Ann: Quarterly Activities Report, page-337

Papstock, during the last GFC, I made comments that Australia would not go into recession because our commodities would still be in demand. In fact, we had a double benefit of not only from the export of commodities, but we saw our dollar rise over $US1 due to demand and a secure banking system. The outcome, based on probability, played out. It was never certain, but probable. Risk takers did well despite the media beat up at the time.

Initially, our stocks got hit in the GFC, but the assets that underpinned the Australian economy paid their way and maintained Australian welfare. Our banking system is secured by a compulsory cash reserve with the Reserve Bank being lender of last resort. The Commonwealth Government can come out as it did last time and guarantee bank deposits. Australia has a AAA credit rating. There is no such compulsory cash reserve in the States, and the Fed is a private institution, so the fluctuations in the economy are greater. Our Reserve bank is mandated to stabilize our economy through monetary policy.

What is different now, is that Australia has taken on significant debt to fund Covid relief, bushfire relief, flood relief and now defence. On the plus side, world shipping which reduced supply during Covid is now active and our exports should rebound to reduce a capital account deficit on the Balance of Payments. Our inflation issue is a supply problem, but it is not double digit. Inflation is retreating to where I said it would be if Esra remembers his comment at the time. An inflation rate of 2% is fantasy because the fundamental base of income has risen as it does over time. I remember once upon a time business paying 22% on overdrafts. In my view, 4-6% inflation is ok. The income differential in terms of purchasing power was no different than today, but we had to go without to get through it. Europe, Britain and India are increasing trade ties with Australia as is Japan and South Korea. China and Australia still have a significant trade relationship. Plenty of places who will buy from Australia. One hopes diplomacy will win out. I also note both the Ukrainian leader and the Chines leader have agreed to meet. Lets hope something positive comes from that.

Debt, defence and energy issues have befallen Europe. Higher interest rates are a means of redirecting scarce capital to priority areas, and for Americans, like Australians the priority now seems to lie with defence and not housing. But critical resources are also required to battle climate change and create new technologies which will remain a high priority as will the means to pay for them. Australia happens to be one of the largest gold producers and given de-dollarization that has taken place in the world, gold will be linked to trade across trade blocks as will a basket of currencies as per Bank of International Settlement rulings 2021.

While retail will have less disposable income due to interest rate rises in the short term, because our largest source of funds is the USA, who keep jacking them up, those with deep pockets like government and industry along with overseas direct investment will ensure supply will meet generated demand for necessary commodities. As a growing trend, the likes of Tesla are already making direct investment in companies to guarantee supply of raw materials. There is plenty of cash on the sidelines. Key beneficiaries in Australia will be gold and copper producers. There are of course plenty of jobs out there for Australians to remain fully employed. It is not doom and gloom compared to other economies. There is a concerted push by the Commonwealth Government to develop vertical integration through manufacturing. The return of manufacturing will assist our independence. They could do more on the energy front with gas as the WA government did and exercise greater control on who can own this country. Australians have been poor negotiators in the past.

At the moment the focus around the world is on a defence led recovery, as it has always been while countries re-tool and re-tool because outsourcing has left them vulnerable, particularly in the rust belt of the USA which has led to domestic social conflict. This investment by definition is future consumption. Then war ravaged Ukraine will need to re-build once the fighting has stopped.

As far as SPQ is concerned, we have to sit it out. They are viable IMO and there is room for tremendous growth. The price drop at the moment has more to do with macro events. At a last resort, the Steam Engine gold could be toll treated and readily accessed given I see the price of gold doubling in 3 years as do many other commentators, because the price will be reflected in trade, digital gold and safe haven. The Steam Engine gold will get better with depth and is likely to reach and be connected to Bottletree. Further drilling is important here, IMO. I don't think there will be any shortage of suiters able to finance SPQ development.

Copper is in short supply and will remain so. It makes more sense to me, that the current copper price is being held back for defence reasons rather than lack of domestic demand. Copper is a large component of munitions. Wars are won by both logistics and resources. China has dropped Covid restrictions which in turn will increase their domestic demand for copper as one of the world's biggest importers of copper which will push world price up.

SPQ is well endowed with copper and not only at Bottletree. A new drilling program will commence when the wet finishes and that's about April at Cockie Creek which has proven copper and a large target. Molybdenum is also important for hardening steel and we have seen price increase significantly since world conflict has emerged. SPQ has discovered high grades of Molybdenum.

So for me, as a large holder, I remain patient with the longer view.