Did BHP Blow $10B Buying Oz?

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Going to say, you know when you
like have to tell a joke on

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demand, Like yeah, what's your
like, go to joke?

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Mate I'm terrible.
I'm blanking mate, what's yours?

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I don't know.
It's always why Parts, parts.

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Why?
Because they are.

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It's dreadful.
I think I'm almost better off

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having not having one.
No one ever laughs.

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All righty.
Should we RIP into it Travis

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Ricciardo?
We've got an exciting episode in

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store today, mate.
Some some big companies

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reporting, some interesting
companies, capital raising and a

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prelude to one of the most
exciting companies on the ASX.

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None other than Min Res.
And you're looking very smart

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for the occasion mate.
You're all dressed up.

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I I mate this is a a shirt I I
bought when we were in in in

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Cape Town because I I didn't
have nice enough shirts to to to

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wear.
I thought I recognized that one.

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Yeah, exactly mate.
Subsequently got worn 3 or 4

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days in a row.
How's it feel to be back in the

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back in the hot seat mate?
Mate, it feels, it feels pretty

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good.
It was rather seamless today

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when you jump onto a couple good
stories and we've got a few good

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ones.
I think I was pretty excited

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getting into the weeds on
Adriatic.

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We've sort of followed it in and
out for a couple years now.

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What's going on there?
And we've kind of keenly been

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following the the evolution of
the company from a, you know,

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construction story, development
story in no.

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No, no, it was construction into
fully funded developer, fully

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funded developer, fully funded
developer, fully funded

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producer, fully funded producer.
The subtitle ramp up, ramp up,

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ramp up and.
Gosh, anyway, they're raising

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money again today.
They are, which we'll cover in

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good detail, BHP as well.
A few interesting things.

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Slash the interim divvy to the
lowest level since the real, the

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real depths of the commodity
cycle.

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Yeah, which, you know, there's a
number of reasons why that's

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kind of happening, which we'll
talk about and.

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I'm keen to revisit their
acquisition of Oz Minerals and

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probably probably give them a
fail for now, yeah.

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I think that's that's worthy and
more unpack that one.

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Why why don't we start there?
Because they're the the big

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fella, the big Australian, a lot
of eyes, you know, all the

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generalists look at them for a
kind of bellwether of how the

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resource sector is doing, mainly
iron ore, increasingly copper,

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good chunk of their earnings
coming from copper.

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No surprises.
They've spent a massive amount

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on acquisitions and what doesn't
get quite the same attention as

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the amount of CapEx that they've
spent on all of those projects

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as well.
Totally mate.

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There's always a bit the truth
read with BHP's results.

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So the only way you can really
do it justice is just to focus

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on a very small slither of that
company.

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And I'm, I'm choosing the part
of the company that's a bit

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close to home within the, within
the big Australian, not the West

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Australian iron ore business,
but instead the South Australian

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copper business.
Because I actually think it'll

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be an important part of Mike
Henry's legacy.

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And the revelation recently, you
know, is, is that is that, you

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know, he, his successor is going
to be determined in the near

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future as well.
So in the tail end of Mark's

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kind of reign, I just wanted to
revisit the, the $10 billion

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acquisition of Oz Minerals
because that was, that was, you

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know, just a tad over two years
ago that that kind of all, all

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happened.
And to kick things off, I want

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to bring up this chart.
This was a chart on slide 20 of

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their earnings deck released
today.

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Where?
Talk through it for the the

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people on the podcast.
What are we kind of saying?

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Basically kind of articulating
where the the growth in in

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copper tons or copper production
from the South Australian copper

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business is going to come, you
know, particularly over the the

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next five years.
And then beyond that into the

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mid twenty 30s.
They're sort of saying that the

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copper production could go from
300, you know, 1000 tons per

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annum all the way up to, you
know, potentially 700,000 tons

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per annum without stepping it up
along the way.

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And.
Got to have a growth story.

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Got to have a growth story.
It's kind of interesting though.

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You look at, just look at the
title of the chart as well,

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Copper SA growth pathway
capturing US 1.5 billion in

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potential synergies.
So the narrative's already

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there.
They're trying to kind of

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substantiate the, the
acquisition of Oz Minerals.

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We're talking about synergies
within the, the, the title

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there.
And but like if you just look at

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the chart, they've laid out the
volume growth and you'll notice

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the heavy lifting to be done by
Olympic dam and eventually Oak

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Dam on the in the mid twenty 30s
there.

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What what you'll notice is that
it's not really Carapatina

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that's moving the dial or or
Promhill, especially Promhill.

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It's it's all pretty marginal
growth to come come from the Oz

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minerals mines there.
And and here's here's another

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chart which I pulled up from the
half year results.

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This is one of the usual charts
you'll see in in BH PS results

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when they report it.
I love the chart.

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It's return on capital employed
by asset and of course, always W

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Australian iron ore business
leads the way because any, any

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marginal expansion you can do
there delivers just a phenomenal

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IRR as a result of the fact that
it's such a high margin

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business.
So it's always such a a dominant

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part of this chart.
But, but follow this chart all

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the way down the tail end and
what you'll, what you'll notice

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is that the return on cap
employed at the South Australian

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copper business is lower than
they even get for, for, for the

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BMA business.
And you'll remember they refuse

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to invest any more in Queensland
coal business.

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Well, it's like a hardline
stance they've got thanks to the

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royalty regime now, but kind of
just.

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Interesting.
Yeah, they, they do really love

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this, this chart.
I mean, it shows you so much

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about their business.
It shows you how awesome a cash

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generator that iron ore business
is.

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Just you get the sense from
there where it sits on the cost

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curve and you sort of invert
that you get you get some big

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sort of thoughts on copper South
Australia.

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Keep in mind on the X axis there
is, there is the cumulative

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capital employed.
So the amount of capital

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employed at the South Australian
copper business, it's like I'm

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eyeballing it here, but it's
kind of comparable to the final

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business.
But the return on that capital

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is so de minimis in comparison,
it kind of looks like on the

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numbers here, it's like a 2 to
3% return on capital employed

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for the South Australian copper
business in, in the reporting

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period.
He asked.

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And if I, I kind of dial it back
to Promhill again, there was,

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there was this disclosure within
BH PS reporting today where,

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where they basically revealed
that the capital budget for the

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expansion, there's a, a
prominent hill operation

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expansion that's been kind of
underway for a period now.

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The, the, the CapEx for that has
now blown out to US 912 million.

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Now this, this project or
expansion project, it's

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basically the sinking of a of
the Weira shaft at the, at the

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mine.
This was approved by Oz Minerals

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back in 2021.
At the time it was approved, it

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was supposed to be Aussie $600
million kind of capital project.

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If you convert what BHP has
revealed today into into Aussie

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dollars, it's equivalent to 1.4
billion Aussie or 2.4 times the

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original estimate when when OZ
Minerals approved it.

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And on top of that, it was meant
to be completed by 2024 when

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when OZ Minerals approved the
the spend.

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Now, now in this detail today,
we say that it's not going to be

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completed until second-half of
of FY20 7 and.

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Shouldn't be a surprise it.
Shouldn't, it shouldn't be,

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especially if you read the
director special because I think

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we published last year were on
the decline.

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It was around September that
there was 130 metres worth of

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frozen material in the, in the
glory hole of the the shaft

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being being sunk there of.
Of course, you know, that's the

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relates to the Weir shaft, which
is the the key part of this PHOX

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project that is being being
underway.

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And and this project, the whole
the point of it is you'll have

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this hoisting shaft which would
then enable enable the, you

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know, the mind to to be able to
reached tons of them in a

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resource which otherwise
uneconomical to truck.

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It really kind of points to the
style of mining that they're

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doing there being a bit outside
the skill set, a very different

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to building a train line in a
port and just running a

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logistics business super, super
effectively.

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To their credit, in WA this is a
completely different challenge

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and requires a very different
technical game.

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I do.
I just, I just get this sense

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that every time one of the big
one of the big miners embarks on

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sinking a shaft, they just fuck
it up like.

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It's tough.
I mean, we saw the article the

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other day about Rio and the
delays at OT and everything that

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kind of happened that the
article was about from Kerry at

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the Fin about non disclosure.
Yeah.

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And the the consequence was
clocks, blowout time delays.

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And these things are super
technically difficult and

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there's barely a handful of
operators in the world that that

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actually do them.
Yeah, yeah.

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I mean, BHP had huge issues with
with Jansen as they were going

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going deep and of course, Anglo
with wood Smith like the, you

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know, and this is a different
scale entirely.

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But but the there's a pretty big
implication for for the South

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Australian copper business when
you encounter not just the the

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cost blow outside of things, but
it's, it's the implication of

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that time extension from 2024
all the way out to 2027, likely

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to, you know, get pushed
further.

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But yeah, we, we, we talked
about this in director special

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to bring it back to the M and a
kind of deal that was done by

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BHP in late 2022.
They paid, they paid $10

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billion, you know, 10 billion
Australian dollars for for Oz

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00:09:43,600 --> 00:09:45,920
minerals.
Now, now when they, when they

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did this, the independent expert
agreed with the price tag and

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they, they broke down the value
of each kind of part of the

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portfolio for us.
So you can, you can basically

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infer effectively what BHP paid
for each of the assets within OZ

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Minerals portfolio.
At the time, Chrome Hill was 2.5

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00:10:01,840 --> 00:10:05,760
billion, Karatina 5 billion, W
Musgrave about two billion.

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00:10:05,760 --> 00:10:08,920
I'm rounding there, but you get
the picture with W Musgrave.

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After BHP acquired OZ Minerals,
they they probably spent close

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to another billion dollars on
the project before, you know,

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halting things entirely there
and then you got to basically

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put a zero on that now.
It sounds super brutal.

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00:10:21,880 --> 00:10:27,720
Yeah, Christ, doing no favours.
And yeah, yeah, it's on site.

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00:10:27,720 --> 00:10:31,040
A horrible allocation of a
capital.

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00:10:31,480 --> 00:10:36,720
Prom Hill, we've got in in
Aussie dollar terms, $1 billion

200
00:10:36,720 --> 00:10:40,240
kind of capital blowout already
and God knows what the impact is

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00:10:40,240 --> 00:10:42,240
on the on the schedule delay
implications.

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00:10:42,480 --> 00:10:46,200
Carapatina, you know, it's the
the only thing doing all right

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in the portfolio of what they
they kind of picked up

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00:10:48,080 --> 00:10:51,320
notwithstanding the block cave
is already way behind schedule

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00:10:51,320 --> 00:10:53,760
though.
So look, I think there's just a

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00:10:53,760 --> 00:10:56,200
big question mark here on
whether the South Australian Cup

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00:10:56,200 --> 00:11:00,200
portfolio is, is really BHP
appropriate or not.

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00:11:00,240 --> 00:11:04,000
You can see by the return on
capital employed in in in this

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earnings release and historic
ones when they when they would

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00:11:06,960 --> 00:11:10,800
categorize it as an Olympic dam
only that it it historically

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00:11:11,000 --> 00:11:15,080
isn't a BHP type asset.
It just doesn't even yielded the

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00:11:15,320 --> 00:11:18,280
returns on capital that you
would expect if a BHP type

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00:11:18,280 --> 00:11:20,120
asset.
Of course, BHP are super bullish

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00:11:20,120 --> 00:11:22,920
on copper and if copper price,
you know, goes up, all of a

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00:11:22,920 --> 00:11:25,320
sudden your return on capital
looks marvellous.

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00:11:25,320 --> 00:11:27,320
But to to date it just it just
hasn't.

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00:11:27,320 --> 00:11:31,040
So I think does the deal stack
up for BHP yet buying odds?

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00:11:31,040 --> 00:11:33,840
I think no, I think you know
these those potential one point

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00:11:34,040 --> 00:11:38,160
US 1.5 billion in synergies
don't offset the four billion

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00:11:38,160 --> 00:11:42,520
Aussie of write downs that I've
just talked about in between US

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00:11:42,520 --> 00:11:45,840
minerals and the and the blowout
that at at Prom Hill since

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00:11:45,840 --> 00:11:48,240
buying US minerals.
And and when Mike Henry's kind

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00:11:48,240 --> 00:11:52,200
of term comes to an end, I
think, I think there's even a

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00:11:52,200 --> 00:11:54,520
chance that these assets could
make their way out of the

225
00:11:54,520 --> 00:11:57,680
portfolio again.
New CEO comes in.

226
00:11:58,240 --> 00:12:00,000
Yeah.
The board, yeah, it wouldn't

227
00:12:00,000 --> 00:12:03,600
happen, wouldn't happen straight
away and there's probably like a

228
00:12:03,600 --> 00:12:07,080
low chance on it happening given
the the DNA of of a copy Heather

229
00:12:07,400 --> 00:12:11,360
BHP.
But yeah, can can a BHP which

230
00:12:11,360 --> 00:12:16,240
has, yeah, so much fat to that
business, can it actually

231
00:12:16,240 --> 00:12:20,800
generate the returns required to
to get good margin out of these

232
00:12:20,800 --> 00:12:24,840
assets or is it sort of better
suited in a, in a right sized

233
00:12:25,680 --> 00:12:27,920
lean, lean operator that can
that can do it?

234
00:12:28,120 --> 00:12:30,720
It's looking looking pretty
tough at at the moment.

235
00:12:30,760 --> 00:12:32,760
We'll see.
You know, the big swing factor,

236
00:12:32,760 --> 00:12:34,520
like you said, is the is the
copper price.

237
00:12:34,640 --> 00:12:35,960
We'll see how that sort of
performs.

238
00:12:36,480 --> 00:12:39,000
That may change the perception
that people kind of have.

239
00:12:39,000 --> 00:12:41,400
But as it stands, you know, this
is the big the big deal that

240
00:12:41,400 --> 00:12:44,400
Mike Henry did and it's yeah,
it's not looking too great.

241
00:12:44,480 --> 00:12:47,600
I'm sure he'll be, you know, all
too aware of that at at the

242
00:12:47,600 --> 00:12:51,640
moment and he'll be working hard
to look at other deals, look at

243
00:12:51,640 --> 00:12:54,200
other propositions.
Obviously the the Anglo deal,

244
00:12:54,200 --> 00:12:57,080
had that gone through would have
completely changed his his

245
00:12:57,080 --> 00:13:00,800
legacy or everyone would have
sort of put odds to the side and

246
00:13:00,800 --> 00:13:03,160
thought about however that deal
might have gone down had it gone

247
00:13:03,160 --> 00:13:05,280
through.
Needless to say, it didn't go

248
00:13:05,280 --> 00:13:06,840
through, so here we are.
Yeah.

249
00:13:06,960 --> 00:13:09,680
And look, there was a lot of
there was there was a whole

250
00:13:09,680 --> 00:13:12,640
separate slide in the in the
deck today, which basically

251
00:13:12,640 --> 00:13:18,600
showed the the capital intensity
of of of inorganic opportunities

252
00:13:18,600 --> 00:13:20,440
versus organic growth
opportunities that they have

253
00:13:20,440 --> 00:13:21,720
within their Chilean copper
business.

254
00:13:22,120 --> 00:13:25,720
And what the point of the slide
was that they've got a lot more

255
00:13:25,920 --> 00:13:31,040
creative ways to add tons via
their organic growth within,

256
00:13:31,720 --> 00:13:34,920
within Chile.
Now it didn't show, it didn't

257
00:13:34,920 --> 00:13:37,320
show that same chart for their S
Australian copper business.

258
00:13:37,320 --> 00:13:40,120
So I just use.
The Prezzo to highlight the

259
00:13:40,120 --> 00:13:44,640
positive.
Yeah, I think, I think it's been

260
00:13:44,640 --> 00:13:46,960
disappointing so far for the for
the South Australian copper

261
00:13:46,960 --> 00:13:48,920
business.
I think you're right, mate.

262
00:13:49,120 --> 00:13:50,760
All right, what do we got next
start?

263
00:13:50,800 --> 00:13:54,880
Well, you know, what I always
find interesting is, you know,

264
00:13:54,880 --> 00:13:58,920
we, we've just come back from
Africa, notably went to in Darba

265
00:13:58,920 --> 00:14:01,400
conference And when we, when we
traveled to, to corners of the,

266
00:14:01,560 --> 00:14:03,440
the planet.
One thing that I've picked up on

267
00:14:03,440 --> 00:14:06,480
a couple of times, I'm always
amazed at just the, the brand

268
00:14:06,480 --> 00:14:09,080
recognition you, you can
sometimes get across the globe

269
00:14:09,080 --> 00:14:11,240
for, for a little Perth kind of
company.

270
00:14:11,240 --> 00:14:13,360
And I'm not talking about money
of mine, mate.

271
00:14:13,680 --> 00:14:15,440
I'm talking about K drill.
K drill.

272
00:14:15,480 --> 00:14:19,200
We we were, we were talking
about, I can't remember who the

273
00:14:19,200 --> 00:14:21,280
conversation was with, but I
definitely distinctly remember

274
00:14:21,280 --> 00:14:22,320
it.
Maybe you remember, but we're

275
00:14:22,320 --> 00:14:24,000
talking about the wicked
partners that help us keep the

276
00:14:24,000 --> 00:14:28,600
podcast free for everyone in in
a conversation with someone at

277
00:14:28,600 --> 00:14:30,160
one of the functions we were at
at in Darba.

278
00:14:30,160 --> 00:14:33,320
I think that was South African
and they said I bet those ads

279
00:14:33,440 --> 00:14:35,160
ads work.
If if I needed drilling, I'd

280
00:14:35,160 --> 00:14:37,760
Google K drill unprompted.
It was amazing.

281
00:14:38,600 --> 00:14:42,200
But see mate, K drills, home
ground is, is WA, all these

282
00:14:42,200 --> 00:14:45,480
spots on this map, that is where
their rigs have been lately, RC,

283
00:14:45,480 --> 00:14:48,840
Diamond, Olga and air core rigs.
They traverse the West

284
00:14:48,840 --> 00:14:52,120
Australian Outback to get the
core needed for exploration

285
00:14:52,120 --> 00:14:54,600
drilling, mate.
And you know who gets the most

286
00:14:54,680 --> 00:14:57,080
metres per shift?
You know the drilling partner

287
00:14:57,080 --> 00:15:00,600
that says we can do it?
The K spelled with AK.

288
00:15:00,600 --> 00:15:04,200
We can tell me whatever.
Your drilling needs mate K drill

289
00:15:04,200 --> 00:15:08,480
can hey drill call druba or
rhino today call with AK.

290
00:15:09,200 --> 00:15:13,560
Go K drill all your RC diamond,
any drilling needs you've got,

291
00:15:14,000 --> 00:15:15,920
give the big fellas a call you
you remember.

292
00:15:15,920 --> 00:15:17,000
That chat it.
Was I do?

293
00:15:17,000 --> 00:15:17,800
Was it Mike Henry?
Oh.

294
00:15:20,840 --> 00:15:21,880
Gosh.
All righty.

295
00:15:21,920 --> 00:15:24,720
Let's let's have a quick chin
wag about M&A.

296
00:15:25,440 --> 00:15:27,400
This was just.
A big end of town M&A.

297
00:15:27,480 --> 00:15:31,240
A bit of a brain fart I had, I
had just thinking the other day,

298
00:15:32,800 --> 00:15:35,880
the US dollar, US Aussie dollar,
I think it's back to 64 cents,

299
00:15:35,880 --> 00:15:38,000
but it, you know, went like as
low as 60 cents there.

300
00:15:38,000 --> 00:15:43,160
It's still the US dollar is
still, yeah, like really strong

301
00:15:43,160 --> 00:15:45,960
on a relative basis.
And when you've got that

302
00:15:46,160 --> 00:15:49,960
dynamic, I think it makes that
cross-border M&AA lot more

303
00:15:49,960 --> 00:15:53,240
interesting here for any New
York listed miners to

304
00:15:53,240 --> 00:15:55,680
potentially, you know, buy
Australian assets.

305
00:15:56,520 --> 00:15:58,800
You know, in the in the gold
space, there's a there's a

306
00:15:59,120 --> 00:16:01,640
handful of New York listed
companies.

307
00:16:01,880 --> 00:16:04,600
The inverse also applies.
It's, you know, not at all

308
00:16:04,600 --> 00:16:10,480
compelling for for ASX listed
miners to to go to the US, but I

309
00:16:10,480 --> 00:16:13,280
just think watch this space to
see if there's any opportunism

310
00:16:13,280 --> 00:16:15,160
on, on this front.
It's a kind of, you know,

311
00:16:15,440 --> 00:16:19,040
perfect set of, of macro
scenarios that can can motivate,

312
00:16:19,120 --> 00:16:20,920
motivate that kind of M&A
activity.

313
00:16:21,880 --> 00:16:24,520
When you have record gold price,
animal spirits kick in and then

314
00:16:24,520 --> 00:16:28,200
you've got the, you know, the
USAUD kind of in your favour to

315
00:16:28,200 --> 00:16:29,760
to embark on these sorts of
ambitions.

316
00:16:29,960 --> 00:16:32,400
I'm on watch out for those,
yeah, animal spirits that you

317
00:16:32,400 --> 00:16:35,560
speak of, mate.
That is what the gold industry

318
00:16:35,560 --> 00:16:37,720
has been whipped for for the
last decade.

319
00:16:37,920 --> 00:16:42,360
And you know, you listen to the
likes of Jake Klein, he comes,

320
00:16:42,440 --> 00:16:47,080
he comes to mind, very, very
cognizant of these animal

321
00:16:47,080 --> 00:16:52,120
spirits returning, very fixated
on shareholder returns at the

322
00:16:52,120 --> 00:16:55,080
end of the day.
And Agnico, another company I'm

323
00:16:55,080 --> 00:16:57,760
sure comes to your mind, you
listen to their call, very

324
00:16:57,760 --> 00:17:02,640
fixated on what our shareholders
getting for this gold price.

325
00:17:02,960 --> 00:17:05,640
Is it flowing through to the
bottom line or are we just

326
00:17:05,640 --> 00:17:08,240
seeing cost inflation?
It's managing those costs super,

327
00:17:08,240 --> 00:17:11,720
super tight.
And yeah, not going and blowing

328
00:17:11,720 --> 00:17:14,280
it all if you don't make it on
a, on a bad deal at the top of

329
00:17:14,280 --> 00:17:16,400
the cycle.
So yeah, very, very keen to see

330
00:17:16,400 --> 00:17:16,800
how it.
Plays out.

331
00:17:16,800 --> 00:17:19,520
I don't think you'll hear the
word on a per share basis

332
00:17:19,520 --> 00:17:22,040
mentioned more than during an
agnico call.

333
00:17:22,560 --> 00:17:25,680
It's everything's per share.
No qualms with that on my end,

334
00:17:25,680 --> 00:17:26,599
Matt.
Yeah, sorry.

335
00:17:26,960 --> 00:17:31,520
Something that there might be
qualms on your end is Adriatic

336
00:17:31,680 --> 00:17:36,200
is raising today Australian 80
million or US $50 million.

337
00:17:37,160 --> 00:17:40,200
It's not the not the first time
we've we've, we've woken up to a

338
00:17:40,200 --> 00:17:44,720
surprise Adriatic raise.
Is it different this time mate?

339
00:17:45,800 --> 00:17:47,960
I won't answer that.
I'll let the company answer

340
00:17:47,960 --> 00:17:48,440
that.
Let's play.

341
00:17:48,600 --> 00:17:51,560
Let's play a snippet from about
two weeks ago from the quarterly

342
00:17:51,960 --> 00:17:54,880
call.
Finally, on liquidity, do you

343
00:17:54,880 --> 00:17:58,960
believe that you will have
enough cash to get through 2025

344
00:17:59,440 --> 00:18:01,560
or will you need to look at
other options in terms of

345
00:18:01,720 --> 00:18:03,440
capital raises?
Yeah.

346
00:18:03,640 --> 00:18:07,800
So I should feel pretty decent
and and to circle back to to

347
00:18:07,920 --> 00:18:11,680
some of the slides, 46 million
of of cash today, you know, now

348
00:18:11,680 --> 00:18:14,200
that we've closed the traffic of
prepayment and we have been

349
00:18:14,440 --> 00:18:16,520
basically cash flow neutral for
for four months now.

350
00:18:16,520 --> 00:18:19,000
So I think that's kind of a
good, you know, sort of track

351
00:18:19,000 --> 00:18:22,320
record even though the plant has
only been again running at kind

352
00:18:22,320 --> 00:18:25,120
of like 25% capacity.
And we had our, you know, sort

353
00:18:25,120 --> 00:18:27,200
of challenges in October and and
December, you know, due to

354
00:18:27,200 --> 00:18:29,040
weather, which obviously you
know came in with a bit of a

355
00:18:29,040 --> 00:18:31,200
lighter quarter.
So if you think about that, I

356
00:18:31,200 --> 00:18:35,040
didn't say, OK, but now we're
doing 75 to 80% capacity in the

357
00:18:35,040 --> 00:18:36,560
plant.
The crushers back up to running

358
00:18:36,560 --> 00:18:39,800
1500, you know, plus a ton per
day, that's about a 40,000 ton a

359
00:18:39,800 --> 00:18:42,680
month sort of run rate.
So kind of 2/3 to 70% of

360
00:18:42,680 --> 00:18:45,120
production.
On that basis, we should be well

361
00:18:45,120 --> 00:18:47,880
ahead of of just cash flow
neutral or break even.

362
00:18:47,880 --> 00:18:49,480
We should be, you know, positive
free cash flow.

363
00:18:49,480 --> 00:18:53,440
So you think 46 today, we've got
to pay back about 18 to 20

364
00:18:53,440 --> 00:18:55,280
million a quarter for the next 4
quarters.

365
00:18:55,760 --> 00:18:57,720
But really it will be cash flow
positive.

366
00:18:57,720 --> 00:18:59,800
So from here, everything we're
paying for should be, should be

367
00:18:59,800 --> 00:19:02,560
out of cash flow and we don't
see the need for additional

368
00:19:02,560 --> 00:19:04,680
liquidity.
No chance of a raise just two

369
00:19:04,680 --> 00:19:07,680
brief weeks ago.
That was the the ideal thing to

370
00:19:07,680 --> 00:19:10,960
say if you want to raise money
in two weeks time at A at A at a

371
00:19:11,000 --> 00:19:14,160
pretty they're pretty close to
all time high share price and a

372
00:19:14,160 --> 00:19:17,360
tight discount.
It's, it's honestly, you know,

373
00:19:17,880 --> 00:19:21,280
impressive to get that, get a
raise like this away under those

374
00:19:21,280 --> 00:19:25,600
circumstances when it was
probably a relatively, you know,

375
00:19:26,000 --> 00:19:27,880
clear line of sight to a funding
gap here too.

376
00:19:28,040 --> 00:19:31,080
Yeah, seriously impressive.
And I think that's why it's

377
00:19:31,080 --> 00:19:34,520
worth giving a quick mention of
the backers that they've got.

378
00:19:34,520 --> 00:19:35,520
I think a lot of people will
know this.

379
00:19:35,520 --> 00:19:39,400
But to your point about a 7%
discount, which is, you know,

380
00:19:39,480 --> 00:19:43,560
relatively tight and you've got
L1 on the register owning a big

381
00:19:43,560 --> 00:19:46,160
chunk around that 15 sort of
percent range.

382
00:19:46,800 --> 00:19:52,040
The same can be said for Helicon
Fund out of London and then

383
00:19:52,120 --> 00:19:53,680
Orion, who had tied in with the
debt.

384
00:19:53,680 --> 00:19:56,200
They're on the Equity 2.
And have they tipped in more

385
00:19:56,200 --> 00:19:58,240
Orion in this race?
They got named yet?

386
00:19:58,400 --> 00:19:59,640
Really.
Because they were trimming in

387
00:19:59,640 --> 00:20:01,200
the the last place when they
did.

388
00:20:01,920 --> 00:20:03,160
Interesting to say that, right?
Yeah.

389
00:20:03,160 --> 00:20:08,080
And then former party guests in
Old West and QRC are also on the

390
00:20:08,080 --> 00:20:10,520
on the register, nowhere near as
substantial as the previously

391
00:20:10,520 --> 00:20:12,560
mentioned ones.
And of course, you've got the,

392
00:20:12,560 --> 00:20:15,800
the board and significantly Paul
Cronin, who was also named to be

393
00:20:16,080 --> 00:20:21,840
tipping into this raise.
So US 50 million, like you said,

394
00:20:22,520 --> 00:20:26,520
ostensibly being raised to fast
track, very expansion and

395
00:20:26,520 --> 00:20:28,400
enhanced balance sheet
flexibility.

396
00:20:28,920 --> 00:20:31,480
Now this sounds as you were
alluding to, awfully similar to

397
00:20:31,480 --> 00:20:35,040
the rise that they did during
construction, which was in

398
00:20:35,040 --> 00:20:37,960
quotation marks for exploration
or the rise they did last year

399
00:20:37,960 --> 00:20:41,600
to go on an operator.
And I, I don't want to take away

400
00:20:41,600 --> 00:20:44,680
from the, the difficulty of
ramping up a project, you know,

401
00:20:44,680 --> 00:20:45,960
we've, we've never done it
before.

402
00:20:45,960 --> 00:20:48,680
I'm pretty aware of that.
And it's hard work.

403
00:20:48,680 --> 00:20:53,160
You're always going to face
challenges that you had no idea

404
00:20:53,640 --> 00:20:55,640
would be whacking you in the
face before you start.

405
00:20:55,640 --> 00:20:58,680
So it is seriously hard, and I
don't want to make light of

406
00:20:58,680 --> 00:21:03,600
that, but I think the amount of
raises they've had to do just

407
00:21:03,600 --> 00:21:06,360
really speaks to the challenges
in getting this particular

408
00:21:06,360 --> 00:21:09,120
operation up and running.
There's been all sorts of

409
00:21:09,120 --> 00:21:13,080
problems.
And with that in mind, I can't

410
00:21:13,080 --> 00:21:18,000
take the narrative sort of spin
on the raise too seriously.

411
00:21:18,440 --> 00:21:21,040
Just a couple of weeks ago when
we played that highlight and the

412
00:21:21,040 --> 00:21:24,280
quarterly came out we'll put up.
Now you can sort of see a

413
00:21:24,280 --> 00:21:28,600
snippet from Laura Tyler the the
MD talking about a delay to the

414
00:21:28,600 --> 00:21:31,320
start of commercial production,
which had been pushed, which has

415
00:21:31,320 --> 00:21:35,840
been pushed numerous Times Now
this time into Q1 of this

416
00:21:35,840 --> 00:21:39,440
calendar year because of weather
and other related, which were

417
00:21:39,440 --> 00:21:42,680
only the, the most recent of the
challenges that they kind of

418
00:21:42,680 --> 00:21:44,400
faced.
So it's kind of hard to, to

419
00:21:44,400 --> 00:21:47,880
marry up going for an expansion
when you're running the, the

420
00:21:47,880 --> 00:21:50,920
meal at 25% of capacity and you
haven't really run it at any

421
00:21:50,920 --> 00:21:53,600
more than that like yet.
There were times there were days

422
00:21:53,600 --> 00:21:56,840
where they were running it at
sort of 60 or 70% the meal

423
00:21:56,840 --> 00:21:59,880
capacity of, you know,
nameplate, which is 800,000 tons

424
00:21:59,880 --> 00:22:02,600
per annum.
But it's, it's, it's hard to,

425
00:22:02,600 --> 00:22:04,720
you know, match those two up in
my mind.

426
00:22:04,800 --> 00:22:09,920
Is the, I mean we see, we see
expansion raises all the time,

427
00:22:09,920 --> 00:22:13,760
but the use of funds this time
it was actually kind of 5050

428
00:22:13,760 --> 00:22:17,080
between balance sheet and and
expansion and.

429
00:22:17,680 --> 00:22:20,640
Yeah.
I mean, you have to do that from

430
00:22:20,640 --> 00:22:23,160
a legal perspective.
I'm sure general counsel would

431
00:22:23,160 --> 00:22:26,480
be saying at least for their own
incentive, their own job, that

432
00:22:26,720 --> 00:22:29,160
they'd want that jotted down
under use of funds, like you

433
00:22:29,160 --> 00:22:32,560
said, divvied up half and half
towards this expansion capital,

434
00:22:32,920 --> 00:22:36,480
which no, that that's only going
to hit nameplate supposedly in

435
00:22:36,480 --> 00:22:38,440
2027.
So that's quite a ways down the

436
00:22:38,440 --> 00:22:40,440
track.
And the study showed that that

437
00:22:40,440 --> 00:22:44,360
was relatively cheap US
25,000,000 to take it from the

438
00:22:44,360 --> 00:22:48,920
800,000 to the 1.3 million tonne
per annum operation.

439
00:22:48,920 --> 00:22:51,720
But this is showing up the
balance sheet debt repayments

440
00:22:51,720 --> 00:22:55,720
start on the 31st of March.
That had been pushed back three

441
00:22:55,720 --> 00:22:59,360
months, three months which had
been pushed six months.

442
00:22:59,360 --> 00:23:02,240
So this was meant to start 3/4
of a year ago already.

443
00:23:02,240 --> 00:23:07,240
They've had pretty a pretty
friendly relationship from the

444
00:23:07,320 --> 00:23:09,720
the debtors, I kind of say is.
Orion on the OK.

445
00:23:09,880 --> 00:23:12,200
Yeah.
And they got a prepaid with

446
00:23:12,200 --> 00:23:15,320
traffic late last year as well,
right?

447
00:23:15,360 --> 00:23:17,360
They did.
So they announced that at the

448
00:23:17,360 --> 00:23:21,160
beginning of December and they
locked that prepayment up I

449
00:23:21,160 --> 00:23:23,640
think on the 17th of January
from memory.

450
00:23:23,880 --> 00:23:26,840
So if you might remember, I
think in about April of last

451
00:23:26,840 --> 00:23:29,960
year, they got an additional
facility with Orion, but this

452
00:23:30,520 --> 00:23:32,480
swapped out for the traffic
prepayment.

453
00:23:32,560 --> 00:23:36,560
Traffic prepayment was US $25
million, which these guys say is

454
00:23:36,560 --> 00:23:40,120
on much friendlier terms than
that previously short term

455
00:23:40,280 --> 00:23:42,040
Orion.
Which it very well may have

456
00:23:42,040 --> 00:23:45,560
been, but I, I always, because,
because they'd done a raise

457
00:23:45,560 --> 00:23:48,960
before where they basically
articulated that they, you know,

458
00:23:49,000 --> 00:23:52,400
the, the raise funds could be
utilized instead of having to

459
00:23:52,400 --> 00:23:55,360
tip into that, that secondary
Orion facility.

460
00:23:55,360 --> 00:23:58,600
And then they got the traffic,
the traffic prepaid so that they

461
00:23:58,600 --> 00:24:01,040
didn't have to draw down the UI
facility.

462
00:24:01,280 --> 00:24:03,960
In the back of my head, I always
wondered like, what are the draw

463
00:24:03,960 --> 00:24:05,960
down conditions?
What are the CPS to actually

464
00:24:05,960 --> 00:24:07,800
draw down there?
And are there any that they,

465
00:24:07,920 --> 00:24:10,200
they can't actually meet?
And that might be driving some

466
00:24:10,200 --> 00:24:11,640
of the funding arrangements as
well.

467
00:24:11,640 --> 00:24:14,880
I never quite got to the bottom
of that line of questioning, but

468
00:24:15,040 --> 00:24:18,280
yeah, erased today and prepaid's
already drawn.

469
00:24:19,520 --> 00:24:22,240
At least it puts to bed some of
the balance sheet fees in the

470
00:24:22,240 --> 00:24:24,280
short term.
Yeah, I think, I think through

471
00:24:24,280 --> 00:24:26,920
2025 they're, they're fine.
So like I said, repayment

472
00:24:26,920 --> 00:24:31,480
starting that's sort of circa US
$20 million every quarter from

473
00:24:31,480 --> 00:24:34,160
March 31st.
So that'll, that'll add up

474
00:24:34,880 --> 00:24:37,960
pretty, pretty quickly for as
you heard in the snippet that I

475
00:24:37,960 --> 00:24:41,760
paid played before for an
operation that was, you know,

476
00:24:42,200 --> 00:24:47,200
break even at best, at best.
And there there are investments

477
00:24:47,200 --> 00:24:50,280
they need to make still, you
know, talking about things like

478
00:24:50,640 --> 00:24:52,840
paste and other parts of the
plant.

479
00:24:52,840 --> 00:24:54,720
You know, they've they've had to
fix up the crusher.

480
00:24:55,240 --> 00:24:56,520
There'll be other challenges
they'll face.

481
00:24:56,520 --> 00:25:01,000
But yeah, there's investments
that need to go into, into the

482
00:25:01,000 --> 00:25:04,320
mill.
We know that operations are much

483
00:25:04,320 --> 00:25:05,840
more expensive than what they
were.

484
00:25:05,840 --> 00:25:08,240
You can sort of glean that from
all in sustaining costs.

485
00:25:08,240 --> 00:25:11,920
When they do talk about it,
they're up touching on 50% from

486
00:25:11,920 --> 00:25:13,440
the the DFSA number of years
ago.

487
00:25:13,440 --> 00:25:16,240
Because of challenges like we
spoke about, we can't additional

488
00:25:16,240 --> 00:25:18,360
ground support needed.
Yeah, the sorts and the

489
00:25:18,600 --> 00:25:21,280
development meters are like half
of what the, is that right?

490
00:25:21,520 --> 00:25:24,040
Yeah, exactly.
And that that's just a couple of

491
00:25:24,040 --> 00:25:27,960
the issues that a whole other
with consumables snow hindering

492
00:25:27,960 --> 00:25:30,400
access and all that.
Yeah, Just to round out on the

493
00:25:30,400 --> 00:25:34,680
on the financing side of things
as well, they've got that debt

494
00:25:34,800 --> 00:25:38,440
and while you won't see it in
the the quarterly report,

495
00:25:38,440 --> 00:25:41,800
there's a good chunk of
capitalized interest there as

496
00:25:41,800 --> 00:25:42,840
well.
It's kind of hard to glean.

497
00:25:42,840 --> 00:25:44,640
There's different reporting
standards because they

498
00:25:45,280 --> 00:25:47,320
prioritize that London part of
their listing for the the

499
00:25:47,320 --> 00:25:50,440
financial reporting as I sort of
understand it, but I'd be

500
00:25:50,440 --> 00:25:53,680
guessing in excess of US $30
million is capitalized in

501
00:25:53,680 --> 00:25:58,400
interest there as well.
So on the positive side of

502
00:25:58,400 --> 00:26:04,320
financing, they are doing this
raise at a, you know, at a

503
00:26:04,480 --> 00:26:07,920
pretty decent price.
Like this isn't a very dilutive

504
00:26:07,920 --> 00:26:10,680
raise for the challenges that
they've faced.

505
00:26:10,800 --> 00:26:14,360
I feel like we've spoken to that
companies in a not and not too

506
00:26:14,360 --> 00:26:18,720
dissimilar position and they've
had to do a way, way bigger

507
00:26:19,080 --> 00:26:22,800
discount whilst they're trading
at A at a much lower, you know,

508
00:26:22,800 --> 00:26:24,960
P NAV or with it, whichever kind
of multiple you use.

509
00:26:24,960 --> 00:26:29,880
So 80 million Aussie roughly
when you're a billion odd dollar

510
00:26:29,880 --> 00:26:33,040
company isn't the the worst
thing in the world from the

511
00:26:33,040 --> 00:26:36,240
company's perspective?
You normally, yeah, you normally

512
00:26:37,000 --> 00:26:40,600
say a company priced to raise
the they'll become raised, the

513
00:26:40,600 --> 00:26:43,840
market can can figure it out,
they'll sell off in the lead up

514
00:26:43,840 --> 00:26:46,320
and then the ultimate ramp up
raise is a lot more dilutive.

515
00:26:46,760 --> 00:26:48,960
Really speaks to some supportive
shareholders I think.

516
00:26:49,400 --> 00:26:54,160
Yeah, supportive shareholders,
Yeah, yeah, yeah, there's,

517
00:26:54,480 --> 00:26:56,880
they're having some like some
wins on the recovery, everything

518
00:26:56,880 --> 00:26:59,280
like that.
But I think it's still, it's

519
00:26:59,280 --> 00:27:04,160
still kind of hard to figure out
how ramp up is really going to

520
00:27:04,160 --> 00:27:07,680
unfold and execute because you
take some small wins, but then

521
00:27:07,680 --> 00:27:10,560
there's context to the wins that
they've had as well.

522
00:27:11,680 --> 00:27:15,040
Like what they're mining right
now is a lot higher grade than

523
00:27:15,720 --> 00:27:18,360
than you know, the reserve grade
is, how long can that last?

524
00:27:18,360 --> 00:27:20,720
What does that do to the
recoveries etcetera like that,

525
00:27:20,720 --> 00:27:23,760
right?
Yeah, we know the the positive

526
00:27:23,760 --> 00:27:26,640
flow through from higher head
grade feed red that's going

527
00:27:26,640 --> 00:27:30,160
through currently looking a lot
more positive versus what the

528
00:27:30,160 --> 00:27:31,720
study was.
How long can that last as a

529
00:27:31,720 --> 00:27:33,720
question?
But right now that should be

530
00:27:33,720 --> 00:27:37,120
flowing on quite positively to
recoveries.

531
00:27:37,480 --> 00:27:39,360
That goes sort of both ways.
So there there's a sort of

532
00:27:39,800 --> 00:27:42,240
question on that front.
Also the challenges with the

533
00:27:42,240 --> 00:27:44,160
mill, they've been at the front.
You know the, the challenge was

534
00:27:44,560 --> 00:27:47,920
that they articulated in the
call was regarding the crusher.

535
00:27:48,440 --> 00:27:52,000
And like I said, they're doing
about 1/4 of the nameplate

536
00:27:52,000 --> 00:27:55,520
capacity as they sort of work
through and really scale things

537
00:27:55,520 --> 00:27:57,960
up, maybe the bottleneck shifts
and maybe they have other

538
00:27:57,960 --> 00:28:01,360
challenges in other plants,
other parts of the plant.

539
00:28:01,360 --> 00:28:04,720
So we'll kind of see like these
guys have their back against the

540
00:28:04,720 --> 00:28:08,880
wall and you know, to, to their
credit, they've, I'm sure

541
00:28:08,880 --> 00:28:11,640
they've been working super hard.
Like I can rattle off some of

542
00:28:11,640 --> 00:28:14,720
the challenges from the the
weather they faced, snow that

543
00:28:14,720 --> 00:28:18,320
sort of had its flow and impacts
on power to the mine.

544
00:28:18,680 --> 00:28:21,800
The rock competency challenges,
which we started speaking about

545
00:28:21,800 --> 00:28:25,600
a couple years ago now, the
shortage in consumables, legal

546
00:28:25,600 --> 00:28:28,280
challenges regarding the
tailings, the crusher like I

547
00:28:28,280 --> 00:28:32,040
just mentioned, contract issues,
water challenges and the railway

548
00:28:32,520 --> 00:28:35,200
about everything under the sun
that could have hit these guys.

549
00:28:35,760 --> 00:28:38,360
Hannah has and haven't fallen
apart.

550
00:28:38,360 --> 00:28:41,640
Things are still moving forward.
So hopefully they can address

551
00:28:41,640 --> 00:28:43,200
them.
And I'm sure that the internal

552
00:28:43,200 --> 00:28:45,720
learnings are just stacking up
and up and up and hopefully they

553
00:28:45,720 --> 00:28:49,400
can straighten out the ship.
But yeah, I think things are

554
00:28:49,400 --> 00:28:54,040
looking quite different from
what the the DFS outlines four

555
00:28:54,040 --> 00:28:57,560
years ago and to what we were
thinking a couple years ago.

556
00:28:58,400 --> 00:29:01,920
It's, it's a hard one to, I've
always found Adriatic really

557
00:29:01,920 --> 00:29:06,160
hard to pick if it's a, you
know, I'm optimistic or

558
00:29:06,160 --> 00:29:10,440
pessimistic on, on the outlook.
And yeah, I look forward to the,

559
00:29:10,480 --> 00:29:14,640
the, the ramp up kind of being
over and commercial production

560
00:29:15,600 --> 00:29:18,080
being executed.
It's just like what you're what

561
00:29:18,080 --> 00:29:20,520
you're funding dynamics look
like in the interim that that

562
00:29:20,520 --> 00:29:22,760
matter a lot, especially when
there's debt, the cap structure.

563
00:29:23,120 --> 00:29:26,200
What do you think matters to the
stock from here mate?

564
00:29:26,720 --> 00:29:27,800
I think you hit the nail on the
head.

565
00:29:27,800 --> 00:29:29,800
Debt.
Debt has just amplified

566
00:29:29,960 --> 00:29:31,960
everything like like it always
does.

567
00:29:32,240 --> 00:29:37,280
But you know, you've just
getting the mining side humming

568
00:29:37,280 --> 00:29:38,560
and then getting the plant
humming.

569
00:29:38,680 --> 00:29:43,000
They're the biggest things.
And then you can potentially see

570
00:29:43,000 --> 00:29:45,880
some sort of tailwinds if silver
moves in their favor, if zinc

571
00:29:45,880 --> 00:29:48,560
moves in their favor, obviously
they're polymetallic.

572
00:29:48,560 --> 00:29:50,560
So those are the kind of big
ones.

573
00:29:52,600 --> 00:29:54,880
That's just what you kind of got
to look out for.

574
00:29:54,880 --> 00:29:57,120
And hopefully, I think there's a
lot that we don't actually know.

575
00:29:57,120 --> 00:30:00,080
I think there's a lot of
challenges that it's very hard

576
00:30:00,080 --> 00:30:04,480
for a public equities investor
to to get good insight on at the

577
00:30:04,480 --> 00:30:07,000
moment.
Lots has changed from the DFS

578
00:30:07,000 --> 00:30:09,280
like we kind of touched on
there.

579
00:30:09,280 --> 00:30:12,480
So if you're an investor, you
kind of just got to cross your

580
00:30:12,480 --> 00:30:14,520
fingers a bit and hope the team
that can work it out.

581
00:30:15,320 --> 00:30:19,080
And yeah, you're the company
just just keep on pressing away.

582
00:30:19,080 --> 00:30:20,520
What do?
You, What do you make of L1

583
00:30:20,520 --> 00:30:24,640
Capital?
They've been pretty big here.

584
00:30:24,640 --> 00:30:27,480
I think, I think the biggest
shareholder now, I think.

585
00:30:27,960 --> 00:30:32,880
But their commitment, yeah, came
about a year ago and has has

586
00:30:33,760 --> 00:30:35,320
ramped up and they've been,
yeah.

587
00:30:35,520 --> 00:30:36,720
Yeah.
So they're about neck and neck

588
00:30:36,720 --> 00:30:41,720
with Helicon in and around 15%
when I last looked shareholders

589
00:30:41,720 --> 00:30:45,400
in this one.
We've obviously spoken a bunch

590
00:30:45,400 --> 00:30:49,520
about this off the record that
the track record in, in the main

591
00:30:49,520 --> 00:30:52,440
fund is super impressive.
These guys have smart and

592
00:30:52,440 --> 00:30:56,040
anecdotally the amount of smart
people we've spoken to that rate

593
00:30:56,040 --> 00:30:59,720
their team very highly.
I think you know that that

594
00:30:59,720 --> 00:31:03,120
reflects very well on them.
Then you dive into the returns

595
00:31:03,120 --> 00:31:06,520
and again, like we've spoken
about, a lot of them come from

596
00:31:06,560 --> 00:31:08,560
mining, which is interesting
because these these guys are

597
00:31:08,840 --> 00:31:11,880
generalist investors.
So it's it's intriguing to see

598
00:31:11,880 --> 00:31:15,120
that the sector in which the
highest amount of their returns

599
00:31:15,120 --> 00:31:19,760
has been driven over a decade
plus is the the materials space,

600
00:31:20,160 --> 00:31:21,880
so.
The one, the one equity that

601
00:31:21,880 --> 00:31:25,880
they've obviously been pretty
public on lately is is min

602
00:31:25,880 --> 00:31:27,640
raised.
And I think the average price in

603
00:31:27,640 --> 00:31:33,120
mittens is like 5453 bucks.
It's now 30 and yeah, earnings

604
00:31:33,120 --> 00:31:35,120
coming off the market today.
Yeah.

605
00:31:35,360 --> 00:31:37,560
And and they, they keep kind of
doubling down a bit.

606
00:31:38,800 --> 00:31:41,200
Yeah, yeah, absolutely right.
They they play in a lot of the

607
00:31:41,200 --> 00:31:46,520
sort of bigger names, like I
think you can't make a judgement

608
00:31:46,520 --> 00:31:48,840
on them as investors on, on one
kind of company.

609
00:31:48,840 --> 00:31:52,160
You, you don't always get them
right, you know, and we'll see

610
00:31:52,160 --> 00:31:53,920
how that one plays out.
That's a that's a longer term

611
00:31:53,920 --> 00:31:55,880
bet.
They're not like the quote UN

612
00:31:55,880 --> 00:31:57,800
quote fast money that we've
spoken about in the past.

613
00:31:57,800 --> 00:32:00,520
They're not, they're not a pod
shop or that they take a a long

614
00:32:00,520 --> 00:32:02,160
position.
But other names, we've seen them

615
00:32:02,160 --> 00:32:04,880
being busy.
And lately West Gold comes to

616
00:32:04,880 --> 00:32:06,480
mind.
Next Gen. biggest shareholder,

617
00:32:06,480 --> 00:32:08,560
next Gen.
Yeah, Next Gen. did quite well

618
00:32:09,120 --> 00:32:10,720
for a while.
It's sort of backtracked a bit.

619
00:32:10,720 --> 00:32:13,360
I don't know the latest on their
position in that one.

620
00:32:13,800 --> 00:32:16,080
I think their net debt, wow,
could be wrong, yeah.

621
00:32:17,440 --> 00:32:20,280
It's interesting, yeah.
Never spoken with them so can't

622
00:32:21,680 --> 00:32:23,800
can't speak to that side of it.
Getting Dutch show on.

623
00:32:23,800 --> 00:32:25,160
We've tried to reach out to you
a few times.

624
00:32:25,280 --> 00:32:27,720
We would like to, we would love
to have them on the show and

625
00:32:27,840 --> 00:32:30,720
hear about their views.
Rafi, get in touch, Mark.

626
00:32:31,880 --> 00:32:33,800
All right, there's another
company I want to talk about,

627
00:32:33,800 --> 00:32:34,800
mate.
Tell me mate.

628
00:32:35,840 --> 00:32:38,600
This is a company that can make
a heap of challenges just

629
00:32:38,600 --> 00:32:42,280
disappear for a mining company.
Got to talk about salt Bush

630
00:32:42,360 --> 00:32:45,240
contracting.
These guys are the Champions of

631
00:32:45,240 --> 00:32:48,720
bulk haulage first and foremost.
Get it in your minds.

632
00:32:49,400 --> 00:32:51,680
These guys are the mind to mill
specialist.

633
00:32:51,880 --> 00:32:54,480
And it's not just bulk haulage,
they also do earth moving,

634
00:32:54,480 --> 00:32:56,520
crushing and screening.
I hate more.

635
00:32:56,520 --> 00:33:00,720
If you want to hit your tongue
targets when the ore comes out

636
00:33:00,720 --> 00:33:03,680
of the ground, comes out of the
pit, wherever it is, just cool

637
00:33:03,680 --> 00:33:05,640
salt Bush, they'll move it.
I don't want to hit my tongue

638
00:33:05,640 --> 00:33:06,960
targets mate, I want to beat
them.

639
00:33:06,960 --> 00:33:10,000
You want to exceed that?
I want to exceed salt Bush 200%

640
00:33:10,000 --> 00:33:12,520
as their website says mate, win
win, win, win.

641
00:33:12,600 --> 00:33:16,800
Not my words.
Their words I win, you win, and

642
00:33:17,200 --> 00:33:19,800
everyone wins.
Community wins, the customer

643
00:33:19,800 --> 00:33:22,920
wins, the client wins, your
employees win, everyone wins.

644
00:33:22,920 --> 00:33:24,440
Mate.
These guys have got hubs in

645
00:33:24,440 --> 00:33:29,560
Kalgoorlie, Makethara, Perth and
none other than Perinjury.

646
00:33:29,640 --> 00:33:32,240
Perinjury.
I had to look up, that's a

647
00:33:32,240 --> 00:33:33,200
Farmington.
Mate.

648
00:33:33,320 --> 00:33:36,800
Yeah, I I was intrigued, but lo
and behold, if you're around

649
00:33:36,800 --> 00:33:39,240
there, if you're in the area,
get in touch with Salt Bush.

650
00:33:39,280 --> 00:33:41,400
And I don't think this has been
stressed enough.

651
00:33:41,800 --> 00:33:44,200
Obviously everyone knows that
they do bulk haulage, that's

652
00:33:44,200 --> 00:33:46,280
your bread and butter.
But they're also in equipment.

653
00:33:46,280 --> 00:33:49,520
Hire Rd. maintenance from
handling and management, mine

654
00:33:49,520 --> 00:33:52,120
site construction set up.
You want to get a box cut?

655
00:33:52,120 --> 00:33:55,280
Excavated site rehab, tailings
construction.

656
00:33:55,960 --> 00:33:59,240
As Maddie said, you want
anything done on a mine site,

657
00:33:59,240 --> 00:34:02,840
just give salt Bush contracting
a call and they will happily

658
00:34:02,840 --> 00:34:05,320
look after you.
Salt Bush go salt Bush.

659
00:34:06,040 --> 00:34:07,920
Good on it mate.
What GCS?

660
00:34:08,400 --> 00:34:11,400
They are family business mate.
Absolute legends.

661
00:34:12,159 --> 00:34:17,560
All righty one last thing to
touch on mate, because I'm yeah,

662
00:34:18,520 --> 00:34:21,719
by the time this episode goes up
mid means have probably already

663
00:34:21,840 --> 00:34:25,040
already reported, and I'm sure
we'll have a bit to to troll

664
00:34:25,040 --> 00:34:27,920
through tomorrow when when their
call will be as well.

665
00:34:27,920 --> 00:34:29,840
And I'm sure we'll talk about it
a bit more too.

666
00:34:29,840 --> 00:34:33,960
But, but I kind of just wanted
to give a brief prelude to to in

667
00:34:33,960 --> 00:34:37,880
Rez's results, which which will
probably be out by now.

668
00:34:39,440 --> 00:34:41,920
I don't think they'll be very
good is my gut feel.

669
00:34:41,920 --> 00:34:44,159
But that could already be priced
in, to be honest.

670
00:34:44,920 --> 00:34:47,199
Ding Ding Ding Valley GC, who
still holds men, by the way.

671
00:34:47,800 --> 00:34:53,360
The thing, the thing I I wanted
to mention before the results

672
00:34:53,360 --> 00:34:56,159
actually come out, though, is a
certain report that was released

673
00:34:56,159 --> 00:34:59,480
over the weekend.
In the two trading days since

674
00:34:59,480 --> 00:35:03,080
that report was released in
share prices has fallen 5%.

675
00:35:03,080 --> 00:35:06,480
It's flirting already with that
$30 mark, which has been its

676
00:35:06,480 --> 00:35:09,960
floor for the last, you know,
six months amid all of the

677
00:35:09,960 --> 00:35:12,880
turmoil that's that's come the
way the company and and the

678
00:35:12,880 --> 00:35:16,120
report that was released.
It actually came out of album

679
00:35:16,120 --> 00:35:19,960
miles litany of reporting
documents for their, you know,

680
00:35:20,000 --> 00:35:26,080
four year FY20 2024 calendar
year 24 is there their reporting

681
00:35:26,080 --> 00:35:29,720
period.
And it was a technical report in

682
00:35:29,720 --> 00:35:33,080
amongst all the docs, which was
produced by RPM Global

683
00:35:33,720 --> 00:35:37,080
specifically on Wodgina.
Because it was a whole technical

684
00:35:37,080 --> 00:35:40,720
report on, on Wodgina with a
bunch of comprehensive detail

685
00:35:40,720 --> 00:35:42,960
that hasn't kind of been
publicly released before, both

686
00:35:42,960 --> 00:35:46,200
about the, the resource, the
performance of the asset today

687
00:35:46,200 --> 00:35:49,360
and forecast performance based
on the the life of mine plan

688
00:35:49,360 --> 00:35:54,280
that exists within the JV.
And without going into like the

689
00:35:54,280 --> 00:35:57,040
full detail of, of everything in
this report, I think it's fair

690
00:35:57,040 --> 00:35:58,840
to say there'd be a few
discrepancies between how the

691
00:35:58,840 --> 00:36:02,240
market has been valuing Wodgina
versus what this report suggests

692
00:36:02,240 --> 00:36:06,280
the value of Wodgina is.
Headline take away is it based

693
00:36:06,280 --> 00:36:10,600
on the Life of Mine plan
detailed within this report. 50%

694
00:36:10,680 --> 00:36:18,840
of of Wodgina has an NPV of
Aussie $1.3 billion at AUS $1300

695
00:36:18,960 --> 00:36:21,680
per time spot price.
Bit below broker consensus,

696
00:36:21,680 --> 00:36:23,600
wasn't it?
It's a fair bit below broker

697
00:36:23,600 --> 00:36:27,080
consensus for for men's 50%
share of Wodgina is, you know,

698
00:36:28,000 --> 00:36:32,000
slightly north of 3 billion,
which is which is nearly a

699
00:36:32,160 --> 00:36:36,080
difference of $10 per share when
you think of it in min min share

700
00:36:36,080 --> 00:36:39,200
price.
What's more is, is the life of

701
00:36:39,200 --> 00:36:43,880
mine plan that's in this, which
creates the base case in this

702
00:36:43,880 --> 00:36:46,080
report.
It assumes recoveries that

703
00:36:46,080 --> 00:36:49,760
wasn't actually, you know,
increase like 80% over the next

704
00:36:49,760 --> 00:36:53,920
couple of years and it also
assumes grade increases a fair

705
00:36:53,920 --> 00:36:58,040
bit from where it is now as
well. 2025 was looking like a

706
00:36:58,040 --> 00:37:01,920
tough year in that.
Report Max strip ratio 2025.

707
00:37:02,040 --> 00:37:05,680
Yeah, capital investment was,
you know, elevated it.

708
00:37:06,320 --> 00:37:08,840
It was coming at the wrong time
to say the least for mins.

709
00:37:09,040 --> 00:37:11,640
Yeah.
So I just think there's some big

710
00:37:11,640 --> 00:37:14,760
clouds hanging over the asset
and this is remember this, this

711
00:37:14,760 --> 00:37:16,840
is the the best of the the bunch
in there.

712
00:37:16,880 --> 00:37:20,760
The the lithium portfolio and
mins of course they have a

713
00:37:20,760 --> 00:37:24,320
favorable mining services
contract at the the project,

714
00:37:24,320 --> 00:37:27,880
which you know helps them kind
of offset some of the negative

715
00:37:27,880 --> 00:37:30,840
cash flows of being a 50% equity
holder of the project.

716
00:37:31,640 --> 00:37:35,360
But you know, with the detail
in, in this report, I, I don't

717
00:37:35,680 --> 00:37:39,600
believe that that that's
offsetting the, you know, the

718
00:37:39,600 --> 00:37:42,240
cash outflow that you're, you're
seeing at current lithium

719
00:37:42,240 --> 00:37:44,320
prices.
I'd still I'd still be a

720
00:37:44,320 --> 00:37:48,880
believer that this this asset is
is cash negative for mins at the

721
00:37:48,880 --> 00:37:50,440
moment.
Yeah, it's such a funny one that

722
00:37:50,680 --> 00:37:54,360
that, yeah, when you're the the
half owner of the business,

723
00:37:54,440 --> 00:37:58,640
yeah, if it's benefiting one
side, it's it's taking at least

724
00:37:58,640 --> 00:38:00,520
half from the other.
Yes, yeah.

725
00:38:00,520 --> 00:38:03,600
So, yeah, I think their
contracts have these like, you

726
00:38:03,960 --> 00:38:06,280
know, various escalation terms
etcetera, depending on I do

727
00:38:06,320 --> 00:38:09,560
yeah, certain.
But I still can't believe a

728
00:38:09,600 --> 00:38:12,960
narrative that this asset would
be cash positive for me.

729
00:38:12,960 --> 00:38:15,640
And that's my, my view based on
everything that I've read in

730
00:38:15,640 --> 00:38:17,400
this report.
Anyway, I'll have more to say

731
00:38:17,400 --> 00:38:19,840
about the whole, the whole
business after their, their

732
00:38:19,840 --> 00:38:22,520
results I'm I'm sure and I look
forward to, to reading them

733
00:38:23,160 --> 00:38:25,080
tonight.
Yeah, lots of fascinating

734
00:38:25,080 --> 00:38:28,960
implications on what a potential
sale of what you know could look

735
00:38:28,960 --> 00:38:32,080
like.
And that contract would be a

736
00:38:32,080 --> 00:38:34,480
huge in impediment to anyone
wanting to.

737
00:38:35,040 --> 00:38:38,000
I totally agree.
I mean, they often talk about

738
00:38:38,120 --> 00:38:40,440
how if they were, you know,
they've got a life of mine

739
00:38:40,920 --> 00:38:43,840
mining services contract over
the overall of their assets.

740
00:38:43,840 --> 00:38:47,480
So they ever sold them, they'd
say them, but I just don't see,

741
00:38:48,120 --> 00:38:51,920
I struggle to see someone who
would buy it and and want to

742
00:38:51,920 --> 00:38:56,120
keep that contract in place.
You'd want to retweet it or

743
00:38:56,120 --> 00:38:58,120
remove it entirely.
Like would would Pilgrim

744
00:38:58,120 --> 00:39:01,080
Minerals buy what you know?
Well, I don't know, but I doubt

745
00:39:01,160 --> 00:39:04,360
they'd buy it if it came with
Inreza's contractor.

746
00:39:04,560 --> 00:39:08,280
Yeah, I could say that with a
bit of confidence.

747
00:39:08,640 --> 00:39:11,400
I think, you know, you'd want to
have a bit more control in your

748
00:39:11,400 --> 00:39:14,320
own destiny if you're going to
buy the asset and maybe they'll

749
00:39:14,320 --> 00:39:17,120
get an opportunity in the the
coming sort of period.

750
00:39:17,440 --> 00:39:20,040
We'll sort of see.
Yeah, it's, it's an interesting

751
00:39:20,040 --> 00:39:23,000
one.
Very excited to see how that

752
00:39:23,200 --> 00:39:24,600
earnings release goes and the
call goes down.

753
00:39:24,600 --> 00:39:26,400
I'm sure to be fireworks as
usual with.

754
00:39:27,400 --> 00:39:32,040
See if they hold 30 bucks mate.
Let's see, all righty, we've got

755
00:39:32,040 --> 00:39:35,000
a couple awesome partners to
thank as we wrap up, mate.

756
00:39:35,400 --> 00:39:38,200
Big thank you to Mineral Mining
Services, Grounded Sandvik

757
00:39:38,200 --> 00:39:42,200
Ground Support, CRA Insurance,
Kdrill, the Mighty Saltbush

758
00:39:42,200 --> 00:39:46,760
Contracting, SWIC, Quattro,
Project Engineering and Cross

759
00:39:46,760 --> 00:39:50,640
Boundary Energy.
And last but not least, if you

760
00:39:50,640 --> 00:39:53,240
want to go to the AUS IMM
Underground Operators

761
00:39:53,240 --> 00:39:55,600
conference, get in touch, go on
the show notes.

762
00:39:55,640 --> 00:39:57,520
There's a discount of 100 bucks
waiting for you.

763
00:39:58,360 --> 00:40:08,360
Go Australia.
Go Australia situation or needs

764
00:40:08,600 --> 00:40:11,400
of any particular person.
Before making any investment

765
00:40:11,400 --> 00:40:14,440
decision, you should consult
with your financial advisor and

766
00:40:14,440 --> 00:40:17,600
consider how appropriate the
advice is to your objectives,

767
00:40:17,800 --> 00:40:19,800
financial situation and needs.