Are data centres the new EVs? (Alex Turnbull Interview)

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Righto muddy miners, another
Friday special, another bloody

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Ripper delivered by Axis Mining
Technology, the trusted advisor

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and drill.
Our survey instrumentation and

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the trust we have for them is
probably similar to the trust we

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have with everyone else that
comes on.

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Just like this fella.
Straight from the humidity of

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Singapore.
Mr Alex Turnbull, welcome to

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Money of Mine Copper.
Thank you mate.

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You've got a light blue shirt
and I thought you're not allowed

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to wear them in Singapore cause
of the sweat.

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I thought it was white shirts
only over there.

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Poor mate.
And there's an advanced

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technological development.
You can get them made in

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Siyasaka so it just stays
slightly off your skin so you

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don't get too hot.
So I've got a lot of them in

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this climate.
There's a there's an ice vest

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under it too.
Very good.

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Probably.
Yeah, exactly.

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I've seen those people go for
runs in them.

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It's crazy.
Trav give the bloody give the

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spiel of Mr Turnbull.
Another great sub stacker out

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there.
Yeah, he writes bit of a bit of

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a frequent writer on his on his
on his sub stack, which I can't

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pronounce, so you've got to
forgive me his syncretica.

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I'm probably saying that wrong.
Syncretica, yeah.

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There we go.
But, you know, you're, you're,

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you're an investor in yeah, the
materials, energy, kind of open

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source modelling kind of like
areas maybe he previously worked

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on the, on the special seats
desk at Goldie's in on the Asian

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special suits desk and spends
plenty of time.

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I just like, you know, the way
you kind of word it to me is you

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think a lot about that interface
of, you know, data, data

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centres, chips, energy, metals.
And that's, you know, that that

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overlaps a fair bit with our
wheelhouse and what our our

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listeners think and care about
as well.

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So pretty, pretty keen to, to
explore some of the, the things

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you've been thinking about,
Alex, because you know that

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these are the themes that really
inform the commodity cycles that

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get us excited and demotivated
at the same time.

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Yeah, no, it's, it's it's
interesting.

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I mean, I've also done a bunch
of policy work with a think tank

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because one thing I guess I've
seen now we more golden special

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since we bought talus and though
the assets that became talus and

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like green bushes out of
bankruptcy and we we literally

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just underwrite the tantalum.
We didn't even think much about

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the lithium.
And then you started to have DV

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thing come along with the Nissan
Leaf.

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And one sort of consistent
pattern is is, you know, the

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tech moves that you know, are
very quick cadence, but the

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problem is getting mines up
takes 710 years.

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So there's always these kinds of
moments where something happens

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on the tech side and it leaves
miners hanging or ultimately

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something happens on the tech
side and you have a bunch of

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semiconductor companies saying I
need a 300 tonnes of 300 million

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tonnes of whatever.
And there's like literally 1/4

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of that available.
So it's interesting as investing

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because it creates these really
big displacements and shocks.

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But you got to kind of be
following both at the same time.

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But you know, it's interesting.
The way you, the way you kind of

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yeah, described it to me over
it, you know, text exchange was,

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was the, you know, the, the tech
evolves.

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You know, before the, the, the
narratives that, you know, the

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investment narratives kind of
evolve and I, I guess you know,

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naturally then you want to focus
on what, where, where is the

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tech evolving right now that
will inform kind of tomorrow's

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narratives.
And actually, like, I'm keen to

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know where are you spending a
lot of your time thinking right

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now because of the tech
evolution?

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Yeah, I think a lot of the a lot
of what's happened in batteries

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in terms of people getting all
the cobalt out, I mean that's I

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think that's largely played out.
I think that people's consensus

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numbers on cobalt demand been a
lot lower has kind of played out

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and then the split between
nickel and LFP or some people

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say sodium now I think that's
also fairly well priced.

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I'm not sure what's going to get
those two metals off the off the

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canvas, but that's I think
that's now been absorbed.

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I think what is very
controversial now is how much

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power a data centre is going to
use and is this going to be an

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additional over five years, 20%
bump to US power demand because

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given the state of permitting
and power grids and so forth,

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that's going to be very hard to
implement.

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But that would that would be a
big change to those markets.

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So spending a lot of time
looking at, you know, chip and

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data centre topology, how people
are trying to reduce power, how

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successful they've been and how
much is coming down the pipe in

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terms of energy efficiency.
So yeah, that's been spending a

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fair bit of time on that.
Optical compute, photonics,

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these sorts of things, yeah.
So if we just to get a concept

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of where you think these data
centres and you know, the world

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of semiconductors at the moment,
rewind, I don't know, four years

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ago or so when you had everyone
pivoting to the future facing

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metals, the everyone, yeah,
cobalt, cobalt was going to be

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the thing everyone getting into
nickel sulphide.

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Then obviously the, you know,
the battery uptake change to

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changed a bit and then it was
all it was all about this future

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EV demand and obviously lithium
went bloody bananas and we're

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here now and it's all just are
we at that point is that is data

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centres the new a VS from four
years ago I.

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I think so.
So thematically what happened

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was it's all it's like that's a
really good comparison because

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what happened with the EV thing
was you had policy driven

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massive push on EV demand,
particularly in China.

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And you also had a funny thing
where due to the COVID mess and

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a lot of normal ICE companies
not being able to get their

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chips made for analogue because
basically all of Malaysia got

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COVID simultaneously for about
four months straight back in

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2021.
You suddenly had Teslas were

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available that their operations
weren't interrupted.

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And suddenly there's enormous
demand for for Tesla vehicles.

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At the same time, you had all
those mines shut down.

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So you know, you're Elita Zeltur
as all these guys.

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So that just went vertical.
And similarly, what's happened

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with data centres is due to AI,
suddenly people realise they

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want to invert matrices a lot
very quickly all at once.

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So you've had this kind of
demand displacement in terms of

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compute.
What we haven't seen though is

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how people are going to kind of
tamp down that demand in terms

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of efficiencies and that's
definitely coming.

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So, so one sort of simple way to
think about it is that anytime

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you run something along copper
wire, you've got some resistive

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losses.
So you know, you take two sides

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of an, I don't know if you were
terrible pyromaniacs as

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children, but I was two sides of
a 9 Volt battery.

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Run a copper wire through it or
try to make an electromagnet

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gives off a lot of heat.
If you move that to optical to

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light, then there's no heat
losses.

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So that's a matter that's.
So the real, the question

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abstractly is how much
computation can you do with as

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little electrical as possible.
And that's what, you know,

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people in physical labs are
exploring the boundaries of, but

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there's a lot of products coming
to market which will facilitate

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a good chunk of that.
So what's the if you want to

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hide in on the actual metals
between the construction of the

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data centres and the power
supply, what are going to be the

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what, what are the the big
ticket items at the moment from

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the first pass you'd say?
Yeah, I mean, definitely it's

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just, I mean, right now it's a
lot of so in terms of not so

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much metals themselves, but you
see like a lot of the to to

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dissipate all this hate.
It's just it's a lot of HVAC,

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it's a lot of heat management
companies like Vertiv in the US

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and just also just you know,
simple high voltage switches.

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So I think the Beige Book came
out last night.

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We've now got run running four
straight years of electoral

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components being in shortage in
the US between, you know,

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renewables, build out data
centres and so forth.

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So people who make just basic
switch gears and stuff like that

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or are busy.
So businesses are doing well.

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I think in Australia you've got
various, you know, contractors

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and electrical who are still
absolutely booked out here.

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Comical stories of, of how hard
it is to get good electricians,

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particularly in regional areas.
And I think that's, that's

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pretty much ongoing.
So that, that's one stylized

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fact.
In terms of the metals demand

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currently, it's quite very
copper intensive.

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But what I'm looking at is how
copper intensive data centre

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plans people have planned out
for 2027 versus something

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they've built over the last 18
months and it's quite a big

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difference.
So that's only I'm trying to get

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some hard numbers around.
It's a this might be a dumb

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question, but with data centres
in the heat and everything is

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does silver ever come into play
as a better conductor of

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electricity?
What the best conductor or is

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it?
Is that never going to be a

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thing?
Not too expensive in in terms of

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the heat dissipation and
everything.

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Not not, I don't think so.
What's Silver's kind of

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interesting right now is that
it's a lot of it's used in

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solar.
There are technologies to get

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that, to get the silver out of
solar if you go to hetero

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junctions and there's guys like
Sun Drive and a couple of

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companies in Germany.
But what's interesting is, is

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that because the sector's so
been so bombed out, no one's

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going to do the CapEx to get rid
of the silver.

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So the silver intensity is going
to stay and be very high and you

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can run numbers which are not
even close to crazy where silver

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starts to become, you know, mid
30% of total global silver

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production just for solar.
And so that that's a metal which

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could get very silly over the
next couple of years if people

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don't make that technology
switch.

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And no one's going to put that
money in to make that technology

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switch when they're making a
negative 20% gross margins as a

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lot of these guys are.
So that that's a metal, which is

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kind of set up an interesting
way where it could get quite

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bananas for a little while,
frankly.

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I, I think the, the elephant in
the room with regards to, to

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data centres is energy and where
the old energy will come from.

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That's obviously been a big
talking point, at least in the,

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the kind of circles that that we
speak in.

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What have you sort of learnt
from from diving in to this at a

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sort of broader level to start
with?

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Yeah.
So I mean, if you think about, I

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mean, data centre, basically
they want to keep the ships,

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let's call it that sort of more
or less atmosphere, you know,

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ASM like atmospheric
temperature, so 20 to 40° C, You

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don't want it to get too cold,
too hot.

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The interesting thing for a lot
of these data centres is that

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because they've only just become
insanely power intensive quite

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quickly on the AI side in terms
of, you know, unit per square

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metre footprint, there's a lot
of stuff you can do.

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And they're also, they're
normally big flat, you know,

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it's not like a vertical
building.

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So there's all sorts of stuff
going on right now.

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People are saying, well, maybe
we just put a bunch of solar

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panels on it and we just freeze
a bunch of water during the day

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and we just use that as like an
ice battery.

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There's a lot of sort of
efficiencies to squeeze out of

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these things that have largely
not happened yet.

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I think for in terms of like,
you know, is coal going to stay

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on the grid or is it going to
continue to retire on as per

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projections, you know, 3-4 years
ago that what matters is a total

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power demand.
And what I'm saying is that I

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think people's estimates are,
are way too high right now.

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They're going to come down to
these efficiencies at the at the

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ship's level.
But it's, I think in the short

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term, yeah, if you've got a coal
plant which is due to retire in

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2028, it's probably going to get
punted for an extra 2 years at

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this point.
And is that, is that a trend you

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see across across the Western
world?

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Is there sort of, you know,
disparities in that and how it

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might, you know, play out in in
China versus America versus

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Australia?
I think so essentially in places

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where you have very easy
permitting to build renewables

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00:11:48,280 --> 00:11:51,480
or batteries or what have you,
you still get pushed out faster.

224
00:11:51,480 --> 00:11:53,960
So Germany's done all sorts of
stupid things with their energy

225
00:11:53,960 --> 00:11:58,600
policy, mostly around nuclear,
egregiously so.

226
00:11:58,600 --> 00:12:00,520
But on the other hand, they have
very permissive permitting.

227
00:12:00,520 --> 00:12:02,160
So just getting stuff built is
easy.

228
00:12:02,600 --> 00:12:04,360
It's a little bit like
Queensland, but you've got that

229
00:12:04,360 --> 00:12:07,440
coordinator general thing.
So just like actually getting

230
00:12:07,440 --> 00:12:08,920
poles and wires done is just
simpler.

231
00:12:10,320 --> 00:12:14,360
So yeah, we're in places where
you can build the substitute or

232
00:12:14,360 --> 00:12:17,560
the other sources of power
things get pushed out quickly,

233
00:12:17,560 --> 00:12:20,400
but where you can't build
because you've just got a crazy

234
00:12:20,400 --> 00:12:24,640
permitting mess.
Like, I don't know, you know,

235
00:12:24,640 --> 00:12:27,200
the Northeast US or California
things got a bit more slightly.

236
00:12:28,320 --> 00:12:30,600
Is there is there any numbers
you can wrap around the power

237
00:12:30,600 --> 00:12:34,800
required for these data centres?
Like as a comparison to to

238
00:12:34,800 --> 00:12:38,280
something else, like how energy
intensive they actually are.

239
00:12:39,920 --> 00:12:41,160
Yeah.
I mean, look that people are

240
00:12:41,160 --> 00:12:44,360
talking about a one GW data
centre that's like a, that's a,

241
00:12:44,880 --> 00:12:48,040
that's a, that's a, that's a
big, yeah.

242
00:12:48,040 --> 00:12:49,880
So, so there's one being
planned.

243
00:12:49,880 --> 00:12:53,680
But then they're also looking at
reducing the switching

244
00:12:53,680 --> 00:12:58,520
interconnect costs using some
technology by about 80%.

245
00:12:58,960 --> 00:13:03,400
So you know, there's this race
between actually demand for this

246
00:13:03,400 --> 00:13:05,960
stuff and, and the efficiencies
are really starting to come

247
00:13:05,960 --> 00:13:07,760
through.
Whereas no one was really

248
00:13:07,760 --> 00:13:11,680
engineering this stuff from a
power point of view, you know,

249
00:13:11,680 --> 00:13:15,840
with a big focus on power until
1218 months ago when the

250
00:13:15,840 --> 00:13:18,280
densities got to the point where
you had to start spending crazy

251
00:13:18,280 --> 00:13:22,240
amounts on getting liquid.
Like a like you'd be like a

252
00:13:22,240 --> 00:13:26,040
liquid cooling interconnect to a
chip which pushes through a

253
00:13:26,040 --> 00:13:28,280
liquid to take off the heat
because you can't actually do it

254
00:13:28,280 --> 00:13:30,560
through airflow anymore.
Any degree of reasonable

255
00:13:30,560 --> 00:13:33,320
efficiency.
So there's a lot, lot of moving

256
00:13:33,320 --> 00:13:34,960
pieces right now.
I feel like it's a little bit

257
00:13:34,960 --> 00:13:38,120
like battery cathodes were like
two years ago where nickel and

258
00:13:38,120 --> 00:13:42,640
cobalt were nuts.
And suddenly people in whatever

259
00:13:42,680 --> 00:13:45,560
the physics of the, sorry, the
chemistry lab at CATL and so

260
00:13:45,560 --> 00:13:47,960
forth were told, all right,
guys, like, you know, if you

261
00:13:47,960 --> 00:13:50,840
want to get promoted in this
organisation, you need to thrift

262
00:13:50,840 --> 00:13:52,760
a lot of the expensive stuff so
you get to work.

263
00:13:52,760 --> 00:13:54,200
And that kind of happened,
right?

264
00:13:55,640 --> 00:13:57,640
So I think we'll see more of
that sort of thing.

265
00:13:58,040 --> 00:13:59,720
Right.
So that's what, what, 5 to $10

266
00:13:59,720 --> 00:14:03,640
billion just to power a data
centre without building the data

267
00:14:03,640 --> 00:14:06,160
centre effectively, Like if
you've got to build a one GW

268
00:14:06,160 --> 00:14:08,640
reactor to power it.
Yeah, yeah.

269
00:14:08,760 --> 00:14:12,400
If you, yeah, if you want to
build a nuclear reactor to pair

270
00:14:12,400 --> 00:14:15,360
with A1 gig data centre, it's
it's pretty crazy stuff.

271
00:14:15,400 --> 00:14:18,440
A lot of the really big ones and
really crazy projects are in the

272
00:14:18,440 --> 00:14:23,080
Middle East, but there's also a
lot of them where you're saying

273
00:14:23,080 --> 00:14:26,720
in the US there's one big Amazon
centre where they basically

274
00:14:26,720 --> 00:14:29,760
teamed up with an existing
nuclear plant to take the whole

275
00:14:29,760 --> 00:14:31,880
offtake and.
That's that does it matter

276
00:14:31,880 --> 00:14:34,760
where, where the data centres
are built, where they emerge,

277
00:14:34,760 --> 00:14:36,640
They just will they naturally
emerge where there is a, you

278
00:14:36,760 --> 00:14:40,320
know, a glut of, of, of low cost
energy or is, or is there like

279
00:14:40,320 --> 00:14:42,880
more to it?
It depends.

280
00:14:42,880 --> 00:14:47,120
I mean, so, so you know,
obviously if you there's latency

281
00:14:47,120 --> 00:14:50,080
as an issue.
So if you, if you're whatever

282
00:14:50,080 --> 00:14:54,080
requests information from, I
don't know, a Spotify server on

283
00:14:54,080 --> 00:14:57,840
AVPN, it's just laggy.
And that's annoying if you

284
00:14:58,320 --> 00:15:00,280
request it from somewhere
locally.

285
00:15:00,280 --> 00:15:03,200
So distance is important for
certain applications.

286
00:15:03,520 --> 00:15:05,800
But if you're just doing a big
training run, like you're

287
00:15:05,800 --> 00:15:10,480
ingesting some obscene amount of
data to make GPT 5 or whatever,

288
00:15:10,960 --> 00:15:13,840
location doesn't really matter.
So try, so I think for

289
00:15:13,840 --> 00:15:16,920
inference, which is where you
actually, you know, actually run

290
00:15:16,920 --> 00:15:18,920
a question to the model and get
a reply.

291
00:15:19,720 --> 00:15:21,960
You, you obviously don't want to
be waiting 5 seconds for a

292
00:15:21,960 --> 00:15:24,600
reply, but if you're just doing
a big training run, I mean, you

293
00:15:24,600 --> 00:15:26,200
don't care.
That's not something you as a

294
00:15:26,200 --> 00:15:30,200
consumer observe.
So they what about the modelling

295
00:15:30,200 --> 00:15:33,640
of it is like where is it sit at
the moment about all this, the

296
00:15:33,840 --> 00:15:36,640
power required and the copper
required for data centres.

297
00:15:36,640 --> 00:15:40,960
Is this like one, how much, how
much exists at the moment and

298
00:15:40,960 --> 00:15:45,000
what is being modelled for the
future projections of these data

299
00:15:45,000 --> 00:15:47,560
centres or is it, yeah, very
opaque at the moment.

300
00:15:48,240 --> 00:15:50,600
It's, it's pretty opaque.
So if you look at, if you go to

301
00:15:50,960 --> 00:15:54,360
your friendly neighbourhood
consultants at Woodmac and so

302
00:15:54,360 --> 00:15:56,960
forth and they try to give you a
sense, you sort of and you poke

303
00:15:56,960 --> 00:16:01,200
them pretty hard on the details,
which is what I like to do find

304
00:16:01,200 --> 00:16:04,600
there's not as much there, which
is why I've been spent a lot of

305
00:16:04,600 --> 00:16:07,840
time talking to interconnect
companies and other sort of

306
00:16:08,040 --> 00:16:10,720
businesses to really get my head
around what those actual numbers

307
00:16:10,720 --> 00:16:14,320
are.
I think right now they're pretty

308
00:16:14,320 --> 00:16:15,800
accurate on what the intensity
is now.

309
00:16:15,840 --> 00:16:17,280
I think they can tell you where
we are today.

310
00:16:18,080 --> 00:16:21,600
I think going forward, some of
their projections, if you look

311
00:16:21,600 --> 00:16:26,040
at various ways companies have
thrifting on power and normally

312
00:16:26,600 --> 00:16:28,320
thrifting on power means
thrifting on COP.

313
00:16:28,560 --> 00:16:31,400
They're kind of the same thing
for that fundamental physical

314
00:16:31,400 --> 00:16:34,640
reason.
Those things are going to pick

315
00:16:34,640 --> 00:16:37,160
up in a quite a big way, but
really not for the next 18

316
00:16:37,160 --> 00:16:40,800
months, I would say just in
terms of the late times of how

317
00:16:40,800 --> 00:16:43,880
people plan this stuff out.
But once that starts to hit,

318
00:16:43,880 --> 00:16:46,560
it'll, I think it'll be, it'll
feel a little bit like what

319
00:16:46,560 --> 00:16:48,680
happened with battery metals
once all the Indonesian nickel

320
00:16:48,680 --> 00:16:53,440
supply starts to come on or once
all the mysterious spodumain out

321
00:16:53,440 --> 00:16:57,240
of Africa started to turn up and
people supply demand balances.

322
00:16:57,240 --> 00:16:59,520
But no one could really track it
at the port level that well.

323
00:16:59,840 --> 00:17:02,960
So I, I think it's going to be
the short like it's like a lot

324
00:17:02,960 --> 00:17:04,839
of things in commodities.
In the short run, momentum tends

325
00:17:04,839 --> 00:17:08,599
to work, but in the long run,
you know main reversions are a

326
00:17:08,599 --> 00:17:11,400
real pain in the bum.
Well all this bloody all that,

327
00:17:11,599 --> 00:17:15,280
the heat coming out of these
these data centres and the

328
00:17:15,440 --> 00:17:17,560
bloody the water cooling
required.

329
00:17:17,560 --> 00:17:20,680
Mate, I'm bloody thirsty.
If I can feel the heat, drink it

330
00:17:20,680 --> 00:17:26,720
out of my green water bottle.
Geez that just just green lands

331
00:17:26,720 --> 00:17:31,040
popped in me head.
Green water bloody tell you what

332
00:17:31,400 --> 00:17:34,120
isn't.
Ohh mate, have a have a look at

333
00:17:34,120 --> 00:17:35,800
this.
You've got me.

334
00:17:35,880 --> 00:17:38,120
Pipes.
Wow, water pipes.

335
00:17:38,280 --> 00:17:43,120
Jesus, pipes pipes, pipes.
There is water pipes flying out

336
00:17:43,120 --> 00:17:46,000
the door at Greenlands.
Talk about moving a shit tonne

337
00:17:46,000 --> 00:17:48,160
of water.
Look at the size of these pipes.

338
00:17:48,160 --> 00:17:50,200
They could transport a lot of
water, they could cool data

339
00:17:50,200 --> 00:17:51,480
centres, they could build mines,
they could.

340
00:17:51,720 --> 00:17:55,120
But they could transport iced
water to go straight into the

341
00:17:55,120 --> 00:17:57,840
data centre to keep that bastard
at 20 to 40.

342
00:17:57,840 --> 00:18:00,800
You want water, you don't want
water, They'll they'll fix it

343
00:18:00,800 --> 00:18:03,120
both for you, right?
10K10K.

344
00:18:03,240 --> 00:18:06,160
If you don't know if you want
water or don't on it, I'll tell

345
00:18:06,160 --> 00:18:08,840
you if you need it or not.
Simple as that.

346
00:18:09,040 --> 00:18:12,720
So make pipes, buddy.
Hey, they're freaking huge.

347
00:18:12,840 --> 00:18:14,240
Think water.
Think Greenlands.

348
00:18:14,520 --> 00:18:16,320
Very easy.
Think data centres.

349
00:18:16,320 --> 00:18:20,880
Think Greenlands.
And the the to your to build on

350
00:18:20,880 --> 00:18:24,640
your analogy to EVs Maddie, like
the the flimsy part, I imagine

351
00:18:24,640 --> 00:18:28,320
is just, you know, projecting
what the the the intensity is

352
00:18:28,320 --> 00:18:30,800
actually going to be over time.
Like how how how how?

353
00:18:31,560 --> 00:18:33,840
Well, that's, that's what
happened with, didn't it?

354
00:18:33,840 --> 00:18:36,640
Isn't that what also happened in
the lithium modelling, how they,

355
00:18:36,760 --> 00:18:39,360
yeah, they got wrong the actual
amount of lithium intensity

356
00:18:39,360 --> 00:18:43,000
going into the batteries, Yeah.
And was kind of confused with

357
00:18:43,000 --> 00:18:45,160
the inventory levels, right?
Yeah, we didn't know what was

358
00:18:45,160 --> 00:18:46,800
sitting, you know, at the the
battery.

359
00:18:46,800 --> 00:18:51,440
Maker, just a big ball of fuck.
Yeah, I mean it's so it's funny

360
00:18:51,440 --> 00:18:53,520
on the lithium thing.
So paper just came out with a

361
00:18:53,720 --> 00:18:55,440
normally what they do is they
pre lithiate.

362
00:18:55,440 --> 00:18:58,840
So they sort of charge the
battery slightly, let it sort of

363
00:18:58,840 --> 00:19:02,280
marinate for a period of time in
order to develop an interface

364
00:19:02,280 --> 00:19:06,800
layer on the anode, right.
And so people just tried, why

365
00:19:06,800 --> 00:19:08,960
don't we just run a bunch more
current through it all, more

366
00:19:08,960 --> 00:19:12,160
lithium out of the solution,
have a thicker interface layer.

367
00:19:12,160 --> 00:19:13,880
And what does that do to the
properties of battery and

368
00:19:13,880 --> 00:19:16,560
actually means you can get
almost double the cycle life.

369
00:19:16,560 --> 00:19:19,480
So great.
But this is, you know, it's

370
00:19:19,480 --> 00:19:22,000
funny you read these chemistry
papers and some guys like, oh,

371
00:19:22,000 --> 00:19:24,040
look, I've doubled the cycle up.
I'm like, good for you, pal.

372
00:19:24,560 --> 00:19:27,800
And they're like, yeah, but we
need like 25% more lithium per

373
00:19:27,800 --> 00:19:30,240
kWh.
Now I'm like, that is that is

374
00:19:30,240 --> 00:19:31,800
actually a big deal and
resources.

375
00:19:32,240 --> 00:19:40,240
So it's funny how there's people
on the yeah, I think there's

376
00:19:40,240 --> 00:19:45,280
often a lot of upside in talking
to nerds in chemistry labs, or

377
00:19:45,280 --> 00:19:48,160
at least the people who tell you
at the battery companies where

378
00:19:48,160 --> 00:19:52,440
their next sort of essentially
cathode plans are, because it

379
00:19:52,440 --> 00:19:55,240
has huge effects on supply
demand balances and this stuff.

380
00:19:56,000 --> 00:19:58,880
And yet you know that I find the
consultants or at least the

381
00:19:58,880 --> 00:20:01,120
people who produce the estimates
of long term supply demand

382
00:20:01,120 --> 00:20:03,360
balances are not super
responsive to what's going on

383
00:20:03,360 --> 00:20:05,640
there.
Alex, you've, you've written a,

384
00:20:05,640 --> 00:20:09,040
a fair bit talking about lithium
and how the, the Aussie industry

385
00:20:09,040 --> 00:20:13,200
and, and Western industries more
broadly can kind of insulate

386
00:20:13,200 --> 00:20:15,240
them from the, the volatility
that we've seen.

387
00:20:15,240 --> 00:20:18,800
You know, with prices running up
to 8000 now down to a bit over

388
00:20:19,200 --> 00:20:21,080
700 bucks.
I think to, to start, it'd be

389
00:20:21,080 --> 00:20:25,320
good to get a bit of a flavour
for how you sort of put this

390
00:20:25,320 --> 00:20:26,480
forward.
I know you've spoken about sort

391
00:20:26,480 --> 00:20:28,720
of strategic reserves.
I'm not sure if you're thinking

392
00:20:28,720 --> 00:20:30,840
has evolved since you you wrote
about this.

393
00:20:31,680 --> 00:20:35,240
Yeah, no, definitely.
I mean, the, so my thinking on

394
00:20:35,240 --> 00:20:38,600
this comes from doing far too
many lithium bankruptcies.

395
00:20:38,920 --> 00:20:44,840
So, you know, obviously Talison
got sold out of Sons of Gualia,

396
00:20:44,840 --> 00:20:46,760
which is they messed up their
gold hedge in that's another

397
00:20:46,760 --> 00:20:49,320
story entirely.
But then you had sort of another

398
00:20:49,320 --> 00:20:52,920
wave of failures where Galaxy
almost sort of drop dead.

399
00:20:54,520 --> 00:20:56,920
You then had the wave of
bankruptcies with sort of Alita

400
00:20:56,920 --> 00:21:02,160
Altura and so forth.
And the problem is that from a

401
00:21:02,400 --> 00:21:05,040
policy point of view, so say
you, you, you're a government,

402
00:21:05,040 --> 00:21:06,920
you want everyone to
decarbonize, you need lithium,

403
00:21:07,360 --> 00:21:09,800
cool.
But you need capital to commit

404
00:21:09,800 --> 00:21:11,960
to that.
And there's this end point of,

405
00:21:12,120 --> 00:21:15,920
OK, 2,000,000 tonnes, 3,000,000
tonnes, LC demand out 2030,

406
00:21:15,920 --> 00:21:20,920
whatever your number is.
But to get there, you know, you

407
00:21:20,920 --> 00:21:24,160
as an investor need to have the
company survive and not die all

408
00:21:24,160 --> 00:21:26,960
the time.
And that's pretty challenging,

409
00:21:26,960 --> 00:21:30,200
historic.
And so what's banned also for

410
00:21:30,200 --> 00:21:32,760
large companies, they tend to
under invest because they know

411
00:21:33,600 --> 00:21:35,680
these oversupply periods are
brutal.

412
00:21:36,200 --> 00:21:39,120
Part of the problem with lithium
is that you can't really store

413
00:21:39,120 --> 00:21:41,600
the end product.
So hydroxide, if you try to

414
00:21:41,600 --> 00:21:46,440
store that, but more than 12
months, it's very aquaphilic.

415
00:21:46,440 --> 00:21:48,880
It basically absorbs water in
the atmosphere and turns into

416
00:21:48,880 --> 00:21:51,600
sludge.
Carbonate's a bit better, but

417
00:21:51,600 --> 00:21:54,840
not a lot better.
So the way you kind of would

418
00:21:54,880 --> 00:21:59,000
manage a market like this is
being able to store Spodumain in

419
00:21:59,000 --> 00:22:04,000
some way that the problem is, is
that if you want to do some sort

420
00:22:04,000 --> 00:22:08,120
of physical trade where you say
buy a bunch of copper on the LMA

421
00:22:08,520 --> 00:22:10,600
and then head to the futures
curve is slipping upwards.

422
00:22:10,600 --> 00:22:11,920
You can hedge that a couple of
years out.

423
00:22:11,920 --> 00:22:14,800
You can you can get like a good
bit of leverage from bank on

424
00:22:14,800 --> 00:22:16,760
that.
You can't do any of that in

425
00:22:16,760 --> 00:22:20,600
spodumain because there's no
there's no futures, there's no

426
00:22:20,600 --> 00:22:25,920
warehousing infrastructure and
there's no financing as a result

427
00:22:25,920 --> 00:22:28,280
of that.
So This is why we kind of

428
00:22:28,280 --> 00:22:32,440
overshoot all the time in
lithium because there's no real

429
00:22:32,440 --> 00:22:34,200
bank funding.
It's kind of the difference

430
00:22:34,200 --> 00:22:38,120
between a market where you've
got strategic demand for storage

431
00:22:38,120 --> 00:22:43,320
and physical where you know, I
can go out and buy it and put it

432
00:22:43,320 --> 00:22:45,840
in a warehouse and so forth as a
fund.

433
00:22:45,840 --> 00:22:48,480
I can't do that in spudgering.
So trying to work out how to

434
00:22:48,480 --> 00:22:51,480
make sponge in a little bit more
of a drawn up LME style market

435
00:22:51,480 --> 00:22:54,320
is a isn't, I think important
because otherwise we'll get

436
00:22:54,320 --> 00:22:56,560
short again.
It'll take ages, people to put

437
00:22:56,560 --> 00:22:58,440
supply on and we'll be up at
some crazy level.

438
00:22:58,440 --> 00:23:02,040
And then the governments will be
upset because people don't want

439
00:23:02,040 --> 00:23:03,480
to buy these because they're
expensive again.

440
00:23:03,600 --> 00:23:07,000
And that's sort of that sort of
ping pong thing is not ideal.

441
00:23:07,080 --> 00:23:09,320
There's some bag holders that
have really opened.

442
00:23:09,320 --> 00:23:11,520
That happens.
On the.

443
00:23:12,000 --> 00:23:15,320
Stocks.
Yeah, I mean, so the way I model

444
00:23:15,320 --> 00:23:19,840
it is that if I if you're say
we're at whatever 700 bucks spot

445
00:23:19,880 --> 00:23:24,480
right now, if you think the long
term incentive price for spot is

446
00:23:24,480 --> 00:23:28,160
say 1500 bucks or probably high
if you're talking to someone

447
00:23:28,160 --> 00:23:32,560
like Patron Metals or Minarez or
what have you, then it is vastly

448
00:23:32,560 --> 00:23:35,400
more appealing to just sit on a
bunch of physical.

449
00:23:35,400 --> 00:23:38,080
You can store it cheaply and the
great thing about spot is it's

450
00:23:38,080 --> 00:23:40,320
not very reactive.
You can store it on a womb pad

451
00:23:40,320 --> 00:23:42,520
for a long time and and float it
later.

452
00:23:42,520 --> 00:23:44,200
I mean, that's certainly
happened out of bankruptcies

453
00:23:44,200 --> 00:23:48,720
before than it is to keep on
tripping money into some junior

454
00:23:48,720 --> 00:23:53,160
mining team who are still going
to conferences, still have too

455
00:23:53,160 --> 00:23:57,760
much SGNA, you know, not it's a
basically like there's a lot of

456
00:23:57,760 --> 00:23:59,920
negative carry.
I would say in the sense of like

457
00:23:59,960 --> 00:24:03,720
the cost to play in a mining
company, which is below it's,

458
00:24:04,200 --> 00:24:07,360
you know, all the AISC is a lot
higher than just sitting on

459
00:24:07,360 --> 00:24:10,400
rocks.
So, you know, a lot of people

460
00:24:10,400 --> 00:24:14,000
want in physical training,
they'll just accumulate physical

461
00:24:14,000 --> 00:24:16,120
rather than trying to mess
around with junior miners and

462
00:24:16,120 --> 00:24:17,800
all the all the risks associated
with them.

463
00:24:18,280 --> 00:24:21,280
So essentially but but that's
part of the reason why stuff

464
00:24:21,280 --> 00:24:23,880
like copper and zinc tend to
normalise a bit faster and be a

465
00:24:23,880 --> 00:24:25,400
little bit more better behaved
markets.

466
00:24:26,440 --> 00:24:29,280
So are you saying this, you know
this, this does happen, but it

467
00:24:29,280 --> 00:24:31,720
tends to happen perhaps with
commodity traders and people

468
00:24:31,720 --> 00:24:36,040
more in private markets that
we're not as sort of Privy to?

469
00:24:37,520 --> 00:24:39,040
Yeah.
I mean, so commodity traders can

470
00:24:39,040 --> 00:24:40,880
take a view.
I mean, I'll give you an

471
00:24:40,880 --> 00:24:43,080
example.
In 2015, it's fairly well known

472
00:24:43,880 --> 00:24:46,640
Glencore accumulated a massive
position in zinc and then

473
00:24:46,640 --> 00:24:49,000
preceded to shut down some of
those zinc capacity, which is

474
00:24:49,640 --> 00:24:52,040
pretty clever depending on how
you look at things.

475
00:24:52,480 --> 00:24:55,080
But that's, you know, you can't
actually accumulate that

476
00:24:55,080 --> 00:24:57,600
physical leg in lithium.
You basically just have to take

477
00:24:57,600 --> 00:25:01,840
the corporate risk and if you
want to mess around with futures

478
00:25:02,000 --> 00:25:05,080
on, it's all cash settled.
That's all references, Asian

479
00:25:05,080 --> 00:25:08,160
prices, there's a little bit of
bubbly wobbly stuff in terms of

480
00:25:08,640 --> 00:25:10,920
how accurate those prices are.
And then you know, there's stuff

481
00:25:10,920 --> 00:25:13,400
you can't store, you can't sit
on it for more than about 12

482
00:25:13,400 --> 00:25:18,120
months at best.
So that means if you, if you're

483
00:25:18,120 --> 00:25:20,800
going to bet on the physical
market normalising, it's going

484
00:25:20,800 --> 00:25:23,120
to happen in 12 months or else
you've got to flog your

485
00:25:23,120 --> 00:25:25,080
inventory very quickly before it
goes bad.

486
00:25:25,600 --> 00:25:28,240
Whereas if I just want to make
you like cop cathode, I can sit

487
00:25:28,240 --> 00:25:30,960
on that for a more or less
indefinite period of time.

488
00:25:31,840 --> 00:25:35,360
And so essentially long term,
long term value investing in

489
00:25:35,360 --> 00:25:38,880
physical is not possible on
lithium, which is why it feels

490
00:25:38,880 --> 00:25:42,000
like a very cracked out market
wherever on short term because

491
00:25:42,000 --> 00:25:43,760
they kind of have to be as a
current stats.

492
00:25:44,760 --> 00:25:48,320
So on, on a slightly different
tech, we've seen a lot of the

493
00:25:48,320 --> 00:25:52,120
companies down here try to go
downstream IGO Minres briefly

494
00:25:52,120 --> 00:25:56,200
before they, they sold out.
You've also sort of, you know,

495
00:25:56,200 --> 00:25:58,080
in tandem seen a lot of
discussion with, with

496
00:25:58,080 --> 00:26:00,480
governments encouraging it and
what not.

497
00:26:00,480 --> 00:26:02,280
What, what are the kind of views
you've come to take it?

498
00:26:02,280 --> 00:26:05,200
You, you spend a lot of time
looking at, at Asia, you know,

499
00:26:05,280 --> 00:26:07,800
cattle and the like, who've
done, you know, phenomenally

500
00:26:07,800 --> 00:26:11,800
well in their sort of iteration
and and learning turnover.

501
00:26:12,240 --> 00:26:14,720
Why have we struggled so much in
Australia?

502
00:26:16,160 --> 00:26:19,120
I think a lot of, I mean,
building a refinery is to a

503
00:26:19,120 --> 00:26:21,160
certain extent it's easier if
you've done them before.

504
00:26:21,200 --> 00:26:23,520
And of course China's built a
lot of lithium refining

505
00:26:23,520 --> 00:26:25,720
capacity.
There's also just some of it's

506
00:26:25,720 --> 00:26:28,200
just the same reason why it
costs a lot to build a railway

507
00:26:28,200 --> 00:26:30,240
in Australia versus bilbon in
China.

508
00:26:30,240 --> 00:26:33,560
It's just labour costs,
efficiencies.

509
00:26:35,800 --> 00:26:39,880
You know, some people would
point to C, FM, EU, no

510
00:26:39,960 --> 00:26:43,040
particular opinion on my side
there, but it's just, it's the

511
00:26:43,040 --> 00:26:46,880
reason why I built cost building
stuff in, you know, a lot more

512
00:26:46,880 --> 00:26:49,160
developed jurisdictions is just
generally more costly.

513
00:26:49,160 --> 00:26:51,400
There's no, there's no mystery
there.

514
00:26:52,280 --> 00:26:58,720
I think the issue is, is that
the producers, the advantage of

515
00:26:58,720 --> 00:27:02,200
having downstream is that you
are selling a end product which

516
00:27:02,200 --> 00:27:05,440
can be sold directly to Japan or
Korea or where or the US or what

517
00:27:05,440 --> 00:27:07,920
have you.
Whereas if you're selling spod,

518
00:27:08,120 --> 00:27:10,440
to a certain extent, you are at
the mercy of whatever the

519
00:27:11,640 --> 00:27:16,640
Chinese market is doing.
And so you particularly in a

520
00:27:16,640 --> 00:27:20,160
bear market, the discounts and
physical spot can be pretty

521
00:27:20,160 --> 00:27:22,240
terrible.
And so that's what's led to a

522
00:27:22,240 --> 00:27:24,800
lot of mine failures and
closures also means if you're

523
00:27:24,800 --> 00:27:27,800
selling spot to China, you're
facing someone in Shanghai.

524
00:27:28,200 --> 00:27:33,240
The understanding of talk law
and enforceability of contracts

525
00:27:33,240 --> 00:27:35,640
is going to be very different to
you, historically speaking.

526
00:27:35,640 --> 00:27:38,440
So we've seen a lot of
situations like with a leader

527
00:27:38,440 --> 00:27:41,920
where the Chinese off taker just
said, actually, no, I don't want

528
00:27:41,920 --> 00:27:45,240
to take it to the 800 bucks
anymore spot 650 and they get

529
00:27:45,240 --> 00:27:47,600
the company ran out of cash in
two months or so.

530
00:27:48,080 --> 00:27:50,720
So there's a there's a credit
risk mitigating thing there too.

531
00:27:51,680 --> 00:27:55,080
So I think there's but you know,
this is another thing.

532
00:27:55,080 --> 00:27:57,440
It's essentially do order
companies and people who are

533
00:27:57,440 --> 00:28:05,200
buyers of chemicals want to have
an enforceable, stable contract

534
00:28:05,200 --> 00:28:06,560
chamber.
They want something which is

535
00:28:06,560 --> 00:28:08,840
going to be very cheap when it's
good, very expensive when it's

536
00:28:08,840 --> 00:28:11,040
not, and very unreliable at any
given point in time.

537
00:28:11,720 --> 00:28:16,080
And so there's a there's sort of
a security versus price trade

538
00:28:16,080 --> 00:28:19,440
off here, which people are kind
of ignoring, but tends to bite

539
00:28:19,440 --> 00:28:21,440
them on the bum at the worst
possible times.

540
00:28:21,440 --> 00:28:23,880
I did.
I did not know about that that

541
00:28:23,880 --> 00:28:26,240
detail with with a leader in
there and they're.

542
00:28:26,240 --> 00:28:30,120
Also, yeah, and Altura, they
were, they were getting they

543
00:28:30,120 --> 00:28:33,120
they also had, you know, people
not taking cargoes or deferring

544
00:28:33,120 --> 00:28:35,440
cargoes non stop.
This is yeah.

545
00:28:35,440 --> 00:28:40,040
It was sort of interesting how a
lot of these guys in 2019, they

546
00:28:40,040 --> 00:28:42,040
didn't raise equity when they
cook because they're off taker

547
00:28:42,040 --> 00:28:43,840
and say no, no, no, I'm good for
it, I'm good for it, I'm good

548
00:28:43,840 --> 00:28:44,960
for it.
And then suddenly, actually I'm

549
00:28:44,960 --> 00:28:48,960
gonna take any material, get
wrecked, come and send me that

550
00:28:48,960 --> 00:28:51,920
is.
Maybe like the last one on, on

551
00:28:51,920 --> 00:28:55,200
kind of, you know, the lithium
companies like you've had a fair

552
00:28:55,200 --> 00:28:58,400
bit of work with the, the, the
miners that have found their way

553
00:28:58,400 --> 00:28:59,840
into bankruptcy for whatever
reason.

554
00:29:00,160 --> 00:29:03,360
Yeah, I'm, I'm.
I'm guessing you'd take a

555
00:29:03,360 --> 00:29:05,960
relatively positive view on the
on the credit case for a lot of

556
00:29:05,960 --> 00:29:08,720
these miners, but I'd be curious
to know your view on the equity

557
00:29:08,720 --> 00:29:10,920
case?
Yeah.

558
00:29:10,920 --> 00:29:16,160
I mean, so the problem is the
credit case is that it's hard.

559
00:29:16,320 --> 00:29:18,720
You really have, you're really
kind of the problem is there's

560
00:29:18,720 --> 00:29:22,120
no way to really hedge or manage
physical risk now.

561
00:29:22,560 --> 00:29:25,640
So the credit case is you might
as well be getting paid equity

562
00:29:25,640 --> 00:29:28,480
returns in the good times
because you're certainly taking

563
00:29:28,480 --> 00:29:30,360
something close to equity risk
in the bad times.

564
00:29:31,160 --> 00:29:35,080
I think on the equity case now
the issue is, is that are we

565
00:29:35,080 --> 00:29:40,680
going to get some voluntary
reduction in supply to stabilise

566
00:29:40,680 --> 00:29:43,560
the market somewhat?
I think we should.

567
00:29:43,560 --> 00:29:47,560
The reason is, is that a lot of
these miners don't have a tonne

568
00:29:47,560 --> 00:29:49,640
of debt.
I guess min res is a notable

569
00:29:49,640 --> 00:29:51,960
exception now.
So they do have the capacity.

570
00:29:51,960 --> 00:29:54,560
So we're just going to throttle
back supply until this balances

571
00:29:54,560 --> 00:29:56,720
and we're not going to produce
any losses.

572
00:29:58,120 --> 00:30:01,760
So I think there's the scope for
these guys to kind of reduce

573
00:30:01,760 --> 00:30:04,440
output without getting in
trouble with their creditors.

574
00:30:04,880 --> 00:30:07,560
Whereas a lot of these guys last
time around had covenants with

575
00:30:07,560 --> 00:30:09,800
creditors where they said you
got to produce or like we're

576
00:30:09,800 --> 00:30:12,440
going to pull on this line next
week, which just made the sell

577
00:30:12,440 --> 00:30:14,720
off all the worse.
And so I think that there's

578
00:30:14,720 --> 00:30:16,160
scope for supply discipline.
Now.

579
00:30:18,000 --> 00:30:21,680
I, I think the equities though
that they will only bottom and

580
00:30:21,680 --> 00:30:23,520
physical kind of bottoms.
And the scary thing for a lot of

581
00:30:23,520 --> 00:30:26,040
the equities now is a lot of
these guys are making pretty

582
00:30:26,040 --> 00:30:28,840
sizable cash losses.
So, you know, you look at all

583
00:30:28,840 --> 00:30:31,200
these names and if things don't
get better soon, that you've got

584
00:30:31,200 --> 00:30:32,920
to assume there's a certain
amount of dilution coming down

585
00:30:32,920 --> 00:30:35,680
the Pike.
Given you've spent this time

586
00:30:35,680 --> 00:30:38,680
looking, you know, all the way
from the raw materials through

587
00:30:38,680 --> 00:30:41,840
to the, the, you know, the final
technology.

588
00:30:42,160 --> 00:30:45,320
I'm interested to hear, Alex,
what you kind of make of what

589
00:30:45,320 --> 00:30:49,440
you kind of think the end game
is for the European and the US

590
00:30:49,440 --> 00:30:53,880
automakers given the the rise
of, you know, BYU and the whole

591
00:30:53,880 --> 00:30:57,120
suite of Chinese AV makers.
Yeah.

592
00:30:57,200 --> 00:31:01,000
I mean, there's, yeah, the
Germans have not covered

593
00:31:01,000 --> 00:31:02,920
themselves in glory.
And I think the markets

594
00:31:02,920 --> 00:31:05,080
gradually figured that out over
the course of the last six to

595
00:31:05,080 --> 00:31:10,240
eight months.
I think the there's a lot of

596
00:31:10,240 --> 00:31:13,240
moving parts here.
I mean, firstly, there's a

597
00:31:13,240 --> 00:31:16,200
couple of things which have kind
of become quite clear from

598
00:31:16,200 --> 00:31:19,080
consumer point of view in China.
They've got charging stations

599
00:31:19,120 --> 00:31:21,200
all over the place.
People are very comfortable

600
00:31:21,200 --> 00:31:23,640
buying EB's.
Nobody wants to be, you know,

601
00:31:23,640 --> 00:31:29,640
driving an oversized iPhone with
wheels and not be able to charge

602
00:31:29,640 --> 00:31:31,520
it.
That's sort of a people have a

603
00:31:31,520 --> 00:31:35,640
natural angst about that.
So I think demand for EVs in a

604
00:31:35,640 --> 00:31:39,600
lot of markets is very heavily
capped by how comfortable people

605
00:31:39,600 --> 00:31:41,960
are about charging.
So in the US they've started to

606
00:31:41,960 --> 00:31:44,520
really pick up that roll out.
So that's that's been very

607
00:31:44,520 --> 00:31:46,480
constructive.
But in the interim, you're

608
00:31:46,480 --> 00:31:49,320
seeing a lot of demand for what
they call EREVS or extended

609
00:31:49,320 --> 00:31:53,720
range electric vehicles.
So you get about plus -100 KS of

610
00:31:53,720 --> 00:31:56,640
range of the battery and then
you've got plug in for the rest.

611
00:31:57,280 --> 00:32:00,160
That seems to be the sweet spot
for a lot of markets in the US

612
00:32:00,920 --> 00:32:05,160
and a lot of Europe now too.
I think what happened with autos

613
00:32:05,160 --> 00:32:09,520
is they said, OK, we've got our
core IC thing, we're going to

614
00:32:09,520 --> 00:32:12,880
have a specialised TV thing.
But then DVD take up wasn't

615
00:32:12,880 --> 00:32:15,520
quite as good as they expected
because people aren't quite

616
00:32:15,640 --> 00:32:16,840
fully comfortable making the
jump.

617
00:32:16,840 --> 00:32:18,840
The guys who are doing very well
right now actually Toyota,

618
00:32:19,160 --> 00:32:22,240
because I've always had this
sort of bias towards hybrids or

619
00:32:22,240 --> 00:32:25,040
degrees of hybridization or plug
in.

620
00:32:26,760 --> 00:32:30,400
So yeah, so I think that's how
everyone's kind of like people

621
00:32:30,400 --> 00:32:32,920
haven't kind of actually, well,
most of the Autocomp haven't

622
00:32:32,920 --> 00:32:35,680
kind of got models which are
really clicked with people that

623
00:32:35,680 --> 00:32:38,760
well either on price point or
sizing.

624
00:32:39,200 --> 00:32:42,640
But that's starting to change
and in China, of course,

625
00:32:42,640 --> 00:32:44,320
everyone feels very comfortable
on DVS.

626
00:32:44,320 --> 00:32:46,480
They just buy them and be what
is happy and maximum.

627
00:32:47,080 --> 00:32:49,120
In, in China, I know you've
spent a lot of time, Alex,

628
00:32:50,120 --> 00:32:52,840
thinking about their, their
energy market and, and the make

629
00:32:52,840 --> 00:32:56,120
up of it.
And, and I mean, there's a few

630
00:32:56,120 --> 00:32:59,040
kind of interesting facets of
the, of the Chinese energy

631
00:32:59,040 --> 00:33:01,840
market that you know, aren't
immediately obvious to, to, to

632
00:33:01,840 --> 00:33:04,280
people, including myself until I
kind of read, read, read some of

633
00:33:04,280 --> 00:33:06,880
your writing.
We, we all kind of know about

634
00:33:06,880 --> 00:33:10,600
the, the hydropower industry
that, you know, that, that, that

635
00:33:10,600 --> 00:33:13,240
China's the beneficiary of.
But it's not necessarily like

636
00:33:13,240 --> 00:33:16,840
strictly intuitive that the, the
reliance on, on or the

637
00:33:16,840 --> 00:33:20,000
utilisation of hydropower
actually drives demand for

638
00:33:20,000 --> 00:33:22,400
import of, of, of coal and, and
gas.

639
00:33:23,280 --> 00:33:25,520
Can you, can you, can you tell
me what, Yeah, what you found

640
00:33:25,520 --> 00:33:26,960
there?
Yeah.

641
00:33:26,960 --> 00:33:29,640
I mean, if you think about just
think about the shape of sort of

642
00:33:29,640 --> 00:33:32,680
China, it's got a big sort of
table top in Tibet.

643
00:33:33,200 --> 00:33:37,640
And then, you know, essentially
the the cradle of Chinese

644
00:33:37,640 --> 00:33:41,640
civilization is basically people
who grew crops in the river

645
00:33:41,640 --> 00:33:45,600
systems that hang off that,
namely the Yangtze and Yellow

646
00:33:45,600 --> 00:33:48,920
River.
So the there's an enormous

647
00:33:48,920 --> 00:33:52,000
amount of hydro, but you know,
as in any sort of power market

648
00:33:52,000 --> 00:33:54,960
with a lot of hydro, whether
that's Norway or, you know, the

649
00:33:54,960 --> 00:33:58,040
Alps in Switzerland or Austria,
it's variable.

650
00:33:58,400 --> 00:34:01,360
And the interesting thing with
the hydro in China is that a lot

651
00:34:01,360 --> 00:34:04,880
of the hydro, you know,
basically there's water coming

652
00:34:04,880 --> 00:34:07,200
off Tibet and Sichuan and then
going downhill.

653
00:34:07,520 --> 00:34:10,800
There's very big high voltage to
connect to southern provinces of

654
00:34:10,800 --> 00:34:15,280
Guangdong and Guangxi, which are
big importers of thermal coal.

655
00:34:15,760 --> 00:34:19,400
So essentially when the hydro
availability is excellent and

656
00:34:20,120 --> 00:34:23,000
there's lots of power to export
from these inland provinces

657
00:34:23,000 --> 00:34:26,560
close to the southern ones and
there's a bit of a, you know,

658
00:34:27,000 --> 00:34:29,400
humid, my chase moment for
thermal exporters.

659
00:34:31,000 --> 00:34:33,440
And so, yeah, so I do track it
because it is important

660
00:34:33,440 --> 00:34:37,840
statistically sort of more
medium term signals and Asian

661
00:34:37,840 --> 00:34:40,719
demand for thermal coal.
Northern China is kind of its

662
00:34:40,719 --> 00:34:42,480
own thing.
They have plenty of coal in the

663
00:34:42,480 --> 00:34:45,239
north.
They, you know, unless they do

664
00:34:45,239 --> 00:34:47,679
something silly on the supply
side, it's it's a little bit

665
00:34:47,679 --> 00:34:51,000
more of a stable system.
So, yeah, but you know, this is

666
00:34:51,000 --> 00:34:52,639
a thing in Europe too.
I mean, the years where they've

667
00:34:52,639 --> 00:34:56,360
got weak hydro, suddenly the
market feels super tight and

668
00:34:56,360 --> 00:34:57,680
gas.
And there's a reason for that,

669
00:34:57,840 --> 00:35:00,120
right?
And the good news is that in

670
00:35:00,120 --> 00:35:02,200
most countries you can get
really good dam and rainfall

671
00:35:02,200 --> 00:35:04,920
data.
And China, the hydro data is

672
00:35:05,040 --> 00:35:08,520
they kind of often put it online
and make it very difficult to

673
00:35:08,520 --> 00:35:10,920
scrape and they pull it off.
It's it's a little bit of a cat

674
00:35:10,920 --> 00:35:12,560
and mouse game in terms of
analysis.

675
00:35:12,960 --> 00:35:15,560
But yeah, it's worth the trouble
I generally find.

676
00:35:15,560 --> 00:35:19,080
So is it literally how much it
the variability in the hydro

677
00:35:19,200 --> 00:35:21,640
based on how much it rains in
Tibet?

678
00:35:21,840 --> 00:35:23,840
Is it as simple as that?
Yeah.

679
00:35:23,840 --> 00:35:25,640
I mean, basically you get the
monsoon, right?

680
00:35:25,640 --> 00:35:27,280
Comes off the Indian Ocean,
bang.

681
00:35:27,360 --> 00:35:30,880
It's the, you know, Himalayas, A
lot of it lands on the Indian

682
00:35:30,880 --> 00:35:33,840
side, a lot of it flows up onto
the Chinese side, and then that

683
00:35:33,840 --> 00:35:36,600
sort of drives China's hydro
system as it goes towards the

684
00:35:36,600 --> 00:35:40,680
East China Sea.
That's pretty simple.

685
00:35:40,680 --> 00:35:43,840
So it's sort of this monsoon.
The funny thing is now in India,

686
00:35:44,760 --> 00:35:47,560
because you've got also some
coal imports there, the

687
00:35:48,400 --> 00:35:52,360
behaviour of the monsoon on the
Indian side now substantially

688
00:35:52,360 --> 00:35:54,320
impacts demand for import
thermal coal there.

689
00:35:54,320 --> 00:35:58,440
So I didn't do hydrological
engineering, but sometime or

690
00:35:58,440 --> 00:36:01,160
meteorology, but it's sort of
kind of important to.

691
00:36:01,160 --> 00:36:02,760
Transfer stuff like.
Asian.

692
00:36:02,760 --> 00:36:05,640
Column close enough, yeah.
Yeah, it is.

693
00:36:05,800 --> 00:36:08,800
It is what it is.
It's if it moves the market hard

694
00:36:08,800 --> 00:36:11,720
and it's under under covered,
then I'll take a crack at it.

695
00:36:12,040 --> 00:36:13,440
Sure.
You you checked in the number

696
00:36:13,440 --> 00:36:17,480
that it at times can translate
to 4% of the global electricity

697
00:36:17,760 --> 00:36:20,400
output.
Yeah, Yeah, that blew my mind.

698
00:36:21,160 --> 00:36:23,160
But and, and this stuff can
swing.

699
00:36:23,160 --> 00:36:25,440
So if you think of like in a
commodity market, if you're like

700
00:36:26,320 --> 00:36:30,000
global supply demands like 345
percent tight, I mean that is

701
00:36:30,080 --> 00:36:32,760
that's, that's like 2022 crisis
grade stuff.

702
00:36:33,520 --> 00:36:37,040
And this stuff can be up and
down 20% year to year.

703
00:36:37,440 --> 00:36:40,400
So it's an enormous influence
not just on their market, but

704
00:36:40,400 --> 00:36:43,640
globally.
So yeah, it's worth tracking.

705
00:36:43,840 --> 00:36:46,680
Yeah, it's it's they don't make,
they don't make your life easy.

706
00:36:46,680 --> 00:36:49,080
Like I said, there's not like a
nice little data API where you

707
00:36:49,080 --> 00:36:52,000
can pull down all the dam levels
and everything that's going on

708
00:36:52,000 --> 00:36:55,360
minute to minute like you can in
Norway or or Switzerland for

709
00:36:55,360 --> 00:36:58,520
that matter.
Is that just tying back into you

710
00:36:58,520 --> 00:37:02,680
said global, global energy
demand and then heading towards

711
00:37:02,680 --> 00:37:07,560
this future of EVs, if everyone,
if there's is a massive uptake

712
00:37:07,560 --> 00:37:11,640
and everyone's charging EVs
overnight, how much is that?

713
00:37:12,360 --> 00:37:15,480
Is that negligible or massive in
terms of global power demand

714
00:37:15,720 --> 00:37:20,720
once you're replying combustion?
Look, it depends on, there's

715
00:37:20,720 --> 00:37:23,320
lots of different numbers.
There's so many studies on this,

716
00:37:23,320 --> 00:37:25,160
right?
You kind of start to get a sense

717
00:37:25,160 --> 00:37:27,120
of what the error bars are on
the numbers.

718
00:37:27,200 --> 00:37:34,080
If you look at moving everyone
to EVs and then you've got, you

719
00:37:34,080 --> 00:37:38,040
know, moving industrial
processes to hydrogen or, or

720
00:37:38,040 --> 00:37:40,760
heat pumps or what have you.
Normally the bump is somewhere

721
00:37:40,760 --> 00:37:43,240
in the order of 20 to 25% off
the baseline.

722
00:37:44,840 --> 00:37:46,560
So that's substantial.
But that's something which plays

723
00:37:46,560 --> 00:37:50,000
out over, you know, to 2050 or
one of you 0 targeted.

724
00:37:50,000 --> 00:37:52,040
So that's, you know, you can
kind of absorb that.

725
00:37:52,280 --> 00:37:54,800
The data centre stuff is a bit
spicy because people are saying

726
00:37:55,280 --> 00:37:59,000
some investment banks anyway are
saying we're going to be 20% up

727
00:37:59,040 --> 00:38:02,160
in six years and that's, that's
a big deal.

728
00:38:02,280 --> 00:38:05,040
If that's real.
I'm becoming a little bit more

729
00:38:05,040 --> 00:38:08,400
sceptical on how real that is.
But that's a real thing.

730
00:38:09,880 --> 00:38:12,240
So yeah, but the interesting
thing is also like you've got

731
00:38:12,240 --> 00:38:16,120
all these EVs on on and people
can sort of time their charging

732
00:38:16,120 --> 00:38:17,880
and then people put solar on
their houses.

733
00:38:17,880 --> 00:38:21,480
Then you know, how much at the
substation that you actually

734
00:38:21,480 --> 00:38:23,840
seen demand go up?
And what does the shape of that

735
00:38:23,840 --> 00:38:25,480
look like?
And it's, and they need to say

736
00:38:25,520 --> 00:38:28,000
this, electrical engineers spend
a lot of time modelling this

737
00:38:28,000 --> 00:38:29,680
stuff out.
It's kind of interesting, but

738
00:38:29,680 --> 00:38:32,000
it's all it's an emerging
picture as.

739
00:38:32,680 --> 00:38:34,200
Yeah.
So for the data centres like

740
00:38:34,200 --> 00:38:37,400
when this big uptake of them, if
it does happen, is that going to

741
00:38:37,400 --> 00:38:41,600
replace anything in the world
like reduce the need of anything

742
00:38:41,600 --> 00:38:45,400
or is it just going to be a pure
edition of the need for copper,

743
00:38:45,400 --> 00:38:47,360
the need for extra power
etcetera?

744
00:38:49,240 --> 00:38:51,520
Well, I mean, there's obviously
all these efficiencies you get

745
00:38:52,040 --> 00:38:56,320
from these.
So I mean, I use AI use like

746
00:38:56,320 --> 00:38:58,640
Claude's pretty good.
If you're writing code, if you,

747
00:39:00,360 --> 00:39:03,480
you know, feeling a bit dusty 1
morning and you're not really

748
00:39:03,480 --> 00:39:06,800
feeling like writing some
boilerplate stuff, you can get

749
00:39:07,320 --> 00:39:10,200
AI to do a lot of that for you.
Now that's kind of a big deal.

750
00:39:10,920 --> 00:39:12,800
Does that replace anything in
the physical world?

751
00:39:12,800 --> 00:39:17,360
Well, TBD for example, one thing
that's kind of crazier this AI

752
00:39:17,360 --> 00:39:21,880
stuff is that because you can
now essentially brute force

753
00:39:22,800 --> 00:39:27,680
modelling physical chemistry.
So how ions move through a

754
00:39:27,680 --> 00:39:30,960
substrate or what have you,
people are now the search for

755
00:39:31,000 --> 00:39:35,440
better battery cathodes is now
increasingly happening in

756
00:39:35,440 --> 00:39:37,800
silicon.
And then they go from say 3

757
00:39:37,800 --> 00:39:40,640
million options down to 70.
And then they test those 70 on a

758
00:39:40,640 --> 00:39:42,800
wet bench.
So I think you're going to see

759
00:39:42,800 --> 00:39:45,320
it in terms of the speed up in
technology in a lot of areas.

760
00:39:46,080 --> 00:39:48,120
But I think it's going to be big
in pharmacology.

761
00:39:48,120 --> 00:39:50,720
You've already seen that and
also in physical chemistry for,

762
00:39:52,000 --> 00:39:54,360
you know, battery cathodes,
materials and that sort of

763
00:39:54,360 --> 00:39:57,760
stuff.
So it's it's not like you can

764
00:39:57,760 --> 00:40:00,840
just sort of go into a couple of
line items in Excel model and

765
00:40:00,840 --> 00:40:03,280
show where it's going to turn
up, but it is sort of popping up

766
00:40:03,280 --> 00:40:05,360
all over the place.
So I think, I think one of the

767
00:40:05,360 --> 00:40:08,440
big pieces we haven't yet spoken
about that ties in is stationary

768
00:40:08,440 --> 00:40:10,320
storage.
What, what do you kind of make

769
00:40:10,320 --> 00:40:15,840
of the consensus growth numbers
out there for stationary storage

770
00:40:15,840 --> 00:40:19,400
and you know how that plays into
metals demands and all these

771
00:40:19,400 --> 00:40:22,160
sorts of things?
I, I think it's so I think it's

772
00:40:22,160 --> 00:40:25,320
sort of interesting.
There's there's often a very

773
00:40:25,320 --> 00:40:29,120
it's it's, it's tricky to model.
The reason is, is that right

774
00:40:29,120 --> 00:40:33,360
now, given spreads you see
intraday in say the NEM in

775
00:40:33,360 --> 00:40:37,160
Australia, NSW or Victoria or
something, you know, prices are,

776
00:40:37,640 --> 00:40:41,040
I could open, you've probably
seen that open NEM website.

777
00:40:41,040 --> 00:40:43,080
You can see prices are basically
negative for about four or five

778
00:40:43,080 --> 00:40:45,520
hours a day.
Now they get smashed up to like

779
00:40:45,520 --> 00:40:49,880
300 bucks for about 90 minutes
or two hours around dinner time.

780
00:40:49,880 --> 00:40:52,920
And then it's back down to
something sensible for people

781
00:40:52,920 --> 00:40:54,520
who want batteries.
They're absolutely meant to you.

782
00:40:54,680 --> 00:40:57,640
I mean, you can do sort of back
of the envelope stuff even

783
00:40:57,640 --> 00:40:59,880
assuming they don't get any of
this spending reserve or

784
00:40:59,880 --> 00:41:04,680
frequency and ancillary services
revenue, they're they're doing

785
00:41:04,680 --> 00:41:06,080
great.
But the interesting thing is as

786
00:41:06,080 --> 00:41:08,480
a lot of storage goes in those
spreads will come down pretty

787
00:41:08,480 --> 00:41:09,960
hard.
So there's kind of an

788
00:41:09,960 --> 00:41:12,920
equilibrium where you need
enough spread to justify that

789
00:41:12,920 --> 00:41:15,760
store stationary demand.
I think it's very robust now,

790
00:41:16,120 --> 00:41:18,760
but in 3-4 years where the
spreads going to be And then if

791
00:41:18,760 --> 00:41:21,840
you've got Snowy 2, at least in
Australia, coming over the top

792
00:41:21,840 --> 00:41:25,680
with a hammer in 2028, then is
that going to slow down?

793
00:41:25,760 --> 00:41:30,160
I think in the meantime there's
sort of going to be a a speeding

794
00:41:30,160 --> 00:41:33,080
up and slowing down thing where
spreads very wide now.

795
00:41:33,080 --> 00:41:34,880
Doesn't make sense to build a
solar farm if you're going to

796
00:41:34,880 --> 00:41:36,080
have to sell it for negative
power.

797
00:41:36,080 --> 00:41:39,040
That's pretty stupid.
But then people pile into

798
00:41:39,040 --> 00:41:42,240
batteries, solar farm gets a
better level, people dump in

799
00:41:42,240 --> 00:41:45,360
more solar and there's going to
be sort of a, a bit of a sort of

800
00:41:45,640 --> 00:41:48,200
out of sequence sort of sign and
cause waves thing going on

801
00:41:48,200 --> 00:41:49,960
there.
Reminds me of the avocado farms,

802
00:41:49,960 --> 00:41:52,960
'cause they remember when
avocados were like 7 bucks and

803
00:41:53,240 --> 00:41:56,120
the people who had farms were
minting it and then so everyone

804
00:41:56,120 --> 00:41:58,280
bloody planted avocado farms
everywhere.

805
00:41:58,280 --> 00:42:01,360
They take six years to come to
fruit and then by then there was

806
00:42:01,520 --> 00:42:03,800
like avocado, 2 bucks 'cause
there's so many more avocados.

807
00:42:04,800 --> 00:42:07,000
Thought the cure for high prices
is high prices would have.

808
00:42:07,000 --> 00:42:10,080
Been more in the Neero resource.
That's odd.

809
00:42:10,920 --> 00:42:12,400
I think I think that's exactly
right.

810
00:42:12,440 --> 00:42:14,760
I mean, the difference is though
is like in solar, it takes like

811
00:42:14,760 --> 00:42:16,960
an 18 months, two years to throw
up the farm, so long as you get

812
00:42:16,960 --> 00:42:19,960
your permits, batteries.
It's like some of the sometimes

813
00:42:19,960 --> 00:42:22,920
you can put these installations
together 6 to 12 months.

814
00:42:23,160 --> 00:42:25,240
Yeah.
So, so it's going to be a little

815
00:42:25,240 --> 00:42:27,800
bit more of a tighter cycle, but
I think that you're going to

816
00:42:27,800 --> 00:42:30,160
start to see that play out a bit
and it should mean prices are

817
00:42:30,320 --> 00:42:32,360
mostly a bit less cracked out
going forward.

818
00:42:32,360 --> 00:42:34,680
Well, where things get spicy and
even in the electrical

819
00:42:34,680 --> 00:42:37,600
engineering you guys do these
big models, there's a guy called

820
00:42:37,600 --> 00:42:39,520
Tom Brown at University of
Berlin.

821
00:42:39,520 --> 00:42:42,560
He does some great stuff.
The time that's going to always

822
00:42:42,560 --> 00:42:45,840
going to be dicey is like it's
cold winter, not a lot of sun,

823
00:42:45,840 --> 00:42:48,360
not a lot of wind.
And that's when things will get

824
00:42:48,360 --> 00:42:50,960
silly.
So that's where you're going to

825
00:42:50,960 --> 00:42:55,120
need electrolysis for, you know,
150 hours of a winter where

826
00:42:55,120 --> 00:42:58,680
things are not great and the
prices will always be nuts then.

827
00:42:58,680 --> 00:43:01,800
And then they'll be, you know,
2530 bucks for most of the rest

828
00:43:01,800 --> 00:43:04,400
of the time.
Is it just a function of like of

829
00:43:04,960 --> 00:43:07,920
of like the, you know, the best
implementation and requirement,

830
00:43:07,920 --> 00:43:10,400
all that sort of stuff is just a
function of the penetration of

831
00:43:10,400 --> 00:43:12,920
solar and, and, and wind in any,
in any market.

832
00:43:14,200 --> 00:43:16,680
Yeah, I mean places like
Australia, it's super cheap.

833
00:43:16,720 --> 00:43:20,120
I mean, The thing is, is that I
mean, people get very political

834
00:43:20,120 --> 00:43:24,800
about nuclear.
And my opinion is that if you're

835
00:43:24,800 --> 00:43:29,280
summer, which is has not much
sun, not all, not great wind and

836
00:43:29,280 --> 00:43:32,480
it's cold said you're crazy not
to the nuclear like it is

837
00:43:32,480 --> 00:43:34,520
absolutely unhinged.
Like people say no, Poland

838
00:43:34,520 --> 00:43:36,080
shouldn't and you kill.
I'm like, well, what are they

839
00:43:36,080 --> 00:43:38,640
going to do?
This is like, what are their

840
00:43:38,640 --> 00:43:40,720
choices here?
Whereas if you're somewhere like

841
00:43:40,720 --> 00:43:44,360
a lot of wind, a lot of sun, you
know, you can do a decent amount

842
00:43:44,360 --> 00:43:46,520
of pumped hydro, you're
Argentina or Australia.

843
00:43:46,520 --> 00:43:48,160
I mean, you've got plenty of
choices.

844
00:43:48,160 --> 00:43:51,080
You don't need to do anything
large and complicated.

845
00:43:51,080 --> 00:43:52,840
You can just do dumb modular
stuff.

846
00:43:53,720 --> 00:43:57,360
So I think it's going to be very
much how people do this energy

847
00:43:57,360 --> 00:44:00,680
transition is going to be very
much a depend on your local

848
00:44:00,680 --> 00:44:04,520
endowment, physical endowment
and that'll define what's going

849
00:44:04,520 --> 00:44:08,760
to be the lowest cost option.
One of the one of the your non

850
00:44:08,760 --> 00:44:11,880
consensus kind of calls last
year, which sort of, you know,

851
00:44:11,920 --> 00:44:15,960
played out to be pretty, pretty
correct was, I mean, you're

852
00:44:15,960 --> 00:44:18,640
pretty pessimistic on the
outlook for for met coal when

853
00:44:18,960 --> 00:44:21,200
when consensus was pretty,
pretty optimistic.

854
00:44:21,200 --> 00:44:25,480
And I think you were, you were
sort of looking at the the, the

855
00:44:25,480 --> 00:44:29,800
displacement of, of seaborne met
coal as a result of, of lower

856
00:44:29,800 --> 00:44:32,360
cost Mongolian coal feeding into
into China.

857
00:44:33,880 --> 00:44:35,680
Yeah.
Like, how did you kind of come

858
00:44:35,680 --> 00:44:38,680
to that view and how have you
seen it play out since?

859
00:44:39,680 --> 00:44:46,360
Yeah, I mean, so I I did a I did
in 2016, 1716 there was like a

860
00:44:46,360 --> 00:44:48,200
bankruptcy of a Mongolian coal
producer.

861
00:44:48,200 --> 00:44:50,440
So I always done a lot of Asian
distressed that stuff.

862
00:44:50,440 --> 00:44:55,320
So I got involved in that.
So I got to know that company

863
00:44:55,320 --> 00:44:56,960
recently.
Well, what was kind of

864
00:44:56,960 --> 00:45:01,000
interesting during COVID, China
did a bunch of very silly things

865
00:45:01,000 --> 00:45:05,680
in the coal market, which I
wrote about, I think it was.

866
00:45:06,520 --> 00:45:10,320
But basically they if they shot
their border with Mongolia, OK,

867
00:45:10,720 --> 00:45:13,080
so you can't get Mongolian Coca
Cola anymore because you're

868
00:45:13,080 --> 00:45:15,120
worried the Mongolians all have
COVID and they're going to pull

869
00:45:15,120 --> 00:45:16,360
it.
China, fine.

870
00:45:16,680 --> 00:45:18,960
But then they also had a massive
fight with Australia over

871
00:45:18,960 --> 00:45:21,280
whatever it was Scott Morrison
ticked them off about.

872
00:45:21,280 --> 00:45:24,520
It was COVID inquiry, which I
think was probably a good idea.

873
00:45:25,640 --> 00:45:28,280
So then you see, so where were
they going to get their Metcal?

874
00:45:28,360 --> 00:45:33,080
So you've kind of Mongolia's
out, Australia's out.

875
00:45:33,840 --> 00:45:37,000
At the same time, they started
to run a very big stimulus.

876
00:45:37,440 --> 00:45:40,800
So METCO got very silly.
And then of course with Russia,

877
00:45:40,800 --> 00:45:44,080
a lot of the met coal supply
from the Donbass or exported

878
00:45:44,080 --> 00:45:48,480
through ports near Crimea and so
forth, that just tightened the

879
00:45:48,480 --> 00:45:50,960
market further.
So to just say it went, it went

880
00:45:50,960 --> 00:45:54,240
absolutely been honest and
justifiably so and sort of so

881
00:45:54,240 --> 00:45:59,280
we're involved in owning Alpha
Metallurgical in the US and a

882
00:45:59,280 --> 00:46:00,600
few others because it was just
amazing.

883
00:46:00,600 --> 00:46:03,560
It was just a market which I
didn't think could get this

884
00:46:03,560 --> 00:46:05,440
tight in any feasible state of
the world.

885
00:46:05,440 --> 00:46:08,840
But you just have like 1 global
policy era after another.

886
00:46:08,840 --> 00:46:12,360
And I think at that point that
was got up to 600 bucks or

887
00:46:12,360 --> 00:46:14,360
something silly.
I think what was interesting was

888
00:46:14,360 --> 00:46:18,720
that after China kind of lost
control of COVID, they then

889
00:46:18,880 --> 00:46:21,400
effectively let it RIP and then
reopen the Mongolian border.

890
00:46:22,680 --> 00:46:25,400
And they were also trying to get
more Mongolian output even

891
00:46:25,400 --> 00:46:27,840
before they kind of towel
chopped on on COVID.

892
00:46:27,840 --> 00:46:30,880
And then of course, you had this
supply shock of, you know,

893
00:46:30,920 --> 00:46:34,320
something like 50 million tonnes
of net hitting the market, not

894
00:46:34,320 --> 00:46:36,080
hitting the global market.
And you couldn't see it in the

895
00:46:36,080 --> 00:46:38,280
shipping data because it was all
right, you know, done moved

896
00:46:38,280 --> 00:46:40,680
across by trucks and rail, but
the market started to weaken.

897
00:46:41,200 --> 00:46:44,240
And yeah, Mongolia just keeps on
producing more because their

898
00:46:44,240 --> 00:46:47,200
cash costs are like 75 bucks to
look into the Chinese border.

899
00:46:47,760 --> 00:46:49,400
So not a lot to slow them down
there.

900
00:46:49,800 --> 00:46:53,080
So you shared some comments in
in a sub stack piece that you

901
00:46:53,080 --> 00:46:56,200
wrote at the time as well.
And the, the gist of it is you

902
00:46:56,200 --> 00:47:00,200
were falling into question the
yes, the, the pay, the bonus

903
00:47:00,200 --> 00:47:03,040
structure and everything of the,
the Aussie producers, given that

904
00:47:03,040 --> 00:47:06,800
they weren't able to massively
capitalise or at least expand

905
00:47:06,800 --> 00:47:10,200
production in a significantly
tight market where process was

906
00:47:10,200 --> 00:47:11,960
super elevated.
What was it, you know,

907
00:47:12,000 --> 00:47:15,360
reflecting back on a year later,
do you have views on how the,

908
00:47:15,640 --> 00:47:17,880
you know, RAM is structured for
these guys and the the

909
00:47:17,880 --> 00:47:19,840
performance that the Aussie
players had at the.

910
00:47:19,840 --> 00:47:24,040
Time I I think I think it's it
was kind of weird because that

911
00:47:24,040 --> 00:47:26,320
was about as good amount as you
could ever hoped for right.

912
00:47:26,320 --> 00:47:29,440
I mean, the Russians have
basically taken Outback, got any

913
00:47:29,440 --> 00:47:31,040
dumbass supply from Ukraine is
gone.

914
00:47:31,040 --> 00:47:33,400
Like you should be able to ramp
your output.

915
00:47:33,400 --> 00:47:36,960
But it was interesting that they
couldn't get their output up.

916
00:47:37,040 --> 00:47:41,320
And I met with White Haven, with
a couple of other guys in

917
00:47:41,400 --> 00:47:45,080
Singapore, and I wasn't sort of
satisfied with the answer they

918
00:47:45,080 --> 00:47:47,120
have why they couldn't get up.
And some was definitely due to a

919
00:47:47,120 --> 00:47:49,360
tight labour market.
And I think that's that was fair

920
00:47:49,360 --> 00:47:52,880
enough.
But yeah, underperformance was

921
00:47:53,520 --> 00:47:57,680
quite surprising.
And it's, you know, a lot of

922
00:47:57,680 --> 00:48:00,040
these mining management teams,
like, look at this, we're making

923
00:48:00,040 --> 00:48:01,720
record EBITDA.
I'm like, yeah, but you can't

924
00:48:01,720 --> 00:48:04,240
even lift volumes into like a
$600.00 met market.

925
00:48:05,160 --> 00:48:09,600
What's up with that?
So that was a bit strange.

926
00:48:10,400 --> 00:48:14,120
I didn't love.
I thought they were doing

927
00:48:14,120 --> 00:48:15,680
victory laps they hadn't really
earned.

928
00:48:15,720 --> 00:48:19,120
Unless they could take credit
for shutting the Chinese border

929
00:48:19,120 --> 00:48:22,640
with Mongolia or kicking off the
Ukraine war, they didn't really

930
00:48:22,640 --> 00:48:25,120
have a hand in it.
How much of that do you kind of

931
00:48:25,120 --> 00:48:29,000
view US mines having a a natural
sort of run rate?

932
00:48:29,000 --> 00:48:31,800
Obviously, like you said, there
are a lot of yeah issues within,

933
00:48:31,800 --> 00:48:34,440
within Australia, labour being
one of them, energy price, all

934
00:48:34,440 --> 00:48:36,480
these sorts of things.
Weather events happened.

935
00:48:37,000 --> 00:48:39,960
But a lot of mines tend to kind
of have a, a natural run rate.

936
00:48:39,960 --> 00:48:42,160
And I say this from someone
who's never really worked on a

937
00:48:42,160 --> 00:48:47,120
mine, but it's from the outside
seems very hard, you know, to

938
00:48:47,200 --> 00:48:49,880
ramp up production even when
prices are very high as much as

939
00:48:49,880 --> 00:48:52,400
you'd kind of want to.
Do you have any learnings on

940
00:48:52,400 --> 00:48:54,240
that kind of?
Front, Yeah, yeah, we looked at

941
00:48:54,240 --> 00:48:56,560
it, on it, we went through a
couple of the mines in Australia

942
00:48:56,560 --> 00:48:59,360
and like, of course there's like
a constraint so there's some of

943
00:48:59,360 --> 00:49:01,040
it's just yellow goods on site
or labour.

944
00:49:01,040 --> 00:49:03,760
So how you know how much you
can, you know your long wall

945
00:49:03,760 --> 00:49:05,880
only has certain capacity and a
lot.

946
00:49:05,880 --> 00:49:07,960
But often with these plants,
it's like there's a constraint

947
00:49:07,960 --> 00:49:09,920
at the wash plant.
And what we found was there

948
00:49:09,920 --> 00:49:12,040
wasn't like an obvious
constraint at the wash plant for

949
00:49:12,040 --> 00:49:14,520
a lot of these installations.
They just couldn't get up there,

950
00:49:15,080 --> 00:49:17,240
their earth movements a lot.
Now that might have just been

951
00:49:17,240 --> 00:49:19,400
entirely driven by labour.
That was definitely one bit of

952
00:49:19,400 --> 00:49:21,960
feedback we got.
I reckon that that rang pretty

953
00:49:21,960 --> 00:49:24,160
true.
But I was surprised how little

954
00:49:24,160 --> 00:49:27,160
flex there was in the system,
despite the fact when you look

955
00:49:27,160 --> 00:49:31,560
at what the headroom is at a
system level at a mine, it

956
00:49:31,560 --> 00:49:33,480
seemed to have some capacity to
move.

957
00:49:33,480 --> 00:49:39,320
So that was a bit of a surprise.
So yeah, it was it's it's a

958
00:49:39,320 --> 00:49:41,680
mystery.
I I hope someone gets a

959
00:49:41,680 --> 00:49:44,720
comprehensive answer at some
point, But I was shocked at how

960
00:49:45,480 --> 00:49:49,240
non elastic the sort of supply
curve was in the space of a

961
00:49:49,280 --> 00:49:52,960
pretty crazy price fight.
I think, I think on your point,

962
00:49:52,960 --> 00:49:56,160
JD, I think the natural run rate
of mines is also it's very

963
00:49:56,160 --> 00:50:02,240
capital sensitive like your
Kathleen Valley for instance,

964
00:50:02,240 --> 00:50:06,240
that could that could do
6,000,000 tonne if they put an

965
00:50:06,240 --> 00:50:09,760
underground crusher in and a
conveyor and and everything like

966
00:50:09,760 --> 00:50:11,760
that.
So like I think probably your

967
00:50:11,760 --> 00:50:14,160
narrow vine golds and that
they're very, they've got a

968
00:50:14,160 --> 00:50:16,800
natural run, right.
But I think these big like your

969
00:50:16,800 --> 00:50:20,040
big copper and lithium projects
depending on the capital.

970
00:50:20,040 --> 00:50:22,520
It's capital and time, right?
Because you would have easily

971
00:50:22,520 --> 00:50:25,960
been able to raise money or debt
if the the met coal price is 600

972
00:50:25,960 --> 00:50:27,240
bucks.
But obviously it takes time to

973
00:50:27,760 --> 00:50:29,480
get everything humming and stuff
so.

974
00:50:30,080 --> 00:50:32,240
Yeah, I I was, I think that's a
good point.

975
00:50:32,240 --> 00:50:35,480
Like all the like the like more
base metals like copper, gold,

976
00:50:35,480 --> 00:50:37,680
that's like a very capital
intensive and also just more

977
00:50:37,680 --> 00:50:40,000
energy intensive.
I think Amo had something where

978
00:50:40,000 --> 00:50:43,120
they looked at like electrifying
mines and it's quite clear like

979
00:50:43,120 --> 00:50:45,200
a gold project just uses way
more power.

980
00:50:45,520 --> 00:50:49,160
But for bulks and like more
earth movement driven stuff, it

981
00:50:49,280 --> 00:50:51,600
theoretically should be simpler
so long as you you've got

982
00:50:51,680 --> 00:50:53,120
capacity in your wash plan or
whatever.

983
00:50:53,120 --> 00:50:55,480
But yeah, that just, it just
didn't ramp, which was

984
00:50:55,480 --> 00:50:58,560
interesting.
I never quite could get a clear

985
00:50:58,560 --> 00:51:00,840
answer on why literally no one
could get their numbers up.

986
00:51:01,200 --> 00:51:04,120
Well, that's, that's the
underground like natural mining,

987
00:51:04,120 --> 00:51:06,000
right?
I'm probably talking about open,

988
00:51:06,040 --> 00:51:12,080
open pits, probably a bit
different in terms of MMS

989
00:51:12,080 --> 00:51:14,760
dictate the mining, right?
Yeah, the natural, the natural

990
00:51:14,760 --> 00:51:18,600
mining right when you're in an
MMSJV is like, they'll tell you

991
00:51:19,560 --> 00:51:22,280
what they're mining and then
they're like, we need more.

992
00:51:22,280 --> 00:51:25,120
They're like, okay, we'll get
it, Yeah.

993
00:51:25,200 --> 00:51:27,240
It really depends who the
contractor is and if you've got

994
00:51:27,240 --> 00:51:30,200
MMS around and the commodity
price is flying and you want

995
00:51:30,200 --> 00:51:33,880
more coming out the ground, so.
It'll be a better IR and MPV and

996
00:51:34,160 --> 00:51:36,560
the heck mate, the numbers will
be better than yours as well.

997
00:51:36,560 --> 00:51:38,000
Yeah.
Well, it's like the maximum

998
00:51:38,000 --> 00:51:43,720
possible mining, right?
Plus 50% is what MMS mining

999
00:51:43,720 --> 00:51:45,640
supply.
Yes, exactly.

1000
00:51:45,640 --> 00:51:48,040
Yeah.
And they take the risk off your

1001
00:51:48,040 --> 00:51:50,320
hands, you know?
So most risk free.

1002
00:51:50,320 --> 00:51:55,000
So where's that you're saying?
JD no risk, maximum mining rate

1003
00:51:55,000 --> 00:51:58,840
plus 50% if you'll want it.
Because they'll just do it and

1004
00:51:59,480 --> 00:52:01,400
it's pretty much free.
It's a classic.

1005
00:52:01,400 --> 00:52:04,880
Win, win, win, Matthew.
It is a win win win.

1006
00:52:04,880 --> 00:52:10,800
www.miningservices Go MMS, go
MMS, go do a you know people

1007
00:52:10,800 --> 00:52:13,520
that are doing a JV with MMS
Anyone.

1008
00:52:13,520 --> 00:52:16,040
They're happy, minimum 8 hours
sleep at night.

1009
00:52:16,640 --> 00:52:20,200
They have no worries at all.
They just zonked.

1010
00:52:21,320 --> 00:52:22,800
You want good sleep?
You want to look after your

1011
00:52:22,800 --> 00:52:24,320
health?
Get an MMS JV.

1012
00:52:24,360 --> 00:52:27,160
Pick up the phone.
So, so looking forward in the in

1013
00:52:27,160 --> 00:52:30,680
the met coal market, every
single producer that I looked at

1014
00:52:30,680 --> 00:52:35,640
that the annual report of August
was super bullish India in, you

1015
00:52:35,640 --> 00:52:39,000
know, the next decade, the next
two decades and add to 2050.

1016
00:52:39,320 --> 00:52:41,880
Given given the you know, decade
you've been looking at the Met

1017
00:52:41,880 --> 00:52:44,560
coal market, what do you kind of
make of this this emergence?

1018
00:52:44,560 --> 00:52:47,560
Are they kind of looking for
someone to piece in the model to

1019
00:52:47,560 --> 00:52:50,760
show the growth to investors or
do you think this is legitimate?

1020
00:52:52,240 --> 00:52:54,760
I think it's, look, I mean that
there's going to be more steel

1021
00:52:54,760 --> 00:52:56,040
demand, right?
I don't think it's ever going to

1022
00:52:56,040 --> 00:52:59,400
be anything like China in terms
of per capita or what have you,

1023
00:52:59,400 --> 00:53:03,200
but the number's going to go up.
I mean, I'm not, I'm not some

1024
00:53:03,200 --> 00:53:06,160
insane person.
However, the interesting thing

1025
00:53:06,160 --> 00:53:11,000
when I look at India's options,
India has a lot of thermal Co.

1026
00:53:11,120 --> 00:53:14,320
So they don't think they're, you
know, to the extent they can

1027
00:53:14,320 --> 00:53:17,120
sort out their internal
constraints, whether it be rail

1028
00:53:17,120 --> 00:53:20,160
or, you know, funky political
stuff in the Eastern states,

1029
00:53:21,400 --> 00:53:23,880
they can they can produce as
much coal as they probably need.

1030
00:53:24,200 --> 00:53:27,680
What's going to be interesting
on the met coal side is these

1031
00:53:27,680 --> 00:53:30,000
are all going to be quite new
steel plants.

1032
00:53:30,280 --> 00:53:33,880
So China's essentially made its
choices in terms of its mix of

1033
00:53:33,880 --> 00:53:37,040
blast furnace versus EAF and
their demand probably drops over

1034
00:53:37,040 --> 00:53:38,800
time.
And but they're going to they're

1035
00:53:38,960 --> 00:53:40,880
going to have the same mix of
plants, I think.

1036
00:53:41,320 --> 00:53:46,200
But India, the interesting thing
is, is that you can now get do

1037
00:53:46,200 --> 00:53:48,920
direct reduction plants.
There's a Italian company called

1038
00:53:48,920 --> 00:53:50,960
Danieli which makes steel plant
equipment.

1039
00:53:51,560 --> 00:53:54,720
And you can now take that
natural gas crack into the, you

1040
00:53:54,720 --> 00:53:57,960
know, carbon dioxide and
hydrogen and then use the

1041
00:53:57,960 --> 00:54:00,080
hydrogen as a direct reduction
mechanism.

1042
00:54:00,800 --> 00:54:04,440
And the pitch Danieli is well,
you know, you can use natural

1043
00:54:04,440 --> 00:54:06,760
gas today, you don't need that
coal to reduce this iron.

1044
00:54:07,160 --> 00:54:10,280
And then in the future you can
use green hydrogen.

1045
00:54:10,400 --> 00:54:14,200
So if you're a steel company and
you want to keep your ESG

1046
00:54:14,200 --> 00:54:16,440
ratings in a good place, you can
say, well, I'm going to build a

1047
00:54:16,440 --> 00:54:18,680
plant which gives me the option
to switch to something great at

1048
00:54:18,680 --> 00:54:22,400
some point in the future.
So the composition, I think what

1049
00:54:22,400 --> 00:54:25,800
people need to look to is what
is the composition of new steel

1050
00:54:25,800 --> 00:54:28,400
plants being built in India?
Because if they move towards

1051
00:54:28,840 --> 00:54:33,240
more electric arc furnace where
they can take, say twiggies

1052
00:54:33,240 --> 00:54:37,080
directly, reduced iron pellets
from the Pilbara and then just

1053
00:54:37,080 --> 00:54:40,800
tip it in or they go for
something where they can take

1054
00:54:40,800 --> 00:54:43,800
net gas, crack it and then do
the reduction themselves on

1055
00:54:43,800 --> 00:54:46,360
side, that's pretty bearish,
METCO, right?

1056
00:54:46,360 --> 00:54:48,240
Then that growth story is not
going to play out.

1057
00:54:48,640 --> 00:54:51,120
So that's another thing we're
spending a bit of time on,

1058
00:54:51,120 --> 00:54:54,280
looking at what the future plant
mix is going to be in India

1059
00:54:54,280 --> 00:54:57,920
because that will define how
METCO intensive that steel

1060
00:54:57,920 --> 00:55:01,200
demand growth is.
What what do you make of FMG?

1061
00:55:01,200 --> 00:55:04,080
As you mentioned their, their
ambitions, they've been, you

1062
00:55:04,080 --> 00:55:07,800
know, pretty steadfast in
wanting to be real, real zero, I

1063
00:55:07,800 --> 00:55:11,560
think is the terminology they
use now by by 20-30 if you spend

1064
00:55:11,560 --> 00:55:16,200
time looking at that.
Yeah, I mean the the various

1065
00:55:16,200 --> 00:55:19,200
pathways, there's actually a big
a new project which I played a

1066
00:55:19,200 --> 00:55:22,760
minor role in looking at all
these pathways to reduce carbon

1067
00:55:22,760 --> 00:55:26,160
and steel and that paper should
be out in about four months.

1068
00:55:26,160 --> 00:55:31,440
I think it's been an absolute
bear of a modelling exercise.

1069
00:55:32,800 --> 00:55:35,720
I think it.
Yeah, it's been been quite a

1070
00:55:35,720 --> 00:55:39,080
journey modelling all these
various pathways to how you how

1071
00:55:39,120 --> 00:55:42,000
you can decarbonize stuff.
So do you do, do you just run,

1072
00:55:42,000 --> 00:55:44,000
do you just run met coal and do
carbon capture?

1073
00:55:44,080 --> 00:55:46,440
That's an option.
Do you do this stuff where you

1074
00:55:46,440 --> 00:55:49,920
take very finely ground?
I'm fine.

1075
00:55:49,920 --> 00:55:53,120
Stick it in a sodium hydroxide
bath at 100 C, run an

1076
00:55:53,120 --> 00:55:55,680
electrolytic cell through it and
then scrape off the eye.

1077
00:55:55,680 --> 00:55:57,720
That's another option.
There's a hydrogen thing.

1078
00:55:57,720 --> 00:55:59,800
Everyone knows about that.
So there's a lot of ways up the

1079
00:55:59,800 --> 00:56:02,200
mountain and just working out
what the mix is going to be.

1080
00:56:04,240 --> 00:56:07,120
I think Fortescue's got a number
of bets.

1081
00:56:07,120 --> 00:56:10,240
They've got electrolytic cell
thing they're working on.

1082
00:56:10,920 --> 00:56:13,000
They've obviously got this
hydrogen thing which is now

1083
00:56:13,000 --> 00:56:15,320
going to be stopped, they said
next year at Christmas Creek.

1084
00:56:15,760 --> 00:56:18,160
So we're going to see.
But they're plenty serious and

1085
00:56:18,400 --> 00:56:23,400
they're putting the money down.
I think it's I think part of the

1086
00:56:23,400 --> 00:56:27,240
problem is being, is that they
have talked a very big game up

1087
00:56:27,240 --> 00:56:29,960
to this point and it's very hard
for customers to understand

1088
00:56:29,960 --> 00:56:31,960
what's real and what's not.
But I think people are going to

1089
00:56:31,960 --> 00:56:34,840
start taking delivery of
material and at that point it's

1090
00:56:34,840 --> 00:56:36,200
going to be pretty real next
year.

1091
00:56:36,680 --> 00:56:38,600
I mean, this is the same when
for the ski started.

1092
00:56:38,800 --> 00:56:43,840
They were a high yield borrower
when I started in in finance and

1093
00:56:44,080 --> 00:56:46,000
no one was ever sure whether
Triggy was real.

1094
00:56:46,000 --> 00:56:47,240
And lots of people were very
sceptical.

1095
00:56:47,240 --> 00:56:50,800
But Triggy's shown himself to be
a bit of a talker, but he's also

1096
00:56:50,800 --> 00:56:53,280
a deliberate.
So I think that's you got to

1097
00:56:53,280 --> 00:56:54,880
kind of get him further than
that point.

1098
00:56:56,240 --> 00:56:59,320
I suppose the, the, the last
kind of area I want to explore

1099
00:56:59,320 --> 00:57:01,640
is one that I haven't seen you
write about yet, but he's, you

1100
00:57:01,640 --> 00:57:05,360
know, incredibly topical.
And that's the current state of

1101
00:57:05,360 --> 00:57:09,960
the iron ore market and being,
you know, being kind of having a

1102
00:57:10,560 --> 00:57:12,880
decent China lens.
Alex, I imagine you've been

1103
00:57:12,880 --> 00:57:15,440
thinking about this a bit too.
Yeah.

1104
00:57:15,440 --> 00:57:17,640
I mean, it's a, it's a lot like
sort of the question is a lot

1105
00:57:17,640 --> 00:57:21,480
like when China had a big real
estate sort of slow down 201415

1106
00:57:22,040 --> 00:57:26,160
and we briefly touched what was
the low print like $34 on spot

1107
00:57:26,160 --> 00:57:28,280
or something like that.
It was that was pretty

1108
00:57:28,280 --> 00:57:33,240
terrifying.
I think the scary thing now, OK,

1109
00:57:33,240 --> 00:57:37,360
so basically China is about a
5050 split between imports of

1110
00:57:37,360 --> 00:57:41,680
iron and domestic production.
And the domestic stuff is by all

1111
00:57:41,680 --> 00:57:44,120
accounts kind of rubbish.
It's got high phosphorus, it's

1112
00:57:44,520 --> 00:57:47,600
in a lot of places, it's, you
know, blended average cost is

1113
00:57:47,600 --> 00:57:50,400
maybe 7080 bucks a tonne.
But as we have seen with

1114
00:57:50,400 --> 00:57:53,000
lithium, China will keep stuff
running at a loss for their

1115
00:57:53,080 --> 00:57:55,200
national security or self
sufficiency reasons.

1116
00:57:55,680 --> 00:58:03,080
So the real horror show node is
for next year is no one really

1117
00:58:03,080 --> 00:58:04,560
taps the brakes in the pill,
bro.

1118
00:58:05,960 --> 00:58:10,240
China keeps running their
production at a big loss and

1119
00:58:10,240 --> 00:58:12,000
then you've got some undo coming
over the top.

1120
00:58:12,000 --> 00:58:14,280
Depending on when you think
that's going to happen or how

1121
00:58:14,280 --> 00:58:17,760
much, how much that will happen,
that could get very scary

1122
00:58:17,760 --> 00:58:22,240
indeed.
And the issue is, is that what's

1123
00:58:22,240 --> 00:58:25,800
China's flaw in terms of how
much demand is going to recede?

1124
00:58:25,840 --> 00:58:28,480
And it's pretty clear that's
going to recede a fair bit.

1125
00:58:29,000 --> 00:58:31,880
But then also, at what point are
they going to gradually start to

1126
00:58:31,880 --> 00:58:33,560
turn off their domestic
production, which is not

1127
00:58:33,560 --> 00:58:37,240
competitive?
And I don't know, but there are

1128
00:58:37,240 --> 00:58:38,840
a lot of people who thought the
pedal light would have been

1129
00:58:38,840 --> 00:58:40,720
turned off by now.
It's still running.

1130
00:58:42,600 --> 00:58:46,640
Yes, apparently not everyone.
Well, you can get, you can get,

1131
00:58:46,720 --> 00:58:49,120
we can get satellite products.
And there's still what what is?

1132
00:58:49,120 --> 00:58:50,400
Yeah.
Give us a bit of insight on

1133
00:58:50,440 --> 00:58:53,560
that.
So it's funny, like I, I, I, I

1134
00:58:53,760 --> 00:58:58,960
sort of, I, I speak and read and
write Mandarin.

1135
00:58:58,960 --> 00:59:02,520
So I sort of tried to check in
on, well, you know, like in

1136
00:59:02,520 --> 00:59:06,640
these mining towns in Jiangxi,
what people are like each and

1137
00:59:06,640 --> 00:59:08,320
what they've got all these
people of petal light mines and

1138
00:59:08,320 --> 00:59:10,240
they're kind of horrible because
the grade's terrible.

1139
00:59:10,240 --> 00:59:12,800
They produce all this, you know,
mine waste.

1140
00:59:12,800 --> 00:59:15,320
And previously a lot of that
mine waste was just basically

1141
00:59:15,320 --> 00:59:18,600
gypsum.
So I went into fiberboard for

1142
00:59:18,600 --> 00:59:21,880
construction and that was fine.
And now of course, the real

1143
00:59:21,880 --> 00:59:26,040
estate markets toast.
So there's clearly big waste

1144
00:59:26,040 --> 00:59:28,680
piles around the place and some
of the locals are expressing

1145
00:59:29,040 --> 00:59:31,760
firm opinions locally, but
they're still running these

1146
00:59:31,760 --> 00:59:33,920
plants.
And they're by all accounts, I

1147
00:59:33,920 --> 00:59:38,240
mean, they say their costs are
in the high, you know, on

1148
00:59:38,240 --> 00:59:40,440
carbonate equivalent, like
eighty, $19,000.

1149
00:59:40,440 --> 00:59:44,240
I think that's an underestimate.
But you know, obviously people

1150
00:59:44,240 --> 00:59:45,600
have different, different
opinions.

1151
00:59:45,600 --> 00:59:49,040
But by all accounts, they are
losing like -30% gross margins.

1152
00:59:49,440 --> 00:59:51,320
Like that's the full case on
these guys right now.

1153
00:59:52,680 --> 00:59:55,040
Is that the full and this is
fully integrated cost?

1154
00:59:55,600 --> 00:59:57,400
No, this is cash.
I'm the integrator.

1155
00:59:58,120 --> 01:00:00,600
I don't know 25.
So I mean, these guys are just

1156
01:00:00,600 --> 01:00:03,960
losing money hand over fixed.
And if they if they like that's

1157
01:00:04,360 --> 01:00:06,920
that's one of the numbers I
really watch and lithium is that

1158
01:00:07,320 --> 01:00:10,320
if they start to turn off that
supply, then the market will

1159
01:00:10,320 --> 01:00:13,000
normalise pretty quickly.
But to the extent that China

1160
01:00:13,080 --> 01:00:16,200
wants to dump and wants to
produce stuff at a massive loss

1161
01:00:16,200 --> 01:00:19,240
for other reasons, you know,
security or whatever the

1162
01:00:19,240 --> 01:00:22,880
internal narrative is, it's very
hard for that market to behave

1163
01:00:22,880 --> 01:00:25,280
itself normally.
So also some headlines that in

1164
01:00:25,280 --> 01:00:29,520
in Zijin's latest reporting, you
could kind of infer that that

1165
01:00:29,520 --> 01:00:32,800
they, you know, throttled some
some some lipidilite production.

1166
01:00:33,720 --> 01:00:36,240
There's some, but there's still
a lot running and the amount

1167
01:00:36,240 --> 01:00:38,280
that they threw on last year was
crazy.

1168
01:00:38,280 --> 01:00:40,720
Yeah, I was.
I was at Fast Markets in May

1169
01:00:40,720 --> 01:00:46,760
last year and a guy from one of
the domestic producers in China,

1170
01:00:46,760 --> 01:00:50,560
this is when Spider Man
carbonate was still like 35

1171
01:00:50,560 --> 01:00:53,800
grand or something on the basis
of we're going to crush this.

1172
01:00:53,960 --> 01:00:55,800
You know, we get where our costs
are like high teens.

1173
01:00:55,800 --> 01:00:57,320
I was like, OK, so we're going
to high teens.

1174
01:00:57,360 --> 01:00:58,640
It's good shorting down to
there.

1175
01:00:58,960 --> 01:01:00,440
But then they haven't turned
anything off.

1176
01:01:00,440 --> 01:01:03,400
So it's just it's just kept on
getting getting smoked.

1177
01:01:03,560 --> 01:01:06,080
So we'll see.
I think we're kind of waiting to

1178
01:01:06,080 --> 01:01:08,800
see what what they do because
that would be the that would be

1179
01:01:09,200 --> 01:01:12,240
in a normal market where
companies try to make money.

1180
01:01:12,960 --> 01:01:14,440
That would be how things would
normal.

1181
01:01:14,800 --> 01:01:17,080
But China is not just about
making money.

1182
01:01:17,240 --> 01:01:19,640
In fact, it's something that's
very not about making money.

1183
01:01:20,400 --> 01:01:21,800
They're done.
Well, If you kept that short

1184
01:01:21,800 --> 01:01:23,600
position open, that'd have been
pretty fruitful.

1185
01:01:24,160 --> 01:01:24,520
What?
What?

1186
01:01:24,520 --> 01:01:25,200
What do you kind of.
Yeah.

1187
01:01:26,120 --> 01:01:27,760
Yeah, it's been, it's been OK.
But then the problem is

1188
01:01:27,760 --> 01:01:29,560
everything gets kicked out of
the index and you can't get the

1189
01:01:29,560 --> 01:01:30,920
stock borrow and you know it's
like.

1190
01:01:34,080 --> 01:01:38,120
That could be worse problems.
What do you think of Chinese

1191
01:01:38,480 --> 01:01:40,440
government stimulus more more
broadly?

1192
01:01:40,440 --> 01:01:41,640
There's been a lot made of it.
Obviously.

1193
01:01:41,640 --> 01:01:45,160
You mentioned that the property
market in a real, you know,

1194
01:01:45,920 --> 01:01:48,680
point of pain.
Do you think there's more

1195
01:01:48,680 --> 01:01:51,680
stimulus to come through or do
you think that's kind of run its

1196
01:01:51,680 --> 01:01:55,040
course and the, the property
sector and the, the portion of,

1197
01:01:55,040 --> 01:01:58,200
you know, economic output that
makes up of China is going to

1198
01:01:58,720 --> 01:02:03,160
normalise over time?
I, I think what they're trying

1199
01:02:03,160 --> 01:02:05,920
to do now is they're basically
stopped property because it was,

1200
01:02:05,960 --> 01:02:07,520
it was very crazy for a long
time.

1201
01:02:07,600 --> 01:02:11,080
There were, you know, very the
guys, Hugh Andrews sort of

1202
01:02:11,080 --> 01:02:14,400
called this out before he went
really went literally very

1203
01:02:14,400 --> 01:02:16,840
tropo.
It was clearly a little bit nuts

1204
01:02:17,000 --> 01:02:17,960
even a decade ago.
He's.

1205
01:02:18,680 --> 01:02:20,640
Pretty good he's.
Great.

1206
01:02:20,640 --> 01:02:24,680
I think he's he's I love that
guy, but you know, he went there

1207
01:02:24,680 --> 01:02:26,000
and he was like, this is
bananas.

1208
01:02:26,000 --> 01:02:29,880
And it was right.
And eventually they decided to

1209
01:02:29,880 --> 01:02:31,320
stop that.
So what they're doing now is

1210
01:02:31,320 --> 01:02:36,520
they're trying to export their
way out of this malaise through

1211
01:02:36,520 --> 01:02:39,880
EVs, through solar, through
batteries.

1212
01:02:40,120 --> 01:02:43,920
But now it seems like they're
you know that even that all that

1213
01:02:43,920 --> 01:02:45,520
output is struggling to get
absorbed now.

1214
01:02:47,440 --> 01:02:50,280
So yeah.
So I'm not sure what's what's

1215
01:02:50,280 --> 01:02:52,800
really next for them.
The usual answer is in most

1216
01:02:52,800 --> 01:02:57,000
countries is you actually try to
not have all these stead in

1217
01:02:57,000 --> 01:03:00,000
enterprises for all this cash
and you just distribute

1218
01:03:00,000 --> 01:03:02,040
dividends to effectively people
in them, which is the

1219
01:03:02,040 --> 01:03:04,400
government.
And then the government can, you

1220
01:03:04,400 --> 01:03:09,080
know, encourage a more stimulus
for locals, but but that's not

1221
01:03:09,080 --> 01:03:11,760
happening.
So I think they're kind of

1222
01:03:11,760 --> 01:03:13,400
running out of Rd.
I'm not sure what their next

1223
01:03:13,400 --> 01:03:17,240
category categories are.
They're going to try to take

1224
01:03:17,240 --> 01:03:19,560
some crazy global sharing as
quickly as they can.

1225
01:03:20,320 --> 01:03:22,600
And obviously there's real
pushback now on trade with

1226
01:03:22,600 --> 01:03:25,000
these.
The Europeans are getting very

1227
01:03:25,320 --> 01:03:28,320
pointed.
The Americans have slammed the

1228
01:03:28,320 --> 01:03:31,240
door shut.
So ultimately, how many EVs and

1229
01:03:31,240 --> 01:03:35,120
solar panels can you dump into
places like Pakistan and Nepal?

1230
01:03:35,120 --> 01:03:36,520
It's a good number, but it's
not.

1231
01:03:36,760 --> 01:03:39,520
It's not even AUS state in terms
of demand terms.

1232
01:03:40,840 --> 01:03:44,800
I was reading somewhere that
Chinese policy setters haven't

1233
01:03:44,800 --> 01:03:47,840
have a better appreciation than
than the ones in the West in

1234
01:03:47,840 --> 01:03:50,760
relation to kind of moral hazard
and fragility in the, you know,

1235
01:03:50,920 --> 01:03:53,720
the financial system, etcetera.
And and maybe, you know, maybe

1236
01:03:53,720 --> 01:03:58,240
maybe there's a some of the, you
know, some of the stimulatory or

1237
01:03:58,240 --> 01:04:01,680
lack thereof kind of stuff to
come from now we'll have that in

1238
01:04:01,680 --> 01:04:04,000
mind.
Is that a valid perspective do

1239
01:04:04,000 --> 01:04:08,160
you think or is it?
I, I think it's, I think there

1240
01:04:08,160 --> 01:04:14,160
are some people who sort of have
this, let's try to turn this

1241
01:04:14,160 --> 01:04:15,880
into sort of more of a moral
exercise.

1242
01:04:16,200 --> 01:04:19,480
The ultimate point is China is
able to not go into a massive

1243
01:04:19,480 --> 01:04:26,000
recession right now because they
are able to export a lot and

1244
01:04:26,000 --> 01:04:29,680
absorb demand elsewhere.
So also someone's going to buy

1245
01:04:29,680 --> 01:04:33,200
all this stuff.
And the issue is that a people

1246
01:04:33,200 --> 01:04:36,960
in Europe or the US in
particular, take the view that

1247
01:04:36,960 --> 01:04:40,000
they don't want the auto sector
to be annihilated by Chinese

1248
01:04:40,000 --> 01:04:44,240
exports, then what's China going
to do then, right?

1249
01:04:44,240 --> 01:04:47,480
This is this whole thing works
so long as they can export

1250
01:04:47,640 --> 01:04:50,120
unimpeded.
And as in the case, and lithium

1251
01:04:50,120 --> 01:04:52,800
can export, you know, basically
run losses.

1252
01:04:52,800 --> 01:04:55,240
The banking system just
underwrites the losses of the

1253
01:04:55,240 --> 01:04:57,440
pedal like guys, so they can
export.

1254
01:04:58,080 --> 01:05:00,600
And that's that's essentially
like, do you want to give people

1255
01:05:01,920 --> 01:05:04,600
a stimulus so they can monitor
working services or do anything

1256
01:05:04,600 --> 01:05:06,240
else?
What do you want to underwrite

1257
01:05:06,240 --> 01:05:09,480
losses at a corporations that
keep people employed with?

1258
01:05:09,880 --> 01:05:12,640
The whole endpoint is kind of
like maintaining jobs, but it's

1259
01:05:12,640 --> 01:05:15,680
just this very elaborate way
which you have to kind of crush

1260
01:05:15,680 --> 01:05:18,480
businesses elsewhere.
I don't know how long term

1261
01:05:18,480 --> 01:05:21,560
sustainable that is.
You know, the places where they

1262
01:05:21,560 --> 01:05:24,840
are dumping.
And I think that's that's going

1263
01:05:24,840 --> 01:05:27,520
to be a challenge.
So we'll say, I mean, the US

1264
01:05:27,520 --> 01:05:29,600
obviously has become
increasingly sceptical on free

1265
01:05:29,600 --> 01:05:31,840
trade with them.
I think a lot of that's quite

1266
01:05:31,840 --> 01:05:34,960
well reasoned.
Europe's kind of getting there

1267
01:05:34,960 --> 01:05:37,120
in places.
So I'm not sure how much longer

1268
01:05:37,120 --> 01:05:39,280
they'll be able to keep this up.
It's really a political question

1269
01:05:39,280 --> 01:05:41,960
in Europe and the US more than
anything else.

1270
01:05:43,640 --> 01:05:45,440
Fascinating.
Beautiful mate, I've got I've

1271
01:05:45,440 --> 01:05:47,920
got nothing else but I've really
appreciated this conversation.

1272
01:05:48,000 --> 01:05:52,520
Sensational.
I was zoned in the whole time.

1273
01:05:52,520 --> 01:05:56,320
That was freaking awesome mate.
Yeah, I'm a I'm a fan of the

1274
01:05:56,640 --> 01:05:59,160
the, the global view.
So yeah, appreciate you making

1275
01:05:59,160 --> 01:06:00,480
the time coming on the show,
Alex.

1276
01:06:00,560 --> 01:06:03,160
It's, it's actually our first,
first yarn in the weeds about

1277
01:06:03,160 --> 01:06:06,360
data centres really like of
actually going into detail

1278
01:06:06,360 --> 01:06:09,440
because it's a, it's a buzzword
at the moment, but.

1279
01:06:10,160 --> 01:06:12,000
Other than antimony.
Antimony.

1280
01:06:12,320 --> 01:06:15,640
Surprised the antimony but but
it's like that's the first

1281
01:06:15,680 --> 01:06:18,600
thought in detail one we've had.
So I look forward to plenty more

1282
01:06:18,600 --> 01:06:20,480
of that.
I mean, a lot of these weird

1283
01:06:20,480 --> 01:06:22,840
like off the run metal, like
gallium for example, like that

1284
01:06:22,840 --> 01:06:26,560
was like 3 bucks a kilo.
Like because China just decided,

1285
01:06:26,560 --> 01:06:30,040
hey, we produce a bunch of
bauxite, you know, we might as

1286
01:06:30,040 --> 01:06:32,800
well aluminium, we might as well
just produce a byproduct.

1287
01:06:33,160 --> 01:06:35,360
And The funny thing is now we've
got a China's basically banned

1288
01:06:35,360 --> 01:06:37,840
exports.
The price is now 455 bucks a

1289
01:06:37,840 --> 01:06:40,200
kilo.
And at the same time, I saw

1290
01:06:40,200 --> 01:06:42,720
actually an article in the West,
there were people getting all

1291
01:06:42,720 --> 01:06:48,640
stroppy about the wagger up and
all the like refineries of all

1292
01:06:48,640 --> 01:06:54,320
that red mud waste in WA.
And I'm like, wait up, we've got

1293
01:06:54,320 --> 01:06:56,400
a gallium shortage outside
China, OK.

1294
01:06:57,120 --> 01:07:01,160
And we've got a red mud disposal
problem in WA.

1295
01:07:01,520 --> 01:07:04,040
Interesting.
Why don't we just process all

1296
01:07:04,040 --> 01:07:06,720
the red mud, do exactly what
they do in China and solve this

1297
01:07:06,720 --> 01:07:08,200
problem?
And it's like there's no

1298
01:07:08,200 --> 01:07:12,280
discussion of that anywhere.
It's it's pretty funny.

1299
01:07:12,280 --> 01:07:14,960
So there's a lot of these,
there's a lot of these kinds of

1300
01:07:14,960 --> 01:07:16,960
missing markets where I think
there's room for the government

1301
01:07:16,960 --> 01:07:19,840
to say, all right, guys, you
need to reprocess that waste.

1302
01:07:19,840 --> 01:07:21,360
But here's the thing.
I'm gonna give you, you know,

1303
01:07:21,360 --> 01:07:25,320
300 bucks for the 300 bucks kilo
for the for the gallium and that

1304
01:07:25,320 --> 01:07:26,960
would work.
I'm going, I'm going to find a

1305
01:07:26,960 --> 01:07:29,400
red mud producer and we'll talk
after the show, mate.

1306
01:07:29,560 --> 01:07:32,040
There's, there's, there's a lot
of it in WA.

1307
01:07:32,040 --> 01:07:34,520
The alumina guy sounded like a
former guest of our our, our

1308
01:07:34,760 --> 01:07:35,800
party.
Todd Milan.

1309
01:07:35,800 --> 01:07:37,480
You might even know him, but he
was.

1310
01:07:37,480 --> 01:07:38,840
I think he used to head up there
was.

1311
01:07:38,840 --> 01:07:40,120
He's a nickel guy, right?
Yeah.

1312
01:07:40,520 --> 01:07:43,720
But he used to be like Rio Tinto
aluminium division.

1313
01:07:43,800 --> 01:07:45,720
Some, some, some.
Senior role there and he, he

1314
01:07:45,720 --> 01:07:49,120
advocated for, you know, these
gallium circuits on some of the

1315
01:07:49,120 --> 01:07:51,120
downstream stuff.
But but you know, never quite

1316
01:07:51,320 --> 01:07:54,520
like that that you know, small
CapEx and like you know, it was,

1317
01:07:54,560 --> 01:07:57,800
it was just kind of irrelevant
and never, never, never kind of

1318
01:07:57,800 --> 01:08:00,440
justified anything.
Any, any, this is The funny

1319
01:08:00,440 --> 01:08:02,600
thing with all these like
critical, like particularly the

1320
01:08:02,600 --> 01:08:05,480
stuff in semiconductors, like
everyone kind of assumes it's

1321
01:08:05,480 --> 01:08:07,280
going to be there.
If you're a real tenter, you're

1322
01:08:07,280 --> 01:08:09,840
like, OK, so I'm going to put in
150 bucks, so I could have maybe

1323
01:08:09,840 --> 01:08:11,360
make 20 bucks a day, but they're
a year.

1324
01:08:11,360 --> 01:08:14,480
Like this is sort of pizza money
at Rio Tinto.

1325
01:08:14,880 --> 01:08:16,960
But the problem is when we don't
have it, we will absolutely

1326
01:08:16,960 --> 01:08:18,680
know.
That cannot be not fun.

1327
01:08:19,200 --> 01:08:21,680
So I think that in those
situations, there's definitely a

1328
01:08:21,680 --> 01:08:24,800
role for government for sure.
Ah, bloody beautiful mate.

1329
01:08:24,800 --> 01:08:27,080
I apologise in advance
everything you said about data

1330
01:08:27,080 --> 01:08:29,920
centres and that or you're gonna
be hear those words resonating

1331
01:08:29,920 --> 01:08:32,560
out of my mouth in the future as
my own idea.

1332
01:08:32,560 --> 01:08:35,439
So just letting you know, hope
they're not copyright.

1333
01:08:35,439 --> 01:08:37,120
Yeah.
So I appreciate the insight

1334
01:08:37,120 --> 01:08:38,359
mate.
That was sensational.

1335
01:08:38,479 --> 01:08:39,279
Cheers, Alex.
Thanks.

1336
01:08:39,319 --> 01:08:40,560
Good to chat, have a good one.
Bye.

1337
01:08:41,080 --> 01:08:41,560
You too mate.
How?

1338
01:08:41,800 --> 01:08:42,279
Good.
Was that?

1339
01:08:42,520 --> 01:08:46,439
That was awesome.
That was that was as yeah, that

1340
01:08:46,439 --> 01:08:48,880
was really fascinating.
I love, I love asking any

1341
01:08:48,880 --> 01:08:50,359
question and having someone
answer it.

1342
01:08:50,600 --> 01:08:52,200
So what?
They just know heaps of shit.

1343
01:08:52,840 --> 01:08:55,600
That, that global view is very
much up my alley.

1344
01:08:55,600 --> 01:08:58,439
So I was, I was a big fan of
that chat and you know, a lot of

1345
01:08:58,760 --> 01:09:01,160
different talking points and
like you said, Maddie data

1346
01:09:01,160 --> 01:09:02,880
centres, these sorts of things,
things we haven't touched on,

1347
01:09:03,120 --> 01:09:05,760
which I'm sure we will do a
whole lot more of in the future.

1348
01:09:05,760 --> 01:09:09,960
But if he had like, in terms of
the like investment experience

1349
01:09:09,960 --> 01:09:13,600
and said he can read and write
Mandarin, like, that'd be like

1350
01:09:13,600 --> 01:09:16,240
the most appealing Tinder
profile he could put up.

1351
01:09:16,279 --> 01:09:20,720
Like far out like what a bloke.
Like I said, anything he can't

1352
01:09:20,720 --> 01:09:22,520
do?
Unbelievable.

1353
01:09:22,840 --> 01:09:24,800
Speaking of Speaking of
unbelievable, Maddie.

1354
01:09:25,040 --> 01:09:30,960
Axis axis mining technology lost
for words our unbelievable

1355
01:09:30,960 --> 01:09:32,920
mineral mining services.
You want to look after your

1356
01:09:32,920 --> 01:09:37,000
health and get a good sleep.
Do ajv with them mate verify

1357
01:09:37,359 --> 01:09:41,800
buddy Adia Adia first ad route
for Adia yesterday get excited

1358
01:09:41,800 --> 01:09:46,000
for the conference.
DSI underground Silverstone CRE

1359
01:09:46,000 --> 01:09:51,359
insurance greenlands equipment
pipes pipes pipes K drill and

1360
01:09:51,840 --> 01:09:55,000
obviously it's no brainer.
Get a Spark chart India.

1361
01:09:55,280 --> 01:09:59,600
Pedro, go Australia.
Information contained in this

1362
01:09:59,600 --> 01:10:02,360
episode of Money of Mine is of
general nature only and does not

1363
01:10:02,360 --> 01:10:05,000
take into account the
objectives, financial situation

1364
01:10:05,040 --> 01:10:07,080
or needs of any particular
person.

1365
01:10:07,360 --> 01:10:10,400
Before making any investment
decision, you should consult

1366
01:10:10,400 --> 01:10:13,440
with your financial advisor and
consider how appropriate the

1367
01:10:13,440 --> 01:10:17,160
advice is to your objectives,
financial situation and needs.