Russo Rules

Russo's Rules

Originally published on
Mining Journal

Better to know where you’ve been

01 May 2014

I think it was my grandfather who I first heard use the term: "Great minds think alike, but donkeys never differ".

April fools

16 April 2014

It's now just over a year since that fateful Friday (April 12, 2013) when gold, having opened the day at US$1561/oz, broke down through $1520 for the first time in several years and closed the week at $1483.

GFC over and not forgotten or forgotten and not over?

14 April 2014

AN ECONOMIST with a sense of humour seems to be rare in my experience so I took great delight in watching a presentation by Bill Evans of Westpac recently. He observed that the public perception of bankers has become so bad that where he once described himself as a banker when he filled in his customs and immigration forms, Bill now owns up to being an economist!

Hocus pocus not the focus

14 April 2014

As I feared – I won't say predicted – PDAC was indeed a metal-price-forecast-fest, with Barrick Gold's Jamie Sokalsky leading the charge. Setting the record straight on his chairman's earlier favourable comments towards hedging he made it clear hedging was not on the agenda. "Gold is not something we are considering hedging". He was also reported to have said that "within two or three years, I wouldn't be surprised to see gold back up towards US$2,000/oz".

ETFs: villain or victim?

08 April 2014

"Gold producers squashed the gold premium, they didn't need help from anyone"

A better plan: don't leave home without it

07 March 2014

PDAC is again upon us. Indaba is just behind us and Mines and Money HK will be over before the month is out. The great global promotional caravan moves from town to town; country to country. Often it seems like only the venue changes. Many of the peoplecompanies at these events are the same. Not enough time has passed for many of the companies' stories to have changed, so they are also the same; but for a lucky drill hole here, or an unwanted advance from a stronger suitor there.

The cranks are bugging me

21 February 2014

When I started in the gold market in 1984, the term 'Gold Bug' was a kind of endearing (if not slightly sympathetic) reference to those crusty older folk that still had a soft spot for gold despite what non-gold bugs believed was the clear evidence of the previous three to four years, that gold's best years were behind it.

To infinity and… back

31 January 2014

Looking at the performance of gold shares, and the funds that invest in them, an outsider could only conclude that almost no-one saw last year coming.

My money is on the cockroaches

24 January 2014

Last year will was one of the worst years on record for US-dollar gold. Down 28% from its opening level of US$1,675.90/oz to close the year at US$1,205.65/oz (only 2% off the lows of the year), places it as the largest dollar per ounce drop (next biggest US$192/oz in 1981) and the second biggest percentage drop (the biggest was 33% in 1981) in the past 50 years.

So hard to say, I'm sorry

29 May 2013

SITTING through a range of presentations at a recent mining conference it's impossible not to be blown away by what some of the local junior/mid-tier companies have achieved over the past five to 10 years. But at the same time, it's impossible not to feel ill at the amount of shareholder value that's been blown away in recent times, and I'm talking about the same companies.

The trouble with aspirational targets

December 11 2013

AFTER thirty years of involvement in commodity and currency markets I have come to the view that the best way to try and make sense of exchange rates is to consider the exchange rate of any particular nation as the closest thing you will get to its share price.

And their ghost may be heard as you pass by

04 Jul 2012

BILLABONG must be without doubt one of the worst run companies in Australia. I don't just point at the spectacular share price decline to support that statement - think about the fundamental tailwinds they had. Billabong should have been in the fast lane of the two-speed economy. The mining boom has created a whole new genus in Australia, the Cashed-up Bogan and what does Billabong do best? It dresses bogans.

What's Plan B?

13 Jun 2012

THOSE with hindsight like to scoff about the arrogance of the builders/designers of the Titanic and the fact that it didn't have sufficient life boats for all on board. Given it was thought to be "unsinkable" it's probably the case that the only reason it had any lifeboats at all was because it might have looked less "ocean-liner" like without them.

Scarcity more likely than rising costs to drive gold higher

23 May 2012

ARAM Shishmanian, the CEO of the World Gold Council, reckons if current trends continue that gold miners will need at least $US3000 gold prices just to stay in business. If you didn't already know it you might be surprised to learn that the World Gold Council is an association whose 23 members comprise the world's leading gold mining companies, representing about 60% of global corporate gold production. With friends like the World Gold Council, who needs enemies? Talk about savaging the hand that feeds you!

Gold, God, bugs and believers

25 Apr 2012

IN A recent article in the Sydney Morning Herald, 'Getting to grips with the gold bug variations' (see link below) Matthew Kidman opens with the claim, "There is not an analyst on the face of the Earth who can accurately value gold". The implication seems to be that this is something unique to gold. I would challenge him to produce an analyst who has accurately and consistently predicted the future value of anything worth buying or trading.

The cost of dilution ultimately undermined the solution

11 Apr 2012

I WROTE recently about what I referred to as the Producer Ponzi Premium, that is the potential premium on the gold price that exists/persists as a consequence of a series of major gold purchases, each executed in a very narrow time window, by major producers such as Newcrest, Lihir, Barrack, Anglo, etc over the past 4-5 years.

The Producer Ponzi Premium - is it out there?

14 Mar 2012

I HAVE a split personality when it comes to gold. I think everyone should own some gold but they should hope they never make any real money out of it.

All this inking gets you thinking

8 February 2012

WHEN I was a kid tattoos were something that was associated with sailors and bikers and the only tattooed ladies were in side show alley. Now it seems you can't go anywhere without seeing men and women from many different walks of life that are 'inked'.

Beards, bellies and budgets

25 January 2012

A NEW year is upon us and that means new year's resolutions. I imagined mine would be the same as it has been for the last 10 years at least. I make it, I don't achieve it, so it's there to make all over again the next year - a very economical approach. Of course its real economy is that by being pre-set it removes any need for greater introspection or reflection that might occur without such a pre-set and well-worn resolution so close at hand.

Don't hold your breath

27 October 2011

JUST when it seemed that the whole European situation couldn't get any more farcical, in stepped Wayne and Julia to give those Frogs, Krauts and Breakfast Creeks a firm rebuke for not having come up with a solution already. Perhaps the fact they were about to preside over CHOGM had given them a sense that the world really was their stage. Whatever it was, I am betting that it had those European leaders all quaking in their boots.

Martian's long the USD Index surely you can't be serious?

22 September 2011

I AM CONFUSED. Yes, yes I am confused most of the time about something but this confusion is quite specific. I am confused as to why "everybody" seems to know that the USD is dead, and that it is going to "hell in a hand basket", but when I look at the charts I see such a different picture. To the guy down the back that says, "the Euro's going to hell in a hand basket too", implying that both of them are dying, my immediate response is simply this: LIFO. Which is one of the few things I remember from first year accounting.

If not here, where?

25 August 2011

For some years now you have been promoting the fact that one of the key virtues of your company is that you are "unhedged and debt free".

Diggers from a distance

18 August 2011

I AM 30,000 feet somewhere over the great Australian Bight in a Boeing 767 on my way to Perth to follow up on a conversation with a prospective customer that began at the Diggers & Dealers forum two weeks ago. Earlier today I had an invigorating conversation about a fabulous gold project with two guys I bumped into at the baggage carousel in Perth as we gingerly greeted the day after Diggers.

Golden Aussie drafts to new highs behind Cadel Evans

28 July 2011

TRYING to make the news interesting every day must be a challenge. I have an informal commitment to write this column once a fortnight and I struggle to find something new (and hopefully interesting) to write about. Your mother probably told you if you have nothing nice to say, say nothing.

The money or the tonnes

30 June 2011

A COUPLE of weeks ago I attended the Resources and Energy Symposium in Broken Hill. Quite different in design to any other mining conference I have attended over the past two or more decades - its theme was built around a discussion on ideas and how the mining industry could 'future proof' itself. Of course there was the usual promotional spots for miners to sell their story, their individual future, (someone has to pay the bills) but there was also a range of very interesting and thought provoking speakers on current industry issues, growing threats and possible future scenarios.

It's all about the shareholders' wishes, isn't it?

2 June 2011

ASK the CEO of an unhedged mining company what is the basis of that policy and the answer is nearly always the same: "Shareholders want exposure to the upside in the price of what they produce and hedging gives away the upside". I have never met one who has polled shareholders on this but invariably they have a fund or two on the register, or promising to join, who actively encourage them not to.

Every conspiracy has a silver lining

19 May 2011

I LOVE a good conspiracy as much as the next guy and we have plenty on the run at present. Osama bin Laden died years ago and president Obama chose now to stage the raid to save the USD and improve his chances of re-election; Dominique Strauss-Kahn (DSK to his mates) head of the IMF and presidential wannabe of France was framed in a "honey-pot sting" and didn't really try to assault a chambermaid; and my personal favourite ... the world is running out of silver and so much so that it will be more scarce (and therefore logically more valuable) than gold.

Diesel Days

28 April 2011

LAST week I drove about 2300km around New South Wales visiting a couple of mates on rural properties and doing a bit of camping and bush bashing with my youngest son. One simple pleasure of country driving in a diesel vehicle is being able to use the high-flow bowsers at truck-stops. Those suckers will fill an 80-litre tank in less than a minute.

Two and a half men in the boardroom

7 April 2011

I USED to think that Charlie Sheen was just playing himself in "Two and a Half Men". Based on recent events it seems he's a better actor than most of us thought. Charlie Harper, the character performed to the script given him, looks to be very different to Mr Sheen, performing to a script he wrote himself.

Ratios, rational reasoning or reality: you decide

17 March 2011

I SAW a presentation last week on Peak Oil given by Bruce Robinson of the Australian Association for the Study of Peak Oil and Gas. There was a great array of data among the 91 slides that made up the full presentation, all suggesting numerous other parties clearly support his view that we aren't going to be able to replace with exploration, what we consume. Peak Oil is either here already or will be here soon.

Inside Job: do yourself a favour!

23 February 2011

NOT blessed with the looks of Ralph Fiennes I find it difficult to recall what I ever did on long plane flights before individual video screens. That said, on a recent trip to LA I couldn't actually recall, by the end of the flight, all the movies I had watched on that flight. I had to revert to the program to remind myself. By the time I was home again I estimate I had watched over 10 movies and most tend to blend into a blur of clichés. One movie, however, was riveting.

Run rabit run.

19 January 2011

WITH the coming Lunar New Year we will be entering the Year of the Rabbit. I'm not sure what the Chinese astrologers have to say about the character of someone born in the Year of the Rabbit, but for me rabbits seem to be well known for three things: their ability to run fast but not particularly straight; their proclivity to breed, well, like rabbits; and, their propensity to stand in the middle of the road unblinkingly staring at the headlights of the vehicle about to dispatch them to that great warren in the sky.

Silver lining or lead by-product balloon?

17 November 2010

WHAT if QEII was so well expected that the only people who actually sold US dollars and bought commodities after the announcement are the kind of people who should stick to their day jobs and not believe that they too can be George Soros, trading FX and/or precious metals on 1-5% down, based on the knowledge gained at a free seminar they learned about in the Sunday paper and some slick (and overpriced) software they bought whilst there?

Ignore the rant but please don't ignore Grantham

3 November 2010

A FEW people who read my last column, "What's it like inside a bubble", described it as a rant. I looked it up to be sure and the best definition of rant I saw was, "a loud bombastic declamation expressed with strong emotion". Then I had to look up bombastic.

What's it like inside a bubble?

27 October 2010

I'M mad as hell and I'm not going to be quiet about it anymore! There is a housing bubble in the country and quite frankly when an overpaid CEO like Ralph Norris says, "there is nothing to sustain the view there is a housing bubble as such" (Australian 22/10/10), it's just plain offensive.

Coming face to face with a distant relative

20 October 2010

LOOKING back over past issues of this column and others, and a range of strategy notes to clients of Noah's Rule over the past six years, there has been one theme that has been by far the most consistent. And that is the simple position that it's not rational or logical to expect the Australian dollar to remain the Pacific Peso, adding healthy premiums to USD commodity prices if you are either in the crowd that has stapled itself to an ever expanding China; cemented yourself into a BRIC wall; you are in the crowd that believes the USD is going to hell in a hand basket; or, some combination of the three.

Change is the only constant

29 September 2010

FOR some time now much of the mining community has outsourced the concept of managing metal price and currency price risk to its shareholders. "That's why they buy us". "Not up to us to try and second guess the market". Simple statements that supposedly pass the responsibility for significant risks that could (and regularly do) lead to business failure belie the truth of complexity and responsibility of properly running a multifaceted business such as a mining company with multiple exposures to metal(s), various currencies, diesel, electricity, freight rates etc.

Farmer wants a life

8 September 2010

IT WAS never the intention of this column to write about politics. It's supposed to be about how market risks impact companies and developing a logical common sense approach to risk management. In the current environment it seems very difficult not to talk about politics because it seems in many ways that politics and the current political landscape in Australia is probably one of the most significant risks that business in Australia faces. Unfortunately it is also one of the most difficult to manage and impossible to hedge.

Changing of the guard

25 August 2010

HAVING read some of his books and articles I was a bit of a Niall Ferguson groupie before seeing him speak at Diggers and had high expectations. He exceeded them. Someone commented afterwards that his slides were of very poor quality to which I could only respond, "did he have slides - I didn't notice?" It was powerful stuff, entertainingly delivered, but admittedly painting on a canvas that extends well beyond the average attention span of attendees who just want to know where copper or gold will be at Christmas.

Irrational moi

4 August 2010

BEHAVIORAL finance (or as it is sometimes called, behavioural economics) is a relatively new field. It is the study of the psychology behind the behaviour of financial market participants. It seems to be largely ignored by classical economists because the very essence of their belief/faith is that markets reach rational outcomes; whereas, the behavioural economist observes the regular irrationality of markets and market participants and seeks to understand the drivers. Keynes clearly had sympathy with their view when he quipped, "markets can remain irrational for longer than you can remain solvent".

Quick prime minister, there's not much time

23 June 2010

DEAR Prime Minister, congratulations on your recent elevation. You must be exhausted after a day like that. We were exhausted just watching it.

Heads you win

16 June 2010

HEAD 'em up, head 'em up, come in spinner, they cry, as the punters bet on heads or tails. Two-Up's history in Australia dates back to the goldfields in the late 1800s and it was the spread of the discovery of gold that propelled the game across the country. It was very much a working class game which is why it found its way into the trenches in World War One and from there into the hearts of a generation of Australians and into the very fabric of our nation's story.

Get up and go and visit a mine

16 June 2010

LAST week I had the pleasure to attend the official opening of the White Dam gold project in South Australia. It's a long time since I have actually been to a mine site � too long.

The great divide

19 May 2010

WHEN I lived in Perth the Swan River tribalism was a source of great amusement. Not a substantial body of water but a clear demarcation zone. In fact it seemed to me the two halves of Perth were so divided that two people from the north side wanting to have an extra marital affair need only meet up south of the river and they were unlikely to be seen by anyone they knew (or that they cared knew of their arrangements).

If the salary cap fits

5 May 2010

FOR heaven's sake what's all the fuss about with the Melbourne Storm? Firstly, it's only rugby league. Secondly, they made league outside State of Origin almost watchable. Given the word on the street is that "half the clubs are doing it" perhaps the guys who should be getting the bollocking are the ones that are breaching the cap and still can't produce watchable games or winning seasons.

Wise heads ... after the fact

31 March 2010

YOU have got to try hard to be loved less than a banker, I know, but this is one of those times.

Flying and banking behind the curtain

16 March 2010

I HAVE just returned from my first visit to PDAC. It certainly won't be my last. What an amazing forum. It is testament to the scale of the mining industry worldwide and its still bright future mixed with a reminder that we share a great deal with the gaming industry, but their odds are better. If they had cocktail waitresses and punters that could buy stocks with "PDAChips" I think they could run it 24 hours a day for the three and a half days it is on.

Once bitten, twice worth a try

9 March 2010

WHY is it okay to remarry (several times) after a shocking experience(s) but one bad hedging experience, it seems, is enough to have people swear off it for life?

Gold markets and urinals...

16 February 2010

FROM a distance it might be easy to imagine Indaba is nothing more than an excuse for Europeans and Canadians to fly south for a brief respite from the winter chills and let's face it, Cape Town is certainly a fabulous place to do just that. I love the place. If you're a soccer fan go straight there for the World Cup and skip Johannesburg.

There's nothing - absolutely nothing - half so much worth doing

2 February 2010

IT WAS Toad's friend Rat (or Kenneth Graeme for the pedants) who once said, "Believe me, my young friend, there's nothing - absolutely - half so much worth doing as simply messing about in boats". After two weeks of doing just that I have to heartily agree.

My life was saved by a fridge magnet (others weren't so lucky)

21 December 2009

IT'S TRUE! My life was saved by a fridge magnet. Well not saved as in I was about to die but I was saved from a slow death in a life I had come to enjoy less and less, my life as an employee; a bank employee in particular.

Now it's Peak Gold, oh dear!

7 December 2009

I AM not sure how I missed this but scanning some old articles I noticed an interview with The Daily Telegraph in London where Barrick Gold president Aaron Regent said worldwide gold production has finally hit "terminal decline". In fact he went so far as to argue that we have reached "Peak Gold".

Dear Weekend AFR editor, please refrain from putting our metal on your cover

23 November 2009

THE AFR Weekend Edition ran a cover story on gold the weekend before last. Norman May would have been proud: it was gold, gold, gold and $US2000/oz was nothing to be laughed at. I call on all people who are involved in, or benefit from, gold mining to write to that venerable publication and plead for them to cease and desist. Feel free to copy the following and send it to them.

Are you my mother?

9 November 2009

IF YOU are a similar vintage to me, or my parents, then you may recall that 1960s children's book about the little bird that fell out of the nest and wandered around asking various animals and even an earthmover, "Are you my mother?". "Are you my mother" came to mind twice last week.

We're from the G20 and we're here to help

26 October 2009

FOR many of us the movement of the Mighty Aussie Dollar (currently not answering to Pacific Peso) is all a bit academic unless we have a French champagne habit or we want to go overseas on holidays. It's amusing to watch the way politicians take credit for it going up (sign of strong economic management) and then blame "traders" when it falls, but really we don't care too much. Of course it's a different story if you are an importer or an exporter.

Aussie dollar giveth, Aussie dollar taketh away

12 October 2009

IN THE past 18 months the Aussie dollar has been as high as US98.5c, as low as 60.09c and is now trading at 90.25c, with reports soon expected of party planners getting enquiries for themed 'Parity Parties'.

Pirates to starboard, politicians to port

28 September 2009

I LUNCHED this week with 700 other people at the Brisbane Mining Club. Such was the interest in the speaker Cynthia Carroll CEO of Anglo American that the venue kept being changed as the numbers swelled.

It's all about the journey, not the destination

14 September 2009

LAST year at Diggers & Dealers in Kalgoorlie Noah's Rule hired "Connie" for the night flight and took a range of clients and "friends of Noah" up for a couple of laps of Kalgoorlie. I was so impressed with the people from the Historical Aircraft Restoration Society (HARS) who look after and fly the plane that I resolved to travel to Diggers on it the following year.

Money for Jam

7 September 2009

AUGUST 31: I RECENTLY read an interesting article about trends in television shows and what the stations (their advertisers) are demanding. The clear trend is to uplifting and positive "feel good" shows. In short, out with Big Brother and Survivor and in with Master Chef and Random Acts of Kindness.

Green shoots abound in Kalgoorlie

17 August 2009

THE dust has settled on Kalgoorlie, the Diggers tent and most of the bar maids have left town and I almost feel human again.

Gold Loan with a Twist

20 July 2009

ON THE cocktail list of hedging and derivative products that have been offered up to gold producers over the years there are some very exotic products that have a kick like a mule. Think mescal with a worm. Our advice to clients is wherever you see �exotic� think toxic and lie down until any urge to sip such a cocktail goes away.

California Drowning (as sung by Peter, Michael and Arnie)

13 July 2009

SOMEONE once said "life's not fair", so why should markets be fair? World equity markets are supposedly approaching "fair value". I contend markets never trade at fair value. I think it is more reasonable to argue that fair value is simply the line between overvaluation and undervaluation that historians and others draw in afterwards, with perfect hindsight.

7.30 ... time for a close look at gold

22 June 2009

THE fact that I feel the need to qualify offering my current "best guess" on the gold market has two key drivers.

The last two hundred days

15 June 2009

READERS of previous columns and clients of Noah's Rule will know we put little faith in forecasting. Some "experts" get it right for a while and become the champion of a particular market movement for a while but the invariably flame out. Anyone heard of Abby Cohen lately?

Tipping point reached as black swans feast on green shoots

18 May 2009

I ALWAYS find it fascinating how quickly new words or expressions enter into the popular lexicon, particularly when used by financial experts in the media, and politicians.

Options: Expensive Compared to What?

11 May 2009

IN MY opinion options are the singularly most useful price risk management tool available to corporate hedgers. It is also my experience that they are significantly misunderstood which leads to them either being under-utilised (if used at all) or incorrectly utilised by many corporations.

Its all Relative

27 April 2009

A QUARTER of a century ago I started paying interest to foreign exchange markets in a reasonably serious manner. Prior to that all I knew was if you went to America you got more money (and things were cheaper) and if you went to New Zealand you got less money (and everything except dairy products was more expensive). How the world changes! It's an interesting reminder of the longer term impact of "dirty floats": think Yuan.

Would you ask your broker where to drill?

13 April 2009

AFTER years of attending various gold and base metals conferences and Diggers and Dealers I attended my first oil and gas conference last week. There were a few familiar faces in the crowd that had made the switch from mining, but otherwise it was a new crowd to me.

Feed the Ducks

6 April 2009

MARCH 30: ANYBODY who has ever tried to sell a large position in a junior mining stock will know that it has to be done while the stock is rising and demand is strong. As they say, "feed the ducks while they are quacking". Once everyone else turns seller too, prices fall precipitously on very little volume.

Reverting to the Golden Mean

16 March 2009

AFTER years of attending various gold and base metals conferences and Diggers and Dealers I attended my first oil and gas conference last week. There were a few familiar faces in the crowd that had made the switch from mining, but otherwise it was a new crowd to me.

The Year of Team Ox

23 February 2009

SITTING back and listening to one of the industry's most entertaining presenters, rapturous audiences were left in no doubt that when it came to "The Mighty Ox" there was oodles of potential oozing from their ground and the hungry horde up north ready to snap up all they could produce. Mr Hegarty was particularly famous for his use of Barrasi quotes and Aussie Rules references to describe the Ox's brilliant future. "It was only the third quarter and the best was yet to come."