Never Compromise on Stock Quality (Dave Franklyn)

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All right, money miners, we have
a, we could chat to share with

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you today with none other than
Dave Franklin.

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So a lot of the money miners
would know Dave, he runs the

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Argonaut Natural Resource Fund.
And why I think we both are very

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attracted to him mate, is that
he has this investment

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philosophy that is very similar
to to the two of us there.

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There's parts of that that
really resonate with the the two

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of us and.
What is that?

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The the, the phrase to capture
it best is not compromising on

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value as well as sort of getting
in the weeds on companies

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running up through the the ramp
up cycle, understanding the the

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cost curve really well and
trying to be disciplined

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throughout, which is something I
think we can, we can all learn

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off.
And here we go.

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Let's get to it, Dave Franklin.
This is suddenly not a stock

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pickers market again.
What are you making of it?

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Yeah, look, well, I think it'll,
it is always a stock pickers

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market, right.
So I think there's times where

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where there's, you know,
commodities and resources is

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generally running, but there's
times like now where it's pretty

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tough and and really you got to
sort of eke out the the

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opportunities as you find them.
So you know, as, as, as you guys

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would know, we're high
conviction.

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So typically we have a large
portion of our portfolio in in

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the top five or ten stocks and
that's that's where we're at now

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and we think we'll do well from
that.

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What are you making of the the
broader macro environment?

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Take it anywhere you want.
The trade war, China, energy,

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commodities.
Yeah.

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Well, I think the two, the two
places you got to look what's

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going on is, is the US and, and
China.

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And maybe starting with China,
the way I look at it is they're

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going through a transition much
like I think the US is going

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through a transition, but but
it's a bit different.

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I mean, what's happened with
China in the last five years is

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firstly, they locked down their
population for three years

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roughly with COVID.
And then when they let them out,

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they then slam their wealth by
crushing the, the property

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market.
So, so you had a, a population

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that really didn't want to spend
money.

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And now I think the Chinese
government is realizing that

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their next step of growth needs
to come from domestic demand

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and, and getting their
population to spend.

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And, and it's easier said than
done, right?

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So they've done a few baby steps
on the stimulus side, but really

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I think what you need to see is
some major stimulus.

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And I think that'll be one of
the key drivers for the resource

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market.
Now, having said that, I think

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they're also stepping back a bit
and just saying, well, what's

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happening in the US and before
we make a big commitment, you

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know, let's see how that that
that goes forward.

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So I think China's a really
interesting position and I think

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they're very committed to 5%
growth.

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And particularly where they're
under pressure from the US, I

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think they'll they'll really
stick to that.

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So I think you will see
stimulus.

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Do you think, do you think that
stimulus is, it takes the shape

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of different types of stimulus
that we've grown accustomed to

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in the past given yeah, a big
kind of day tour from the the

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risk associated with property
stimuli.

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Well, I think you're right.
I think what they need to do is

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they need to put more money in
the hands of the people and get

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them spending.
And you know, it's the other

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side of of what Trump is is
talking about now, right, Where

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all the products that are being
reduced in China, you know, the

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vast majority is being being
exported and sold into other

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economies where I think the
Chinese population needs to step

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up and the economy needs to be a
bit more self self perpetuating.

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So, you know, I think that's I,
you know, I think that's going

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through a transition and I think
that's going to be positive for

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resources.
It's it's like a it's a catch 22

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with China in some ways, because
in order to have private

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investment or, you know, firms
investing well, there has to be

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kind of sufficient profitability
for them to make the investment.

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Obviously big savings is a is a
phenomenon in China.

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Yeah.
So how do you how do you survive

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or the investment?
Well, one of the things that

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counteracts that is the massive
ambitions to to have

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overcapacity that kind of
reduces the firm's

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profitability.
Do you envisage them actually

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rolling out some supply side
policies to maybe reduce the,

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you know, the overcapacity
things return firms to

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profitability and that then you
get, you know, firm

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profitability, then you get
confidence and that kind of

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thing?
Or do you think that that will

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just continue in their
endeavours to that?

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Yeah.
I mean, I think it's a bit of a

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mix.
Do you know what's, as we all

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know, what's different about
China is they take a longer term

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view and the, the EV market and,
and the general production of,

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of batteries is a really good
example of that where they take

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a long term view.
They devote a lot of capital to

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it.
And, and over time they have

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have dominated that market.
And you know, we're talking to

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someone yesterday and they're
saying the cost of a, a battery

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now is essentially halved in the
last 18 months.

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So they, they reduce their cost
of production so much so then

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they can dominate the supply
globally.

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And I think that's, that's,
that's, I think that's part of

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their business strategy.
You know, rarer, if you look at

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how that flows through to
commodities, you got lithium

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prices down the dumps and
rarer's prices down the dumps.

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And that's really a function of
that.

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They're just, they're driven
prices down by dominating supply

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and then that flows through to
the to the to the end products.

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Do you do you think Australia is
in a is in an extremely

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difficult position and and how
do you think it plays out like

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our security partner in the US?
Yeah, now by far largest

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customer in China that that
seems like a head on collision

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that's still on the horizon,
but.

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Well, it's a precarious position
for Australia where you kind of

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walking that tightrope between
your biggest customer and your

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and your, yeah, global economic
partner, I guess, and security

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partner, yeah, so.
We Start learning Mandarin.

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Yeah, you know, I'd like to
think.

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They've been accused of being on
the Chinese.

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Payroll so driving you but like
there's.

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A middle ground there.
You know, the good thing is

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we've got stuff that China wants
and we've got stuff that the US

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wants.
Probably what we need to see is,

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is is strong political leaders
that take advantage of of that

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situation, right, I think.
In a while since we've seen one

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of them.
Well, exactly, exactly.

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But it's probably worth just
touching on the US on the other

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side of China.
And you know, like I'm not the

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greatest fan of of Donald Trump,
right?

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But and he's a polarizing
figure.

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And you know, I think the
frustration we're all seeing

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investment markets is he has a
very chaotic management style,

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which means that volatility is
going to follow him, you know,

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while while he's in office.
But if you look at the US and

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where the US was heading, it was
stagnating.

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And there's some issues they
need to address.

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And the, the big one is, is a
debt position.

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You know, it kept getting
bigger.

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They, you know, their trade
deficit was, was a worry.

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If you look at what they did on
energy policy, the energy prices

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have been high because of the
energy transition, which was

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perhaps managed poorly.
You got a bureaucratic or, you

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know, cost of government
expense, which was out of

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control, you know, planning and
regulation very difficult, You

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know, whether you're building a
house or whether you're building

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a mine, right?
Just the time frames blew out.

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So what you needed is someone to
come in and shake all that up

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and say, look, you know, we keep
going down this path.

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We're going to be in some
serious trouble.

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And, you know, I think the, the
positive is that, you know, when

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you strip away Trump and, and
his style is they're addressing

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some of the issues now come down
to how will they execute?

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And you know, you have to say
with Trump in control, there's

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always risk around that.
But he does have some good

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people around him.
And I think, you know, the

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market is gaining confidence as
Scott Bessent has has has taken

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the lead in a lot of those
negotiations.

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And even if you look at things
like defence, the fact that

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Germany is now stepping up and
probably the rest of Europe will

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step up and and cover a lot of
their costs, that's really given

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their economies a bit of a kick
as well.

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So, you know, I think there is a
silver lining there, if we can,

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if it can be managed, can be
managed properly.

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Yeah, yeah, absolutely.
They've, they've got their work

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cut out for them, right.
And there's, I mean, there's,

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there's heaps of ways we can
kind of take this.

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You have a a portion of the
funding in gold as well.

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And that's been a a huge benefit
of, yeah, what what has

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happened.
How do you see that playing out?

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Yeah.
Well, I mean, you know, it's

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it's gold's time in the sun,
right.

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I remember when we, we started
the fund five years ago and, and

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as we've talked about before,
the way we start is what do we

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think of the key resilient
themes that are impact on, on

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the resource sector.
And the two were sort of energy

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transition and electrification
as one and the other was

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geopolitical risk and a view
that, you know, the world is

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going to go through a period of
increased geopolitical risk.

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And, and I think that's really
played out and they're probably

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still the two key themes you'd
be looking at.

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You know, what's, what's the,
you know, what's going on with

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gold is, is a whole lot of
factors.

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One is 1 is globally, there's
there's plenty of economies and

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plenty of countries that don't
really want to hold U.S. dollar

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assets.
And so they're looking for an

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alternative and that's been a
driver of central bank buying

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over the last, you know, five
years in particular.

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You've got, but then you've also
got, you know, other factors

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like interest rates near their
peak.

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And, and with the geopolitical
situation that we've just been

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talking about, you know, people
want to hold gold as a as a

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store of value.
So there's still a lot of key

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drivers there for for the gold
price.

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It's obviously had a big run
over the last couple of years,

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but I think you're still going
to have it in your portfolio.

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Yeah, yeah, absolutely.
And, and to go back to the the

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geopolitical environment between
China and the US and then, you

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know, the US and the rest of the
world, really we're at a pause

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technically with this tariff
situation.

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But the market has really taken
to heart that this pause will

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continue on indefinitely.
The market is now above what it

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was before Liberation Day.
Yeah.

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Do you think this comes back to
to bite the market soon or do

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you think Trump trying to kind
of forgets about this after

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having seen what happened to the
market?

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Well, I think he was certainly
scared, you know, mid-april when

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the market was really taking.
And I think when when, you know,

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bond yields started to go up
rather than go down and you saw

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an outflow of money from the US,
it really questioned, you know,

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the US is position as a, you
know, as a reserve currency.

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And, and so I think I think he's
going to be aware of that.

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But, you know, I think Trump's
style is go hard and go

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excessive and then sort of
backtrack and come up with a

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deal that that you kind of hope
to get.

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And I think he'll probably end
up giving away more than than he

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wanted to.
So I think he is going to be

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cognizant of where the market's
AT.

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And I think people like Scott
Percent, who I who I mentioned

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before, you know, I think the
best description I heard of him

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is he's kind of the adult in the
room And, and I think you kind

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of need something like that.
So I think you'd have to say

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there's more volatility to come,
right?

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I think just to assume it's all
good from here is, is a bit

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unrealistic.
I hope it's, I hope that is the

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case, but but you've got to
expect volatility.

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So the way you handle that as a
as a fund manager, I think is

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00:11:14,760 --> 00:11:18,400
you kind of prepare for the
worst and and hope for the best

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00:11:18,760 --> 00:11:21,520
and you construct your portfolio
to reflect that.

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Yeah.
You've also got a higher than

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normal cash position from from
what I could last see.

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00:11:27,960 --> 00:11:29,600
Is that still the case and
what's your thinking around

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00:11:29,600 --> 00:11:31,320
that?
Higher than normal cash

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00:11:31,320 --> 00:11:33,480
position.
That is what miners have after

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00:11:33,480 --> 00:11:35,960
they just called KCA.
In fact, mate, all this time

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00:11:35,960 --> 00:11:37,440
we've been telling people to
just call KCA.

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00:11:37,440 --> 00:11:40,440
We've never actually just called
KCA ourselves.

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00:11:40,520 --> 00:11:46,560
That was until today.
Watch this, we got ya.

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00:11:46,600 --> 00:11:50,400
What is the differentiator of of
KCA versus anyone else?

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00:11:51,040 --> 00:11:55,200
For me, it's the flexibility and
the ability to to want to make

237
00:11:55,560 --> 00:11:57,400
our client that's more
successful as well.

238
00:11:57,400 --> 00:11:59,360
Like it's just getting the shift
up.

239
00:11:59,840 --> 00:12:04,000
Yeah, like, and it's making like
if they've got a problem, like

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00:12:04,000 --> 00:12:07,360
what's the issue?
Tell me the problem and if you

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need it, we'll just do it and
we'll try and find a way to make

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00:12:11,400 --> 00:12:14,120
it make it work.
And I guess we'll look at

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00:12:14,120 --> 00:12:16,520
everything.
When like when you say a

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client's got a problem, what
does a problem sometimes look

245
00:12:19,240 --> 00:12:22,520
look like for a client?
A problem could be like a piece

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00:12:22,520 --> 00:12:25,240
of equipment.
So for example, like the client

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00:12:25,480 --> 00:12:28,680
rang up the other day and said
they need a 6020 truck.

248
00:12:29,120 --> 00:12:32,200
You know, we've got a standing
truck like, well, it doesn't,

249
00:12:32,200 --> 00:12:33,560
you know, it's not going to suit
the fleet.

250
00:12:33,920 --> 00:12:36,040
It's a hire truck.
You know, we don't have any

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00:12:36,080 --> 00:12:37,600
parts.
We don't have people trying.

252
00:12:38,080 --> 00:12:42,320
I'm now trying to source a 6020
truck because I want to deliver

253
00:12:42,320 --> 00:12:44,440
to the client.
And obviously it's a, it's a

254
00:12:45,040 --> 00:12:47,280
period of time that we can, we
can justify.

255
00:12:47,720 --> 00:12:49,680
It's just making that happen.
It's not even in fleet.

256
00:12:49,680 --> 00:12:54,480
But how do we make this work for
the client and work for us?

257
00:12:54,880 --> 00:12:56,960
I'm glad that I just called KCA
today.

258
00:12:57,120 --> 00:13:01,840
And you know what, anyone that
has your mobile number, it's in

259
00:13:01,840 --> 00:13:04,560
the show notes.
They can also just call KCAJD.

260
00:13:04,880 --> 00:13:06,760
This is this is what you get
when you just call KCA.

261
00:13:06,760 --> 00:13:11,640
Call KCA.
Well, you know what we do in

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00:13:11,640 --> 00:13:15,000
periods of uncertainty, we've
got a couple of levers that we

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00:13:15,000 --> 00:13:16,880
pull.
The 1st is we say, well, yes,

264
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we're entering into what we
think might be a, a more

265
00:13:19,200 --> 00:13:22,600
volatile time is we try and
reduce our exposure to small cap

266
00:13:22,600 --> 00:13:25,320
stocks and we increase to bigger
cap stocks and, and you know,

267
00:13:25,560 --> 00:13:27,520
and really a focus on quality
and liquidity.

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00:13:27,840 --> 00:13:31,080
The other side to that is, is,
is, is cash.

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00:13:31,080 --> 00:13:35,960
So unusually, we can go to 30%
cash in the portfolio and, and,

270
00:13:36,800 --> 00:13:40,760
and we're at 20% now.
And that's just a reflection of,

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00:13:41,560 --> 00:13:44,080
you know, we want to be able to
move quickly, either invest more

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00:13:44,080 --> 00:13:50,160
or, or, or take more out, you
know, because you know, the way

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00:13:50,160 --> 00:13:52,640
I look at investing in the
resource market is the cyclical

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00:13:52,640 --> 00:13:54,240
market.
And there's obviously also these

275
00:13:54,240 --> 00:13:58,000
geopolitical type factors that
that impacted when the market's

276
00:13:58,000 --> 00:14:00,480
rallying, you want to be a
relative investor and when the

277
00:14:00,480 --> 00:14:02,640
market's falling, you want to be
an absolute investor because no

278
00:14:02,640 --> 00:14:05,800
one likes to lose money.
So you know, you kind of need to

279
00:14:05,800 --> 00:14:07,960
plan your portfolio construction
around that.

280
00:14:08,280 --> 00:14:12,800
What it's such an interesting
point when you think of the,

281
00:14:12,840 --> 00:14:15,800
yeah, the portfolio pressures of
our resources focused by

282
00:14:15,800 --> 00:14:20,200
management because resources by
definition super cyclical, yeah,

283
00:14:20,360 --> 00:14:22,760
you need to have endurance
through the cycle.

284
00:14:22,760 --> 00:14:25,880
And oftentimes our like
resources, multiple resources

285
00:14:25,880 --> 00:14:28,120
are hyper correlated because
they're driven by things like

286
00:14:28,120 --> 00:14:29,480
global demand, China, yada,
yada.

287
00:14:29,800 --> 00:14:32,120
Yeah.
So how do you actually have

288
00:14:32,120 --> 00:14:38,040
absolute return in times when?
The reason is going down well, I

289
00:14:38,040 --> 00:14:41,560
mean, I think the ability to
switch between commodities is is

290
00:14:41,560 --> 00:14:43,760
important.
So as you're saying, a lot of

291
00:14:43,760 --> 00:14:46,320
commodities are are correlated,
but but some aren't.

292
00:14:47,040 --> 00:14:53,320
So number one is, is to try and
target those commodities that

293
00:14:53,320 --> 00:14:55,720
are looking pretty good.
So for example, gold at the

294
00:14:55,720 --> 00:14:58,680
moment is, has been a good place
to be and that's obviously

295
00:14:58,680 --> 00:15:02,280
contributed to, to there's a
portfolio of results.

296
00:15:02,280 --> 00:15:05,600
The second is stock pickings or
you know, as we started stock

297
00:15:05,600 --> 00:15:08,400
pickings always a part of what
you gotta do, right?

298
00:15:08,400 --> 00:15:12,080
So in, in any sector, in any
commodity, there'll be those

299
00:15:12,080 --> 00:15:16,280
stocks that are undervalued and
maybe misunderstood by the

300
00:15:16,280 --> 00:15:17,920
market.
And if you can, if you can get

301
00:15:17,920 --> 00:15:20,240
some gains out of those, then
that's really good.

302
00:15:20,560 --> 00:15:25,000
And then probably the third area
is really that quality liquidity

303
00:15:25,000 --> 00:15:27,680
position in that if you take a
view, the market's gonna fall

304
00:15:28,120 --> 00:15:32,120
And while you can't totally
avoid that, you can be in the

305
00:15:32,120 --> 00:15:34,720
kind of companies going to that
are going to fall less than the

306
00:15:34,720 --> 00:15:37,440
rest of the market.
So you know, for example, you

307
00:15:37,440 --> 00:15:40,200
know, more recently we've
increased our exposure to BHP

308
00:15:40,200 --> 00:15:44,360
and Rio, which really we don't
normally own because we think

309
00:15:44,360 --> 00:15:47,680
there's better value out there.
But what it does in this kind of

310
00:15:47,680 --> 00:15:50,520
market is it provides resource
sector exposure in a pretty

311
00:15:50,520 --> 00:15:54,080
general way.
But pseudo cash, yeah, but

312
00:15:54,440 --> 00:15:56,840
exactly optionality.
But if the market rallies,

313
00:15:56,840 --> 00:16:00,000
you're going to, because it is
the index essentially you're

314
00:16:00,000 --> 00:16:01,760
going to keep, you know, you're
going to get a benefit from

315
00:16:01,760 --> 00:16:02,960
that.
But if it falls, it's going to

316
00:16:02,960 --> 00:16:05,840
fall by less.
So it's really sort of managing

317
00:16:05,840 --> 00:16:07,720
all those, all those levers,
yeah.

318
00:16:07,960 --> 00:16:10,320
You made the comment when we
last spoke about not

319
00:16:10,400 --> 00:16:13,360
compromising on quality and I
think that is what you just said

320
00:16:13,360 --> 00:16:15,400
in in different words.
But I'd love to hear you just

321
00:16:15,920 --> 00:16:19,800
speak more about that because on
the surface, sounds easy,

322
00:16:19,800 --> 00:16:21,440
obvious, understandable.
Yeah.

323
00:16:21,480 --> 00:16:25,080
But to actually stick to that
through, through the mania times

324
00:16:25,080 --> 00:16:28,160
when everything's running and,
you know, be rewarded, yeah.

325
00:16:28,160 --> 00:16:30,200
Or when it goes down Is is not
that easy?

326
00:16:30,400 --> 00:16:34,160
Yeah, you know, we're always
looking.

327
00:16:34,160 --> 00:16:38,040
So how do you, how do you define
quality?

328
00:16:38,320 --> 00:16:40,280
You know, I, I think there's a
number of different ways in

329
00:16:40,280 --> 00:16:44,120
resources you, you know, you,
you got to have a really good

330
00:16:44,120 --> 00:16:47,120
understanding of costs, right?
You know, what is the average

331
00:16:47,120 --> 00:16:49,280
cost across the sector and how
does the company you're looking

332
00:16:49,280 --> 00:16:54,600
at right on that sort of, you
know, on that, on that, on that

333
00:16:54,600 --> 00:16:56,600
line.
So I think that's number one.

334
00:16:56,600 --> 00:17:00,120
I think increasingly and as you
guys know, you know, John

335
00:17:00,120 --> 00:17:04,079
McDonald is working with us,
he's been with us probably

336
00:17:04,079 --> 00:17:07,720
getting on to a year now.
And he's added a lot of value

337
00:17:07,720 --> 00:17:10,480
in, in how you should look at a
resource company.

338
00:17:10,480 --> 00:17:13,920
And, and really what it comes
down to is what's the free cash

339
00:17:13,960 --> 00:17:18,119
that it generates and what's the
value of the reserve and, and,

340
00:17:18,119 --> 00:17:21,000
and, and the current reserve and
what the reserve might be in the

341
00:17:21,000 --> 00:17:23,720
future.
And I think they're really good

342
00:17:23,720 --> 00:17:27,319
disciplines because if there's a
negative with the reporting of

343
00:17:27,480 --> 00:17:30,880
of resource companies, you know,
the quarterlies, which I think

344
00:17:30,880 --> 00:17:35,880
really drive sort of the the
short term market reactions, you

345
00:17:35,880 --> 00:17:38,960
know, they often they don't tell
you what you want to know,

346
00:17:38,960 --> 00:17:40,720
right.
So, you know, all in sustaining

347
00:17:40,720 --> 00:17:44,760
cost is a is a, you know, is a
pretty tangible or intangible

348
00:17:44,760 --> 00:17:48,520
kind of thing in that I think.
I heard Johnny Mack ever use the

349
00:17:48,520 --> 00:17:50,520
word All in sustaining cost.
Yeah, Yeah.

350
00:17:50,680 --> 00:17:53,080
So it's all in cost.
So, So what we increasingly do

351
00:17:53,080 --> 00:17:54,920
is you kind of say, well, what's
the movement in cash?

352
00:17:55,360 --> 00:17:57,680
And I think I've heard you guys
talk about that as well.

353
00:17:57,680 --> 00:17:59,920
What's the movement in cash and
should there be any adjustments?

354
00:17:59,920 --> 00:18:03,640
And and then look at sort of
free cash yield or or you know a

355
00:18:03,640 --> 00:18:07,080
multiple and gold's a really
good example of that because

356
00:18:07,080 --> 00:18:12,320
what you've got is, is you've
had this sector just rally where

357
00:18:12,320 --> 00:18:14,480
the gold price is now sort of
approaching.

358
00:18:15,000 --> 00:18:22,760
It's just over $5000 Australian
and, and, and costs have sort of

359
00:18:22,760 --> 00:18:24,760
moved up a bit, but the margins
are increasing.

360
00:18:24,760 --> 00:18:27,680
But the other side to that is,
is equity prices have moved up

361
00:18:27,680 --> 00:18:29,600
as well.
You know, so if you look at well

362
00:18:29,840 --> 00:18:33,680
how they're all looking on a
free cash flow yield, there's a

363
00:18:33,920 --> 00:18:36,920
there's a big divergent and some
are fully priced again because

364
00:18:37,040 --> 00:18:39,080
the share price is kind of
matched to where their free cash

365
00:18:39,080 --> 00:18:40,800
is that.
The the thing that'll will

366
00:18:40,840 --> 00:18:44,960
separate them is what return
they can generate on that free

367
00:18:44,960 --> 00:18:46,320
cash as well.
Like yeah.

368
00:18:46,920 --> 00:18:48,240
And that's the.
Result part of it.

369
00:18:48,240 --> 00:18:49,760
Yeah, exactly.
And that, that's the.

370
00:18:50,160 --> 00:18:52,160
Yeah, that's the uncertain
thing, I think.

371
00:18:52,760 --> 00:18:56,560
And exactly the other thing I
think in these kind of markets

372
00:18:56,560 --> 00:19:01,560
and gold's a really good example
is, is I think that the tendency

373
00:19:01,560 --> 00:19:05,000
is to move away from the really
good quality companies because

374
00:19:05,000 --> 00:19:08,000
you think they're fully priced.
And then you go, you know, and

375
00:19:08,000 --> 00:19:10,880
you think the lesser quality
companies are better value or

376
00:19:10,880 --> 00:19:13,200
cheaper.
But you know, when you factor in

377
00:19:13,200 --> 00:19:15,160
the quality difference, perhaps
they're not right.

378
00:19:16,760 --> 00:19:20,120
So, you know, so one company
that I think is a real stand out

379
00:19:20,120 --> 00:19:23,000
is Genesis, where I think you
look at and go cheer.

380
00:19:23,000 --> 00:19:26,400
It's had a huge run and it
probably does look a bit fully

381
00:19:26,400 --> 00:19:28,200
priced.
But if you look at its free cash

382
00:19:28,200 --> 00:19:31,520
flow yield, it's, you know, it's
at the top end, which for a

383
00:19:31,600 --> 00:19:34,440
company which came through what
it's been through, yeah, is

384
00:19:34,440 --> 00:19:36,640
pretty impressive.
And and it's reserve life is

385
00:19:36,640 --> 00:19:38,520
also very strong.
This is probably an appropriate

386
00:19:38,520 --> 00:19:40,840
time to do a Ding Ding, Ding
Valley GC, not just on Genesis,

387
00:19:40,880 --> 00:19:41,920
but she's got money in your
fund.

388
00:19:41,920 --> 00:19:43,240
So yeah, get that out of the
way.

389
00:19:43,560 --> 00:19:45,080
Every time I've looked at
Genesis, it's always been too

390
00:19:45,080 --> 00:19:47,680
expensive to buy.
Yeah, but yeah, it's a company.

391
00:19:47,680 --> 00:19:50,560
You think a management team,
they'll generate value, they'll

392
00:19:50,560 --> 00:19:53,840
allocate capital effectively.
And I feel like an idiot every

393
00:19:53,840 --> 00:19:56,400
time, you know, because it's.
Well, and we're, we're the same

394
00:19:56,400 --> 00:19:59,240
you kind of think and, and I
think the difference is really

395
00:19:59,240 --> 00:20:02,440
in the last quarter in
particular, free cash is really

396
00:20:02,440 --> 00:20:05,600
strong, right?
So, so, you know, the good thing

397
00:20:05,600 --> 00:20:08,680
with with the team there is they
kind of say what they're going

398
00:20:08,680 --> 00:20:13,640
to do and, and, and and and they
deliver which which is which is,

399
00:20:13,800 --> 00:20:17,280
you know, pretty rare really.
Trev, are we talking about

400
00:20:17,400 --> 00:20:20,360
Genesis or?
Grounded here there are so many

401
00:20:20,360 --> 00:20:24,360
parallels JD grounded group is
the genesis of mine site

402
00:20:24,360 --> 00:20:25,840
accommodation.
This is how I think about it

403
00:20:26,040 --> 00:20:30,000
just like Genesis JD on first
impression, you think the tender

404
00:20:30,000 --> 00:20:32,360
is too expensive, right?
They're they're on the pricey

405
00:20:32,360 --> 00:20:34,840
end, but.
You think the lesser quality

406
00:20:34,840 --> 00:20:38,360
companies a better value or
cheaper, but you know, when you

407
00:20:38,360 --> 00:20:40,840
factor in the quality
difference, perhaps they're not.

408
00:20:41,000 --> 00:20:42,280
Perhaps they're not indeed,
Dave.

409
00:20:42,280 --> 00:20:45,480
You have to factor in the
quality difference, JD.

410
00:20:45,560 --> 00:20:48,240
It's the quality that matters
with a mine site camp to make

411
00:20:48,240 --> 00:20:50,560
life better.
And does the site have amenities

412
00:20:50,560 --> 00:20:52,680
that make it enjoyable?
Do the rooms have a bit more

413
00:20:52,680 --> 00:20:55,240
space in the bathrooms?
Feel like a bathroom?

414
00:20:55,240 --> 00:20:57,360
These are the simple things, but
they go a long way because if

415
00:20:57,360 --> 00:20:59,480
you factor in the quality
difference, like Dave says,

416
00:20:59,680 --> 00:21:02,320
quality accommodation equals
happy working and more

417
00:21:02,320 --> 00:21:04,640
productivity.
Importantly, better people want

418
00:21:04,640 --> 00:21:07,120
to come and work there too.
You know, my favorite thing

419
00:21:07,120 --> 00:21:09,480
about Paul Natoli and the entire
team are grounded though, JD.

420
00:21:09,480 --> 00:21:11,480
Please tell me.
They kind of say what they're

421
00:21:11,480 --> 00:21:14,520
going to do and and and and and
they deliver.

422
00:21:14,640 --> 00:21:20,240
Back to Dave, how does?
Jurisdictional risk factor into

423
00:21:20,240 --> 00:21:22,880
this and does that ebb and flow
with with the market times or

424
00:21:22,880 --> 00:21:25,080
have you just got a completely
different structure to?

425
00:21:25,680 --> 00:21:31,360
Well, so our portfolio now, so
we, we, we monitor the

426
00:21:31,360 --> 00:21:34,920
proportion of the portfolio
where the projects, the

427
00:21:34,920 --> 00:21:38,320
underlying projects, you know
where they're located, right.

428
00:21:38,320 --> 00:21:42,720
And, and typically we have over
90% of the underlying projects

429
00:21:42,720 --> 00:21:45,160
in the company we own in
Australia or North America.

430
00:21:47,040 --> 00:21:49,960
And it, it, it doesn't vary a
whole lot.

431
00:21:50,920 --> 00:21:53,760
We will go into high risk
locations, but you know, we're

432
00:21:53,760 --> 00:21:57,320
very cognizant of, of the risk.
So we do own a little bit in

433
00:21:57,320 --> 00:22:00,440
Brazil, some of the rare earths
own own clays there.

434
00:22:00,880 --> 00:22:03,520
I think that's kind of the best,
the best place to play it.

435
00:22:03,640 --> 00:22:08,120
But, but if we don't need to
take that risk, then we won't.

436
00:22:08,760 --> 00:22:13,400
So gold's a good example again,
I would need to be convinced to

437
00:22:13,400 --> 00:22:19,560
buy you know a W African gold
producer just because there is a

438
00:22:19,560 --> 00:22:22,760
lot of choice in Australia.
And so why take that where

439
00:22:22,760 --> 00:22:25,360
particularly in the portfolio,
it's kind of in the portfolio

440
00:22:25,360 --> 00:22:29,760
where there is that store of
value and and defensive element?

441
00:22:30,800 --> 00:22:35,960
To expand the conversation on
portfolio makeup, if you like,

442
00:22:36,520 --> 00:22:38,400
sort of spoken about
jurisdictional risk.

443
00:22:38,640 --> 00:22:42,240
Touching on, on commodities, you
mentioned holding certain

444
00:22:42,240 --> 00:22:45,480
commodities, EG gold as a kind
of safe place when, when things

445
00:22:45,480 --> 00:22:46,480
are volatile.
Yeah.

446
00:22:46,720 --> 00:22:49,520
Are there other sort of
commodities or or places you

447
00:22:49,520 --> 00:22:51,920
kind of hide if you like, other
than obviously you mentioned

448
00:22:52,080 --> 00:22:55,360
going to bigger names as well.
Yeah, when times get tougher and

449
00:22:55,640 --> 00:22:57,400
in anticipation of tougher
times.

450
00:22:58,640 --> 00:23:00,520
Yeah.
So because you can't put

451
00:23:00,680 --> 00:23:04,000
everything into, you know, into
those into those area, you can't

452
00:23:04,000 --> 00:23:06,160
put everything into gold and
cash.

453
00:23:08,040 --> 00:23:11,440
So we do probably the other
thing I would say is, is in

454
00:23:11,440 --> 00:23:14,040
volatile times, you know, to me
the most important thing is to

455
00:23:14,040 --> 00:23:16,920
have a plan, right?
So what I'm going to do if I, if

456
00:23:16,920 --> 00:23:19,120
the market starts to turn down
or if I think the market's going

457
00:23:19,120 --> 00:23:22,440
to turn down, what you learn
through having those plans is

458
00:23:22,440 --> 00:23:23,760
that they don't always work
right.

459
00:23:23,760 --> 00:23:27,000
And you kind of got to reassess.
So you know, what was

460
00:23:27,000 --> 00:23:33,760
interesting in in leading into
April 2 was, you know, we'd

461
00:23:33,760 --> 00:23:37,640
constructed a portfolio in a way
that we thought would be

462
00:23:37,640 --> 00:23:40,960
defensive, but and so we had a
reasonable amount in oil and

463
00:23:40,960 --> 00:23:44,360
gas, in particular oil and gas
services.

464
00:23:44,360 --> 00:23:46,480
So we had whirly, which we
thought would be defensive and

465
00:23:46,480 --> 00:23:54,880
we had amplitude energy, which
East Coast gas should should be

466
00:23:54,880 --> 00:23:57,320
pretty immune for what's
happening globally, right.

467
00:23:57,680 --> 00:24:01,720
But I think both those fell by
15% in, in the month, right?

468
00:24:01,720 --> 00:24:04,360
So, so the best laid plans don't
always work, right.

469
00:24:04,360 --> 00:24:05,640
But I think the key is to have a
plan.

470
00:24:05,640 --> 00:24:08,600
So, but that's what you're
looking for.

471
00:24:08,640 --> 00:24:12,240
And so a good example would have
been uranium, uranium stocks

472
00:24:12,240 --> 00:24:14,200
actually performed really well
through April.

473
00:24:14,800 --> 00:24:17,280
And that was on the basis of the
spot price starting to kick up

474
00:24:17,280 --> 00:24:21,760
would be closer to to the
contract price.

475
00:24:22,240 --> 00:24:25,120
And and so, you know, so we
benefit from that.

476
00:24:25,120 --> 00:24:28,040
So you're trying to pick out the
commodities that aren't quite as

477
00:24:28,040 --> 00:24:31,640
aligned to global growth or, or
wherever that issue might be.

478
00:24:31,920 --> 00:24:35,320
Yeah.
You, you, you spoke of the fact

479
00:24:35,320 --> 00:24:39,200
it's always a stock stock
because market it's just, you

480
00:24:39,200 --> 00:24:41,520
know, you're always trying to
find value, even if it takes

481
00:24:41,520 --> 00:24:43,280
time for that value to be
recognized by the market.

482
00:24:44,080 --> 00:24:46,200
Your uranium exposure is next
Gen.

483
00:24:46,280 --> 00:24:49,040
Yeah, yeah.
World's best undeveloped uranium

484
00:24:49,040 --> 00:24:53,920
deposit.
Yeah, Yeah, Uranium as a sector,

485
00:24:53,920 --> 00:24:55,840
I think it's really interesting,
right, because what you've got

486
00:24:55,840 --> 00:25:00,240
is a small number of investable
companies and it moves in and

487
00:25:00,240 --> 00:25:02,120
out of favour.
But when it's in favour, you got

488
00:25:02,120 --> 00:25:04,400
a whole lot of money moving into
a small number of companies That

489
00:25:04,400 --> 00:25:07,800
forces up their values.
And I think particularly with

490
00:25:07,800 --> 00:25:13,240
the Australian listed companies,
it's, it's very, you know, it's

491
00:25:13,240 --> 00:25:16,200
hard to find compelling value,
right, Because typically their

492
00:25:16,200 --> 00:25:20,360
costs are higher and their
volume production volumes either

493
00:25:20,840 --> 00:25:23,600
ramping up or, or in the OR, or
what they're planning are

494
00:25:23,600 --> 00:25:25,160
relatively low.
So it's difficult.

495
00:25:25,160 --> 00:25:29,160
So, so next Gen.
I think is a stand out in that,

496
00:25:29,480 --> 00:25:32,480
as you're saying, it's a
fabulous project.

497
00:25:33,400 --> 00:25:36,280
It looks like it's not too far
away from final approvals.

498
00:25:37,320 --> 00:25:42,880
It's grade is, is exceptional.
And value wise, I still think it

499
00:25:42,880 --> 00:25:45,160
looks all right.
I mean, I was doing a, a bit of

500
00:25:45,160 --> 00:25:48,560
an analysis the other day.
If you look at Cazetta Prom and

501
00:25:48,560 --> 00:25:51,880
Chemico, they both produce, you
know, attributable production

502
00:25:51,880 --> 00:25:55,520
pretty similar somewhere around
£25 million per per annum.

503
00:25:55,520 --> 00:25:56,960
You know, can bounce around a
bit, but that's it.

504
00:25:56,960 --> 00:26:00,600
You know, next Gen. is going to
be producing I think £29 million

505
00:26:00,600 --> 00:26:04,800
for its first five years.
Chemicals market cap in

506
00:26:04,800 --> 00:26:06,960
Australian dollar terms about 35
billion.

507
00:26:07,960 --> 00:26:11,480
Next Gen. is 5 billion and it's
probably got 3 billion spend.

508
00:26:11,880 --> 00:26:15,520
So, so I think there's value
there.

509
00:26:15,960 --> 00:26:18,560
Is that discount too big?
It probably is.

510
00:26:18,560 --> 00:26:21,520
But as we know, they've also had
a few sort of governance issues

511
00:26:21,520 --> 00:26:24,200
that have have probably had an
impact.

512
00:26:24,200 --> 00:26:28,080
So, so I think you, you know,
we, we like it, we think it's

513
00:26:28,080 --> 00:26:30,520
the way to play the sector.
It's, it's going to be low cost,

514
00:26:30,520 --> 00:26:35,480
it's going to be big volumes.
And I think I'd like to think

515
00:26:35,480 --> 00:26:38,240
that management have learnt from
how the market responded to some

516
00:26:38,240 --> 00:26:40,680
of the decisions made.
Won't do that again.

517
00:26:41,560 --> 00:26:45,160
Yeah, I think I did hear about
some of that stuff on the

518
00:26:45,600 --> 00:26:48,520
development of the the project.
They've got a new government in

519
00:26:48,680 --> 00:26:52,880
Canada now, but they
preemptively took some steps it

520
00:26:52,880 --> 00:26:56,400
seemed on on the surface, on the
outside to, you know, make

521
00:26:57,000 --> 00:26:59,960
resource development a bit
easier to make there be a bit

522
00:26:59,960 --> 00:27:04,120
less friction between provinces,
states in in Canada.

523
00:27:04,120 --> 00:27:07,200
Are you, are you more
constructive on a timeline of

524
00:27:07,200 --> 00:27:08,560
them actually getting that
through?

525
00:27:09,040 --> 00:27:12,240
Well, yeah, I mean, I think
there's a couple of things, you

526
00:27:12,240 --> 00:27:15,480
know, and it probably, I think
that, you know, what the US has

527
00:27:15,480 --> 00:27:17,680
been doing is probably a factor
in that as well, where Canada

528
00:27:17,680 --> 00:27:20,520
are going.
You know, we we need to we need

529
00:27:20,520 --> 00:27:23,760
to stimulate our economy and one
day, one way to do that is to

530
00:27:23,960 --> 00:27:25,760
stimulate resource sector
investment.

531
00:27:26,920 --> 00:27:30,400
And I think much like a lot of
the Western economies, they've

532
00:27:30,400 --> 00:27:33,600
been slowly moving and bogged
down in regulation.

533
00:27:34,040 --> 00:27:35,480
So I think, I think you're
right.

534
00:27:35,480 --> 00:27:38,560
I think what's happening in
Canada is what we're hearing is

535
00:27:38,560 --> 00:27:40,680
at the moment there's a system
where you need provincial

536
00:27:40,680 --> 00:27:43,800
approval and then you need
federal approval and there's a

537
00:27:43,800 --> 00:27:46,320
lot of duplication and and time
frames blow out.

538
00:27:46,680 --> 00:27:49,640
I think where it's heading is
that it will focus very much on

539
00:27:49,640 --> 00:27:52,640
the provincial approvals and and
maybe won't require a federal

540
00:27:52,640 --> 00:27:55,400
approval.
The positive that we've seen

541
00:27:55,400 --> 00:27:58,080
with both next general.
So Denison, which is probably

542
00:27:58,080 --> 00:28:02,640
the other uranium projects
nearest to production is there's

543
00:28:02,640 --> 00:28:06,400
been dates set for the final
approval meetings, which are

544
00:28:06,800 --> 00:28:09,600
around for Denison around the
end of the calendar year and for

545
00:28:10,120 --> 00:28:13,640
for for next Gen. 2 meetings,
one in November and one in

546
00:28:13,640 --> 00:28:16,720
February.
So I can't see any reason why we

547
00:28:16,720 --> 00:28:19,880
shouldn't get final decisions on
both those projects in that time

548
00:28:19,880 --> 00:28:21,600
frame.
So for the first time in a long

549
00:28:21,600 --> 00:28:24,320
time, it's being locked in.
I think it was probably six

550
00:28:24,320 --> 00:28:26,440
months behind where everyone
thought for both those

551
00:28:26,600 --> 00:28:28,800
companies.
But at least there is a date.

552
00:28:28,800 --> 00:28:30,560
So I think it's full steam
ahead.

553
00:28:32,040 --> 00:28:34,360
Now we're talking about
individual companies as well,

554
00:28:34,360 --> 00:28:37,520
Dave, Let's let's jump back to
gold for a moment, because great

555
00:28:37,520 --> 00:28:40,440
land is a big part of the
portfolio.

556
00:28:40,440 --> 00:28:43,600
And yeah, not, not the first
funding to, to have that as a

557
00:28:43,640 --> 00:28:47,960
sort of core part of the
portfolio not yet listed in, in

558
00:28:47,960 --> 00:28:50,760
Australia, but they've had a,
they've had a terrific run.

559
00:28:50,760 --> 00:28:53,240
What, what are you making of
sort of value in, in the the

560
00:28:53,280 --> 00:28:55,760
stock and the company's
prospects going forward from

561
00:28:55,760 --> 00:28:57,840
here?
Yeah, it's, it's, it's been a

562
00:28:57,840 --> 00:29:00,600
really interesting story.
And I think what's been

563
00:29:00,600 --> 00:29:04,960
encouraging is that the, the,
the economics and the, and the,

564
00:29:05,440 --> 00:29:08,680
the story behind it has got
better since it did the deal.

565
00:29:08,680 --> 00:29:14,080
So, so basically Graitland
listed in London owned 30% of

566
00:29:14,080 --> 00:29:16,800
Haveron, which is a, which is a
fantastic project.

567
00:29:16,800 --> 00:29:20,800
The other 70% was owned by
Newmont and Newmont also in the

568
00:29:20,800 --> 00:29:26,800
Telfa mine and mill, which which
is not too far away with with

569
00:29:27,120 --> 00:29:29,760
new Crest getting taken on
Newmont, Newmont decided to sell

570
00:29:29,760 --> 00:29:33,560
that asset because Greatland had
a 30% interest in Haver on it

571
00:29:33,560 --> 00:29:36,280
kind of got first dibs at at
looking at it.

572
00:29:36,720 --> 00:29:42,720
So, so they bought it for 750
mil and to do that they need to

573
00:29:42,880 --> 00:29:44,640
to do a discounted capital
raise.

574
00:29:45,600 --> 00:29:47,360
I think it was at a 30 or 40%
discount.

575
00:29:47,360 --> 00:29:48,360
That was a.
Really good buy into.

576
00:29:48,840 --> 00:29:51,840
And and so that was the
opportunity at that point.

577
00:29:51,840 --> 00:29:54,200
There was still a lot of talk,
you know is tell for an asset or

578
00:29:54,200 --> 00:29:57,920
is it a liability right in that
it's a big mill and take a lot

579
00:29:57,920 --> 00:30:00,240
of feeding.
But immediately you when it

580
00:30:00,240 --> 00:30:03,720
became like clear that they had
the stockpile build up over the

581
00:30:03,720 --> 00:30:06,760
duration of months and months,
Yeah, yeah.

582
00:30:06,760 --> 00:30:09,520
Then you, Yeah, you probably,
yeah, that's what you bought, so

583
00:30:09,520 --> 00:30:10,960
I should be.
You pieced together the fact

584
00:30:10,960 --> 00:30:12,760
they paid back in no time.
Well, exactly.

585
00:30:13,280 --> 00:30:15,960
So, so you know, jumping to
today, right, They've owned it

586
00:30:15,960 --> 00:30:20,600
for just under 5 months.
So they paid 750, it's generated

587
00:30:20,600 --> 00:30:24,520
something like 300 million in in
free cash and that's cash that's

588
00:30:24,520 --> 00:30:28,040
sitting in the bank.
And with a bit of drilling,

589
00:30:28,040 --> 00:30:33,280
they've increased their reserve
at Telford to 750,000 oz and

590
00:30:33,280 --> 00:30:36,720
really will continue drilling.
And I think, I think they'll

591
00:30:36,720 --> 00:30:39,000
continue to increase and they've
still got the stockpile there as

592
00:30:39,000 --> 00:30:41,880
well.
So I think that's you know that

593
00:30:42,000 --> 00:30:45,520
so, so you know, they're going
to they're going to pay their

594
00:30:45,520 --> 00:30:46,720
purchase.
Well, they're going to get their

595
00:30:46,720 --> 00:30:50,760
purchase price back in cash
within 12 months, which will

596
00:30:50,760 --> 00:30:53,200
then give them something like a
billion dollars in cash, which

597
00:30:53,200 --> 00:30:55,120
will help them develop, develop
Haver on.

598
00:30:55,840 --> 00:30:58,320
And Haver on is probably, you
know, like it's it's probably

599
00:30:58,320 --> 00:31:04,680
been missed a bit by the market,
but I think it's a very high

600
00:31:04,680 --> 00:31:07,240
quality asset.
It's going to be very low cost.

601
00:31:07,760 --> 00:31:12,320
It's probably this of a you
know, of a scale of probably

602
00:31:12,320 --> 00:31:16,920
less a scale than than degrade,
but quality of resource it's

603
00:31:17,320 --> 00:31:21,320
it's right up there.
So, so at the moment very few

604
00:31:21,680 --> 00:31:24,720
institutions own it.
It's not really in any indices.

605
00:31:24,720 --> 00:31:26,840
It's going to least mid year in
Australia.

606
00:31:27,400 --> 00:31:30,880
And on my calculations, it's
still probably the the cheapest

607
00:31:31,640 --> 00:31:33,880
quality gold stock you can own.
I think you know if you take

608
00:31:33,880 --> 00:31:38,040
the, the free cash generated in
in March, in the March quarter

609
00:31:38,040 --> 00:31:42,560
and you annualize that you're
looking at a 30% return free

610
00:31:42,560 --> 00:31:45,400
cash yield and a big resource
base.

611
00:31:46,120 --> 00:31:49,440
Yeah, it's, it's fantastic.
It's, it's, it's remarkable how

612
00:31:49,440 --> 00:31:52,400
quickly the market's perception
has has changed of the company

613
00:31:52,400 --> 00:31:54,520
of the acquisition.
How about that, that little

614
00:31:54,520 --> 00:31:56,080
piece.
One of the other concerns was

615
00:31:56,080 --> 00:31:59,640
that the stockpiles working
through with have your own only

616
00:31:59,640 --> 00:32:02,920
coming online.
Yeah, 2 plus years, yeah,

617
00:32:02,920 --> 00:32:06,960
they've tried to address that.
Are you have your concerns been

618
00:32:06,960 --> 00:32:10,640
relieved on on that gap or?
Yeah, I think, yeah, absolutely

619
00:32:10,760 --> 00:32:15,080
so, so.
So they haven't only been

620
00:32:15,840 --> 00:32:18,040
putting the stockpiles through.
They've been doing some mining.

621
00:32:18,040 --> 00:32:23,480
And I think indications are
there's a lot more ore at Delpha

622
00:32:23,480 --> 00:32:25,960
than than perhaps marketed and
understood.

623
00:32:26,120 --> 00:32:30,240
And the drilling success has,
has, has been very, very good.

624
00:32:30,720 --> 00:32:34,160
But you know, with, with, with
it only being early days.

625
00:32:34,160 --> 00:32:37,360
And as I, as I mentioned, you
know, they added 750,000 oz

626
00:32:37,360 --> 00:32:40,080
recently.
So I think that you're right.

627
00:32:40,080 --> 00:32:42,840
That was really the question is
can they main production and

628
00:32:42,840 --> 00:32:45,560
something like 300,000 oz
between now and when everyone

629
00:32:45,560 --> 00:32:46,920
kicks in?
And I think they can.

630
00:32:48,640 --> 00:32:53,520
I think it's a signing story.
Would they go shopping in in the

631
00:32:53,520 --> 00:32:54,840
area?
There's a couple of juniors.

632
00:32:57,200 --> 00:33:00,000
Look, I don't think they need, I
don't think I need to do

633
00:33:00,000 --> 00:33:04,560
anything in a hurry, and that's
probably not what those juniors

634
00:33:04,560 --> 00:33:09,280
want to hear.
So I think ultimately it makes

635
00:33:09,280 --> 00:33:13,240
sense to add those in, but I
don't think you'll see it

636
00:33:13,240 --> 00:33:17,360
happening.
Yeah, Speaking of shopping,

637
00:33:17,360 --> 00:33:19,320
what's going to happen in
Bellevue?

638
00:33:20,320 --> 00:33:24,120
Bellevue, I think they're in
penance mode, aren't they?

639
00:33:24,120 --> 00:33:25,960
Right.
So I think they've done the

640
00:33:25,960 --> 00:33:28,640
right thing and they need to
step back and just reset the

641
00:33:28,640 --> 00:33:32,960
business.
You know, I think Darren's a

642
00:33:32,960 --> 00:33:35,680
good guy and I think he's
recognized that what he needs to

643
00:33:35,680 --> 00:33:41,960
do is just reduce the production
rate, deliver on that, keep his

644
00:33:41,960 --> 00:33:44,800
costs down, start to generate
free cash.

645
00:33:45,640 --> 00:33:47,000
He's pushed out the hedging a
bit.

646
00:33:47,000 --> 00:33:49,080
Give him a bit of leeway to
generate some cash.

647
00:33:50,280 --> 00:33:53,640
So it's been a frustrating time.
We haven't really been an

648
00:33:53,640 --> 00:33:58,000
investor in Bellevue since since
its commissioning phase do.

649
00:33:58,000 --> 00:34:02,480
You think they get bought?
Well, potentially, yeah, I think

650
00:34:02,480 --> 00:34:06,280
they probably need to
demonstrate the operational

651
00:34:06,280 --> 00:34:11,280
capability of of the mine and
business, but they deliver on

652
00:34:11,280 --> 00:34:12,960
what they're saying.
So the good thing is now they

653
00:34:12,960 --> 00:34:17,239
deliver on what they're saying,
then they look cheap, but they

654
00:34:17,239 --> 00:34:24,000
need rebuilding credibility.
Yeah, maybe we move tax to to

655
00:34:24,000 --> 00:34:25,840
copper.
There's a few names days of your

656
00:34:26,159 --> 00:34:31,920
of your portfolio over time like
kept tabs on it in the copper

657
00:34:31,920 --> 00:34:34,400
space.
It's been metals Acquisition

658
00:34:34,400 --> 00:34:38,960
Corp and developed consistently
both both run by kind of proven,

659
00:34:39,360 --> 00:34:41,800
you know, stewards of capital
in, in mining.

660
00:34:42,040 --> 00:34:44,600
Yeah.
What's been the the enduring

661
00:34:44,600 --> 00:34:46,840
rationale?
Well, we like copper.

662
00:34:46,840 --> 00:34:50,400
If you if you look across the
commodity landscape, copper is a

663
00:34:50,400 --> 00:34:53,800
real stand out, right?
And, and we're kind of looking

664
00:34:53,800 --> 00:34:56,600
through the noise a bit.
Obviously a big driver of copper

665
00:34:56,600 --> 00:34:58,520
as a commodity is what's
happening in global growth.

666
00:34:58,520 --> 00:35:02,080
And we've got, you know, the
uncertainty with with Trump and

667
00:35:02,080 --> 00:35:05,600
China and all that, right?
But we just think copper, it's a

668
00:35:05,600 --> 00:35:08,000
big market.
It's hard to manipulate a lot of

669
00:35:08,000 --> 00:35:10,480
demand drivers, constrained
supply.

670
00:35:11,440 --> 00:35:13,840
It is a commodity that you want
to get exposure to and it's not

671
00:35:13,840 --> 00:35:15,440
easy to get good quality
exposure.

672
00:35:16,320 --> 00:35:20,440
So Mac, we like, I think Mick's
done a good job in taking an

673
00:35:20,440 --> 00:35:27,520
asset that hadn't been well run.
Now we had to fund it in unusual

674
00:35:27,520 --> 00:35:29,480
ways at the time to get hold of
that asset.

675
00:35:29,480 --> 00:35:32,520
So if there's a negative, it's,
it's, you know, they had

676
00:35:32,520 --> 00:35:35,040
mezzanine debt, they had
streaming and they got royalties

677
00:35:35,040 --> 00:35:39,800
and all these kind of stuff that
complicates the the story.

678
00:35:39,800 --> 00:35:43,120
But at its core, I think he's
done a very good job in bringing

679
00:35:43,120 --> 00:35:46,080
down operating costs,
productions heading towards

680
00:35:46,080 --> 00:35:49,480
50,000 oz per annum.
The mayor and mayor in mine I

681
00:35:49,480 --> 00:35:51,560
think can be a bit of a kicker
on top of that.

682
00:35:53,160 --> 00:35:58,760
So, you know, I think it's, it's
probably marginally underpriced

683
00:35:59,600 --> 00:36:02,360
at the moment.
So really you need a kick up in

684
00:36:02,360 --> 00:36:04,320
the copper price to really get
it moving.

685
00:36:05,800 --> 00:36:10,040
But you know, it's a high grade
mine probably probably, you

686
00:36:10,040 --> 00:36:12,600
know, arguably one of the
highest grade outside Africa.

687
00:36:13,080 --> 00:36:15,440
Yeah.
So you know, we're happy to be

688
00:36:15,440 --> 00:36:20,040
there and and what you want in,
you know, in what has been

689
00:36:20,040 --> 00:36:23,880
probably a difficult project is
is high class management.

690
00:36:23,880 --> 00:36:27,640
I think do.
You think the like, is it as

691
00:36:27,680 --> 00:36:30,840
easy as copper price going up,
kind of high leverage, yada

692
00:36:30,960 --> 00:36:34,280
yada, lots of talk because they
don't want the copper price got

693
00:36:34,280 --> 00:36:36,280
too much because then the
contingent copper price payment

694
00:36:36,280 --> 00:36:38,000
kicks in as well.
There's a sweet spot where you

695
00:36:38,000 --> 00:36:39,080
want it to be high enough, but
not.

696
00:36:39,440 --> 00:36:41,600
Yeah, not too high.
So I think what you're saying is

697
00:36:41,600 --> 00:36:43,680
they're bringing, they're, you
know, they're bringing down

698
00:36:43,680 --> 00:36:47,080
their debt, which I think is
important and you know, refining

699
00:36:47,080 --> 00:36:49,680
the mezzanine debt, which which
I think is all important.

700
00:36:51,200 --> 00:36:53,120
So there.
Were rumours that Harmony was

701
00:36:53,160 --> 00:36:54,800
was interested?
Did you did you hear that too?

702
00:36:54,800 --> 00:36:58,760
Yeah, I I didn't hear it was,
but but yeah, yeah.

703
00:36:59,920 --> 00:37:04,440
So we'll see.
So develop, look, we really like

704
00:37:04,440 --> 00:37:08,600
it and and we did a side tour to
Woodlawn last year and it

705
00:37:08,600 --> 00:37:11,480
highlighted a couple of things.
One is I think the scope for

706
00:37:11,480 --> 00:37:15,840
that asset is, is more as far as
production and and mine life is

707
00:37:15,840 --> 00:37:17,680
probably greater than what the
market's expecting.

708
00:37:17,680 --> 00:37:21,920
But it also just highlighted
what good management can do, you

709
00:37:21,920 --> 00:37:23,520
know, to have a good motivated
team.

710
00:37:25,000 --> 00:37:27,520
And if you're going to back some
of them resources, I think it'll

711
00:37:27,520 --> 00:37:30,160
be amount is, is good guy to
back right.

712
00:37:30,680 --> 00:37:34,400
So I think that's really
interesting in that, you know,

713
00:37:34,560 --> 00:37:38,240
ideally develop we should come
into production this sorry

714
00:37:38,520 --> 00:37:40,440
Woodlawn should come into
production this quarter.

715
00:37:41,480 --> 00:37:45,240
I think even at current copper
prices it's going to deliver and

716
00:37:45,240 --> 00:37:47,880
zinc prices is going to deliver
pretty strong cash flows.

717
00:37:48,960 --> 00:37:53,360
It's looking to sell a 20%
interest in the mine, which you

718
00:37:53,360 --> 00:37:57,760
can do that somewhere around NPV
is is really going to underpin

719
00:37:57,760 --> 00:38:00,840
the value of the broader group.
And then you've got to sell the

720
00:38:00,840 --> 00:38:04,520
springs and you got their mining
services assets which which I

721
00:38:04,520 --> 00:38:07,520
think also look good.
So had a big run and I think

722
00:38:07,520 --> 00:38:10,760
it's probably still mildly
underpriced and needs to deliver

723
00:38:10,760 --> 00:38:12,840
on the production and perhaps
that sell down.

724
00:38:12,840 --> 00:38:17,800
But I think it's a stock that is
going to emerge as a as a much

725
00:38:17,800 --> 00:38:19,200
bigger company over the next
five years.

726
00:38:19,800 --> 00:38:21,880
On the mining service part of
the business, obviously

727
00:38:21,880 --> 00:38:24,240
Bellevue's had a pretty
tumultuous period.

728
00:38:24,240 --> 00:38:26,880
Do you think that, I mean
there's this folks about the

729
00:38:26,880 --> 00:38:29,560
contract there, but do you think
that continues to factor that in

730
00:38:29,960 --> 00:38:32,920
as continuing for for quite a
period or what do you think?

731
00:38:33,640 --> 00:38:37,320
Yeah.
Look, I mean, you never quite

732
00:38:37,320 --> 00:38:42,160
know in a situation like that,
you know, what, what led to the,

733
00:38:42,680 --> 00:38:46,600
the Bellevue issues.
But certainly the, the, the

734
00:38:46,600 --> 00:38:52,280
feedback I get is it wasn't
really the develop contract that

735
00:38:52,280 --> 00:38:55,440
was a major problem.
So I think they're good at what

736
00:38:55,440 --> 00:38:58,040
they do.
I think so.

737
00:38:58,760 --> 00:39:02,240
You know, I see Bellevue,
ideally the Bellevue asset

738
00:39:02,240 --> 00:39:05,640
recovering and and develop
remaining there as a as a

739
00:39:06,400 --> 00:39:08,280
contractor for a long period of
time.

740
00:39:09,240 --> 00:39:10,880
Yeah, just bring the the mic in
a bit.

741
00:39:11,000 --> 00:39:12,640
The noise gate cuts out when you
speak softly.

742
00:39:12,640 --> 00:39:14,080
Yeah, bring it closer towards
you.

743
00:39:14,080 --> 00:39:15,080
Yeah.
Oh, beautiful.

744
00:39:15,160 --> 00:39:21,440
Yeah, It's it's interesting,
isn't it?

745
00:39:21,440 --> 00:39:24,320
I mean like the typical pathway
you, you get close to

746
00:39:24,320 --> 00:39:28,760
production, you start producing
rewrite and and do you think

747
00:39:28,760 --> 00:39:31,040
it's just effectively a matter
of time where the market starts

748
00:39:31,040 --> 00:39:34,560
to believe with lawn is is
capable of positive free cash?

749
00:39:35,320 --> 00:39:37,760
Well, I think so.
I mean, I think if you look at

750
00:39:38,840 --> 00:39:40,920
its recent share price
performance, the, the, the

751
00:39:40,920 --> 00:39:43,120
market's probably already jumped
to that conclusion.

752
00:39:43,160 --> 00:39:44,640
Yeah.
And I think that's a reflection

753
00:39:44,640 --> 00:39:50,200
on, on on how people assess the
risk as it moves into

754
00:39:50,200 --> 00:39:52,880
production.
I think they're saying this has

755
00:39:52,880 --> 00:39:55,120
been largely de risk and
obviously they didn't have to

756
00:39:55,120 --> 00:39:57,200
build the plant, they just need
to fix it up.

757
00:39:57,520 --> 00:40:00,440
Yeah, which which obviously is
the benefit.

758
00:40:00,760 --> 00:40:03,320
Have have you got on, on that
specific point there of

759
00:40:03,320 --> 00:40:06,680
investing in companies that are
part of the, the rewrite that's

760
00:40:06,680 --> 00:40:09,760
sort of part of the LASAN curve,
if you like, you know, just

761
00:40:09,760 --> 00:40:13,560
speaking as as the novice mining
stock functor, What are the sort

762
00:40:13,560 --> 00:40:17,600
of key, the key bits lessons you
can kind of share in getting

763
00:40:17,600 --> 00:40:19,600
that right, because it's clearly
something you've done with a few

764
00:40:19,600 --> 00:40:22,840
companies now and making sure
you, you catch that wave in in

765
00:40:22,840 --> 00:40:24,760
the right way.
And yet you manage the risk.

766
00:40:24,760 --> 00:40:28,080
And there's sort of unobvious
parts of that that that have

767
00:40:28,240 --> 00:40:30,080
really stood out to you of your
journey.

768
00:40:30,240 --> 00:40:32,680
Yeah, it's, it's a, it's a good
question.

769
00:40:33,920 --> 00:40:36,920
Because you know, if you think
about a Bellevue or you think

770
00:40:36,920 --> 00:40:41,240
about a line town or you think
about Woodlawn, I think they're

771
00:40:41,280 --> 00:40:43,560
all really interesting and all
really different kind of

772
00:40:44,280 --> 00:40:45,920
outcomes.
You know, with Bellevue, we

773
00:40:45,920 --> 00:40:51,640
always had some, some concerns
about the resource and how easy

774
00:40:51,640 --> 00:40:55,040
that would be to mine.
And so we held it up until

775
00:40:55,040 --> 00:40:56,960
commissioning and then said,
well, we're just going to stand

776
00:40:56,960 --> 00:41:00,800
back and see how all this goes.
And, and, and that's obviously

777
00:41:00,800 --> 00:41:03,440
worked pretty well, which was
good long town.

778
00:41:03,440 --> 00:41:06,520
We probably had, we had some
concerns as well, right, because

779
00:41:07,640 --> 00:41:12,080
an underground lithium ion or
spodumene mine that scale was,

780
00:41:12,360 --> 00:41:15,920
was challenging and then the
whole processing side is

781
00:41:15,920 --> 00:41:18,040
difficult as well.
So we did the same thing.

782
00:41:18,040 --> 00:41:20,120
We stood back and and watched
and, and waited.

783
00:41:20,520 --> 00:41:23,160
Obviously the commodity price
came down, which impacted them.

784
00:41:23,160 --> 00:41:29,440
But you know, I look back at,
at, at, at the, at Lyntown and

785
00:41:29,440 --> 00:41:31,480
what they've been able to
achieve in their delivery and

786
00:41:31,480 --> 00:41:38,040
it's been first class, right?
So, so, so in general we and,

787
00:41:38,040 --> 00:41:40,760
and then with, with Woodlawn, we
probably took we, you know,

788
00:41:41,040 --> 00:41:44,600
we're happy to back management
because one is the, the

789
00:41:44,600 --> 00:41:48,240
processing facility was already
there and two, we knew that

790
00:41:48,320 --> 00:41:50,320
management were very good at
underground mines.

791
00:41:50,680 --> 00:41:55,280
So, so we kind of take it case
by case.

792
00:41:55,560 --> 00:41:59,600
But in general in mining if
things are going to go wrong,

793
00:41:59,600 --> 00:42:01,600
often they go wrong in that
commissioning phase.

794
00:42:01,600 --> 00:42:05,600
So if you don't need to be
there, then then you don't be

795
00:42:05,600 --> 00:42:07,240
there.
And so it'll come down to

796
00:42:07,240 --> 00:42:09,760
valuation.
So if you know, if if you looked

797
00:42:09,760 --> 00:42:12,040
at a Bellevue at that time, it
was kind of factoring in and all

798
00:42:12,040 --> 00:42:15,720
going well.
So do you need to be there, you

799
00:42:16,120 --> 00:42:17,080
probably don't.
So.

800
00:42:17,560 --> 00:42:20,280
Yeah.
Has has your view on on lithium

801
00:42:20,280 --> 00:42:22,920
equity exposure changed over the
last year?

802
00:42:23,960 --> 00:42:25,280
Probably not much over the last
year.

803
00:42:25,280 --> 00:42:28,160
Well, the so the positive is the
prices have all fallen further

804
00:42:28,240 --> 00:42:29,600
right and so there's better
value there.

805
00:42:30,160 --> 00:42:34,320
The issue that I have is, you
know, current spodger mean price

806
00:42:34,880 --> 00:42:43,000
is roughly $700.00 a tonne US
and I reckon most of the major

807
00:42:43,000 --> 00:42:44,720
players.
So, so firstly, it's not a

808
00:42:44,720 --> 00:42:46,720
market where you want to be
looking at 2nd tier assets.

809
00:42:46,720 --> 00:42:51,160
So if you can say, you know,
Bill, bro, Wodgina, you know,

810
00:42:51,200 --> 00:42:55,560
IGO and Lion Town I'll probably
put up there because because

811
00:42:55,560 --> 00:42:59,720
they've done a pretty good job.
But I reckon all those excluding

812
00:42:59,840 --> 00:43:03,920
Greenbushes, IGO, you know, I
reckon they're, they, they're

813
00:43:03,920 --> 00:43:07,800
all in costs are probably
somewhere around 8 to $900 US,

814
00:43:08,520 --> 00:43:09,200
right?
So what?

815
00:43:09,200 --> 00:43:11,360
So what they're saying that
lithium is no one's making any

816
00:43:11,360 --> 00:43:11,920
money.
I.

817
00:43:11,960 --> 00:43:14,560
Think with IGA you've got like
they're all in cost include

818
00:43:14,560 --> 00:43:16,480
Kwinana and they're probably.
Probably the same, yeah, Yeah.

819
00:43:16,640 --> 00:43:18,720
Well, exactly.
So, so, so green bushes.

820
00:43:18,720 --> 00:43:22,280
I mean the green, green bushes I
reckon is probably 100 bucks or

821
00:43:22,280 --> 00:43:26,000
or more lower than those others.
And it's probably the only one

822
00:43:26,000 --> 00:43:28,920
selling a 6% con and that price
is 6%, right.

823
00:43:28,920 --> 00:43:33,040
So, so, so the sector's still
kind of underwater.

824
00:43:33,040 --> 00:43:36,400
And then it comes down to well,
what's the long term price

825
00:43:36,400 --> 00:43:38,800
likely to be, right?
If you look at most of the

826
00:43:39,240 --> 00:43:41,680
commodity forecasters, they're
saying maybe 1200.

827
00:43:41,680 --> 00:43:43,960
Firstly, they're saying it's
going nowhere for a year and

828
00:43:43,960 --> 00:43:46,960
then maybe it gets to 1200 and
1200.

829
00:43:46,960 --> 00:43:49,320
If you back calculate and say,
well, based on their production,

830
00:43:49,800 --> 00:43:51,440
they still don't look overly
cheap, right?

831
00:43:51,440 --> 00:43:54,440
So, but that's the way markets
work.

832
00:43:54,440 --> 00:43:56,920
So I think what you'll see at
some point you'll see a spike.

833
00:43:58,040 --> 00:44:00,880
I think we're getting closer to
the time where you could buy any

834
00:44:00,880 --> 00:44:05,920
of those companies, you know, an
IGO Pilbara or, or Lyontown.

835
00:44:05,920 --> 00:44:07,600
Lyontown's got debt which you
don't like.

836
00:44:07,600 --> 00:44:14,040
So it's probably one step behind
those others and, and take your

837
00:44:14,040 --> 00:44:15,520
view.
And no, no, the way we often

838
00:44:15,520 --> 00:44:19,200
look at that is to say, look, it
doesn't look overly compelling

839
00:44:19,200 --> 00:44:21,920
now, but do we reckon we can
double our money in the next

840
00:44:21,920 --> 00:44:23,720
three years?
So can we get sort of an annual

841
00:44:23,720 --> 00:44:26,360
return of just over 30% per
annum over three years?

842
00:44:26,680 --> 00:44:29,800
If you think you can then then
then you buy you.

843
00:44:30,040 --> 00:44:31,800
Don't mind being early.
Exactly.

844
00:44:31,800 --> 00:44:34,200
For the commodity prices.
Exactly, because when it turns,

845
00:44:34,200 --> 00:44:36,560
it turns really quickly and if
you're not in, you miss out on

846
00:44:36,560 --> 00:44:39,800
that 30 or 40% gain.
Yeah, you, you point on IGI is

847
00:44:39,800 --> 00:44:41,680
right though.
The good thing about IGI is I

848
00:44:41,680 --> 00:44:45,640
got 25% of of green bushes,
which is a cracking asset.

849
00:44:45,640 --> 00:44:47,000
Unfortunately they don't operate
it.

850
00:44:47,000 --> 00:44:49,560
But because I think Ivan's
actually done a good job, and it

851
00:44:49,560 --> 00:44:53,560
seems to me he's adding good
value to that joint venture, but

852
00:44:53,560 --> 00:44:56,160
it's all the other stuff.
They got 2 hydroxide plants that

853
00:44:56,160 --> 00:44:59,120
don't work, and they got nickel
businesses pretty rooted, right?

854
00:44:59,120 --> 00:45:01,760
So there's a bit of tidying up
to be done there.

855
00:45:02,400 --> 00:45:03,800
Yeah, which I think he's doing,
yeah.

856
00:45:04,200 --> 00:45:05,840
Yeah, yeah.
It takes a bit of time.

857
00:45:06,000 --> 00:45:07,320
None of this happens sort of
overnight.

858
00:45:07,320 --> 00:45:09,000
It's the same with success,
right?

859
00:45:09,120 --> 00:45:11,200
Yeah.
There's a notable absence in

860
00:45:11,200 --> 00:45:12,960
your Cop allocation.
No sand fire.

861
00:45:13,080 --> 00:45:15,360
Why?
We've owned it in the past,

862
00:45:15,360 --> 00:45:18,040
Yeah.
And value wise, I just thought

863
00:45:18,040 --> 00:45:20,640
it was getting up there.
So what sand fire needs?

864
00:45:21,360 --> 00:45:23,800
So sand fire I think's done a
fantastic job, right?

865
00:45:24,200 --> 00:45:28,920
So they've bought Mateo online,
they've ramped it up really

866
00:45:28,920 --> 00:45:30,560
without a hitch, generating good
cash.

867
00:45:30,560 --> 00:45:32,560
They've got their debt down
doing everything.

868
00:45:32,560 --> 00:45:37,000
Well, I think the question is,
well, what they need to

869
00:45:37,320 --> 00:45:43,760
demonstrate now is how they can
grow the mine life at Mateo and,

870
00:45:44,440 --> 00:45:46,040
and, and that's probably the
challenge they've got.

871
00:45:46,040 --> 00:45:50,400
So what what it doesn't have is
production growth over above

872
00:45:50,400 --> 00:45:54,400
where it is now.
But it's hard to criticize them.

873
00:45:54,400 --> 00:45:57,920
I think Brendan Harris and his
team done an incredible job.

874
00:45:57,920 --> 00:46:00,840
We have owned it and we sold it.
And if you look back over the

875
00:46:00,840 --> 00:46:02,960
last 12 months, we probably
should have held that and maybe

876
00:46:02,960 --> 00:46:07,480
sold Mac, right, but on
performance, but it kind of

877
00:46:07,480 --> 00:46:09,680
works itself out.
Yeah, they've they've done a

878
00:46:09,680 --> 00:46:12,960
remarkable job and sort of
capital sort of flooding in like

879
00:46:12,960 --> 00:46:15,440
you mentioned before in a
different scenario into a

880
00:46:15,440 --> 00:46:19,280
limited number of names has
really been evident in the

881
00:46:19,280 --> 00:46:20,800
copper space.
Something we didn't mention

882
00:46:20,800 --> 00:46:24,640
before in the copper discussion
was the tailwind from TCR is

883
00:46:24,640 --> 00:46:31,400
just dropping off dramatically.
I think Mac quoted 15 ish cent

884
00:46:31,600 --> 00:46:35,240
per pound on a sort of C1 basis
free kick essentially from the

885
00:46:35,240 --> 00:46:37,080
markdown at the beginning of
this year.

886
00:46:37,160 --> 00:46:39,320
Yeah, that, that's awesome for,
for all of those guys.

887
00:46:39,320 --> 00:46:43,240
Not so awesome for the the, the
folks downstream, but yeah, real

888
00:46:43,240 --> 00:46:45,520
tailwind, right.
It's, you're right, it's made a

889
00:46:45,760 --> 00:46:47,760
a massive difference.
And I think it, it's kind of

890
00:46:47,760 --> 00:46:51,880
stems from a lot of countries
saying that you need to, you

891
00:46:51,880 --> 00:46:56,520
need to process, you know, the,
the copper before you export it.

892
00:46:56,520 --> 00:47:00,240
And so there's a lot of over
capacity, there's over capacity

893
00:47:00,240 --> 00:47:01,760
and, and so prices are coming
down.

894
00:47:01,760 --> 00:47:04,760
So I think you're right at a
time where every little bit

895
00:47:04,760 --> 00:47:07,840
helps as far as margin, it's
it'll make a big difference.

896
00:47:07,920 --> 00:47:11,400
Yeah, yeah that that trend of
countries imposing that on their

897
00:47:11,440 --> 00:47:14,520
their miners is, is a big one on
sand fire.

898
00:47:14,520 --> 00:47:16,640
Again, you mentioned lack of
growth.

899
00:47:16,760 --> 00:47:19,480
Do you think they go shopping
and you want to kick about some

900
00:47:19,480 --> 00:47:22,720
names if you think they do.
Look, they've got, they've got

901
00:47:22,720 --> 00:47:24,880
another asset in the US and I
think they're tossing out

902
00:47:24,880 --> 00:47:26,960
whether they develop that or or
sell that.

903
00:47:27,720 --> 00:47:32,640
So I think that's a possibility.
I think what they'd like to do

904
00:47:32,640 --> 00:47:38,800
is to is to grow organically by
by building out their resource

905
00:47:38,800 --> 00:47:43,120
and reserve through exploration.
It's the cheapest and best way

906
00:47:43,120 --> 00:47:45,560
to do it if you can.
And I think they're actively at

907
00:47:45,760 --> 00:47:49,600
both their their assets looking
to do that.

908
00:47:49,720 --> 00:47:53,520
But the, you know, the risk is
you got to find something,

909
00:47:53,520 --> 00:47:56,280
you're going to do that.
Yeah, they did a lot of looking

910
00:47:56,280 --> 00:48:00,520
at Degrusa and didn't come up
much, but yeah, the brownfields

911
00:48:00,520 --> 00:48:03,600
way in particular, given how
hard permitting is all around

912
00:48:03,600 --> 00:48:05,440
the world, yeah, they can tack
things on.

913
00:48:05,440 --> 00:48:07,200
That'd be fantastic.
Well, exactly.

914
00:48:07,200 --> 00:48:11,040
And you'd have to say, you know,
Botswana and the copper belt

915
00:48:11,040 --> 00:48:16,720
there is pretty prospective.
So you, you know, you'd like to

916
00:48:16,720 --> 00:48:19,960
think that if they, they put the
dollars in the ground, they will

917
00:48:19,960 --> 00:48:22,520
be successful.
Yeah, putting to the side of the

918
00:48:22,520 --> 00:48:25,320
fact that they are like
relatively fully valued as as

919
00:48:25,920 --> 00:48:27,240
far as the copper kind of
producers go.

920
00:48:27,240 --> 00:48:31,440
I always like sand fire as a
company entity feels a lot more

921
00:48:31,440 --> 00:48:35,200
likely to me to get acquired
than it to be an acquirer of

922
00:48:35,200 --> 00:48:37,880
something else because it's, you
know, for the most part pretty

923
00:48:37,880 --> 00:48:41,120
pure black on a copper vehicle.
Lots of lots of companies want

924
00:48:41,120 --> 00:48:42,760
more copper.
Lots of gold companies want all

925
00:48:42,760 --> 00:48:45,520
of a sudden gold companies have
better script, better capability

926
00:48:45,520 --> 00:48:47,400
to buy things.
Senfires are kind of a neat

927
00:48:47,560 --> 00:48:49,320
component if you want.
To well, I think, I think the

928
00:48:49,320 --> 00:48:52,720
only, the only offsetting factor
is, is mine life at Mateo.

929
00:48:52,720 --> 00:48:55,560
Yeah, right.
So but the, you know, the

930
00:48:55,560 --> 00:48:58,360
Spanish asset is, is chugging
away and that'll chug a lot

931
00:48:58,640 --> 00:49:02,320
along for a long time.
So, so I think, you know, as I

932
00:49:02,320 --> 00:49:04,400
said, I think the management
team's done a really good job,

933
00:49:04,600 --> 00:49:07,080
good quality asset.
I don't think it's excessively

934
00:49:07,080 --> 00:49:08,600
expensive.
It's just not.

935
00:49:09,160 --> 00:49:11,800
It just doesn't fit our sort of
valuation at the moment.

936
00:49:11,880 --> 00:49:13,960
Nothing really cheap in the
world of copper, is there?

937
00:49:13,960 --> 00:49:14,880
Exactly.
Exactly.

938
00:49:15,080 --> 00:49:16,960
The the last thing I want to
talk about Dave, perhaps the

939
00:49:16,960 --> 00:49:19,880
most interesting, actually the
most geopolitically interesting

940
00:49:19,920 --> 00:49:22,400
is rare earths.
And you mentioned that you hold

941
00:49:22,400 --> 00:49:25,480
some of the the clay projects in
Brazil.

942
00:49:25,480 --> 00:49:29,560
So, so why don't we start there?
How are they going to fit into

943
00:49:29,560 --> 00:49:34,120
the the piece of this emerging
rare earths cost curve?

944
00:49:34,840 --> 00:49:38,800
Yeah, Well, I think rare earths
is, is is is a really

945
00:49:38,800 --> 00:49:42,800
interesting sector.
And I don't have all the

946
00:49:42,800 --> 00:49:46,480
answers, I don't think, but I
think maybe where you got to

947
00:49:46,480 --> 00:49:48,480
start when you look at rare
earths, well, there's two areas

948
00:49:48,480 --> 00:49:49,920
you look at, right.
What's happening in China?

949
00:49:50,280 --> 00:49:53,720
China totally dominates the
production of rare earths and

950
00:49:53,720 --> 00:49:58,080
the processing of rare earths.
And, and they meant, you know,

951
00:49:58,080 --> 00:50:01,040
it looks to me like there's been
the prices have been depressed

952
00:50:01,280 --> 00:50:03,560
to make sure that no one else
gets projects off the ground.

953
00:50:05,200 --> 00:50:09,000
So then you look at Lioness and
lioness are the you know, the

954
00:50:09,240 --> 00:50:13,680
the ex China major player,
really the only one that has

955
00:50:13,720 --> 00:50:20,080
really successfully achieved the
separation of of the rare earths

956
00:50:20,080 --> 00:50:25,720
and DPR and now moving to the
heavies, turbium and dysprosium

957
00:50:26,800 --> 00:50:30,360
and and and created a a business
there but.

958
00:50:30,640 --> 00:50:34,120
Even what they produce very
often does end up in China.

959
00:50:34,720 --> 00:50:36,840
Yeah, yeah.
It's like 1 level of separation

960
00:50:36,840 --> 00:50:37,720
and more.
Separation.

961
00:50:37,800 --> 00:50:41,040
All roads lead to China, yeah.
But but the issue is, you know,

962
00:50:41,280 --> 00:50:45,240
I think the point though is that
their market cap, 7 billion and

963
00:50:45,240 --> 00:50:47,760
a current price they make is
essentially no money, right, I

964
00:50:47,760 --> 00:50:48,920
think.
They're, they're losing a few

965
00:50:48,920 --> 00:50:50,640
$100 million a quarter at the
moment last.

966
00:50:50,640 --> 00:50:52,840
So yeah.
But yeah, it's, it's amazing.

967
00:50:52,840 --> 00:50:56,800
So, so, so you know, how much
are you prepared to back the

968
00:50:56,800 --> 00:50:59,160
fact that rarest price is going
to rebound?

969
00:50:59,800 --> 00:51:04,440
So hence we're looking at, at
Brazil and I think the ionic

970
00:51:04,440 --> 00:51:10,400
clays are, have the have the
ability to produce rare earths

971
00:51:10,400 --> 00:51:13,800
at a much cheaper price.
And so we're not big there, but

972
00:51:13,800 --> 00:51:16,240
we've got some exposure,
exposure through meteoric which

973
00:51:16,240 --> 00:51:21,040
we which we kind of like.
And you know, I think it's

974
00:51:21,040 --> 00:51:25,120
progressing its project.
If if you take a view that NDP,

975
00:51:25,200 --> 00:51:29,080
well rarest prices are you know
50 bucks a kilo or somewhere

976
00:51:29,080 --> 00:51:32,760
around that 50 to 60.
It looks like the ironic clays

977
00:51:32,760 --> 00:51:35,640
are the only ones that, that can
compete in that kind of market.

978
00:51:35,680 --> 00:51:38,680
But it's early days, it's early
days.

979
00:51:39,120 --> 00:51:42,000
How do you think about the the
technical risk that they need to

980
00:51:42,000 --> 00:51:45,280
to overcome importantly in that
processing step?

981
00:51:45,280 --> 00:51:47,880
That's yeah, that's the big mark
against all of these names.

982
00:51:48,080 --> 00:51:49,640
Yeah.
Well, I think, I think you're

983
00:51:49,640 --> 00:51:51,960
right.
It's kind of it's yet to be

984
00:51:51,960 --> 00:51:57,000
done.
So I think you got to tread

985
00:51:57,160 --> 00:51:58,800
cautiously.
Yeah.

986
00:51:59,720 --> 00:52:02,920
Yeah, yeah, yeah, I've got.
Yeah.

987
00:52:02,920 --> 00:52:04,400
One, one last question for you,
Dave.

988
00:52:04,400 --> 00:52:07,160
It's actually 2 questions.
Yeah, that's right.

989
00:52:08,360 --> 00:52:11,120
Biggest mistake the last five
years.

990
00:52:12,480 --> 00:52:17,600
Oh, that's a good question.
The biggest mistake in the last

991
00:52:17,600 --> 00:52:23,960
five years.
Look, if, if I, if I look back,

992
00:52:25,960 --> 00:52:29,200
probably trying to, you know,
changing the portfolio too much,

993
00:52:29,200 --> 00:52:33,560
like out stock portfolio
turnover is not that great,

994
00:52:33,640 --> 00:52:35,200
right?
Typically we like to find

995
00:52:35,200 --> 00:52:38,200
positions and stuff, but I think
you can overthink it, right?

996
00:52:38,200 --> 00:52:40,400
So you got to kind of, I think
what you got to do is look

997
00:52:40,400 --> 00:52:42,480
through the noise and say, I'm
prepared to wear a bit of

998
00:52:42,480 --> 00:52:46,200
volatility because I know I'm in
good quality stocks and I'm in

999
00:52:46,200 --> 00:52:47,720
sectors that I think are going
to do well.

1000
00:52:48,360 --> 00:52:51,720
But what happens is, you know,
the market is influenced by fear

1001
00:52:51,720 --> 00:52:55,120
and greed and, and as much as
you try and eliminate that, you

1002
00:52:55,120 --> 00:52:57,920
know, when, when the market
turns down, often you go, I just

1003
00:52:57,920 --> 00:53:01,240
want to have a bit more cash and
you sell something and the

1004
00:53:01,240 --> 00:53:05,000
markets, you know, delivers a
response very quickly where you

1005
00:53:05,000 --> 00:53:06,480
go, shit, I should have just
done nothing.

1006
00:53:06,480 --> 00:53:07,960
And April is a good example of
that.

1007
00:53:07,960 --> 00:53:11,840
You know, we, we performed, I
think pretty well in, in a, in a

1008
00:53:11,840 --> 00:53:13,680
difficult environment.
We could have done lots of

1009
00:53:13,680 --> 00:53:16,400
things, you know, you could have
shorted at the wrong time or,

1010
00:53:16,400 --> 00:53:18,800
or, or stuff.
But I look at the decisions that

1011
00:53:18,800 --> 00:53:20,760
we made and we only made a
couple of transactions.

1012
00:53:21,240 --> 00:53:23,600
And if I'd just done nothing, I
would have performed better,

1013
00:53:23,720 --> 00:53:25,720
right?
So it's probably just saying,

1014
00:53:26,200 --> 00:53:28,920
OK, you know, I've done the
work.

1015
00:53:28,920 --> 00:53:31,440
I know these stocks I'm just
going to hold through here.

1016
00:53:31,440 --> 00:53:32,200
I.
Bought it because I had

1017
00:53:32,200 --> 00:53:34,040
conviction.
Yeah, yeah, yeah.

1018
00:53:34,080 --> 00:53:35,840
Yeah.
And on the flip side of that,

1019
00:53:35,960 --> 00:53:37,960
the best decision you've made
for the last five years.

1020
00:53:39,080 --> 00:53:41,920
The best decision?
Chance to talk yourself up.

1021
00:53:42,320 --> 00:53:46,360
Yeah.
Well, I think, I think probably

1022
00:53:46,360 --> 00:53:49,080
two things.
One is it's all about quality,

1023
00:53:49,200 --> 00:53:52,160
right?
If you're buying quality assets,

1024
00:53:53,200 --> 00:53:55,960
you're probably going to do all
right, as long as you're not

1025
00:53:55,960 --> 00:53:57,800
paying too much for them.
So it's a, it's a balance

1026
00:53:57,800 --> 00:54:00,880
between quality and value, but
if you got to choose, you go

1027
00:54:00,880 --> 00:54:04,960
value.
So never compromise on value in

1028
00:54:04,960 --> 00:54:07,280
the resource sector.
And the other, the other point

1029
00:54:07,280 --> 00:54:10,680
is probably how we structured
the fund initially, right?

1030
00:54:10,680 --> 00:54:14,520
So the fact that we can invest
in small caps and big caps, you

1031
00:54:14,520 --> 00:54:16,680
know, we can invest in BHP and
we can invest in something in a

1032
00:54:16,680 --> 00:54:19,560
mark cap of five mil.
The fact that we can go to 30%

1033
00:54:19,560 --> 00:54:23,320
cash gives you flexibility to
protect yourself in a down

1034
00:54:23,320 --> 00:54:24,840
market.
I think that's really critical.

1035
00:54:25,960 --> 00:54:28,040
Dave, I've really enjoyed this.
Thanks for making the time and

1036
00:54:28,040 --> 00:54:30,080
coming on Money of Night.
Yeah, thank you.

1037
00:54:30,120 --> 00:54:31,080
So good to chat.
Yeah.

1038
00:54:31,640 --> 00:54:32,520
Thanks, Dave.
Awesome.

1039
00:54:34,240 --> 00:54:37,080
Fantastic.
There we go mate and a massive

1040
00:54:37,080 --> 00:54:40,200
thank you to all our partners.
Firstly GRX get your tickets,

1041
00:54:40,200 --> 00:54:43,640
they are in the show notes May
20 to May 22nd and extend that

1042
00:54:43,640 --> 00:54:47,080
thanks to Mineral Mining
Services branded Sandy Ground

1043
00:54:47,080 --> 00:54:51,560
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KCA Site Services, Black Diamond

1044
00:54:51,600 --> 00:54:54,560
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Boundary Energy Hurduru Money

1045
00:54:54,560 --> 00:54:54,880
Miners.