?” “Uh, not so good.” You know, any, any day now. Any day now, it’ll be great, you know?

I don’t, I don’t, I don’t think the, you know, the US secu­ri­ty umbrel­la is, uh, help­ing Bahrain or Jor­dan or Qatar or Oman or Saud­is or

Tony Kynas­ton: that now, aren’t they?

Cameron: Those count- who? The Amer­i­cans or the oth­er coun­tries?

Tony Kynas­ton: coun­tries

Cameron: Yeah, I think, I think that’s one thing that the whole Iran deba­cle, and Ukraine is, is, is part of this as well, right?

That they, they pushed Ukraine into a war with Rus­sia and then basi­cal­ly, uh, doing a Homer Simp­son back­ing away slow­ly [00:34:00] into the bush­es. Uh, they’re like, “What? Who? Zelen­skyy? Nev­er heard of him. Uh, don’t put that call through.” Any­way, mov­ing right along. Stocks, Tony. A1M. Uh, I think you’re gonna be talk­ing about these guys lat­er on, right?

Tony Kynas­ton: a pulled pork

Cameron: Toby asked us to talk about them, um, so I won’t spoil your thun­der for lat­er on

Tony Kynas­ton: put what you had there in your notes into my pulled pork, so away. Yeah

Cameron: Well, they bought a cop­per mine pur­chase. Uh, a cop- they bought a cop­per mine. They, they did­n’t buy a pur­chase, they bought a cop­per mine. You do call it a pur­chase, don’t you? Min­ing, they says like, “I got a pur­chase,” and isn’t that like old timey Dead­wood speak, a pur­chase? I’m not sure what that means.

Tony Kynas­ton: par­cel of

Cameron: A- A1M Mines is pleased to announce, this is dat­ed the 23rd of Sep­tem­ber, it has entered into bind­ing agree­ments to acquire a 100% inter­est in Mat­era Met­als Lim­it­ed, own­er of the Mount Cuth­bert Cop­per Project, [00:35:00] for $120 mil­lion, con­sist­ing of 100 mil­lion in new ful­ly paid A1M Mines ordi­nary shares and 20 mil­lion in cash from Drag­on Field Inter­na­tion­al Lim­it­ed, its stake­hold­ers and the oth­er share­hold­ers of Mat­era.

Blahdy, blahdy, blah. Uh, Mount Cuth­bert is a his­toric min­ing cen­ter dat­ing back to the ear­ly 1900s. It was devel­oped as a mod­ern heap leach SXEW oper­a­tion in the ear­ly 2000s to treat near sur­face cop­per oxide mate­r­i­al, and most recent­ly oper­at­ed from 2014 to 2022 at a small scale before being placed on care and main­te­nance in 2022.

It has seen min­er­al- min­i­mal explo­ration since the ear­ly 2000s and almost no deep­er drilling to tar­get cop­per sul­fide min­er­al­iza­tion. A1M Mines believes that Mount Cuth­bert has the poten­tial to sup­port a stand­alone oper­a­tion pro­duc­ing both cop­per con­cen­trate and cop­per cath­ode, rep­re­sent­ing a sec­ond flag­ship asset that would mate­ri­al­ly trans­form the [00:36:00] com­pa­ny’s scale and pro­duc­tion pro­file.

So it’s a big deal for these guys. so there you go

Tony Kynas­ton: I told– I do talk about that a lit­tle bit the, the ques­tion I had on that deal was, if the mine’s in care and main­te­nance, why would you buy it? But, uh, if you wan­na know what the answer is, then lis­ten to the pulled pork

Cameron: Oh, look at you putting in a, a teas­er. A hook. A cook, yeah. Michael, “Thanks for the pulled pork TK. What are your thoughts on Sea For­est, SEA? I like the fact that they have a tri­al with Woolies,” I think it might be a tri­al with Woolies, “but hav­ing trou­ble under­stand­ing their com­pe­ti­tion. I don’t see their IP being an advan­tage.

Rather they are ear­ly and try­ing to stal- scale quick­ly. Always appre­ci­ate your thoughts.” Well, will you appre­ci­ate his thoughts on this? We will s-

Tony Kynas­ton: There you go, putting a teas­er into it.

Cameron: Yeah, yeah, yeah. Stay tuned to see what Tony thinks about SEA.

Tony Kynas­ton: chan­nel, same bat time. [00:37:00] Uh, well, I can’t do a pulled pork on these stocks. I can give you my thoughts because, um, both of them fail our, our QAV thresh­olds and tests.

Cameron: Who’s both?

Tony Kynas­ton: Sor­ry.

Cameron: Is– You said both. Uh, there’s no ACE in that one, in that, uh, email

Tony Kynas­ton: Oh. Oh, I know. Sor­ry. I, I got, I got, uh, Michael’s ques­tion from the Face­book post in the group

Cameron: Oh, well, okay. Thought I did too. All right

Tony Kynas­ton: SCA and ACE

Cameron: Ah, okay

Tony Kynas­ton: Um, yeah, so two stocks we can’t, we can’t score them. Both have neg­a­tive oper­at­ing cash flow and both are heav­i­ly neg­a­tive in a sen­ti­ment sense. Um, so these are the kind of spec­u­la­tive growth com­pa­nies I stay away from. Um, and I guess you would need some kind of edge in terms of your knowl­edge, either of the stocks or the com­pa­nies or the sec­tors to invest in these with any con­fi­dence. Um, but to, to just cov­er them quick­ly, C– SEA is Sea For­est Lim­it­ed, that [00:38:00] com­pa­ny adds sea­weed to live­stock feed, which is a good idea. Uh, but the com­pa­ny is burn­ing cash to do it. So they raised funds recent­ly, list­ed, and now they’re burn­ing through their cash to, uh, get to prof­itabil­i­ty at, at some stage in the near future before the cash runs out. And they are get­ting bet­ter. The cash burn is, um, is slow­ing. They lost nine point three mil­lion dol­lars last year.

Now they’re los­ing four point six mil­lion dol­lars, so it’s improv­ing. And there is still plen­ty of cash on hand, about twelve point six mil­lion dol­lars on the, on the bal­ance sheet. So this is real­ly a race to gen­er­ate pos­i­tive cash flow before the cash at hand runs out. if it does, the com­pa­ny will have to raise cap­i­tal or debt to keep going, which either dilutes investors or dilutes the qual­i­ty of the bal­ance sheet.

So, uh, the com­pa­ny has­n’t been list­ed long. It’s in a down­ward trend. This is pret­ty much a sto­ry stock. Um, so my, my approach would be to wait until the under­ly­ing met­rics improve. So [00:39:00] that’s, uh, SEA. ACE is Acusen­sus, not to be con­fused with Acu­men­tis, which is some­times on the buy list. But is a mak­er of detec­tors that the police and state gov­ern­ments use to detect things like mobile phone use in cars, peo­ple not wear­ing seat belts, dan­ger­ous dri­ving on our roads, et cetera. It had pos­i­tive cash flow and con­sis­tent­ly had pos­i­tive cash flow up until the lat­est peri­od, where it went neg­a­tive. So I can’t score it using QAV, and it’s also now a sell on the three-point trend line, and it’s been a falling knife since Octo­ber, pos­si­bly and prob­a­bly cor­re­lates with the neg­a­tive oper­at­ing cash flow, um, when it changed. a sto­ry stock. Um, it’s, it’s a good sto­ry. Like we kin­da need these, devices, uh, um, on our roads. But, um, you know, again, I have no edge to my knowl­edge of the com­pa­ny or the sec­tor and how much [00:40:00] growth they might see, whether they’ll go over­seas, whether they’ll stay here, um, whether they’re gonna roll out to every state and ter­ri­to­ry.

Who knows? thing I think is, I don’t know how, uh, you came across these stocks, but, uh, again, my expe­ri­ence is you prob­a­bly start to hear about these kinds of stocks when per­for­mance is going back­wards, the CEOs get on their road­shows and spruik the sto­ry and try and get sup­port for the share price. so yeah. Cou­ple– There are a cou­ple of sto­ry stocks. I, I did note that ACE has had pos­i­tive oper­at­ing cash flow in the past, even though it’s still been loss-mak­ing. I, I did go back to an old buy list from Sep­tem­ber 2025 to see how ACE was on, uh, the QAV buy list when it did have pos­i­tive oper­at­ing cash flow before it start­ed to turn down with sen­ti­ment. but even back then, the qual­i­ty score was five out of twelve or forty-two per­cent, and the QAV score was point zero two, [00:41:00] well below the cut­off of point zero one. and back then, the Stock Doc­tor finan­cial health for this com­pa­ny was ear­ly warn­ing, and it’s cur­rent­ly mar­gin­al. So we’re not see­ing much in the way of qual­i­ty, not see­ing much in the way of scor­ing, uh, in terms of its met­rics and KPIs to, to be able to sup­port a, a buy on either of these two stocks, uh, or even back then when, um, ACE was, uh, was, uh, at least pos­i­tive from an oper­at­ing cash flow point of view. The oth­er point I want­ed to make, too, is they’re both small ADT stocks, so you’ll need to be care­ful that they’re not fish traps. in oth­er words, you’ll be able to buy into them, but if they keep declin­ing, you’ll get stuck and find it dif­fi­cult to, to b– to back out, um, with­out push­ing the price down fur­ther. Uh, so yeah, I can’t give either of these two com­pa­nies a cur­rent QAV score, uh, they don’t even make it into my down­load these days. So that’s my com­ments. Michael?

Cameron: Well, there you go, Michael. Um, hope you appre­ci­at­ed those thoughts. [00:42:00] Um

Tony Kynas­ton: Well, hope­ful­ly Michael’s enlight­ened enough not just to be look­ing for con­fir­ma­tion bias and, uh, you know, we’ll, uh, we’ll see that these are g- uh, these are inher­ent­ly risky stocks

Cameron: I just appre­ci­ate all of these guys, Toby, Michael, and Paul com­ing up, send­ing in ques­tions so we have some­thing to talk about this week

Tony Kynas­ton: Thank you

Cameron: that isn’t my abs or Shostakovich. Uh, but we will talk about both before the end of the show. Uh, Paul. “Hi Cam. Hope all is well.” All is well. Got abs, Paul. “I have a ques­tion for the show.

I’m lov­ing my QAV dou­ble mar­ket returns, which I have now received for five sol­id years thanks to you both.” Con­grat­u­la­tions, Paul. Well done. But I want more returns. Oh, come on, Paul. My ques­tion is specif­i­cal­ly about a, yeah, specif­i­cal­ly about a Buf­fett quote that was some­thing like if he was man­ag­ing a small amount of mon­ey under a mil­lion, he could get returns of 50% or more by explor­ing [00:43:00] inef­fi­cien­cies in small over­looked com­pa­nies.

Got a feel­ing that was Munger. Yeah

Tony Kynas­ton: at a loose end these days. He’s no longer chair­man of

Cameron: Yeah, he’s got noth­ing to do.

Tony Kynas­ton: got noth­ing to do

Cameron: Um, “What does Tony think that Buf­fett meant by that? How would Tony change his process if he was man­ag­ing a small­er amount of mon­ey? Cheers guys. Lov­ing the pod­cast, Paul.” Obvi­ous­ly did­n’t lis­ten to our episode or my– read my newslet­ter over the last cou­ple of weeks where we talked about the sta­tis­ti­cal improb­a­bil­i­ty of beat­ing dou­ble mar­ket over the long term, how the odds of beat­ing that long term go absolute­ly through the roof.

Get­ting 20% or dou­ble mar­ket is hard enough. Uh, get­ting like dou­ble plus a lit­tle bit, like 22%, if the mar­ket’s doing 10%, get­ting 22%, your chances go to like one in 22,000 or some­thing, um, to be able to do that con­sis­tent­ly. It falls right off the end of the bell curve

Tony Kynas­ton: That’s right. It’s a bell curve, isn’t it? [00:44:00] Yep. Um, yeah, look, I mean, I’ll, I’ll take War­ren at face val­ue. I. If he says he can get fifty per­cent man­ag­ing a mil­lion-dol­lar port­fo­lio, I no rea­son to ques­tion him. But I think it is. And what would I do dif­fer­ent­ly? Noth­ing. I’d still use QAV, and I start­ed off with a small amount of mon­ey thir­ty years ago, so

Cameron: rel­a­tive­ly speak­ing

Tony Kynas­ton: rel­a­tive­ly speak­ing. Um, it’s, uh. But War­ren’s say­ing is exact­ly like we do in some instances in QAV because it’s, it’s a bit like a, a, a small com­pa­ny with­out bro­ker cov­er­age. So w‑we, um, to get in first and hope­ful­ly ride the mar­ket up to where they, this com­pa­ny becomes more appar­ent on insti­tu­tion­al radars. Uh, I guess the, the the­sis is because no one is look­ing, none of the big com­pa­nies are look­ing at this or bro­kers are look­ing at this, the stocks can be mis­priced by the mar­ket. Um, and, you know, they, they tend to be small ADT stocks, so hav­ing a small port­fo­lio helps us get into [00:45:00] those with­out too much risk. but small ADT stocks can be ignored by instos because they know that they would move the, the price if they bought or sold, so they tend to stay away. Um, unless they’re a kind of a PE com­pa­ny maybe who does­n’t real­ly care about the cur­rent mar­ket price and push­ing it around, they’ll just make an offer for the com­pa­ny. Buf­fett also believed that he could find inter­est­ing cor­po­rate plays at the small end of the mar­ket. So, for exam­ple, not just in the com­pa­nies them­selves, but if they’ve issued bonds at a high yield, that might be inter­est­ing. Um, or if, uh, they were trad­ing below val­ue, so I guess book val­ue or, um, that might be inter­est­ing for him. Or if there was some kind of asset spin-off that he could par­tic­i­pate in or merg­er that he could arbi­trage or some­thing. So he thought he had, a bet­ter edge at the small end of mar­ket, less com­pe­ti­tion, um, for those assets. So I, I, um, I accept his, his claim at face val­ue. He could. You get fifty per­cent.

I haven’t [00:46:00] been. It’s more like dou­ble mar­ket. I real­ly should go spend some time going back and look­ing up, know, how, how stocks with, uh, no bro­ker cov­er­age have gone for QAV. I haven’t done that for a while. um, yeah, I’ll put that on the list and have a look at it. Get some AI to help me to do it

Cameron: Cheers, Paul

Tony Kynas­ton: Uh, but thanks for the com­ment and the ques­tion

Cameron: yeah, thank you, Paul. Uh, let me just do some mod­el, uh, some port­fo­lio updates while I’m think of it. Um, our mod­el port­fo­lio run­ning since Sep­tem­ber 2019, CAGR of six­teen point two per­cent per annum ver­sus the SPDR two hun­dred sev­en point six three. So doing slight­ly bet­ter than dou­ble mar­ket over that peri­od of time.

For the last one year, it’s doing six point six one per­cent ver­sus three point zero eight, so doing dou­ble mar­ket for the last year, even though it’s fall­en quite a bit in the last week. Um, [00:47:00] year to date, cal­en­dar year to date, that is six point three two per­cent ver­sus two point eight six for the SPDR two hun­dred, so bet­ter than dou­ble mar­ket pret­ty much on all of those time frames.

The com­bined live port­fo­lios all time, which is Feb­ru­ary 2022, doing twen­ty point nine eight per­cent per annum ver­sus nine point five six per annum for the SPDR. Again, bet­ter than dou­ble mar­ket. Uh, for the last one year, fif­teen point two sev­en ver­sus three point zero eight. Jeez, that’s insane.

What the hell?

Tony Kynas­ton: Which port­fo­lio was that?

Cameron: That’s the com­bined live port­fo­lios.

Tony Kynas­ton: live. Okay

Cameron: South­ern Cross Elec­tri­cal Engi­neer­ing up 499%

Tony Kynas­ton: ‘Cause it’s

Cameron: Dura- Duratec up 297%, SRG Glob­al up 280, GNP, Genus­Plus Group up 269. Is [00:48:00] that, is that just for this peri­od? No, it’s, uh, since we’ve held them.

Tony Kynas­ton: yep

Cameron: Yeah. Um, year to date for the com­bined 9.23 ver­sus 2.86, still three times mar­ket.

Um

Tony Kynas­ton: Isn’t that inter­est­ing about stocks like SRG though? I mean, when we bought them, they were um, an elec­tri­cal engi­neer­ing com­pa­ny. We had no idea that data cen­ters were gonna be a huge thing, or I did­n’t any­way, you may have. and, um, you know, a cou­ple of our best per­form­ing stocks have trans­formed into their time in the sun, which tends to be how it works.

We only sort of see in hind­sight that they were in the right place at the right time to take advan­tage of it.

Cameron: Yeah. Indeed. Uh, by com­par­i­son, the US mod­el port­fo­lio that’s been run­ning since Sep­tem­ber 23 is up 93.31% ver­sus the S&P 500 up 72.9. [00:49:00] That’s, um, not, uh, per annum obvi­ous­ly, that’s all time. Uh, you know, we’ve come back a lot. We were up at 127% at the begin­ning of July. We’ve come back to 93, still beat­ing the mar­ket, but nowhere near where we were.

We were pret­ty much dou­ble mar­ket back in July there too. Uh, we’ve tak­en a big hit with the, uh, shenani­gans going on, um, in the US. The Unit­ed States live port­fo­lio, which has been run­ning since Decem­ber 25, is now 8% ver­sus 11.7. It was beat­ing the mar­ket briefly in Sep­tem­ber, ear­ly Sep­tem­ber, um, but has come back a lot and I’ll talk about that more on our US show this week.

The whys and where­for­es. So yeah, it’s, uh, had a few stocks go back­wards, but, uh, not doing too bad. I’m hap­py with that. It’s okay. All right. That’s my notes. TK, what else you got on your list?

Tony Kynas­ton: Our RBA is meet­ing today, so we may get [00:50:00] a, an announce­ment while we’re on– While we’re record­ing this. I’m not sure if we will. but it’s pre– I mean, I think the mar­ket’s say­ing it’s a nine­ty per­cent chance of a rate rise. Um, and the US rose rates recent­ly. rates recent­ly. So I’d sus­pect that that’s gonna hap­pen now. And did you, do you know that will make us the sec­ond high­est cen­tral bank rate in the world, Cam, if we raise rates today? Do you know

Cameron: Wow. Um, I’m gonna take a guess and say. No, like, no, hey, hey, hey, hey, hey. Like, no, no, no, no Googling. Hands are up if peo­ple can’t see the cam­era. Uh, uh, um, Japan

Tony Kynas­ton: Ice­land. Well, Japan rates are very low. Ice­land.

Cameron: Oh, okay

Tony Kynas­ton: with no nat­ur­al resources or exports and sur­vives on tourism, which you’d expect to have high rates, is, is the only one in the world high­er than us. [00:51:00] A resource-rich coun­try where peo­ple bust down the door to get into, and we’re hav­ing to raise, raise rates to the high­est lev­els in the world.

Uh, There’s some­thing basi­cal­ly wrong with the fun­da­men­tal man­age­ment of the econ­o­my in Aus­tralia, I think, and hope­ful­ly some­one will fix it.

Cameron: Isn’t that why they’re.

Tony Kynas­ton: but,

Cameron: Isn’t, isn’t that why they’re rais­ing rates to fix the, over­heat­ing of the econ­o­my? Hmm.

Tony Kynas­ton: rates for infla­tion, but there’s. A lot of peo­ple have point­ed out infla­tion is up because the gov­ern­ment hand­outs that have gone on, um, in the last sort of six to 12 months, as well as the ris­ing petrol prices too.

So there’s a cou­ple of things going on in the econ­o­my. I guess my com­ments stem from the fact that pro­duc­tiv­i­ty is very, very low, prob­a­bly the low­est I‑I’ve seen in my life­time. and that’s real­ly the only thing that can help an econ­o­my, uh, when infla­tion is going up. If it was pro­duc­tive, the out­put, out­put could keep, keep pace and we.

Our, our liv­ing [00:52:00] stan­dards would remain the same, but it’s not. So, um, we’re gonna have to take a bit of med­i­cine now because of that. rates will go up, and, uh, if the gov­ern­ment keeps hand­ing out mon­ey or if the Iran war isn’t set­tled and the oil price stays high, then they’ll go up again. Um, which is, you know, not, not great for or our back pock­ets or our liv­ing stan­dards or for com­pa­nies try­ing to raise to do things which are pro­duc­tive or any of those things.

So there’s a bit of a malaise going on in Aus­tralia at the moment, and I talked once before about the Trea­sury not with the cen­tral bank, and if the gov­ern­ment keeps giv­ing hand­outs for ele-elec­tric­i­ty prices or fuel ser­vices, user road tax cuts or what­ev­er, um, or just even income tax cuts, then, that just. It becomes infla­tion­ary and e- an econ­o­my with­out much pro­duc­tiv­i­ty. most of the pro­duc­tiv­i­ty, uh, most of the GDP growth, which is a mea­sure of pro­duc­tiv­i­ty, has come from migra­tion. And of course, that’s [00:53:00] now being ques­tioned by all major polit­i­cal par­ties and there­fore will go down, and then we’re real­ly stuffed.

So good luck to us, Cam. I hope you’re right about AI sa-sav­ing our bacon, ’cause we need it.

Cameron: Well, that’s been my argu­ment for 30 years is we need some­one to come and save our bacon. I don’t think it’s gonna be the aliens. I don’t think it’s gonna be Jesus. Uh, AI is,

Tony Kynas­ton: it’s gonna be Elon or Trump or

Cameron: AI is, uh, the only s- poten­tial sav­ior that we have on the cards. Could also kill us all though, so it’s, you know. Yeah, yeah, yeah

Tony Kynas­ton: we’re in a good space, aren’t we? Don’t you feel good about the future?

Cameron: Hey. Well, you know, as I was explain­ing to peo­ple in the kung fu dress­ing room the oth­er night, block uni­verse the­o­ry, which, uh, falls out of, uh, Ein­stein’s the­o­ry of rel­a­tiv­i­ty says

Tony Kynas­ton: tar­get you for extra pun­ish­ment in

Cameron: They do. do. They do. Yeah, they do. If not for this, then because I always try and turn our warmups, [00:54:00] uh, into a dance class.

Um, uh,

Tony Kynas­ton: to the waltz?

Cameron: I wish. No, it’s, it’s just to try and get Chris­sy’s atten­tion, to make her laugh. I’m just doing goofy shit just to try and make Chris­sy laugh, and then every­one goes, “Now we know where Fox gets it from.” Um, you know, it falls out of Ein­stein­ian rel­a­tiv­i­ty, so the future is already hap­pen­ing. It’s hap- it coex­ists with the present, so I don’t feel good or bad or I feel indif­fer­ent about the future.

I know it’s already hap­pen­ing, so we’re just– my job is just to, you know, hang around and see what, what, what, what’s gonna hap­pen. I’m, I’m excit­ed to turn the page of the adven­ture book and see what’s next for life on the plan­et Earth

Tony Kynas­ton: Yeah, look, that’s a, that’s a, a good, good way to look at it. No, no, I agree. The future is un- is already writ­ten. Um, every­thing that’s exist­ed ex- is hap­pen­ing today, [00:55:00] in the

Cameron: Exact­ly.

Tony Kynas­ton: Yep.

Cameron: Oh, that’s David Byrne. Real­ly?

Tony Kynas­ton: Bri­an

Cameron: What song’s that?

Tony Kynas­ton: Every­thing that hap­pens is hap­pen­ing today.

Cameron: Oh, is that a Talk­ing Heads track or a solo

Tony Kynas­ton: heads. It’s prob­a­bly about 10 years old, I think

Cameron: Oh, I’m gonna have to look that up. All right.

Tony Kynas­ton: Any­way,

Cameron: Thank you

Tony Kynas­ton: rant. I think, uh, I think we could be in a bet­ter space than we are, let’s put it that way

Cameron: Tony Kynas­ton for Prime Min­is­ter

Tony Kynas­ton: thank you. Uh,

Cameron: It, it’s time

Tony Kynas­ton: up

Cameron: For who?

Tony Kynas­ton: for the Prime Min­is­ter.

Cameron: Oh, right.

Tony Kynas­ton: vote for a

Cameron: You don’t need to pay. You do Elon, just you don’t need the pay. You don’t need the mon­ey. Just do it. You just sold your place in Syd­ney. You don’t need mon­ey. Just, uh, do it for free. Do it for a dol­lar like Elon

Tony Kynas­ton: Yeah. All right. That’s,

Cameron: Yeah. Do it. Do it

Tony Kynas­ton: gov­ern­ment ser­vice full stop real­ly, isn’t it? You

Cameron: Well

Tony Kynas­ton: prob­lems, and they do it as [00:56:00] a ser­vice to soci­ety

Cameron: Yeah. Not, not every­body is will­ing to do that as your kind of coin though, Kynas­ton.

Tony Kynas­ton: Ooh.

Cameron: Some, some of us need to pay rent. Hmm. Yeah. Yes. Well, yes. Oh, well, most of those, you don’t want them any­where near. Most of the ones that can afford it, you don’t want them any­where near the wheels of gov­ern­ment. You, I trust.

Every- every­one else

Tony Kynas­ton: ’ cause

Cameron: you play golf with, no, not so much. You’ve told me. Yeah, you’ve told me. That’s come out of your mouth, the peo­ple you play golf with.

Tony Kynas­ton: Mm-hmm.

Cameron: Not your friends, I’m just talk­ing about ran­dom peo­ple you meet at pri­vate golf clubs, right? Not exact­ly the, uh, you know, the, uh, the, the, the

Tony Kynas­ton: Pub­lic spir­it­ed mind­ed

Cameron: Yes. There you go. Yeah. Yeah. They’re all.

Tony Kynas­ton: a good one

Cameron: They read The Aus­tralian and watch Fox or Sky TV and

Tony Kynas­ton: they’re gonna vote for Pauline,

Cameron: Yeah

Tony Kynas­ton: whose [00:57:00] qual­i­fi­ca­tion is run­ning a fish and chip shop in Oxley

Cameron: And go to jail. Don’t for­get that. She went to jail too.

Tony Kynas­ton: it was a bit of a stitch up, but yeah, she

Cameron: It was, it is, was a bit of a stitch up. I, I, I will admit that. All right, let’s get on with it.

Tony Kynas­ton: Yep So fol­low­ing on from your lit­tle news grab about, uh, Mines, done actu­al­ly done a Pulled Pork on AIC twice before over the life of QAV. The last one was two and a half years ago in April twen­ty twen­ty-four, I, I could­n’t find it on the list because the list does­n’t go back far enough, but I’m pret­ty sure I, I did a pork on AIC back in the– at the very start of QAV. And the rea­son why I re-remem­ber that is because I think that was the cat­a­lyst for us decid­ing how to han­dle com­pa­nies that had mul­ti­ple com­modi­ties

Cameron: Oh

Tony Kynas­ton: then AIC was a cop­per gold It still, it still kind of is. Well, it still [00:58:00] is. But back then it was based in WA and I think it was fifty per­cent was gold and fifty per­cent was cop­per in terms of its rev­enues,

Cameron: Right

Tony Kynas­ton: changed to being some­thing like nine­ty per­cent cop­per, ten per­cent gold.

Cameron: Right

Tony Kynas­ton: revis­it­ing because it has real­ly changed dra­mat­i­cal­ly quick­ly, I’ll go over that dur­ing the Pulled Pork. so cur­rent­ly it, it, um, has, uh, a min­ing area called the Eloise Cop­per Mine, and that’s in the Mount Isa sort of Clon­cur­ry in North West Queens­land. So as I said before, last time I spoke about this com­pa­ny, it was a gold min­er in WA, so it’s, it’s moved dra­mat­i­cal­ly since then. Um, also, over the recent past any­way, let’s say the last five years, uh, acquired the near­by Jeri­cho Field, which is four kilo­me­ters away from Eloise, and they’re devel­op­ing Jeri­cho into a, a, a cop­per facil­i­ty as well, cop­per mine that will, uh, when it comes online, use the, the, uh, pro­cess­ing facil­i­ties at Eloise.

It’s a kind [00:59:00] of a hub and spoke mod­el that we’ve seen before in the gold min­ing that we’ve looked at in Um, it also holds a fur­ther two thou­sand square kilo­me­ters of explo­ration tenure in Queens­land or ten­e­ments in Queens­land. and it does also still main­tain some, uh, explo­ration ven­tures in, uh, WA, South Aus­tralia and New South Wales, but they’re f- they’re fair­ly minor.

The main game is cop­per min­ing in Queens­land. Eloise pro­duces around thir­teen thou­sand tons of cop­per per year, there are plans to dou­ble that with Jeri­cho com­ing online in the next three years. to do this, AIC are also part­ner­ing with GR Engi­neer­ing, anoth­er com­pa­ny that’s been on our buy list before, to scale up the Eloise pro­cess­ing plant.

So, they expect to have both Jeri­cho and Eloise work­ing by twen­ty twen­ty-nine when they fore­cast to pro­duce twen­ty-five thou­sand tons of cop­per per annum, so, um, almost dou­bling what they’re doing now. Uh, in [01:00:00] terms of the under­ly­ing com­modi­ties, cop­per is cur­rent­ly a buy and Josephine is a gold, but nine­ty per­cent of rev­enue for AIC is cop­per and gold is a, is a by-prod­uct, a very valu­able by-prod­uct but essen­tial­ly a byprod­uct of the process of min­ing for cop­per. Uh, so we should now use the cop­per price to check for the com­mod­i­ty sen­ti­ment on, on AIC. And, um, like I said before, when we first looked at this five or six years ago, it was rough­ly s- split between cop­per and gold, but cop­per’s now more impor­tant and will become even more impor­tant going for­wards. One thing I drilled down to this time a lot more than in the past, Pulled Pork, is the pedi­gree and the his­to­ry of this com­pa­ny, which was very inter­est­ing, um, when I went down the rab­bit hole on that.

So I’m just gonna out­line it quick­ly now or my time to out­line it now, I should say. it traces its his­to­ry back to the unlist­ed com­pa­ny with the same or sim­i­lar name, AIC Resources Lim­it­ed, that com­pa­ny was set up by the El-Raghy fam­i­ly, E‑L dash [01:01:00] R‑A-G-H‑Y, if I’ve mis­pro­nounced it. El-Raghy was famous in the min­ing sec­tor for lead­ing a com­pa­ny called Cen­t­a­min, C‑E-N-T-A-M-I‑N, Cen­t­a­min PJSC. and he took it from a small junior explor­er list­ed on the ASX to dol­lar, uh, gold min­er list­ed in, uh, Lon­don and even­tu­al­ly tak­en over by, uh, uh, uh, Angl­o­Gold Ashan­ti. Um, when, uh, El-Raghy and his close cor­po­rate asso­ciates, includ­ing Aaron Coller­an, who was also involved in Cen­t­a­min, AIC Resources, the mar­ket viewed it as the team’s next vehi­cle what they did with Cen­t­a­min to a, to a new junior, gold min­er at that time. and, uh That start­ed, um Um, so I’m just gonna try and reorder my notes on the fly here. I’ll go– uh, let me talk about Cen­t­a­min first. So Cen­t­a­min, [01:02:00] PLC, for­mer­ly Cen­t­a­min Egypt and Cen­t­a­min PJSC, uh, was a m‑mineral explo­ration com­pa­ny list­ed on the ASX but then dis­cov­ered the Sukari gold mine in Egypt where, uh, s‑the elder El-Raghy, Sami El-Raghy, uh, from.

So he immi­grat­ed to Aus­tralia but was still famil­iar with the, uh, or geol­o­gy sit­u­a­tion of Egypt, uh, list­ed an explor­er uh, went back into Egypt and devel­oped the Sukari gold mine and that was in the east­ern desert of Egypt near the Red Sea. Uh, they start­ed drilling the site in the mid-1990s and they dis­cov­ered a mas­sive gold deposit at Sukari in 1997.

So, uh, Sukari became the first mod­ern large-scale gold mine in Egyp­t’s his­to­ry. And even though it was an area that had been mined for gold since antiq­ui­ty by the Pharaohs, it had left, been left large­ly untouched by, [01:03:00] uh, mod­ern min­ers. The, um, for that gold mine com­menced in 2009 since then it’s grown into a tier one asset pro­duc­ing rough­ly, uh, five hun­dred thou­sand ounces of gold annu­al­ly with a mine wa- life stretch­ing well into the 2030s. Um- S- as I said before, Cen­t­a­min was orig­i­nal­ly found­ed as an Aus­tralian junior explor­er and list­ed on the ASX 1970 by Sami El-Raghy, S‑A-M‑I. was an Egypt­ian-born geol­o­gist who migrat­ed to Aus­tralia and, uh, found­ed the mod­ern explo­ration focus of Cen­t­a­min, and used his, uh, per­son­al his­to­ry under­stand­ing Egyp­t’s geo­log­i­cal poten­tial to secure the agree­ments for Sukari.

Uh, his son Joseph, uh, which is the AIC con­nec­tion, assumed the role of man­ag­ing direc­tor in 2002 and then lat­er chair­man, [01:04:00] he famous­ly nav­i­gat­ed the com­plex financ­ing and con­struc­tion, includ­ing deals with the Egypt­ian gov­ern­ment, uh, to, um, to bring Sukari into full pro­duc­tion. And that includ­ed a very volatile Egypt­ian polit­i­cal land­scape, includ­ing the 2011 Egypt­ian rev­o­lu­tion. um, he sold that, that mine, um, to Angl­o­Gold Ashan­ti. And to give you a per­spec­tive of how much it grew, uh, I was– I found it dif­fi­cult to get, um, uh, an equiv­a­lent sort of com­para­tor from when Cen­t­a­min first list­ed on the ASX back in the ’70s. it first list­ed in Lon­don, it was a six pence per share list­ing, and the takeover offer from Angl­o­Gold Ashan­ti was a, was at 163 pence per share. So that’s just from the 2009 peri­od when it list­ed through to, I think, 2024 it was final­ized. a lot of, um, good track record at, at, uh, run­ning min­ing com­pa­nies and dev­el- [01:05:00] develo- devel­op­ing them from explo­ration stage into big, large pro­duc­ers. So Joseph El-Raghy, um, has start­ed this strat­e­gy again with AIC Mines, uh, he’s adopt­ing the same sort of strat­e­gy they adopt­ed at Cen­t­a­min in Europe, uh, sor­ry, in Egypt with the Sukari, uh, mine there. And it’s a, it’s kind of an exist­ing sort of, um Or strat­e­gy that we’ve seen in like where you have a, a hub and spoke mod­el. So you have a cen­tral pro­cess­ing facil­i­ty, in this case it’s the Eloise pro­cess­ing facil­i­ty in Mount Isa or Clon­cur­ry area in Queens­land. And, um, rather than do a lot of, uh, explo­ration hap­haz­ard­ly, uh, they focus the cap­i­tal heav­i­ly on drilling near the exist­ing strikes. That hap­pened in Sukari in Egypt, and it’s hap­pen­ing now in Eloise. Um, so they’ve dis­cov­ered the Jeri­cho, uh, area which they’re devel­op­ing. They’ve [01:06:00] also found anoth­er hi- uh, major high-grade resource exten­sion near Eloise called Lens Six. so by find­ing cop­per right next to active oper­a­tions, they add high­ly prof­itable ton­nage that can be extract­ed imme­di­ate­ly and put through their cur­rent, uh, pro­cess­ing plants with­out too much, um, start­up, uh, cap­i­tal or start­up devel­op­ment on infra­struc­ture being involved.

There is of course some expan­sion which they’re doing to Eloise, but it’s not as, um, cost­ly as going, uh, as build­ing from the ground up because they already have pow­er and, um, uh, infra­struc­ture in place. the oth­er thing about, uh, El Raghi was that he was– had been a stock­bro­ker, so he, uh, under­stood how to play the cap­i­tal mar­kets, which have even­tu­al­ly led sen­ti­ment to its Lon­don list­ings. for exam­ple, instead of heav­i­ly uh, share­hold­ers, um, with, you know, sort of pen­ny stock cap­i­tal rais­es, um, in, in the case of, uh, AIC, they [01:07:00] have, uh, secured a, um, a major fun­der called Trafigu­ra. And a glob­al trad­ing house for met­als like cop­per, they’ve secured a forty mil­lion dol­lars pre­pay­ment facil­i­ty for AIC to be able to con­tin­ue with its cop­per devel­op­ment.

So a bit dif­fer­ent to rais­ing, um, debt or to, uh, issu­ing new stock. A pre­pay­ment facil­i­ty is basi­cal­ly say­ing that, us some mon­ey now and, uh, we’ll, we’ll build the f- the, uh, the mine, and then we’ll give you, um, a return based on, uh, the com­mod­i­ty that we dig out of the ground and sell.” um, often the way that mines oper­ate, um, but it’s an alter­na­tive to rais­ing, uh, rais­ing cap­i­tal from, new share­hold­ers. often see that with, um, uh, you know, the Chi­nese com­pa­nies doing off-take agree­ments with some of our larg­er min­ers. Um, they might do that in a pre­pay­ment type way to, uh, facil­i­tate their, their growth as well. so back to the his­to­ry of AIC. In two thou­sand and nine­teen, [01:08:00] the unlist­ed AIC Resources con­duct­ed a reverse takeover of the list­ed Intre­pid Mines. And what that meant was that, uh, because Intre­pid was list­ed, they used the, um, the list­ing to, uh, back­door list AIC Mines. So, um Intre­pid had been around for a long time, since 1993. It was an explo­ration min­ing com­pa­ny, and it even­tu­al­ly merged with AIC back in 2019. And the rea­son I say it was a reverse share list­ing is because, uh, the share­hold­ers of AIC Resources even­tu­al­ly end­ed up with the major­i­ty of the com­bined enti­ty, rough­ly 70% of the stock in, uh, in the, uh, com­bined, uh, m- deal once it was done. And also too, AI- AIC Resources’ lead­er­ship com­plete­ly took over the c- man­age­ment of the com­pa­ny. So, uh, Aaron Coller­an, who was the man­ag­ing direc­tor of AIC Resources, became the CEO, and Joseph El-Raghi became the chair­man of the list­ed merged com­pa­ny. So, um, [01:09:00] that’s kind of the recent back­ground. But at the time, one of the rea­sons for also with Intre­pid is that they had some, um, uh, s- uh, ten­e­ments in WA, and as soon as they merged, uh, they used some of the funds that they had, um, access to, to buy some land parcels in WA.

So the Marymia project was the big one, and that was list­ed in the East­ern Gas­coyne region of West­ern Aus­tralia, is, uh, about 160 kilo­me­ters south of New­man. Uh, Marymia was a large con­tin­u­ous block of ten­e­ments cov­er­ing about 3,700 square kilo­me­ters, most­ly still in explo­ration phase, or all of it’s still in explo­ration phase. and it sat, um, very close to two prof­itable mines in uh, one called Plu­ton­ic and anoth­er one called DeGrus­sa Cop­per Gold Mine, which was oper­at­ed by Sand­fire Resources, and I spoke about that when I did the Pulled Pork, [01:10:00] um, on the, on Sand­fire, two or three years ago or so. a- again, they, they liked the idea of, uh, explor­ing where there was already resources known in the area. but Intre­pid had, uh, some rights to a thing called the Dool­gun­na Sta­tion project, which was com­plete­ly next door, com­plete­ly con­tigu­ous, con­tigu­ous with Marymia. So merg­ing the two com­pa­nies again allowed them to, put the whole explo­ration block under one l- uh, area and under one man­age­ment team, which meant that if they did, um, strike some­thing there, they could, uh, build one set of infra­struc­ture for, uh, for their ten­e­ments. at the same time, though, they were also, invest­ing in anoth­er, area called the WA Province in north­west WA. Uh, and it was the– That par­tic­u­lar project was called the Lamill, L‑A-M-I‑L, gold cop­per project. um, so inter­est­ing­ly enough [01:11:00] When they were offered, uh, access to or to, to buy the Eloise Cop­per Mine in Queens­land in 2021 they thought was a, a good deal at $27 mil­lion, they decid­ed to piv­ot away from gold min­ing in WA and, uh, to get into cop­per min­ing in Queens­land. They had some cop­per assets in it was main­ly gold focused. Uh, and so the kind of see­saw hap­pened. So w- instead of min­ing for gold and hav­ing cop­per as a by-prod­uct, they’re min­ing for cop­per with the gold as a by-prod­uct. And, um, when they took over the Eloise Cop­per Mine, it imme­di­ate­ly gen­er­at­ed pos­i­tive mine cash flow, which is anoth­er re- thing that they liked about the deal. Um, uh, but I think, um, you know, hats off to the man­age­ment of this com­pa­ny for see­ing the future of cop­per back in 2021. it’s kind of easy now in hind­sight to say the cop­per price is high and that’s because of its, um, use in, uh, [01:12:00] glob­al green ener­gy tran­si­tions like, um, elec­tric vehi­cles, solar pow­er, wind pow­er, et cetera, and pow­er grids. but they, they got onto that, uh, horse pret­ty ear­ly and, um, and went in boots and all to change from WA to Queens­land. So good on them for doing that. Um, also, uh, uh, decid­ed that they liked the idea of hav­ing an active pro­duc­ing mine rather than con­tin­u­ing to spend drilling in WA to try and find some­thing which was big enough to mine and, and to set up and, and start from noth­ing. Uh, and I guess the oth­er thing which has worked out for­tu­itous­ly for them from, uh, pur­chas­ing Cop­per Mine is that they bought it from a com­pa­ny called FMR, and that’s anoth­er part of the his­to­ry of this com­pa­ny which is intrigu­ing and, and pos­i­tive for them. going back through the his­to­ry of Eloise Cop­per Mine, it start­ed in ’88, 1988. it was dis­cov­ered by BHP back then, [01:13:00] and in 1995 it was acquired by a com­pa­ny called Amalg Resources, NL, a Nether­lands or Nether­lands-based resource com­pa­ny. um, they com­menced the under­ground min­ing and, uh, com­mis­sioned their first, uh, pro­duc­tion in 1996. But in 2004, that mine was divest­ed to Barmin­co. and peo­ple will, will remem­ber Barmin­co if they’ve been around for a while. It’s been a stock I’ve owned in the past and it’s been on my buy list I think pri­or to QAV. Um, think it was even­tu­al­ly bought out Barmin­co was the prog­en­i­tor for FMR Invest­ments. con­tin­ued to the mine for the 17 years up until it was tak­en over by AIC. as part of the deal, they did­n’t take cash. They took some cash but did­n’t take all cash for the sale of the mine and Invest­ments still remains a 14% [01:14:00] share­hold­er today of AIC and they have a, a posi­tion on the board. FMR Has, or has, I say has been run by two, um, very expe­ri­enced min­ers. Uh, one of them’s passed on, but, um, the estate is still, is still there as part of FMR.

So Peter Bartlett was the co-founder of Barmin­co, of the world’s largest under­ground min­ing con­trac­tors, and Ron Say­ers was the– who was– who’s now passed on, was the founder of Aus­Drill, which is now part of Per­en­ti, which is the, uh, under­ground drilling con­trac­tor. So both of those two play­ers had, uh, um, his­to­ry in the drilling part of the, uh, sec­tor of, uh, of min­ing in WA and, and both did very well with that. And they’re both, um, uh, now four­teen– well, com­bined they’re a four­teen per­cent share­hold­er in this com­pa­ny. Uh, and FMR still oper­ates a lot of oth­er invest­ments as well. Um, they have invest­ments in junior resources. They have ano- uh, anoth­er mine that they [01:15:00] run, such as the Green­fields Gold, uh, mill in Cool­gar­die in WA, among oth­er, um, ha- min­ing assets that they have. So they took, uh, the share­hold­ing in AIC rather than tak­ing, um, all cash, and, uh, they did that explic­it­ly because they believed in the future of Eloise and they want­ed to share in the upside. And they also very much liked the Joseph El-Raghi, Aaron Coller­an vision of buy­ing up region­al, um, explo­ration grounds, uh, like the Jeri­cho deposit, and then fun­nel­ing, fun­nel­ing it back through the Eloise infra­struc­ture.

So I guess in a way, FMR’s– FMR saw this as a way of expand­ing, um, along that strat­e­gy with­out hav­ing to put nec­es­sar­i­ly cash in. Now, hav­ing said that, they have put cash in, because, um, AIC has done some cap­i­tal rais­ings and, uh, FMR always tops up to keep their four­teen per­cent, um, share­hold­ing, uh, over time. So, uh, and they have, uh, stood behind AIC [01:16:00] and its strat­e­gy, and every time it’s decid­ed to raise mon­ey, they’ve, put their hands in their pock­et to do that. So I think that’s a, a tick for AIC going for­ward. Um, at the same time as all this was going on, AIC was get­ting out of WA gold min­ing, so sold, uh, the L- the Lamill project or their share in the Lamill project to a com­pa­ny called Aven­tine Resources.

That hap­pened in May this year, um, which com­plete­ly removed, um, the explo­ration, uh, fund­ing oblig­a­tion from AIC’s books. But they did keep a half a per­cent share of net smelt, net smelter return as a roy­al­ty. So they’ll get some upside, um, when, uh, a big dis­cov­ery is made in this, area, uh, and, and becomes, uh, pro­duc­tion­ized. Uh, they’ve also, um, got­ten rid of the Marymia gold project, so, um They com­plete­ly halt­ed explo­ration, uh, in, in the project over time, and [01:17:00] they were, tak­en to court, um, what’s called War­dens Court in WA around dif­fer­ent objec­tions to some of the ten­e­ments they had. Not an unusu­al thing for, for a gold explor­er to have hap­pen to them, but they can be cost­ly to fight legal­ly.

So as these things have occurred, AIC has for­feit­ed their, uh, their rights over the ten­e­ments in the Marymia, uh, area and then they’ve, um, been sell­ing them off as well, and they’ve com­plet­ed the divesti­ture of the ten­e­ments in Marymia year as well. So they’ve, uh, got­ten out of, um, high-risk WA gold-cop­per explo­ration and are now com­plete­ly a, a pure play high-growth Queens­land cop­per pro­duc­er. Um, how­ev­er, they haven’t rest­ed on their lau­rels, so as soon as this, uh, these kind of piv­ots and trans­ac­tions have been put to bed, they announced, as you said before, Cam, that they’re going to or that they have plans to acquire the, [01:18:00] um, Mount Cuth­bert cop­per project for $120 mil­lion. they’ve also raised addi­tion­al cap­i­tal, uh, to this, um, an extra $50 mil­lion.

So they’re actu­al­ly rais­ing $170 mil­lion to be able to hit the ground run­ning with, um, uh, with drilling, uh, a, a, a very inten­si­fied drilling project, uh, in the Mount Cuth­bert area once they, they gain own­er­ship. Um- There are pros and, and cons with this. The, the, I guess the biggest ben­e­fit is that Mount Cuth­bert gives AIC a sec­ond cop­per hub.

It’s about 150 clicks away from Eloise, and it, uh, the project con­tains some two hun­dred and forty-six thou­sand tons of, um, cop­per, is a rea­son­able, uh, mine life when they get the, the mine back up and run­ning. the cur­rent pro­cess­ing facil­i­ty there, can do eight thou­sand tons per year, so, you know, it’s kind of like a twelve-year uh, mine life based on what [01:19:00] they can see under the ground. But as you said before, the, the pre­vi­ous own­er, um, Man­tara Met­als or Mat­era Met­als, was– has basi­cal­ly put the, pro­cess­ing facil­i­ty on care and main­te­nance because they were focused on the, uh, cop­per to be found near the sur­face, and the rest of the cop­per is requir­ing a, a dif­fer­ent type of approach, uh, to dig deep­er. And, um, there will have to be a change to the, extrac­tion plant to be able to process cop­per in a dif­fer­ent way when it comes from a low­er, lev­el. So my first ques­tion was why, you know, why would you buy an eight thou­sand ton per year extrac­tion plant you could­n’t basi­cal­ly use it? And the answer is that they will use it, so they’ll– there is some sur­face-lev­el cop­per avail­able, and there’s cer­tain­ly a lot of what’s called heaps, so, um, area that’s already been mined but, um, has been pushed aside but can be reprocessed for, um, [01:20:00] sur­face, uh, cop­per extrac­tion. And that will give this com­pa­ny some cash flow while they devel­op, uh, the extrac­tion plant, uh, enhance­ments they need to do pro­cess­ing for deep-deep­er cop­per. good. The oth­er thing that, um, this, uh, pur­chase g‑gives AIC is that it’s esti­mat­ed it takes five to sev­en years to get, uh, through all the gov­ern­ment red tape to devel­op a new mine, um, which they won’t have to do because they’re buy­ing an exist­ing mine which has all the rel­e­vant per­mits in place. so that’s a‑another head start for this com­pa­ny as well. So uh, this type of acqui­si­tion is called a brown­fields acqui­si­tion, so it’s not com­plete­ly green, but it’s not com­plete­ly plug and play, so it’s kind of in between. But there are cer­tain­ly, uh, ben­e­fits from doing it The, the wrin­kle, I guess, is that, um, they’re, they’re rais­ing cap­i­tal which will dilute cur­rent share­hold­ers. Um, and there­fore it makes it dif­fi­cult to rely on the cur­rent num­bers even though they’re very, very good. we have to kind [01:21:00] of project out into the future as to what’s gonna hap­pen when Mount Cuth­bert comes along. And I guess also, you know, trust our faith in, uh, in man­age­ment who have kicked a lot of goals so far and kicked them in the past with sen­ti­ment to be able to keep, uh, keep doing well for us. Let me just quick­ly look at the FY twen­ty-six num­bers and I’m doing that, um, bear­ing in mind that they will, you know, become very altered when there’s more shares issued, uh, and some debt raised to be able to do Mount Cuth­bert. Um, but it’s a bit of a tick to the cur­rent, uh, track record for man­age­ment, um, to, look at.

So in the cur­rent, uh, peri­od, the rev­enue was up twen­ty-nine per­cent. Net prof­it after tax was up a hun­dred and sev­en­ty-six per­cent. Oper­at­ing cash flow was up a hun­dred and ten per­cent. the real­ized cop­per prices went up, so cop­per that they, uh, was able, able to sell on aver­age for sev­en­teen thou­sand dol­lars a ton. This half was, um, up from what they sold it for in FY twen­ty-five, which was four­teen thou­sand one twen­ty-eight per ton, and the same for gold. [01:22:00] So gold, they were get­ting six thou­sand one twen­ty-one, uh, Aus­tralian per ounce, and in FY twen­ty-five they were get­ting four thou­sand five hun­dred Aus­tralian per ounce. uh, that all hap­pened even despite, uh, the infla­tion­ary pres­sures we talked about before, includ­ing a spike in, in diesel costs of some twen­ty-five per­cent at least. AIC man­age­ment kept their all-in sus­tain­ing costs near­ly flat at four dol­lars nine­ty-nine Aus­tralian a pound for cop­per. So, you know, again, very, very good man­age­ment of the, the min­ing Um, I did have a look at what ana­lysts were say­ing about the Mount Cuth­bert acqui­si­tion and, you know, it was very pos­i­tive. Um, the lead­ing resource bro­kers, uh, who are fol­low­ing the deal said, uh, basi­cal­ly AIC Mines con­sen­sus expec­ta­tions for next year have jumped sharply, so earn­ings per share are [01:23:00] pro­ject­ed to reach an aver­age of nine cents per share.

They’re, they’re cur­rent­ly around five cents per share, so that’s a six­ty to eighty per­cent increase. Um, but, uh, the ana­lyst did also point out that, um, there might be a bit of a, um, mut­ed first half to FY twen­ty-sev­en in terms of earn­ings per share and there­fore, uh, stock price as the trans­ac­tion is digest­ed and before all of these ben­e­fits come to pass. Um, so You– I don’t think there’s a, a rush to get into this share. the, the deal de-risks the com­pa­ny from being a sin­gle oper­a­tor to being a mul­ti-asset pro­duc­er, which, uh, investors always like because a sin­gle asset can, you know, need to be shut for main­te­nance or can have a weath­er event slow­ing it down. Um, but if you have two of them, you can man­age your way through those kinds of risks, um, in a, uh, a, you know, a, a much more strate­gic way But there is $100 mil­lion worth of new scrip being [01:24:00] issued, and there’s also extra debt being brought on. but it, you know, if all goes to plan, it’s gonna be, um, a mean­ing­ful expan­sion which will be good for the com­pa­ny. in terms of QAV num­bers, again, rely­ing on the cur­rent num­bers, not the, the ones after this, uh, sh- share issue. ADT is $1.5 mil­lion, so it’s rea­son­ably large. The price for my analy­sis was 86 and a half cents. that gave us an IV1 of 26 cents and IV2 of 75 cents. So been a fair­ly sharp run-up in the share price, um, the WA piv­ot was over and the pro­ceeds were in from that, and then now that the announce­ment of Mount Cuth­bert’s come on, the share price has risen, risen quite dra­mat­i­cal­ly. so, um, we can’t buy it for IV1 or IV2. We can’t buy it for book plus 30, which is 73 cents. But it is still below con­sen­sus fore­cast, uh, earn­ings. It’s eighty per­cent of con­sen­sus tar­get, so we can buy it for that. does­n’t pay a div­i­dend. It puts every­thing [01:25:00] into, uh, into growth. is, uh, just recent­ly be- been called a star growth stock by Stock Doc­tor, so it gets an extra tick for that. And of course, because of that Stock, uh, Stock Doc­tor finan­cial health is strong and the trend is steady. enough, Stock­o­pe­dia don’t see it the same way. Their qual­i­ty rank­ing is only six­ty-three, and their over­all rank­ing is sev­en­ty-four. uh, drilling into the F score, which is four out of nine, I think the rea­son­ing behind that is because Stock­o­pe­dia are mark­ing it down because of the increas­ing debt and the cap raise.

So, um, they’re being fair­ly con­ser­v­a­tive in how they see things. Uh, the PE for this com­pa­ny is sev­en­teen point two, which is not the high­est or the low­est, so we, we don’t score it for that. Pr/OpCaf is cur­rent­ly run­ning at six point four five times, so it just squeezes in beneath our uh, times cut­off. earn­ings per share growth is fifty-five per­cent, which is quite high. So growth over PE is well above our, our thresh­old of one point five. It cur­rent­ly sits at three point two, so basi­cal­ly [01:26:00] dou­ble. is an own­er founder. Um, if you look at the down­load, though, we’re not scor­ing it for own­er founder because, uh, the, the, um, the own­er founder holds about six per­cent of the com­pa­ny and we look for ten. But if you do wan­na fudge that one, FMR hold four­teen per­cent. And again, not an own­er founder. They’re the own­er f– well, they’re not even the own­er founder of the, Eloise pro- project, but they’ve been involved for a long time and, uh, and, uh, are very expe­ri­enced, uh, oper­a­tors in, um, in, in min­ing in Aus­tralia.

So I did­n’t have to fudge that score, but you may want to. three-point trend line upturn is not new, and as I said, the stock­’s been going up, uh, dra­mat­i­cal­ly, uh, for a while. Uh, there is con­sis­tent­ly increas­ing equi­ty, which I like. so over­all, the qual­i­ty score for this com­pa­ny is eleven out of fif­teen or sev­en­ty-three per­cent, and the QAV score is point one one, which puts it towards the bot­tom of our buy list.

So like I said, no hur­ry to get into it, but if you do want– do like the sto­ry and, and want expo­sure, [01:27:00] you can cer­tain­ly buy this stock on the back of the QAV score. the risks are fair­ly obvi­ous. Cap­i­tal rais­ing with share­hold­er dilu­tion. I guess if you cou­ple that with the fact the stock price has had a good run late­ly, um, I do agree with the ana­lysts.

It may well go side­ways in the near term. but, uh, the track record of man­age­ment for doing these things is good. And if you believe the ana­lysts, then, uh, the future looks like, um, a dou­bling of where the com­pa­ny is now in terms of its prof­it and rev­enues, which is also good. So longer term, it looks like it’s a, a good play. and there’s cer­tain­ly upside and pos­i­tives about repeat­ing the sen­ti­ment sto­ry and, uh, and on the sur­face of things any­way, Mount Cuth­bert looks like a good deal with plen­ty of upside. So in sum­ma­ry, I think it’s near the bot­tom of the buy list, um, but this is the kind of growth sto­ry I can get, excit­ed about and buy into, um, rather than small com­pa­nies putting sea­weed in stock feed. [01:28:00] so just a shout-out to Michael to, um, have a look at this com­pa­ny as well.

Cameron: Thank you, TK. All I could think of, uh, when lis­ten­ing to that was, every night I’m there, I’m always there. She knows I’m there, and heav­en knows, I hope she goes. Boom, boom. Yeah.

Tony Kynas­ton: I did too.

as I was putting it togeth­er.

Cameron: orig­i­nal­ly record­ed by

Tony Kynas­ton: Well, I, I know the sec­ond one and I’m not sure who the first, the orig­i­nal recorders are.

Cameron: Yeah. Damned cov­ered it in ’86. Bar­ry Ryan, um, writ­ten by his broth­er Paul Ryan, 1968

Tony Kynas­ton: Right. a very catchy track. Madame did a great

Cameron: track. orig­i­nal is, the cov­er is pret­ty much the orig­i­nal. They just, you know, did­n’t real­ly add a lot to it. The orig­i­nal is a real­ly great, real­ly great track. Very, very catchy. Yeah, great song. Oh, thank you. Um, we do hold A1M in a few port­fo­lios. I’ve added it April, May to a [01:29:00] few port­fo­lios.

Yeah, it’s up 33 to 44%, depend­ing on when I added it. Not bad for what­ev­er that is, four months Well, TK, after hours and we don’t have a lot of time because I got­ta record the Amer­i­can show and go to Kung Fu, so lim­it­ed amount of time we can talk about Shostakovich. I’m sor­ry. I know you’re gonna be dis­ap­point­ed

Tony Kynas­ton: We can skip it if you,

Cameron: Ah, yeah, I am busy.

I am.

Tony Kynas­ton: and when you’re

Cameron: Yeah, yeah. I will. I will. I don’t. Trust me, I will. Do you have any­thing to add to After Hours?

Tony Kynas­ton: not real­ly. I’m still the, the biog­ra­phy of Mar­garet Olley, which I high­ly rec­om­mend. I think it’s called More Than Just a Still Life. It’s a, it’s a great sto­ry. Um, yeah, and went to the races for lunch on Sun­day to the Manika­to Stakes at Caulfield, which is lots of fun. Saw some good rac­ing and expen­sive hors­es run fast, and caught up with some friends, which was great

Cameron: Nice. Was Steven Mabb there?[01:30:00]

Tony Kynas­ton: No, no, it was, uh.

Do you remem­ber Joe Bar­beris? We got him on to talk

Cameron: Yes.

Tony Kynas­ton: Joe and anoth­er friend of ours

Cameron: loved talk­ing with Joe at your birth­day break­fast, um, the day after your birth­day par­ty. Loved it. Was very impressed with Joe

Tony Kynas­ton: He’s an impres­sive per­son, and we had fun talk­ing on Sun­day as well

Cameron: Well, I was sup­posed to have lunch with Steven Mabb last week and he blew me off. He had to work on the tools. He had a guy who was off work and he had to go on the tools. So we’re still, we’re try­ing to resched­ule our catch up

Tony Kynas­ton: nice. So Steven and I have a new race­horse called Char­lie 99,

Cameron: Oh, nice

Tony Kynas­ton: has been tri­al­ing recent­ly. It’ll prob­a­bly not run until the autumn, but, um, the reports are good.

Cameron: Excel­lent. Good luck with that.

Tony Kynas­ton: thanks

Cameron: Well, that’s it. Uh, we’ll be back next week. Uh, when’s Cup? You said you want a Cup week­end off. When’s that?

Tony Kynas­ton: Tues­day in Novem­ber.

Cameron: Oh, that’s a long time away. AI could have killed us all by then.

Tony Kynas­ton: Mm-hmm

Cameron: All right. [01:31:00] Thank you, TK. Hap­py hunt­ing every­one

Tony Kynas­ton: Hap­py ASX Do we have a rate rise yet?