Huw McKay Makes Sense of the Chaos

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But if you have a full
bipolarization of the world,

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well, that is a fascinating
situation for individual

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commodity markets.
But there's one thing China has

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which you can't teach.
You can't teach a country to be

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enormous, Doctor.
Hugh Mackay, former chief

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economist of BHP, senior
international economist at

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Westpac for many years before
that, an advisor inside

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government now at the Crawford
School at ANUQ.

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He is an incredible intellect at
the intersection of Geo economic

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strategy where the material base
of the modern world is moving.

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His book, The Strategic Logic of
China's Economy is is widely

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viewed as one of the the
clearest long range frameworks

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on on China's rise and its its
constraints as well.

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I think I think the money miners
are going to get a lot out of

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this.
JD what did we get into in the

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combo?
Mate, we, we covered heaps for

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longer term money miners out
there.

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They'll know that we had Hugh on
in late 2024 and he was so

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insightful on so many issues
talking to the the points that

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you touched upon there.
So we had to get him back on to

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hone in on a few specifics.
We're talking about the RnB,

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whether that's going to be the
new currency of the world, what

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that means for gold and this
whole debasement, trade and

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inflation and all those other
topics that are often cited.

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We speak about quite a lot
government debt, what that means

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for the world going forward, be
it the US, Australia, the

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massive win that miners have had
in Australia.

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This has been pretty quietly
spoken about, but the massive

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benefits that have flowed from
strong commodity prices as well

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as a weak Aussie dollar, it's
been a real winner.

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And then some of the other
topics which he touched upon

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last time, copper, the bull
market we're going through

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there, Rio Tinto and Glencore,
the deal and a whole heap mall.

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If you're wondering money
miners, why Hughes in his high

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vis shirt he he kindly pulled it
out of his his his his draw.

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It's from his a time that he
visited Escondido.

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He tells us.
So you know, he's got some

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humour here as well, even though
there's not too much laughing in

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the in the conversation, like
he's.

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Got we're talking about real
stuff here, mate.

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It's.
Got a witty side to it before

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we.
Before we jump in the

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conversation, mate, these
markets have been super

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volatile, Super super volatile
for anyone involved in the

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resources game, and I wouldn't
blame you if that's making your

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your stomach churn.
I love it.

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Volatility.
Is it all about you?

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I don't mind it, but for
everyone out there, you're at a

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different stage.
You could be a bit more close to

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retirement and you're thinking,
hey, My Portfolio peeling off

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10% in a day is, is not so
healthy.

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So you should think about
diversifying that portfolio and

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you should think about the great
Australian investment property.

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Like what could be more
Australian than mining stocks

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and property market?
Nothing mate, nothing.

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And if you're missing property,
you should think about Exceed

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Capital.
Exceed Capital is a proudly

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Australian business out of
Queensland and they've got a

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brand new property trust that
you should check out.

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It's called the SP Property
Trust.

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We're talking about Gold Coast
real estate, a very low vacancy

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market.
Their asset has great tenants

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like Bupa.
The Queensland government

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targeting 8% cash returns,
monthly distributions paid out

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five year time horizon is is the
goal for this one.

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So a lot of juicy details in
there and they're all in the

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show notes if you're keen.
I update my thinking.

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What could be more Australian
than mining stocks property in

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the Gold Ghost.
All right, check out the succeed

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capital to Hugh Mackay.
Here we go.

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Hugh Mackay, It has been quite
some time since we last spoke

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and the world has changed quite
a bit since then.

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It's evolving, commodity markets
booming.

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China and the US are still a
kind of log ahead.

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So I kind of want to start the
conversation right there.

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Xi Jinping made some some
fascinating comments earlier

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this week about the R&B, their
currency and it's it's rising

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preeminence and the fact that it
should be the global reserve

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currency.
I'm curious to hear what you

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made of these, these remarks,
Hugh.

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RMB, reserve currency, financial
hegemony, yeah, the the big

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questions look to I guess one
thing that you have to consider

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if you want to make a statement
like that as as the Chinese

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leader is, does the incumbent
currency look vulnerable?

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Yes.
Does the US dollar look

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vulnerable at the moment?
Well, the US public debt

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trajectory certainly looks
vulnerable.

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Those people who aren't spending
their lives pouring over AI

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stocks are spending the rest of
their time looking at the

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debasement trade, which is
playing out in precious metals

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and crypto currencies.
And if people are willing to

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openly talk about a debasement
trade of the US dollar, that

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would imply in the fullness of
time that the current vehicle

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currency on which the
international system runs maybe

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vacating the throne now, I think
President Xi is getting well

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ahead of himself if he thinks
the RMB is ready to step

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directly into that, into that
position.

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There's a lot of things that
come with taking on that

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international vehicle currency
mantle.

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Very few of them are currently
fulfilled by the Chinese

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economy, the Chinese political
system, the rule of law,

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governance, liquidity,
transaction costs, you know, the

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list goes on.
Like for goodness sake, they

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haven't even eased capital
controls fully yet.

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So let's not get too far ahead
of ourselves.

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But there's one thing China has
which you can't teach this is

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you can't teach speed in
sporting contests.

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Someone either has fast twitch
muscles or they don't.

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You can't teach a country to be
enormous.

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And China is enormous.
And so it's it's physical

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footprint in the global system,
particularly in the commodity

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space, where I think the main
game for Beijing initially is to

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how much, how much of the
commodity trade can we

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denominate in our home currency.
It does have a massive physical

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footprint in trading goods and
particularly trade in resources.

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That's not a bad start for
thinking about these things, but

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it takes a lot more than that to
be the anchor of the

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International Monetary system.
So not this decade, not next

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decade.
But is the US dollar creating

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space for someone to make that
claim and to pursue it as a

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super ordinate objective for a
different society?

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Perhaps.
But yeah, a little bit over his

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skies there.
I'd suggest do.

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Do you think there's there's a
credible case for an R&B or a

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goal based alternative to the
USD?

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Like if you were to scenario
analysis map it out, you know,

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20 years from now, what's your
weighted probabilities of of the

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world's reserve currency?
Well, there's nothing official

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about the US dollars status in
the International Monetary

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system.
It's just the outcome of pure

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economic gravity and the way the
world order has evolved since

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World War 2.
So no one stood up one day and

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said the US dollar is it.
Someone did stand up one day and

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say the gold standard is over.
That person was Richard Nixon.

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He went off gold in 1971.
There was a fixed parity between

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the US dollar and gold, and
there were fixed parities

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between that price and all the
other currencies at the time.

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And that ushered in the era of
Fiat currencies.

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And so you have two people, sort
of two sets of people coming in

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on this particular debate.
You have libertarian views which

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find Fiat currencies offensive
because it means they have to

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pay tax.
And they feel that it's it's

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impinges upon their freedom.
And therefore, they like the

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whole idea of decentralized
finance, blockchain,

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infrastructure, full
transparency, and most

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important, finite and fixed
supply.

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Now, a growing global system
based on capitalism would not

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thrive under a monetary system
which focused on finite and

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fixed supply.
You know why?

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Because we want to grow.
And the second you grow, you

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create demand for more money.
But if you're not going to

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create any more money, the next
step is that the price of goods

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and services in the money you've
chosen, which can't grow in

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supply, is going to go down.
There's a word for that.

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It's called deflation.
Deflation is horrible, and it's

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particularly horrible if you
have accrued debts in the past.

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Part of the logic for accruing
those debts in the past is that

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growth in the underlying system,
in a nominal sense, was going to

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pay some of that debt off for
you.

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But if you've accrued all this
debt and then prices start to

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move backwards, that is
horrible.

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And one of the most powerful
theories of depressions is

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actually called the debt
deflation hypothesis, which was

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sort of an empirical, an
empirical piece of work studying

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how the Great Depression from
the 1930s happened.

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And there was a gold standard at
the time, of course.

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And yeah, I think people don't
realize how toxic for the global

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capitalist system, which is
built on the creation of credit

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and people taking risk and
accruing debt liabilities to

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back those risks, how toxic
moving to a crypto basis would

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be or a physical basis like GOB.
Should governments run their

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balance sheets more in a more
disciplined fashion?

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Yes, of course they should.
But I I do feel though that the

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what would be called the fiscal
Hawks in macroeconomic terms,

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hawkish as in they don't like
debt doves being people who are

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more relaxed about it.
I'd certainly put myself more in

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the the dovish camp in terms of
what level of government debt is

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sustainable in the global system
and why.

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I think bigger levels of debt
are sustainable than what a hawk

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might suggest.
It's two things.

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One, the government footprint in
contemporary societies is much,

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much bigger than it was so 100
years ago.

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Governments used to be a very,
very small part of the economy.

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They're now very big parts,
let's say 35 to 55% in a wealthy

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country in terms of how much
income is filtered through their

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balance sheets on a regular
basis.

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And to say that someone has that
much income washing through

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their balance sheet can't
service debt, which is say twice

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the size of their annual income,
Well, that just seems like

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ridiculously conservative when
you consider, for example,

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households take out mortgages
all the time, which are 678

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times their annual income.
And as an individual taking out

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a mortgage, I don't have the
ability to legislate to raise

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taxes and increase my income.
So I think people are a little

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bit too little bit too hawkish
about that.

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But the other thing and this,
this sort of goes to how

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precious metals trade and how
quickly they can go to

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valuations which sort of have no
sort of connection to how much

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it physically costs to develop a
gold mine or to develop a silver

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mine, etcetera.
The stock of financial assets or

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the stock of financial wealth in
the global system is so

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monumentally large.
Now something has to carry that

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on the liability side of the
balance sheet.

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And financial wealth in the
global system is 6 or 7 or 8

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times world GDP.
Well, GDP is around $100

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trillion.
So let's take that 7% multiple

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there and say there's $700
trillion of financial wealth

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looking for a home.
How much public debt can you

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sustain under that situation?
Should 1/4 of that be held in

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government debt?
Should a fifth be held in it?

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Should a third be held in it?
Like, the exact number doesn't

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really matter, but the scaling
up of government debt isn't

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outlandish relative to the
scaling up of financial wealth

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in the global system.
A tricky aspect of this though,

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is that a lot of that government
debt was accrued what interest

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rates were lower than they are
now.

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And one of the reasons why
interest rates are going up is

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because there is more inflation
premium, which is built into the

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price of those bonds and there
was in the past.

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And that is going to be a tricky
transitional period.

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Doesn't mean that the US dollar
is no longer the incumbent as

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the vehicle currency for the
system, but it does mean that

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governments need to start being
a bit more realistic about their

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spending trajectories and in
some cases more realistic about

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their revenue raising.
Anglosphere economies like the

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US, Australia, UK, Canada, they
can probably think about their

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revenue side, revenue side of
things as well as spending.

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Europeans, I think they've
already got as much revenue as

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00:14:59,920 --> 00:15:02,200
they can possibly get.
They need to start thinking

230
00:15:02,200 --> 00:15:04,920
about their spending.
You you mentioned the phrase

231
00:15:04,920 --> 00:15:07,240
that government's being
realistic about their spending.

232
00:15:07,240 --> 00:15:12,960
I think the that the basement
trade is a is really the result

233
00:15:12,960 --> 00:15:16,280
of the financial world investors
being realistic about

234
00:15:16,280 --> 00:15:19,720
government's lack of propensity
to control their spending.

235
00:15:20,080 --> 00:15:22,760
There's yeah.
But I do find that interesting

236
00:15:22,760 --> 00:15:26,080
that you, you talk about the
potential of 2 * 2 times GDP,

237
00:15:26,080 --> 00:15:29,160
but not being obscene.
Whereas conventional wisdom is,

238
00:15:29,200 --> 00:15:32,840
is when you're north of 120% of
GDP, it's, it kind of all ends

239
00:15:32,840 --> 00:15:36,200
in in a few ways.
And they're all dire for for

240
00:15:36,200 --> 00:15:40,280
countries and empires.
Well, you're the, this is one of

241
00:15:40,280 --> 00:15:45,360
those areas where you can focus
on the flows which come with

242
00:15:45,360 --> 00:15:48,680
servicing a stock of debt, IE
how much of my income is going

243
00:15:48,680 --> 00:15:52,480
to servicing my debt out of my
current income.

244
00:15:53,720 --> 00:15:58,080
Or you can focus on the level
and say, OK, well that level

245
00:15:58,120 --> 00:16:00,160
just looks crazy.
Let's let's do something about

246
00:16:00,160 --> 00:16:04,120
this.
The vast majority of analysis

247
00:16:04,120 --> 00:16:06,720
you will see is related to those
flows.

248
00:16:07,480 --> 00:16:12,360
And the the big metric a lot of
people like to talk about is how

249
00:16:12,360 --> 00:16:15,520
much does the government spend
servicing their debt versus

250
00:16:15,640 --> 00:16:18,200
spending on their military or
spending on the healthcare

251
00:16:18,200 --> 00:16:23,840
system or spending on education.
All these core functions of

252
00:16:23,840 --> 00:16:26,960
government.
And the one that often comes up

253
00:16:26,960 --> 00:16:29,840
in great power situations is the
military spending.

254
00:16:29,840 --> 00:16:36,480
And Ray Dalio, the hedge fund
manager, has done some

255
00:16:37,560 --> 00:16:40,400
historical studies and he thinks
that metrics really important.

256
00:16:41,240 --> 00:16:45,040
And look, it's a, it's a genuine
sort of sticker shock moment

257
00:16:45,040 --> 00:16:46,600
when you say something like
that.

258
00:16:49,600 --> 00:16:52,160
And so, yeah, I think it does
make sense.

259
00:16:52,680 --> 00:17:00,400
But I was remember being on a
call with the former with a

260
00:17:00,400 --> 00:17:05,079
former senior politician, not a,
not a, not in Australia.

261
00:17:05,720 --> 00:17:09,680
And they were talking about, you
know, the politics of fiscal

262
00:17:09,680 --> 00:17:12,440
adjustment.
And they say, look, if you've

263
00:17:12,440 --> 00:17:17,359
got a, if you've got a billion
dollar problem, then you can

264
00:17:17,359 --> 00:17:21,520
think about sort of trimming,
trimming your budget for a

265
00:17:21,520 --> 00:17:25,800
billion dollars and you can
probably find that somewhere.

266
00:17:26,200 --> 00:17:31,120
But if your problem is $100
billion or $200 billion, there's

267
00:17:31,120 --> 00:17:36,400
nothing which is going to get
you through that without fierce

268
00:17:36,400 --> 00:17:39,840
and vicious political opposition
from the groups which are having

269
00:17:39,840 --> 00:17:44,200
something taken away from them.
And so the political calculus is

270
00:17:44,200 --> 00:17:47,320
that it just becomes too hard.
And any country which has gone

271
00:17:47,320 --> 00:17:50,320
past that threshold where all of
their fiscal problems have those

272
00:17:50,320 --> 00:17:53,680
huge numbers attached to them.
And so it actually means

273
00:17:53,680 --> 00:17:55,240
something dramatic is going to
happen.

274
00:17:55,840 --> 00:17:59,120
And I'm going to be taking a lot
of things away from this segment

275
00:17:59,120 --> 00:18:03,280
of my society and possibly not
giving it to anybody else.

276
00:18:03,280 --> 00:18:06,120
So I don't even have a
consistent constituency to say,

277
00:18:06,120 --> 00:18:10,200
yes, we should do that to offset
the people saying don't ever do

278
00:18:10,200 --> 00:18:16,600
that, then you've got a problem.
And that is that's the position

279
00:18:16,600 --> 00:18:22,600
you don't want to get to.
And some European countries

280
00:18:22,600 --> 00:18:24,280
reached that point a long time
ago.

281
00:18:25,360 --> 00:18:27,600
The UK is getting close to
there.

282
00:18:27,600 --> 00:18:32,320
Now.
I'm not sure we're there in

283
00:18:32,320 --> 00:18:34,200
Australia.
I think Australia's fiscal

284
00:18:34,200 --> 00:18:38,320
position is still very strong
relative to most other advanced

285
00:18:38,320 --> 00:18:43,120
countries.
But in Australia, because we're

286
00:18:43,160 --> 00:18:48,440
we're also spending a lot of
money in a recurring sense.

287
00:18:49,160 --> 00:18:52,440
And what is financing that on
the revenue side of the balance

288
00:18:52,440 --> 00:18:56,520
sheet has a heavy cyclical
component to it, which is this

289
00:18:56,520 --> 00:18:58,440
commodity boom that we're living
through.

290
00:18:59,360 --> 00:19:01,720
And we're living through it at a
time when the Australian dollar

291
00:19:01,720 --> 00:19:06,760
isn't very high, which is just
making the management of mining

292
00:19:06,760 --> 00:19:12,320
companies in a country like ours
look look pretty special.

293
00:19:13,560 --> 00:19:15,600
But there's a little bit of
fairy dust sprinkled on it,

294
00:19:15,600 --> 00:19:19,120
which is this massive disconnect
between the level of commodity

295
00:19:19,120 --> 00:19:21,160
prices and level of the
Australian dollar.

296
00:19:21,640 --> 00:19:24,600
And I wrote something on this in
the Financial Review this week,

297
00:19:24,600 --> 00:19:27,800
actually.
And you can if you're interested

298
00:19:27,800 --> 00:19:32,480
in those technical details.
But yeah, that has created a

299
00:19:32,840 --> 00:19:37,400
huge revenue boost to
governments in Australia.

300
00:19:38,080 --> 00:19:41,880
And that means you can, you can
spend a lot more today without

301
00:19:41,880 --> 00:19:45,520
it showing up as a dreadful
deficit position.

302
00:19:47,760 --> 00:19:51,600
But when the cycle turns, it
will it will look quite quite

303
00:19:51,600 --> 00:19:54,280
stark.
And one of the points you you

304
00:19:54,280 --> 00:19:57,160
kind of allude to in that
article is that that that has

305
00:19:57,160 --> 00:19:59,600
got to change in, in simple
terms for those that haven't

306
00:19:59,600 --> 00:20:04,040
read it, you're saying we have
great commodity prices here and

307
00:20:04,160 --> 00:20:09,160
an unusually weak foreign
exchange position exchange rate

308
00:20:09,680 --> 00:20:11,520
given where the commodity prices
are.

309
00:20:11,520 --> 00:20:15,160
So is it your expectation that
that that closes the Aussie

310
00:20:15,160 --> 00:20:18,720
dollar gets stronger if the
commodity price prices continue

311
00:20:18,720 --> 00:20:21,880
to hold up over the next 1234
years?

312
00:20:24,120 --> 00:20:27,360
This is the kind of thing you
actually is best looked at sort

313
00:20:27,360 --> 00:20:31,200
of in a two by two matrix
setting to sort of look at the

314
00:20:31,200 --> 00:20:34,200
combinations of adjustment
profiles.

315
00:20:37,720 --> 00:20:41,720
The reason why I can't sort of
be sort of adamant on the answer

316
00:20:41,720 --> 00:20:46,440
to this question is one of the
reasons we got here is because

317
00:20:46,440 --> 00:20:49,360
some correlations that were
historically reliable broke

318
00:20:49,360 --> 00:20:53,880
down.
And this pandemic decade, a lot

319
00:20:53,880 --> 00:20:56,600
of correlations which used to be
reliable did breakdown

320
00:20:56,600 --> 00:20:59,680
temporarily.
And you get in a situation you

321
00:20:59,680 --> 00:21:03,840
say, OK, well, are we just going
to go back to that world which

322
00:21:03,840 --> 00:21:07,480
the where the correlations were
reliable or are they going to

323
00:21:07,480 --> 00:21:10,400
stay broken?
Is a new correlation going to

324
00:21:10,400 --> 00:21:15,720
assert itself?
But what we've got in the

325
00:21:15,720 --> 00:21:21,480
Australian context is Australian
interest rates have been below

326
00:21:21,680 --> 00:21:24,040
US interest rates for most of
the decade.

327
00:21:25,160 --> 00:21:28,960
That's an historically abnormal
situation.

328
00:21:29,360 --> 00:21:32,240
Typically the US has lower
interest rates than Australia,

329
00:21:33,280 --> 00:21:35,400
but the Reserve Bank of
Australia has set interest rates

330
00:21:35,400 --> 00:21:38,280
below the level of the US
Federal Reserve has chosen at

331
00:21:38,280 --> 00:21:40,240
the cash rate level, overnight
rate.

332
00:21:42,200 --> 00:21:45,800
Normally that happens in a
crisis like in the Asian crisis,

333
00:21:47,000 --> 00:21:49,960
but to have that combination of
relative interest rates with the

334
00:21:50,040 --> 00:21:55,680
US at the same time we've got a
commodity boom is really weird.

335
00:21:57,640 --> 00:22:04,960
And I think there are reasonable
indications that after the

336
00:22:04,960 --> 00:22:08,200
February rate hike of the
Reserve Bank of Australia, which

337
00:22:08,200 --> 00:22:11,240
has pushed Australia above the
US for the first time in more

338
00:22:11,240 --> 00:22:18,200
than 60 months, and the US has
got a lot of political pressure

339
00:22:18,200 --> 00:22:23,920
on the Fed there, it's likely
that we're not going to go back

340
00:22:23,920 --> 00:22:26,080
to that negative territory.
And that should show up in a

341
00:22:26,080 --> 00:22:28,120
firmer Australian dollar on
average.

342
00:22:28,920 --> 00:22:38,160
But the gap is so big that any
closure is likely to be

343
00:22:38,160 --> 00:22:43,200
unfavourable for resource
profitability, government

344
00:22:43,200 --> 00:22:47,920
revenues, mining, equity.
So let's just run through a

345
00:22:47,920 --> 00:22:51,040
couple of those scenarios.
Let's say the currency stays

346
00:22:51,040 --> 00:22:55,000
where it is and commodity prices
fall to where the currency sort

347
00:22:55,000 --> 00:22:59,560
of says they should be.
OK, well, that's sort of stable

348
00:22:59,560 --> 00:23:01,480
U.S. dollar cost from an FX
point of view.

349
00:23:01,480 --> 00:23:04,120
But revenues go down because the
base commodity price goes down.

350
00:23:04,720 --> 00:23:07,720
Not good news, but it's a part
of the cycle, right?

351
00:23:09,040 --> 00:23:11,840
The other one is that the
Australian dollar jumps up to

352
00:23:11,840 --> 00:23:15,200
the level of the commodity
prices say it should be, and

353
00:23:15,200 --> 00:23:16,480
commodity prices stay where they
are.

354
00:23:16,480 --> 00:23:20,000
Well, that's bad news on the
cost side of the balance sheet

355
00:23:20,600 --> 00:23:23,760
because your U.S. dollar costs
are going to go through the roof

356
00:23:24,520 --> 00:23:27,440
because your Australian dollar
wage bill is going through the

357
00:23:27,440 --> 00:23:30,320
roof, but you haven't gotten the
offset on the revenue side.

358
00:23:30,320 --> 00:23:34,440
So that's bad news as well.
Or you meet somewhere in the

359
00:23:34,440 --> 00:23:37,560
middle, but that's two bad
things happening.

360
00:23:37,640 --> 00:23:41,560
Commodity prices down,
Australian dollar up.

361
00:23:41,840 --> 00:23:47,600
So most of the most of the exit
routes from this disconnect

362
00:23:48,200 --> 00:23:54,800
don't look good.
What I think we can hope for is

363
00:23:54,840 --> 00:23:57,440
a very protracted adjustment
process.

364
00:23:57,440 --> 00:24:02,480
And when I say protracted, I
mean over a decade or so where

365
00:24:02,480 --> 00:24:07,720
you get this directional shift,
but it happens slowly enough

366
00:24:07,720 --> 00:24:09,800
that you don't really recognize
it in the moment.

367
00:24:11,600 --> 00:24:17,720
So you do close that gap, but
it's just a drift and then it

368
00:24:17,720 --> 00:24:21,440
would be less disruptive.
Anyone who's spent a long time

369
00:24:21,440 --> 00:24:24,760
around the mining industry or
financial markets understand

370
00:24:24,760 --> 00:24:27,800
that things don't just drift and
adjust over 10 years.

371
00:24:27,800 --> 00:24:34,160
They usually once sentiment
turns for whatever reason, it's

372
00:24:34,200 --> 00:24:37,120
a it's either a Sprint for the
exit or a Sprint to get on the

373
00:24:37,120 --> 00:24:40,880
bandwagon.
And I'll leave it there.

374
00:24:41,880 --> 00:24:45,360
Animal spirits or FOMO, whatever
you describe it, things do

375
00:24:45,360 --> 00:24:49,080
happen all at once.
In fact, I'm, I'm reminded of,

376
00:24:49,320 --> 00:24:54,560
of, of, of us talking last time
here about a phenomenon where

377
00:24:54,560 --> 00:24:58,400
things can happen all at once.
And we're talking about specific

378
00:24:58,400 --> 00:25:02,880
commodity prices just going,
yeah, parabolic all at once.

379
00:25:02,880 --> 00:25:05,040
And we describe that phenomenon
in iron ore.

380
00:25:05,040 --> 00:25:08,160
And you describe the
circumstances that that led you

381
00:25:08,160 --> 00:25:10,360
to come to the conclusion that
it's very capable of that

382
00:25:10,360 --> 00:25:14,600
happening in copper as well.
Is that happening in copper

383
00:25:14,680 --> 00:25:16,400
right now or are we still too
early?

384
00:25:19,400 --> 00:25:25,160
Well, the answer to that can be
yes and no because the nothing

385
00:25:25,160 --> 00:25:29,200
has occurred since we last spoke
let's say roughly 12 months ago,

386
00:25:29,800 --> 00:25:36,440
which has made the the structure
structural bull case for copper

387
00:25:36,440 --> 00:25:41,440
any less strong financial
markets.

388
00:25:41,440 --> 00:25:46,400
Of course they want to try and
price in 20 years of good news

389
00:25:46,400 --> 00:25:50,680
immediately and here we are
$13,000 copper.

390
00:25:52,160 --> 00:25:59,240
So the financial markets want to
monetize today and they do, but

391
00:25:59,240 --> 00:26:05,760
they find that these rallies,
they're very difficult to

392
00:26:05,760 --> 00:26:12,480
sustain because there is no sort
of producer consumer element to

393
00:26:12,640 --> 00:26:17,920
the kicker in price.
If it's just a bunch of hedge

394
00:26:17,920 --> 00:26:23,800
funds trading with each other or
trading desks at big banks, you

395
00:26:23,800 --> 00:26:28,840
know, then it's going to be
finite because they always need

396
00:26:28,840 --> 00:26:32,800
new buyers to enter into the
market to sustain what they've

397
00:26:32,800 --> 00:26:35,520
got.
And if the real, the real

398
00:26:35,520 --> 00:26:41,360
economy part, IE the copper
miners, copper smelters, copper

399
00:26:41,360 --> 00:26:44,040
consumers aren't participating,
it's always going to burn itself

400
00:26:44,040 --> 00:26:47,200
out.
We had a mini example of this

401
00:26:51,160 --> 00:26:55,560
when when when data centres
first became a thing in terms of

402
00:26:56,200 --> 00:27:03,760
people talking about it, a whole
bunch of US hedge funds ramped

403
00:27:03,760 --> 00:27:08,920
the COMEX copper price because
of this AI leverage theme.

404
00:27:10,240 --> 00:27:16,160
Because when you have something
as sort of as powerful as the AI

405
00:27:16,160 --> 00:27:21,640
investor theme, there's the
direct linkage, and then there

406
00:27:21,640 --> 00:27:26,840
is this scouring of the whole
investment universe to find

407
00:27:26,840 --> 00:27:29,560
things which are roughly
adjacent to that and have some

408
00:27:29,560 --> 00:27:32,200
kind of leverage but may not
have been discovered yet.

409
00:27:33,400 --> 00:27:37,640
And copper and data centres was
that.

410
00:27:37,960 --> 00:27:42,440
So everybody jumped on that
trade really quickly and then

411
00:27:43,440 --> 00:27:46,120
someone inconveniently
introduced some facts.

412
00:27:47,360 --> 00:27:50,520
It might have been me, maybe
not, I can't confirm or deny,

413
00:27:50,520 --> 00:27:54,360
but someone might have said that
you realise this is 1% of copper

414
00:27:54,360 --> 00:28:00,920
demand, don't you?
And I said, oh OK, well that's

415
00:28:00,920 --> 00:28:03,600
not very much is it?
I say no, it's not very much,

416
00:28:05,360 --> 00:28:07,360
but copper was a good buy at the
time.

417
00:28:09,000 --> 00:28:13,800
The the best short term trade in
copper over the last little

418
00:28:13,800 --> 00:28:25,800
while was in January 2025.
This was during the period

419
00:28:25,800 --> 00:28:28,560
between Trump being elected and
Inauguration day.

420
00:28:30,200 --> 00:28:33,600
So he told everybody very
transparently he was slapping

421
00:28:33,600 --> 00:28:38,040
tariffs on everything.
Now the way tariffs work in a

422
00:28:38,040 --> 00:28:44,960
commodity market is that it
should show up immediately in

423
00:28:44,960 --> 00:28:50,880
regional premium.
But in January you looked at the

424
00:28:50,960 --> 00:28:58,200
forward curve for COMEX in the
US over LME in the UK.

425
00:29:00,000 --> 00:29:04,280
Nothing.
So I, I wrote a blog at the time

426
00:29:04,760 --> 00:29:07,920
on my sub stack called
Commodities and Tariffs, Smoke

427
00:29:07,920 --> 00:29:16,200
but no Fire and suddenly
liberation day and all those

428
00:29:16,200 --> 00:29:18,280
sorts of things.
And everyone said, oh, hang on a

429
00:29:18,280 --> 00:29:25,320
minute, copper in the US, if
I've actually got it sitting in

430
00:29:25,320 --> 00:29:30,080
London, I can just move it to
the US and it's going to be 50%

431
00:29:30,200 --> 00:29:32,240
more valuable.
You kidding me?

432
00:29:33,640 --> 00:29:38,480
And yes is the answer.
So you have this massive,

433
00:29:38,760 --> 00:29:42,840
massive physical trade, which
was the easiest money I've ever

434
00:29:42,840 --> 00:29:45,040
seen sitting out there in
commodity markets.

435
00:29:45,040 --> 00:29:47,960
But if you look at the forward
curve a day or two before

436
00:29:47,960 --> 00:29:49,800
Inauguration Day, there was
nothing there.

437
00:29:50,560 --> 00:29:52,680
Just goes to show how
inefficient these commodity

438
00:29:52,680 --> 00:29:56,800
markets can be.
And when you think about how

439
00:29:56,800 --> 00:30:01,600
inefficient they are and what
can happen when a weight of sort

440
00:30:01,600 --> 00:30:09,760
of non specialised money comes
into a market like the silver

441
00:30:09,760 --> 00:30:16,440
market recently basically
trading a ratio to another medal

442
00:30:16,440 --> 00:30:17,960
about which I don't know very
much.

443
00:30:20,240 --> 00:30:23,120
Yeah, it's a recipe for immense
price volatility.

444
00:30:25,160 --> 00:30:27,520
Part of this is the fact that
the producers don't spend much

445
00:30:27,520 --> 00:30:33,200
time in those markets anymore.
You, you wrote an article

446
00:30:33,200 --> 00:30:37,000
recently, Hugh as well tacking
onto the copper theme there and

447
00:30:37,000 --> 00:30:40,680
that sort of story about Rio
Tinto and Glencore and the

448
00:30:40,680 --> 00:30:45,400
proposed deal and perhaps some,
some interest from BHB.

449
00:30:45,680 --> 00:30:49,200
I'm curious to, to hone in as
well as the copper, the, the

450
00:30:49,200 --> 00:30:51,800
trading desk part of, of
Glencore's business.

451
00:30:51,800 --> 00:30:55,080
This is a, you know, a
fascinating and controversial

452
00:30:55,080 --> 00:30:58,520
part of their, their business
and heaps of different analysts

453
00:30:58,680 --> 00:31:01,440
have different opinions.
They're going to cast it off or

454
00:31:01,440 --> 00:31:03,520
it's going to be an integral
kind of part of their business.

455
00:31:03,520 --> 00:31:07,080
In a more uncertain world, how
do you kind of think about the

456
00:31:07,240 --> 00:31:09,440
strategic importance of that
desk?

457
00:31:11,720 --> 00:31:17,400
Yeah, look, it's it's probably
one of the most difficult

458
00:31:17,400 --> 00:31:21,280
aspects of anyone thinking about
merging with Glenn.

459
00:31:21,280 --> 00:31:23,840
Cool.
How do they think about putting

460
00:31:23,840 --> 00:31:28,280
a value on that business?
And there are lots of businesses

461
00:31:28,280 --> 00:31:32,600
which fit very nicely within the
corporate finance box.

462
00:31:34,600 --> 00:31:36,760
Commodity trading businesses are
not one of them.

463
00:31:38,040 --> 00:31:43,480
Things that do fit nicely in the
box, a relatively low volatility

464
00:31:44,560 --> 00:31:51,120
and have some kind of stable
relationship to slow moving

465
00:31:51,120 --> 00:31:55,720
variables like GDP, you know,
that sort of stuff.

466
00:31:58,480 --> 00:32:05,040
The commodity trading
businesses, they can be pretty

467
00:32:05,840 --> 00:32:08,480
underwhelming for years and
years at a time.

468
00:32:09,880 --> 00:32:14,480
And then you run into a year
where the head of the desk at

469
00:32:14,680 --> 00:32:18,040
the commodity desk at Macquarie
Bank, you know, makes twice as

470
00:32:18,040 --> 00:32:20,880
much as the CEO.
That's the way they go.

471
00:32:21,840 --> 00:32:25,120
But if you don't know when that
year is going to arrive, how do

472
00:32:25,120 --> 00:32:28,240
you value it?
Because if it's in year 10,

473
00:32:29,040 --> 00:32:31,200
you're discounting means that's
kind of irrelevant.

474
00:32:31,200 --> 00:32:34,960
If it's in year 2, I can almost
pay whatever I want for this

475
00:32:34,960 --> 00:32:36,320
business and it's going to be a
good idea.

476
00:32:36,920 --> 00:32:45,800
And so that businesses which
have that right hand tail

477
00:32:47,680 --> 00:32:50,680
aspects to them, IE when they
have a big year, they have a

478
00:32:50,680 --> 00:32:55,120
really big year, but they can
also have some pretty big draw

479
00:32:55,120 --> 00:33:01,400
downs if they get on the wrong
side of something, you know,

480
00:33:01,400 --> 00:33:04,200
they're, they're very difficult
to fit into that box.

481
00:33:04,760 --> 00:33:10,200
Very easy to value Rio Tinto's
iron ore business if you've got

482
00:33:10,200 --> 00:33:14,720
a decent price deck.
Very, very difficult to value

483
00:33:14,720 --> 00:33:19,960
Glencore's trading business.
But what would it give you as a

484
00:33:19,960 --> 00:33:22,960
diversified resources company
that you don't currently have?

485
00:33:25,520 --> 00:33:33,200
It would give you some insurance
against market access

486
00:33:33,200 --> 00:33:42,720
uncertainty and this is really
big when a sophisticated company

487
00:33:42,720 --> 00:33:48,520
looks at looks at sort of the
scenario landscape today,

488
00:33:51,680 --> 00:33:57,160
situations where market access
get impaired by geopolitics

489
00:33:57,480 --> 00:34:02,480
everywhere in these scenarios.
So under those circumstances,

490
00:34:05,360 --> 00:34:11,000
you can see very clearly how
having that physical commodity

491
00:34:11,000 --> 00:34:17,960
trading business storage
optionality becomes potentially

492
00:34:17,960 --> 00:34:23,800
very valuable, particularly if
you're if your own storage as a

493
00:34:23,800 --> 00:34:27,320
diversified resources company
now is very modest.

494
00:34:28,199 --> 00:34:31,320
So for example, if you think
about BH, PS iron ore business,

495
00:34:31,320 --> 00:34:37,199
they have very little ability to
store product on shore at Port

496
00:34:37,199 --> 00:34:41,400
Hedland, very, very difficult.
There's nothing, there's no

497
00:34:41,400 --> 00:34:47,639
space, right?
And so to get the throughput you

498
00:34:47,639 --> 00:34:54,400
need, that incredible logistics
chain needs to keep moving and

499
00:34:54,400 --> 00:35:01,560
keep moving continuously.
But what about if you had some

500
00:35:01,560 --> 00:35:07,160
land optionality somewhere in
the Asian region, in a neutral

501
00:35:07,160 --> 00:35:14,800
country where if you lost access
to a market for a particular

502
00:35:14,800 --> 00:35:17,640
period of time, you knew where
that product was going to go and

503
00:35:17,640 --> 00:35:20,560
sit and you were going to ride
it out.

504
00:35:20,560 --> 00:35:24,960
You weren't going to impinge
your operation to keep the

505
00:35:24,960 --> 00:35:28,040
throughput going, but you had
somewhere to put that and that

506
00:35:28,040 --> 00:35:30,840
was part of your marketing
strategy all along.

507
00:35:31,320 --> 00:35:32,560
You know that would be valuable,
right?

508
00:35:34,680 --> 00:35:40,240
And if you're in another
business, if you where where

509
00:35:40,240 --> 00:35:45,120
that land optionality could help
you, you know, why not?

510
00:35:45,120 --> 00:35:51,440
It was metallurgical coal, of
course, which was directly

511
00:35:51,680 --> 00:35:56,680
impacted by the, let's call it a
trade war between China and

512
00:35:56,680 --> 00:36:02,200
Australia where we lost access
to Chinese coal markets for a

513
00:36:02,200 --> 00:36:05,120
period of time.
You know, it's not great to

514
00:36:05,120 --> 00:36:08,000
store a whole lot of coal
somewhere either.

515
00:36:08,280 --> 00:36:11,640
But if you'd actually had a
physical trading business which

516
00:36:11,640 --> 00:36:14,840
was built to sort of wrestle
with those kind of problems,

517
00:36:17,200 --> 00:36:18,640
then you can see how that might
help you it.

518
00:36:20,760 --> 00:36:24,160
Feels like a patent hypothetical
just given the nature of of

519
00:36:24,160 --> 00:36:28,880
heightened tensions between
China and CMIG and BHP right

520
00:36:28,880 --> 00:36:32,920
now.
Look, I wouldn't ever emphasise

521
00:36:32,920 --> 00:36:40,080
that particular angle.
What what I, but we have seen

522
00:36:40,080 --> 00:36:47,160
circumstances where for whatever
reason access to a market has

523
00:36:47,160 --> 00:36:55,640
been informally closed or we've
actually had export controls in

524
00:36:55,640 --> 00:36:57,760
the other direction.
So both of these are Geo

525
00:36:57,760 --> 00:37:02,280
economic tools.
China has done it with rare

526
00:37:02,280 --> 00:37:05,800
earths in the past in terms of
export controls.

527
00:37:05,800 --> 00:37:08,440
They've done it stopping things
at the border in terms of

528
00:37:08,440 --> 00:37:13,240
Australian coal.
So even if you have 0

529
00:37:13,240 --> 00:37:16,000
imagination, you don't have to
imagine this.

530
00:37:16,920 --> 00:37:22,040
It's already happened.
And so building it in, I think,

531
00:37:22,040 --> 00:37:26,840
in terms of what you would, what
you would think about the

532
00:37:26,840 --> 00:37:30,760
optionality the physical trading
business brings you, Yeah, can

533
00:37:30,760 --> 00:37:32,960
you build that yourself
internally?

534
00:37:33,760 --> 00:37:36,640
Maybe.
But there's benefits of

535
00:37:36,640 --> 00:37:39,520
incumbency if you've already got
this sort of physical storage

536
00:37:39,520 --> 00:37:43,000
stuff going on.
So I'm not talking here about,

537
00:37:43,240 --> 00:37:45,960
you know, people taking massive
paper positions in commodities.

538
00:37:45,960 --> 00:37:49,000
I'm talking about the
optionality of controlling your

539
00:37:49,000 --> 00:37:51,960
own destiny in terms of the
physical trade and riding out

540
00:37:51,960 --> 00:37:56,280
difficult periods.
Now there's another aspect to

541
00:37:56,280 --> 00:37:59,320
this which actually points in
the other direction.

542
00:38:00,360 --> 00:38:03,160
So you can trade as much as you
want with a rival.

543
00:38:05,400 --> 00:38:11,040
You cannot trade at all with
your enemy once someone flips

544
00:38:11,040 --> 00:38:15,800
from one category to the other.
Or you can trade as much as you

545
00:38:15,800 --> 00:38:20,880
want with someone who you know,
has kind of a little bit of a

546
00:38:20,880 --> 00:38:25,400
shady reputation, but if they're
physically under sanction, like

547
00:38:25,400 --> 00:38:27,560
formally under sanction, you
can't trade with them at all.

548
00:38:29,000 --> 00:38:32,000
Now, commodity trading
companies, I'm sorry to tell

549
00:38:32,000 --> 00:38:36,840
you, and this will shock your
listeners, bust sanctions.

550
00:38:39,600 --> 00:38:47,080
We won't be shocked together.
And some of the anecdotes in a

551
00:38:47,120 --> 00:38:50,280
book like The World for Sale
about.

552
00:38:50,720 --> 00:38:54,520
Totally.
Where some of this stuff plays

553
00:38:54,520 --> 00:38:58,840
like it's, it's messy stuff.
And if you're in a situation

554
00:38:58,840 --> 00:39:09,920
where the enforcement of things
like sanctions busting or

555
00:39:09,960 --> 00:39:15,480
accommodating trade flows
between, you know, three parties

556
00:39:15,480 --> 00:39:17,640
to get the stuff to where it
needs to go eventually, if

557
00:39:17,640 --> 00:39:23,680
someone just starts enforcing
that really carefully, some of

558
00:39:23,680 --> 00:39:28,880
those really big years, those
right hand tail years in the

559
00:39:28,880 --> 00:39:34,120
history of the trading
companies, it might look a

560
00:39:34,120 --> 00:39:40,480
little bit different.
So the way, for example, the US

561
00:39:40,480 --> 00:39:43,800
military has been pursuing
sanctioned tankers in the

562
00:39:43,800 --> 00:39:48,080
Caribbean in the wake of
Venezuela, for instance.

563
00:39:49,480 --> 00:39:51,520
But there are mixed signals
here, of course, as well,

564
00:39:51,520 --> 00:39:55,920
because Trump has also indicated
that the Foreign Corrupt

565
00:39:55,920 --> 00:39:58,520
Practices Act in the United
States is actually

566
00:39:58,520 --> 00:40:02,800
disadvantaging U.S. companies.
So the authorities should start

567
00:40:02,800 --> 00:40:05,040
looking the other way on that
particular act in terms of

568
00:40:05,040 --> 00:40:07,520
emerging markets.
So like, who knows?

569
00:40:08,040 --> 00:40:12,040
But there's also that aspect of
things.

570
00:40:12,600 --> 00:40:19,320
And Glencore.
Has settled with the Department

571
00:40:19,320 --> 00:40:22,960
of Justice on one or two things.
I think there's there's still

572
00:40:22,960 --> 00:40:26,160
some stuff sitting out there,
one assumes.

573
00:40:28,080 --> 00:40:29,560
Yeah.
And that's very big reputation

574
00:40:29,560 --> 00:40:36,600
or risk to carry.
But it is par for the course for

575
00:40:38,040 --> 00:40:41,760
those, those trading companies,
They have very high appetite for

576
00:40:41,760 --> 00:40:48,800
risk.
And yeah, and a really prosaic

577
00:40:48,800 --> 00:40:54,080
point, cost of capital.
So working capital in

578
00:40:54,080 --> 00:40:57,960
diversified mining companies,
that particular line on the

579
00:40:57,960 --> 00:41:01,680
spreadsheet gets shaved and
shaved and shaved and shaved and

580
00:41:01,680 --> 00:41:04,720
shaved.
You know, that's what CF OS do

581
00:41:04,720 --> 00:41:07,120
on a day-to-day basis.
How can I get my working capital

582
00:41:07,120 --> 00:41:09,240
down?
And that was when interest rates

583
00:41:09,240 --> 00:41:12,800
were essentially 0.
Imagine what they're like now in

584
00:41:12,800 --> 00:41:15,720
terms of how much they begrudge
that working capital.

585
00:41:16,880 --> 00:41:20,800
Physical trading businesses are
capital hungry, working capital

586
00:41:20,800 --> 00:41:29,120
hungry, and when short term
capital for working purposes is

587
00:41:29,120 --> 00:41:35,120
more expensive, that puts a
greater onus on the trading

588
00:41:35,120 --> 00:41:41,000
business to make more money to
justify the capital, which tends

589
00:41:41,000 --> 00:41:46,040
to give them more risk appetite.
But will their limits go up?

590
00:41:46,640 --> 00:41:50,400
So does that mean that they have
to be pushed into higher risk,

591
00:41:50,400 --> 00:41:55,640
higher returning activity?
So like it's, it's not simple at

592
00:41:55,640 --> 00:42:01,880
all.
And one of the things I sort of,

593
00:42:02,120 --> 00:42:04,480
well actually the thing I
finished that article on about

594
00:42:04,480 --> 00:42:07,880
looking at the looking at this
potential tie up in a

595
00:42:07,880 --> 00:42:13,280
hypothetical sense is both of
the big two are preaching

596
00:42:13,280 --> 00:42:16,920
simplicity.
Yeah, well, that era is over.

597
00:42:17,200 --> 00:42:20,640
If either of you merge A
Glencore complexity, you've

598
00:42:20,640 --> 00:42:26,520
swapped scale for simplicity.
You've chosen complexity.

599
00:42:27,600 --> 00:42:31,000
The payoff is scale, the payoff
is copper.

600
00:42:33,000 --> 00:42:34,600
But simplicity has to be lost
it.

601
00:42:35,520 --> 00:42:39,280
Makes it so amazing to me that
like we, it seems like we all

602
00:42:39,280 --> 00:42:43,200
agree that that the value of
Glencor's trading business in

603
00:42:43,200 --> 00:42:46,720
many respects would have been
maximized if it was, if it would

604
00:42:46,720 --> 00:42:49,960
like, you know, spun off or was,
was was privatized and contracts

605
00:42:49,960 --> 00:42:51,520
remained, etcetera to allow it
to happen.

606
00:42:52,000 --> 00:42:54,120
And that way you can kind of
keep the talent, keep the

607
00:42:54,120 --> 00:42:57,600
people, keep the the pikeness
where commodity trading

608
00:42:57,600 --> 00:43:01,200
businesses can, can thrive and
maybe even get maximum value for

609
00:43:01,200 --> 00:43:04,760
it as as well in the process.
But but what seems to be

610
00:43:05,000 --> 00:43:09,200
forefront is, is a deal where
where whole of Glencor is is

611
00:43:09,200 --> 00:43:13,040
swallowed whole of Glencor.
Well, I don't know about a spin

612
00:43:13,040 --> 00:43:17,400
off in commodity trading.
I think it's spin off of the

613
00:43:17,400 --> 00:43:21,760
coal business possibly US
domicile makes a lot of sense.

614
00:43:23,960 --> 00:43:27,360
But Glencore, yes, it has a
very, very unique structure with

615
00:43:27,360 --> 00:43:31,480
the trading business.
It is a formidable industrial

616
00:43:31,480 --> 00:43:35,320
company as well.
It's good at mining.

617
00:43:36,880 --> 00:43:38,960
It's actually quite good at
downstream as well, even though,

618
00:43:39,000 --> 00:43:41,320
like many mining companies, it
doesn't like the return on

619
00:43:41,320 --> 00:43:43,240
capital from its downstream
assets.

620
00:43:43,960 --> 00:43:47,320
The metals business has been
pretty ordinary from a yeah, an

621
00:43:47,320 --> 00:43:50,040
operational capability.
Well, but if you just look at if

622
00:43:50,040 --> 00:43:55,520
you look at the history, their
performance to guidance is very

623
00:43:55,520 --> 00:43:58,360
different to the other
companies.

624
00:43:58,720 --> 00:44:03,920
Why is that?
Well, part of it is the the way

625
00:44:03,920 --> 00:44:11,600
that Glencore seeks to eke value
out of assets which probably

626
00:44:11,600 --> 00:44:14,920
aren't high quality enough to
make it into the capital

627
00:44:14,920 --> 00:44:18,760
allocation processes of a Rio
Tinto or a BHP.

628
00:44:20,040 --> 00:44:24,480
And what makes Linko unique is
they can take a third or fourth

629
00:44:24,480 --> 00:44:30,080
quartile copper asset and
understand in their own minds

630
00:44:30,080 --> 00:44:34,240
that they can boost the IRR on
that through their marketing

631
00:44:34,240 --> 00:44:36,960
activities.
And one of the ways you can do

632
00:44:36,960 --> 00:44:42,680
that is by being quick to
shutter that operation during

633
00:44:42,680 --> 00:44:50,440
the down cycle and be positioned
to take advantage of the

634
00:44:50,440 --> 00:44:52,600
announcement effect that they're
shutting copper production.

635
00:44:53,800 --> 00:44:56,760
So there are, there are some,
there are some synergies between

636
00:44:57,320 --> 00:45:01,480
controlling the operations
yourself, having the equity tons

637
00:45:02,400 --> 00:45:04,800
and running the trading
business.

638
00:45:05,320 --> 00:45:09,800
I think the trading business
would be far less valuable

639
00:45:10,240 --> 00:45:14,160
without the industrial back end.
And surely transferring all the

640
00:45:14,600 --> 00:45:17,840
the pricing to your your Swiss
headquarters helps, which they

641
00:45:17,840 --> 00:45:19,840
do in just about every
jurisdiction that they operate.

642
00:45:20,920 --> 00:45:23,120
Well, you guys are bankers.
You'd know more about that than

643
00:45:23,120 --> 00:45:26,120
me, but.
We'll put that to the side.

644
00:45:26,120 --> 00:45:28,520
I reckon the Economist knows.
I reckon the Economist knows

645
00:45:28,520 --> 00:45:29,600
more about transfer price
discussed.

646
00:45:30,000 --> 00:45:38,040
On transfer pricing, and I'm not
listening, the the that, that

647
00:45:38,040 --> 00:45:42,400
aspect of things is very
important.

648
00:45:42,640 --> 00:45:45,720
If you just go stand alone, I'm
a commodity trading company,

649
00:45:48,920 --> 00:45:50,640
Yeah.
When you don't have that sort of

650
00:45:50,640 --> 00:45:55,840
baseline revenue there coming
from the industrial business, I

651
00:45:55,840 --> 00:45:57,280
think you'd be far less
formidable.

652
00:45:57,960 --> 00:46:03,000
Now it's different if you are an
energy trader that the scale of

653
00:46:03,000 --> 00:46:07,080
the value chains in energy are
so much larger than the value

654
00:46:07,080 --> 00:46:13,160
chains in metals.
So the, you know, the, if you're

655
00:46:13,160 --> 00:46:17,360
an oil market trader, you're,
you're playing depending on the

656
00:46:17,360 --> 00:46:20,400
oil price, let's say 2 1/2
trillion to 3 1/2 trillion

657
00:46:20,400 --> 00:46:23,800
dollar value chain.
There's more than enough for

658
00:46:23,800 --> 00:46:26,440
everybody embedded, embedded in
there.

659
00:46:27,440 --> 00:46:30,240
You know, the biggest value
chains in metals are not that

660
00:46:30,240 --> 00:46:35,120
large, particularly some of the
commodities in which Glencore

661
00:46:35,120 --> 00:46:40,040
operates.
And to think that you would be a

662
00:46:41,400 --> 00:46:46,080
a business of sufficient global
scale by playing in these sort

663
00:46:46,080 --> 00:46:49,280
of backwater markets as a
standalone.

664
00:46:50,640 --> 00:46:54,440
Yeah, I'm not sure that that's a
particularly compelling,

665
00:46:55,560 --> 00:46:57,480
compelling way of thinking about
things.

666
00:46:58,880 --> 00:47:00,800
There's something that occurs to
me actually because the energy

667
00:47:00,800 --> 00:47:05,320
came up there.
I did like the way that Shell,

668
00:47:05,640 --> 00:47:10,360
the the major oil company talked
about their trading franchise.

669
00:47:11,640 --> 00:47:16,560
So they've actually gone out to
investors and they've put an IRR

670
00:47:16,560 --> 00:47:26,200
uplift number to to their
upstream businesses through

671
00:47:26,200 --> 00:47:30,000
their trading activities.
Can't remember the exact number.

672
00:47:30,000 --> 00:47:33,880
It might be one to two
percentage points of IRR based

673
00:47:33,880 --> 00:47:36,080
on the quality of the trading
business.

674
00:47:37,080 --> 00:47:41,000
And if you know anything about
Shell and its global operations

675
00:47:41,200 --> 00:47:46,520
and its position in the LNG
market, you can see why people

676
00:47:46,760 --> 00:47:51,000
take that claim seriously when
they put it in investor deck

677
00:47:51,280 --> 00:47:53,640
totally.
But also by putting that IRR

678
00:47:53,640 --> 00:47:57,800
number on it and saying 1:00 to
2:00, it works better in the

679
00:47:57,800 --> 00:48:04,120
shoe box of corporate valuation.
Totally.

680
00:48:04,480 --> 00:48:07,800
You, you made the point earlier
that I really want to touch on

681
00:48:07,800 --> 00:48:11,000
here of the, the Foreign Corrupt
Practices Act.

682
00:48:11,000 --> 00:48:16,560
The the, the US and, and all of
this and what we saw the night

683
00:48:16,560 --> 00:48:19,960
before last was really
interesting with in the lead up

684
00:48:19,960 --> 00:48:22,920
to a proposed Glencore Rio Tinto
deal.

685
00:48:23,720 --> 00:48:28,200
Glencore selling a 40 proposing
to sell a 40% stake of their DRC

686
00:48:28,200 --> 00:48:31,760
copper assets, which would too
many people were a huge sticking

687
00:48:31,760 --> 00:48:37,080
point in a deal to AUS
government backed deal with the

688
00:48:37,880 --> 00:48:42,800
deputy secretary of of the of
state having a comment right at

689
00:48:42,800 --> 00:48:45,720
the top of that kind of list.
That that seems like a pretty

690
00:48:45,720 --> 00:48:50,000
interesting point and something
I suspect we'll see more of in

691
00:48:50,000 --> 00:48:53,040
the the evolving geopolitical
landscape.

692
00:48:53,040 --> 00:48:55,280
Is is that something you kind of
picked up on?

693
00:48:56,560 --> 00:49:04,560
Yeah, I, I did see that, yeah.
The the town of Colwaisee

694
00:49:05,640 --> 00:49:09,920
conjures up many things for me
in the in the DRC.

695
00:49:11,080 --> 00:49:15,080
So yes, does this help in terms
of the broader relationship with

696
00:49:15,120 --> 00:49:19,640
the US government and any
potential questions antitrust

697
00:49:19,640 --> 00:49:21,960
authorities in the US might have
about this deal?

698
00:49:23,160 --> 00:49:28,000
Is that a useful thing to do?
Yeah, I think so, particularly

699
00:49:28,000 --> 00:49:31,240
if you get a good price, because
one of the things which

700
00:49:33,240 --> 00:49:37,400
companies should like about
sovereign participation like

701
00:49:37,400 --> 00:49:42,680
this is how well advised is the
sovereign going to be once

702
00:49:42,680 --> 00:49:44,400
they've announced they're going
to do something?

703
00:49:44,400 --> 00:49:48,600
And do you get some free money
by the sovereign actually paying

704
00:49:48,600 --> 00:49:52,320
too much for for an asset like
this one?

705
00:49:54,680 --> 00:49:56,680
Yeah.
I don't think it does away with

706
00:49:56,720 --> 00:50:01,200
the broader reputational
question around what kind of a

707
00:50:01,200 --> 00:50:04,520
company is Glencore, what kind
of a company is Rio Tinto?

708
00:50:05,760 --> 00:50:09,440
How do those two cultures blend
what's actually sitting out

709
00:50:09,440 --> 00:50:13,920
there in terms of unqui,
unquantifiable legal liability

710
00:50:13,960 --> 00:50:16,960
if something hasn't been found
yet and it might be found later,

711
00:50:16,960 --> 00:50:22,800
who knows.
But I think it opens up an

712
00:50:22,800 --> 00:50:28,200
interesting question about in
this tie up competition,

713
00:50:28,200 --> 00:50:33,840
authorities around the world
would be looking at this and

714
00:50:34,840 --> 00:50:41,240
thinking, well, what's my pound
of flesh for putting this one

715
00:50:41,240 --> 00:50:46,480
through?
That's now the reason that China

716
00:50:46,480 --> 00:50:51,960
actually owns the Los Bambos
mine in South America is the

717
00:50:51,960 --> 00:50:55,160
Chinese competition authorities
extracted their pound of flesh

718
00:50:55,160 --> 00:50:57,520
from the original merger,
Glencore X Stratum.

719
00:50:57,760 --> 00:51:03,880
There's there's a pound of flesh
in the latest SQM approval with

720
00:51:04,040 --> 00:51:07,320
with the SQM, could Alco deal
from the Chinese?

721
00:51:08,240 --> 00:51:10,040
Yeah.
Yeah, competition approval as

722
00:51:10,040 --> 00:51:11,440
well.
Yeah.

723
00:51:11,440 --> 00:51:15,440
And So what would be an
attractive asset for, you know,

724
00:51:15,440 --> 00:51:18,880
the competition authorities to
leverage, you know, like it's a,

725
00:51:21,680 --> 00:51:26,800
I would suspect that potentially
the Chinese entity might be more

726
00:51:26,800 --> 00:51:31,840
interested in that asset that
the US have just poured into and

727
00:51:31,840 --> 00:51:35,320
might have a better, better
sense of extracting value from

728
00:51:35,320 --> 00:51:37,720
it.
But of course, Coalwaysi is on

729
00:51:37,720 --> 00:51:42,080
the libido corridor now.
Your listeners don't maybe

730
00:51:42,080 --> 00:51:46,360
haven't all heard that term, but
one of the problems with Central

731
00:51:46,360 --> 00:51:50,760
African copper is it's
essentially stranded from a

732
00:51:50,800 --> 00:51:57,120
logistics point of view and
copper from the southeast corner

733
00:51:57,120 --> 00:52:00,360
of the DRC, the Democratic
Republic of Congo, which is

734
00:52:00,600 --> 00:52:04,000
smack bang in the middle of that
continent, and Zambia to the

735
00:52:04,000 --> 00:52:07,960
South.
It's traditionally they've

736
00:52:07,960 --> 00:52:11,400
needed to actually turn it into
refined copper to move it.

737
00:52:11,400 --> 00:52:16,800
And it moves on trucks through
some pretty dangerous territory

738
00:52:17,560 --> 00:52:23,680
all the way down to the East
Coast of South Africa, Durban in

739
00:52:23,680 --> 00:52:28,600
Natal.
And more recently, because

740
00:52:28,600 --> 00:52:33,360
Zimbabwe has become so dangerous
and the security costs for

741
00:52:33,360 --> 00:52:36,880
escorting those convoys of
copper has become so onerous,

742
00:52:36,880 --> 00:52:40,200
they've actually had to go all
the way around to Botswana to

743
00:52:40,200 --> 00:52:43,080
get some safer roads and then
make their way east.

744
00:52:43,080 --> 00:52:48,240
So this is, this is horrendous
in terms of the logistics, you

745
00:52:48,240 --> 00:52:51,720
know, you think min res and
their their Rd. in WA is less

746
00:52:51,720 --> 00:52:54,800
efficient than proper rail.
Like on the resource that you

747
00:52:54,800 --> 00:52:58,280
got, it's got nothing on trying
to trying to get copper out of

748
00:52:58,280 --> 00:53:01,960
the middle of Africa.
But the Libeto corridor is this

749
00:53:03,760 --> 00:53:12,120
sort of AG7 sort of idea to get
a rail corridor from coalways in

750
00:53:12,120 --> 00:53:20,480
the DRC going West to exit out
of Angola and actually provide

751
00:53:21,840 --> 00:53:27,480
an alternative infrastructure
route to mobilize that very,

752
00:53:27,480 --> 00:53:30,080
very resource rich corner of the
world.

753
00:53:32,240 --> 00:53:35,400
Chinese of course like to build
a lot of infrastructure.

754
00:53:36,240 --> 00:53:39,920
They build a lot in Africa and
they also own the eastern rail

755
00:53:39,920 --> 00:53:46,400
route from that area, which goes
out through Tanzania into Dar es

756
00:53:46,400 --> 00:53:51,640
Salaam, the Colwaisi
specifically.

757
00:53:52,040 --> 00:53:55,480
Another thing that China is
doing in that part of the world

758
00:53:55,480 --> 00:54:01,640
is they've established a huge
training institute for local

759
00:54:01,640 --> 00:54:11,200
engineers and I call this the
the, the Singhwa Alumni Reunion.

760
00:54:11,960 --> 00:54:15,200
So Singhwar is the top
engineering school in in China,

761
00:54:15,600 --> 00:54:18,720
sort of China's MIT is how it's
usually described in the Western

762
00:54:18,720 --> 00:54:20,320
press.
Now.

763
00:54:20,800 --> 00:54:24,720
The world's best steel analyst
who worked for me when I was at

764
00:54:24,720 --> 00:54:27,360
BHP was a Singhwar engineering
grad.

765
00:54:28,040 --> 00:54:31,200
So I always used to ask him
where all his alumni are working

766
00:54:31,200 --> 00:54:35,160
now.
Now in the late 20 tens, he said

767
00:54:35,160 --> 00:54:39,560
are they're all in Pakistan,
most of them are building water

768
00:54:39,560 --> 00:54:42,480
treatment plants in Pakistan as
part of the belt and Rd.

769
00:54:44,640 --> 00:54:46,960
But you Fast forward five years,
I said, oh, what what's

770
00:54:46,960 --> 00:54:49,040
happening with your, with your
old mates from Xinhua.

771
00:54:49,040 --> 00:54:50,680
And he said, oh, they're all in
coal, lazy.

772
00:54:52,800 --> 00:54:59,240
And that it's actually not a bad
lifestyle versus some of the

773
00:54:59,240 --> 00:55:03,360
alternatives.
Working in a huge R&D lab for

774
00:55:03,360 --> 00:55:07,600
BYD in China and not earning
much, but also having to live in

775
00:55:07,600 --> 00:55:12,360
the Chinese surveillance state.
You go and you have a bit of fun

776
00:55:12,360 --> 00:55:16,120
in Africa and you do something
cool and you see the world.

777
00:55:16,120 --> 00:55:23,760
And yeah, it's not a bad gig.
Yeah, but it's a, it's a

778
00:55:24,000 --> 00:55:27,080
becoming a more hotly contested
area of the world, obviously.

779
00:55:27,080 --> 00:55:32,680
And if the libido corridor does
what it's intended to do, it

780
00:55:32,680 --> 00:55:35,800
also changes the economics of
Central African copper projects

781
00:55:36,040 --> 00:55:41,600
significantly, and they may end
up being able to just produce

782
00:55:41,600 --> 00:55:45,080
concentrates rather than having
to build the expensive

783
00:55:45,080 --> 00:55:49,200
downstream processing.
And that makes a big difference

784
00:55:49,200 --> 00:55:55,280
when you're China and you've
been in this breakneck speed

785
00:55:55,280 --> 00:56:01,240
build out of your own smelting
capacity to run down your copper

786
00:56:01,240 --> 00:56:03,320
cathode import requirement over
time.

787
00:56:03,320 --> 00:56:08,480
And that's why treatment charges
in copper so horrendously low

788
00:56:08,480 --> 00:56:12,760
from a smelter's point of view,
but best days ever from a copper

789
00:56:12,760 --> 00:56:15,200
concentrate producers point of
view.

790
00:56:15,600 --> 00:56:18,320
But that would change things a
lot if the Central African stuff

791
00:56:18,320 --> 00:56:20,440
started to exit its concentrate
rather than refined do.

792
00:56:21,560 --> 00:56:24,360
You think that the local
countries would just force them

793
00:56:24,360 --> 00:56:27,360
to do the downstream?
Or do you think China has, you

794
00:56:27,360 --> 00:56:30,400
know, far in excess of the
muscle needed to get their way?

795
00:56:35,160 --> 00:56:41,120
I think there would be a
probably a desire to to have the

796
00:56:41,120 --> 00:56:44,200
downstream processing.
But if you've got the

797
00:56:44,200 --> 00:56:48,880
infrastructure in place and the
companies were able to explain

798
00:56:48,880 --> 00:56:53,000
the differential economics and
actually say, well, the pie, the

799
00:56:53,000 --> 00:56:58,080
profitable pie that we can all
share will be much larger.

800
00:56:58,400 --> 00:57:03,320
If we don't spend a few billion
dollars paying a Chinese

801
00:57:04,400 --> 00:57:07,960
engineering company to build a
smelter, we can use that $2

802
00:57:07,960 --> 00:57:10,640
billion for other things.
Do you have any ideas about what

803
00:57:10,640 --> 00:57:15,040
that might be?
And that reminds me of another

804
00:57:15,040 --> 00:57:19,640
anecdote from that part of the
world where the sicker mines

805
00:57:19,640 --> 00:57:26,400
project in the DRC, every time
the regime changed hands, this

806
00:57:26,400 --> 00:57:29,760
project had to get renegotiated
with the new owners or new

807
00:57:29,760 --> 00:57:33,680
owners of the country, like, and
they just kept extracting more

808
00:57:33,680 --> 00:57:38,400
and more and more civilian
infrastructure to keep the keep

809
00:57:38,400 --> 00:57:41,600
the mining license.
And I was looking at this, I

810
00:57:41,640 --> 00:57:44,320
think, Gee, this is, see,
they're really folding pretty

811
00:57:44,320 --> 00:57:45,840
quickly on the civilian
infrastructure.

812
00:57:45,840 --> 00:57:47,600
Why they're not negotiating so
hard.

813
00:57:48,560 --> 00:57:51,760
Then I actually, then I realized
that the owner of this copper

814
00:57:51,760 --> 00:57:54,400
mine was actually an engineering
infrastructure company.

815
00:57:54,880 --> 00:57:57,520
And they were, they wanted into
the DRC for the infrastructure

816
00:57:57,520 --> 00:57:59,880
contracts anyway.
And they just own this copper

817
00:57:59,880 --> 00:58:01,680
mine because that was kind of
their point of entry.

818
00:58:02,040 --> 00:58:08,960
And yeah, sometimes you uncover
strange things when you dig a

819
00:58:08,960 --> 00:58:12,400
little bit below the surface.
Yeah.

820
00:58:12,960 --> 00:58:18,600
So it's not necessarily if you,
if you tell someone there are

821
00:58:18,600 --> 00:58:21,360
hundreds of millions of dollars
or billions of dollars that we

822
00:58:21,360 --> 00:58:25,120
could save and use for something
else if we don't go downstream

823
00:58:25,120 --> 00:58:30,480
with the smelter and you talk
about what to do with that, you

824
00:58:30,480 --> 00:58:32,040
know you've got a chance of a
fair hearing.

825
00:58:34,800 --> 00:58:39,200
I've got some questions you that
are a bit hypothetical in

826
00:58:39,240 --> 00:58:41,840
nature, but I feel like these
are the sorts of questions that

827
00:58:42,160 --> 00:58:46,400
you ponder, that, you know,
major, major political groups

828
00:58:46,400 --> 00:58:49,680
ponder that the major miners who
operate and are walking a fine

829
00:58:49,680 --> 00:58:56,200
line ponder as well what would
or should Australia do if China

830
00:58:56,200 --> 00:59:09,200
moves on Taiwan.
Well, look, I think ultimately

831
00:59:10,600 --> 00:59:18,080
the alliance with the United
States is the pillar of

832
00:59:18,760 --> 00:59:27,760
Australia's national security.
So you have to be very conscious

833
00:59:27,760 --> 00:59:33,200
of that before you say anything
publicly on on such a matter.

834
00:59:33,320 --> 00:59:34,520
Maybe I should rephrase it.
What?

835
00:59:34,520 --> 00:59:36,720
What could even trigger
Australia to decouple from the

836
00:59:37,000 --> 00:59:38,840
US?
You know Where is that red line?

837
00:59:40,120 --> 00:59:46,640
Look, I wouldn't be setting up a
set of signposts for that.

838
00:59:48,680 --> 00:59:54,640
The best way to tackle questions
like this is by devising widely

839
00:59:54,640 --> 01:00:01,320
divergent potential scenarios.
Investigate them.

840
01:00:02,640 --> 01:00:08,920
Understand what you might do if
I ended up following your

841
01:00:08,920 --> 01:00:13,200
specific chain of logic to a
conclusion, or the opposite

842
01:00:13,200 --> 01:00:18,200
happened and I follow that to a
conclusion and you understand

843
01:00:18,240 --> 01:00:20,680
all of the you try to understand
the whole landscape.

844
01:00:21,520 --> 01:00:24,440
And then you say, are there any
no regret decisions I could take

845
01:00:25,000 --> 01:00:30,800
under these circumstances which
which would set me up well for

846
01:00:30,800 --> 01:00:32,880
the future?
And then you step into the

847
01:00:32,880 --> 01:00:41,160
judgement course.
So I'm I'm relatively attracted

848
01:00:41,160 --> 01:00:45,520
to the echidna strategy position
on the future of Australia's

849
01:00:45,520 --> 01:00:50,320
defence booked by Sam Rogovine.
Recommend that you take a look

850
01:00:50,320 --> 01:00:56,480
at it.
I've always thought Hugh White's

851
01:00:56,480 --> 01:01:04,520
views on the security balance
between Australia, China and the

852
01:01:04,520 --> 01:01:08,000
United States and other major
players in the region such as

853
01:01:08,000 --> 01:01:10,400
Japan are always worth reading
also.

854
01:01:13,560 --> 01:01:19,840
And finally, there the most
important assumption in one of

855
01:01:19,840 --> 01:01:23,600
these big scenario analysis I'm
talking about, it's got nothing

856
01:01:23,600 --> 01:01:28,920
to do with China and Taiwan.
I call it the Year 5 assumption,

857
01:01:31,520 --> 01:01:38,720
as in Year 5 of Trump 2.0.
What happens in the next round

858
01:01:38,720 --> 01:01:43,760
of US politics?
And that's where you actually

859
01:01:43,760 --> 01:01:50,560
take your jumping off point for
what does the long run future

860
01:01:50,560 --> 01:01:56,800
look like if the US continues
down this path of populism, the

861
01:01:57,040 --> 01:02:01,080
US alone sort of a bullying
hegemon.

862
01:02:02,000 --> 01:02:04,600
Then you think about acting in
one way.

863
01:02:05,640 --> 01:02:11,400
If you have Democrats running
the White House and a stronger

864
01:02:11,400 --> 01:02:17,600
position in Congress and you end
up with a more like a Biden type

865
01:02:17,600 --> 01:02:20,120
administration where you start
to think about things very

866
01:02:20,120 --> 01:02:24,200
differently and you have to
consider the opposite of what

867
01:02:24,200 --> 01:02:29,680
feels most concrete today to do
a good job at long term

868
01:02:29,680 --> 01:02:37,120
forecasting.
When I started my career, couple

869
01:02:37,120 --> 01:02:40,400
of things which were held as
completely true, and you just

870
01:02:40,400 --> 01:02:44,560
should not argue about them, is
that the US would be alone at

871
01:02:44,560 --> 01:02:49,080
the top of the superpower tree
for the 21st century.

872
01:02:50,840 --> 01:02:55,640
OK, well, that's not true.
Was the new economy as they

873
01:02:55,640 --> 01:02:58,400
called it at the time, you know,
because the invention of the

874
01:02:58,400 --> 01:03:01,000
Internet was still fresh in
people's minds and there was a

875
01:03:01,000 --> 01:03:02,960
tech bubble going on in the
United States.

876
01:03:03,400 --> 01:03:07,640
This is all the old economy.
Oh, you don't want to be old

877
01:03:07,640 --> 01:03:10,640
economy.
And who are the best performed

878
01:03:10,640 --> 01:03:14,760
economies of the first quarter
of the 21st century?

879
01:03:15,560 --> 01:03:19,040
Well, Australia was the best
performing advanced economy

880
01:03:19,040 --> 01:03:20,440
arguably.
Why?

881
01:03:21,080 --> 01:03:22,880
Because of our old economy
industries.

882
01:03:24,800 --> 01:03:29,640
And that was intimately
associated with China leveraging

883
01:03:29,640 --> 01:03:37,840
old economy type industries like
manufacturing and real estate to

884
01:03:38,400 --> 01:03:41,480
an infrastructure and everything
we know about China over the

885
01:03:41,480 --> 01:03:47,560
last quarter century to loom
into view, you know, as a very

886
01:03:47,560 --> 01:03:50,000
strong #2 superpower in the
global system.

887
01:03:50,680 --> 01:03:53,480
So unless you're prepared to
think creatively about the

888
01:03:53,480 --> 01:03:57,560
opposite of what most people
think is the main thing today,

889
01:03:59,000 --> 01:04:01,600
you can be woefully under
prepared for the long term.

890
01:04:02,840 --> 01:04:05,680
Yeah.
So do mining companies, big

891
01:04:05,680 --> 01:04:09,920
mining companies think about
contingency plans around a

892
01:04:09,920 --> 01:04:14,440
Taiwan situation?
Yes, all the time.

893
01:04:15,440 --> 01:04:17,440
What?
Would that do?

894
01:04:19,080 --> 01:04:20,920
What does mining?
What do mining companies do?

895
01:04:20,920 --> 01:04:23,040
Yeah, what would, what would
BHP, what would Rio, what would

896
01:04:23,040 --> 01:04:27,360
Fortescue do?
Look, I don't think I'll go into

897
01:04:27,360 --> 01:04:33,120
the specifics, but if you think
about any kind of maritime

898
01:04:33,120 --> 01:04:38,920
bottleneck being closed, that
creates a huge footprint for the

899
01:04:38,920 --> 01:04:42,560
maritime trade and bulk
commodities are a maritime

900
01:04:42,560 --> 01:04:46,000
business.
So first thing you think about

901
01:04:46,480 --> 01:04:54,360
there are your shipping routes.
If if the Taiwan Strait is

902
01:04:54,360 --> 01:04:59,080
closed, what are my other
options for for getting to

903
01:04:59,080 --> 01:05:01,040
Japan, for getting to South
Korea?

904
01:05:02,400 --> 01:05:06,720
You know, that's really where
you start thinking, but that's

905
01:05:06,720 --> 01:05:14,320
the tactical side of things.
Then you have to start thinking

906
01:05:14,320 --> 01:05:17,640
about, OK, if there is a
conflict somewhere, what's the

907
01:05:17,640 --> 01:05:22,840
duration of it?
What's the resolution of it?

908
01:05:24,640 --> 01:05:30,800
And are we dealing with an enemy
or a rival when the smoke

909
01:05:30,800 --> 01:05:33,640
clears?
And if you're just dealing with

910
01:05:33,640 --> 01:05:41,960
a rival again, then you go back
to this sort of edgy global

911
01:05:41,960 --> 01:05:49,160
commerce that we have now.
But if you want to actually

912
01:05:49,160 --> 01:05:55,280
hypotheticate that it's a,
you're in a situation where

913
01:05:57,480 --> 01:06:00,600
countries choose just to not to
trade to combatant with

914
01:06:00,600 --> 01:06:04,640
combatants and you have a full
bipolarization of the world.

915
01:06:06,480 --> 01:06:11,240
Well, that is a fascinating
situation for individual

916
01:06:11,240 --> 01:06:16,400
commodity markets.
So if you have a board and have

917
01:06:16,480 --> 01:06:21,240
three months on your hands, take
a look at all of the major

918
01:06:21,240 --> 01:06:26,960
commodity markets, assign the
obvious countries in sort of to

919
01:06:26,960 --> 01:06:29,720
AUS side versus an Eastern Bloc
side.

920
01:06:30,680 --> 01:06:34,920
And then look at the swing
states in the middle and say,

921
01:06:35,400 --> 01:06:41,440
OK, what is the balance going to
be in the two blocks if that

922
01:06:41,440 --> 01:06:47,920
swing state does swings to one
side or other or manages to keep

923
01:06:47,920 --> 01:06:49,880
trading with both sides because
it's unaligned.

924
01:06:50,520 --> 01:06:52,440
So let's think about an
Indonesia, which is kind of

925
01:06:52,440 --> 01:06:55,360
unaligned that sort of has a
foot in both camps.

926
01:06:57,160 --> 01:07:00,080
It's possible in a in a
bifurcation scenario, Indonesia,

927
01:07:00,080 --> 01:07:05,880
nickel finds its way everywhere.
But what about uranium from

928
01:07:05,880 --> 01:07:10,920
Kazakhstan?
Yeah.

929
01:07:11,440 --> 01:07:14,360
What about iron ore from Brazil?
You know, there's.

930
01:07:14,720 --> 01:07:18,040
And so you sort of go through
all of this, you come up with

931
01:07:18,040 --> 01:07:21,680
some fascinating permutations.
And so you can actually think

932
01:07:21,680 --> 01:07:25,480
about the attractiveness of an
individual commodity in that

933
01:07:25,480 --> 01:07:27,640
long catalog of things you're
interested in.

934
01:07:28,560 --> 01:07:32,280
You can actually say, would this
advantage, this commodity

935
01:07:32,280 --> 01:07:40,440
produced in this jurisdiction
under under bifurcation where

936
01:07:40,440 --> 01:07:42,240
you can only trade with 1/2 of
it?

937
01:07:42,760 --> 01:07:47,320
Am I going to the half of the
world which is suddenly short of

938
01:07:47,320 --> 01:07:50,480
this commodity and therefore I
get scarcity pricing, or am I

939
01:07:50,480 --> 01:07:53,280
going to the half of the world
where I have abundance of this

940
01:07:53,280 --> 01:07:57,240
commodity and I'm out of
business?

941
01:07:58,320 --> 01:08:01,720
So, so many directions that can
go into.

942
01:08:05,480 --> 01:08:14,920
And yeah, in terms of the things
I worry about in warfare, some

943
01:08:14,920 --> 01:08:20,279
of the things are they're not
about kinetic conflict, hot

944
01:08:20,279 --> 01:08:24,359
conflict, if you will.
One of the things I've come

945
01:08:24,359 --> 01:08:32,800
across more recently is the idea
of cognitive competition and how

946
01:08:34,040 --> 01:08:38,720
AI engines could actually be
used to weaken an adversary by

947
01:08:38,720 --> 01:08:41,680
kind of teaching their
population not to think anything

948
01:08:43,160 --> 01:08:46,359
and weakening their strategic
capability and their decision

949
01:08:46,359 --> 01:08:50,240
making ability through cognitive
tools.

950
01:08:50,920 --> 01:08:54,640
Which is pretty scary.
I'll be much more afraid of

951
01:08:56,640 --> 01:09:01,080
living in a society which had
forgotten how to think than in

952
01:09:01,080 --> 01:09:06,600
one which occasionally ends up
in a skirmish over islands in

953
01:09:07,439 --> 01:09:12,160
any of our oceans.
But the final point I'd make

954
01:09:12,160 --> 01:09:17,240
there, if you like your
dystopian novels, you know the

955
01:09:17,240 --> 01:09:19,600
top 2 dystopian novels of the
20th century.

956
01:09:19,600 --> 01:09:21,600
We all know them.
Brave New World by Aldous

957
01:09:21,600 --> 01:09:29,520
Huxley, 1984 by George Orwell
and someone summarized this very

958
01:09:29,520 --> 01:09:32,880
neatly the other day, and I
apologize to the author of the

959
01:09:32,880 --> 01:09:36,479
blog because I forget their
name, but they opened by saying

960
01:09:37,160 --> 01:09:43,040
George Orwell was afraid of
society moving in the direction

961
01:09:43,040 --> 01:09:48,720
of burning books and all this.
Huxley was afraid of a society

962
01:09:48,720 --> 01:09:51,840
moving to a point where they
just didn't care about books

963
01:09:51,840 --> 01:09:53,200
anymore and stopped reading
them.

964
01:09:55,000 --> 01:09:57,880
And that's kind of the cognitive
warfare angle.

965
01:09:57,880 --> 01:10:04,640
The last one, what if we become
post literate and our brains

966
01:10:04,640 --> 01:10:11,000
sort of degrade in terms of
higher order function?

967
01:10:11,320 --> 01:10:14,200
That's a really scary thing.
It's a good paper from the chief

968
01:10:14,200 --> 01:10:19,600
scientist at NATO on this.
That is yeah, horrifying and

969
01:10:19,600 --> 01:10:23,880
fascinating to to think about in
on the on the George Orwell

970
01:10:23,880 --> 01:10:25,920
point as well.
We're in a moment as well where

971
01:10:26,280 --> 01:10:29,360
Animal Farm, his other famous
book is being reinterpreted as a

972
01:10:29,720 --> 01:10:33,240
as a critique on capitalism and
becoming a major Hollywood movie

973
01:10:33,240 --> 01:10:35,960
as well.
So there's lots of moving parts

974
01:10:35,960 --> 01:10:39,040
to this right now.
If we if we pull it a bit closer

975
01:10:39,040 --> 01:10:43,760
to home Hue and we talk a bit
about Australia's role in

976
01:10:43,760 --> 01:10:46,880
everything we were just speaking
about and, and public policy.

977
01:10:46,880 --> 01:10:50,080
One of the bigger decisions our
government and various state

978
01:10:50,080 --> 01:10:54,160
governments made last year was
to bail out some of the the

979
01:10:54,160 --> 01:10:57,480
smelters, various metals,
various commodities, various

980
01:10:57,480 --> 01:11:01,560
companies as well.
And right now this has a kind of

981
01:11:01,920 --> 01:11:06,040
defined ish timeline on it six
months to to three years in a

982
01:11:06,040 --> 01:11:09,240
few different cases.
I'm curious to hear whether you

983
01:11:09,240 --> 01:11:14,320
think this was a a mistake and
where this ends up going.

984
01:11:20,800 --> 01:11:25,160
Well, I think you have to deal
with it on case by case basis,

985
01:11:25,160 --> 01:11:28,200
not saying we should never do
this or we should always do

986
01:11:28,200 --> 01:11:36,920
this.
My position on the ageing

987
01:11:37,520 --> 01:11:50,680
downstream sector is if we are
to use taxpayer funds to keep

988
01:11:50,680 --> 01:11:56,680
that capacity in Commission,
there has to be a very, very

989
01:11:56,680 --> 01:11:59,000
specific conditionality placed
on that.

990
01:12:01,880 --> 01:12:10,640
That conditionality is that the
government and the operator have

991
01:12:10,640 --> 01:12:13,920
a very open discussion about
byproducts.

992
01:12:18,640 --> 01:12:23,440
So I would say if you want to
get your smelter, your refinery,

993
01:12:26,520 --> 01:12:29,400
actually I should say mostly
refineries because you actually

994
01:12:29,400 --> 01:12:31,480
separate the byproducts at the
refining stage.

995
01:12:33,120 --> 01:12:39,560
If you want public funds, you
need to actually not just use

996
01:12:39,560 --> 01:12:45,800
that three years of OpEx and
then just sort of say, oh, it

997
01:12:45,800 --> 01:12:47,600
actually is all too hard in
three years time.

998
01:12:48,600 --> 01:12:52,560
You actually need to tell me
what potential byproducts are in

999
01:12:52,560 --> 01:12:56,240
your waste stream, which you're
currently not collecting, what

1000
01:12:56,240 --> 01:12:58,960
it would cost to build the
processing circuits to go and

1001
01:12:58,960 --> 01:13:03,440
get those byproducts.
And let's talk about that.

1002
01:13:06,040 --> 01:13:12,120
So that's why I was in my own
mind, I felt that the the Port

1003
01:13:12,120 --> 01:13:18,920
Pirie decision was actually
quite defensible because you've

1004
01:13:18,920 --> 01:13:24,800
got some really important niche
commodities potentially in that,

1005
01:13:26,080 --> 01:13:28,840
in that waste stream which you
can go and get.

1006
01:13:29,480 --> 01:13:32,600
And if you look at the strategic
reserve that the Australians

1007
01:13:32,600 --> 01:13:40,080
have recently announced, you've
got antimony, you've got gallium

1008
01:13:41,200 --> 01:13:46,040
and you've got rare earths.
So antimony and gallium, of

1009
01:13:46,040 --> 01:13:52,320
course, they're byproducts from
industrial metals processing

1010
01:13:52,360 --> 01:13:57,840
bigger markets, but the West
hasn't actually made the same

1011
01:13:57,840 --> 01:14:01,960
effort that the Chinese have to
go after the byproducts

1012
01:14:01,960 --> 01:14:03,640
systematically from the
beginning.

1013
01:14:05,200 --> 01:14:10,520
One of the reasons for that is
some of these niche markets are

1014
01:14:10,520 --> 01:14:14,200
so small.
If you bring on, bring on a new

1015
01:14:14,200 --> 01:14:19,560
resource body of some scale in
a, in zinc, for example, and

1016
01:14:19,560 --> 01:14:24,360
you've got, and that's got a lot
of germanium in it.

1017
01:14:25,680 --> 01:14:29,880
You might say, well, if I
actually build the the

1018
01:14:29,880 --> 01:14:32,640
processing circuit to get the
germanium out of my zinc

1019
01:14:32,640 --> 01:14:37,200
concentrate, I'm going to kill
the germanium market in one guy

1020
01:14:38,360 --> 01:14:43,280
because my zinc deposit's so
big, then I'm going to kill the

1021
01:14:43,280 --> 01:14:45,520
niche market.
And so the economics of the

1022
01:14:45,520 --> 01:14:49,440
byproduct don't add up.
And that is why I think

1023
01:14:49,440 --> 01:14:53,360
strategic reserve and
stockpiling models should be

1024
01:14:53,360 --> 01:14:58,160
focused very narrowly, not on
big exchange traded markets with

1025
01:14:58,160 --> 01:15:01,400
huge civilian, diverse
diversified end users in

1026
01:15:01,400 --> 01:15:04,120
civilian activities like battery
raw materials.

1027
01:15:04,840 --> 01:15:07,760
It's those niche metals with
defence applications, high

1028
01:15:07,760 --> 01:15:11,440
technology applications, you
don't need much at any given

1029
01:15:11,440 --> 01:15:18,360
time, but you won't have any if
you just use the pure economics

1030
01:15:18,560 --> 01:15:21,400
of what's the processing circuit
going to cost me, what's that

1031
01:15:21,400 --> 01:15:25,120
going to do to the market price
of this very fragile balance

1032
01:15:25,120 --> 01:15:28,720
which I have.
I actually think that is a place

1033
01:15:28,720 --> 01:15:36,760
where a sensible approach to
reserve stockpiling by

1034
01:15:36,760 --> 01:15:41,320
sovereigns, fair pricing to
remunerate long run marginal

1035
01:15:41,320 --> 01:15:45,360
cost so on and so forth.
I actually think that is a very

1036
01:15:45,360 --> 01:15:51,760
good idea.
But if the operator is not

1037
01:15:51,760 --> 01:15:54,360
prepared to have that
conversation about by products

1038
01:15:54,360 --> 01:15:58,760
which may have some strategic
heft to them, I wouldn't engage.

1039
01:15:59,440 --> 01:16:03,000
I've got, I've got like a
thought on my mind, Hugh, while

1040
01:16:03,520 --> 01:16:07,640
we're talking about the, the
dynamics between Australia and

1041
01:16:07,640 --> 01:16:15,200
China, the, the tensions that
are more more pertinent between

1042
01:16:15,200 --> 01:16:17,960
the US and, and, and China right
now.

1043
01:16:17,960 --> 01:16:21,680
But the, the ways that that kind
of plays out for, for the

1044
01:16:21,680 --> 01:16:26,800
miners.
And I just love to understand

1045
01:16:26,800 --> 01:16:32,960
your synopsis of what's going on
between the likes of the rise of

1046
01:16:32,960 --> 01:16:38,240
CMRG, their influence and the,
the, the pressure that the iron

1047
01:16:38,240 --> 01:16:43,000
ore miners are feeling or what
there's a reluctance to really

1048
01:16:43,240 --> 01:16:44,800
put disclosure out there about
it.

1049
01:16:44,800 --> 01:16:47,760
And I, I kind of get that from
just a negotiation strategy

1050
01:16:47,760 --> 01:16:49,880
perspective.
It's all downside from from, but

1051
01:16:49,880 --> 01:16:52,800
it can't, it feels like, it
feels like there's a lot more

1052
01:16:52,800 --> 01:16:57,520
than, than meets the eye here.
It's, it's played out in Jimmy

1053
01:16:57,520 --> 01:17:01,080
Bar finds 1st.
And then there's the, the, the

1054
01:17:01,080 --> 01:17:04,000
kind of currency debate, the
the, the term contract dynamics.

1055
01:17:05,360 --> 01:17:09,120
How are you kind of interpreting
this this whole dynamic for the

1056
01:17:09,320 --> 01:17:13,160
iron ore producers?
Yeah.

1057
01:17:13,200 --> 01:17:18,400
Like first of all, I should
state here that any comment I

1058
01:17:18,400 --> 01:17:20,640
make is very much an outsider
comment.

1059
01:17:20,800 --> 01:17:24,800
You know, I, I talk a lot to my
former colleagues in the

1060
01:17:24,800 --> 01:17:27,040
industry, but I wouldn't
embarrass them by asking any

1061
01:17:27,040 --> 01:17:29,840
direct questions about anything
as sensitive as this.

1062
01:17:29,840 --> 01:17:33,880
So anything I say is purely
speculation on my behalf.

1063
01:17:36,040 --> 01:17:40,600
Look, I've given a lot of sort
of background interviews on this

1064
01:17:40,600 --> 01:17:46,280
over the last little while, but
I've chosen not to not to be

1065
01:17:46,440 --> 01:17:52,720
formally quoted on any of this.
What's going on with CMRG and

1066
01:17:52,720 --> 01:17:56,200
BHP?
It could be, it could be nothing

1067
01:17:56,200 --> 01:17:58,840
or it could be everything.
That's sort of the range that

1068
01:17:58,840 --> 01:18:04,520
we're talking about here.
You open the conversation with

1069
01:18:04,520 --> 01:18:07,880
RMB denomination and RMBS role
in the world.

1070
01:18:07,880 --> 01:18:12,160
Well, first step towards that
making that happen would be to

1071
01:18:12,160 --> 01:18:17,440
leverage the power that you have
in certain markets to get them

1072
01:18:17,440 --> 01:18:18,880
denominated in your own
currency.

1073
01:18:21,480 --> 01:18:28,760
And so I think it's entirely
natural that an entity like CMRG

1074
01:18:28,760 --> 01:18:35,320
would be pushing for CNY as the
as the acronym that goes in

1075
01:18:35,320 --> 01:18:39,960
front of the number they would
love to denominate iron ore in

1076
01:18:39,960 --> 01:18:43,880
RMB on the ground.
The reality is that at the

1077
01:18:43,880 --> 01:18:47,720
Chinese port, a huge amount of
iron ore changes hands in RMB

1078
01:18:47,720 --> 01:18:54,480
already, and RMB price signals
through the Dalian exchange and

1079
01:18:54,480 --> 01:18:58,440
the port are already very
influential in terms of setting,

1080
01:18:59,800 --> 01:19:02,520
setting iron ore pricing
globally.

1081
01:19:02,600 --> 01:19:05,720
What you don't have is the
treasury departments of major

1082
01:19:05,720 --> 01:19:08,000
resources companies running big
RMB books.

1083
01:19:09,840 --> 01:19:16,920
They also don't have costs of
any huge amount in RMB either

1084
01:19:17,320 --> 01:19:23,040
because the procurement
organizations are running their

1085
01:19:23,040 --> 01:19:28,160
businesses in a different way,
different vendors, US, Sweden,

1086
01:19:28,360 --> 01:19:31,280
Japan, you know, Singapore,
etcetera, etcetera.

1087
01:19:31,480 --> 01:19:33,720
So this isn't a big spend on the
RMB side.

1088
01:19:36,080 --> 01:19:38,800
Why is it playing out more
obviously with BHP than the

1089
01:19:38,800 --> 01:19:45,520
other majors?
Look, I think symbolically Valet

1090
01:19:45,520 --> 01:19:49,280
and Rio have sort of been the
two largest producers over time.

1091
01:19:49,280 --> 01:19:54,200
But BHP is the company that
changed the pricing mechanism

1092
01:19:55,480 --> 01:20:01,560
back in the day.
And you won't get anywhere in

1093
01:20:01,560 --> 01:20:04,360
this industry unless you can
change BH PS position on

1094
01:20:04,360 --> 01:20:06,800
something.
It is sort of the the leader in

1095
01:20:06,800 --> 01:20:12,040
terms of how the market can
operate and in terms of

1096
01:20:12,040 --> 01:20:17,400
sponsoring the Pras, getting
things like transparent screen

1097
01:20:17,400 --> 01:20:23,240
pricing moving.
So that's probably why the

1098
01:20:23,240 --> 01:20:27,520
effort would be directed more to
BHP, but also why BHP is

1099
01:20:27,520 --> 01:20:32,240
probably the toughest to
negotiate with because the

1100
01:20:32,240 --> 01:20:41,520
pricing mechanism and that BHP
pioneered and has since taken

1101
01:20:41,520 --> 01:20:46,480
over the industry has created
10s, if not hundreds of billions

1102
01:20:46,480 --> 01:20:51,720
of dollars of value for or
exporters sending money to

1103
01:20:51,720 --> 01:20:53,400
China.
And of course that is a transfer

1104
01:20:53,400 --> 01:21:01,200
from the Chinese and it's worth
dying in a ditch over, I think

1105
01:21:01,200 --> 01:21:05,440
from the Australian point of
view, but also worth dying in a

1106
01:21:05,440 --> 01:21:08,000
ditch over from the Chinese
point of view.

1107
01:21:08,440 --> 01:21:11,240
But neither side can live
without the other for very long.

1108
01:21:12,280 --> 01:21:19,480
And that's that's the reality of
this trade and sort of use that

1109
01:21:19,480 --> 01:21:24,800
concept in in multiple
conversations I have about these

1110
01:21:24,800 --> 01:21:27,480
markets.
Probably the most pertinent of

1111
01:21:27,480 --> 01:21:30,160
them is the steel
decarbonisation.

1112
01:21:33,040 --> 01:21:35,640
Lot of people have gone more
quiet on that.

1113
01:21:35,840 --> 01:21:38,920
You know, Trump has sort of
created the post shame society

1114
01:21:38,920 --> 01:21:45,280
where everyone who didn't like
ESG before but was afraid to say

1115
01:21:45,280 --> 01:21:48,800
so is now saying so.
Didn't want to decarbonize

1116
01:21:48,800 --> 01:21:51,000
before, but we're afraid to say
so they're now saying so.

1117
01:21:52,840 --> 01:21:55,400
But yeah, there are two great
realities of the steelmaking

1118
01:21:55,400 --> 01:21:58,520
value chain.
It's the Pilbara on the one

1119
01:21:58,520 --> 01:22:02,600
hand, and it's China's blast
furnaces on the other.

1120
01:22:03,320 --> 01:22:09,000
And any future take you have on
the steel value chain must take

1121
01:22:09,000 --> 01:22:19,120
into account those two large and
immovable objects and not even

1122
01:22:19,120 --> 01:22:24,520
similar changes though.
What a beautifully simple yet

1123
01:22:24,680 --> 01:22:28,560
complex relationship to, to, to
have and to, to fight over.

1124
01:22:28,680 --> 01:22:31,480
Very curious to see how that
plays out here.

1125
01:22:31,480 --> 01:22:33,840
As always, it's been fantastic
to speak.

1126
01:22:33,840 --> 01:22:36,720
I think we could speak for many
more hours about all of these

1127
01:22:36,720 --> 01:22:38,480
topics.
They're deeply fascinating to to

1128
01:22:38,480 --> 01:22:40,280
us.
And hopefully the, the list the

1129
01:22:40,280 --> 01:22:42,200
listeners as well.
And you're going to have a few

1130
01:22:42,200 --> 01:22:45,280
more of these conversations
coming up in, in, in a couple

1131
01:22:45,280 --> 01:22:46,920
weeks with a conference you've
put together.

1132
01:22:46,920 --> 01:22:49,600
So I think it's worth kind of
sharing a couple of details

1133
01:22:49,600 --> 01:22:52,920
because some of the the speakers
you've got coming are pretty

1134
01:22:52,920 --> 01:22:56,320
important to this conversation.
Yeah, look, absolutely.

1135
01:22:56,320 --> 01:23:01,840
So, so my, my home base is the
ANU in Canberra, Australian

1136
01:23:01,840 --> 01:23:05,800
National University, and we're
running a slightly different

1137
01:23:05,800 --> 01:23:07,640
kind of critical minerals
conference.

1138
01:23:08,400 --> 01:23:14,120
What we're trying to do is get
all the different professions

1139
01:23:14,240 --> 01:23:17,200
that touch on this industry
together in one room, the

1140
01:23:17,200 --> 01:23:19,800
different policy makers from
different backgrounds in one

1141
01:23:19,800 --> 01:23:24,240
room, different countries to
really look at the thing from

1142
01:23:24,240 --> 01:23:29,880
all angles.
And February 19 and 20 I'm Co

1143
01:23:29,880 --> 01:23:36,080
convening the Geo economics,
geopolitics, pricing mechanisms

1144
01:23:36,160 --> 01:23:42,160
side of things, which I think
will be fascinating and my Co

1145
01:23:42,160 --> 01:23:45,760
conveners 1 is a political
scientist 1 is a geologist.

1146
01:23:48,840 --> 01:23:55,760
The we'll be bringing in Amanda
Lukasey from Linus Nevada Power

1147
01:23:55,760 --> 01:24:03,120
of Fortescue fame, Grant Wilson
of Taivan Limited.

1148
01:24:05,600 --> 01:24:11,160
And it's going, I'm going
hopefully getting a lot of

1149
01:24:11,160 --> 01:24:14,440
public officials there as well,
talking to them about

1150
01:24:14,440 --> 01:24:19,120
stockpiling.
But yeah, so it's called Recon

1151
01:24:19,360 --> 01:24:23,160
Recon Plus.
It grew out of a rare earth

1152
01:24:24,320 --> 01:24:27,440
metals conference, but it's now
broadening to all critical

1153
01:24:27,440 --> 01:24:32,560
minerals.
So R double Econ plus at ANU.

1154
01:24:34,320 --> 01:24:36,480
Yeah.
It'd be great if we get some of

1155
01:24:36,480 --> 01:24:39,000
your listeners along.
Fantastic.

1156
01:24:39,000 --> 01:24:42,120
We, we highly recommend it.
Hugh, thank you so much for for

1157
01:24:42,120 --> 01:24:45,160
joining us and, and sharing your
thoughts on this, this amazing

1158
01:24:45,160 --> 01:24:47,880
world where we're living in, in
these fascinating times.

1159
01:24:47,880 --> 01:24:50,520
Yeah.
My pleasure.

1160
01:24:50,560 --> 01:24:52,080
Thank you so much here.
Here we go.

1161
01:24:52,080 --> 01:24:56,040
Like you said, Trev, that just
gives me a plethora of more

1162
01:24:56,040 --> 01:24:58,280
topics to to read up on, to
learn about.

1163
01:24:58,280 --> 01:25:01,960
There's so much wisdom in there
and so many fascinating

1164
01:25:01,960 --> 01:25:04,680
subjects.
We we kind of covered marginally

1165
01:25:04,680 --> 01:25:06,040
there.
There's a lot more to go into.

1166
01:25:06,640 --> 01:25:08,840
Last last time I mentioned
Taiwan on one of our podcasts.

1167
01:25:08,840 --> 01:25:10,960
I think people just commenting,
you're delusional, Travis,

1168
01:25:10,960 --> 01:25:12,280
yadda, yadda.
Anyway, I pose it as a

1169
01:25:12,280 --> 01:25:13,920
hypothetical.
I just want to know what happens

1170
01:25:13,920 --> 01:25:16,640
in certain scenarios.
I'm not saying anything will

1171
01:25:16,640 --> 01:25:18,560
happen, just I'm curious.
These are big topics.

1172
01:25:18,560 --> 01:25:19,800
They've got to be thought about.
And they have, like,

1173
01:25:19,800 --> 01:25:23,000
geopolitical implications for
commodity markets, of course,

1174
01:25:23,040 --> 01:25:24,800
and the miners that operate
within them who are trying to

1175
01:25:25,160 --> 01:25:27,720
tread their way between these,
you know, enormous, bifurcating

1176
01:25:27,720 --> 01:25:29,760
superpowers of the world.
I couldn't agree more.

1177
01:25:29,760 --> 01:25:33,880
Fascinating, fascinating topics,
all thanks to our partners.

1178
01:25:33,880 --> 01:25:36,480
We get to chat about this stuff,
mate Sandvik Ground Support

1179
01:25:36,880 --> 01:25:40,520
Focus, the platform by Market
Tech Intralinks and our partners

1180
01:25:40,520 --> 01:25:42,280
at the beginning of this show
Exceed capital.

1181
01:25:42,320 --> 01:25:43,840
Go check them all out in the
show notes.

1182
01:25:44,000 --> 01:25:47,960
Hoodoo hoodoo.
Now remember, I'm an idiot.

1183
01:25:48,200 --> 01:25:50,680
JD is an idiot.
If you thought any of this was

1184
01:25:50,680 --> 01:25:53,200
anything other than
entertainment, you're an idiot

1185
01:25:53,560 --> 01:25:54,720
and you need to read out
disclaimer.