Episode Transcript
The Finance Ghost: Welcome to this episode of Magic Markets. It’s episode 257. It’s a new year. By now, I think most people are back at work and back in the thick of it, reading some mildly frightening global headlines and following some pretty big transactions out there.
There’s a lot going on in geopolitics; there’s a lot going on in commodities as well. We’ve already seen a potential megamerger this year with Glencore and Rio Tinto deciding if they’d like to dance.
At the centre of so much of this recent activity, Anglo - Teck as well, there’s been one little commodity that everyone wants to dance with, and that is copper.
Today, from Mesh.Trade, we’ve got Connie Bloem with us, who is going to tell us all about the new copper product that they are launching at Mesh. Before we say hello to Connie, let me welcome Moe.
Moe, always fun doing this, of course, and we’re talking about commodities today, which gets you excited.
Mohammed Nalla: Yes, Ghost. You’re talking about megamergers out there, right? I was just wondering if you were referring to the US wanting to merge Greenland into the greater United States. [laughing]
The Finance Ghost: I don't think that has anything to do with copper, you know. Maybe Nobel Peace Prize, or something else, perhaps.
Mohammed Nalla: Well, that Nobel Peace Prize is in gold, and again, we’ve spent the last couple of shows talking macro. We spoke about geopolitics last week, and that’s why it’s so important.
I’m so glad to be welcoming Connie onto the show with Mesh because a while ago, for listeners that will remember, around the middle of last year (maybe even Q2 of last year), we spoke to Mesh about their launch of a gold token.
And for reference, gold was actually around $3,000 an ounce or thereabouts. It was definitely below $3,500. I remember that. Mesh launched that. I’d love to hear how that went.
And then shortly thereafter, Mesh looked at a silver token – and this was before the market was talking about silver. So, this was (and I stand to be corrected, Connie, you can tell me) around August of last year. It’s now more than doubled, from where we are.
And now there’s the broader copper or commodities complex coming through, on the back of a number of themes and trends. I want to unpack all of that.
Connie, I think it’s a nice feedthrough from the shows we’ve had over the last couple of weeks, and also a nice way to reference some of the work we’ve done with Mesh in the past.
What were the success stories? How have those launches – how have those tokens – gone? Welcome back to Magic Markets.
Connie Bloem: Hi guys, and Happy New Year. It’s always good to be back with both of you. We’re definitely not trying to conquer any new countries that don't belong to us this year. We’re just trying to conquer the country that we’re already in!
But I like you referring to the commodities. It has been a bit unexpected because generally, I think that the most complex, well-structured products will always do the best.
But then it’s always these ‘normal’ kind of assets that just time and time again surprise me – in the market, but also my own portfolio. Very much, with the metals specifically and commodities in general.
South Africa is such a commodities-driven country that you can't go wrong with these assets in your portfolio. But the copper has been something that we’ve been looking at for a while. It may also have led from the success of both the gold and silver launches that we’ve seen on Mesh, but you can't just ignore copper in the market.
I mean, we’re all talking about EV charging stations, EV cars, energy projects, AI. All those things are driven by energy. You can't talk about energy if you can't talk about copper. So, this is where our thinking has come through for this.
And specifically, can you find a single-exposure copper product that’s actually worth your while as well?
The Finance Ghost: So Connie, just to give you an idea, when I canvassed people asking them what stocks they wanted to buy this year (Ghost Mail readers), a company that came through a lot was Jubilee Metals.
For the pure reason that it’s really the only way to get copper and nothing but copper. Well, there are a couple of names, to be fair. But they’re at various points of exploration, whereas Jubilee is actually producing.
Lots of people are looking at that and saying, “Wow, you know, that’s an interesting acquisition target.” And that’s retail investors, who have been following the stories with copper, who are seeing all the interest in this space.
I was actually wrong earlier – Greenland does have some copper. Whether or not that’s the primary reason for what’s going on, I don't think so, but I just wanted to make the point that investors are definitely not ignoring copper.
And I think we can thank those megamergers for that, because it’s really put the spotlight on just how valuable copper is, Moe.
Mohammed Nalla: Yes, just maybe one additional point to touch on there. It was around a show or two ago, Ghost, when I said I believe that maybe we are seeing the early stages of another commodity supercycle.
We had that commodity supercycle in the early 2000s. It was fantastic for South Africa. You saw the rand stronger. The question I had posed to you was: how do investors get a nice pure-play exposure to some of the commodities that will give you this electrification theme, to the data-centre theme?
And the commodities are copper, as Connie has indicated. It’s also aluminium (or ‘aluminum’ as they call it up here in North America), that’s coming through with a reasonable amount of popularity.
And so, Connie, I think that’s why I’m so glad to have you on the show. Because I’d like to know – what’s the thinking at Mesh around the thesis on copper? Can we unpack that a little bit?
Was it very much a pull coming through from your clients saying, “We need exposure to these commodities”?
Or was it Mesh, kind of forward-looking, saying, “We’re seeing these cycles, we’re seeing some of these trends, and we’re going to put a product to market that will allow our investors on the platform some exposure, because we don't feel they’re getting that pure-play exposure through some of the stock and equity names that are out there”?
Connie Bloem: That’s a really awesome question. We generally try to kind of be ahead of the curve – and I mean, so many companies say that they intend to be ahead of the curve, because what do you truly know about what your customers would want in the future?
But what we definitely saw coming together for our client base, and I believe in South Africa, you should actually not be looking at just the trends that are coming from the listed market. You should also be looking at the trends coming from the private market.
And there’s a very specific reason why I’m saying this: the biggest growth in our country is actually happening within those entrepreneurial ventures that are still raising through the private market.
Yes, that’s true in many countries, but our newly developed companies are kind of steering clear of the JSE. They steer clear of a listing venue in general, and this is no fault of the JSE. It’s how our market is forming, and it’s how our market is getting capital out to fund their businesses.
The big trends that we’re seeing here, specifically for our clients raising funds, is energy. Energy is coming up again and again in our market. Independent Power Producers, as they would call themselves – IPPs. And it was just too obvious for me to ignore the space in the commodities industry.
Then, also, the space is not heavily competed. As I mentioned, trying to get single-exposure copper is actually very, very tough. So, unless you’re looking at signing up to an FX platform and so forth, you don't generally get these kinds of assets in your portfolio.
Your advisor also doesn't generally recommend this one as an exposure – and not because they wouldn't recommend it; it’s just, yet again, hard to get to. So, this is kind of where we saw the gap for ourselves in the market, and also a gap for our clients in the market.
I think that looking and reading a lot around the AI revolution happening in the Americas – and I know we were joking about Greenland and having some copper there, but Greenland definitely has a lot of the minerals that AI is building itself on. We maybe can't ignore that conspiracy theory.
But South Africa needs this, and this is a growth space for us, so we’re definitely going to list it. And the other very little-known fact is that there is no trusted copper stablecoin in the market. So we’re definitely going to launch it to give our clients that awesome space to invest in.
The Finance Ghost: Yes, what’s interesting at the moment is the way people speak about electrification.
Until the middle of last year, everyone kind of assumed that PGMs were just absolutely dead in the water, and internal combustion engine vehicles, and now it looks like some of the electrification stuff has been pushed back a bit. PGMs have suddenly been given a boost.
But the direction of travel for the world as a whole has not gone away. I think there has just been a reality check around how people need to get around and what’s practical in the short term.
People – what’s that old saying? They overestimate the rate of change and they underestimate the extent of change. And that seems to be what’s happened here.
So, people overestimated how quickly we would get there, and PGMs were just thrown out when they shouldn't have been. But that doesn't mean that this stuff is never going to happen. There’s a reason why the biggest names in mining are looking at copper at the moment.
And these imbalances, what drives the price and what drives the M&A and everything else, is that supply takes a long time to come on stream in the mining sector. That’s why it’s described as cyclical, right? It’s because supply takes time. And just because a country has a particular mineral doesn't mean that you can get it out of the ground very quickly, right?
So, that’s part of the investment thesis that investors need to consider when they’re buying, specifically copper, directly as a commodity. You’re buying a supply-demand imbalance. I mean, that’s where the research focus would be, right?
Connie Bloem: Yes, absolutely. I agree with you on that point. And you also mentioned that a country may be mining-company rich (so this is obviously something that South Africa knows well; we have the JSE built on mining companies), but less and less people are opting to invest in a mining company.
Because you’re not actually investing in the underlying commodity as a standalone. You’re investing in the entire mining company as an equity exposure. And we’ve said it how many times (and Ghost, I’ll reference you here in your own writing), why would you invest in equity if you’re getting debt returns on them?
So, if you want to have exposure to copper (or to gold, or to silver), go to the commodity directly and you don't get all the structural noise around equity. I don't know whether Moe is going to agree with me here or not, but I’ll put on my tinfoil hat again for this conversation.
Mohammed Nalla: Yes. I’ve said it publicly many times on the show (I may have even referenced it when we did the gold show when you launched your gold token, right?), that my preference over the longer term has always been for the underlying commodity.
Now, it’s a double-edged sword because, when markets are doing as well as they’re doing right now and gold shoots through the moon (or whatever the commodity is, right – could be gold, could be copper), the miners that have that exposure give you the operational and financial leverage effect on that.
So, they can do remarkably well to the upside. You’re going to outperform (if you’re sitting in some of those equities) if you get this massive bull run.
However, the inverse of that applies as well, because over the longer term, those mining companies have operational exposure. They have this margin creep that comes through from labour, and energy, and a whole bunch of regulatory stuff that they’ve got to deal with.
That’s why, as a very long-term commodities investor (I always invested in commodities for the very long term), I see this as a nice, stable anchor to my portfolio to get direct exposure to specific commodities that I like, under a certain theme.
Now, that applies very well to gold. Maybe even to silver, to a slightly lesser degree, in my case. And I’ve been a little bit wrong on that. Silver has been remarkable over the course of the last six months, certainly shooting the lights out.
But copper, for me – going back to the point around cyclicality, supply and demand – copper (as an industrial metal, as something that is physically used) becomes a lot more cyclical. It’s less of an anchor in my portfolio, and more of a thematic play.
I think those are some of the dynamics that I wanted to touch on there. I want to segue from that specific point, though, to ask a direct question to you, Connie.
I was giving one of my institutional clients a report back just last week, and we were looking at allocations to metals (gold in particular, but allocations to metals in general) within institutional portfolios versus retail portfolios.
Because institutions are generally… they’ve got their hands tied. Their mandates are quite restrictive. A lot of institutions are unable to invest in the metals market directly. They get their exposure through a proxy, through equities, whatever it might be.
And if you look at those allocations (don't quote me on the number, because you get different stats depending on where you look), they’re around 1% – 2%, if even that.
Now, private investors, retail investors, and family offices have been escalating their allocation, but I would be hard-pressed to think that those allocations are materially above the 5% – 10% level.
So, how much more runway do you think we have in that space – in the private-client space, the family-office space, and the institutional space?
And then secondly, what can be done? Have we actually seen that play through? Or is this an instance where retail (and maybe family offices, private money) can get ahead of the curve versus institutions whose hands are effectively tied by their mandates?
Connie Bloem: That’s a very interesting point and I love the conversation topic that you had with your client there.
I think that this is an opportunity for high-net-worth individuals (HNWIs), family offices, and retail clients alike to, firstly, get access to this part in their portfolio. I think a very limited number of portfolios actually have exposure, I would even wager, to silver.
Mostly, when people go into commodities and go into metals specifically, they would do single-exposure to most probably gold in this category. Which is awesome – you should have some gold in there – but then you’re also missing out on silver, and on copper.
So, I would say that generally the percentage allocation is going to be increasing in the next while. And the only reason I’m saying this is that it’s obviously thematic at this stage, and that you struggle to measure how much people should have in their portfolio if you’ve never had the ability to get the exposure of it into your portfolio in the first place.
I would say that it’s never going to rival your gold exposure in your portfolios, just because of the cyclical nature of copper and especially, as you mentioned, the industrial use that drives the supply and demand of it up and down.
So, I don't foresee that it’s going to reach those kinds of levels, but I definitely think it’s going to have a proper run as well, over the next few years. Then, it will definitely depend on what your investing horizons are.
Because if we start talking about portfolio allocations here, we’re definitely talking about horizons that are longer than a single year – most probably, we have to look at five to ten years.
And if we look at the next five- to ten-year horizon, South Africa needs to seriously invest in its infrastructure, across the board. It needs to invest very heavily in its energy infrastructure – we can see the South African economy trying to push in that direction.
We’re seeing that South Africa really needs to invest in their AI and data infrastructure, to stay ahead of the curve and to keep on track with the bigger countries (such as America and China) and where they’re going.
So, with the information that we currently have, I would say that, most probably, we’re going to see an uptick in copper in the portfolios.
The Finance Ghost: Yes, I think as soon as investors are buying the commodity directly, as you say, it’s quite a long-term thing. It’s diversification. Because, to your point earlier, Moe, the mining houses can do much better than the commodity when the commodity is flying. You get the leverage to the upside; it’s beautiful.
People have forgotten that gold and especially PGMs… historically, this was how people stayed rich (gold); it wasn’t how you got rich. Just last year, it was absolutely incredible. And now, suddenly, everyone thinks gold is just this absolute winner, you know – “Go and buy the mining company,” etcetera.
Whereas long-term, a lot of people have bought the commodity and just added to it over time, and gotten the inflation tick. You don't have to go and research the mines directly. You don't have to worry about which country they’re operating in, what can happen, are mines there being nationalised, and all of the other stuff that comes up and drives that thinking.
So, I think that’s maybe what will be really interesting: to see whether or not there is an uptick in copper directly, not just in copper look-through. Because, as we’ve been saying on this podcast, it’s actually quite difficult to go and get the copper exposure.
Let's maybe talk about that, in terms of how they go and get the physical metal today, Connie. How does this thing trade?
If I wake up tomorrow morning (and this is obviously before Mesh goes and plugs this gap) and I want to go and own copper directly, how do I actually do that? Where do I buy copper?
Connie Bloem: To a point that you made earlier, of “no one got rich by gold”, I think some of our forefathers would disagree with you there, especially if you come from that Montana gold…
The Finance Ghost: Yeah, maybe. If you dug it out of the ground yourself, then I think you could have done okay, definitely. Yeah, fair enough. [laughing]
Connie Bloem: [laughing] But unfortunately, those times have long passed for all of us. Well, currently, the easiest way to get copper exposure is, as we’ve mentioned again and again here, via your mining companies.
Getting direct copper exposure is a very, very niche product at this stage. Most probably, if you’re trading through a stockbrokerage of some sort, you would have access to an ETF or ETN that has some exposure to it, but it’s not a very readily available asset directly.
So, the place that I’ve seen that are the most readily available as we speak (now, before Mesh launches this) is most probably your FX trading applications and platforms. Just because they generally trade their metals like you trade your FX.
I don't know how many FX listeners you have here, but they most probably have some gold and silver trading there on the side. Because you generally would trade copper for the dollar exposure as well – copper is priced in dollars per tonne, so it’s a good place to trade it out.
But yet again, now you’re onboarding into an FX application. And if you don't trade FX, why would you now manage a part of your portfolio in this space? It’s just very cumbersome.
I definitely think that there will most probably be some metal baskets and so forth available as well – not something that’s too widely marketed in South Africa, so you really need to go and search for that as well.
So when we launch it, it’s going to be available in the same construct that gold is available and silver is available: one platform where you can find all your alternative and private capital markets assets to invest in.
And we’re just planning on plugging this commodity space, because I think this is definitely something that’s quite unique and something that people should be investing in more often.
Mohammed Nalla: Yeah, Connie, I want to jump in here. Some of your more internationally orientated listeners may be trading it through platforms that allow them exposure to copper futures.
And I raise that point because this is where some of the complexity comes about. Because in the futures, you’ve got roll costs, you’ve got leverage – there’s a whole bunch of complexity that comes about with that.
Maybe let's use this as a nice way to kind of synthesise what exactly Mesh is going to be doing in this copper space, so that I understand it correctly.
You’re looking at a token that references copper. My understanding is it’s going to be in rand, so that kind of takes care of (for South African investors) the FX exposure there. In what kind of denominations are you going to be looking at that? That’s the one question.
The other question is what does liquidity look like? What do fees look like? And specifically around denominations, as you say, copper – internationally, when you trade in futures – that’s referenced per tonne.
If I’m buying a token that’s giving me a tonne of copper, it’s not like the gold argument where you could say, “Hey, physical delivery on this one,” because I don't know where I’m going to store a tonne of copper. [laughing]
So, maybe just take us through some of those dynamics and what that looks like.
Connie Bloem: I enjoy each and every asset that we get to list on Mesh, because all the assets that we list, we actually have a hand in constructing from the ground up, in some way or form.
When we started getting involved in copper, I still had a lot of the thinking of gold and silver in my mind. Like, “Oh, this is an easy asset to launch. Let's just kind of follow that model.”
That assumption lasted me about all of ten minutes because, as you mentioned, this asset trades in tonnes. So, we’ll be listing it as one token equals one tonne of copper. As a rule of thumb here, in the last week or so, copper has been trading at just over $13,000 per tonne. That’s quite a lot!
So firstly, you need to be able to find physical delivery of a tonne of copper, plus have that amount of money lying around to buy a tonne of copper to do so.
So, each token will be 1 token : 1 tonne of copper. It’s investment-grade copper then, as well.
Something that does pop up quite often and should be a question that all South Africans ask themselves is, “But can't you steal copper?” And lo and behold, you can actually steal a tonne of copper.
So, because it’s a hot metal – and I heard that pun as I said it, because yes, it does transport energy quite effectively. It’s also hot because it’s a target, and you can't just vault it. It doesn't vault like gold or silver; you actually have to store it in warehouses.
The logistics behind that are incredibly difficult to handle, so we’ve partnered with the same company that we’ve partnered with around silver, because they have exposure and extensive experience when it comes to handling copper.
But to your point, we can't do physical delivery of copper. Some institutions may start asking for it, and then we will most probably be open to it, but we mere mortals cannot take physical delivery of copper. So, that’s definitely a difference between this asset and previous ones.
And you also can’t deposit your copper. So, you can't pitch up with a handful of wires. We unfortunately can’t accept that as a copper deposit either. This is kind of where some of the differences will come in.
As always, we will be able to fractionalise it until the seventh decimal place, so your minimum trading amount will most probably be around your R50 mark yet again, as we usually do.
We always try to keep those fees very transparent and compact. With any physical asset, you need to think about your vaulting fees. You need to think about your handling and your transportation fees as well.
And, as we’ve done with gold and silver and as we will keep on doing, we generally put that into the price when you purchase that asset. So, you have two years' worth of vaulting or two years' worth of warehousing on your asset involved as well.
So you don't need to wait for those surprises coming through the post telling you, “Oh, sorry, you need to now give us a part of your holdings back so we can pay your vaulting fees for you.”
Then, the Mesh trading fees are always very transparent and ready for you to view. On commodities, we trade at a 0.6% trading fee. We don't spread the prices on the market.
We do have market makers participating, so the price that you see on screen is the willing buyer, willing seller (WBWS) price. Mesh doesn’t get involved in the spreading of those prices at all.
The Finance Ghost: Fantastic. Look, the Midas touch is obviously very gold-focused, but you had that Midas touch with gold and with silver, perhaps copper as well, Connie. We’ll see what happens.
But I think it’s also particularly interesting just to see how this now fits into the broader Mesh ecosystem. Because you’ve been very, very busy over the past 12 months in launching not just these commodity-focused products, but also lots of other investment products on the platform.
And there are a number of podcasts. We’ll include some links in the show notes for those who want to go back and actually learn more about what Mesh is up to. There’s a lot of really good stuff in there.
Mohammed Nalla: Yes, and maybe just a parting comment from me, Connie. To your point, $15,000 a tonne of copper. Translate that into rands, and it means you’re about a quarter of R1 million per tonne, I guess, for copper. So, your point around fractionalisation actually preempted a question I was going to ask.
I was like, “If you are actually doing this as ‘one token is a tonne of copper’, that’s a lot of copper out there. How do smaller investors get exposure to it?”
And seven decimal places down to a minimum size of call it R50, there and thereabouts, I think that’s part of the entire Mesh value proposition that you’ve had throughout all of these offerings: make it accessible to effectively the smallest retail investor out there. So again, feather in your cap in terms of getting that right.
And maybe just to round that off, I think we’ve discussed so many things with Mesh and I just want to touch on some of the key points. We discussed gold, we discussed silver, which was definitely quite topical. Now, we’ve got copper, and that’s your commodities complex.
I’m not going to ask you, you know, “Do you have anything else in the pipeline?” But we can take that discussion offline, and maybe we’ll bring you back for a future show when that actually materialises. I’ve got some interesting ideas.
You also gave us some private market exposures. There were the properties in Stellenbosch, I remember we had a show on that. You gave us a whole bunch of things across multiple asset classes.
The reason I wanted to just highlight that and reiterate what Ghost is saying is that so often, investors are short on choice. They just focus on the equity side of their portfolio. They don't do much in the private asset space; they don't do much in the fixed income space.
And again, just looking at Mesh's offering on your website (and we can refer the listeners through to that), credit to you and the team in terms of just trying to build out a multi-asset exposure on a single platform that is, I guess, appropriate for people that are both crypto-native, but also people that are new to the ecosystem.
So, that’s a kind of parting framing of the context. Connie, any last thoughts you want to add to that? And maybe just point our listeners towards where they can find Mesh, and just what some of the highlights are of that offering as a whole.
Connie Bloem: Thank you, Moe, that’s a great compliment. We’ve been building and working really hard to get this complex of assets available to our clients, but also not to overwhelm them with duplicates and multiples of the same kind of assets as well.
So, we’ve been very selective about who we partner with, as well. I think we started speaking to you two with regards to AnBro at the start, so we also have the AnBro funds listed on our platform.
But the coming months for Mesh, I am incredibly excited for. Because we’re obviously launching our properties, but we have so many interesting companies coming to the market.
We can start saying that we generally have an energy raise coming through. We have a beautiful credit provider as well. I can start teasing a couple of other items in here as well, but if you like your coffee hot and piping, there may be something in the mix for you there as well!
We’re just going to keep on building out and targeting the good entrepreneurs in the South African market – and across the world, for that case – and just bringing them to a place where people can really invest in their businesses.
So, if you’re looking out for anything within the alternative and private capital markets space, you can find us at www.mesh.trade, and you can read all about what we’re listing and what we’re doing there.
Coming soon in January and February, you need to get your investing hats on, because it’s going to be very busy in our world.
The Finance Ghost: Sounds amazing. There’s a lot of really cool stuff coming, Connie. I think we’ll leave it there for this one.
To our listeners, go and check out Mesh's excellent website and their social media channels. If you want to go and learn more about this, reach out to the team. They’re always keen to chat.
They’re very passionate about what they do and what they’re building. They are truly building a disruptor in the South African market, so obviously, they welcome any opportunity to talk about it. Reach out to them, ask them questions, and go and check it out.
I think this is a really well-timed product, Connie. Congratulations to you and the team. It’s something genuinely different and interesting in the South African market, and it’s a metal that’s going to get more and more attention. So, well done from my side.
Mohammed Nalla: Yes, thanks, Connie. Thanks for coming onto the show. To our listeners, let us know what you thought of the show. Hit us up on social media. It's @MagicMarketsPod, @FinanceGhost and @MohammedNalla all on X.
The transcript will have a link to Mesh's website as well as some of the previous podcasts we’ve done, where we’ve discussed a whole range of these very exciting offerings, so go and check that out as well.
We hope you’ve enjoyed it, but let us know. We’re also on LinkedIn. Pop us a note on there.
Until next week – same time, same place. Thanks so much, and cheers.
The Finance Ghost: Ciao.
Connie Bloem: Bye.
