Investment Matters

Company news: Aurelia Metals and Worley

Australian equities sub-portfolio

Aurelia Metals announced the initial resource estimate for its Federation deposit. An initial resource estimate looks to quantify the grade and amount of resource that is present, as well estimate the economics of mining these resources. We were very pleased with the result – which indicates a deposit of a size and grade that has the potential to generate considerable cash flow. A key reason for this is the deposit will be able to be mined and processed utilising existing infrastructure. This was central to our investment thesis in Aurelia.

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Worley held its Investor Day, which we (virtually) attended. The company outlined the role it is looking to play in the energy transition, as the world moves towards utilising renewable and alternative forms of energy. Pleasingly, it outlined that it has identified a range of cost savings which will be highly material to its bottom line. It expects to deliver $275m in savings by the end of next calendar year. These changes reflect a change in the way the organisation will work post-COVID – for example, reducing the number of offices, reducing travel expenses and conferences.

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We trimmed some of your holding in Mineral Resources over the past few weeks. The company’s share price has benefited as the price of iron ore has risen and is now closer to what we think it is worth.

 

Alternatives sub-porfolio

Last week we made an addition to your Alternatives sub-portfolio: iShares’ Government Inflation exchange-traded fund (ETF) – ASX: ILB.AXW.

The fund owns a basket of inflation-linked government bonds.  We expect inflation-linked bonds will perform well in an inflationary environment. They will particularly benefit under a scenario where inflation rises, but bond yields do not – a higher probability scenario given the action we have seen by central banks recently.

As such, it provides an exposure to inflation that is relatively uncorrelated – similar to gold, adding diversification to portfolios, with a relatively low level of risk.