There are only 4 Copper Producers left on the ASX - only one is below      Intrinsic Value  Romano Sala Tenna, Katana Asset Management May 2021 Right here right now - the biggest themes driving markets are electrification and decarbonisation - which are really 2 sides of the same coin.  And with the global resolve now clearly past the inflection point, these 2 themes are likely to be the dominant drivers for most of this decade. So far, in an effort to gain exposure, Aussie investors have stumbled from graphite to cobalt to lithium to nickel and then back to lithium again.   However, there is an emerging viewpoint that copper could be the surest way to gain exposure to the enormous electrification opportunity.  For example, Goldman Sachs recently released a piece of research titled: Green Metals: Copper is the New Oil. Given that the Australian market is renowned as one of 2 global resources hubs, it would be reasonable to assume that there would be a host of copper producers listed on the ASX    However that is not the case. If we exclude BHP and RIO - whose main earnings come from iron ore - there are only 4 ASX listed copper producers. Over the past decade, a combination of corporate activity, low copper price, increased fiscal discipline and depleted ore bodies has left us with just FOUR ASX listed copper producers. This is extraordinary for the most widely used base metal on our planet. Of the 4 producers, OZL and C6C are both trading on PERs in the mid20's.  SFR would appear superficially cheap, however the DeGrussa mine is scheduled to be depleted sometime during 2022.  This leaves Aeris, which our funds have been steadily accumulating on a PER of <3x. Aeries recently came to life on the well-timed and equally well priced purchase of the Cracow gold mine from Evolution in 2020.   In fact so well timed and priced was the acquisition, that in the space of 12 months they have been able to completely pay off their debt and are now generating strong surplus cashflow. But it is the Tritton Copper mine near Cobar in western NSW that has piqued our interest.  The Tritton min has been producing copper since 2005.   During this time it has produced over 320,000 tonnes of contained metal.   Over the past decade, it has produced between 23,000 and 30,000 tonnes every year.   It is forecast to produce around that amount - ~23,000t - this current financial year, at an AISC of $3.75 per lb.   Yet despite this long term record, the stock is trading on a consensus average PER of 3x over 2021FY to 2023FY.   Clearly the market has concerns.  From our analysis, there are 2 major investor issues: mine life and hedging Mine Life The last stated reserve of 86t contained metal equates to a little under 4 years.  So on the surface this would appear an issue.   However, there are important factors that make it highly likely that the mine will be operating for many years to come. The first of these is highlighted by existing resources (as opposed to reserves).  At 250,000 tonnes of contained copper, this is equates to more than 10 years at the current production rate.   At the current high copper price, we would expect a solid and ongoing conversion of resources into reserves    But there is an even more important point.   Reserve definition drilling requires a much higher level of saturation.   Most mines of this nature drill the ore body to sustain mine plans (only) several years out.  As the mine goes deeper, infill drilling of known resources will continue to add to reserves.   The best demonstration of this is to review past reserve statements.   In 2013, total cu reserves were 126,000 tonnes.  Since then the Tritton mine has produced nearly 190,000 tonnes and counting. The second factor that adds to our confidence is that Aeris has reported strong exploration success over the past 12 months.  In the coming years we are likely to see additional tonnes from 3 sources: Life of mine extensions via mineralisation at depth, South Wing, Budgerygar and the corridor between Tritton and Budgerygar Brownfields exploration at Murrawombie, where >5 metre intersections as high as 4% have been recorded Greenfields exploration via the Constellation target where the first drill hole spectacularly intersected 20m at 2.4% Cu. It's important to recognise that for much of the past decade, Aeris has been struggling with low Cu and gold prices and hence has not had the dollars to spend on exploration.  This has changed in the past 12 months, and we would expect a steady stream of positive drill results. Hedging Like a lot of companies, when the Cu price rallied hard, Aeris prudently put in place some hedging in the event that the move faulted.   Clearly in hindsight this has capped their short term benefit.   However the hedging currently in place is modest.   Aeris has locked in 78% for the current quarter (which has only 7 weeks to run) and 26% for the September quarter, both at an average of $4.57 per pound.  This will still see a strong cash build, whilst also allowing the company to sell part production into the decade high price.    Beyond the September quarter, Aeris is unhedged and will be able to sell 100% of its production at spot, which at the time of writing had pushed through $6.30 per pound.   Strong Risk-Return Proposition If prices hold anywhere near the current level, this will see Aeris generate 'super profits'.   If the emerging consensus view is correct, then a combination of 'super profits and limited cu producers may see investors clamour for stock.  On past earnings, a PER of 9x would equate to a share price north of 30c.   If we flow through the current spot price for copper, then the 'theoretical' valuation is multiples thereof.   .   If the market is being overly cautious, then this is a rare opportunity in a sector that has the strongest of tailwinds. Funds operated by this manager: Katana Capital Ltd, Katana Australian Equity Fund

An Extraordinary Scam that is Netting Millions Romano Sala Tenna, Katana Asset Management 19 February 2021 In 30 years following markets, I've seen a lot of scams. But the current one is the most dangerous yet, and people we know and care about are going to lose money unless we warn them. Two weeks ago a Melbourne-based friend emailed me. His closest friend's 68-year-old mother, who happens to be disabled from a stroke, had recently inherited $300,000. Using www.compare-investments.com.au, they checked for a rate better than the 0.4% on offer at the bank. After completing an enquiry form, they were soon emailed a "prospectus" from a global bank. This offered 4.56% for one year, 5.49% for two years right up to 9.21% per annum for 10 years. My friend asked me what I thought. The 23-page prospectus looked professional and completely consistent with genuine documents from the global bank in question. But as I later discovered, key pieces of information were doctored, including the phone number, email address and of course the bond rates. As I read the prospectus, my first impression was that the rates looked really good! Good, but not ludicrously high enough to raise my suspicions. And with the apparent backing of a big bank brand, it seemed like an option worth considering. But timing is everything in the markets. And fortunately for my friend (and unfortunately for the scammers), literally 24 hours beforehand, I had received an email from the head of fixed interest at Bell Potter Securities, warning of high yield bond scams. An exchange of emails confirmed that this was indeed a scam. If this unfortunate lady had proceeded, her application form and 100-point identification check would have provided the scammers with all the information they needed to steal her identity. Worse still, if she had transferred money, it would have been directed to a false bank account and then very quickly skimmed off-shore; never to be returned. I'm not too proud to admit that, if not for that email the day beforehand, I would not have realised this was a scam. And if a professional money manager doesn't immediately recognise an investment scam, what hope is there for the average citizen? Most Scams Are Easy to Spot... Such scams usually have one or more of the following traits: dubious introduction - often cold calling or spaml unbelievable returns capital guarantees unknown brands and amateur marketing materials (often with poor grammar and typos) off-shore contacts - commonly from Hong Kong or Eastern Europe; my favorite one last year was a 'financial adviser' in Estonia offering a special deal only to close associates, to which I was graciously included despite having never met him  deadlines - pressure to act quickly or miss out; this last trait is perhaps the most tell-tale of all scams.  ...but not this one Several factors, alongside the impressive but "realistic" returns - especially over one- and two-year terms - actually further suggested the authenticity of this scam, including: The brand was a tier-one globally recognised bank. The marketing materials were professional and consistent. The pathway to the scam - via a comparison site - appeared legitimate. The capital guarantee was in fact there, but not immediately obvious. And the contact details were for a Sydney CBD number. As an aside, when I phoned that number it went through to an after-hours voice recording. But earlier in the week I actually got through to a lady with an Australian accent, who definitely did not work for a tier-1 global bank! We are in an especially dangerous time for scams, and it is not just because of the pervasive reach of technology. The even bigger issue currently is that because cash rates are so low, many mums and dads - who have often only ever used bank deposits - are now looking elsewhere. Scammers are becoming increasingly clever and more resourceful, and it has never been quicker or easier to enact a scam than it is today. This scam was certainly deceptive, but you can bet even more sophisticated scams are close behind. We need to ensure that those most vulnerable are not defrauded. Simple steps to protect savings - yours or others I think most scams can be avoided if the would-be victim follows three simple steps: Never feel rushed - take your time and independently verify the offer. If you're pressured to act quickly, it's almost certainly a scam Only use a licensed financial adviser - and check every financial decision with them. We are blessed in this country that we have a strong regulatory framework that licenses and monitors financial advisers; you can check to see if someone is registered at https://moneysmart.gov.au/financial-advice/financial-advisers-register. Watch for above-average returns or a capital guarantee - every scam must offer something that you can't get elsewhere, or you won't take the bait. Even this scam offered rates (on the five- and 10-year bonds) that in hindsight were too far above market. It also offered a capital guarantee, which only very specialised institutions can do, and only on low-risk, low-return products. Further Steps if You Have Time There are some additional things to look for: The ACCC runs the SCAMwatch website, which provides information to consumers and small businesses on how to recognise, avoid and report scams. This website is good if no other reason than it highlights the breadth and depth of scams operating. However, it can take time to update; for example this current scam has been operating for weeks and it is still not listed on the website. Check the purported issuer's website to see if there any alerts about imposter scams and check the contact details, branding and current offers. Once gain this should not be solely relied upon. As a final point, take the time to report any scams to SCAMwatch. The short time it takes to fill out the form may very well save someone else's life savings. Please Warn Anyone You Care About I have been following financial markets for 30 years, and this scam passed my radar. If a seasoned market follower can be fooled, then anyone can. Our only defence is to warn those we care about.