As AI becomes more embedded in everyday life, it’s heartening to hear an analogue method holds true for identifying a good company – mining or otherwise.
“If you’re investing in any company, the top three things… it’s people, it’s people and it’s people,” according to Sean Russo, principal and managing director of risk advisory Noah’s Rule.
He was sharing key learnings as he reflected on a long-running career in markets with Lowell Resources Funds chief investment officer John Forwood in a wide-ranging webinar earlier this month.
“That is my one overwhelming learning from 45 years in this business,” Russo continued.
“The ore bodies have been there forever – they’ve been there for millennia. People find them. People invent the new technologies to find them. It’s all about people.”
He said AI was becoming more prevalent and could prove helpful but people and their experience and dealing with honesty and integrity were very important.
For those seeking “fair value,” Russo said there was no such thing, as the market was always on a journey.
“Fair value is the line that experts draw in afterwards when the market careers from overvaluation to undervaluation,” he said.
Other key learnings included that the flow of funds trumps narratives and that consensus forecasts were probably only useful as contrary indicators.
Russo, who joined the air force academy before starting his career in the markets as a chalkie on the Australian Stock Exchange, said one of his favourites was that “it’s better to be approximately right than precisely wrong”.
“A colleague of mine called Doug Stewart said this up in the Blue Mountains at some weekend away we had at Rothschild years ago, and I just went, ‘Oh, that just sums up so perfectly some of the stuff that you see’.
He cited the example from when he first met Forwood during finance and hedging negotiations with a mining company years ago, where a junior analyst was trying to get the ratios to work.
“And you go, listen, it’s not going to start then, it’s not going to be there, it’s not going to be those tons, that grade, that price, you are just trying to create certainty that doesn’t exist,” Russo said.
The quest for certainty was also woven into his final insight.
“People regularly conflate risk with uncertainty, and I think the further away they are from the coalface, the more that’s the case,” he said.
“What do I mean by that? Well, I think a lot of people think risk is, you know, sitting down at the roulette wheel and understanding what the odds are.
“I think with mining you’ve got to really believe that you’re dealing with uncertainty.”
He said former champion poker player Annie Duke’s book “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts” had really resonated with him.
“She said poker is decision-making under conditions of uncertainty over time, and I thought … that’s running a mining company,” he said.
“In fact, that’s being a parent.
“There’s so many things … you’ve got to be bold enough to admit that you’re actually dealing with uncertainty, not with risk.”
