Veteran mining expert Peter Major explores the global commodities market, highlighting a surge in gold and renewed investor interest in mining stocks. With South Africa grappling with rising costs and regulatory burdens, Major stresses the need for government reforms to unlock growth. He remains bullish on gold and platinum, advising investors to be cautious stock pickers as demand rises but warns of ongoing challenges in navigating a complex, evolving market landscape.
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Extended transcript of the interview ___STEADY_PAYWALL___
Alec Hogg (00:06.094)
Well, for more years than I care to remember, Peter Major has been the go -to man in South Africa for mining. He’s coming back to South Africa in the next, well, in the next few hours to attend the Joburg mining in Darbar next week. But right now he’s in British Columbia and he’s going to give us an update on what’s going on with this nascent commodities boom.
Alec Hogg (00:35.897)
Peter, I hope you agree with me. Nascent commodities boom. South Africa needs it desperately. On our business portfolio, we’ve invested in Anglo -American. I’ll get your view about that in a moment. But it does appear as though the universe is aligning for the mining sector at last. We’ve got a stimulus in China and interest rates being cut around the world. But you’re the expert, you’re the insider. How are you reading it?
Peter Major (01:03.762)
Look, I was never an expert, but sometimes I had a clue what was going on, or at least I had a clue how to react to what was going on. And what’s going on now as a veteran, I would say inflation is worse than people think it is. And it might just be inflating in asset values. Doesn’t matter, you know, whether it’s consumer values or asset values.
Inflation means too much money being printed to justify current prices. And gold is certainly reflecting that. And we probably have a freer, more open economy in the world today than any of us have ever experienced before, probably since more than 100, 150 years ago. Very few prices can be controlled and very few prices are being controlled right now. So
My impression now like is it’s as free market as ever supply and demand. Gold is definitely leading the charge. Plenty of oil out there and we now have alternative energies making a big come into the market. And that’s why the oil price is where it’s at. know, people complain about high oil. Well, just look at where oil is today and compared to long -term averages, you know, we’re not that far above the long -term average. Whereas gold,
is way above a long -term average. Gold is definitely the star here. But the other commodities, they’re reflecting, I think, reality. Platinum is slightly higher than its long -term average. Palladium is still way higher than its long -term average. Rhodium is. And we go down the list. Most of these commodities higher than their long -term average because our population is much higher than its long -term average. And our demand for these metals is real.
It’s real genuine demand. don’t think it’s speculative at all. So they’re not following this super commodity boom all in lockstep like they did back in 2003, 2004 when they were all pounded way, way too low or back in the 70s when inflation had been raging for years and the commodities hadn’t reflected it. It’s very much each one’s individually reflecting its supply and demand.
Peter Major (03:31.06)
Always sounds simplistic and it’s just my interpretation.
Alec Hogg (03:35.388)
does that mean that those who have not been investing in commodities shares should start looking at it now, given the big picture? I know it’s always difficult to even believe that we can read the big picture, but it does seem at this point in time as though we are going to see lower interest rates in the West and a stimulus in China, which surely would increase demand for commodities.
Peter Major (04:02.782)
Yeah, I think you’re dead on. Yes, those two factors together, they’re increasing the demand. should investors be looking to get in mining shares? Well, look at how cheap they are. How risky is it getting into Anglo -American even today? And geez, Anglos has had two big runs. And I’m much more of a short term. I hate to say the word short term and trader, short term investor.
When you’re my age, when you’re 69 years old, though, everything’s got to be short term. And commodity shares for a long time have been cheap on a historical measure of price to NAV, price to earnings ratio. Why have they been there? Because people didn’t see the growth in it. People saw the growth in AI and they see the growth in all these new media and IT companies. And they say,
Alec Hogg (04:38.022)
Ha ha.
Peter Major (05:02.016)
the growth in mining, you know, we’re pretty close to balance and we were pretty close to balance. And platinum is a great example, know, platinum, the world is using what we’re producing right now. They’re probably using a little bit more, but it’s a small commodity of 5 million ounces produced a year, whereas gold mining is a hundred million ounces. Why? Because the demand is 20 times greater. so
buying any of these commodity stocks, you’re buying something that is finite, that the costs are going to go up if you want to produce more. the demand for all our commodities, other than probably oil or iron ore, the demand doesn’t have to go up very much before there is a shortage. We’re hearing it with copper, we’re hearing it with gold, seeing it with gold, not so much with iron ore.
Not so much with oil, but all these things. If the world’s growing pretty steady now, I would think we’re not going to see big rises in demand all of a sudden. But the shares are reflecting more than enough bad news out there. I think anybody, I honestly wouldn’t go out buying gold shares.
Gold might go to 3000. Then that means the gold shares are going to go up even more. But I just, I want to buy something when everybody hates it. Nobody’s looking at it or they’re just starting to look at it. They’re just starting to stop hating it. think certainly you got to be a stock picker now. You can’t just blindly go out and buy commodity shares because a lot of them have over, have really started reacting weeks ago, months ago.
Alec Hogg (06:55.67)
So, so the idea of buying Anglo -American was on the basis, not just of the global uptick in commodities or increased demand, but because when we see hostile takeover bids failing, it does give the management a bit of a wake up call. Now you’re going to be at the Joburg mining in Darba where the headline act is Duncan OneBlood from Anglo -American. If he gives the, the update on what’s happening at the company.
Peter Major (06:57.243)
Yeah.
Alec Hogg (07:25.351)
What would make you satisfied that they are following the plan that they gave to investors to ward off BHP Billiton?
Peter Major (07:36.432)
Alec, I didn’t think Duncan was doing that bad of a job when Billiton made the takeover. I thought it was a very overpriced offer they made there in the end. And I was surprised more people didn’t take it.
Everything, every time we see a hostile take or majors take on these is eight out of 10 don’t work. One out of 10 breaks even one out of 10 ends up being a good deal. And I think this one fit into that pattern. think, but I think, BHP in the end there was offering something that even Duncan probably couldn’t have matched. And I’m glad it wasn’t taken over. was.
asking everybody, please give thought because once it’s taken over, it’s going to be like the beers. You’re not going to have another angle. It’s not going to have this other tool in your blocks, this other alternative. But I thought it was a very generous offer. And yes, it really gave Duncan a wake up call. I think the guy was doing a decent job. But hey, when you’re scared, you find out you can do an even better job. So he made it very obvious what he was trying to do.
and investors are going to be measuring when he’s at the end of the next week, they’ve got the scorecard in front. And if he’s not very far down the path, he’ll be justifying why. But remember when Mark Crudafati took over Anglo American and we saw a real drop in commodity shares and in commodity prices. It was scary. And Mark just had to keep his investors pacified through the rough spot.
And he said, okay, we’re going to be selling non core items. We’re going to be selling them. Or non five tier five star items. But as soon as commodities started turning up, as soon as the demand for mining shares turned around, he revised that strategy real quick and he was a little slow on the action. Why? In the first place, because he wasn’t going to give away all Ingalls assets were good and he wasn’t going to give them away. But you had to say to
Peter Major (09:45.51)
and start doing things just to keep investors happy, just to keep them on your side. I think Duncan’s pretty much the same here. He knows investors want to get a lot higher price for their Anglo -American. Do they really care if he keeps to beers or sells to beers? Probably not anymore. It’s not as special as it used to be. Even the appearance of it isn’t what it used to be, let alone the actual performance. But
He’s going to sell it if he thinks he gets a good price and he’s not going to sell it if he’s going to give the thing away. You know, it’s a very cyclical stock and his other assets, yeah, they’re cyclical and, you know, just to sell everything, well then investors should have just let it go to militant. So I don’t think Duncan’s going to do anything radical here. You know, if they think somebody else would do better, well.
He’ll probably lay down and say, then bring him in. But I’m doing all I can. I’m trying to get you the best price. I believe I can, but he’s got to show, he’s got to be credible. We can go through each of the things he wanted us to believe he was going to do, if you like Alec.
Alec Hogg (10:58.834)
Well, I’d like to hear your view on Anglo platinum, because that’s something that Sa Jacobs at our recent conference. And I’m really delighted that you’re going to join us in March for the business conference then. But Sa Jacobs was saying he started buying platinum stocks because somebody’s blinked. And in this case, was Sebaña that had cut back about 200 ,000 ounces of its stall water production. So
Anglo platinum at the moment, big part of Anglo American. The plan is to unbundle it. Would that be a good time to buy before unbundling after unbundling? What’s your take?
Peter Major (11:39.456)
I watch the metal prices when I determine if I’m going to increase a holding asset in a mining share or if I’m going to decrease it. And I look at where’s that share price relative? Then that’s where I start. It’s not the be all and end all, but I start where is it on the metal price curve? then you say, okay, what do I believe the demand is going to be?
for that share, for that commodity. What’s the shares rating? How does the public perceive it? I don’t like buying something when everybody else is busy buying it, because I think the crowd’s already pushed it. Maybe it’s not past what it’s worth, but I just want to be the first guy in. And that’s impossible. I want to get there as close as I can. I don’t think I’ve got the ability to determine how much higher it’s going to go.
the crowd is just buying it. I just want to know, I think like Warren Buffett said, it dirt cheap when everybody hates it. That’s simplistic, but that’s my mantra here. Okay. Amplats. Typical Anglo -American holding. Great commodity, sorry, great mineral property. Amplats still has arguably
best ground in South Africa. got the Plat Reef, they got the Moranski, they’ve got UG2, and they’ve been getting rid of their higher cost operations, their lower life operations for a decade now. And so on an asset basis, if you want to be in platinum, Engel still has the best platinum asset. Then if you say, can they increase production faster than the others? Can they grow?
We want to know that there’s still growth. Can Amplats grow better than Empala or can they grow faster or cheaper? I think they can. So that means their rating is going to be a little bit higher because they have more potential for growth than a lot of their competitors. And then platinum, only five million ounces being produced in South Africa, maybe two and a half million, three million ounces being produced in the rest of the world.
Peter Major (14:04.808)
So yeah, what we do is dominant.
I don’t want to mimic all the reasons Cy Jacobs thinks it’s a buy, it’s all these angles assets. We’ve always said angles, didn’t buy crummy assets. Angles didn’t buy crummy ore bodies and angles under Ernest Oppenheimer, another Harry Oppenheimer, without a doubt knew how to grow those assets and maximize their value. Then we can go on to the people that succeeded Harry and Gavin Raleigh, Tony Trayer.
I think our speed bump, unfortunately, was Cynthia Carroll. She was an outsider. It was hard to fit in. You hadn’t been trained in the Anglo mode, you know, how we got these assets, why we got our assets, what we use as criteria when we buy new assets. know, Anglos had perfected a protocol for doing that. And I think Graham Womblood follows that and it’s a good protocol. I’m behind the guy.
all their assets, including the beers, I don’t want them giving them away. I’m holding Anglo -American because it’s cheap, it’s got good management, it’s got fantastic assets, and they’re in a commodity boom that just doesn’t want to stop. And yeah, I’ve got faith in them down at this price level.
Alec Hogg (15:28.919)
Peter, to refer to something that is on the Stock Exchange news service today and to just get your take on this, Barlow World released its trading update for 11 months to the end of August. It’s a September year end. And it said its mining clients in South Africa are struggling with high costs and they aren’t buying the equipment that it sells, caterpillar equipment, et cetera.
Is this a universal feeling that South African miners are getting hurt by higher costs?
Peter Major (16:09.342)
Yeah, they were getting hurt by higher costs. And I don’t want to wear out this argument, but where do the higher costs come from? government has to take the responsibility for this. Look at, let’s just pretend we’re starting a mine from scratch. How is our infrastructure? Not great. How is our legislation, the licensing process to get those?
Horrible. And even if our licensing process, Alec, worked first class, look at the kind of rules our guys have to do. And all these things add cost. That’s what the government seems to have missed the most, is all their actions help a company on costs or hurt a company on costs. Well, boy, across the board, their actions have hurt all South Africans. But
on mining because they’ve specifically targeted mining, it’s hurt their costs umpteen times more. always hear mining inflation is almost double what the consumer inflation is. I don’t know if it’s quite that bad, but it is worse and it’s consecutively worse because government has intentionally passed legislation to hurt mining and that translates into higher
costs. You can’t separate the two. know government doesn’t believe that, but it’s true. If you’re hurting somebody, their costs of survival are higher and they’ve continually hurt mining. They specifically target mining. It’s like every third or fourth word goes back to mining. They’ve just had this ingrained hate for the existing mining companies and management and shareholders and all their actions have reflected that. So yes, when you see
massive investment in places like Zambia and the DRC, which are hard to operate in, know, electricity, transport, getting your people there, getting your equipment, those are hard places to operate in. And yet foreign companies are putting tens of billions of dollars in those hard to operate places because they think their costs will be lower than if they were putting it in South Africa.
Alec Hogg (18:30.372)
Sure. What about the new government of national unity? Is there some light on the horizon there?
Peter Major (18:37.28)
Look, without a doubt for the average guy, there is light there. The mining companies, they see the light, but there’s, there’s a big difference between somebody shining a light on you and saying, my gosh, look at the horrible state you’re in. You’re chained up, you’re underfed. The rain’s dripping on you. at least they, when the light’s on you, it means someone sees your plight, but now they have to do something about it. So,
There is light with the GNU. There’s people involved in this new government who understand business, who understand politics, who understand what the previous government was doing to everyone in South Africa, individuals and companies. So yeah, it’s great having somebody finally open the door and they say, I hear your screams here. I’m trying to do something about it, but the manacles are really thick.
There’s no keys for the locks. I like it. I’m not knocking it. It’s what we’ve prayed for, but they’ve got a lot of work to do. And remember, this is a GNU that still has some big dominant players in there that are, they’re responsible for the state that countries in, they’re responsible for the state that mining’s in. They’re not willingly going to change their mind.
and they can’t be forced to change their mind. They have to be coerced, seduced, and gradually, delicately cajoled into saying, look at the horrible state these chained up people of ours and our industries are in. Please help us undo some of the chains. Because if you say we got to do all the chains and let these guys get up and run around and get healthy again, my gosh, you know what the EFF and the ANC are going to say about that. So.
It’s a delicate, slow process and money is not going to just come in because we finally shine the light on the state of things and we show we want to start fixing it. Money is going to wait till they see enough concrete actions that they say, wow, now there’s momentum building. Now these things are going to rerate. They are going to have growth. They are going to get control over their costs. They are going to recapitalizing what they’ve run down into the ground.
Peter Major (21:00.008)
Money’s just going to wait more. They want more than just light being shined on it. They want to see some actions that look like they’re not going to stop.
Alec Hogg (21:09.341)
Peter Major is the Mining Director for Modern Corporate Solutions and I’m Alec Hogg from BusNews .com.
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