Know This Before Investing in African Miners

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But I think, you know, between
the gold mine, you know, with

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two grams of tonne in Ghana and
one with 20 grams of tonne in

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Burkina Faso, you're probably
still going to go for the one in

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Ghana just because of the
political risks.

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All righty shit won't happen
today.

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It's a bit mate.
Travis Ricciardo There is a hate

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happening around the mining
world today.

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But there's a lot the rack
attack in Arizona is is

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ratcheting up the there's
uranium mines being expropriated

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by African governments.
Barrack is continuing to be

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marred by, you know, it's
challenges and it's it's hated

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by the market for being a worse
performer than gold.

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And, and Tim Stamosa, mate, he's
an African investor and I had

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the privilege of speaking to him
earlier.

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We're going to play his insights
on what it's like to to invest

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in Africa, what you need to know
about the various countries,

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their appetite for capital and
the risks that you face.

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Can't wait.
That was a that was a wicked

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chat.
I'm really excited to to share

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that one because people often
paint the whole continent with

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the same brush and it's not
justified.

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So it's awesome to hear, right.
But there's a a heap of stuff

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going on in the market that we
just don't have the time to to

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talk about.
But raisings that develop

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Bannerman to name.
Big raises Big raises develops

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$180 million Bannerman's was a
chunky size.

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Yeah, 85 bucks from them snow
line.

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They came out with their PEA
numbers, which were pretty

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chunky.
Emerald had a snag and Hope

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Downs but Rio Hancock announcing
a big investment so not not to.

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Mention great Lands debuting on
the ASX today.

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They are long.
Yeah, that's been a long-awaited

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debut, mate.
There's just a bunch going on, a

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bunch going on and we probably
missed half of the the things

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got all the gold razors recently
too anyway.

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Start us off mate.
Rack attack.

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We're going back the rack.
Attack in Arizona is heating up

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even more, JD.
This deal has my bandwidth.

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I'm loving it.
And we've now got confirmation

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that it's it's properly
competitive because Quintera has

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submitted a bid themselves at
5.7 cents where we left off on

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Friday.
Camel, they had upped their bid

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twice in the same day and
snagged themselves a 5% stake in

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the company.
The original deal was $0.05,

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right?
That's what was agreed.

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The first up was revision
revealed Friday morning, 5.3

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cents.
And then by Friday evening it's

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already 5.5 cents.
Camel, Camel, Camel, all three

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of those, right?
So of course, yesterday when

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this when Monday market open
comes around, my eyes glued to

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the screen to see what the the
latest development would be on

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the rack attack in Arizona.
And I wasn't disappointed, JD,

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because it quickly became
apparent that Quintera, the

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private equity group, they had
been working hard over the

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weekend, Quintera managed to
strike a deal with RCF, who you

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know, when you look at the
public data that's available, it

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appeared like RCF was the only
substantial shareholder other

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than the two bidders in the race
here.

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RCF, they had a 7.4% stake in
the ordinary shares of the

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company.
That's 256,000,000 shares, but

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also in their name were
62,000,000 Opies.

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These were already in the money
because they had an exercise

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price of four cents.
So like certainly a decent stake

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when you put it all together.
And also where we left off on

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Friday, because it turned out
that it was Camel that scooped

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up the 5% block trade at at five
and a half cents.

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It meant that Quintero likely
still only had 12% of the

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company themselves, but they
were clearly keen to build that

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to a higher state to have more
influence.

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They did a bit of work over the
weekend.

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They struck a deal with RCF Mate
for the entire holding of RCF,

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all the shares, all the options.
They paid 5.6 cents for the

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shares each and 1.6 cents for
the options each.

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And you, you're probably
thinking, why on earth would RCF

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be willing to part ways with at
stake when this is a competitive

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situation?
Why, you know, you're giving it

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away, but you're not getting the
upside of it.

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Well, excellent question, JD,
And I know you were thinking of

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it because if you read the sale
deed sign between RCF and

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Quintera Quintera, you'll see
that RCF sold their stake.

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But for all intents and
purposes, if there's any deal

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uplift from where they sold out,
they still get paid and they get

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to keep 100% of that uplift, not
50% like we've seen more

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commonly like I think when
capital drilling was they sold

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out of their their predictive
stake to to Perseus.

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Yes, yeah.
So they would share 50% of any

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an uplift if a change of control
happen in the next 12 months

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from memory.
Don't you wish you could just

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have them when you offload your
shares?

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Like yeah, yeah, yeah.
By taking the.

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Outside, yeah, I'm happy to sell
them to you, just as long as I

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get all of the upside that comes
from this competitive situation.

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But you take the downside
though, that's all good.

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Yeah, and you know, RCF 100% of
the upside the entire.

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Upside so Kinterra get their
feel.

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They sit at a bit over 19% of
New World.

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They then lob a bid mate.
They do, mate.

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We learned this pretty quickly
Monday morning, too.

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First, the story appears in
Street Talk.

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They reveal that Kinterra has a
privately lobbed a bid to the

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board of New World at 5.7 cents
per share and this leak warrants

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an announcement out of New World
Resources themself in this brief

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release.
What they what they say is that

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New World confirms it received
an unsolicited non binding

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conditional and indicative
proposal from Quintero Capital.

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Indicative proposal is
incomplete and subject to a

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number of conditions and the
board is in the process of

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reviewing the proposal.
So I read this and I'm just

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thinking mate, Hallelujah like
this.

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This is officially a public
bidding war now like a bidding

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war it is it's beautiful.
These don't come around everyday

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and before I get two carried
away, there's a few caveats that

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are sort of necessary.
So Quintero's offer is is

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conditional, right.
You can say that in the wording

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unsolicited conditional.
So we we don't know what these

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conditions are that have been
presented to the board, but or

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if the conditionality in this in
their offer risk is of

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comparable conditionality to
what has already been agreed in

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the camel offer.
And, and that conditionality

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can, can matter a bit here, but,
but this is a bidding war.

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Like now we now we see New world
stock trading a tad north of

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Quintera's offer price already.
Like if you look at the volume

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that transacted today, like
shares of trading at 5.8 cents,

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Quintera's, Quintera's
conditional bid that it's just

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a, you know, an indicative
proposal put to the board that's

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5.7.
So market's getting excited

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mate.
So what's next?

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I'm excited.
What's next?

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Well.
Who is it?

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The the new world board, they
have to determine whether I can

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this Cantera offer is capable of
becoming a superior offer or

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not.
And I think the answer to this

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question is going to prove to be
yes.

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And of course, we've got the
placement still hanging in the

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background from Friday.
Now remember that placement was

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conditional on no other offer
received within 14 days that is

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deemed to be capable of becoming
a superior offer.

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So which point when this when
this offer from Quintero gets

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deemed to be capable of becoming
superior?

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Well, that placement falls away,
right?

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Because it was conditional and
hence the takeover's panel

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proceedings will also fall away.
So just put all of that to bed

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now and when the when the answer
to to all of this is is yes,

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then remember Camel, they have a
matching right as part of the

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this game implementation deed.
And in effect, what does all

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that mean?
It means that we get to witness,

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we get to find out the answer to
the question, who wants this

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more?
Who is willing to pay more Camel

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or Quintera?
That's ultimately where this is

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right now.
Like assuming the conditionality

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penned to the board in the in
the Quintera offer is is of

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similar conditionality to the
Camel's agreement.

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And we get to be like people in
the crowd at a home auction and

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there's two bidders left, right.
And they get to keep on going

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higher and higher until one of
them says too much.

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You, you have it, mate.
Like I, you know, I, I can't

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justify this price and all of
this, all of this to the benefit

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of the homeowners of that home
auction, JD, or in this case,

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the new World resources
shareholders, all to the benefit

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of them.
I'm so pumped.

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Having a win, yeah.
It's such an interesting dynamic

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seeing a private equity group go
head to head against a minor.

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Have you got a favorite mate?
I don't, I don't, I don't have a

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favorite because I'm just like
not familiar with the bidders

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very well.
But I do actually think I'd

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rather be like, like if, if I
was completely indiscriminate

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about price and I didn't care
about price paid, who I think

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has a better chance here.
I actually think that even

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though like Camel's got deal
protection and a matching right

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and assigned an agreed scheme
implementation deed, I think the

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20 like 19 odd percent stake
that Quintero has is, is

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actually more, more influential
here.

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So I think that kind of matters
more if they if they both have

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similar levels of of yeah,
insensitivity to price, like I'd

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rather be Quintero, yeah.
If you're as in the ways on this

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one as we are mate, the the two
founders of Quintero did a potty

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not too long ago.
You can you can just search

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their names to check it out, or
in yesterday's director special

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if you want to get a bit of a
flavour for what their approach

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to to owning these assets is
like.

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Cheryl Kamal, if you want to
come on the podcast and be part

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of the rack attack in Arizona,
we'll have you on.

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And same to same to anyone at
Camel.

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Yeah, yeah.
Same to Saxophone is free.

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Same to Nick Warwick, would we
have him on to try and solicit

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the best offer that?
Would be pretty much get a third

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party involved.
Yeah, why not?

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All right mate.
Well, Antler is an old mine with

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a with a rich history.
Operations started here in the

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early 1900s actually found the
deposit in the 1870s and I was

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looking at some of the cross
sections and some of the the

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long sections in the recent New
World presentations.

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I, I found it interesting.
I was looking at the the decline

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just waving its way down and the
consistency of the ore body

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there and mate, I couldn't help
but think of Derek Hurd and

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Sandvik ground support.
He's.

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Been running that business for
20 years mate.

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Let's just go to the Goodman
himself.

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Here he is.
How has DSR changed under the

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the big umbrella of Sandvik?
I'd better be careful.

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What I say is that right?
They pay the bills.

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One of the challenges that DSI
and I say that same by itself

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had was trying to drive this
automation strategy and, you

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know, efficiencies without the
connection to equipment.

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So now we're part of one
business.

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We get the opportunity to work
with the underground drills

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team, the rock tools team, the
other parts of Sandvik to work

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collaboratively to develop
better systems for the mining

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houses and clients.
So actually it's really good.

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And one of the good examples is
the resin injection systems that

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you've spoken about before that,
you know, now that's one of the

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pushes that we've had through
the underground drills team to,

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you know, work with those guys
to have a kit you can put on a

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jumbo, but now you can injection
bolt off a jumbo.

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Now that wasn't around from a
Sandvik perspective a couple of

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years ago.
And you know, certainly it's a

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big drive that we've been able
to push through the Sandvik

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machine.
There we go mate, go Sandvik

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ground support.
OK, JD, you've been noticing a a

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growing trend.
Maybe it's alarming, maybe it's

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abnormal, maybe it's not, but
more minds are getting

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nationalized.
What's going on?

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They are mate.
There's a few things to to chat

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about here.
So I want to chat about the

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00:11:16,520 --> 00:11:20,840
recent resource nationalism kind
of displays we've we've seen.

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I want to also chat about why
the market hates Barrack and has

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done so for quite some time.
And then we're going to share

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00:11:27,200 --> 00:11:30,600
that chat we mentioned with Tim
Stemosa, which I'm pretty

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excited about.
So you want to start by talking

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about Niger?
How come?

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There's this company Samir, it
is the uranium miner of Niger.

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It's a joint venture between
Orano who owns 63% of it and

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Superman which is Niger State
owned mining entity, one of the

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00:11:47,600 --> 00:11:51,560
remaining 37%.
Now this has been operating and

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mining uranium since the 70s and
it's turns out, you know, for a

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long time about 5% of world
uranium supply.

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So not an insignificant amount.
Now recently there was a bit of

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a step down as one of the
operations the the the

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underground mine called Komenac
there ceased and on the back of

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political instability, they had
a military coup in 2023.

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We've seen that sort of step
down to kind of 2 to 3% of world

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supply.
But looking at other commodities

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that we've spoken about in the
past couple of years, you know,

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you take those sorts of amounts
offline or you you move it and

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stuff and it can have pretty
sizeable effects on commodities.

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00:12:28,120 --> 00:12:32,160
But if we look at specifically
what's happened in Niger, they

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got fed up with a company that's
predominantly owned by the

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government of their former
colonial ruler, France, and they

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gave Arano the boot.
So they're nationalizing the

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asset.
Not a surprise here,

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particularly since the coup in
2023 in countries there, the

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00:12:47,680 --> 00:12:50,360
relationship has been
deteriorating.

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The share took control of the
the assets took operating

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control late last year as well.
They accused the the French in

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this case have taken more than
their fair share to to justify

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the expropriation.
And as you'd suspect, the the

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French disagreed with that.
But what can you do when the

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mine is where it is?
Nasty mate is this?

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00:13:09,080 --> 00:13:12,320
Is this as simple as there's
just wanting a bigger slice of

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00:13:12,320 --> 00:13:15,080
the pie like like ordinary
resource nationalism?

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00:13:15,080 --> 00:13:18,360
Or is there like, is there more
to it in terms of like where is

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00:13:18,360 --> 00:13:21,560
the uranium production going to
here and does that change?

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00:13:22,480 --> 00:13:25,880
Like what you can clearly see is
that that they have been fed up

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with the relationship with
France.

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00:13:27,080 --> 00:13:30,960
So they've lent far more into
the, the Russian sphere of

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00:13:30,960 --> 00:13:35,360
influence and partly China as
well, but they've they've moved

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away from the the West.
You can see that with the the

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00:13:39,080 --> 00:13:41,840
Wagner Group, which has been all
throughout the, the sort of

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00:13:41,840 --> 00:13:46,960
Sahal from Burkina, Nigeria,
Central African Republic, Mali,

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It's, it's a theme that sort of
spread across those countries.

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00:13:50,240 --> 00:13:53,440
And you know, what we've also
seen in a lot of those countries

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00:13:53,440 --> 00:13:56,200
is military crews.
So they want to keep the

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economics more in country.
This is a theme across the world

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and it's a theme kind of as old
as time, you know, and I don't

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00:14:02,160 --> 00:14:05,520
think we're completely immune
from it in the West here either.

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00:14:06,000 --> 00:14:09,440
You know, you can't just pin it
down to, to one or two kind of

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00:14:09,520 --> 00:14:11,960
factors.
I think it's a growing trend.

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And I think there's like
contagion with this recent

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00:14:14,880 --> 00:14:17,320
resource nationalism.
I think people like here in

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00:14:17,320 --> 00:14:21,280
Nigeria will see what's happened
in Guinea, Mali and these sorts

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of places.
They realize, hey, we we can get

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00:14:23,560 --> 00:14:25,240
a bit more of the economics.
And I don't think they're

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00:14:25,240 --> 00:14:30,520
completely, you know, out of the
loop in saying that, hey, they

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00:14:30,520 --> 00:14:34,520
might not have had the best deal
if we go back to the the 70s and

285
00:14:34,520 --> 00:14:36,160
beyond.
So it's not completely

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00:14:36,160 --> 00:14:40,320
unfounded, but it is what it is.
And where it leaves the uranium

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00:14:40,320 --> 00:14:42,320
market is an interesting
perspective.

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00:14:42,320 --> 00:14:44,640
Like firstly, I think it's
something that commodity traders

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00:14:44,640 --> 00:14:47,400
kind of love because markets
become more opaque.

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00:14:48,280 --> 00:14:51,280
The supply isn't leaving the
world market, it's still there.

291
00:14:51,400 --> 00:14:56,080
Costs escalate because it's not
the the freest and most easily

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00:14:56,080 --> 00:14:58,920
kind of traded market anymore.
Things are rerouted.

293
00:14:59,160 --> 00:15:01,040
As well as the losers.
Yeah, exactly.

294
00:15:01,040 --> 00:15:02,800
So it's kind of interesting.
I do think we see a bit of

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tightening in the, the uranium
market and perhaps that has a, a

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00:15:07,240 --> 00:15:09,760
bit of upside risk to it in
time.

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00:15:10,280 --> 00:15:13,160
But I, I don't think we should
dwell too much on the point of

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00:15:13,160 --> 00:15:16,840
resource nationalism because Tim
is going to share phenomenal

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00:15:16,840 --> 00:15:19,360
insights on, on that kind of
point, mate, He.

300
00:15:19,440 --> 00:15:21,240
Yeah, he made some great, great
points.

301
00:15:21,240 --> 00:15:24,440
And as it relates to the type of
strongman leaders that pop up

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00:15:24,440 --> 00:15:27,520
in, in these types of countries
and how they appear to a crowd

303
00:15:27,520 --> 00:15:29,600
that promised the world that,
yeah, there's this kind of

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00:15:29,960 --> 00:15:32,320
rinse, repeat dynamic.
I I found that so interesting to

305
00:15:32,320 --> 00:15:35,360
kind of contextualize what it
what those long term risks are

306
00:15:36,160 --> 00:15:37,560
when you play in certain parts
of the world.

307
00:15:37,840 --> 00:15:40,200
Absolutely.
He is a wealth of knowledge and

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00:15:40,200 --> 00:15:42,760
you see it across the globe, but
he's got real, real great

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00:15:42,760 --> 00:15:45,880
insight in into Africa.
But my mind was sort of bouncing

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00:15:45,880 --> 00:15:47,280
around going in different
directions.

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00:15:47,280 --> 00:15:50,360
I was sort of starting to think
about Mali and that kind of led

312
00:15:50,360 --> 00:15:53,200
to me thinking a bit about
Barrick and what's happened with

313
00:15:53,680 --> 00:15:56,840
their Lulu complex there.
And you know, in the process of

314
00:15:56,840 --> 00:15:59,600
kind of having the economics
rejigged and then so I.

315
00:15:59,600 --> 00:16:01,240
Can't talk about Barrick mate.
Yeah.

316
00:16:01,240 --> 00:16:04,800
And then what's happening in in
the Middle East, obviously their

317
00:16:04,800 --> 00:16:09,880
huge growth project is Rico
Dick, which sits well less than

318
00:16:09,880 --> 00:16:13,640
100 kilometers from the border
of Iran in western Pakistan.

319
00:16:13,640 --> 00:16:17,280
So yeah, we've got a lot to to
talk about here there.

320
00:16:18,400 --> 00:16:22,280
This is a $50 billion U.S.
dollar mining company.

321
00:16:22,400 --> 00:16:24,280
Now you could you could strongly
make the argument.

322
00:16:24,280 --> 00:16:27,000
I think that is too big and and
too many assets to manage.

323
00:16:27,000 --> 00:16:28,440
But we'll we'll leave that for a
moment.

324
00:16:28,440 --> 00:16:32,520
And the share price has just not
performed well.

325
00:16:32,520 --> 00:16:35,120
And this is not just a one year
phenomenon, A2 year phenomenon.

326
00:16:35,120 --> 00:16:37,440
You're going back in a number of
years really since sort of like

327
00:16:37,440 --> 00:16:42,000
2020 on the back of the big deal
they did in 2019 like there is

328
00:16:42,080 --> 00:16:44,320
in gold. 2019, yeah.
Yeah, exactly.

329
00:16:44,320 --> 00:16:48,240
There's been huge
underperformance for a host of

330
00:16:48,240 --> 00:16:51,600
reasons, right And.
Production has fallen like.

331
00:16:51,920 --> 00:16:55,040
Like consistently lower costs
have escalated.

332
00:16:55,440 --> 00:16:57,720
Granted, that's been a theme
across the industry, but.

333
00:16:57,840 --> 00:17:00,160
Issues in many parts of the
world with their host countries.

334
00:17:00,160 --> 00:17:03,840
Yep.
And they've got a lot of capital

335
00:17:03,840 --> 00:17:06,000
that needs to be spent going
forward.

336
00:17:06,000 --> 00:17:09,319
And I found it particularly
pertinent reading comments from

337
00:17:09,560 --> 00:17:14,760
Agnico Eagle, Agnico Eagle's CEO
just yesterday saying the only

338
00:17:14,760 --> 00:17:18,960
metric you need to hit as a gold
mining company to be a valid

339
00:17:18,960 --> 00:17:23,680
gold mining investment is to
outperform gold bullion and.

340
00:17:23,720 --> 00:17:26,240
Yeah, Why do you, why do you
bother owning A mining company

341
00:17:26,440 --> 00:17:28,359
if it's not operating?
Leverage the gold price.

342
00:17:28,800 --> 00:17:31,280
Exactly, exactly.
And that is the question we're

343
00:17:31,280 --> 00:17:33,920
going to have a crack at
answering now, mate, because

344
00:17:33,920 --> 00:17:36,560
it's become consensus to be
bearish.

345
00:17:36,560 --> 00:17:38,120
Barrick I.
Don't know if it's a bit

346
00:17:39,080 --> 00:17:40,840
consensus to be negative Barrick
but I don't know.

347
00:17:40,840 --> 00:17:43,200
I don't know if it's consensus
to be bearish Barrick in a gold

348
00:17:43,320 --> 00:17:44,840
bull market.
Yeah, I'll take that.

349
00:17:44,960 --> 00:17:46,200
Yeah, I think that's fair
enough.

350
00:17:46,200 --> 00:17:48,720
It's not as if these people have
specific but you know, explicit

351
00:17:48,720 --> 00:17:50,840
short positions in the stock,
but they.

352
00:17:50,880 --> 00:17:53,240
It's easy to to like, yeah,
point out that they have been

353
00:17:53,240 --> 00:17:56,400
drastic underperformers in a
sector where you've got a huge

354
00:17:56,400 --> 00:17:58,120
rising tide being the gold
price.

355
00:17:58,280 --> 00:18:01,280
Yeah.
And it's easy to say nobody's

356
00:18:01,280 --> 00:18:04,760
going to back you for a growth
project in Pakistan.

357
00:18:04,760 --> 00:18:06,560
That's another kind of common
refrain.

358
00:18:06,560 --> 00:18:10,880
And you know Chuck in the
portfolio 10 to 15% of your your

359
00:18:10,880 --> 00:18:14,360
earnings coming from Mali where
your relationship is less than

360
00:18:14,360 --> 00:18:16,520
friendly as well.
All these things kind of can

361
00:18:16,680 --> 00:18:21,520
compound the discount that they
are getting relative to their

362
00:18:21,520 --> 00:18:25,480
peers.
So the CapEx overhang is real.

363
00:18:25,560 --> 00:18:28,960
They have spent a decent amount
of money on Pueblo Viejo in the

364
00:18:28,960 --> 00:18:32,200
Dominican Republic.
That is that is scaling up.

365
00:18:32,960 --> 00:18:37,520
They have earmarked a lot to be
spent at Lamwana in Zambia.

366
00:18:37,680 --> 00:18:40,640
So it is Lamwana super pit.
Exactly and that's their

367
00:18:40,920 --> 00:18:44,840
evolution to becoming more of a
copper producer rather than just

368
00:18:44,840 --> 00:18:48,760
a gold producer.
And then you've got Rico Dick.

369
00:18:48,760 --> 00:18:52,000
So this is the asset that they
own 50% off.

370
00:18:52,000 --> 00:18:55,160
It's a huge copper gold story.
People have known about this

371
00:18:55,160 --> 00:18:59,320
project for a long, long time.
Barrack have had issues with the

372
00:18:59,320 --> 00:19:01,280
government.
They finally have got to a point

373
00:19:01,280 --> 00:19:05,520
where they're happy and keen to
invest and make this the the

374
00:19:05,520 --> 00:19:08,880
horse they're backing and
investors are just not not

375
00:19:08,880 --> 00:19:10,920
warming to it so.
What's the, what are the latest

376
00:19:11,160 --> 00:19:14,000
kind of consensus numbers around
what CapEx is going to be in

377
00:19:14,680 --> 00:19:17,720
Yeah, to bring Rico Dick online.
Like I see, I see kind of around

378
00:19:17,720 --> 00:19:21,440
that 9 billion US kind of quoted
relatively frequently out of the

379
00:19:21,480 --> 00:19:25,800
the South side and that's a lot
of money to be spent to bring

380
00:19:25,800 --> 00:19:28,760
this online.
Now granted what they they've

381
00:19:28,760 --> 00:19:31,400
got a 50% stake in it.
What, what share would they

382
00:19:31,400 --> 00:19:33,360
actually be having to, to commit
upfront?

383
00:19:33,360 --> 00:19:37,600
Like it's still an enormous
CapEx profile to come come out

384
00:19:37,600 --> 00:19:40,200
of Barrick.
And the weird thing about gold

385
00:19:40,200 --> 00:19:43,880
miners is, is often they they
don't actually make a hell of a

386
00:19:43,880 --> 00:19:46,440
lot of free cash flow throughout
throughout the the cycle in the

387
00:19:46,440 --> 00:19:48,000
good times, they make it make a
bit.

388
00:19:48,000 --> 00:19:49,440
But you know, this is a good
time right now.

389
00:19:49,440 --> 00:19:51,720
And they're going to be
reinvesting the majority of that

390
00:19:51,880 --> 00:19:54,880
into a part of the world that
has a big a big question mark

391
00:19:55,160 --> 00:20:00,160
over it amid kind of heightened
geopolitical conflict and, and

392
00:20:00,280 --> 00:20:03,080
the the key risk of kind of
destabili destabilizing a

393
00:20:03,080 --> 00:20:05,360
region, which is already pretty.
Destabilized.

394
00:20:05,480 --> 00:20:07,040
Yeah, Yeah.
I was flicking back through

395
00:20:07,040 --> 00:20:09,040
their most recent quarterly and
there were some super

396
00:20:09,040 --> 00:20:12,480
interesting comments from Mark
Bristow, the CEOI read a couple

397
00:20:12,480 --> 00:20:14,400
out because I think they're
super relevant here.

398
00:20:14,880 --> 00:20:17,720
So Barrack has a distinct
approach to growth, one that

399
00:20:17,720 --> 00:20:20,720
avoids the pitfalls of industry
short termism in favor of long

400
00:20:20,720 --> 00:20:24,200
term growth, internally funded
value creation.

401
00:20:25,080 --> 00:20:29,000
While others pursue shortcuts
through M&A, we continue to

402
00:20:29,000 --> 00:20:31,880
invest in our own future by
building and not just buying,

403
00:20:32,360 --> 00:20:36,400
creating real value.
So it's, you know, it's, it's

404
00:20:36,400 --> 00:20:39,880
aimed, it's kind of pointed.
And it's not as if they haven't

405
00:20:39,880 --> 00:20:42,800
tried those other means in the
past.

406
00:20:42,800 --> 00:20:45,560
They've done a lot of
acquisitions.

407
00:20:45,560 --> 00:20:48,800
Their, you know, their share
count over the over the decades

408
00:20:48,800 --> 00:20:51,800
has increased like many gold
miners quite substantially.

409
00:20:51,800 --> 00:20:54,480
It's in this point in time, the
means of growth that they're

410
00:20:54,480 --> 00:20:56,800
choosing is to invest
internally.

411
00:20:56,800 --> 00:21:00,040
But yeah, yeah, yeah.
You can't exactly accuse them

412
00:21:00,040 --> 00:21:03,840
for for not having a crack here,
but they are getting severely

413
00:21:03,840 --> 00:21:07,560
discounted in in the market from
it like Agnico Eagle is the is

414
00:21:07,560 --> 00:21:09,360
the stand out that that's the
one that kind of gets the

415
00:21:09,360 --> 00:21:13,560
premium valuation.
They have assets, you know, more

416
00:21:13,560 --> 00:21:17,920
or less purely in in Tier 1
locations and they are big

417
00:21:18,320 --> 00:21:21,240
operations that they can
continue to invest in and see

418
00:21:21,240 --> 00:21:23,720
those returns from.
They've done MNA well, they've

419
00:21:23,720 --> 00:21:25,800
executed on it.
And then you have that sort of

420
00:21:25,800 --> 00:21:29,640
pack that try it trades in and
around one time to NAV and you

421
00:21:29,640 --> 00:21:32,920
have a big step down to to where
Barrett kind of currently

422
00:21:32,920 --> 00:21:34,640
trades, right?
That's at spot GOG.

423
00:21:34,720 --> 00:21:36,800
You're saying that they tried
less than one time stamp?

424
00:21:36,800 --> 00:21:37,640
Yeah.
Correct.

425
00:21:37,680 --> 00:21:40,840
Yes, Yeah, yeah, yeah, yeah.
Yeah, yeah, yeah, yeah, yeah.

426
00:21:40,840 --> 00:21:43,680
I, I think it's going to be an
interesting decade for them.

427
00:21:44,040 --> 00:21:45,840
I don't know.
I don't know how it pans out.

428
00:21:46,120 --> 00:21:49,480
I also think that I actually
could like if there was like a

429
00:21:50,600 --> 00:21:56,480
like an if Elliott had had the
kahunas to do another, another

430
00:21:56,480 --> 00:21:59,720
activist campaign in a resources
company that barracks barracks a

431
00:21:59,760 --> 00:22:01,960
prime candidate for it in some
ways.

432
00:22:02,080 --> 00:22:06,520
It's an interesting 1 though,
because a lot of the criticism

433
00:22:06,600 --> 00:22:10,600
from other investors about these
gold companies is reserves is

434
00:22:10,600 --> 00:22:13,560
just diminishing, diminishing
and they don't have a growth

435
00:22:13,560 --> 00:22:16,080
profile.
And that would be the case that

436
00:22:16,080 --> 00:22:20,080
Elliot, I'd imagine would make
is that cut off the cash flow

437
00:22:20,080 --> 00:22:22,760
that you're going to send to
Rico Dick and other growth

438
00:22:22,840 --> 00:22:24,960
projects and focus on what
you've got and just harvest the

439
00:22:24,960 --> 00:22:26,840
cash.
They it might be there might be

440
00:22:26,840 --> 00:22:28,720
like I think there's low hanging
fruit on portfolio

441
00:22:28,720 --> 00:22:32,120
rationalization that you can you
can argue for the likes of a

442
00:22:32,360 --> 00:22:34,440
barrack.
All your operations stand up on

443
00:22:34,440 --> 00:22:36,440
their own feet.
If not, sell, sell off the ones

444
00:22:36,440 --> 00:22:39,240
that that don't focus on.
Yeah, like what Newmark's done

445
00:22:39,240 --> 00:22:41,560
and they've done that in part
selling, selling Donlin.

446
00:22:41,600 --> 00:22:43,280
I mean they could easily do it
more.

447
00:22:43,280 --> 00:22:46,640
I think there's far too many
assets in that portfolio you.

448
00:22:46,640 --> 00:22:47,880
Reckon that regret selling
Donlin.

449
00:22:49,600 --> 00:22:52,440
It's an interesting question,
right I I one day that could be

450
00:22:52,520 --> 00:22:54,040
an enormous mine.
It's a super.

451
00:22:54,040 --> 00:22:57,040
Pertinent question, right?
Because the exact reason why

452
00:22:57,360 --> 00:22:59,880
people on the other side of the
table in that transaction bought

453
00:22:59,880 --> 00:23:03,640
the mine is because of their
fears over what's happening in

454
00:23:03,640 --> 00:23:07,560
Mali and what perhaps could
happen in future in Pakistan.

455
00:23:08,000 --> 00:23:12,480
Gold is the the horse they're
backing and they want it to be

456
00:23:12,480 --> 00:23:15,760
large scale.
Heaps of answers and in a Tier 1

457
00:23:16,320 --> 00:23:18,480
jurisdiction.
Protected by the rule of law, as

458
00:23:18,640 --> 00:23:22,040
Tim Stare Moser will say.
And yeah, I'm really, really

459
00:23:22,040 --> 00:23:24,840
keen to play play that
conversation, which we'll do

460
00:23:24,840 --> 00:23:26,440
now.
But before we play the

461
00:23:26,440 --> 00:23:30,080
conversation with Tim, JD, I
want to briefly tease a

462
00:23:30,080 --> 00:23:32,760
controversial interview that
we've got coming out next month.

463
00:23:33,000 --> 00:23:34,720
I won't tell the money miners of
the yesterday's.

464
00:23:35,120 --> 00:23:37,800
Here's a tiny snippet.
You know that one the other day

465
00:23:37,800 --> 00:23:43,640
was what's the drill recovery in
diamond hole, not holes, not

466
00:23:43,640 --> 00:23:46,640
applicable.
I'm like, you do get core loss,

467
00:23:46,640 --> 00:23:49,920
all right.
The drillers put blocks in the

468
00:23:49,920 --> 00:23:52,360
wrong way around.
People drop trays of core and

469
00:23:52,360 --> 00:23:54,760
just stuff it back in and they
don't tell you.

470
00:23:55,440 --> 00:23:58,080
Now, are you saying that none of
that ever happened in your drill

471
00:23:58,080 --> 00:23:59,920
program?
Now, I can't speak for the

472
00:23:59,920 --> 00:24:04,280
quality of the logging by the G
OS, but I can tell you, JD, none

473
00:24:04,280 --> 00:24:05,880
of that ever happens on AK
Drill.

474
00:24:05,880 --> 00:24:08,880
Drill program.
K Drill knows that sample

475
00:24:08,880 --> 00:24:10,360
matters.
It's the slogan.

476
00:24:10,360 --> 00:24:13,480
It's enforced by the enforcer
Ryan O'Sullivan himself.

477
00:24:14,200 --> 00:24:16,720
Here I was thinking K drill only
cared about meters mate.

478
00:24:16,840 --> 00:24:20,160
No no no no mate, they're more
than just a pretty face.

479
00:24:20,480 --> 00:24:24,200
Productive drilling plus clean,
reliable sampling you can trust.

480
00:24:24,760 --> 00:24:27,000
Mate, if I was out there trying
to find the next Rico Dick,

481
00:24:27,000 --> 00:24:29,600
trying to find the next Kamoa,
trying to find the next

482
00:24:29,760 --> 00:24:33,720
Escondida, next Super bit, first
call would be to K Drill mate.

483
00:24:33,720 --> 00:24:35,920
I'd be getting Ryan O'Sullivan
on the phone.

484
00:24:35,920 --> 00:24:37,760
Stat you can trust their
sampling mate.

485
00:24:37,760 --> 00:24:42,360
Go K drill OK for the chat with
Kim Stemosa kicks off talking

486
00:24:42,360 --> 00:24:45,680
about Zimplats.
I actually have historically had

487
00:24:45,680 --> 00:24:50,880
an investment in Zimplats, which
is a very good platinum mining

488
00:24:50,880 --> 00:24:53,720
operation in Zimbabwe that you
know, everyone runs for the

489
00:24:53,720 --> 00:24:55,040
hills whenever they hear
Zimbabwe.

490
00:24:55,040 --> 00:24:57,800
But it's actually very well
structured and cleverly done by

491
00:24:57,800 --> 00:25:00,880
the guy who set it up.
And obviously totally it's a

492
00:25:00,880 --> 00:25:04,000
subsidiary.
Of 87% owned by Impala they they

493
00:25:04,080 --> 00:25:07,040
need to give them some streams
so they're always going to pay

494
00:25:07,040 --> 00:25:10,880
out free cash and.
And it's actually a Guernsey

495
00:25:10,880 --> 00:25:12,640
structured vehicle.
It is, so it is.

496
00:25:12,960 --> 00:25:16,400
A lot of the money sort of never
actually enters Zimbabwe.

497
00:25:16,400 --> 00:25:19,760
The mining is done there and
then it's sold and the money is

498
00:25:19,760 --> 00:25:21,280
booked offshore.
Obviously the Zimbabwean

499
00:25:21,280 --> 00:25:23,360
government and people will do
quite well out of it as well.

500
00:25:23,360 --> 00:25:26,480
But yeah, I was actually
involved in that way back as an

501
00:25:26,480 --> 00:25:31,520
investor prior to implants
making the the takeover bit.

502
00:25:31,560 --> 00:25:33,760
I think it was like 2003 or
something.

503
00:25:33,760 --> 00:25:35,440
Yeah.
So, so the Guernsey structure

504
00:25:35,440 --> 00:25:38,520
makes it that Guernsey structure
I think makes it a bit trickier

505
00:25:38,720 --> 00:25:42,120
to to mandatorily take over the
minority interests as well,

506
00:25:42,120 --> 00:25:45,560
because if it's an Australian
company, you could get to 90%

507
00:25:45,560 --> 00:25:48,080
and then you know, force.
But I think the Guernsey

508
00:25:48,200 --> 00:25:49,720
structure actually makes that.
Correct.

509
00:25:49,720 --> 00:25:51,720
A trickier proposition.
There's no compulsory

510
00:25:51,720 --> 00:25:54,440
acquisition in Guernsey.
It was actually deliberately

511
00:25:54,440 --> 00:25:57,840
structured that there was a guy
called Peter Vandersby who was

512
00:25:58,480 --> 00:26:00,680
behind the Delta Gold back in
the day.

513
00:26:01,080 --> 00:26:04,040
I spoke to him at the time when
I was doing the research into

514
00:26:04,120 --> 00:26:07,680
the company Jesus a long time
ago, but it's still going

515
00:26:07,680 --> 00:26:10,000
strong.
It's been a tremendous story if

516
00:26:10,000 --> 00:26:12,520
you've held it for that long and
you've received the dividends.

517
00:26:12,560 --> 00:26:14,240
Yeah.
So there's opportunities all

518
00:26:14,240 --> 00:26:17,560
over Africa, Ghana doing very
well at the moment also with

519
00:26:17,560 --> 00:26:20,400
gold.
I was on a call last Friday with

520
00:26:20,480 --> 00:26:22,880
the brokerage firm that we work
with in Ghana.

521
00:26:22,880 --> 00:26:25,640
There were talking about the
currency having appreciated that

522
00:26:25,640 --> 00:26:29,440
tremendously in recent months,
partly on the strength of the

523
00:26:29,440 --> 00:26:31,920
gold exports in the foreign
exchange that's bringing into

524
00:26:31,920 --> 00:26:34,240
the economy.
The only stock we own over there

525
00:26:34,240 --> 00:26:39,240
is MTN Ghana, which is the main
mobile telecommunications

526
00:26:39,240 --> 00:26:41,440
company.
But when an economy is doing

527
00:26:41,440 --> 00:26:46,080
well, often because of some
minerals exports doing well and

528
00:26:46,080 --> 00:26:48,760
earning them lots of foreign
exchange, then the whole place

529
00:26:48,760 --> 00:26:51,280
starts to do better.
And the kinds of businesses that

530
00:26:51,280 --> 00:26:55,040
we invest in also do well
because consumers have more

531
00:26:55,040 --> 00:26:57,280
money in their pocket and
there's money circulating around

532
00:26:57,280 --> 00:26:59,520
the economies.
I'm curious, Tim, how have you

533
00:26:59,520 --> 00:27:01,600
actually noticed the
investability of the various

534
00:27:01,680 --> 00:27:03,640
African countries change over
time?

535
00:27:03,840 --> 00:27:05,600
Yeah, yeah.
Look, there's 54 countries in

536
00:27:05,600 --> 00:27:07,720
Africa.
It's a very diverse continent,

537
00:27:07,720 --> 00:27:10,640
even more diverse than Asia,
where I was before.

538
00:27:10,800 --> 00:27:16,840
But I tend to focus on economies
that have common law as their

539
00:27:16,840 --> 00:27:19,480
foundation, which is something
that I'm familiar with as an

540
00:27:19,480 --> 00:27:22,080
Australian, and then obviously
English as the language of

541
00:27:22,080 --> 00:27:24,160
business.
But in general, where I'm

542
00:27:24,160 --> 00:27:28,920
focused, you know, Tanzania,
Kenya, Uganda, Nigeria, Ghana,

543
00:27:30,080 --> 00:27:34,200
Zambia, these are places that
have a legacy of British

544
00:27:34,200 --> 00:27:38,760
colonialism that shaped the way
that the law has developed post

545
00:27:38,760 --> 00:27:41,400
independence as well.
And English is still very much

546
00:27:41,400 --> 00:27:42,960
the language of business around
the place.

547
00:27:42,960 --> 00:27:45,080
So that makes it quite familiar
for me.

548
00:27:45,440 --> 00:27:49,600
Also the way that corporations,
law and stock exchanges operate,

549
00:27:49,760 --> 00:27:53,360
they're quite similar.
They're not as sophisticated as

550
00:27:53,360 --> 00:27:56,200
Australia for example, although
they are in certain ways.

551
00:27:56,280 --> 00:27:59,320
For example, the way where we
have a chess system and the way

552
00:27:59,400 --> 00:28:02,520
that shareholdings are
registered electronically. 1

553
00:28:02,520 --> 00:28:05,960
exception oddly is Namibia.
There's still paper based

554
00:28:05,960 --> 00:28:07,680
settlement there.
It's very hard to get a

555
00:28:07,680 --> 00:28:12,120
custodian says it's a bit odd
and maybe I think has a a German

556
00:28:12,120 --> 00:28:13,920
colonial history.
I don't know whether that's got

557
00:28:13,920 --> 00:28:15,760
anything to do with it.
But in general, they're all

558
00:28:15,760 --> 00:28:19,400
moving steadily towards being
more modernized and offering

559
00:28:19,400 --> 00:28:21,720
better disclosure, and things
are improving.

560
00:28:22,000 --> 00:28:24,760
Am I right in kind of
characterizing Nigerian stock

561
00:28:24,760 --> 00:28:27,400
market is kind of uninvestable
say five years ago and and

562
00:28:27,400 --> 00:28:32,640
what's changed?
So Nigeria, when I started my

563
00:28:32,640 --> 00:28:37,800
funds back in 2020, had a very
odd exchange rate mechanism

564
00:28:37,800 --> 00:28:43,640
where there was a peg of sorts
at about 450 to the US dollar.

565
00:28:44,280 --> 00:28:47,920
But foreign investors that had
legacy investments on the Stock

566
00:28:47,920 --> 00:28:52,000
Exchange because there had been
a boom from about 2011 all the

567
00:28:52,000 --> 00:28:55,960
way up to shortly before 2020
when I started the fund.

568
00:28:55,960 --> 00:28:59,920
And people would sell stock and
want to repatriate their

569
00:28:59,920 --> 00:29:02,400
profits, but they couldn't
because there were no dollars

570
00:29:02,400 --> 00:29:05,520
available at banks and
custodians to change your

571
00:29:05,520 --> 00:29:07,960
Nigerian currency into so that
you could take it home.

572
00:29:08,680 --> 00:29:12,360
What was actually going on was,
you know, giant corruption

573
00:29:12,360 --> 00:29:16,480
really, where the scarce foreign
exchange that the central bank

574
00:29:16,480 --> 00:29:20,120
had was being allocated to
favorable or to favorite

575
00:29:20,200 --> 00:29:22,720
parties.
So there was a black market that

576
00:29:22,720 --> 00:29:26,640
developed in the true exchange
rate was more like 950 or 1000

577
00:29:26,640 --> 00:29:28,360
to more than double the official
rate.

578
00:29:28,840 --> 00:29:32,440
So I took the view that it was
uninvestable at that time for me

579
00:29:32,440 --> 00:29:35,360
as someone putting new money in
because how the hell was I ever

580
00:29:35,360 --> 00:29:38,000
going to get it out?
That said, I did find a way of

581
00:29:38,000 --> 00:29:41,480
getting money in at a much
better exchange rate by buying

582
00:29:41,520 --> 00:29:43,600
jewel listed companies.
There are some Jewel listed

583
00:29:43,600 --> 00:29:46,960
Nigerian shares in in London.
So you could buy the shares in

584
00:29:46,960 --> 00:29:50,120
London at the black market
exchange rate effectively and

585
00:29:50,120 --> 00:29:53,880
then transfer those shares into
Nigeria and sell them and get a

586
00:29:53,920 --> 00:29:57,240
a much larger amount of local
currency than you would by

587
00:29:57,240 --> 00:29:59,960
wiring your dollars straight in
at the official pegged rate.

588
00:30:00,720 --> 00:30:02,720
So we tested that.
We put a little bit of money in,

589
00:30:03,240 --> 00:30:06,320
but in subsequent years there
was a change of a regime.

590
00:30:06,320 --> 00:30:09,640
New president came in and in his
inauguration speech he basically

591
00:30:09,640 --> 00:30:13,360
said, right, the fixed currency
is gone, Currency as of tomorrow

592
00:30:13,360 --> 00:30:17,160
is free floating and we've
actually made money in Nigeria

593
00:30:17,160 --> 00:30:19,120
since then.
We don't have a huge percentage

594
00:30:19,120 --> 00:30:22,360
of the fund in Nigeria.
I think it's about 8% versus

595
00:30:22,360 --> 00:30:26,280
sort of 35% in in Tanzania and
30% in Kenya.

596
00:30:26,600 --> 00:30:30,520
But at the moment it is actually
back to being on the radar and

597
00:30:30,520 --> 00:30:33,440
investable because of the
currency convertibility problem

598
00:30:33,440 --> 00:30:35,640
having been fixed to a large
extent.

599
00:30:35,680 --> 00:30:38,000
And we actually have a small
position in something that

600
00:30:38,080 --> 00:30:40,400
that's gone up six fold so far
this year.

601
00:30:40,960 --> 00:30:44,040
That reminds me a bit of my old
days, investing in the right

602
00:30:44,040 --> 00:30:47,000
mining stock so you can really
get some big pops.

603
00:30:47,480 --> 00:30:49,800
Either 6 fold or one sixth in a
short period of time.

604
00:30:49,800 --> 00:30:50,800
Yeah, yeah, there.
You.

605
00:30:51,160 --> 00:30:55,600
Go, is it possible?
So like, do do you tend to kind

606
00:30:55,600 --> 00:30:58,200
of have a bit of a sense when a
country is becoming more hostile

607
00:30:58,200 --> 00:30:59,960
to foreign capital?
We get this all the time in

608
00:30:59,960 --> 00:31:03,040
mining where regime change comes
and all of a sudden the

609
00:31:03,040 --> 00:31:05,520
conditions are far more onerous
and hostile on the existing

610
00:31:05,520 --> 00:31:07,280
mines.
The government wants to

611
00:31:07,360 --> 00:31:10,120
expropriate a larger percentage
of the pie and you can't have to

612
00:31:10,120 --> 00:31:12,880
say yes.
Otherwise I face a very lengthy

613
00:31:12,880 --> 00:31:15,400
kind of arbitration process and
that deters foreign capital.

614
00:31:15,400 --> 00:31:18,360
Can you see those sort of
symptoms coming before they do?

615
00:31:19,920 --> 00:31:23,240
Tough question.
It is a pattern across Africa.

616
00:31:23,240 --> 00:31:28,520
And if you step back and look at
the reasons why, institutions

617
00:31:28,680 --> 00:31:32,680
tend to be quite weak and the
culture tends to be based on

618
00:31:32,880 --> 00:31:35,280
personalities and strong
leaders.

619
00:31:35,760 --> 00:31:38,720
And I guess it's a function of
the tribal nature of a lot of

620
00:31:38,720 --> 00:31:40,320
the societies in these
countries.

621
00:31:40,760 --> 00:31:43,680
Although in other parts of the
world that was also the case,

622
00:31:43,680 --> 00:31:45,160
but a lot further back in
history.

623
00:31:45,680 --> 00:31:50,720
So generally what you'll find is
even a president from the same

624
00:31:51,120 --> 00:31:55,520
political party taking over from
his or her predecessor might

625
00:31:55,520 --> 00:31:58,920
have completely different
policies because it's based on

626
00:31:58,960 --> 00:32:01,640
that person and the kind of
people who follow them.

627
00:32:02,080 --> 00:32:06,480
So yes, if you're a mining
company that wants to develop a

628
00:32:06,480 --> 00:32:10,120
great ore body over a period of
decades, you do have that

629
00:32:10,120 --> 00:32:14,320
problem because you do a deal
with whoever's in power and

630
00:32:14,360 --> 00:32:17,800
everyone's happy.
The regime changes, whether it

631
00:32:17,800 --> 00:32:22,080
be a new political party coming
in or a new strongman or even a

632
00:32:22,080 --> 00:32:25,600
person from the same political
party as in Tanzania, the same

633
00:32:25,600 --> 00:32:28,320
political party has been in
power ever since independence,

634
00:32:28,320 --> 00:32:31,920
like over 60 years.
But the personality that comes

635
00:32:31,920 --> 00:32:35,480
in and occupies the seat will
have a different view on things.

636
00:32:35,480 --> 00:32:37,520
They'll have different hangers
on that they have to keep happy

637
00:32:37,520 --> 00:32:39,400
and whatever.
So there's always that danger

638
00:32:39,400 --> 00:32:44,120
that the rules of the game
change and I don't really see

639
00:32:44,720 --> 00:32:49,200
anywhere where that doesn't
apply or where it's going to get

640
00:32:49,560 --> 00:32:53,920
all cleaned up and made
predictable anytime soon.

641
00:32:54,760 --> 00:32:58,000
Maybe a place like Botswana is a
little bit easier to operate in

642
00:32:58,000 --> 00:33:01,280
than a lot of other countries
where the institution seem a

643
00:33:01,280 --> 00:33:04,440
little bit stronger and rules
are followed more regularly.

644
00:33:04,880 --> 00:33:07,760
So I guess, yeah, as a
shareholder, you just have to

645
00:33:07,760 --> 00:33:11,360
face the fact that there is that
risk and it's something that the

646
00:33:11,360 --> 00:33:14,080
company that you've invested in
also needs to be cognizant of

647
00:33:14,080 --> 00:33:16,440
and know how to manage.
One observation I have of a lot

648
00:33:16,440 --> 00:33:19,560
of the money companies that
right in Africa is a tendency to

649
00:33:19,560 --> 00:33:24,280
maybe try to minimize the
payable tax by using interesting

650
00:33:24,280 --> 00:33:27,400
structures or transfer pricing
mechanisms to avoid what rather

651
00:33:27,400 --> 00:33:30,400
wise be pretty onerous tax
regime imposed by the local

652
00:33:30,680 --> 00:33:32,320
country.
Do you have any observations on

653
00:33:32,320 --> 00:33:36,200
that strategy amongst the full
of companies that you actually

654
00:33:36,200 --> 00:33:39,520
invest in?
Is it typically just an avoided

655
00:33:39,520 --> 00:33:42,040
strategy because you pay the
piper even more down the track

656
00:33:42,040 --> 00:33:44,800
or what?
That's a very good topic.

657
00:33:44,800 --> 00:33:48,280
This is a very complex topic.
And yes, the knock on natural

658
00:33:48,280 --> 00:33:50,960
resources companies, which are
seen as more extractive and

659
00:33:50,960 --> 00:33:55,080
exploitive by everyone, but it
also applies to multinational

660
00:33:55,080 --> 00:33:58,400
consumer companies, that of the
type that we invest in.

661
00:33:58,720 --> 00:34:01,960
It's definitely an issue.
A typical structure that

662
00:34:02,120 --> 00:34:06,360
companies that we own will have
is a multinational controlling

663
00:34:06,360 --> 00:34:10,080
shareholder that might have
between 60 and 75% ownership of

664
00:34:10,080 --> 00:34:14,520
the local company.
And then the remaining third or

665
00:34:14,520 --> 00:34:17,960
one quarter of the shares will
be in the hands of local

666
00:34:17,960 --> 00:34:20,920
institutional investors, pension
funds, high net worth people

667
00:34:20,920 --> 00:34:23,480
living locally, foreign funds
like mine.

668
00:34:24,080 --> 00:34:31,440
And if the multinational company
is a good corporate citizen and

669
00:34:31,719 --> 00:34:36,280
pays its obligations and avoids
any sort of egregious transfer

670
00:34:36,280 --> 00:34:38,360
pricing strategies and
everything's hunky Dory.

671
00:34:38,880 --> 00:34:42,600
And often the governments
recognize that these companies

672
00:34:42,760 --> 00:34:47,560
are very good employers and
they're in the formal sector.

673
00:34:47,719 --> 00:34:50,239
They all pay their tax
obligations.

674
00:34:50,239 --> 00:34:53,840
Their employees are in the
system and on the books as pay

675
00:34:53,840 --> 00:34:56,920
as you go taxpayers.
And so they're compliant with

676
00:34:56,920 --> 00:35:00,640
VAT and other Texas.
So the government does very well

677
00:35:00,640 --> 00:35:03,480
by having those kinds of of
companies operating in their

678
00:35:03,480 --> 00:35:06,240
countries.
There are instances however,

679
00:35:06,240 --> 00:35:11,640
where the multinationals try and
push it too far and there are in

680
00:35:11,640 --> 00:35:14,800
fact a couple of companies that
we're invested in now where

681
00:35:14,840 --> 00:35:17,960
we're starting to see things
that we don't particularly like.

682
00:35:18,160 --> 00:35:22,080
So we need to raise it with with
managements, but it's not unique

683
00:35:22,160 --> 00:35:25,760
to mining and natural resources.
When you are selling a product

684
00:35:26,080 --> 00:35:28,960
locally to local consumers, I
guess it's a little bit

685
00:35:28,960 --> 00:35:31,680
different from when you're just
taking it and putting it on a

686
00:35:31,680 --> 00:35:34,040
boat and then sending it
overseas and booking all the

687
00:35:34,040 --> 00:35:36,200
profits offshore and not leaving
much behind.

688
00:35:36,200 --> 00:35:39,320
So I think that's where
sometimes the mining industry

689
00:35:39,320 --> 00:35:41,960
gets a bit of a bad Rep.
I'm keen to get your thoughts on

690
00:35:41,960 --> 00:35:44,880
a couple of different up and
coming or established mining

691
00:35:45,280 --> 00:35:47,440
investment jurisdictions at the
moment.

692
00:35:47,440 --> 00:35:50,360
And I understand there might be
a different lens you'd apply to

693
00:35:50,400 --> 00:35:52,840
a foreign mining company
building mine in X country

694
00:35:52,840 --> 00:35:55,520
versus you investing in an
industrials company listed on

695
00:35:55,520 --> 00:35:58,880
that country's Stock Exchange.
But just curious to understand

696
00:35:58,880 --> 00:36:02,920
your take on the investability
of a few different African

697
00:36:02,920 --> 00:36:05,920
jurisdictions at the moment that
with Kenya?

698
00:36:06,560 --> 00:36:10,680
Kenya does not in general have a
lot of natural resources.

699
00:36:10,840 --> 00:36:14,960
So I think the government in
Kenya, you know, maybe they

700
00:36:14,960 --> 00:36:18,800
weren't as focused on extractive
industries, frameworks and laws

701
00:36:18,800 --> 00:36:21,920
and so on, but it was definitely
possible for them to operate

702
00:36:21,920 --> 00:36:25,280
there and I don't think they had
any huge challenges.

703
00:36:26,320 --> 00:36:30,680
Next door in Uganda, I think the
regime is quite favourably

704
00:36:30,680 --> 00:36:34,440
inclined towards mining and oil
and gas projects is the huge

705
00:36:34,440 --> 00:36:38,400
East African oil pipeline that's
running from Uganda down through

706
00:36:38,400 --> 00:36:40,440
Tanzania to the coast.
Tanga.

707
00:36:40,840 --> 00:36:44,080
The problem they've had is, is
sort of climate change activists

708
00:36:44,080 --> 00:36:47,600
not wanting Western banks,
Oregon financial institutions to

709
00:36:47,600 --> 00:36:50,640
to fund it.
But Uganda it it seems quite

710
00:36:50,640 --> 00:36:53,880
favorable and their currency has
been quite stable because of the

711
00:36:53,880 --> 00:36:56,680
anticipation of this FX that's
that's going to come in.

712
00:36:56,680 --> 00:36:58,480
It's also big agricultural
exporter.

713
00:36:58,920 --> 00:37:03,640
DRC remains, you know, like the
Wild West, a lot of people

714
00:37:03,640 --> 00:37:07,360
making a lot of money there,
sadly a lot of it in in sketchy

715
00:37:07,360 --> 00:37:10,240
fashion.
Zambia is a jurisdiction that's

716
00:37:10,240 --> 00:37:13,200
very pro mining.
It's had other issues with the

717
00:37:13,200 --> 00:37:16,800
drought and currency weakness
because of a debt default.

718
00:37:16,840 --> 00:37:18,720
They borrowed a lot of money
from the Chinese and they

719
00:37:18,720 --> 00:37:21,440
couldn't pay back about a decade
ago and they've been trying to

720
00:37:21,440 --> 00:37:25,800
work through that.
Jana remains a very favorable

721
00:37:25,800 --> 00:37:28,040
jurisdiction for mining.
I think there are a lot of

722
00:37:28,040 --> 00:37:29,680
Australian companies operating
over there.

723
00:37:29,800 --> 00:37:32,640
Botswana remains a good
jurisdiction and we still

724
00:37:32,640 --> 00:37:36,320
operate, as far as I'm
concerned, Zimbabwe, you know,

725
00:37:36,320 --> 00:37:38,160
as I said, I have a history with
the Zimplats.

726
00:37:38,200 --> 00:37:40,480
There are one or two gold
companies that are doing quite

727
00:37:40,480 --> 00:37:43,040
well.
Just the currency problems in

728
00:37:43,040 --> 00:37:45,240
Zimbabwe make it uninvestable
for us.

729
00:37:45,240 --> 00:37:48,920
It's just too hard because they
still haven't got their currency

730
00:37:49,880 --> 00:37:53,320
into any kind of pattern where
it doesn't sort of devalue by

731
00:37:53,320 --> 00:37:55,480
1000%.
Every year they adopted the

732
00:37:55,480 --> 00:37:57,520
dollar.
The latest is that they've got a

733
00:37:57,520 --> 00:38:01,160
new thing called the Zig, which
is the Zimbabwean gold.

734
00:38:01,160 --> 00:38:04,480
So it's supposedly pegged to
gold and that's not working

735
00:38:04,520 --> 00:38:07,560
either.
So, you know, the place does

736
00:38:07,560 --> 00:38:11,120
still function.
And as Implants proves, you can

737
00:38:11,120 --> 00:38:15,200
find ways of getting through it.
What are the most underrated

738
00:38:15,360 --> 00:38:19,560
frontier markets that the
general population has kind of

739
00:38:19,920 --> 00:38:22,600
ruled off, but you can see them
as on the rise or improving

740
00:38:22,600 --> 00:38:24,440
governance, improving rule of
law, etcetera?

741
00:38:26,240 --> 00:38:30,800
So, you know, of the top ten
fastest growing economies in the

742
00:38:30,800 --> 00:38:34,800
world at the moment, I think six
or seven are in, you know, my

743
00:38:34,800 --> 00:38:37,960
university in Africa.
And it's really just not

744
00:38:37,960 --> 00:38:40,400
something that the rest of the
world is focused on.

745
00:38:40,960 --> 00:38:44,600
And I guess it takes a while for
biases to change and for the

746
00:38:44,600 --> 00:38:48,240
word to get out and things to
improve for the perception of

747
00:38:48,240 --> 00:38:51,440
the risks and so on.
It's still much riskier

748
00:38:51,440 --> 00:38:54,320
investing in most of these
markets, but you get paid very

749
00:38:54,320 --> 00:38:56,720
well to take on that risk.
Like you get more than

750
00:38:56,720 --> 00:38:59,680
compensated for those risks.
That's kind of the the thesis

751
00:38:59,680 --> 00:39:01,960
that I have.
But there are countries that are

752
00:39:01,960 --> 00:39:05,880
really making an effort to clean
up their act and become, you

753
00:39:05,880 --> 00:39:08,080
know, beacons of good governance
and this sort of thing.

754
00:39:08,160 --> 00:39:10,640
A lot of people cite Rwanda as
an example of that.

755
00:39:10,760 --> 00:39:13,440
You know, they're, they're
really serious about becoming

756
00:39:13,440 --> 00:39:15,320
the Singapore of Asia, as they
call it.

757
00:39:15,920 --> 00:39:18,360
You go to Kigali and the streets
are spotless.

758
00:39:18,440 --> 00:39:22,360
You know, there's, there's, you
know, rules and regulations and

759
00:39:22,360 --> 00:39:26,680
order and a lot of countries are
trying to clean things up.

760
00:39:27,480 --> 00:39:30,680
But at the same time, you know,
frontier markets are very

761
00:39:30,680 --> 00:39:32,840
fragile.
There are laws and rules and

762
00:39:32,840 --> 00:39:35,720
regulations on the books that
aren't necessarily followed.

763
00:39:35,720 --> 00:39:39,480
And part of the skill of doing
business and investing here is

764
00:39:39,600 --> 00:39:43,480
working how to meander through
the system that way.

765
00:39:44,040 --> 00:39:46,600
Tanzania is an odd country
because it has a socialist

766
00:39:46,600 --> 00:39:49,200
history, but it's certainly
being one that's done very well

767
00:39:49,200 --> 00:39:53,280
for me, largely as a result of
me going in when it was at a

768
00:39:53,280 --> 00:39:56,840
cyclical low and then a change
of regime that was more foreign

769
00:39:56,840 --> 00:39:59,520
investment friendly and
improvements happening.

770
00:39:59,520 --> 00:40:05,200
In that regard I am.
Cautiously optimistic on the

771
00:40:05,200 --> 00:40:07,360
long term future of a place like
Namibia.

772
00:40:07,360 --> 00:40:10,440
They've made some very
significant offshore oil

773
00:40:10,440 --> 00:40:12,360
discoveries.
If the government can get that

774
00:40:12,360 --> 00:40:16,200
right, I think it's total that
has said that they are probably

775
00:40:16,200 --> 00:40:19,040
going to go ahead with theirs.
Even in a place like Nigeria.

776
00:40:19,040 --> 00:40:21,880
They've taken some very hard
economic decisions, swallowed

777
00:40:21,880 --> 00:40:24,760
some bitter medicine and things
hopefully can improve because of

778
00:40:24,760 --> 00:40:26,520
that.
They've sort of got 30%

779
00:40:26,520 --> 00:40:29,400
inflation at the moment, but
they've liberalized the exchange

780
00:40:29,400 --> 00:40:31,160
rate.
They've recognized that they

781
00:40:31,160 --> 00:40:34,360
need to get on top of the theft
of oil, get people investing

782
00:40:34,360 --> 00:40:37,080
back in the oil industry there.
So everyone always thinks I'm

783
00:40:37,080 --> 00:40:40,240
crazy investing in Nigeria and
going there frequently, but it's

784
00:40:40,240 --> 00:40:43,640
actually one of the places that
I'm most excited and bullish

785
00:40:43,640 --> 00:40:46,520
about.
It's got a certain energy and

786
00:40:46,520 --> 00:40:49,440
there's a huge entrepreneurial
culture and actually quite enjoy

787
00:40:49,440 --> 00:40:52,320
going to Lagos.
You know, it can go either way.

788
00:40:52,320 --> 00:40:57,440
There are places where you go
into hyperinflation and Malawi

789
00:40:57,440 --> 00:41:00,600
is an example of that.
Recently, you know, small, very

790
00:41:00,600 --> 00:41:04,160
poor country down to the South,
the West of Tanzania.

791
00:41:04,160 --> 00:41:08,680
But there were a few interesting
businesses there that I did look

792
00:41:08,680 --> 00:41:10,440
at.
I never ended up investing but.

793
00:41:10,440 --> 00:41:12,440
Uranium restart project out that
way.

794
00:41:12,480 --> 00:41:15,720
Yeah, there's a few Aussie
company executive there as well,

795
00:41:15,720 --> 00:41:18,080
I think there's.
Sovereign metals, yeah.

796
00:41:18,880 --> 00:41:23,200
Yeah, I sort of heard mixed
things about uranium while we're

797
00:41:23,200 --> 00:41:25,400
on the topic.
Yeah, because of national

798
00:41:25,400 --> 00:41:27,920
security concerns.
You know, the CIA doesn't want

799
00:41:27,920 --> 00:41:35,040
anyone taking uranium from
Malawi out to the Western ports.

800
00:41:35,440 --> 00:41:38,880
They want it to come through,
you know, say, Kenya, where they

801
00:41:38,880 --> 00:41:41,920
have more influence.
Yeah, there's all these factors

802
00:41:41,920 --> 00:41:44,120
that you have to take into
consideration when you're

803
00:41:44,120 --> 00:41:47,640
looking at resources in Africa.
Things are distributed and

804
00:41:47,640 --> 00:41:50,720
landlocked countries, and, you
know, the product has to

805
00:41:50,720 --> 00:41:52,720
traverse a lot of other
countries before it actually

806
00:41:52,720 --> 00:41:55,000
gets out to the ocean and gets
shipped off.

807
00:41:55,720 --> 00:41:58,600
So that was interesting, but we
went off on a tangent there a

808
00:41:58,600 --> 00:42:00,400
bit.
So what I was saying is Malawi

809
00:42:00,400 --> 00:42:03,800
was it's sort of gone into
hyperinflation, but the stock

810
00:42:03,800 --> 00:42:06,080
market's actually done very well
because there's a lot of people

811
00:42:06,080 --> 00:42:11,280
that will go into shares as a
way of trying to preserve their

812
00:42:11,280 --> 00:42:14,040
wealth, if that makes sense.
And the same in Zimbabwe, you

813
00:42:14,040 --> 00:42:18,760
know, if you own a productive
hard asset with your paper

814
00:42:18,760 --> 00:42:21,000
money, it tends to hold its
value.

815
00:42:21,680 --> 00:42:24,560
And I think there's been a
little bit of that phenomenon

816
00:42:24,720 --> 00:42:28,840
going on in a place like Malawi
also in Zambia to some extent,

817
00:42:29,040 --> 00:42:30,960
and obviously Zimbabwe since way
back.

818
00:42:30,960 --> 00:42:33,960
You know, you buy land or you
can buy a listed company that

819
00:42:33,960 --> 00:42:38,840
owns land, and that's going to
serve as an inflation hedge to

820
00:42:38,840 --> 00:42:41,080
some degree.
You never heard much good about

821
00:42:41,080 --> 00:42:44,200
Burkina Far, so some wonderful
gold mines there.

822
00:42:44,400 --> 00:42:50,600
But yeah, so the the old Sahel
region, for whatever reason,

823
00:42:50,600 --> 00:42:53,520
seems to be very fragile.
Obviously there's there's

824
00:42:53,520 --> 00:42:57,080
problems with, you know, just
the the quality of agricultural

825
00:42:57,080 --> 00:42:58,280
land there.
They're not being able to

826
00:42:58,280 --> 00:43:01,480
support populations and, you
know, desertification.

827
00:43:01,960 --> 00:43:05,960
And I guess that's given rise to
these sort of strong men, rulers

828
00:43:05,960 --> 00:43:09,800
that rise up and promise that
they're gonna fix everything for

829
00:43:09,800 --> 00:43:13,760
people and they gain popularity
for a while while they get given

830
00:43:13,760 --> 00:43:15,880
a few years to deliver the
goods.

831
00:43:15,880 --> 00:43:17,600
And then they never end up doing
so.

832
00:43:17,600 --> 00:43:22,040
So it's not a country that I've
visited or I'm particularly

833
00:43:22,240 --> 00:43:28,280
familiar with, but I think
between a gold mine, you know,

834
00:43:28,280 --> 00:43:32,440
with two grams a ton in Ghana
and one with 20 grams a ton in

835
00:43:32,440 --> 00:43:34,960
Burkina Faso, you're probably
still gonna go for the one in

836
00:43:34,960 --> 00:43:37,480
Ghana just because of the
political risks.

837
00:43:37,480 --> 00:43:38,880
That's.
The seems to be the pattern.

838
00:43:39,360 --> 00:43:40,600
Seems to be the pattern, doesn't
it?

839
00:43:40,720 --> 00:43:42,640
Yeah, well, that's the big take
away.

840
00:43:44,760 --> 00:43:46,480
Just coming to understand your
approach.

841
00:43:47,120 --> 00:43:50,160
Every return has got a degree of
risk you're willing to accept to

842
00:43:50,560 --> 00:43:53,200
try and get that return.
Yeah, you've either got

843
00:43:53,200 --> 00:43:56,960
geological risk or you've got
green type, red type and that

844
00:43:56,960 --> 00:44:03,400
sort of risk.
And for me, when I invest, I'm

845
00:44:04,320 --> 00:44:07,040
basically my mandate is to try
and buy companies that I think

846
00:44:07,040 --> 00:44:11,160
can double their sales and
profits in five years and then

847
00:44:11,160 --> 00:44:14,000
buy them at valuations I think
are low enough that they can

848
00:44:14,000 --> 00:44:16,520
also double.
So if I get both of those things

849
00:44:16,520 --> 00:44:20,040
right with a stock, then it's
got the potential to go Forex in

850
00:44:20,040 --> 00:44:22,200
five years.
Now I'm obviously not going to

851
00:44:22,200 --> 00:44:25,560
get that with everyone, but if I
get enough of them and I don't

852
00:44:25,560 --> 00:44:29,960
have too many disasters, then we
should be able to deliver on our

853
00:44:30,840 --> 00:44:34,480
target, which is to sort of
double people's money every five

854
00:44:34,480 --> 00:44:37,600
years.
So that's what, 14.7% compound

855
00:44:37,600 --> 00:44:39,960
or something like that.
And we're actually on target.

856
00:44:39,960 --> 00:44:43,560
We've been running the fund for
between 4 1/2 and five years

857
00:44:43,560 --> 00:44:46,200
now.
And up until the end of April,

858
00:44:46,200 --> 00:44:50,160
we were compounding at 15.2%.
That's in U.S. dollar terms

859
00:44:50,160 --> 00:44:54,000
after all expenses.
And we've just had a huge month

860
00:44:54,000 --> 00:44:56,960
in May, I think the fund was up
about 8%.

861
00:44:57,200 --> 00:45:00,160
So we've actually vaulted well
above that rate of compound

862
00:45:00,160 --> 00:45:04,160
return that we need to keep our
fund on target to meet what we

863
00:45:04,800 --> 00:45:08,480
indicated investors should
expect if things all go right.

864
00:45:09,080 --> 00:45:14,040
But that's basically my hurdle.
I'm looking for at least 15% of

865
00:45:14,040 --> 00:45:17,160
return on investment in hard
currency for anything that I

866
00:45:17,160 --> 00:45:20,880
invest in.
And to generate a hard currency

867
00:45:20,880 --> 00:45:25,400
return of 15%, you typically you
need to earn several percentage

868
00:45:25,400 --> 00:45:28,520
points above that in local
currency terms because there is

869
00:45:28,520 --> 00:45:32,160
the tendency for these
currencies in frontier markets

870
00:45:32,160 --> 00:45:35,320
to depreciate quite
significantly as time goes by.

871
00:45:35,960 --> 00:45:38,920
But even then, yeah, you can't
put them all in the same bucket.

872
00:45:39,360 --> 00:45:42,000
There are countries that are
better governed and have much

873
00:45:42,000 --> 00:45:45,440
lower inflation rates and
currencies that tend to be a bit

874
00:45:45,440 --> 00:45:48,160
stronger.
So in Tanzania, inflation's

875
00:45:48,440 --> 00:45:51,000
never been above 5% of the time
I've been living there.

876
00:45:51,880 --> 00:45:54,800
Kenya has some debt issues.
The government there is pretty

877
00:45:55,280 --> 00:45:57,360
indebted.
But the inflation rate there has

878
00:45:57,360 --> 00:46:00,160
also never spiraled out of
control all the way it has in

879
00:46:00,160 --> 00:46:05,200
places like Malawi and Nigeria.
So when you're investing in

880
00:46:05,200 --> 00:46:08,240
mining stocks, probably you want
a slightly higher return than

881
00:46:08,240 --> 00:46:10,600
15% just because there's extra
risks.

882
00:46:10,600 --> 00:46:15,080
I mean, I'm buying big, well
known companies that are

883
00:46:15,320 --> 00:46:17,760
dominant in their industries in
these markets.

884
00:46:17,760 --> 00:46:19,920
So typically I'll own the
biggest beer company, the

885
00:46:19,920 --> 00:46:23,760
biggest mobile phone company,
the biggest bank, as long as

886
00:46:23,760 --> 00:46:25,880
evaluations are right.
Like I'm not just buying those

887
00:46:25,880 --> 00:46:28,280
things blindly.
I'm just buying them when I

888
00:46:28,280 --> 00:46:33,840
think everything stacks up.
But it's far less likely for an

889
00:46:33,840 --> 00:46:39,080
African frontier government to
come in and try and meddle in

890
00:46:39,080 --> 00:46:43,760
the affairs of say, Tanzania
Breweries, which controls 75% of

891
00:46:43,760 --> 00:46:46,720
the beer industry in Tanzania.
Whereas if you're a foreign

892
00:46:46,720 --> 00:46:49,920
company operating a gold mine,
then you know you've got a bit

893
00:46:49,920 --> 00:46:52,560
of a target painted on your back
in some respects.

894
00:46:52,560 --> 00:46:54,960
I don't know what your audience
is looking for with their mining

895
00:46:54,960 --> 00:46:57,560
investment returns, but if it
were me, I think I'd be looking

896
00:46:57,560 --> 00:47:01,600
for somewhere in the 20 to 30%
range for a hurdle, which is not

897
00:47:01,600 --> 00:47:03,920
easy.
But risks are everywhere, even

898
00:47:03,920 --> 00:47:07,720
in developed markets nowadays,
so maybe they've come more

899
00:47:07,720 --> 00:47:11,600
towards my end of the spectrum.
Maybe they have.

900
00:47:11,800 --> 00:47:13,760
That's the way I look at it.
Really appreciate that.

901
00:47:13,760 --> 00:47:15,560
Thanks for coming on.
No worries.

902
00:47:15,640 --> 00:47:17,000
All right mate, that was
fantastic.

903
00:47:17,000 --> 00:47:19,480
I hope the money miners enjoyed
that one as much as I did.

904
00:47:19,720 --> 00:47:22,720
A big thank you to Mineral
Mining Services, grounded sand,

905
00:47:22,720 --> 00:47:26,320
big ground support, K drill and
cross boundary energy now.

906
00:47:27,960 --> 00:47:30,720
Remember, I'm an idiot.
JD is an idiot.

907
00:47:31,040 --> 00:47:33,120
If you thought any of this was
anything other than

908
00:47:33,120 --> 00:47:35,840
entertainment, you're an idiot
and you need to read out a

909
00:47:35,840 --> 00:47:36,320
disclaimer.