Originally posted by Anton Chigurh
Hi Umi,
I'm always a touch skeptical of his commentary and ask myself (as with anyone) what his motivation is. Most commentators have vested financial interests and the commodity teams at investment banks you mention are probably the worst of all. That said, he's been right so far (maybe for the wrong reasons or not...) and all we hear about the copper market from most analysts is how huge the supply shortage will be in a few years. Good to keep the conformation bias in check and maybe think about what impact a global slowdown might have?
BHP discovery and nearology. Have you looked at RGL? Little discussed and drilling shortly, fully funded. Bit of a cray pot and I don't hold right now but watching. CHK RGL IVR ARE/AIS RNU. None are perfect. AIS/ARE starting MCs much higher than a typical spec, so if they fail, could be a much larger fall versus the likes of IVR, CHK, RGL. Yet CHK a fair way off drilling and IVR/RGL nearology not as compelling? Guess it depends on strategy, whether you're laying-off into assays, white knuckling etc.
My experience with investment bank commodity teams is that they are sincere, FWIW. But often completely wrong, despite having better data and models. Also, some banks have a separate team for different instruments, eg. separate analysts for fixed interest dept and equities dept, often with different outlooks. I believe copper price is a leading indicator and we saw the price fall heavily before it became evident that China was slowing. I would say if the copper price steadies from here and rises that would indicate China has bottomed out. Remember it was thrashed down to US$2.00 during the GFC, so I think you have to pretty bearish on China, especially with lowish inventory and weakish supply side to think it will go lower than US$2.50.
What is happening with BHP Oak Dam West nearology and the timing of Torrens project AIS/ARE is an amazing set up and let's hope the gods are not too perverse because the geophysics are really very good. I have studied Olympic Dam, Prominent Hill and Carapateena and can truthfully say Torrens actually looks better than any of them pre exploration. I better take a look at RGL as I haven't yet. If Torrens has any success that will flow through to the other nearology plays.
I also think PCK may be an opportunity but want to ask a few questions after the December quarterly comes out before buying any more. I think retail investors generally expect growth to unfold way faster than is realistically possible and this is what is happening here. After all, PCK is only selling into a quarter of the addressable market in Australia (professional carers) because it takes time to get the product ready for the other three quarters (home carers). There are also backend IT system complexities that take time to engineer right. Also, Australia is the first market being sold in, with UK next (assisted by some client overlap).
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