Fund Manager David Finch has message for Gold Miners

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The quantum of cash flow that
the gold mining industry is

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going to deliver this year.
I, I just don't think that the

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market kind of understands that.
I mean, all in costs are

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probably 2100 U.S. dollars an
announce that's 30% free cash

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flow, free cash.
David Finch of, of Finchy, who

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we with us today, who we're
being very keen to, to invite

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and explore a lot of topics with
Vinci.

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We it's been a long time since
we've we've spoken, but we loved

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yeah, kind of, kind of bringing
you on to, to to reveal your,

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your ways that you can actually
save Canadian mining, which,

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which, which were a bit, a bit a
bit adverse to the, to the

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rhetoric at the time.
That was awesome.

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And I just think you're, yeah,
you from your position as a fund

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manager of, of at, at, at ECS
there in, in Paris.

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I mean, you manage this gold
fund, a copper fund and also an

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energy metals fund.
It's pretty much the whole

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spectrum of, of mining companies
that you're, you're, you know,

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you're, you're across.
And it's a pretty interesting

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time to be thinking about about
mining companies, particularly,

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particularly golden precious
companies right now who are

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finding themselves with a lot
more free cash flow than they

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probably thought was possible
just 12 months ago.

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What, what, What do you make of
the decisions that you know

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these companies are going to
have to do with that cash?

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Yeah.
Well, I think there is a a big

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kind of decision point coming
up.

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Gold mining companies have never
had these kind of free cash flow

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yields.
And yeah, I guess the question

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for most investors is, is do
they switch into growth mode as

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they did in 2920 eleven or do
they kind of make a decent

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balance between reserve
replacement and ensuring

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production beyond 2030 and cash
return shareholders?

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And I just think the fact that
the sector remains by any

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objective measures very cheap.
It's, it, it is a result of

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investors uncertainty about
which path the industry and

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individual companies are going
to go down in terms of dealing

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with this huge kind of wall of
cash which is coming out of the

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gold mining industry at the
moment.

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And you know, I, I, I think
there's, there's a reserve

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replacement, the cash return to
shareholders and there's also

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the one that everybody's
frightened of, which is a kind

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of push for growth in
production.

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And, you know, I think until
that's resolved, it's going to

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be difficult to see the
industry.

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Re rate stocks have gone up a
lot, but they've gone up a lot

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because the gold price has gone
up a lot.

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But you know, we haven't
actually had much or any

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multiple expansion, but I don't
think we'll get until people are

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confident about what's going to
happen with the cash and that

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it's a reasonable rational,
reasonably rational deployment.

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The, the diversified majors
faced this conundrum of capital,

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capital allocation like a cycle
ago where, but they all emerged

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with these capital allocation
frameworks.

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And there was a much greater
emphasis on, on, on, on, on, you

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know, the like, I suppose the
dividends, the buybacks and you

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know better, better managing of
balance sheets throughout the

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cycle rather than getting too,
too carried away in the good

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times.
It's like the BHPS and the, and

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the Rios of the world.
They're by and large have have

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made, you know, less bad
decisions.

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I don't know about good
decisions on capital allocation,

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but less bad, less stonkers in,
in the last decade.

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Do you think the gold sector is
there or they haven't had the

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reckoning where you may have
invested pressure to require the

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thorough capital allocation
frameworks to to roll across

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them?
I, I think the pressure is

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there, right?
And certainly, you know, when I

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meet larger gold companies, it,
it's certainly, you know, the

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first kind of item on the
agenda.

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And to be honest, I think some
of them are struggling with just

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Pitt, right, Because it, this
kind of run into this very rich

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period of free cash flow
generation has happened very

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quickly.
It's not as if it's something

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that they it's not as if it's
something that they planned for.

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And, and it's a result of the
gold price going up an awful lot

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in a very short period of time.
So I get an impression talking

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to some managers that, you know,
they're addressing the problem,

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but it, it wasn't something that
they had a plan in the draw for,

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for a while, right?
Because it, it, they weren't

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expecting it to happen.
And I think, you know, for most,

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for most gold mining companies,
we've been starved of any free

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cash for a decade.
It's, it's an extraordinary

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problem to have to, to, to, to
be faced with a nice problem to

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be faced with.
It's just a question of, you

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know, how they how, how, how
they kind of cut the thing

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between reinvestment and cash
return and I think that'll

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differentiate performance quite
a bit over the next two or three

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years as to how companies
address that.

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And David, do you think that's
that sort of fear of how capital

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will be allocated by these
miners growing very impressive

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balance sheets and watches is
perhaps a a fear or a reason

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perhaps why the generalists are
holding back moving into the

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gold sector?
Absolutely.

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I think so, yeah.
Yeah, I think so.

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Because, you know, there's no
denying it's cheap.

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There's no doubt that that that
gold has gone up a lot and

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there's a ton of free cash flow
there.

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I, I think that kind of lack of
trust of management is what's

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really kind of held a lot of
generalists panic.

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You know, I think perhaps not so
much in Australia where you

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know, the institutional
investors kind of the

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generalists know the sector very
well.

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But in the US for instance,
where there's any, there's

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anyone gold stock in the S&P and
then there's hardly any other

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precious metals quoted in the
US, you know, they don't know

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the sector very well, right.
So they're not, they're not

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meeting the management of, you
know, their gold companies in

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bars in downtown Perth every
every Friday afternoon Friday,

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like, you know, it's a much less
closely knit kind of

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relationship between generalists
and, and, and the mining

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industry in general.
I think.

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So I, I think they, you know,
and of course a lot of people

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are polluted by the memory of
what happened in the last down

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cycle where, you know, a lot of
major supposedly blue chip gold

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mining stocks went down 90%.
Which?

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Which?
Yeah, which?

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Which management teams have just
the exemplary kind of gold

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standard, excuse the pun, of
Capital Management, good times

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and bad.
Who?

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Who should everyone replicate?
Look, I think there's different

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views about this.
I, I think the, you know,

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certainly Agnico's ego is often
held up as, as, as a company

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that's had a, a good track
record in terms of both

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technically in terms of building
and operating minds, but also in

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terms of allocating capital to,
to new projects in a, in a, in a

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reasonably contraceptical way.
And you know, have had a, a

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strong cash return policy
through through dividend

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increases and buybacks.
I think that that's kind of, I

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think everybody knows that the
market recognizes it.

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It's, I think it's now got the
same market cap as Newmont,

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right?
Everybody thinks it's Newmont so

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giant, you know, but so I think
that that's kind of recognized.

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I think that the question is
more how the rest of the

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industry in general behaves.
You know, we can all find one or

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two well managed gold miners,
but you can't fit a whole

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portfolio with two stocks,
right?

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So you, you, you've got to find
other guys who have that

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potential and who, who, who you
can talk to and try and explain

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to them, you know what, what the
market's expecting.

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I've, I've got an observation
having like, yeah, listen, I

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listen to a lot of, a lot of
analyst calls as I'm sure you do

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too, of a lot of mining
companies and of the, of the

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gold companies.
AG Nico is still to this day, in

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my opinion, the only company
that all the time just bangs on

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and bangs on and bangs on about
per share metrics.

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Things have to be a creative per
share, per share.

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It's just like it's riddled
through the culture of that

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company to add value on a per
share basis and no one else

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talks like that, not a single
other gold company that talks

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like that.
So I think it's a coincidence

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that they are the the gold
standard.

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Everyone else talks about a
production target.

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Or we need to become a 400,000
oz producer or 1,000,000 oz

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producer.
At what cost?

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Dilution.
Exactly.

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Yeah, Yeah.
Well, that's what we were saying

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before, you know, before the the
the kind of talks started is is

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there is this kind of divergent,
I think between the views of

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people who buy coal mining
stocks, who buy it as a

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essentially as a leveraged
exposure to the gold price plus

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a dividend yield and the
management of many gold

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companies who think that they
are that they have a mission to

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grow production.
And that's kind of not what most

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investors want.
What do you?

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Want you want.
Production start going down, so

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you've got to replace reserves.
You've got a plan for the

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future, but do you want to go
from, you know, do you, do you

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want to make a, a very expensive
acquisition to go from half

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1,000,000 ounces to 700,000 oz?
I, I, I don't think so, but

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particularly at this stage in
the cycle, I mean, I don't know

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where we are in the cycle.
I guess maybe he knows at the

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time, but we're certainly not at
the bottom of the cycle.

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Yeah.
Do you think there's just too

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much of these mergers and
acquisitions essentially just

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for growth sake to, you know,
bump up the market cap to get

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into an index and get the
passive flows?

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And for those sort of, you know,
production growth reasons you

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were saying David rather than
you know perhaps these these per

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share metrics we were talking
about earlier?

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Yeah, Yeah.
No, I mean, I think some of that

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does go on.
That said, you know, I also

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think in general terms that, you
know, we, we don't have enough

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large cap stocks that
generalists can buy.

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You know, there's only four or
five really, which most

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generalists, you know, running
billions and billions of dollars

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can can can buy.
And we have a long tail of often

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quite promising and well run out
of mid caps, which they don't

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even look.
So, yeah, I, I think it's, I

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think those kind of mergers kind
of need to take place.

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But it, it, it really is, you
know, as you say on, on what

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combinations get shopped
together.

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And you know, we have seen in
the past we've, we've seen some

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really irrational merges where
there's been no jurisdictional

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synergies have been, yeah,
there've been no real cost

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savings.
And there it simply has been, as

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you say, to try and get into
some index, and that usually

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doesn't end very well.
Dubious reasons for for M&A you

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they'll always be around I'm
sure the yeah and.

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Of course, you've got a whole
card of highly paid bankers

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pushing them to do these.
Things, yeah.

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Incentives that vest on a change
of control.

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All these things motivate an
outcome.

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Yeah, yeah.
Yeah.

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Speaking of all these projects
or expansions that are, you

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know, becoming economic now
thanks to the gold price, it's

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pretty important for these
companies to take advantage of

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these, you know, circumstances
where they can and get those

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projects into production as as
soon as practical, whether you

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know, you know, they're your
core assets or your non core

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assets.
And this is where MMS come in.

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It sounds like it sounds like
Ally, you're defining you've got

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this unique window in time where
you can make money from projects

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that couldn't make money quite a
long time ago.

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Well, you're not organised.
You're going to need some help

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to get that thing to actually
make money while the times are

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good.
Absolutely.

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So if you're going open pit,
this is MMS bread and butter.

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You only need to check out their
track record at, you know, Black

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Cats.
My array is an example.

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Are you open pit, you know a
currently open pit, but you

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know, maybe down the track you
might wanna do an underground

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inspection extension.
You know MMS make sure they look

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after the open pit ore body and
trade it well.

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00:13:28,960 --> 00:13:31,760
So then if a client does wanna
go ahead and do that and go

225
00:13:31,760 --> 00:13:34,520
underground, they're absolutely
well positioned to execute on

226
00:13:34,520 --> 00:13:35,760
that they.
Look after the resource.

227
00:13:35,760 --> 00:13:38,520
They're not just contractors
that that that that they're

228
00:13:38,520 --> 00:13:40,040
doing a contract.
They are looking after the

229
00:13:40,040 --> 00:13:41,800
resource for the future.
It's all about it's all about

230
00:13:41,800 --> 00:13:44,080
the company, the relationship,
the cash flow, the gold in the

231
00:13:44,080 --> 00:13:45,880
ground, getting it out, non core
assets.

232
00:13:46,320 --> 00:13:48,240
If you haven't thought about
them in a while, get in touch

233
00:13:48,240 --> 00:13:50,200
with MMS because the tech
services team can do all the

234
00:13:50,200 --> 00:13:51,480
work to help you bring it into
production.

235
00:13:51,480 --> 00:13:54,120
ISIPM.
Ms. Bring the technical depth

236
00:13:54,120 --> 00:13:56,600
you need, the production
experience and flexible

237
00:13:56,600 --> 00:13:58,040
commercial models to help you
get there.

238
00:13:58,160 --> 00:14:01,680
Go MMS.
This is like a, a saying that

239
00:14:01,680 --> 00:14:04,120
everyone always comes across
time and time again in when you

240
00:14:04,120 --> 00:14:06,400
when you work in commodity
industries, it's like you always

241
00:14:06,400 --> 00:14:08,240
want to be selling what China is
buying.

242
00:14:09,080 --> 00:14:11,000
And right now China's buying
lots of gold.

243
00:14:11,560 --> 00:14:14,120
Why are they David, and for how
long are they going to be doing

244
00:14:14,120 --> 00:14:23,120
this?
You know, I think that I've

245
00:14:23,200 --> 00:14:25,360
talked about this before and I
don't think my views on it

246
00:14:25,360 --> 00:14:28,200
anymore are particularly
original.

247
00:14:28,200 --> 00:14:37,280
But you know, I do think that
China tends to plan things over

248
00:14:37,280 --> 00:14:39,720
much longer time frames than
anybody else, right?

249
00:14:39,880 --> 00:14:43,520
So because they shouldn't have
the problem of elections or

250
00:14:43,520 --> 00:14:46,160
midterm elections or, you know,
they're not, they're not

251
00:14:46,160 --> 00:14:48,080
planning towards a political
outcome.

252
00:14:48,080 --> 00:14:50,800
They're planning towards some
kind of national outcome.

253
00:14:50,840 --> 00:14:53,840
And they have the security to be
able to plan at the very long

254
00:14:53,840 --> 00:14:56,440
term.
So, you know, I, I do think

255
00:14:56,440 --> 00:15:01,880
China wants its currency to
become the, the, the world's

256
00:15:01,880 --> 00:15:07,120
reserve currency.
I didn't think that that's the

257
00:15:07,120 --> 00:15:10,200
plan that they got for the next
two years or five years.

258
00:15:10,200 --> 00:15:16,120
I think it's probably, you know,
a generational type plan and you

259
00:15:16,120 --> 00:15:18,120
look at the growth in the
Chinese economy versus the

260
00:15:18,120 --> 00:15:21,280
growth in the US economy.
By some calculations, it's

261
00:15:21,280 --> 00:15:23,600
already the largest economy in
the world by some.

262
00:15:23,600 --> 00:15:29,280
It's, it's, it's, it's #2 and I
think it's a carry on going like

263
00:15:29,520 --> 00:15:31,640
like the outgoing.
And there's no reason to think

264
00:15:31,640 --> 00:15:35,120
that they shouldn't think it.
It's going to end up being world

265
00:15:35,120 --> 00:15:36,600
stock.
It's already the world's leading

266
00:15:36,600 --> 00:15:39,000
manufacturing economy by a long,
long chalk.

267
00:15:41,520 --> 00:15:45,200
So I, I kind of think that they
do want that exorbitant

268
00:15:45,200 --> 00:15:47,480
privilege of being the world's
reserve currency.

269
00:15:47,600 --> 00:15:53,480
And I think the accumulation of
gold is, is just part of a long

270
00:15:53,480 --> 00:15:58,360
term plan to underline the
credibility of our process.

271
00:16:01,040 --> 00:16:04,480
I think there's also, I think
that there are many secondary

272
00:16:04,480 --> 00:16:07,520
and, and, and tertiary reasons
which, which, which make it a

273
00:16:07,520 --> 00:16:10,800
sensible plan for them.
And, and, and I think, you know,

274
00:16:10,840 --> 00:16:15,560
that obviously everybody's
talked about this, I mean, the,

275
00:16:15,560 --> 00:16:20,000
the, the confiscation of Russian
reserves and in, in invested in

276
00:16:20,120 --> 00:16:22,560
U.S.
Treasury bonds after the

277
00:16:22,560 --> 00:16:28,440
invasion of Ukraine, kind of,
you know, if anybody's Next up

278
00:16:28,440 --> 00:16:30,400
for confiscation, it's going to
be China, right?

279
00:16:30,400 --> 00:16:33,080
So, you know, you've got to
invest your reserves in

280
00:16:33,080 --> 00:16:37,320
something.
And, you know, I mean, they

281
00:16:37,320 --> 00:16:39,240
still own quite a big chunk of
U.S.

282
00:16:39,240 --> 00:16:42,880
Treasuries, but I guess they're
not going to add to those

283
00:16:42,880 --> 00:16:47,920
anytime soon.
And, you know, other than that,

284
00:16:47,920 --> 00:16:52,800
there's only really gold.
You know, the European

285
00:16:52,800 --> 00:16:57,240
government bonds held by Russia
also got sanctioned.

286
00:16:59,440 --> 00:17:05,640
And you know, when you look at
China's trade partners, I mean

287
00:17:05,640 --> 00:17:08,480
the US portion has shrunk a lot,
right?

288
00:17:08,480 --> 00:17:11,839
And the emerging market portion
of it's grown a lot, which means

289
00:17:11,839 --> 00:17:16,800
that, you know, they are
receiving a tonne of emerging

290
00:17:16,800 --> 00:17:21,079
market currencies.
And I don't think we really want

291
00:17:21,079 --> 00:17:24,920
to own, you know, have large
proportions of their reserves

292
00:17:24,920 --> 00:17:30,600
invested in a kind of cocktail
Indonesian repair or Brazilian

293
00:17:30,600 --> 00:17:36,560
real it it.
But they're just not many kind

294
00:17:36,560 --> 00:17:40,240
of asset classes or, or, or or
assets that they can actually

295
00:17:40,240 --> 00:17:47,720
invest in to replace bonds.
So I, you know, I think they're

296
00:17:47,720 --> 00:17:53,880
going to carry on buying gold,
you know, for a decade or two.

297
00:17:53,880 --> 00:17:55,480
I don't think this is a short
term thing.

298
00:17:57,880 --> 00:18:01,520
It's a, a, a sombering thing to,
to think through in terms of,

299
00:18:01,800 --> 00:18:04,640
yeah, potential market dynamics
for a period of time.

300
00:18:06,360 --> 00:18:07,280
Yeah.
How are you, how are you

301
00:18:07,280 --> 00:18:10,640
positioning the, the portfolio
right now?

302
00:18:10,640 --> 00:18:15,080
I mean, as a, as a, as a mining
stock investor, you kind of

303
00:18:15,520 --> 00:18:17,360
always want to be a bit
contrarian rather than

304
00:18:18,200 --> 00:18:21,440
procyclical, but you know,
timing the cycles, everything.

305
00:18:21,920 --> 00:18:26,840
And just to add to that as well,
I'd love to revisit a tweet of

306
00:18:26,840 --> 00:18:31,040
yours actually, David, which is
probably quite applicable in

307
00:18:31,040 --> 00:18:33,320
today's market.
Being in a, in a market where

308
00:18:33,320 --> 00:18:37,040
the marginal buyer is an idiot,
it doesn't pay to be too smart.

309
00:18:38,600 --> 00:18:41,960
I'm wondering whether how much
that applies still today when

310
00:18:41,960 --> 00:18:45,120
you when you're considering your
portfolio allocation as well?

311
00:18:46,360 --> 00:18:48,000
Yeah, Yeah.
I'm not.

312
00:18:48,120 --> 00:18:50,880
I'm not sure that that that
applies to the gold sector that

313
00:18:50,880 --> 00:18:54,400
much because there's not very
many marginal people involved.

314
00:18:55,040 --> 00:18:58,720
Yeah, which is something stuck
around between each other.

315
00:18:58,880 --> 00:19:00,120
Oh, you should come to
Australia.

316
00:19:00,160 --> 00:19:02,640
You'll you'll find the marginal
people, Yes.

317
00:19:02,640 --> 00:19:03,360
Where everywhere.
Where?

318
00:19:03,360 --> 00:19:08,360
Everywhere.
Yeah.

319
00:19:12,080 --> 00:19:16,800
I kind of think that there's
this, there's always this cycle

320
00:19:16,800 --> 00:19:21,520
in the, in, in, in the gold
equity market where it at the

321
00:19:21,520 --> 00:19:24,400
bottom of the cycle, everybody
owns Ignico Eagle and Franklin

322
00:19:24,400 --> 00:19:29,200
Nevada and you know, the kind of
blue chip stuff.

323
00:19:29,200 --> 00:19:33,240
And as the gold price goes up,
people get more and more daring

324
00:19:33,240 --> 00:19:35,880
and there's a there's a move
towards buying.

325
00:19:36,080 --> 00:19:39,800
You know, you end up with
everybody loving the high cost,

326
00:19:39,800 --> 00:19:44,320
highly indebted companies, you
know, because they offer amazing

327
00:19:44,320 --> 00:19:48,160
leverage to the gold price.
And then the cycle turns down

328
00:19:48,160 --> 00:19:53,720
and that all ends bad, right?
And it can even be a relatively,

329
00:19:53,760 --> 00:19:56,120
you know, it doesn't have to be
the end of the upside in gold.

330
00:19:56,120 --> 00:19:59,080
It can be just a correction,
right, a 10% correction in the

331
00:19:59,080 --> 00:20:01,120
gold price.
And then all these things that

332
00:20:01,120 --> 00:20:04,320
are highly leveraged kind of get
into difficulty.

333
00:20:04,320 --> 00:20:09,800
So I think as a, as a portfolio
manager it, it really is a

334
00:20:09,800 --> 00:20:13,720
question of, of balancing kind
of the the prudent allocation

335
00:20:13,720 --> 00:20:18,560
towards the good quality stocks
and getting some leverage into

336
00:20:18,560 --> 00:20:25,440
the portfolio and.
Kind of rather than buy stocks

337
00:20:25,440 --> 00:20:29,400
that we see as unreliable
operators with, with poor

338
00:20:29,400 --> 00:20:33,120
balance sheets, I'd I'd rather
try and get that leverage into

339
00:20:33,120 --> 00:20:38,920
the portfolio by moving further
down cap and buying kind of

340
00:20:38,920 --> 00:20:44,200
quality explorers or quality
developers rather than buying

341
00:20:44,520 --> 00:20:46,440
quality highly leveraged
producers.

342
00:20:47,560 --> 00:20:50,040
So that's kind of what we've
done.

343
00:20:50,040 --> 00:20:53,040
So I guess the portfolio has
gone down cap a little bit over

344
00:20:53,040 --> 00:20:59,120
the past six months.
The I think the move into some

345
00:20:59,120 --> 00:21:04,080
of the kind of advanced
explorers stroke developers has

346
00:21:04,080 --> 00:21:11,560
kind of worked in terms of of
increasing the exposure to

347
00:21:11,560 --> 00:21:14,160
explorers.
You know, as always with

348
00:21:14,160 --> 00:21:17,800
explorers, you know, you get
some knock it out of the park

349
00:21:17,800 --> 00:21:23,760
and you some who don't, right.
So we certainly haven't seen a

350
00:21:23,760 --> 00:21:27,160
generalized move up in the
exploration sector where, you

351
00:21:27,160 --> 00:21:30,240
know, everything that's
exploring for gold has gone up

352
00:21:30,240 --> 00:21:32,720
regardless of the results.
The market has actually been

353
00:21:32,720 --> 00:21:38,720
surprisingly I think kind of
Hickey about which which

354
00:21:38,720 --> 00:21:42,160
explorers it's allowed to
participate in this gold price

355
00:21:42,160 --> 00:21:44,080
relay.
So yeah.

356
00:21:44,560 --> 00:21:47,880
Yeah, yeah.
The, the, the observation on,

357
00:21:47,920 --> 00:21:51,600
on, on the Australian market is
yeah, like near term, near term

358
00:21:51,600 --> 00:21:55,640
production is being rewarded
massively advanced projects,

359
00:21:55,640 --> 00:21:59,680
marginal projects that are kind
of option like yeah, dynamics as

360
00:21:59,680 --> 00:22:01,840
the gold price rises, all of it,
that stuff's getting rewarded.

361
00:22:01,840 --> 00:22:04,760
But the, yeah, the expiration,
the neurology, all the really

362
00:22:04,760 --> 00:22:07,160
speculative stuff, the IP OS,
none of that's here yet.

363
00:22:07,960 --> 00:22:09,120
Yeah.
Yeah, I know.

364
00:22:09,120 --> 00:22:11,960
And it it's been, it's been the
same in Canada.

365
00:22:11,960 --> 00:22:15,200
There's whole swathes of guys,
you know who fan stuff, right?

366
00:22:15,200 --> 00:22:21,600
But it's, yeah, it's 8 to 10
years away from coming out of

367
00:22:21,600 --> 00:22:25,960
the ground and, and because of
the permitting thing and it

368
00:22:25,960 --> 00:22:29,720
doesn't yet have critical mass
in terms of the size of the the

369
00:22:29,760 --> 00:22:31,600
resource resource not yet
economic.

370
00:22:31,600 --> 00:22:34,440
And yeah, those things have also
been left for dead in Canada.

371
00:22:35,960 --> 00:22:39,000
What is the relative value
between between Australia and

372
00:22:39,000 --> 00:22:41,280
Canada right now?
I mean, I noticed, I noticed the

373
00:22:41,600 --> 00:22:44,440
portfolio is, is certainly you
know dominated to to the

374
00:22:45,320 --> 00:22:47,520
Canadian, Canadian market versus
Australia.

375
00:22:47,520 --> 00:22:49,120
Is that a function of relative
value?

376
00:22:49,120 --> 00:22:52,120
Well, no, I mean, I think we've
got about in the gold fund about

377
00:22:52,120 --> 00:22:54,280
30% of the portfolio is
Australia.

378
00:22:54,920 --> 00:22:58,160
I think the benchmark weighting
in the GDX is probably, I don't

379
00:22:58,200 --> 00:23:02,520
know 2627.
So I think we're marginally

380
00:23:02,520 --> 00:23:09,840
overweight Australia.
I think the, you know, I think

381
00:23:09,840 --> 00:23:14,480
what's good about Australia is
particularly WA, well WA is that

382
00:23:14,480 --> 00:23:16,640
you can get things done
reasonably quickly.

383
00:23:16,960 --> 00:23:19,920
There's a lot of exploration
kind of unsolved, granted mine

384
00:23:19,920 --> 00:23:23,560
leases, you know, and and you
know, you can get stuff up and

385
00:23:23,560 --> 00:23:30,200
going in a relevant time frame.
I think the thing in Canada is,

386
00:23:31,560 --> 00:23:36,240
you know, often it it takes a
lot, lot longer than that You're

387
00:23:36,240 --> 00:23:42,720
talking, you're talking a
permitting process which, you

388
00:23:42,720 --> 00:23:45,560
know, is going to take 8 to 10
years.

389
00:23:45,960 --> 00:23:50,040
So yeah.
And I think that affects

390
00:23:50,040 --> 00:23:51,920
relative valuations.
Some people say, oh, the

391
00:23:51,920 --> 00:23:54,440
Australians are a bit more
expensive than the Canadians,

392
00:23:54,440 --> 00:23:57,720
but it's a good reason for our
people tend to forget the time

393
00:23:57,720 --> 00:24:02,400
value of money and and the time
value of investors attention

394
00:24:02,400 --> 00:24:04,880
span.
When you because you can have a

395
00:24:04,880 --> 00:24:08,080
wonderful geological endowment,
but you know, if you're

396
00:24:08,080 --> 00:24:11,560
plugging, if you're doing sort
of seven to 10,000 meters a year

397
00:24:11,560 --> 00:24:14,120
for 10 years before you can
actually start getting any of

398
00:24:14,120 --> 00:24:17,240
this out of the ground, you
know, people are going to lose

399
00:24:17,240 --> 00:24:18,640
patience.
There's going to be endless

400
00:24:18,640 --> 00:24:21,880
equity dilution and in the end
you're not going to make any

401
00:24:21,880 --> 00:24:22,680
money.
So just.

402
00:24:23,640 --> 00:24:27,000
Sort of, I think.
Speed production is a crucial

403
00:24:27,000 --> 00:24:30,120
factor.
Absolutely And just sort of

404
00:24:30,120 --> 00:24:34,720
building on that as well, David,
you know in this sort of rising

405
00:24:34,720 --> 00:24:38,200
and sort of seems to be you know
sustained high gold price

406
00:24:38,200 --> 00:24:41,520
environment.
Have have your views or your

407
00:24:41,520 --> 00:24:47,000
approach changed into how you,
you know, filter for good

408
00:24:47,000 --> 00:24:52,360
projects if at all I guess you
know, what was assets that were,

409
00:24:52,360 --> 00:24:58,240
you know, trackable now versus
12 months ago, very different,

410
00:24:59,240 --> 00:25:03,160
You know, underground extensions
which you would be a complete

411
00:25:03,160 --> 00:25:07,240
waste of time 1224 months ago
are now being sort of considered

412
00:25:07,240 --> 00:25:12,160
as you know very real, you know,
expansions of options for

413
00:25:12,160 --> 00:25:14,120
assets.
You know, how do you see that?

414
00:25:15,400 --> 00:25:20,520
Yeah, look, I think it's always
the temptation and it is, you

415
00:25:20,520 --> 00:25:25,280
know, a high gold price does
bring lots of projects, does

416
00:25:25,280 --> 00:25:28,880
make a lot of uneconomic
projects economic very quickly,

417
00:25:28,960 --> 00:25:35,000
right.
I, I think you've really got to

418
00:25:35,000 --> 00:25:38,400
look at that I think in terms of
how quickly this project can

419
00:25:38,400 --> 00:25:43,320
happen because, you know, I
think the gold price will be

420
00:25:43,320 --> 00:25:46,280
higher in five years time, but
you know, I may well be.

421
00:25:47,160 --> 00:25:50,120
So I, I think it's very
difficult to base a whole

422
00:25:50,120 --> 00:25:54,800
investment thesis on where you
think the gold price is and

423
00:25:56,120 --> 00:25:59,760
where you had that example of
that gold Rd. underground.

424
00:26:00,400 --> 00:26:05,400
I can't remember what it was
1.2g underground resorts right,

425
00:26:05,400 --> 00:26:11,560
that they were talking about.
You know, sure, maybe that just

426
00:26:11,560 --> 00:26:15,600
about washes its face at 3300
gold, but at 2500 gold it

427
00:26:15,600 --> 00:26:20,920
probably does send gold Kuka
2500 before it goes on and runs

428
00:26:20,920 --> 00:26:24,320
up, you know, So I, I, I think
got to be very careful.

429
00:26:24,320 --> 00:26:29,760
And I think with, with low grade
resources, you've got to be

430
00:26:29,760 --> 00:26:33,000
confident of the scale to keep
the costs low.

431
00:26:33,160 --> 00:26:36,040
And you've got to be confident
that it can come out of the

432
00:26:36,040 --> 00:26:43,720
ground in in some reasonable
time frame where you you've got

433
00:26:43,720 --> 00:26:46,400
some idea of where the gold
price is going to be by the time

434
00:26:46,400 --> 00:26:49,680
they get it out.
One of the things you really

435
00:26:49,680 --> 00:26:52,400
enjoy about the Yeah, the
commentary or comments you put

436
00:26:52,400 --> 00:26:55,320
out there, David, you're not
afraid to be a bit punchy or

437
00:26:56,000 --> 00:26:58,760
yeah, obviously the the the same
Canadian mining was, was an

438
00:26:58,760 --> 00:27:01,040
example of that.
But but I've seen you comment on

439
00:27:01,040 --> 00:27:05,440
2 recent deals in the gold
sector as well with maybe maybe

440
00:27:05,440 --> 00:27:08,240
not so glowing, glowing kind of
comment.

441
00:27:09,080 --> 00:27:12,760
First one more local was, was
our Northern Stars acquisition

442
00:27:12,760 --> 00:27:16,600
of, of of the grey.
How do you reflect on that kind

443
00:27:16,600 --> 00:27:19,720
of yeah for forward months
later, five months later.

444
00:27:20,120 --> 00:27:23,800
Do you, do you still do you
still kind of question the the

445
00:27:23,800 --> 00:27:26,080
dilution to Northern Star
shareholders fought for de Grey

446
00:27:26,080 --> 00:27:28,880
or do you do you think it's like
a it's a sound piece of.

447
00:27:28,880 --> 00:27:31,200
Capital.
Well, we'll see.

448
00:27:31,200 --> 00:27:35,760
I mean, I, I think my, my
comment was that, you know,

449
00:27:35,760 --> 00:27:41,640
northern, you know, neither
evolution nor a northern star

450
00:27:43,040 --> 00:27:45,440
actually have a culture of
building minds, right?

451
00:27:45,440 --> 00:27:49,600
They've they've been financial
constructs where they've bought

452
00:27:49,760 --> 00:27:56,560
and operated minds have been
built by other people and in so

453
00:27:56,560 --> 00:28:01,880
so this is a step into a new
skill set for for for Northern

454
00:28:01,880 --> 00:28:06,320
Star.
And yeah, I had nobody doubts

455
00:28:06,320 --> 00:28:08,840
that they've got the money and
the resources to buy the buy in

456
00:28:08,840 --> 00:28:12,160
or hire in the expertise that
they need to build that culture.

457
00:28:13,200 --> 00:28:16,600
But my only thought was this is
a complex project, right?

458
00:28:18,760 --> 00:28:21,840
And I think my comment was that,
you know, if, if you're going to

459
00:28:21,840 --> 00:28:24,560
have a first stab at building
your mind, this probably

460
00:28:24,560 --> 00:28:26,120
wouldn't be the one you'd
choose, right?

461
00:28:26,120 --> 00:28:28,680
You, you, you try and choose
something a bit simpler.

462
00:28:28,840 --> 00:28:35,480
But yeah, I mean, that's, you
know, probably a very reductive

463
00:28:35,480 --> 00:28:38,640
comment because, you know,
there's not a, there's not 100

464
00:28:38,640 --> 00:28:40,680
simple projects out there that
you could have bought instead of

465
00:28:40,680 --> 00:28:43,240
buying De Grey, which could be
that scale and that kind of

466
00:28:43,240 --> 00:28:47,040
buying.
So I just, my point was really

467
00:28:47,040 --> 00:28:50,120
just to underline that.
I think that, you know, just

468
00:28:51,160 --> 00:28:55,880
just taking the, the kind of
degrade mine plan, such as it is

469
00:28:55,880 --> 00:28:58,720
and plugging it into the
Northern Star model is probably

470
00:28:58,720 --> 00:29:01,920
a bit simplistic, right?
Because I think it, it, it's

471
00:29:01,920 --> 00:29:06,200
going to be, it's going to be a
long and and, and and and tough

472
00:29:06,760 --> 00:29:10,800
build, I think with, with many
risks along the way.

473
00:29:11,960 --> 00:29:15,440
And Equinox Calibre.
Yeah.

474
00:29:15,480 --> 00:29:18,480
I mean, I think the the the
problem with that deal for me

475
00:29:18,480 --> 00:29:22,120
was not so much the logic of
putting the two together,

476
00:29:22,120 --> 00:29:27,160
although you know those bits of
that that you don't didn't make

477
00:29:27,160 --> 00:29:29,120
a lot of sense to me, but bits
that did.

478
00:29:31,000 --> 00:29:36,560
The problem was just with with
the ratios because it was it was

479
00:29:36,640 --> 00:29:42,800
really put together as a merger
of equals and well in terms of

480
00:29:42,840 --> 00:29:46,760
where the, you know, it was done
at market right merger.

481
00:29:48,640 --> 00:29:53,800
And I just think Equinox has a
ton of problems.

482
00:29:55,840 --> 00:29:58,040
So it has a very heavily
indebted balance sheet.

483
00:29:59,720 --> 00:30:08,120
It has one of its largest minds,
which is currently shut down in

484
00:30:08,120 --> 00:30:12,480
in Mexico because of a the
disagreement with the local

485
00:30:12,480 --> 00:30:17,040
residents association.
One of its minds in Brazil,

486
00:30:17,040 --> 00:30:19,760
which had a pit wall collapse
last year.

487
00:30:21,880 --> 00:30:27,160
And greenstone, which is it's
kind of sorry, this Castle

488
00:30:27,160 --> 00:30:33,280
Mountain E, which is a mining
California, still not got its

489
00:30:33,280 --> 00:30:38,040
expansion permit.
And then they've got, yeah,

490
00:30:38,040 --> 00:30:43,800
Greenstone, which is the big
open pit mining Canada, which

491
00:30:43,800 --> 00:30:45,080
they're currently ramping up
with.

492
00:30:45,080 --> 00:30:48,320
Certainly the Q4 production
results from that were a little

493
00:30:48,320 --> 00:30:51,440
bit disappointing and maybe
indicative of the fact that the

494
00:30:51,440 --> 00:30:55,200
ramp up there is not going
entirely according to plan.

495
00:30:57,480 --> 00:31:01,080
And I think so they brought a
lot of problems to this merger

496
00:31:02,720 --> 00:31:07,400
and Caliber.
I think we've got a very low

497
00:31:07,400 --> 00:31:13,640
cost, highly cash generative
series of deposits in Nicaragua

498
00:31:15,040 --> 00:31:20,440
and Valentine Line in Canada,
which is ramping up.

499
00:31:20,480 --> 00:31:24,280
Also another large project
ramping up, probably ramping up

500
00:31:24,280 --> 00:31:28,720
a bit better and a bit faster
than Greenstone thanks to the

501
00:31:28,760 --> 00:31:33,040
the expertise of the team there.
So I think both financially and

502
00:31:33,040 --> 00:31:38,480
operationally kind of brought
some solutions to some of

503
00:31:38,480 --> 00:31:42,080
Equinox's many problems.
And I think if you've got one

504
00:31:42,080 --> 00:31:44,040
side that brings the problems
and other side that brings the

505
00:31:44,040 --> 00:31:48,320
solutions you expect to pre.
Yes.

506
00:31:48,360 --> 00:31:51,960
And you know there was no
premium.

507
00:31:53,520 --> 00:31:57,160
Equinox have kind of, I think
there was a push back from a lot

508
00:31:57,160 --> 00:32:00,800
of shareholders, obviously not
just myself and Equinox have now

509
00:32:03,520 --> 00:32:08,760
agreed to pay a premium, 10%
premium, probably still

510
00:32:08,760 --> 00:32:12,120
inadequate in my view, but you
know, I think enough to get it

511
00:32:12,120 --> 00:32:17,360
through the, the, the voting
process that needs to happen on

512
00:32:17,360 --> 00:32:21,360
the Caliber side.
You know, I think it was a

513
00:32:21,360 --> 00:32:25,480
wonderful deal for Equinox
shareholders, not such a good

514
00:32:25,480 --> 00:32:31,360
deal for Caliber shareholders.
And you kind of have to ask why

515
00:32:31,440 --> 00:32:33,640
the Caliber board agreed to
this.

516
00:32:35,480 --> 00:32:38,560
I think the probably many
political elements within

517
00:32:38,560 --> 00:32:43,880
Canada, I think Ross Beattie,
who's the major shareholder in

518
00:32:43,880 --> 00:32:49,040
Equinox is a very influential
figure in mining and banking

519
00:32:49,040 --> 00:32:52,240
circles in Canada.
I'm sure he was very keen to get

520
00:32:52,240 --> 00:32:53,400
well.
I know he was very keen to get

521
00:32:53,400 --> 00:32:57,440
this project through.
And then obviously on the

522
00:32:57,440 --> 00:33:03,600
caliper side, all the change of
control premium were treaded.

523
00:33:04,120 --> 00:33:07,480
So everybody who's involved in
the caliber management had a

524
00:33:08,280 --> 00:33:13,840
well will have a very nice trip
to the bank in a couple of

525
00:33:13,840 --> 00:33:15,840
months.
Time it was that con note that

526
00:33:15,840 --> 00:33:18,120
happened in conjunction as well
like they convert obviously

527
00:33:18,120 --> 00:33:21,160
Equinox took some of the their
con note but then there was

528
00:33:21,800 --> 00:33:24,240
yeah, I mean like.
It was effectively a poison pill

529
00:33:24,240 --> 00:33:28,240
put in place to, to, to
discourage anybody else from

530
00:33:28,240 --> 00:33:32,680
coming in, but for Caliber and
to discourage shareholders from,

531
00:33:32,800 --> 00:33:35,400
from voting against it.
So that I think that was a

532
00:33:35,400 --> 00:33:38,760
little sharp as well.
So, you know, All in all, I

533
00:33:38,760 --> 00:33:41,800
didn't think it's a deal that
bought a huge amount of credit

534
00:33:42,200 --> 00:33:47,040
to the Canadian mining sector.
I think I think it was a deal

535
00:33:47,040 --> 00:33:51,120
that did have some basis in, you
know, in operational on balance

536
00:33:51,120 --> 00:33:52,760
sheet synergies.
That's for sure.

537
00:33:52,760 --> 00:33:57,680
I, I just think the way it was
presented, the financial metrics

538
00:33:57,680 --> 00:34:02,480
of the deal initially were, you
know, was certainly inadequate.

539
00:34:05,040 --> 00:34:08,719
Gotcha.
When you're looking at the at

540
00:34:08,719 --> 00:34:14,960
the the juniors in the the
sector at the moment, which ones

541
00:34:14,960 --> 00:34:17,320
are you getting excited about?
Like where, where, where is the

542
00:34:17,320 --> 00:34:20,239
relative value?
And feel free to to list this

543
00:34:20,239 --> 00:34:23,000
names of positions.
We'd love to teach and wag about

544
00:34:23,000 --> 00:34:26,560
them.
Yeah, I don't like to talk about

545
00:34:26,560 --> 00:34:31,360
individual positions, but, well,
you know, it's a small, it's a

546
00:34:31,360 --> 00:34:37,360
small old market, isn't it?
But I, I think obviously you

547
00:34:37,360 --> 00:34:38,840
always get this with the bull
market.

548
00:34:38,840 --> 00:34:43,040
There's a lot of old stuff
that's being, you know, recycled

549
00:34:43,040 --> 00:34:45,639
companies that have been
relatively dormant for a decade,

550
00:34:45,639 --> 00:34:48,440
you know, and suddenly the
resource gets rediscovered and,

551
00:34:48,880 --> 00:34:51,280
and brought out and presented to
investors and there's a cap

552
00:34:51,280 --> 00:34:54,199
raise and somebody has another
crack at drilling it.

553
00:34:54,880 --> 00:34:56,719
I mean, there's a ton of that
going around.

554
00:34:57,880 --> 00:35:01,640
I mean there's two or three cat
raises every day and in Canada

555
00:35:03,080 --> 00:35:05,160
and maybe two or three a week in
Australia.

556
00:35:07,560 --> 00:35:11,280
So there's a lot of people
trying to recycle projects which

557
00:35:11,480 --> 00:35:14,800
have been kind of what we were
talking about before rescued by

558
00:35:14,800 --> 00:35:21,480
this rise of the Gulp.
It's a lot of work, I think to

559
00:35:21,480 --> 00:35:24,760
dig into these and see whether,
you know, this is just, but we

560
00:35:24,760 --> 00:35:27,880
just try and resuscitate the
corpse or kind of actually come

561
00:35:27,960 --> 00:35:32,640
back to life, right.
And I, you know, I don't think

562
00:35:32,640 --> 00:35:34,760
there's any broad brush answer
to that.

563
00:35:35,360 --> 00:35:36,640
You know, you can look at
everything.

564
00:35:40,800 --> 00:35:43,320
I think the other thing that
happens is the people get braver

565
00:35:43,320 --> 00:35:45,520
about jurisdictions when the
gold price goes up.

566
00:35:46,240 --> 00:35:52,800
So, you know, jurisdictions
which which have been, which

567
00:35:52,800 --> 00:35:59,960
people have been very suspicious
of the fact that, you know, you

568
00:35:59,960 --> 00:36:03,560
can buy assets in poor
jurisdictions very cheaply and

569
00:36:03,560 --> 00:36:04,960
the gold price has gone up a
lot.

570
00:36:04,960 --> 00:36:08,400
So the risk reward of trying to
build a mine there, you know,

571
00:36:08,400 --> 00:36:10,040
the reward side has gone up a
lot.

572
00:36:11,200 --> 00:36:15,080
I think, you know, it's going to
mean that people are going to be

573
00:36:15,080 --> 00:36:18,080
looking at stuff in, in, in
jurisdictions which which had

574
00:36:18,080 --> 00:36:23,760
previously been all cut black.
Counter intuitively, the the the

575
00:36:23,760 --> 00:36:26,080
risk side kind of goes up too,
because the more money you make

576
00:36:26,080 --> 00:36:29,080
in the risky jurisdictions, the
more vulnerable you are to us,

577
00:36:30,000 --> 00:36:31,400
yeah.
Yeah, for sure.

578
00:36:31,440 --> 00:36:31,920
Yeah.
Yeah, Yeah.

579
00:36:32,400 --> 00:36:37,520
Well, we've seen that a little
bit already, but you know, you

580
00:36:37,520 --> 00:36:40,840
tend not to get exploration
projects nicked off you, right?

581
00:36:41,000 --> 00:36:43,960
They wait until you've built my
mind before they either increase

582
00:36:43,960 --> 00:36:46,680
the royalty rate or for
expiration.

583
00:36:46,680 --> 00:36:49,720
So they're not really interested
in buying a load of ground with

584
00:36:49,720 --> 00:36:55,120
wholesome, but you know, so, so
I think that people are going up

585
00:36:55,120 --> 00:37:00,640
the risk curve in terms of terms
of the genius because, you know,

586
00:37:00,640 --> 00:37:05,480
as everybody knows in in these
countries, there's less, there's

587
00:37:05,480 --> 00:37:07,480
been less exploration
historically, there's more stuff

588
00:37:07,480 --> 00:37:14,040
to find and it's better grade.
And yeah, so, yeah, to be

589
00:37:14,040 --> 00:37:15,880
honest, we've done a little bit
of that as well, so.

590
00:37:17,320 --> 00:37:23,880
To change tech a bit, David, you
also manage the energy metals

591
00:37:24,120 --> 00:37:29,920
and as part of obviously
noticing your, your copper

592
00:37:29,920 --> 00:37:36,200
position is, is, is your biggest
exposure in that and sort of be

593
00:37:36,200 --> 00:37:42,720
further down lithium and tin.
How are you saying, well, let's

594
00:37:42,720 --> 00:37:45,200
start with, you know, perhaps
base metals and copper in

595
00:37:45,200 --> 00:37:48,680
particular.
You sort of got a bit of, you

596
00:37:48,720 --> 00:37:52,360
know, sort of premiums a
divergent between the two

597
00:37:53,080 --> 00:37:55,120
exchanges sort of going on in
the minute.

598
00:37:56,320 --> 00:37:58,880
What's, what are your
observations on on copper at the

599
00:37:58,880 --> 00:38:00,560
minute and what's sort of
exciting you?

600
00:38:02,000 --> 00:38:05,320
Yeah, it's always been a big
part of the story because the

601
00:38:05,320 --> 00:38:09,360
original premise of the fund was
to do with the energy

602
00:38:09,360 --> 00:38:14,480
transition.
I think that, you know, for me,

603
00:38:14,480 --> 00:38:16,840
people misunderstand the energy
transition.

604
00:38:16,840 --> 00:38:19,560
I don't actually believe that
the energy transition was about

605
00:38:19,560 --> 00:38:22,880
saving the planet or reducing
CO2 levels.

606
00:38:22,880 --> 00:38:26,480
I think that the energy
transition is about a battle for

607
00:38:26,480 --> 00:38:30,440
energy independence.
And that's why China's like a

608
00:38:30,440 --> 00:38:33,440
decade of everybody else ahead
of everybody else in the energy

609
00:38:33,440 --> 00:38:35,880
transition.
You know, they're not known for

610
00:38:35,880 --> 00:38:38,640
their kind of green credentials
of China.

611
00:38:39,000 --> 00:38:42,040
All this talk about the energy
transition Trev has got me

612
00:38:42,040 --> 00:38:44,560
thinking about CBA.
Cross boundary energy, they

613
00:38:45,080 --> 00:38:47,320
yeah, I mean, Finchy, he talks
about the type of energy

614
00:38:47,320 --> 00:38:48,640
transition that people have got
all wrong.

615
00:38:48,640 --> 00:38:51,840
I mean, CBA is all about the
energy transition that Finchy's

616
00:38:51,840 --> 00:38:53,640
really referring to, which is
just coming from a place of

617
00:38:53,640 --> 00:38:54,920
energy independence.
How do you have energy

618
00:38:54,920 --> 00:38:56,480
independence Hybrid power
systems?

619
00:38:56,680 --> 00:38:59,080
Absolutely I mean these mines
are going to get powered powered

620
00:38:59,080 --> 00:39:01,880
some high outlook.
You know why not consider the

621
00:39:01,880 --> 00:39:04,680
bloody legends at cross boundary
energy like check out their

622
00:39:04,680 --> 00:39:05,760
website here.
I love this.

623
00:39:06,000 --> 00:39:09,400
It literally says on there why
cross boundary energy cleaner

624
00:39:09,520 --> 00:39:12,480
cheaper power without CapEx or
complications.

625
00:39:12,480 --> 00:39:14,000
I mean, what more could you
bloody want than?

626
00:39:14,000 --> 00:39:16,080
That did you say no CapEx, no
CapEx?

627
00:39:16,360 --> 00:39:19,360
I can get energy for no CapEx.
That is a phenomenal

628
00:39:19,360 --> 00:39:20,880
proposition.
It's kind of like getting

629
00:39:20,880 --> 00:39:22,960
something for free.
And we're talking, as you said,

630
00:39:22,960 --> 00:39:26,440
Trev, hybrid energy solutions
for your mind, you know, whether

631
00:39:26,440 --> 00:39:30,200
that's solar, wind, battery,
energy storage, you know the

632
00:39:30,200 --> 00:39:33,240
whole kit and can poodle.
Get in touch with the only name

633
00:39:33,240 --> 00:39:35,440
you need to know in Energy
Solutions, other than Cross

634
00:39:35,440 --> 00:39:37,640
Boundary Energy of course.
Tim Taylor.

635
00:39:37,640 --> 00:39:41,280
Tim Taylor If it's if cross
boundary energy is the solution

636
00:39:41,280 --> 00:39:43,400
that is good enough for Kamala
Kokola.

637
00:39:43,680 --> 00:39:47,280
Ali Guess what, it's good enough
for your mind and in fact, it's

638
00:39:47,280 --> 00:39:49,600
going to add value, tremendous
value to your mind, just like

639
00:39:49,600 --> 00:39:52,040
Kamala Kokola.
Very impressive copper project.

640
00:39:52,080 --> 00:39:53,960
I am excited to see these
popping up everywhere.

641
00:39:53,960 --> 00:39:54,840
Ali.
CBE.

642
00:39:55,280 --> 00:39:59,040
Tim Taylor The principal
strategic vulnerability of China

643
00:39:59,040 --> 00:40:03,320
has been their dependence on the
outside world for energy, which

644
00:40:03,320 --> 00:40:05,600
is why they're now building God
knows how many nuclear power

645
00:40:05,600 --> 00:40:09,640
stations are getting all of the
north of the country, the solar

646
00:40:09,640 --> 00:40:11,640
panels and everything.
It's so that they can generate

647
00:40:11,640 --> 00:40:15,600
that energy within their country
and they're no longer dependent

648
00:40:15,600 --> 00:40:18,520
on, you know, Australia for
their coal and.

649
00:40:19,360 --> 00:40:21,360
The Middle East and Russia for
their oil and gas.

650
00:40:21,360 --> 00:40:26,600
So I think the you know, people
say, Oh well, you know, all this

651
00:40:26,600 --> 00:40:28,440
green stuff is going out of
fashion.

652
00:40:28,440 --> 00:40:31,800
So the energy transitions over.
I kind of didn't believe that.

653
00:40:33,040 --> 00:40:37,600
And I think that, you know, the
whole of the re electrification

654
00:40:37,600 --> 00:40:42,600
of the Chinese economy is
something which will come to

655
00:40:43,880 --> 00:40:48,720
Europe and to the United States.
And it may be a decade away, but

656
00:40:50,600 --> 00:40:53,200
you know, and all that is
consuming vast quantities of

657
00:40:53,200 --> 00:40:56,840
copper.
And I think that I think that

658
00:40:56,840 --> 00:40:59,480
that is the supplemental driver
to demand.

659
00:40:59,480 --> 00:41:01,240
You know, we've seen this thing
for a long time.

660
00:41:01,240 --> 00:41:06,680
You know, you in the copper
industry is the, you know, more

661
00:41:06,680 --> 00:41:09,880
or less supply and demand
balance out right with one or 2%

662
00:41:09,880 --> 00:41:11,400
and then you get a major new
factor.

663
00:41:11,400 --> 00:41:14,440
The last time we had a major new
factor was the industrialization

664
00:41:14,560 --> 00:41:18,520
and urbanization of China, which
was, you know, step change in,

665
00:41:18,920 --> 00:41:23,560
in, in the copper price.
I, I think that, you know,

666
00:41:24,720 --> 00:41:29,080
that's kind of happening now.
You know, we, I mean, copper is

667
00:41:29,080 --> 00:41:34,320
like 465 or something.
It's been up to 520.

668
00:41:35,200 --> 00:41:37,520
I think the market's starting to
get the message.

669
00:41:39,920 --> 00:41:43,200
I think part of the problem for
copper is that it's incredibly

670
00:41:43,200 --> 00:41:45,760
noisy commodity because it's
highly financialized.

671
00:41:46,000 --> 00:41:50,720
So, you know, I mean, you saw
that a couple of days ago, you

672
00:41:50,720 --> 00:41:54,600
know, I don't know, you get some
negative global GDP growth

673
00:41:54,600 --> 00:41:57,560
figures or somebody revises
their estimate down and so will

674
00:41:57,560 --> 00:42:02,840
the hedge funds short cop.
So you know, you, you, there's

675
00:42:02,840 --> 00:42:07,160
an awful lot of short term noise
in the copper price, I think.

676
00:42:07,200 --> 00:42:12,120
I think long term, you know,
again, this is not the original

677
00:42:12,120 --> 00:42:15,000
observation, but you know,
copper is difficult to get out

678
00:42:15,000 --> 00:42:16,960
of the ground in large
quantities.

679
00:42:16,960 --> 00:42:19,800
You know, first of all, you've
got to find a very large deposit

680
00:42:19,800 --> 00:42:22,480
and then you've got to build it.
And that's, you know, that's

681
00:42:22,480 --> 00:42:25,920
normally, well in today's money
that's going to be 10s of

682
00:42:25,920 --> 00:42:27,640
billions of dollars.
And there's actually not many

683
00:42:27,640 --> 00:42:30,280
mining companies who have 10s of
millions of dollars to invest.

684
00:42:30,280 --> 00:42:36,240
So, you know, I, I can just see
a gradual acceleration in the

685
00:42:36,240 --> 00:42:41,200
rate of the growth of demand and
supply not keeping up over the

686
00:42:41,200 --> 00:42:45,280
longer term.
You know, and again, I know kind

687
00:42:45,280 --> 00:42:46,760
of everybody's pretty punished
on copper.

688
00:42:46,760 --> 00:42:49,480
So I'm not very, you know, it's
not a very original observation.

689
00:42:49,480 --> 00:42:52,400
But you know, some of these
things you've got, you know,

690
00:42:52,400 --> 00:42:54,600
you've got to hold on to your
view through the noise.

691
00:42:54,640 --> 00:43:01,720
And I, I think, you know,
there's some extraordinary kind

692
00:43:01,720 --> 00:43:05,560
of statistics that you can look
at.

693
00:43:07,000 --> 00:43:11,320
So another sort of noise factor
in in copper, although it's died

694
00:43:11,320 --> 00:43:13,800
down a bit recently, has been
Chinese real estate, right.

695
00:43:15,200 --> 00:43:18,040
And everybody thought that,
well, everybody said that, you

696
00:43:18,040 --> 00:43:21,520
know, Chinese real estate is the
principal driver of incremental

697
00:43:21,520 --> 00:43:25,080
demand for copper and Chinese
real estate in the toilet.

698
00:43:25,080 --> 00:43:27,280
So, you know, it's all over for
copper.

699
00:43:27,360 --> 00:43:33,520
But yeah, for the past five
years, the Chinese National Grid

700
00:43:34,160 --> 00:43:36,920
has bought about twice as much
copper as the whole of the

701
00:43:36,920 --> 00:43:42,600
construction industry in China.
And so, you know, the, the, the

702
00:43:42,600 --> 00:43:47,640
drivers have just changed
radically, but the inputs into

703
00:43:47,640 --> 00:43:50,800
the algos have them, right?
So when you get bad news on

704
00:43:50,800 --> 00:43:52,400
Chinese real estate, copper
price still goes.

705
00:43:52,400 --> 00:43:56,080
The Chinese must be loving this
because you know it's a

706
00:43:56,080 --> 00:43:58,440
wonderful opportunity to buy
some more of what they

707
00:43:58,440 --> 00:44:00,760
absolutely need.
Yeah.

708
00:44:01,040 --> 00:44:04,400
I've heard you mention in the
past that that, yeah,

709
00:44:04,400 --> 00:44:07,400
commodities never discount
future deficits until they

710
00:44:07,400 --> 00:44:08,160
happen.
No, no, no.

711
00:44:08,720 --> 00:44:10,960
No.
It's a funny thing to think

712
00:44:10,960 --> 00:44:12,760
about.
It's it's it's an, it's a

713
00:44:12,760 --> 00:44:15,360
clearly obvious statement when
you say, when you say it out out

714
00:44:15,360 --> 00:44:17,680
loud, because we all know, you
know, things are priced,

715
00:44:17,680 --> 00:44:18,920
commodities are priced at the
margin.

716
00:44:19,240 --> 00:44:21,040
Yeah, there's like these, you
know, supply and demand,

717
00:44:21,040 --> 00:44:23,640
inventories, yada, yada.
But but it also does kind of

718
00:44:23,640 --> 00:44:26,600
just hit the part of you that
learns finance.

719
00:44:26,600 --> 00:44:29,360
And if people expect a future,
then surely that you discount

720
00:44:29,360 --> 00:44:31,680
that to today.
It it they're, they're too.

721
00:44:32,560 --> 00:44:35,960
We have the conflicting thoughts
to have about financial assets

722
00:44:35,960 --> 00:44:38,840
in some ways.
Yeah, yeah.

723
00:44:38,840 --> 00:44:41,960
And even if you think, you know,
if you think like, you know,

724
00:44:41,960 --> 00:44:50,120
copper's going to $7.00 by 2030,
say, what are you going to do,

725
00:44:50,760 --> 00:44:52,080
right?
You're going to buy the futures

726
00:44:52,080 --> 00:44:56,040
and roll them over till 2030.
It's going to cost you a fortune

727
00:44:56,040 --> 00:45:00,400
running or are you going to buy,
you know, you want to buy $100

728
00:45:00,400 --> 00:45:04,200
million of copper?
I mean, how much warehouse space

729
00:45:04,200 --> 00:45:06,960
is that?
I mean, this stuff is only

730
00:45:06,960 --> 00:45:11,000
$10,000 a tonne, right?
And the, you know, the cost of

731
00:45:11,000 --> 00:45:13,240
storing that for five years can
be monstrous, right?

732
00:45:13,240 --> 00:45:14,560
It's going to wipe out your
whole Croft.

733
00:45:15,000 --> 00:45:19,840
So it's, it's very other than
buying a company, right, other

734
00:45:19,840 --> 00:45:22,480
than buying an equity, it's,
it's very difficult to play that

735
00:45:22,680 --> 00:45:26,560
kind of long term vision through
the physical commodity.

736
00:45:27,480 --> 00:45:30,280
The the optimal vehicle is yet
the the big undeveloped copper

737
00:45:30,280 --> 00:45:33,880
project where but you know
there's minimal dilution until

738
00:45:34,440 --> 00:45:36,160
until the prices are much
higher.

739
00:45:36,240 --> 00:45:38,120
Yeah, yeah, Copper in the
ground.

740
00:45:39,760 --> 00:45:41,200
Where?
Where's the best copper in the

741
00:45:41,200 --> 00:45:46,880
ground right now?
I guess, I mean, I think there's

742
00:45:46,880 --> 00:45:48,600
some, there's some good stuff in
Zambia.

743
00:45:49,480 --> 00:45:52,680
There's sure there's still some
good stuff in the DRC.

744
00:45:55,160 --> 00:45:58,520
There's more stuff on the
Argentinian side of the the of

745
00:45:58,520 --> 00:46:04,040
the Andes for sure.
Probably these are higher copper

746
00:46:04,040 --> 00:46:07,680
prices.
There are some decent sized

747
00:46:07,680 --> 00:46:13,880
projects in four, three projects
in British Columbia, but you got

748
00:46:13,880 --> 00:46:15,840
a lot of premating uncertainty I
think there.

749
00:46:16,160 --> 00:46:22,240
But yeah, just waiting on you
Australian guys to find some

750
00:46:22,240 --> 00:46:24,040
more copper.
Nothing bad.

751
00:46:24,600 --> 00:46:27,360
I don't, I don't know if we can
help you out too much on that

752
00:46:27,360 --> 00:46:32,000
front.
I slim pickings on our copper

753
00:46:32,000 --> 00:46:34,400
stocks unfortunately.
Yeah, yeah.

754
00:46:34,600 --> 00:46:38,600
I was curious with your, with
your lithium exposure, is that

755
00:46:39,920 --> 00:46:44,480
Hard Rock or brines or or or bit
of both what what's your view on

756
00:46:44,480 --> 00:46:47,840
the two or perhaps in
jurisdictions as well?

757
00:46:49,240 --> 00:46:51,720
Look, it's a, it's a, it's a
relatively small expenditure for

758
00:46:51,720 --> 00:46:59,040
us, but it, it does seem to me
that, you know, we, we, I think

759
00:46:59,040 --> 00:47:02,720
the, the lithium industry has
gone through this, you know,

760
00:47:02,720 --> 00:47:06,480
huge boom bust cycle.
And I think that it's a

761
00:47:06,480 --> 00:47:11,760
relatively, we kind of
stabilized a little bit now I

762
00:47:11,760 --> 00:47:22,520
think to offset the, the, the
kind of large kind of quantity

763
00:47:22,520 --> 00:47:24,240
of potential supply in the
market.

764
00:47:24,240 --> 00:47:28,840
We've got this kind of sudden
acceleration in, in, in battery

765
00:47:28,840 --> 00:47:33,360
storage.
The Chinese have worked out how

766
00:47:33,360 --> 00:47:39,920
to make batteries, LFP storage
batteries in vast quantities

767
00:47:39,920 --> 00:47:43,280
very, very cheaply, but
obviously they still need a lot

768
00:47:43,280 --> 00:47:45,720
of lithium.
But I kind of think the supply

769
00:47:45,720 --> 00:47:50,000
demand thing is balancing a
little bit, but with the caveat

770
00:47:50,000 --> 00:47:53,400
that there's plenty more supply
waiting to come on.

771
00:47:53,880 --> 00:47:58,520
If, you know, demand starts to
increase exponentially.

772
00:48:01,040 --> 00:48:04,680
And and maybe we've got to the
kind of balance that, you know,

773
00:48:04,680 --> 00:48:08,480
you have in the iron ore market
where, you know, actually we've

774
00:48:08,480 --> 00:48:13,640
found the right kind of
equilibrium price and we're

775
00:48:13,640 --> 00:48:16,360
going to trade around here for a
long time.

776
00:48:17,360 --> 00:48:24,520
So I think that The thing is not
so much Hard Rock or brine, it's

777
00:48:24,520 --> 00:48:27,240
just looking at projects and
saying, you know, how do they

778
00:48:27,240 --> 00:48:29,800
look assuming the lithium price
never goes up.

779
00:48:32,040 --> 00:48:34,520
Yeah.
Scary thought for a few lithium

780
00:48:34,520 --> 00:48:37,520
investors.
Is anybody going to allocate

781
00:48:37,520 --> 00:48:42,480
capital to them at these prices?
You know, once they realize that

782
00:48:42,560 --> 00:48:46,240
we're stuck here at this price
forever and they abandoned

783
00:48:46,240 --> 00:48:51,880
growth CapEx and you know, they
work on reducing costs and you

784
00:48:51,880 --> 00:48:54,200
know, can this thing does this
thing look a sensible

785
00:48:54,200 --> 00:48:59,040
investment?
And that's kind of the, the,

786
00:48:59,200 --> 00:49:03,120
the, the criteria we've used for
having a few lithium stocks in

787
00:49:03,120 --> 00:49:08,840
the portfolio.
The the you're a bit of a tin

788
00:49:08,840 --> 00:49:10,560
ball.
I get the the the feeling.

789
00:49:11,920 --> 00:49:15,640
Yeah, yeah, yeah, yeah.
I I've, I've, I've observed, you

790
00:49:16,840 --> 00:49:19,960
know, when going through kind of
some of the historic reporting

791
00:49:19,960 --> 00:49:23,640
of that energy transition fund,
like at some points Alpha min

792
00:49:23,640 --> 00:49:26,040
was like, you know, your, your
highest allocation of all

793
00:49:26,040 --> 00:49:28,560
stocks.
And then at other points metal

794
00:49:28,560 --> 00:49:31,400
metals X was was certainly like
a top five ish kind of position.

795
00:49:31,600 --> 00:49:33,680
Yeah, never at the I didn't
think ever.

796
00:49:33,680 --> 00:49:35,680
At the same time, those two,
you've clearly kind of been one

797
00:49:35,680 --> 00:49:39,840
of the one of the few tin balls
to to be active rotating between

798
00:49:39,840 --> 00:49:41,960
the two.
Tell me, tell me about your

799
00:49:41,960 --> 00:49:43,080
thinking there.
Yeah.

800
00:49:43,400 --> 00:49:47,760
I mean, traditionally we've had,
we've had very large positions

801
00:49:47,760 --> 00:49:49,480
in both stocks.
Yeah.

802
00:49:51,200 --> 00:49:56,840
We, we, we've reduced, we, well,
we've been reducing alpha min

803
00:49:56,840 --> 00:50:01,120
for a while now.
We, we currently have no

804
00:50:01,120 --> 00:50:06,520
exposure and, and we went into
this big draw down, you know,

805
00:50:06,520 --> 00:50:09,800
when there was the big panic
about what was happening in, in

806
00:50:09,800 --> 00:50:15,640
North Kivu with, with without a
position stock, you know, the

807
00:50:15,640 --> 00:50:19,840
stock did get down a lot.
We didn't add it back on

808
00:50:19,840 --> 00:50:25,840
weakness.
And so, you know, our, our big

809
00:50:25,840 --> 00:50:29,320
exposure now is Methos X, which
I think is 7 or 8% of the fund

810
00:50:29,320 --> 00:50:34,680
at the moment.
And my thinking about these two

811
00:50:34,680 --> 00:50:41,880
is that, you know, I'm kind of
here to play tin and kind of the

812
00:50:41,880 --> 00:50:46,520
economics of tin mining.
I'm not really here to take a

813
00:50:46,520 --> 00:50:51,040
kind of geopolitical risk or, or
I think without them in it's,

814
00:50:51,080 --> 00:50:56,800
it's clearly the better company,
it's the better deposit.

815
00:50:59,200 --> 00:51:02,240
And you know, obviously the the
problem was always

816
00:51:02,680 --> 00:51:07,880
jurisdictional risk that that
crystallized with this incursion

817
00:51:07,880 --> 00:51:12,680
of M23 into into the Eastern
DRC.

818
00:51:15,480 --> 00:51:19,160
They've now signed the peace
agreement, got a ceasefire shore

819
00:51:19,160 --> 00:51:22,480
to this.
I'm kind of very skeptical.

820
00:51:25,000 --> 00:51:28,120
I'm very skeptical about.
Skeptical that the US is

821
00:51:29,760 --> 00:51:32,920
ambitions will will will
manifest in reality, or

822
00:51:32,960 --> 00:51:34,800
skeptical that yeah, the
headlines will translate.

823
00:51:34,800 --> 00:51:37,720
Skeptical that peace will royal?
I'm skeptical.

824
00:51:38,920 --> 00:51:45,240
Right.
I think M23 clearly that that

825
00:51:45,240 --> 00:51:47,800
that that, you know, their
stated aim was to replace the

826
00:51:47,800 --> 00:51:50,840
government of the DFC, right?
Which is why people got really

827
00:51:50,840 --> 00:51:55,600
nervous and why like, you know,
stops that Ivanhoe, which is, I

828
00:51:55,600 --> 00:52:00,400
think that, you know, 1600 miles
away from BZ, right?

829
00:52:00,920 --> 00:52:03,320
Where Alfman's miners, you know,
also suffered from this

830
00:52:03,400 --> 00:52:07,520
generalized DRC panic.
And, and they were doing pretty

831
00:52:07,520 --> 00:52:11,400
well, right.
And we're the kind of hearts and

832
00:52:11,400 --> 00:52:16,800
minds kind of thing because the,
you know, the, the DRC army and,

833
00:52:16,800 --> 00:52:19,440
and the, and their various
associated militias.

834
00:52:19,440 --> 00:52:23,960
So basically kind of, you know,
terrorized the local populations

835
00:52:23,960 --> 00:52:28,880
in that area, ripped them off.
And, and I think when M23 came

836
00:52:28,880 --> 00:52:33,240
in, you know, they tried to put
in it has some kind of decent

837
00:52:33,240 --> 00:52:35,360
governance and social protection
and everything.

838
00:52:35,360 --> 00:52:38,560
And I think they were pretty
much welcome actually as a

839
00:52:38,560 --> 00:52:42,320
better alternative to, to, to
the DRC army or, or United

840
00:52:42,320 --> 00:52:44,360
Nations or South Africans or
whatever.

841
00:52:44,760 --> 00:52:47,760
That was, that was a remarkable
bit of footage when I think it

842
00:52:47,760 --> 00:52:51,120
was early February, where when
the city of Goma was taking it

843
00:52:51,120 --> 00:52:55,960
and you could you could see this
massive audience in the stadium.

844
00:52:55,960 --> 00:52:58,520
I think it was United Stadium or
something, the stadium in the

845
00:52:58,520 --> 00:53:00,360
city and people are singing and
chanting.

846
00:53:00,360 --> 00:53:02,960
It was, it was not what I
thought in my head, a rebel

847
00:53:02,960 --> 00:53:04,760
group taking a city would look
like it was.

848
00:53:04,960 --> 00:53:07,560
These people were clearly
welcomed by a large portion of

849
00:53:07,560 --> 00:53:09,960
the population.
And the moment you saw that it

850
00:53:09,960 --> 00:53:12,160
should have been, it should have
been obvious to a lot of people

851
00:53:12,160 --> 00:53:14,960
that there was, you know, there
was risk that they're, it's not,

852
00:53:15,640 --> 00:53:17,720
it's not, you've got, it's not
like you've got rebels out here

853
00:53:17,960 --> 00:53:19,680
coming and taking.
It's like, you know, this is a

854
00:53:19,680 --> 00:53:22,160
movement of people.
And the the movement has has

855
00:53:22,160 --> 00:53:25,600
appealed to people already in
these areas too, for various

856
00:53:25,600 --> 00:53:27,240
ethnic reasons.
Yeah, yeah.

857
00:53:27,360 --> 00:53:30,600
And people talk about this
agreement between the US and and

858
00:53:30,600 --> 00:53:35,240
the DRC government.
I mean, I haven't seen any terms

859
00:53:35,240 --> 00:53:36,960
of any agreement.
I'm not quite sure what's in it

860
00:53:36,960 --> 00:53:41,680
for anybody really.
I didn't, I didn't really see

861
00:53:41,680 --> 00:53:45,520
the US sending troops to the
Eastern TRC.

862
00:53:48,200 --> 00:53:50,760
We shall see.
But for me, the, the, the whole

863
00:53:50,760 --> 00:53:54,760
of the, the kind of the
political toothpaste there is

864
00:53:54,760 --> 00:54:00,840
out of the tube and I'm not sure
it's going to get back in.

865
00:54:01,720 --> 00:54:05,000
So, you know, I, I think it's a,
it's an amazing mind.

866
00:54:05,000 --> 00:54:06,600
I think it's a very well run
company.

867
00:54:07,800 --> 00:54:12,040
You know, I, there's no, there's
nothing to say about that.

868
00:54:12,040 --> 00:54:16,680
And it's also incredibly cheap.
But you know, I, I think maybe

869
00:54:16,680 --> 00:54:21,000
the maybe the geopolitical risk
has not come down as much as the

870
00:54:21,000 --> 00:54:23,960
market kind of thinks it has.
We shall see.

871
00:54:26,040 --> 00:54:30,280
Metals, metals XI mean obviously
it's an even cheaper company

872
00:54:30,280 --> 00:54:33,880
than well, it's probably not
now, but it was structurally a

873
00:54:33,880 --> 00:54:35,760
much cheaper company than than
Alfred.

874
00:54:38,360 --> 00:54:43,600
Obviously with us, you know,
kind of rather murky history of

875
00:54:43,600 --> 00:54:50,000
corporate governance and, you
know, an old mine that requires

876
00:54:50,000 --> 00:54:55,560
a lot of kind of love and care,
but still, you know, must be

877
00:54:55,560 --> 00:54:59,480
generating a ton of cash at this
point of view and with maybe the

878
00:54:59,480 --> 00:55:01,480
possibility of getting their
hands on the other half of

879
00:55:01,880 --> 00:55:07,120
renaissance.
So, yeah, I'm I'm happy to play

880
00:55:07,120 --> 00:55:11,720
tin through that for for the
moment, certainly be very happy

881
00:55:11,720 --> 00:55:14,720
to go back into alpha men if we
can get some kind of clarity.

882
00:55:15,120 --> 00:55:18,280
You know, and I'm not sure M23
will be a bad thing for Conch,

883
00:55:18,280 --> 00:55:19,760
right?
I'm not sure it's their plan to

884
00:55:19,760 --> 00:55:21,840
rape and pillage and steal all
the mines.

885
00:55:21,840 --> 00:55:25,280
And you know, that's probably
not the case, right?

886
00:55:25,280 --> 00:55:30,080
This is a kind of civil war for
for, for control of the country,

887
00:55:30,080 --> 00:55:32,840
but it doesn't mean that
they're, you know, they want to

888
00:55:32,840 --> 00:55:35,160
go in and destroy the assets and
kill all the miners.

889
00:55:35,840 --> 00:55:41,440
But yeah, people are people are
going to worry about until the

890
00:55:41,440 --> 00:55:45,720
situation stabilizes.
Totally, totally.

891
00:55:45,920 --> 00:55:48,400
Ding, Ding, Ding on metal decks.
By the way, I should disclose

892
00:55:48,400 --> 00:55:52,760
I'm a shareholder.
One of the parts of the

893
00:55:52,760 --> 00:55:56,200
portfolio that's like changed
over time within that fund is,

894
00:55:56,240 --> 00:56:01,480
is the uranium position.
Are you, I know you took, you

895
00:56:01,480 --> 00:56:05,560
know, a few profits in uranium
early 2024, which you know seems

896
00:56:05,560 --> 00:56:10,000
like very good timing And what
about now is, is uranium

897
00:56:10,000 --> 00:56:11,280
sentiment?
Is Wayne, are you getting more

898
00:56:11,280 --> 00:56:15,040
interested in in adding uranium?
Yeah, yeah.

899
00:56:15,080 --> 00:56:21,640
We have put a bit of money in
actually, mostly in Australia

900
00:56:21,640 --> 00:56:24,360
actually.
So we bought some boss so a

901
00:56:25,680 --> 00:56:29,800
couple of months ago that didn't
look very clever when we first

902
00:56:29,800 --> 00:56:32,440
did it, but it's, it's now
looking a lot better.

903
00:56:34,680 --> 00:56:41,560
And I do, you know, as as I've
often said, my the problem has

904
00:56:41,560 --> 00:56:44,480
always been finding attractive
valuations with uraniums.

905
00:56:45,320 --> 00:56:49,800
So because you've got all these
uranium lunatics sort of, you

906
00:56:49,800 --> 00:56:54,680
know, not selling their stock,
you know, you've got to, it's

907
00:56:54,720 --> 00:56:57,960
very, very difficult to justify
the valuation of fundamentals

908
00:56:57,960 --> 00:57:01,000
without plugging in a much, much
higher uranium.

909
00:57:01,320 --> 00:57:04,240
So that that's always been kind
of my problem with the second.

910
00:57:05,520 --> 00:57:08,760
Yeah, we do own a bit now it
looks as if the spot price is

911
00:57:08,920 --> 00:57:11,480
showing some signs of life.
I don't know if that's going to

912
00:57:11,480 --> 00:57:16,160
last or not, but it's clearly a
hugely momentum driven sector

913
00:57:16,160 --> 00:57:22,000
and it really does need a much
better uranium price to to go up

914
00:57:22,000 --> 00:57:26,160
some more, right.
I mean it nobody comes along and

915
00:57:26,160 --> 00:57:29,440
says, oh, you know, we love this
business, let's let's buy that.

916
00:57:29,520 --> 00:57:33,240
You know, we'll, we'll wait here
for five years and see if the

917
00:57:33,240 --> 00:57:37,720
uranium thesis plays out.
Well, I'm sure there are some

918
00:57:37,720 --> 00:57:39,720
people who do that, but the
market has all the balance.

919
00:57:39,720 --> 00:57:42,760
It's not the people do that.
They kind of trade the sector

920
00:57:42,760 --> 00:57:44,400
with the momentum of the spot
price.

921
00:57:45,360 --> 00:57:50,440
And you know, we, we, I think
the spot price beginning to show

922
00:57:50,440 --> 00:57:52,080
some sides of life.
Is it durable or not?

923
00:57:52,080 --> 00:57:56,360
I don't know.
But I think, you know, given how

924
00:57:56,360 --> 00:58:01,040
much the stocks have come down,
that there are some stocks that

925
00:58:01,040 --> 00:58:05,560
just look modestly overvalued
now rather than freezily

926
00:58:05,560 --> 00:58:09,520
overvalued.
So yeah, we've added a little

927
00:58:09,520 --> 00:58:12,080
bit to the poop fridge.
Isn't that funny?

928
00:58:13,440 --> 00:58:16,600
It's like your own equities of
maybe like trim, trim minimum of

929
00:58:16,600 --> 00:58:19,480
like 50%, only modestly
overvalued.

930
00:58:19,560 --> 00:58:24,080
Now modest.
Yeah.

931
00:58:24,720 --> 00:58:27,240
What's your most contrarian view
at the moment, David?

932
00:58:28,720 --> 00:58:34,600
Oof, what's one of those?
Contrarian View.

933
00:58:40,520 --> 00:58:43,240
I suppose still believing that
the energy transition is going

934
00:58:43,240 --> 00:58:45,200
to happen is is is probably one
of them.

935
00:58:45,200 --> 00:58:47,400
Most people seem to have thrown
that out of the boat.

936
00:58:47,480 --> 00:58:51,880
But I think that that's because
they kind of misunderstand the

937
00:58:51,880 --> 00:58:58,200
energy transition.
I think, you know, most of the

938
00:58:58,200 --> 00:59:05,080
contrarian kind of views that
that we had of kind of kind of

939
00:59:05,080 --> 00:59:11,480
happened next and searching for
some new ones.

940
00:59:13,320 --> 00:59:15,280
Yeah, it's difficult.
It's difficult.

941
00:59:16,920 --> 00:59:22,280
I think you know it.
There's two types of contrarian

942
00:59:22,280 --> 00:59:23,960
view, right?
There's there's kind of the big

943
00:59:23,960 --> 00:59:25,920
picture 1 and there's the small
picture 1.

944
00:59:25,960 --> 00:59:29,520
And I think still everybody is
bullish on copper, right?

945
00:59:30,240 --> 00:59:33,280
I mean, you don't find people
making, well, very few people

946
00:59:33,280 --> 00:59:36,520
making the case for copper to go
back to $3.00 a pound.

947
00:59:38,440 --> 00:59:42,440
But when you look at the stocks,
the performance of the stocks,

948
00:59:43,600 --> 00:59:47,920
they are pricing, but they
priced a big change because it's

949
00:59:47,920 --> 00:59:50,400
come down a lot.
They have, yeah, but they.

950
00:59:51,120 --> 00:59:57,720
Would so they derated massive
and you know, they may have been

951
00:59:57,720 --> 00:59:59,040
over.
I think they probably were

952
00:59:59,040 --> 01:00:01,920
overvalued at the top and
they've come down a lot and I

953
01:00:01,920 --> 01:00:04,720
think they're now looking very
decent value.

954
01:00:06,120 --> 01:00:10,680
They're pretty unloved.
I think, you know, you look at

955
01:00:10,680 --> 01:00:14,520
things like Matt copper or
capstone.

956
01:00:14,520 --> 01:00:16,680
I mean, they've just didn't
crash right.

957
01:00:16,960 --> 01:00:21,360
And and so they've, I think
they've, they've lost their

958
01:00:21,360 --> 01:00:26,440
premium valuation.
They discounted a lower long run

959
01:00:26,480 --> 01:00:31,000
long term copper price and
sentiment towards some is

960
01:00:31,000 --> 01:00:34,880
extremely poor.
So I think that's a contrarian

961
01:00:34,880 --> 01:00:38,400
opportunity.
If you, I think the problem was,

962
01:00:38,400 --> 01:00:42,200
and myself included is that, you
know, we already held a lot of

963
01:00:42,200 --> 01:00:46,560
them and you know, people say
I'll buy a weakness and you say,

964
01:00:46,560 --> 01:00:50,160
well, with what money, right.
Because, you know, I went on.

965
01:00:50,320 --> 01:00:57,880
So it's it's tricky, but I think
there's some good opportunities

966
01:00:57,880 --> 01:01:03,120
in the copper mining space for
somebody who's got who's still

967
01:01:03,120 --> 01:01:04,560
got the money and still got the
courage.

968
01:01:08,800 --> 01:01:10,760
Yeah.
But yeah, I mean, gold,

969
01:01:10,760 --> 01:01:14,440
obviously everybody's bullish
and I guess silver has been a

970
01:01:15,360 --> 01:01:22,240
disappointing performer relative
to gold for now.

971
01:01:22,240 --> 01:01:26,880
I did an interview with another
with another podcast back in

972
01:01:26,880 --> 01:01:30,040
January, I think, and headline
shout out.

973
01:01:30,920 --> 01:01:33,360
Yeah, we got Antonio and the
headline he chose for the thing

974
01:01:33,360 --> 01:01:36,920
on YouTube was silver is not my
top pick for 2024.

975
01:01:38,600 --> 01:01:40,520
He knows how to appeal to that
North American audience.

976
01:01:41,600 --> 01:01:43,560
Everybody else, everybody else
loves it, right.

977
01:01:44,640 --> 01:01:46,120
But it has been a bit
disappointing.

978
01:01:47,840 --> 01:01:56,840
I didn't see that changing
really a lot, but I think maybe

979
01:01:56,840 --> 01:01:59,160
that's a contrarian view is not
being massively bullish on.

980
01:01:59,160 --> 01:02:01,160
So I don't think everybody seems
to be published on.

981
01:02:01,920 --> 01:02:03,760
I like your view on the, on the
copper stocks.

982
01:02:03,760 --> 01:02:07,800
And it's, it is funny because
even though the like copper

983
01:02:07,840 --> 01:02:12,280
commodity price doesn't factor
in, yeah, a future supply

984
01:02:12,280 --> 01:02:16,600
deficit like you said, but but
the, the equities certainly were

985
01:02:16,800 --> 01:02:19,960
trading on, on multiples that
were suggesting the copper price

986
01:02:19,960 --> 01:02:22,360
is going to be much higher than
it is today in the long term.

987
01:02:23,080 --> 01:02:26,960
And now that those stocks are
not, you know, what I've found

988
01:02:26,960 --> 01:02:32,600
surprising is that there hasn't
been a, a, a flurry of corporate

989
01:02:32,600 --> 01:02:35,360
activity.
Like 12 months ago, every gold

990
01:02:35,360 --> 01:02:37,000
miner wanted to acquire copper
projects.

991
01:02:37,000 --> 01:02:40,920
And now gold's the, the, the
shiny new thing again instead of

992
01:02:40,920 --> 01:02:43,080
copper.
All this where, where are those

993
01:02:43,080 --> 01:02:44,280
deals to buy the copper
projects?

994
01:02:44,280 --> 01:02:45,520
Why?
Why is there, you know, the

995
01:02:45,520 --> 01:02:47,000
floor price, not the corporate
activity.

996
01:02:47,000 --> 01:02:49,000
I find that interesting.
I just think we've got short

997
01:02:49,000 --> 01:02:50,440
attention spans and all that
sort of stuff.

998
01:02:50,440 --> 01:02:54,240
So Goldie's cool again.
Yeah, yeah, yeah.

999
01:02:54,240 --> 01:02:58,480
I think it's it's, you know it's
and in the management's find it

1000
01:02:58,480 --> 01:03:01,800
very difficult to be contrary.
Yeah, that's true.

1001
01:03:02,840 --> 01:03:05,960
It's very difficult when you're
everything is coming along and

1002
01:03:06,280 --> 01:03:08,440
and you want to buy something
that's on it's house.

1003
01:03:08,440 --> 01:03:12,800
You know, it's very difficult
management.

1004
01:03:12,840 --> 01:03:14,360
Yeah.
Just like investors have trouble

1005
01:03:14,360 --> 01:03:16,520
being contrarian instead of
management's, right?

1006
01:03:17,280 --> 01:03:19,680
And then you put 10 people
around a board table and try and

1007
01:03:19,680 --> 01:03:21,960
get them all to be contrarian at
the same time.

1008
01:03:21,960 --> 01:03:25,680
It's it's kind of tough.
Being a contrarian is a kind of,

1009
01:03:26,520 --> 01:03:28,160
you know, individual sport,
right?

1010
01:03:28,160 --> 01:03:32,320
It's not a team sport.
And by its nature and it's.

1011
01:03:32,360 --> 01:03:33,760
Probably.
Probably easier in private

1012
01:03:33,760 --> 01:03:36,120
markets than public markets too.
Absolutely.

1013
01:03:36,120 --> 01:03:39,560
Yeah, yeah, yeah, yeah.
That's an interesting.

1014
01:03:39,560 --> 01:03:41,240
Way to frame it?
Yeah.

1015
01:03:41,240 --> 01:03:45,120
I mean, yeah.
It's been a delight to explore

1016
01:03:45,120 --> 01:03:47,320
some of this stuff with with
you, David.

1017
01:03:47,320 --> 01:03:48,840
We should probably probably let
you go.

1018
01:03:48,840 --> 01:03:52,880
But if before we do, if you got
any any last kind of thoughts

1019
01:03:52,880 --> 01:03:54,600
that you want to just want to
get out?

1020
01:03:57,600 --> 01:04:05,480
Yeah, I just this, this is kind
of a bit of a maybe everybody

1021
01:04:05,480 --> 01:04:10,760
knows this already, right?
But I just think that the, the,

1022
01:04:11,280 --> 01:04:13,720
the quantum of cash flow that
the gold mining industry is

1023
01:04:13,720 --> 01:04:19,800
going to deliver this year.
I, I just don't think that the

1024
01:04:19,800 --> 01:04:26,320
market kind of understands that.
I mean, I mean, all in costs are

1025
01:04:27,200 --> 01:04:29,040
and I'm talking all in costs,
right?

1026
01:04:29,040 --> 01:04:31,840
Not AASC or any of these
nonsense metrics, right?

1027
01:04:31,840 --> 01:04:37,360
But good thing, right, including
growth CapEx costs are probably

1028
01:04:37,360 --> 01:04:43,800
2100 U.S. dollars an ounce and
the gold price is 3300, right?

1029
01:04:45,080 --> 01:04:48,600
So that's, that's a 30% free
cash flow.

1030
01:04:48,840 --> 01:04:53,840
Free cash flow.
I mean, if you look at the

1031
01:04:53,840 --> 01:05:01,360
period 2007 to 2024, the average
free cash flow margin, free cash

1032
01:05:01,360 --> 01:05:03,560
flow margin of the industry was
0.

1033
01:05:04,800 --> 01:05:06,600
Wow.
Right.

1034
01:05:06,960 --> 01:05:09,800
So there were years when it was
+2 or plus three years when it

1035
01:05:09,800 --> 01:05:16,960
was minus about the, the sum of
it all is Z All right, So this

1036
01:05:16,960 --> 01:05:20,520
is a really radical
transformation in this industry

1037
01:05:20,800 --> 01:05:22,600
and how management's deal with
it.

1038
01:05:22,600 --> 01:05:24,920
It's a challenge and some of
them will mess it up and some of

1039
01:05:24,920 --> 01:05:31,120
them will, you know, but you
know, I, I, there are many

1040
01:05:31,120 --> 01:05:33,680
industries that ever have a 30%
reconstruction.

1041
01:05:36,000 --> 01:05:42,880
So I think it is exceptional
times at a time when you

1042
01:05:42,880 --> 01:05:44,840
certainly don't have exceptional
valuations.

1043
01:05:47,040 --> 01:05:50,120
It's a, it's a, it's a super
profit period of time that is.

1044
01:05:50,640 --> 01:05:52,960
It is a super profit and of
course people get nervous with

1045
01:05:52,960 --> 01:05:55,320
super profits because they say
this cannot last right.

1046
01:05:55,320 --> 01:05:59,400
So again, we, we, we need to
start pricing the dent which the

1047
01:05:59,400 --> 01:06:01,440
sector is, is, is doing for
sure.

1048
01:06:03,760 --> 01:06:06,520
But if you think that the
accumulation of gold has got

1049
01:06:06,520 --> 01:06:10,920
some structural drivers and it's
not going to revert to the mean,

1050
01:06:11,600 --> 01:06:15,560
but gold has never reverted to
the mean really has in two or

1051
01:06:15,560 --> 01:06:17,960
three-year periods.
But like over the long term, it

1052
01:06:17,960 --> 01:06:24,640
has a little better, you know,
you, you can start to give this

1053
01:06:24,640 --> 01:06:29,520
set to, you know, looking back,
I mean, before, you know, back

1054
01:06:29,520 --> 01:06:34,080
in the 2000s, the industry
regularly traded on 2 times NPV.

1055
01:06:35,080 --> 01:06:37,960
We were in a structural bull
market in gold and people were

1056
01:06:37,960 --> 01:06:43,760
pricing getting much, much
higher cash flows for longer

1057
01:06:43,760 --> 01:06:46,400
plus reserve expansion, plus all
kinds of things.

1058
01:06:46,720 --> 01:06:49,280
Maybe that was a silly
evaluation 2 times NPV.

1059
01:06:49,280 --> 01:06:53,480
But here today, I think if you
put spot prices in the models,

1060
01:06:53,640 --> 01:06:58,480
you're probably at .6.
Yeah, yeah.

1061
01:06:58,480 --> 01:06:59,880
That's.
Not even cracking the one.

1062
01:07:00,160 --> 01:07:02,440
That's that's amazing to think
about the.

1063
01:07:03,800 --> 01:07:06,080
The.
Within and within the the listed

1064
01:07:06,080 --> 01:07:09,280
universe of like gold producers
or within the the GDX, there is

1065
01:07:09,720 --> 01:07:12,920
there is so much differentiation
between performance there is

1066
01:07:12,920 --> 01:07:16,680
it's not like the rising tide
necessarily lifts all boats.

1067
01:07:16,680 --> 01:07:18,920
There's plenty of
underperformers in there, which,

1068
01:07:19,400 --> 01:07:22,000
yeah, it's a it's a perfect
environment for a stock picker.

1069
01:07:22,760 --> 01:07:24,400
He's familiar with it, with
analysing gold.

1070
01:07:24,400 --> 01:07:25,880
Stock, yeah, there's massive
dispersion.

1071
01:07:25,880 --> 01:07:27,920
The world always has been in the
GPX, right?

1072
01:07:28,400 --> 01:07:30,800
In good years and bad years,
there's always big dispersion.

1073
01:07:31,600 --> 01:07:39,800
Overall, 100% in terms of
dispersion, but yeah, but, but

1074
01:07:39,800 --> 01:07:44,520
I, I just think in general the
industry, you know, is really

1075
01:07:45,560 --> 01:07:48,080
people hate it.
A lot of people won't even look

1076
01:07:48,080 --> 01:07:52,600
at it and, and, and when you get
those kind of conditions, you

1077
01:07:52,600 --> 01:07:54,880
know, we know as people who are
looking at it every day, you go,

1078
01:07:55,360 --> 01:07:56,920
you know, it's not the best
industry in the world.

1079
01:07:56,920 --> 01:08:03,360
In fact, it's not very good
industry in general in the the,

1080
01:08:03,360 --> 01:08:07,080
the just when you look at the
financial metrics, it does just

1081
01:08:07,080 --> 01:08:11,160
look extraordinary and the
valuation hasn't really adjusted

1082
01:08:11,160 --> 01:08:15,840
to that at all, I think.
What were the free cash flow

1083
01:08:15,840 --> 01:08:18,680
margins back in that era where
everything was being valued at

1084
01:08:18,680 --> 01:08:22,359
like 2 times in 1/2?
But it wasn't very.

1085
01:08:22,439 --> 01:08:24,240
It wasn't good.
Because the stocks are very

1086
01:08:24,240 --> 01:08:27,040
valued.
Yeah, yeah, yeah, yeah.

1087
01:08:27,479 --> 01:08:29,880
You know, you go back and you
got free cash flow, you know,

1088
01:08:29,880 --> 01:08:33,520
maybe, maybe the better ones got
to four or five, you know.

1089
01:08:36,080 --> 01:08:39,960
But yeah, so you know, we really
are in uncharted territory and

1090
01:08:39,960 --> 01:08:42,880
to be honest, you know, even the
ready rubbish companies should

1091
01:08:42,880 --> 01:08:45,479
be able to do very, very well
and slim.

1092
01:08:46,880 --> 01:08:48,920
You'd hope so, wouldn't you?
I'd.

1093
01:08:49,160 --> 01:08:53,520
Buy some rubbish gold.
Yeah, Oh, what a, what a

1094
01:08:53,520 --> 01:08:57,399
fantastic note to to wrap up on.
Thank you so much, David, for

1095
01:08:57,399 --> 01:08:59,200
your time and and your insights
today.

1096
01:08:59,200 --> 01:09:02,439
I really appreciate it.
It's a pleasure, lovely to talk

1097
01:09:02,439 --> 01:09:05,800
to you guys always look really
enjoy the show and watch it

1098
01:09:06,160 --> 01:09:08,439
every every day when it comes in
so.

1099
01:09:09,120 --> 01:09:10,000
Thank you very much.
I love it.

1100
01:09:10,600 --> 01:09:12,200
Thank you.
Yeah, Look forward to it.

1101
01:09:12,200 --> 01:09:14,040
Look forward to touching BASE
with you sometime shortly,

1102
01:09:14,840 --> 01:09:17,520
David.
And yeah, good luck reaping the

1103
01:09:17,520 --> 01:09:20,880
rewards if you have your gold
gold stock allocation.

1104
01:09:22,080 --> 01:09:23,520
Lovely.
Thanks very much guys.

1105
01:09:23,600 --> 01:09:25,000
You take care.
Thank you, mate.

1106
01:09:25,359 --> 01:09:25,800
Cheers.
Bye.

1107
01:09:25,920 --> 01:09:27,000
Yeah, bye.
What do you think of that,

1108
01:09:27,000 --> 01:09:28,479
Allie?
That was awesome.

1109
01:09:28,479 --> 01:09:31,920
Ned loved Dave's insight,
especially on the gold stuffer

1110
01:09:32,080 --> 01:09:33,319
as usual.
But you must.

1111
01:09:33,319 --> 01:09:35,800
Be feeling happy to own a lot of
gold stocks right now, yeah?

1112
01:09:36,640 --> 01:09:40,840
I think it's just, I think that
that that sort of final point we

1113
01:09:40,840 --> 01:09:45,319
finished on or just that that
divergent between all in costs

1114
01:09:45,319 --> 01:09:50,399
and and the gold price and and
how big that free cash flow, you

1115
01:09:50,399 --> 01:09:54,920
know, yield and generation is
relative to historical periods

1116
01:09:54,920 --> 01:09:58,280
is I've probably never
considered it that way.

1117
01:09:58,640 --> 01:10:01,320
So that was really fascinating
to walk through amongst

1118
01:10:01,320 --> 01:10:04,240
everything else.
Well, we should, we should thank

1119
01:10:04,240 --> 01:10:08,040
our our wonderful partners Ali
to anyone going to the GRX

1120
01:10:08,320 --> 01:10:09,880
conference.
Well, first of all, go.

1121
01:10:09,880 --> 01:10:13,000
Second of all, use our use our
discounts in the show notes.

1122
01:10:14,080 --> 01:10:16,160
We've got to thank Mineral
Mining Services, Grounded,

1123
01:10:16,160 --> 01:10:19,680
Sandvik Ground Sport, CRE
Insurance, Kdrill, KCI Site,

1124
01:10:19,720 --> 01:10:22,520
Site Services, Black Diamond
Drilling Services, Cross

1125
01:10:22,600 --> 01:10:24,560
Boundary Energy and Hoodoo.
Hoodoo.

1126
01:10:25,440 --> 01:10:28,080
Information contained in this
episode of Money of Mine is of

1127
01:10:28,080 --> 01:10:30,160
general nature only and does not
take into account the

1128
01:10:30,160 --> 01:10:33,760
objectives, financial situation
or needs of any particular

1129
01:10:33,760 --> 01:10:35,800
person.
Before making any investment

1130
01:10:35,800 --> 01:10:38,840
decision, you should consult
with your financial advisor and

1131
01:10:38,840 --> 01:10:42,000
consider how appropriate the
advice is to your objectives

1132
01:10:42,200 --> 01:10:44,200
financial situation.
And need, yeah.