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James Gruber: Hi, Jon. You've upgraded your commodity price assumptions. Can you tell me what the changes are?

Jon Mills: Yeah, James. Well, the main one is we've increased our near-term iron ore prices just because near-term futures have gone up materially recently, and that's basically due to strong Chinese steel production. We also increased our copper price, both near-term and also mid-cycle or long-term assumed price. We just think that inflation is pushing up and stinging the cost curve, and there's also been supply issues in various mines around the world. So, we see long-term copper prices being higher than we previously assumed. Other than that, we've pushed up gold. And probably the other big change is thermal coal prices, which have been very volatile, have come down a bit.

Gruber: Okay. What are your favorite and least favorite commodities going forwards?

Mills: So probably my favorite is gold. Gold prices are still fairly high compared to historical values, but the gold miners themselves have been really affected by worries over interest rates. And more recently, we've had expectations that the central banks have reached peak interest rates. And so, they've been benefiting from that expectation a bit, but they're really still undervalued in our view. As to my least favorite, well, I probably have to go iron ore. I mean, iron ore prices are really strong. But we think over the longer term, they'll come down very materially.

Gruber: What are the biggest risks, upside and downside, for commodities this year?

Mills: Well, when it comes to commodities, you've got to worry about what's happening in China, because it's the biggest source of demand for most commodities. So, in terms of upside risks, if the Chinese government increases stimulus, which it hasn't really done, unlike most times when the economy over there has been slower than they hoped, then that should help commodity demand, whether it's iron ore, copper, what have you. And also, look, Chinese property sector has been struggling and is still struggling. And so, if the government increases support for the property sector over there, then we think that will flow through to iron ore and to a lesser extent copper prices as well.

As for downside risks, well, probably interest rates in the West remaining higher than everyone currently expects. Probably the consensus now is that we're close to, if not at, peak interest rates, and we'll probably see some interest rate reductions, which if so, will flow through to higher economic growth and stronger industrial production, which is bullish for commodities. But look, if inflation stays higher than what the Federal Reserve in the U.S. in particular expects, then we may see higher interest rates for longer.

Gruber: What are your top picks among the mining stocks?

Mills: Well, I guess my first one is Newmont, which is the world's biggest gold miner, for reasons I mentioned earlier in terms of the gold price. But it's also just taken over formerly Aussie listed Newcrest. And so, it's currently digesting Newcrest. It's really been underperforming in terms of production over the past nine months to a year. And that's flowing through to higher costs and lower margins. But we think sooner or later they'll get their act together and production should increase to closer to where it should be, and that should lead to higher earnings and hopefully, a higher share price. The other one I would mention is Whitehaven, so an Aussie thermal coal miner that's also just bought two of BHP's metallurgical coal mines. It remains materially undervalued we think because a lot of investors don't like being exposed to coal.

Gruber: What are your least favorite stocks in the sector then?

Mills: Well, I probably still have to mention Fortescue. A lot of people disagree with me with this, but at the moment, it's benefitting from really high iron ore prices. And because it sells a lower grade iron ore than the likes of BHP and Rio, it's also benefitting from lower discounts that the steel makers in China in particular are paying for its ore. Now, if iron ore prices come down, as we think they will sooner or later, and if discounts blow out, then we would expect Fortescue's share price to respond accordingly to the downside.

The other one I would say is probably Deterra Royalties, which is a great little company. It owns the royalty on BHP's Mining Area C, which is one of the best lowest-cost, longest-life iron ore operations on earth. It's just overvalued, and it's because of high iron ore prices. So, hopefully, at some stage, we'll get to buy it, maybe if iron ore prices do reduce, as we expect they will at some stage.