Structural market change investors have to accept with Romano Sala Tenna

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Righto money miners.
We've got a bit of the, we've

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got the Cottesloe Mafia with us
today, quite a part of the the

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investment mafia I'd say.
Mr. Romano Salatena from Cortana

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Asset Management.
Back after a very, very well

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received episode and chat he did
with the boys about this time

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last year, funnily enough.
So he's come back to tell us a a

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whole heap more, but a bit of a
different story in markets the

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year that's gone compared to
when he previously chatted with

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us, but very, very good chatting
nonetheless.

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Right mate, we start they they
start macro talking about the

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bloody passive Superfund
investing in Australia gravitate

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towards the micro GC What what
stocks we got men res Obviously

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he's he's he's still punching
for the 100 bucks a share for

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men res Good on you Romano by
what they have Whitehaven.

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They were arcadium to grave.
They've both been acquired

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Coronado S 32 Boss Energy WAF W
Farmers Regis.

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Karity.
No, she's all going on.

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Let's get into the boys chat
with Romano.

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Let's do it.
Mate, we've got Romano sitting

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next to us, pretty, pretty
pumped to pick his brain on, on

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all things markets related, the
state of the market, the

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dynamics of the market, the
resources stocks that we're

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interested in.
Romano, you joined us about a

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year ago, maybe slightly less
than a year ago.

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Audience, audience.
Love the chat.

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Lots of insight, lots of, yeah,
perspectives that I think might

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maybe sometimes a little bit,
you know, unconventional or said

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in a different way.
And we're keen to tease that out

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again because markets look a
hell of a lot different to that

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to how they did 12 months ago.
How's everything been, Cortana?

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Yeah, Next question.
Is that the the concise way of

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saying, yeah, you know, it's
like I feel a bit distorted.

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It's been a challenging year, no
doubt.

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We we've been going for 19 years
and we had our second worst year

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on record compared to the
benchmark.

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We're really excited about the
portfolios, how they're

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positioned, but the market
doesn't seem as excited as we

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are at the moment.
The, the, it's a, it's a, it's a

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weird, it's a weird market,
right?

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I mean the, the big stocks get
bigger valuations of of of high

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growth tech stocks and in
Australia of banks just seem to

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get higher and higher multiples
which if you do fundamental

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valuation work seems to stop
making sense at some point.

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Yes, spot on.
So momentum, we, we see five

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investment styles and Momentum's
had its best year since we've

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got data which is 2002 data
stated started.

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So since 2002, I think it put on
3334% as a stall in 2024

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calendar year.
So that's the best year on

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record.
So Momentum is just purely

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devoid of anything, EPS, growth,
valuation, quality,

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fundamentals, it's purely price
momentum stocks are going up,

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therefore they attract greater
flows.

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So which drives a price higher?
As the price goes higher tracks

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greater flows and the cycle
continues until it doesn't.

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And at the moment it's
continuing.

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It was a it was a super
interesting year 2024 and you've

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you've outlined in your, your
recent letter three of the the

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big factors behind your
performance relative to the, the

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market's performance.
I'm really interested to to try

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and nail it down to start with
the the biggest sort of lesson

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you learnt last year from from
the market.

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Oh, it probably didn't learn
anything.

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Probably reminded us that, you
know, Mr. Market determines your

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short term performance.
You know, so we we daily go

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through our portfolios and daily
we criticize each other and

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critique each other and you
know, challenge each other about

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what we're investing in.
And the reality is is you know,

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we write a piece when Commbank
was $117.00 a share and we said

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this is overvalued, but the
chances are we go higher.

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This is about this time last
year.

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Now what we also said that we're
not going to invest in it

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because it doesn't meet, you
know, a holistic approach to

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investing.
It meets one of the criteria

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which is momentum.
But the problem with momentum is

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it can stop as quickly as it
starts and when it does, you've

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got no recourse.
Whereas if you've got, if you're

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investing companies that are
fundamentally sound, that are

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growing, they're good, good
valuations below book value,

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etcetera, you know if the price
retraces, then you've got

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opportunities to sort of build
and add to those positions.

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You spoke last year about not
putting yourself in a box

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either.
You're not a growth investor,

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you're not a value investor.
There was a whole bunch of

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different metrics you kind of
spoke about, but you were pretty

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agnostic to a bunch of them.
And in conjunction with that,

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you'd use a technical overlay as
a part of your investment

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process.
Has that helped at all through

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this sort of year of momentum
going from strength to strength

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from stocks going from, you
know, just strength to strength

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as well, everything just
expanding whilst earnings maybe

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staying relatively flat.
Were you able to pick up on any

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of that momentum or did your,
you know, the the value hat that

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you have in the office pull you
back from actually partaking in

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any of that?
I think it's a really good

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question and it goes to the
heart of what we do and that is

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that we will never buy a stock
purely on technicals.

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So purely, you know, if, if it's
got price momentum, that's an

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important thing for us to look
at, but in and of itself it's

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not going to get us across the
line to buy a company.

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So where we use our technicals,
for example, where it lines up,

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you know, maybe it's got
earnings per share growth above

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the market.
Maybe we've got a strong view

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about management entrepreneurial
capabilities, about some aspect

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of quality.
If we can see some price

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triggers, right, those things
will then be the, the, the

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impetus to buy.
But in terms of timing, that's

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when our technicals come into
it.

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So if we've got something which
you know, and don't get me

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wrong, we have you as some of
our technicals have kept us in

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some of these momentum trades
which we've been in for other

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reasons.
And so by using a technical

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analysis overlay, we've been how
to hold our position.

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And wise tech is actually an
example, you know, much longer

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than we otherwise would have on,
on any other grounds.

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But in of itself it won't drive
a buy signal.

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Gotcha.
So we, we can't really talk

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about momentum without talking
about passive, active first

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passive and this, this massive
debate.

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And to be honest, we haven't had
it too often on on the show, I

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don't think.
But it is one of the the

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foundational drivers, especially
since we started the podcast of

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returns in the industry.
So I'm really keen to dive into

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it.
This was one of the three big

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sort of talking points you had
in your your recent letter about

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2024 and what you learned over
that year and year.

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You showed this sort of chart
with the amount of capital that

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our super funds now have.
They obviously play a big role.

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They're not the kind of
traditional passive that people

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might think of in the States,
but they spend, you know, a vast

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amount of that money on ASX
stocks proportionate to what

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their their sort of size is.
So how is that sort of thinking

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around passive versus active and
the role of active in the market

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evolved in your mind over the
over the year?

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I think, yeah, I think you've
really hit the nail on the head.

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The I think that we have
witnessed a paradigm shift, a

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structural shift in the
investment landscape in

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Australia.
And you know, I think it's been

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brewing for a while with ETS and
the like there.

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But I think what made it
critical what what critical mass

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was the the conglomeration of
the Australian industry

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superfunds.
So if you look at the the top

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five industry superfunds in
Australia today, they have about

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700 billion assets.
The top one Aussie see was got

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about over 300 billion alone.
So just the top five super funds

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now control about 700 billion.
Now you know everyone's

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different, but if you take say a
40% as an average matric across

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that, that they're going to
invest into Aussie equities,

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then Aussie super line 40% of
300 say 120 billion that's going

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to invest in Aussie equities.
Now what that means is that when

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it presses the button and says,
right, why not buy white Aussie

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equities, it now can't really
invest in anything outside the

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top 20 or 50 because to get that
sort of scale, it's just, it's

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just nonsense.
We can't be buying further down

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the the past the A600 certainly.
So we're seeing now that it's

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very concentric.
We're seeing because of this

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aggregation of funds because of
the bigger become bigger and

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that's continuing.
We're seeing, you know, a

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presenters have put a bit of
pressure on the underperforming

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industry funds to be taken over.
They're just getting larger and

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larger.
It means that for them to

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actually invest, they have to
really focus on a, a real subset

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of the ASX now.
So that momentum through passive

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trading or passive investing has
hit critical mass.

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And you know, one of the
learnings has said from now in

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our newsletter from 2024.
So we have to recognize that

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like, we can say it doesn't make
sense.

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We can say that it's, it's going
to revert or whatever.

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But the reality is, is we've had
a structural change in the

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Aussie landscape.
And it's government mandated as

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well.
First of all, we have to put a

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portion of our salaries into
these funds more or less.

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And they have to invest a
portion in the Aussie market.

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Obviously the, the, the Super
funds have a bit of say in what

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that proportion is, but there's
a barrier in which has to go in.

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And yeah, it's it's good to kind
of have those supports if you're

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on that side of momentum, it's a
a good one to be.

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Playing super funds will be
lining up to get a piece of MMS

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I reckon.
GC if they could tip some.

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Cash out the door, that passive
money would be flying in.

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Remember when bloody Ben Cleary
talking about Berkshire Hathaway

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lining up to get a piece of
Glencore?

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That's pretty much equivalent to
what Aussie Super will want to

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get out of MMSI think.
Imagine getting a piece of the

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most vertically integrated and
sophisticated open pit mining

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contractor in WA.
Mate, they don't.

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They that's a bullet
opportunity.

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They don't just move rocks, JC.
They have the tech services arm

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behind the open pit contracting
arm that designs and schedules

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the movement of those rocks.
It's.

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A very important.
Part And Speaking of Rocks, the

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bloody the new CEO, Rob Ryan, he
left rocks to come to MMS.

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To move more rocks.
To move more rocks.

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There is rocks gallant
everywhere for MMS.

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They're bloody machine ready and
tech ready for an open pit

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mining contract.
Hit them up.

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Yeah.
Go MMS you, you really picked at

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the, the changes in multiples,
touching on the PE ratio that a

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lot of these companies trade at
and honing in and really

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identifying that it is an
earnings growth.

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These companies haven't become
better companies, not that

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they're bad companies to start,
but it's just they're getting

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valued that much more for the
dollar and earnings that they

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have.
Can you, can you flesh that out

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a bit more for us?
It's spot on.

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I mean, it's PR expansion, price
settings ratio expansion.

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So the Commonwealth Bank, for
example, hasn't had earnings

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growth.
PR has just expanded from say 13

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times, which is where it was
through the cycle to now be

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trading on 26 times.
Yeah, who's to say that 13 times

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is wrong and all right, And
who's to say 26 times wrong and

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right?
You just have to recognize that

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there has been this structural
paradigm shift in the, in the

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landscape.
And that's, if the weight of

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money is, is being bought on,
on, on passive metrics and

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Commonwealth Bank say makes up
$0.10 or 10% of the index, $0.10

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and a dollar passive money is
going to go to Commbank.

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I think the other thing it's,
you know, accentuated the, the,

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the move with Commbank is the
fact that you have got a fairly

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large retail base.
They are fairly sticky a,

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because they're probably just,
you know, they're blindly

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following Commbank because it's
been so good to them, but also

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because there's CGT issues.
You know, if you've got Commbank

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00:11:54,880 --> 00:11:57,320
at a very low price, you have
to, you know, you're not going

224
00:11:57,320 --> 00:12:00,040
to sell at $160.00 a share even
though it's heavily overvalued

225
00:12:00,480 --> 00:12:03,240
because of tax implications and
reinvesting that money.

226
00:12:03,240 --> 00:12:06,120
So you've got these a whole
different factors working

227
00:12:06,120 --> 00:12:09,760
together and driving.
And then then the, the, that

228
00:12:09,760 --> 00:12:14,720
becomes so perpetuating because
if passive money is driving

229
00:12:14,720 --> 00:12:18,840
share prices and those share
prices are outperforming,

230
00:12:20,200 --> 00:12:23,560
suddenly you get this weird
situation where passive money on

231
00:12:23,560 --> 00:12:25,400
mass is outperforming active
money.

232
00:12:26,160 --> 00:12:29,960
And so the, the weight of money
that that tracks performance

233
00:12:30,240 --> 00:12:32,920
will actually start to flow on a
passive as well, which will then

234
00:12:32,920 --> 00:12:35,560
give another kick and become
further self perpetuating.

235
00:12:35,560 --> 00:12:38,800
So you know, we're in a very,
we're part, we're a good way

236
00:12:38,800 --> 00:12:41,360
through it, but we're at a very
interesting dynamic now where

237
00:12:41,840 --> 00:12:45,080
you know seeing the first time
in my 30 years passive money is

238
00:12:45,080 --> 00:12:50,280
is performing better on mass and
active and we're seeing it

239
00:12:50,280 --> 00:12:53,760
driving inflows based on
performance.

240
00:12:54,120 --> 00:12:56,560
Is it a?
Is it a structural shift though?

241
00:12:56,600 --> 00:13:01,960
If, if you know why, why would
people buy Commbank today?

242
00:13:03,240 --> 00:13:05,800
Well, you're, you're not going
to buy Commbank today if you're

243
00:13:05,800 --> 00:13:07,600
buying it for the, for the
dividend yield, because the

244
00:13:07,600 --> 00:13:10,720
dividend yield is is less than
the risk free rate of return if

245
00:13:10,720 --> 00:13:12,200
you just bought government
bonds.

246
00:13:12,760 --> 00:13:15,600
So you must be the only
rationale to buy Commonwealth

247
00:13:15,600 --> 00:13:18,480
Bank stock today is an
expectation of further capital

248
00:13:18,480 --> 00:13:20,560
gains in the share price.
So you can only possibly buy

249
00:13:20,560 --> 00:13:23,240
that from further multiple
expansion, but you don't have

250
00:13:23,240 --> 00:13:28,240
earnings growth to support that
further multiple expansion.

251
00:13:28,240 --> 00:13:30,680
It's like what we talked about
before we start recording.

252
00:13:30,680 --> 00:13:32,640
That's got to be some form of
greater full theory.

253
00:13:32,640 --> 00:13:34,560
It can't.
It can't be a paradigm shift.

254
00:13:34,560 --> 00:13:37,640
That's simply just a you know.
This time isn't different,

255
00:13:37,640 --> 00:13:40,120
surely?
Well, it's different if if the

256
00:13:40,120 --> 00:13:42,040
weight of money that's
sustaining that move is

257
00:13:42,040 --> 00:13:44,720
sustainably different.
And I would argue that it is

258
00:13:44,720 --> 00:13:48,080
unfortunately, I'd argue that
now we've seen, yes, you know,

259
00:13:48,080 --> 00:13:50,960
we're seeing momentum on
steroids.

260
00:13:50,960 --> 00:13:54,240
But I think moving forward
you're going to see the fact

261
00:13:54,240 --> 00:13:59,320
that passive flows will be a lot
will be a larger proportion of

262
00:13:59,320 --> 00:14:02,640
the market increasing over time.
And therefore we have to

263
00:14:02,640 --> 00:14:04,400
understand how passive flows
run.

264
00:14:05,680 --> 00:14:09,560
You know, there's a great chart
just recently which showed that

265
00:14:10,640 --> 00:14:14,400
every major institution and
retail investor in Australia on

266
00:14:14,440 --> 00:14:17,800
on mass had had been net sellers
of Commbank over the last 12

267
00:14:17,800 --> 00:14:19,800
months.
And it was purely the industry

268
00:14:19,800 --> 00:14:21,400
funds which had driven that
price.

269
00:14:24,120 --> 00:14:27,920
The the same dynamic which the
passive dynamic, which, you know

270
00:14:27,920 --> 00:14:32,240
supports buying irrespective of
the valuation works in reverse

271
00:14:32,240 --> 00:14:34,920
as well.
And and we're we're recording

272
00:14:35,080 --> 00:14:38,520
this today on the I think it's
the 28th of of Jan NVIDIA

273
00:14:38,520 --> 00:14:41,880
overnight.
It's just come off 17% that

274
00:14:41,880 --> 00:14:46,040
that, that to me is an example
of where, yeah, the the sharp

275
00:14:46,040 --> 00:14:50,000
volatility can can work and
reverse if you're suddenly a, a

276
00:14:50,000 --> 00:14:53,320
rapidly smaller proportion of,
of some index, well, guess what?

277
00:14:53,320 --> 00:14:55,840
There's indiscriminate buying
irrespective of the price as

278
00:14:55,840 --> 00:14:59,080
well, and which can lead to a
reversal of this paradigm shift

279
00:14:59,080 --> 00:15:01,440
from a multiple perspective.
Yeah, absolutely, Spotter.

280
00:15:01,520 --> 00:15:03,680
It's only unusual.
We did highlight the fact that,

281
00:15:03,680 --> 00:15:06,160
you know, momentum is the most
dangerous of styles because it

282
00:15:06,160 --> 00:15:08,000
doesn't have a fundamental
backdrop.

283
00:15:08,480 --> 00:15:11,600
And so I wouldn't, I'd be
careful to, to try and pick out

284
00:15:11,600 --> 00:15:13,960
individual stocks.
I mean, obviously in the case in

285
00:15:13,960 --> 00:15:16,320
the video, you know, with that
market capitalisation and

286
00:15:16,320 --> 00:15:19,760
valuation is quite ludicrous on
banks 26 times and it's still

287
00:15:19,760 --> 00:15:24,240
paying 3% yield.
But I would say that on, you

288
00:15:24,240 --> 00:15:28,000
know, on if you look at across
the spectrum, I think that

289
00:15:28,000 --> 00:15:33,360
momentum and passive investing
will have a sustainably bigger

290
00:15:33,360 --> 00:15:36,840
impact on our market moving
forward from this point.

291
00:15:38,320 --> 00:15:41,480
So you, you made the comment,
Romano, who's to say 13 times or

292
00:15:41,480 --> 00:15:47,240
26 times is, is right, but funds
get marked against the, the

293
00:15:47,240 --> 00:15:50,000
market's performance.
And you've made a decision not,

294
00:15:50,000 --> 00:15:54,000
not to buy in this case and not
to hone in specifically on CBA,

295
00:15:54,000 --> 00:15:55,880
because I'm sure all the same
could be said for a bunch of

296
00:15:56,080 --> 00:16:00,600
similar names out there.
But how do you think this ends?

297
00:16:00,600 --> 00:16:03,240
Do you think we sort of stay at
this level of heightened

298
00:16:03,240 --> 00:16:06,440
valuation?
Do you anticipate everything

299
00:16:06,440 --> 00:16:08,720
sort of going up in smoke?
What, what do you kind of think

300
00:16:08,720 --> 00:16:11,120
is going to happen in the in the
medium term?

301
00:16:12,000 --> 00:16:14,840
Look, that's the question
occupies a lot of our our mind

302
00:16:14,840 --> 00:16:16,560
space.
I think there's a number of

303
00:16:16,560 --> 00:16:19,280
scenarios.
One scenario is that the the

304
00:16:19,280 --> 00:16:24,520
large passive flows for whatever
reason on mass dis or start

305
00:16:24,520 --> 00:16:28,440
it'll start with trickle bit on
mass decide to pivot into same

306
00:16:28,440 --> 00:16:30,480
materials.
So I think if you know, if you

307
00:16:30,480 --> 00:16:33,440
start to see a sustainable
recovery in commodity prices or

308
00:16:33,440 --> 00:16:38,080
if you get, you know, confidence
in the China rhetoric changing,

309
00:16:38,520 --> 00:16:41,200
but I think the the industry
funds will suddenly say, right,

310
00:16:41,200 --> 00:16:44,040
we now need to be, we now need
to up our weighting in

311
00:16:44,040 --> 00:16:45,880
materials.
And that's really interesting

312
00:16:45,880 --> 00:16:47,560
because we've been doing a lot
of work in that saying, well,

313
00:16:47,560 --> 00:16:50,920
OK, probably this time around
when we think that that moment

314
00:16:50,920 --> 00:16:54,880
happens, then we have to be a
little bit Dumber than usual and

315
00:16:54,880 --> 00:16:58,120
just say we'll buy BHP, we'll
buy Rio, we'll buy FMG, we'll

316
00:16:58,120 --> 00:17:01,640
buy Woodside, we'll buy the top
five resource plays.

317
00:17:01,640 --> 00:17:04,319
Because if the Super funds, if
the industry funds are now the

318
00:17:04,319 --> 00:17:08,040
ones driving the flows and
they've got scale as an issue

319
00:17:08,040 --> 00:17:11,680
again, they're not going to get
down and be as discerning as,

320
00:17:11,720 --> 00:17:13,359
you know, we would have seen in
past cycles.

321
00:17:13,359 --> 00:17:16,640
They're not going to be looking
at the EPS growth on, I don't

322
00:17:16,640 --> 00:17:20,359
know, a company like Sand Fire
or whatever.

323
00:17:20,359 --> 00:17:22,280
You know, they're going to be
really just sticking to the top

324
00:17:22,280 --> 00:17:24,319
end because it's going to be
sides that that's going to be

325
00:17:24,319 --> 00:17:27,440
most critical to them.
So I think what that means is

326
00:17:27,440 --> 00:17:29,760
moving forward, we have to, you
know, really focus on the top

327
00:17:29,760 --> 00:17:31,960
end again, unless there's a more
compelling reason to step

328
00:17:31,960 --> 00:17:34,520
outside of that.
I think otherwise it ends as you

329
00:17:34,520 --> 00:17:37,440
know, if you do start to see,
and we have start to seen a bit

330
00:17:37,440 --> 00:17:39,760
of it in the media, if the media
really starts to get a hold of

331
00:17:40,200 --> 00:17:42,800
industry superfunds or just
buying Commonwealth Bank as an

332
00:17:42,800 --> 00:17:46,760
example, at some point someone's
going to say right, it's now the

333
00:17:46,880 --> 00:17:49,840
the easiest way to protect my
position, to protect my butt is

334
00:17:49,840 --> 00:17:51,960
to actually not by Commonwealth
Bank.

335
00:17:52,400 --> 00:17:57,360
You can protect your exploration
but by getting K drill to start

336
00:17:58,120 --> 00:18:00,280
punching some Arsene diamond
holes in JC.

337
00:18:00,520 --> 00:18:03,400
Absolutely.
Protect my W Gale to protect in

338
00:18:03,400 --> 00:18:08,360
there, but by K drill now
drilling holes for the them the

339
00:18:08,360 --> 00:18:11,800
pending 400,000 oz producer.
Yeah, right.

340
00:18:11,800 --> 00:18:14,000
Oh yeah, mate.
But that's as that could be as

341
00:18:14,000 --> 00:18:17,080
transformational as the Corolla
acquisition itself having K

342
00:18:17,080 --> 00:18:18,920
drill on their site.
Love.

343
00:18:19,040 --> 00:18:21,720
It you know the drillers in the
off site, is it safe Because you

344
00:18:21,720 --> 00:18:25,920
got the Ryan, the Sergeant
O'Sullivan, He bloody takes that

345
00:18:25,920 --> 00:18:29,440
shit freaking seriously.
And the RC sample management as

346
00:18:29,440 --> 00:18:30,560
well.
Very serious.

347
00:18:30,560 --> 00:18:32,960
Serious.
Yeah buddy, Decades and decades

348
00:18:32,960 --> 00:18:35,200
of experience.
Got loads of Goldfields

349
00:18:35,200 --> 00:18:36,960
knowledge.
Now getting a bit of Murchison

350
00:18:36,960 --> 00:18:39,600
knowledge.
Mate, go seek some knowledge

351
00:18:39,840 --> 00:18:43,120
from Sergeant Ryan and the team
at K Drill.

352
00:18:43,440 --> 00:18:48,520
Not Private Ryan, Sergeant.
Ryan, Sergeant Ryan, Well done,

353
00:18:48,520 --> 00:18:49,760
Rhino.
Go K Drill.

354
00:18:50,000 --> 00:18:52,640
Doesn't look pretty stupid if
that does start to turn down.

355
00:18:52,640 --> 00:18:56,120
So it's really going to be it's
a psychological sentiment thing.

356
00:18:56,120 --> 00:18:59,560
I don't think valuations play
into this in the in the current

357
00:18:59,560 --> 00:19:03,360
cycle.
I can feel all of Perth get more

358
00:19:03,360 --> 00:19:06,480
excited as you say hundreds of
billions of dollars might get

359
00:19:06,480 --> 00:19:08,320
allocated to.
Materials, but not the way.

360
00:19:08,440 --> 00:19:10,840
That's the scary thing, large
cap.

361
00:19:10,840 --> 00:19:14,360
So, yeah, but I think there's
opportunity and if you go down

362
00:19:14,360 --> 00:19:18,200
the curve a little bit, because
so much capital is focused on

363
00:19:18,280 --> 00:19:22,680
concentrated names, there might
be occasional like, you know,

364
00:19:24,120 --> 00:19:27,640
valuation that is super
compelling at the smaller end

365
00:19:27,640 --> 00:19:30,840
where you've got protected
downside, healthy balance sheet.

366
00:19:30,840 --> 00:19:33,440
You know, you can see a pathway
to to to buy backs.

367
00:19:33,440 --> 00:19:36,160
And heck, there's your there's
your bidder of the stock.

368
00:19:36,200 --> 00:19:38,280
Like, those sorts of
opportunities can pop up too.

369
00:19:38,360 --> 00:19:40,320
So you you touched on China
there.

370
00:19:40,360 --> 00:19:42,640
What are you kind of thinking on
on that front?

371
00:19:42,680 --> 00:19:47,680
Obviously a a huge factor in how
everyone does here in in Perth.

372
00:19:47,680 --> 00:19:50,280
Are you bearish bullish medium
outlook?

373
00:19:51,480 --> 00:19:54,960
Look, we try and be a realist
and I think at the moment, it's

374
00:19:54,960 --> 00:19:56,840
still too early to call.
Like, you know, it was always

375
00:19:56,840 --> 00:19:59,080
about what Trump did with the
tariffs.

376
00:19:59,520 --> 00:20:02,440
And so we're waiting for the
inauguration 20 Gen. that's

377
00:20:02,440 --> 00:20:06,080
coming past, you know, Trump's
doing what Trump does, which is,

378
00:20:06,120 --> 00:20:08,800
you know, barking very loudly.
And then his bite tends to be,

379
00:20:08,960 --> 00:20:11,760
you know, substantially less.
I think we need to see, you

380
00:20:11,760 --> 00:20:13,920
know, I think I think XI
Jinping's pretty smart.

381
00:20:13,920 --> 00:20:19,800
He's waiting for.
The actual nuts and bolts of of

382
00:20:19,800 --> 00:20:23,920
Trump's policies, I think once
we see them, then I think we'll

383
00:20:23,920 --> 00:20:27,240
see how China responds.
But you know, people have to

384
00:20:27,240 --> 00:20:29,680
understand as much as we hoped
that it would be different, the

385
00:20:29,680 --> 00:20:32,640
reality is, is that it's not
going to be an infrastructure

386
00:20:32,640 --> 00:20:35,200
LED stimulus.
You know, they now need to pull

387
00:20:35,200 --> 00:20:37,320
on different strings to get
their economy going.

388
00:20:37,320 --> 00:20:40,240
Like there's only so much, I
mean so much surplus housing,

389
00:20:40,240 --> 00:20:42,960
but there's only so many roads
and railways in the ocean build.

390
00:20:43,400 --> 00:20:46,360
I think people have to
understand that that when China

391
00:20:46,360 --> 00:20:49,640
does stimulate, it'll be in a
different manner to what we've

392
00:20:49,640 --> 00:20:52,400
seen in the past cycles.
I think the flip side though is

393
00:20:52,400 --> 00:20:56,480
that India now is really, you
know, where we've thought it

394
00:20:56,480 --> 00:20:59,960
would be the last 10-15 years.
India now is really a sort of

395
00:20:59,960 --> 00:21:02,000
great chart in Indian oil
consumption just recently.

396
00:21:02,000 --> 00:21:06,280
You know, so India is at the
level where it is starting to

397
00:21:06,280 --> 00:21:10,120
have a meaningful impact on
marginal buying.

398
00:21:10,440 --> 00:21:13,000
So you've probably got to have a
close look at, well, you know,

399
00:21:13,000 --> 00:21:16,520
where's India, what's Indian D
fishing versus what's China D

400
00:21:16,520 --> 00:21:20,080
fishing in and probably start to
to look at more of those

401
00:21:20,080 --> 00:21:23,280
commodities.
The the cheap oil from Russia

402
00:21:23,280 --> 00:21:26,120
has been pretty handy to to to
the Indian economy of like.

403
00:21:27,600 --> 00:21:30,400
Yeah, they've, they've certainly
been quite happy to.

404
00:21:31,040 --> 00:21:34,440
It's $60.00 barrel U.S. oil when
everyone else is paying 75.

405
00:21:34,600 --> 00:21:36,920
Yeah.
Yeah, the the Indian narrative

406
00:21:36,920 --> 00:21:39,400
is one that people have touched
on for ages.

407
00:21:39,400 --> 00:21:43,840
I mean, you go back and look at
a, a Rio FM GABHB presentation

408
00:21:43,840 --> 00:21:48,720
from 2005 and China's the thing.
And then the, the growth on top

409
00:21:48,720 --> 00:21:52,400
of the growth story is that
India is the second wave coming.

410
00:21:52,400 --> 00:21:56,160
What, what makes you think it's
a real wave that's going to lift

411
00:21:56,160 --> 00:21:57,160
up?
I'm sure you're, you're hinting

412
00:21:57,160 --> 00:22:00,080
at Metco names and other sort of
names out there right in, you

413
00:22:00,080 --> 00:22:01,520
know, in the more immediate
future.

414
00:22:02,200 --> 00:22:04,440
Yeah, I think now because the
economy, you can just look at

415
00:22:04,440 --> 00:22:09,880
the GDP numbers, the economy's
of a size where 6% GDP or 7% GDP

416
00:22:09,880 --> 00:22:12,960
growth now does mean something.
You know, when it's 2/5 or

417
00:22:12,960 --> 00:22:15,560
nothing, then you know that it
was irrelevant.

418
00:22:15,920 --> 00:22:19,040
But when they are seeing, we're
seeing a quite a substantial

419
00:22:19,040 --> 00:22:22,320
economy and one that's growing
at a, you know, quite a good

420
00:22:22,320 --> 00:22:24,640
clip.
So put those two together and

421
00:22:24,640 --> 00:22:25,920
we're starting to get the China
effect.

422
00:22:25,920 --> 00:22:28,840
Now we're still aware, you know,
China was at its peak, but we

423
00:22:28,840 --> 00:22:31,800
are now starting at the stage
where India is meaningful and

424
00:22:31,800 --> 00:22:34,240
you can throw and you know,
Southeast, Southeast Asia.

425
00:22:34,240 --> 00:22:36,920
I mean, it's a some really
smart, good economies here that

426
00:22:36,920 --> 00:22:38,840
are really starting to grow at
quite a clip too.

427
00:22:40,120 --> 00:22:44,600
So all that kind of said,
getting to the, the third factor

428
00:22:45,160 --> 00:22:51,080
in your 2024 reflective note was
an over allocation to materials

429
00:22:51,080 --> 00:22:54,800
and essentially it was more
money in minors versus banks,

430
00:22:54,800 --> 00:22:57,640
Oregon materials versus
financials as they they kind of

431
00:22:57,640 --> 00:23:00,880
call it.
What what kind of went wrong

432
00:23:00,880 --> 00:23:02,640
here?
Was this more anticipating at

433
00:23:02,640 --> 00:23:05,520
the beginning of the year that
China would come in a bit

434
00:23:05,520 --> 00:23:07,120
earlier?
How did that kind of end up

435
00:23:07,360 --> 00:23:09,840
playing out versus your
expectations one year ago?

436
00:23:09,840 --> 00:23:12,720
Oh.
It's a hard being hard now, Joe.

437
00:23:13,800 --> 00:23:15,160
Well, it was, I think it's two
things.

438
00:23:15,160 --> 00:23:17,640
Firstly is that we didn't want
to be in banks, right.

439
00:23:17,640 --> 00:23:20,520
So if you look at the banks and
materials make up 51% of the

440
00:23:20,520 --> 00:23:23,280
ASX.
So you can't be underweight both

441
00:23:23,280 --> 00:23:25,240
banks and materials.
You've got to, you've got to

442
00:23:25,240 --> 00:23:27,240
make a choice.
You know which one you're going

443
00:23:27,240 --> 00:23:28,240
to, which one you're going to
play it.

444
00:23:28,720 --> 00:23:31,640
We chose to be underweight banks
because we had 13 interest rate

445
00:23:31,640 --> 00:23:34,560
rises in, you know, it was a 15
months or something.

446
00:23:34,560 --> 00:23:38,360
It was the quickest and then the
biggest percentage rate rise on

447
00:23:38,360 --> 00:23:41,640
record in Australia.
So we were the view that you're

448
00:23:41,640 --> 00:23:44,280
going to see some sledding
credit growth, you're going to

449
00:23:44,280 --> 00:23:48,040
see some, you know, distress in,
in mortgages and repayments and

450
00:23:48,400 --> 00:23:50,400
bad and doubtful debts and
whatever else picking up.

451
00:23:52,520 --> 00:23:54,680
Well, how do we get that wrong?
We got that wrong because net

452
00:23:54,680 --> 00:23:58,760
migration, despite all the
Reddit was at a record level and

453
00:23:58,760 --> 00:24:00,840
a lot of these people coming in
were buying houses in the

454
00:24:00,840 --> 00:24:02,960
property market stayed very,
very robust.

455
00:24:02,960 --> 00:24:05,760
And so we still had that growth
come through and we still had

456
00:24:05,760 --> 00:24:08,520
that instead of bad and out for
it's picking up.

457
00:24:08,720 --> 00:24:11,840
When you got 20% growth on
Perth, property prices are 21%

458
00:24:11,840 --> 00:24:14,400
in the last 12 months.
So you know, even if you bought

459
00:24:14,400 --> 00:24:17,560
really badly and you can't cover
your mortgage, guess what, you

460
00:24:17,560 --> 00:24:20,040
sell, you've got some equity
left in the bank doesn't lose.

461
00:24:20,480 --> 00:24:22,000
So I think that was the first
thing.

462
00:24:22,800 --> 00:24:25,720
And the second thing, I think,
you know, material side, it was

463
00:24:25,760 --> 00:24:29,080
only really the back end of 24
that the whole China piece

464
00:24:29,080 --> 00:24:32,000
became important.
Like prior to that, no one was

465
00:24:32,000 --> 00:24:34,720
really talking about China.
It was, you know, and then all

466
00:24:34,720 --> 00:24:36,960
of a sudden this is that we
started to see some of the data

467
00:24:36,960 --> 00:24:39,720
points come through and it got
quite, quite dramatic there.

468
00:24:39,720 --> 00:24:43,560
But by that stage you're already
seeing resource stocks, material

469
00:24:43,560 --> 00:24:45,600
stocks trading at depressed
levels.

470
00:24:46,920 --> 00:24:48,440
So the damage had already been
done.

471
00:24:48,440 --> 00:24:53,920
Like, you know, we tend to jump
early if we're going to jump and

472
00:24:53,920 --> 00:24:56,000
if we miss it, then we'll just
we'll be in for there for the

473
00:24:56,000 --> 00:24:57,160
ride.
And we're at companies that, you

474
00:24:57,160 --> 00:25:00,200
know, I've got high free cash
flows, really good monopoly

475
00:25:00,200 --> 00:25:01,440
positions.
You know, I mean, you're not

476
00:25:01,440 --> 00:25:03,520
you're not building another Mick
coal mine Australia the next

477
00:25:03,520 --> 00:25:06,160
little while, right?
Effectively, Mick, coal mines

478
00:25:06,160 --> 00:25:09,120
have moved into the oligopoly
status in my mind.

479
00:25:10,040 --> 00:25:14,000
It's a wonderful transition to
your portfolio of stocks Romano

480
00:25:14,080 --> 00:25:18,160
and what one of one of one of
them that you know, we talked

481
00:25:18,160 --> 00:25:21,640
about last year and probably
prompted me to reach rethink.

482
00:25:21,640 --> 00:25:25,280
My critique of him was was was
Whitehaven, you know, the the

483
00:25:25,280 --> 00:25:26,960
deal kind of looks as good as
ever.

484
00:25:27,040 --> 00:25:29,760
Metco prices have have
moderated, but the share price

485
00:25:29,760 --> 00:25:34,120
has been you know under
underwhelming given given all

486
00:25:34,120 --> 00:25:36,200
those factors, how do you look
at their outlook today?

487
00:25:37,080 --> 00:25:38,920
Yeah.
So, so that's still in our top

488
00:25:38,920 --> 00:25:42,360
holdings Whitehaven and it's
there on a on a bottom up

489
00:25:42,360 --> 00:25:45,240
perspective.
You just have to look at that

490
00:25:45,240 --> 00:25:46,960
deal they did with you know
Blackwood and Dorney.

491
00:25:47,040 --> 00:25:52,880
I mean, it's exceptional deal
what has throwing him off in the

492
00:25:52,880 --> 00:25:56,480
short to medium term.
His number one has been, you

493
00:25:56,480 --> 00:25:58,840
know, the met coal price has
retraced back from sort of 240

494
00:25:58,840 --> 00:26:01,160
USA talent sort of sit at 190 at
the moment spot.

495
00:26:01,520 --> 00:26:04,760
So, you know, and people don't
quite understand, but with the

496
00:26:04,760 --> 00:26:08,080
increase in royalties and, and
all things that happened, it

497
00:26:08,080 --> 00:26:09,600
really, they really became
marginal.

498
00:26:09,600 --> 00:26:13,200
So you know, it's like a a high
cost marginal gold producer,

499
00:26:13,280 --> 00:26:14,880
right?
It breaks even a certain level.

500
00:26:14,880 --> 00:26:18,080
But then as a gold price goes,
it really starts to RIP because

501
00:26:18,080 --> 00:26:21,280
it's got lots of Oz and and, you
know, leverage there.

502
00:26:21,560 --> 00:26:24,080
Same with now with with with
sorry torque.

503
00:26:24,080 --> 00:26:26,400
Yeah, same with Whitehaven,
right.

504
00:26:26,400 --> 00:26:28,600
Why haven't exactly that?
It's 3030 something million

505
00:26:28,600 --> 00:26:31,680
tonnes per annum.
And so every dollar increase in

506
00:26:31,680 --> 00:26:33,800
the price has a really pretty
honest impact up and down.

507
00:26:33,800 --> 00:26:36,160
And there's not a lot of
additional cost except, you

508
00:26:36,160 --> 00:26:38,560
know, with royalties.
So that's the threat of a second

509
00:26:38,560 --> 00:26:42,080
thing was they did have, you
know, we did see this massive

510
00:26:42,080 --> 00:26:43,800
escalation.
You would have been well across

511
00:26:43,800 --> 00:26:47,800
this in terms of wage inflation
and that that at a time when now

512
00:26:47,800 --> 00:26:49,760
we're trying to consolidate some
mines.

513
00:26:49,760 --> 00:26:51,640
So they really did have a
blowout in their cost short

514
00:26:51,640 --> 00:26:54,320
term.
We think that's voluntary under

515
00:26:54,320 --> 00:26:56,920
control.
People got worried about the

516
00:26:56,920 --> 00:26:59,960
debt, but I think once they
settled the sale of 30% stake, I

517
00:26:59,960 --> 00:27:04,280
think we'll see the debt pretty
much go to zero and then they're

518
00:27:04,280 --> 00:27:05,600
in a position for Capital
Management.

519
00:27:05,600 --> 00:27:08,560
So and then probably other
overlay was with sentiment.

520
00:27:08,560 --> 00:27:11,360
You know, no one was buying
materials material sector.

521
00:27:11,360 --> 00:27:13,280
That whole sentiment piece was
was negative.

522
00:27:13,640 --> 00:27:16,800
So look, as we sit here, it's a
day looking forward, you know,

523
00:27:16,800 --> 00:27:18,880
we're very optimistic about
Whitehaven.

524
00:27:18,880 --> 00:27:21,840
What we can't do is say when the
market's going to decide to

525
00:27:21,840 --> 00:27:23,760
rewrite it.
That's the the hard piece.

526
00:27:23,760 --> 00:27:27,760
I wish we could, but you know,
we've just got to know that

527
00:27:27,760 --> 00:27:32,040
fundamentally on a very cheap
company, you know, broker last

528
00:27:32,040 --> 00:27:34,480
week initiative research
coverage for the first time and

529
00:27:34,760 --> 00:27:37,720
the valuations are 50% above
current stock price.

530
00:27:38,480 --> 00:27:41,560
So we, we know we're on, we're
on a very big, we've got a great

531
00:27:41,560 --> 00:27:44,440
model on it.
Schultzy, Argonaut.

532
00:27:44,560 --> 00:27:47,160
Yeah, Schultzy.
So you know, we've, we've just

533
00:27:47,160 --> 00:27:51,240
got to accept that, you know,
short to medium term, the, the

534
00:27:51,240 --> 00:27:54,960
market's a voting machine.
Medium term, it's a weighing

535
00:27:54,960 --> 00:27:57,440
machine.
And how do you think about

536
00:27:57,640 --> 00:28:01,240
capital returns in the future?
They've done this big deal looks

537
00:28:01,240 --> 00:28:05,680
pretty awesome in in hindsight,
you you're happy for them to not

538
00:28:05,680 --> 00:28:08,560
look at anything ever again on
the on the shopping front and

539
00:28:08,560 --> 00:28:13,200
just distribute buybacks these
sorts of things as far as the

540
00:28:13,200 --> 00:28:16,160
eye can kind of see, you know,
with the the optionality that

541
00:28:16,160 --> 00:28:17,960
you speak to in the in the met
coal price.

542
00:28:18,480 --> 00:28:21,160
Yeah, definitely.
I mean and it's you know a lot

543
00:28:21,160 --> 00:28:23,960
of gold stocks, you know, you've
got 5678 years reserve life.

544
00:28:23,960 --> 00:28:28,560
So you've just got to keep, keep
the drill bit going and keep

545
00:28:28,560 --> 00:28:30,720
having it right.
But, but, but these mines, you

546
00:28:30,720 --> 00:28:33,600
know, one's 40 plus year
reserves and one's 20 years with

547
00:28:33,600 --> 00:28:36,400
a, with a mine that they've got
undeveloped next door to it.

548
00:28:36,400 --> 00:28:40,080
So, you know, they've got a long
runway in terms of reserves.

549
00:28:40,080 --> 00:28:41,440
They don't need to go out and
rule.

550
00:28:41,440 --> 00:28:44,800
They don't need to go out and
buy something and to be in fact,

551
00:28:44,960 --> 00:28:48,160
since they've bought those two
mines for BMI, we're actually

552
00:28:48,160 --> 00:28:51,240
seeing that, you know, the
competition for other MIT coal

553
00:28:51,240 --> 00:28:54,720
mines has been quite fierce.
And so I don't, you know, I

554
00:28:54,720 --> 00:28:57,960
don't think you'd that buy the
minds of evaluation grounds

555
00:28:57,960 --> 00:29:00,160
anyway.
But yeah, absolutely one of the

556
00:29:00,240 --> 00:29:02,440
things that first attracted us
to Whitehaven a number of years

557
00:29:02,440 --> 00:29:06,160
ago was it was they did probably
the most single most aggressive

558
00:29:07,080 --> 00:29:10,160
share buyback out of any company
we've seen.

559
00:29:10,280 --> 00:29:12,680
And we love the fact that
they're prepared to really put

560
00:29:12,680 --> 00:29:15,080
their money back into buying
back and cancelling shares.

561
00:29:15,440 --> 00:29:18,360
So we'd love to see the whole
suite of Capital Management

562
00:29:18,360 --> 00:29:20,960
initiatives.
That was remarkable just that,

563
00:29:21,320 --> 00:29:27,480
yeah, the, the buy back just saw
the stock price go go north

564
00:29:27,480 --> 00:29:30,120
without any downside volatility.
It was, yeah.

565
00:29:30,120 --> 00:29:32,680
I mean, that was following a
period of just phenomenal met

566
00:29:32,680 --> 00:29:39,000
coal prices that that what's
changed now is, is Mongolia's

567
00:29:39,000 --> 00:29:42,120
export capability back into
China, which you know, obviously

568
00:29:42,120 --> 00:29:43,800
removes seaborne tons from the
market.

569
00:29:45,000 --> 00:29:48,960
Do you continue to see that as a
as a risk for further downside

570
00:29:48,960 --> 00:29:52,440
in met coal prices?
Actually, and I do see that as

571
00:29:52,480 --> 00:29:56,880
as the main risk.
It's interesting, interesting if

572
00:29:56,880 --> 00:30:00,360
you go back and study the
history over time of of China's

573
00:30:00,360 --> 00:30:03,800
bulk production and bulk
imports.

574
00:30:03,800 --> 00:30:07,320
So iron was a great example.
You know, I mean China had a lot

575
00:30:07,320 --> 00:30:10,200
of iron ore, but it's and it's
still a lot of iron ore.

576
00:30:10,200 --> 00:30:13,800
But now the mines are so deep
that, you know, the marginal

577
00:30:13,800 --> 00:30:16,920
cost of production is getting up
there at 90 plus USA tonne.

578
00:30:17,440 --> 00:30:20,520
China's you know, importing, I
think it's still so producing

579
00:30:20,520 --> 00:30:23,480
about 200 million tonnes per
annum of iron ore.

580
00:30:24,200 --> 00:30:26,400
But you go back a number of
years ago and it was double,

581
00:30:26,400 --> 00:30:31,400
triple that easily.
But you've seen the same with

582
00:30:31,400 --> 00:30:33,280
coal, right.
So in thermal coal, China's

583
00:30:33,280 --> 00:30:37,080
currently, currently producing
about four and a half billion

584
00:30:37,080 --> 00:30:41,320
tonnes and importing about half
a billion tonnes.

585
00:30:42,080 --> 00:30:46,400
Yeah, as and they are, they are
the marginal cost production

586
00:30:46,400 --> 00:30:48,560
really determines your marginal
spot price.

587
00:30:49,280 --> 00:30:54,200
As we start to see, you know a
number of those mines go deeper

588
00:30:54,200 --> 00:30:57,160
and get more expensive and
logistic bottlenecks and

589
00:30:57,160 --> 00:31:00,440
whatever else here, you're going
to see it just incrementally a

590
00:31:00,440 --> 00:31:02,080
few more of those tons getting
imported.

591
00:31:02,080 --> 00:31:04,320
I think the big surprise in the
last six months was the fact

592
00:31:04,320 --> 00:31:08,160
that the thermal thermal coal
imports actually increased to

593
00:31:08,160 --> 00:31:10,320
China, whereas everyone is
calling to India.

594
00:31:11,000 --> 00:31:14,480
So China, you know, that they're
such a large beast, even though

595
00:31:14,480 --> 00:31:17,920
they're such a large producer,
it doesn't take a lot for them

596
00:31:17,920 --> 00:31:21,520
to need a few more tons and for
them, you know, for them to

597
00:31:21,520 --> 00:31:24,720
actually arbitrage on the, on
the seaborne market.

598
00:31:25,600 --> 00:31:28,600
Now in Metco, it's, it's a much
different story there.

599
00:31:28,600 --> 00:31:33,360
And we were, you know, willing
to rely on India, who is, you

600
00:31:33,360 --> 00:31:37,480
know, is deficient metcoal that
hasn't come through yet.

601
00:31:37,480 --> 00:31:38,800
And we're still trying to work
out why.

602
00:31:38,800 --> 00:31:41,680
Like, you know, for for four
months here, every, every

603
00:31:41,680 --> 00:31:45,880
research that I read said, you
know, the post monsoonal Indian

604
00:31:45,880 --> 00:31:47,800
met coal demand is about to
arrive.

605
00:31:48,000 --> 00:31:50,960
Well, that was since November.
It hasn't arrived yet.

606
00:31:50,960 --> 00:31:55,440
So not sure what's going on
there, but we'll, we'll keep

607
00:31:55,440 --> 00:31:58,080
looking.
So another one of the names you

608
00:31:58,080 --> 00:32:00,920
hold in the coal space while
we're on the theme is Coronado.

609
00:32:01,200 --> 00:32:04,680
They I would say are
substantially less loved than

610
00:32:04,720 --> 00:32:09,760
than Whitehaven were they had a
tough time of it of light.

611
00:32:09,760 --> 00:32:13,200
How, how are you kind of seeing
things now where we're at given

612
00:32:13,200 --> 00:32:15,640
the, the cash and what they've
done on the, on the debt front

613
00:32:15,960 --> 00:32:18,560
over the past six months or so?
Yeah, they will.

614
00:32:18,560 --> 00:32:20,720
They're much less loved for good
reason.

615
00:32:21,520 --> 00:32:23,320
Look, we've been trading that
stock very aggressively.

616
00:32:23,320 --> 00:32:25,760
So we did trade out pretty much
our whole holding around the

617
00:32:25,760 --> 00:32:28,160
1:30 mark and then got really
clever and started buying back

618
00:32:28,160 --> 00:32:30,480
at the $1.00 mark and now it's
at $0.65.

619
00:32:31,280 --> 00:32:33,520
But you know, we see deep value
there.

620
00:32:33,520 --> 00:32:35,520
There's a lot of really nice
drivers here.

621
00:32:35,520 --> 00:32:39,080
And I've just opened up Mammoth,
which is the first underground

622
00:32:39,080 --> 00:32:41,080
mine Australia.
So yeah, that's going to take

623
00:32:41,080 --> 00:32:43,760
some of the weather impact out
of it and reduce costs and, and,

624
00:32:44,320 --> 00:32:47,160
and the like, you know, got some
good expansion projects going

625
00:32:47,160 --> 00:32:49,080
the US there with Buchanan and
Logan.

626
00:32:49,080 --> 00:32:52,440
So you know, they're going to be
a, a bigger producer, lower

627
00:32:52,440 --> 00:32:55,000
cost.
I, I get the film a new CEO.

628
00:32:55,000 --> 00:32:57,280
Actually, I was on the
conference call with him one or

629
00:32:57,280 --> 00:33:00,120
two days ago and would have been
2 days ago been Sunday, wouldn't

630
00:33:00,120 --> 00:33:02,160
it been a bit weird?
So we'll, we'll, we'll go with

631
00:33:02,160 --> 00:33:04,520
all the Friday and Monday and
they have their quarterly call.

632
00:33:05,000 --> 00:33:07,920
And I just get the sense that
he's very operationally focused,

633
00:33:07,920 --> 00:33:12,080
like he's, he's actually, you
know, talking specifics at a

634
00:33:12,080 --> 00:33:14,040
level that you want to see ACO
across.

635
00:33:14,040 --> 00:33:17,720
So I get the feeling new CE OS
much more operationally driven.

636
00:33:18,560 --> 00:33:20,760
There's some really big drivers
apart from the the two I

637
00:33:20,760 --> 00:33:24,960
mentioned with Mammoth and and
and Logan expansion and so

638
00:33:24,960 --> 00:33:27,080
forth.
We've also got the fact that the

639
00:33:27,080 --> 00:33:31,720
horrible, horrible Stanwell Cole
royalty rolls off beginning end

640
00:33:31,720 --> 00:33:35,320
of next year and and that could
be worth about $100 million a

641
00:33:35,320 --> 00:33:38,160
year to him straight away, just
in reduced costs and the like.

642
00:33:38,600 --> 00:33:40,080
So there's a lot of good things
to like there.

643
00:33:40,080 --> 00:33:43,600
It is not for the faint hearted,
you know, it is the high risk,

644
00:33:43,600 --> 00:33:47,200
high leverage play.
But it's $0.65.

645
00:33:47,760 --> 00:33:49,760
I think Mr. Salatan is going to
be getting some of them too

646
00:33:49,760 --> 00:33:54,040
soon.
Yeah, it's one of the hated

647
00:33:54,040 --> 00:33:55,640
stock in a subset of hated
stocks.

648
00:33:55,640 --> 00:33:57,960
Yeah.
Yeah, you got to be contrarian

649
00:33:58,240 --> 00:33:59,640
for for Coronado, that's for
sure.

650
00:34:00,760 --> 00:34:05,480
South 32 is an interesting one.
They had a pretty volatile yeah,

651
00:34:05,480 --> 00:34:08,920
kind of all things considered
good island, you know, aluminium

652
00:34:08,920 --> 00:34:12,080
market and aluminium market
looked kind of, you know,

653
00:34:12,080 --> 00:34:14,239
oversupplied early in the year.
And then there was, it got

654
00:34:14,239 --> 00:34:16,800
really tight all of a sudden.
Worsley.

655
00:34:17,600 --> 00:34:20,560
Yeah, big write down and then
big win late.

656
00:34:20,679 --> 00:34:23,239
It's yeah.
Talk about volatility.

657
00:34:23,719 --> 00:34:24,480
Is it?
Is that?

658
00:34:24,480 --> 00:34:27,920
Is that a name that you've been
adding to lately, or or

659
00:34:27,920 --> 00:34:29,360
trimming?
And if so, why?

660
00:34:29,480 --> 00:34:31,159
I like you guys.
You've picked two in a row that

661
00:34:31,159 --> 00:34:35,719
we've got kind of rides.
So we've got a ladder S 32370

662
00:34:35,920 --> 00:34:40,639
November, December last year and
I can't see ourselves going back

663
00:34:40,639 --> 00:34:42,360
anytime soon.
Like you might have to edit a

664
00:34:42,360 --> 00:34:46,639
bit there these next comments
because I I'm not overly fond of

665
00:34:46,639 --> 00:34:48,840
management and ideas so I'm
probably not going to be in the

666
00:34:48,840 --> 00:34:51,199
Christmas card list, but.
I don't think management will be

667
00:34:51,199 --> 00:34:53,679
there for too much longer.
Well, we've, we've thought that

668
00:34:53,679 --> 00:34:57,040
for a little while they did do a
world, a global search to find

669
00:34:57,040 --> 00:34:59,680
the best CEO on this side of the
current CEO is the best CEO

670
00:34:59,680 --> 00:35:00,920
that.
Was my word on the decline?

671
00:35:00,920 --> 00:35:03,720
Is, is, is Graham's wanted to
retire for a long time, right?

672
00:35:03,720 --> 00:35:06,240
Yeah, about about 18 months now.
Ten years in the gig now.

673
00:35:06,440 --> 00:35:11,080
Look, you go and look at the EPS
10 years ago and go and look, go

674
00:35:11,080 --> 00:35:13,160
and look at EBITDAR 10 years ago
and look at EBITDAR now.

675
00:35:13,160 --> 00:35:14,640
There's not a lot of difference,
right?

676
00:35:15,160 --> 00:35:17,720
They've really now they've done
a couple of things right, I, I

677
00:35:17,720 --> 00:35:21,440
grant you, but they in 10 years
they haven't really added any

678
00:35:21,440 --> 00:35:24,360
growth to that, to that
business.

679
00:35:24,800 --> 00:35:26,840
Like I decided most, most is not
growth.

680
00:35:28,320 --> 00:35:29,440
What?
What did you make of the

681
00:35:29,440 --> 00:35:33,240
Illawarra sale last year?
To be honest, I know that there

682
00:35:33,240 --> 00:35:38,080
was a it was heading to a CapEx
intensive phase, but I still

683
00:35:38,080 --> 00:35:41,640
think that was one of, if not
their best asset and gave them

684
00:35:41,640 --> 00:35:42,920
some really good
diversification.

685
00:35:42,920 --> 00:35:46,320
Now, yes, supposedly get some
ishi brownie points, but in the

686
00:35:46,320 --> 00:35:48,480
fullness of time, let's see
those ishi brownie points really

687
00:35:48,480 --> 00:35:51,360
amount so much.
Yeah, I think they've sold, you

688
00:35:51,360 --> 00:35:54,760
know, I think they've really
downsized that business.

689
00:35:54,800 --> 00:35:57,200
They haven't added value.
And you know, have to remember

690
00:35:57,200 --> 00:35:59,160
resource projects are dwindling
assets.

691
00:35:59,160 --> 00:36:02,360
It's not like you're building
something which is adding value

692
00:36:02,360 --> 00:36:05,680
over time like you've got to
keep finding more tons.

693
00:36:06,080 --> 00:36:08,280
They've sold a lot of the cash
generative assets because

694
00:36:08,280 --> 00:36:11,880
they've been transitioning their
portfolio from, you know, to

695
00:36:11,880 --> 00:36:15,840
become, you know, a future
facing portfolio to the added

696
00:36:15,840 --> 00:36:19,080
copper sold the thermal coal,
sell it, you know, sold met

697
00:36:19,080 --> 00:36:22,000
coal.
But they aren't capital

698
00:36:22,000 --> 00:36:24,720
intensive assets, which you
know, you got to, you got to

699
00:36:24,720 --> 00:36:25,920
read.
And sometimes assets are old,

700
00:36:25,920 --> 00:36:27,680
they're getting, they're old and
tired and they're running out of

701
00:36:27,680 --> 00:36:29,880
tons.
And I don't think like, you

702
00:36:29,880 --> 00:36:32,320
know, they're they're getting a
free kick at the moment from the

703
00:36:32,320 --> 00:36:34,600
alumina price.
Let's be real, OK?

704
00:36:35,280 --> 00:36:38,160
And how long that stays where it
is, I don't know.

705
00:36:38,320 --> 00:36:41,120
But but we know long term it's
towards the top end of where it

706
00:36:41,120 --> 00:36:43,280
trades.
You take that out of the

707
00:36:43,280 --> 00:36:45,800
equation and they've got a big
hole in their earnings.

708
00:36:46,560 --> 00:36:47,920
Yeah.
If you could book in a bit of a

709
00:36:48,560 --> 00:36:51,200
bit of time with management
there, what are the sort of

710
00:36:51,400 --> 00:36:55,000
directions you actually want to
see them get active in or you

711
00:36:55,000 --> 00:36:58,920
know commodities to exit and to
how would you kind of push them

712
00:36:58,920 --> 00:37:01,480
in the right direction?
I think they've still got a BHP

713
00:37:01,480 --> 00:37:04,600
big company mentality and
they're not a BHP anymore.

714
00:37:05,120 --> 00:37:08,560
Like they have to get much more
progressive and aggressive in

715
00:37:08,560 --> 00:37:12,320
terms of exploration, you know?
When was the last time you heard

716
00:37:12,320 --> 00:37:15,640
him talk about exploration?
I don't think ever 10 years, you

717
00:37:15,640 --> 00:37:18,400
know?
We pop up on some of those like

718
00:37:18,520 --> 00:37:21,840
yeah, JVS for junior copper
companies and stuff like that.

719
00:37:21,840 --> 00:37:24,560
They'd end up going nowhere
maybe I'm not sure, but you

720
00:37:24,560 --> 00:37:28,880
know, like, I just think they
have to be a lot more hard at it

721
00:37:28,880 --> 00:37:30,920
and hands on.
I think it's been this really

722
00:37:30,920 --> 00:37:34,680
big, big company mentality and
they're not BHP, you know, they

723
00:37:34,680 --> 00:37:39,360
don't have those Tier 1 assets
in Tier 1 commodities and might

724
00:37:39,360 --> 00:37:43,720
have some Tier 1 assets in Tier
2 commodities possibly.

725
00:37:43,720 --> 00:37:46,960
But even though you know they
haven't really there hasn't been

726
00:37:46,960 --> 00:37:48,720
a lot of regeneration that
portfolio.

727
00:37:49,160 --> 00:37:52,240
And I think that you look at the
earnings profile on on our

728
00:37:52,240 --> 00:37:55,640
model, earnings profile falls
away from here over the next

729
00:37:55,640 --> 00:37:58,440
couple of years.
Yeah.

730
00:37:58,960 --> 00:38:01,120
So happy to be out of that one.
Look, there's a price for

731
00:38:01,120 --> 00:38:03,480
everything, you know, sub $3.
It's it's got a pretty nice

732
00:38:03,480 --> 00:38:06,400
established trading range over
if you're patient from three to

733
00:38:06,400 --> 00:38:10,640
four simplistic, but you know,
sub 3 bucks will certainly dust

734
00:38:10,640 --> 00:38:13,160
off the file and have a look at
it, but it doesn't make sense

735
00:38:13,160 --> 00:38:16,480
right here right now.
How about Boss Energy?

736
00:38:16,560 --> 00:38:20,480
They've had a a hell of a time.
The, you know, in the

737
00:38:20,480 --> 00:38:24,840
background, the uranium
narrative, the nuclear narrative

738
00:38:24,840 --> 00:38:28,920
until a couple days ago when it
sort of hit the brakes quite

739
00:38:28,920 --> 00:38:31,000
abruptly.
It was building and building and

740
00:38:31,000 --> 00:38:33,440
building, despite what the spot
price had done.

741
00:38:33,440 --> 00:38:37,960
And, you know, you might have
looked at the ASX listed uranium

742
00:38:37,960 --> 00:38:40,360
names and being a bit
disheartened, but a lot of the

743
00:38:40,360 --> 00:38:43,240
news was very, very positive.
And for for a long term

744
00:38:43,240 --> 00:38:46,680
shareholder, not too many
reasons to to get awfully

745
00:38:46,720 --> 00:38:49,480
scared.
So I don't know when you've sort

746
00:38:49,480 --> 00:38:51,560
of got into the name or if
you're you're still sort of in

747
00:38:51,560 --> 00:38:53,720
it.
But looking at it today,

748
00:38:53,720 --> 00:38:57,240
wherever it is, 253 bucks.
How do you kind of think about

749
00:38:57,240 --> 00:39:01,000
the the company?
Best of a bad bunch.

750
00:39:01,360 --> 00:39:05,120
I mean, we love the thematic,
you know, uranium just makes a

751
00:39:05,120 --> 00:39:08,560
lot of sense at every level.
You know, AI is the latest

752
00:39:08,560 --> 00:39:11,080
driver, of course, but take that
out of the mix.

753
00:39:11,440 --> 00:39:14,440
The long term outlook for
uranium because of the new

754
00:39:14,440 --> 00:39:17,080
technologies and the new, you
know, module fours and what's

755
00:39:17,080 --> 00:39:19,480
going to come after that.
You know, the way I can

756
00:39:19,480 --> 00:39:22,640
modularize, but also the safety
issues around nuclear reactors

757
00:39:22,640 --> 00:39:24,600
now.
I just think it's inevitable.

758
00:39:25,000 --> 00:39:29,400
OK, So we love the thematic love
uranium, love the supply and

759
00:39:29,400 --> 00:39:31,400
demand profile.
When you look at a couple of

760
00:39:31,400 --> 00:39:33,920
years and most you know, we've
we've had people understand how

761
00:39:33,920 --> 00:39:38,200
much enriched uranium we've had
from Wicker weapons recycling.

762
00:39:38,400 --> 00:39:42,240
That's all finished now, right.
So you know, so there's a really

763
00:39:42,240 --> 00:39:45,640
good demand supply profile.
The problem is, is that there's

764
00:39:45,640 --> 00:39:52,800
it's very hard on the A6 to to
find quality uranium plays that

765
00:39:52,840 --> 00:39:56,360
makes sense on valuation.
Boss is the best of a bad bunch.

766
00:39:56,360 --> 00:40:01,760
We're still there, but you know,
are we, are we sort of emphatic

767
00:40:01,760 --> 00:40:03,960
holders?
No, but we've got to have some

768
00:40:03,960 --> 00:40:06,360
exposure because we like the the
overlying macro.

769
00:40:07,000 --> 00:40:09,040
Why not next Gen.
Why not Paladin?

770
00:40:09,840 --> 00:40:12,320
It's the next gen's interesting
and don't get wrong, we have

771
00:40:12,320 --> 00:40:16,720
looked very closely at next Gen.
You know it is a is a very long

772
00:40:16,720 --> 00:40:19,640
dated option.
So, you know, it's, it's 20 or

773
00:40:19,640 --> 00:40:23,160
we think probably 20-30 before
you see the first pounds out of

774
00:40:23,160 --> 00:40:25,960
the ground there.
And you know, the, the uranium

775
00:40:25,960 --> 00:40:27,560
cycle could have come and gone
by then.

776
00:40:28,080 --> 00:40:30,760
We also do believe that it will
get taken over like, you know,

777
00:40:30,760 --> 00:40:34,320
as they continue to tick off the
regulatory milestones, one of

778
00:40:34,320 --> 00:40:37,160
the big players is just going to
say, well, we can't, if for

779
00:40:37,160 --> 00:40:39,040
nothing else, we can't allow
that many pounds yet in the

780
00:40:39,040 --> 00:40:41,200
market.
So, you know, we'll get taken

781
00:40:41,200 --> 00:40:42,960
over.
But you know, it hasn't been

782
00:40:42,960 --> 00:40:44,080
missed either.
It's not cheap.

783
00:40:44,080 --> 00:40:47,080
So you know but it but it is on
our shortlist.

784
00:40:48,680 --> 00:40:52,640
The the theme of yeah, quality
projects getting taken over

785
00:40:52,640 --> 00:40:57,120
there were there were two in the
Cortana portfolio last year that

786
00:40:57,960 --> 00:41:01,800
were were acquired by yeah,
major, major mining entities,

787
00:41:02,680 --> 00:41:04,840
namely De Grey in a back
backyard.

788
00:41:05,520 --> 00:41:08,160
Yeah, when you're a big
proponent of about 1212 months

789
00:41:08,160 --> 00:41:12,840
ago, Northern Stars rocked up
and yeah, offering offering

790
00:41:12,840 --> 00:41:15,440
script and A and a healthy
premium to to Grey shareholders.

791
00:41:15,440 --> 00:41:18,920
What did you make of of the bid?
Well, surprises Northern Star a

792
00:41:18,920 --> 00:41:21,800
little bit, but I think we we
actually wrote in a few media

793
00:41:21,800 --> 00:41:25,280
pieces, we actually said that
that it's inevitable that it

794
00:41:25,280 --> 00:41:28,000
will get taken over.
And you know, I mean, it's one

795
00:41:28,000 --> 00:41:31,560
of the few takeovers that we've
actually called correctly.

796
00:41:31,560 --> 00:41:34,480
And and as I said, it was it was
the most obvious takeover

797
00:41:34,480 --> 00:41:39,480
because you just don't have, you
know, gold projects of that

798
00:41:39,480 --> 00:41:43,920
scale available in first world
jurisdictions.

799
00:41:44,200 --> 00:41:46,880
So as it was a question of when,
not if, like someone had to take

800
00:41:46,880 --> 00:41:50,760
it over now, right here, right
now, you know, bit surprised in

801
00:41:50,760 --> 00:41:52,280
all the stars for the first
shot.

802
00:41:53,760 --> 00:41:58,800
Don't think it's the last shot
huge, but you know, I I think

803
00:41:58,800 --> 00:42:01,240
that, as I said, you're just not
going to get another asset like

804
00:42:01,240 --> 00:42:02,760
that, certainly not in the
Pilgrim.

805
00:42:02,760 --> 00:42:05,040
My goodness, you could if you
could get a gold deposit

806
00:42:05,040 --> 00:42:06,720
anywhere in the world, where
would you want it to be?

807
00:42:07,440 --> 00:42:09,200
It'd probably be pretty much
where it is.

808
00:42:09,920 --> 00:42:12,880
So, you know, there's a few
players at them and I think

809
00:42:13,040 --> 00:42:16,120
Newmont would root would be a
logical buyer, but unfortunately

810
00:42:16,120 --> 00:42:20,040
I've got the hands for with the,
you know, divesting assets.

811
00:42:20,040 --> 00:42:22,360
You think that now has run its
course as of today, but you

812
00:42:22,360 --> 00:42:24,760
know, they've got a where
they're going to settle up for a

813
00:42:24,920 --> 00:42:30,280
decry, but you know, they've got
pressure oxide deposit called

814
00:42:30,280 --> 00:42:33,440
Leahy Gold and which I know very
well is one of the largest

815
00:42:33,440 --> 00:42:35,920
assets.
So Hox to them is no issue.

816
00:42:35,920 --> 00:42:40,520
That'd be very happy to get an
asset and it's in just on the on

817
00:42:40,520 --> 00:42:44,000
their scales, 5 to 700,000 oz
per annum starting point.

818
00:42:44,880 --> 00:42:49,800
So I think there'll be, you
know, an Eco Eagle, another one

819
00:42:49,800 --> 00:42:52,160
that could come out of the top.
Would be surprised if they

820
00:42:52,680 --> 00:42:55,360
looked at that.
So I don't think it's the last

821
00:42:55,360 --> 00:42:58,840
bid, but if it is, you get a
free option.

822
00:42:58,880 --> 00:43:00,520
We're holding out what we've got
left.

823
00:43:00,520 --> 00:43:02,600
We're holding our position
because you get a free option,

824
00:43:02,600 --> 00:43:04,800
Northern Star, which is a, which
is a good company and good

825
00:43:04,800 --> 00:43:07,400
business.
And suppose your gold price, if

826
00:43:07,400 --> 00:43:08,920
someone does come out of the
top, you're going to have some

827
00:43:08,920 --> 00:43:14,160
upside from there.
Yeah, the the the other one was

828
00:43:14,600 --> 00:43:16,560
Arcadium.
You guys were shareholders of

829
00:43:16,560 --> 00:43:20,840
reacting to obviously came came
along and it's yeah, been been a

830
00:43:20,840 --> 00:43:25,280
been a been a big part of their
2024 story is their venture into

831
00:43:25,280 --> 00:43:26,880
lithium fire Arcadium's
business.

832
00:43:27,760 --> 00:43:29,640
Guessing this one didn't
surprise you as much.

833
00:43:30,560 --> 00:43:34,000
Actually, that did surprise me.
So the Gray we're expecting.

834
00:43:34,200 --> 00:43:37,000
I know Arcadia.
We we're just like well, every

835
00:43:37,000 --> 00:43:38,320
every soul.
He had a bit of luck and that

836
00:43:38,320 --> 00:43:43,600
was our luck in all series is
like why now Rio is is I think

837
00:43:43,600 --> 00:43:46,120
they're they're high fiving
themselves by saying well, we've

838
00:43:46,240 --> 00:43:49,160
acted counter cyclically and and
they have to a degree right.

839
00:43:49,160 --> 00:43:55,480
So Pat on the back for, but not,
you know, buying lithium assets

840
00:43:55,480 --> 00:44:00,920
to the top of the market.
But I don't think the outlook

841
00:44:00,920 --> 00:44:05,880
for lithium is what it's what
what they're expecting it to be.

842
00:44:05,880 --> 00:44:09,160
I just think there's too many
new sources of supply coming on.

843
00:44:10,680 --> 00:44:15,360
All the brine stuff in South
America, all the, you know, Hard

844
00:44:15,360 --> 00:44:19,000
Rock spot through Africa, the
pit light out of China.

845
00:44:19,000 --> 00:44:22,080
I just don't think people
understand, you know, that it's,

846
00:44:22,120 --> 00:44:24,480
it's not going to be what it was
thought to be.

847
00:44:25,680 --> 00:44:29,400
So, yeah, having said that,
there'll always be a price for

848
00:44:29,400 --> 00:44:31,360
everything because you'll come
come back to the cost curve,

849
00:44:31,360 --> 00:44:33,840
right?
So whatever your cost curve is,

850
00:44:34,240 --> 00:44:36,920
you'll get, you'll make a margin
on that, but it's not going to

851
00:44:36,920 --> 00:44:40,240
be the margin that that it was
expected to be.

852
00:44:40,560 --> 00:44:42,800
So I think you know, what did
Alan Bond say?

853
00:44:42,800 --> 00:44:46,920
Everyone sorry, what did I sorry
Carry, carry, carry.

854
00:44:47,080 --> 00:44:49,120
Everyone has that one on Bond.
Well, bad mind.

855
00:44:49,880 --> 00:44:52,480
Everyone has 1 Rio Tinto.
Yeah, so you think they're ever

856
00:44:52,480 --> 00:44:54,560
paid?
I don't think they ever paid,

857
00:44:54,560 --> 00:44:58,560
but I just don't think, I just
don't think lithium is, is what

858
00:44:58,560 --> 00:45:02,000
it's what it's good.
You know, I, I, I think there's

859
00:45:02,000 --> 00:45:04,800
just too much of it out there
and it's and too much yet in the

860
00:45:04,800 --> 00:45:10,400
wrong jurisdictions which will
come to market cheaply and in an

861
00:45:10,400 --> 00:45:13,280
irrational manner.
So how, how had you gone about

862
00:45:13,320 --> 00:45:16,520
picking up the the stock then?
Was that one you'd you'd held

863
00:45:16,520 --> 00:45:19,160
for some time?
I did come into it purely on a

864
00:45:19,880 --> 00:45:23,520
valuation perspective thinking
it's gotten too cheap.

865
00:45:23,520 --> 00:45:26,960
And how much did M&A factor into
your thinking when you actually?

866
00:45:26,960 --> 00:45:29,240
Bought the M&A didn't really
affect your thinking at all.

867
00:45:29,600 --> 00:45:32,720
It was just purely on the on the
base of valuation, replacement

868
00:45:32,720 --> 00:45:35,480
value of assets and so forth.
And it's Rio's defence.

869
00:45:35,800 --> 00:45:39,080
I think even on the price I paid
on some metrics that was

870
00:45:39,080 --> 00:45:41,560
actually replacement costs for
those assets, so build costs.

871
00:45:41,560 --> 00:45:43,760
So, you know, they haven't, they
certainly haven't overpaid.

872
00:45:44,080 --> 00:45:45,720
I'm just not sure they're
getting the return on those

873
00:45:45,720 --> 00:45:48,680
assets they expect to.
And and again, in Rio's defence,

874
00:45:48,680 --> 00:45:51,360
they've got some, you know, some
nice synergies up there with the

875
00:45:51,400 --> 00:45:53,840
Rincon and the like there.
So they've got, you know, some

876
00:45:53,840 --> 00:45:56,560
nice things they can bring
together and it kind of makes

877
00:45:56,560 --> 00:45:58,920
sense for them.
But I'm just not sure the

878
00:45:58,920 --> 00:46:04,720
lithium macro is what people
think it it is.

879
00:46:05,160 --> 00:46:10,160
So, so you hold W farmers as
well, How much obviously they've

880
00:46:10,160 --> 00:46:12,520
got a whole number of
businesses, but how much does

881
00:46:12,520 --> 00:46:15,720
that lithium portion of their
business play into your, your

882
00:46:15,720 --> 00:46:18,560
thinking behind holding them?
Approximately 0.

883
00:46:19,360 --> 00:46:22,120
The better question is.
See, it's all about Bunnings for

884
00:46:22,120 --> 00:46:25,640
East Farmers, Yeah, the the best
retail experience in Australia,

885
00:46:25,920 --> 00:46:27,200
Yeah.
It's true.

886
00:46:27,200 --> 00:46:28,480
It's great.
Yeah.

887
00:46:28,520 --> 00:46:31,680
It's amazing business that one.
Better question though is how

888
00:46:31,680 --> 00:46:34,160
much does it pay into your your
shareholding in in min res?

889
00:46:34,640 --> 00:46:41,760
Well, yeah, so here we go.
Look Min Res it at one stage it

890
00:46:41,760 --> 00:46:45,480
did have a a substantial impact
on our thinking and no doubt,

891
00:46:46,000 --> 00:46:49,520
but the the greater picture with
me and Rays is summer slaughter

892
00:46:49,520 --> 00:46:53,280
produce lithium and mean rays
really on their on their

893
00:46:53,280 --> 00:46:56,920
contracting margins, which is
what they're being valued on.

894
00:46:57,120 --> 00:47:00,120
Still make good money at a
Wodgina and in due course they

895
00:47:00,120 --> 00:47:04,240
will make good money out of
marrying the like even even bald

896
00:47:04,240 --> 00:47:06,960
Hill I think eventually.
If they can roll the bald bald

897
00:47:06,960 --> 00:47:10,960
hill into the Gunfang JV, yeah.
Well, I'm not sure about that,

898
00:47:10,960 --> 00:47:12,800
but, but certainly you know, but
they'll make, they'll make

899
00:47:12,800 --> 00:47:15,240
margin over time there.
And and it's also also sunken

900
00:47:15,240 --> 00:47:17,520
CapEx.
The real reason we love mineral

901
00:47:17,520 --> 00:47:21,520
resources is because probably
the exact reason why we don't

902
00:47:21,520 --> 00:47:24,720
like CR 32.
It's just got an incredibly

903
00:47:24,720 --> 00:47:26,880
innovative entrepreneurial
culture.

904
00:47:27,600 --> 00:47:30,520
But they had the year from hell
in 2024, you had lithium price

905
00:47:30,520 --> 00:47:33,080
collapse, you had the iron oil
price collapse at the same time

906
00:47:33,080 --> 00:47:35,800
as their debt peaked or he's
about to peak.

907
00:47:35,840 --> 00:47:38,640
And you also had, you know, ESG
corporate governance issues.

908
00:47:38,640 --> 00:47:40,280
So it really is a year from
hell.

909
00:47:40,960 --> 00:47:44,880
But I do think that, you know,
what people have missed is the

910
00:47:44,880 --> 00:47:51,280
debt for mineral resources has
expanded so rapidly, not because

911
00:47:51,280 --> 00:47:55,880
they've had to cover any, any
issues, but because I've built

912
00:47:55,880 --> 00:47:58,120
the largest project in the
history of that company being

913
00:47:58,120 --> 00:48:03,800
Onslow.
And you know, June 2025, it's

914
00:48:03,800 --> 00:48:06,320
kind of a run rate at 35,000,000
tonne per annum.

915
00:48:09,840 --> 00:48:13,040
It the, the, the entrepreneurial
culture that you kind of you buy

916
00:48:13,040 --> 00:48:17,080
into there.
Do you have, do you have

917
00:48:17,080 --> 00:48:20,720
confidence that, you know, given
the year from hell that, that

918
00:48:20,720 --> 00:48:23,600
that'll still be there like you,
you don't lose, you know, a

919
00:48:23,760 --> 00:48:27,000
critical mass of, of people from
all of the external and internal

920
00:48:27,000 --> 00:48:28,840
pressures that come come with
the year they've had?

921
00:48:29,480 --> 00:48:31,800
It might be a little bit of
attrition and to be honest,

922
00:48:31,840 --> 00:48:34,680
yeah, you do you.
We did need to see some

923
00:48:35,800 --> 00:48:42,440
additional guardrails and I I
think they're now large in place

924
00:48:42,440 --> 00:48:44,920
and we'll see, you know,
succession on the chairman, the

925
00:48:44,920 --> 00:48:48,240
like.
But you know, that core

926
00:48:48,240 --> 00:48:52,320
entrepreneurial spirit, you
know, that that build FMG that

927
00:48:52,320 --> 00:48:55,960
got me in risk where it is that,
you know, got Roy Hill up and

928
00:48:55,960 --> 00:48:58,000
running.
You know, in case of Genie, you

929
00:48:58,000 --> 00:49:00,400
know, I think that's that's the
thing that's missing in some of

930
00:49:00,400 --> 00:49:02,400
these big corporates.
You know, Rio Tinto is an

931
00:49:02,400 --> 00:49:05,640
example, whether they are or
that, but the fact that they,

932
00:49:05,640 --> 00:49:08,720
you know, that they're being
rumoured to have been well, they

933
00:49:08,720 --> 00:49:10,840
have acknowledged that they've
actually been meeting with

934
00:49:10,840 --> 00:49:15,400
Glencore in the past.
I mean, how does that add VAI to

935
00:49:15,400 --> 00:49:18,400
shareholders?
I can't see it, right.

936
00:49:18,720 --> 00:49:21,600
But these, these smaller
entrepreneurial companies that

937
00:49:21,600 --> 00:49:24,120
really, you know, do develop
projects like if Ben Riz gets

938
00:49:24,400 --> 00:49:30,400
ONS up and running on budget on
time and their proportion say 23

939
00:49:30,400 --> 00:49:33,680
million tonne per annum, they're
making phenomenal margin even at

940
00:49:33,760 --> 00:49:37,600
US $9080 USA tonne.
That money is going to be

941
00:49:37,600 --> 00:49:40,400
recycled back into further
projects and further projects.

942
00:49:40,880 --> 00:49:44,600
And so you, you, you're
genuinely building a business as

943
00:49:44,600 --> 00:49:47,880
opposed to sort of tracking
sideways.

944
00:49:48,840 --> 00:49:51,280
On on the management front
again, do you think Chris

945
00:49:51,280 --> 00:49:54,160
Ellison still runs in two years
time still going to be there?

946
00:49:55,920 --> 00:50:00,200
I do, and I also hope he does.
I think that there's probably

947
00:50:00,200 --> 00:50:05,360
been some gross misreporting
about, you know, and some that's

948
00:50:05,360 --> 00:50:11,120
already been released the ASX.
But I think there's there's

949
00:50:11,120 --> 00:50:15,400
also, you know, it was really a,
it was a bit of a firestorm

950
00:50:15,400 --> 00:50:17,200
around some of the issue issues
here.

951
00:50:17,600 --> 00:50:19,560
I think that in the fullness of
time, we'll get a bit more

952
00:50:19,560 --> 00:50:22,000
clarity on that.
I think that we'll start to

953
00:50:22,000 --> 00:50:25,280
understand that, you know, he's
always had the shareholders best

954
00:50:25,280 --> 00:50:30,040
interests at heart and we'll
start to understand that, you

955
00:50:30,040 --> 00:50:34,880
know, he's added billions of
dollars of value from what was a

956
00:50:34,880 --> 00:50:38,280
company that floated at $0.90 a
share even today at $35 a share,

957
00:50:38,680 --> 00:50:41,280
you know, and it hit $97.00 a
share at one stage there.

958
00:50:41,280 --> 00:50:44,440
Now I think, you know, in the
forms of time we'll see that

959
00:50:44,440 --> 00:50:48,040
stock back $300.00 a share and I
don't think this conversation

960
00:50:48,040 --> 00:50:50,320
will be remembered or
irrelevant.

961
00:50:53,840 --> 00:50:58,720
With the, with the lithium
business, you know, probably not

962
00:50:58,720 --> 00:51:01,880
cash generative at this point in
time, you know, net, net even

963
00:51:01,880 --> 00:51:03,560
with the mining services
contracts.

964
00:51:05,240 --> 00:51:07,200
What do you, what do you think
happens to that?

965
00:51:07,200 --> 00:51:08,760
Do you think it's?
I think it is.

966
00:51:08,920 --> 00:51:12,360
I think what Gen. is cash
generative on a on a on a cash

967
00:51:12,360 --> 00:51:14,880
cost basis?
Well and truly I mean lithium

968
00:51:14,880 --> 00:51:21,080
hit 920 USA ton a few days ago.
It's back just sort of under 900

969
00:51:21,080 --> 00:51:26,320
now.
But I think at 900 USA tonne, if

970
00:51:26,320 --> 00:51:29,280
you had grade 6%, obviously not
getting that full price, I think

971
00:51:29,280 --> 00:51:33,120
they they make a cash profit.
Yeah.

972
00:51:34,440 --> 00:51:36,720
Do you think they consider
selling that part of the

973
00:51:36,720 --> 00:51:39,240
business?
Would you regard them in in that

974
00:51:39,240 --> 00:51:41,960
direction?
It's been a chat years ago and

975
00:51:41,960 --> 00:51:44,000
that the number they could have
potentially got from it was a

976
00:51:44,560 --> 00:51:46,520
very eye ordering sort of
number.

977
00:51:46,520 --> 00:51:49,000
Spin it out on the Yeah, just I
think they wanted.

978
00:51:49,120 --> 00:51:50,280
To spin it, they spoke about
spinning.

979
00:51:50,280 --> 00:51:53,000
It out absolutely but I think
they were well advanced to do

980
00:51:53,000 --> 00:51:55,600
that and I think you know
lithium prices sort of robbed

981
00:51:55,600 --> 00:51:58,960
them of that opportunity yeah I
don't think they they look to

982
00:51:58,960 --> 00:52:01,040
spin it out now now I'm gonna
think you know they.

983
00:52:01,480 --> 00:52:03,040
They did the energy piece as
well, yeah.

984
00:52:03,200 --> 00:52:07,160
The count of cyclical players
and I think, you know, now would

985
00:52:07,160 --> 00:52:08,480
be the wrong time to spin it
out.

986
00:52:08,480 --> 00:52:11,880
But I think always, you know,
Chris is opportunistic, but I

987
00:52:11,880 --> 00:52:15,880
think always what made sense
there was all the supporting

988
00:52:15,880 --> 00:52:20,080
contracts and you know, in a in
a boom time, yes, had some super

989
00:52:20,080 --> 00:52:24,640
margins out of lithium and you
know, you may get those because

990
00:52:24,640 --> 00:52:27,280
it's still a shallow market.
She can still get the spikes

991
00:52:27,280 --> 00:52:29,600
right.
You may still get that those

992
00:52:29,600 --> 00:52:31,920
super prices, you know, for a
short period of time from time

993
00:52:31,920 --> 00:52:36,320
to time.
But I think, you know, it makes

994
00:52:36,320 --> 00:52:39,960
sense to have it in there unless
the price is right from an

995
00:52:39,960 --> 00:52:41,840
external party and you're not
going to get the right price at

996
00:52:41,840 --> 00:52:45,200
the moment.
Do do you think about a, a long

997
00:52:45,200 --> 00:52:48,960
term iron ore price as well?
Is that the sort of way you, you

998
00:52:48,960 --> 00:52:51,720
know, Chuck it, obviously you'd
pick one and put it in your your

999
00:52:51,720 --> 00:52:56,680
model and they sorts or is it a
bit more sort of qualitative in

1000
00:52:56,680 --> 00:52:59,400
a sense with the management team
and the track record and these

1001
00:52:59,400 --> 00:53:02,480
types of things?
I did think about a long term

1002
00:53:02,480 --> 00:53:05,200
minor price for about 10 years
and after being wrong for 10

1003
00:53:05,200 --> 00:53:07,200
years, we should have stopped
thinking about one.

1004
00:53:07,200 --> 00:53:10,600
But I think if you, if you could
got any guide for a long term

1005
00:53:10,600 --> 00:53:13,440
minor price, it has to be a
marginal cost production out of

1006
00:53:13,440 --> 00:53:16,160
China still.
And then and then start doing

1007
00:53:16,160 --> 00:53:18,440
the work which we're trying to
do on India, trying to work out

1008
00:53:18,440 --> 00:53:20,640
what the marginal costs because
they've got iron ore there.

1009
00:53:20,640 --> 00:53:22,600
A lot of it's just in the wrong
spots.

1010
00:53:22,600 --> 00:53:24,720
And you know, there's a big
bureaucracies and they can't

1011
00:53:24,720 --> 00:53:27,000
just come in and say, right,
we're going to going to take up

1012
00:53:27,000 --> 00:53:29,320
100 kilometers here to put a
railway in because you'll have

1013
00:53:30,080 --> 00:53:34,480
about 10,000 legal disputes.
So you know, I think you got to

1014
00:53:34,480 --> 00:53:38,360
work out what's your marginal
cost of production, have a

1015
00:53:38,360 --> 00:53:42,240
clearview on that.
We think clearly it's it's US 90

1016
00:53:42,240 --> 00:53:45,880
and and above now in China, but
you're only talking about

1017
00:53:45,880 --> 00:53:47,200
another couple of 1,000,000 tons
here.

1018
00:53:47,200 --> 00:53:49,960
So as we see, you know, Simon do
and others come on and replace

1019
00:53:49,960 --> 00:53:52,640
some of those tons
progressively, I think that's

1020
00:53:52,640 --> 00:53:53,840
going to become less of an
issue.

1021
00:53:53,840 --> 00:53:56,800
But I still think we've got, so
we've got 12 to 18 months

1022
00:53:56,800 --> 00:53:59,680
minimum of of a robust iron ore
price.

1023
00:53:59,680 --> 00:54:03,440
If you can see the 100 USA tonne
robust around 90 USA tonne and

1024
00:54:03,440 --> 00:54:05,200
then I think just come back to
your marginal cost of

1025
00:54:05,200 --> 00:54:11,360
production.
Are you, are you confident in in

1026
00:54:11,360 --> 00:54:15,720
the onsite iron ore project to
to deliver healthy sustainable

1027
00:54:15,720 --> 00:54:19,680
margins and nameplate?
Absolutely, yeah.

1028
00:54:19,840 --> 00:54:25,480
I control every step of the
production process.

1029
00:54:25,680 --> 00:54:28,120
Now the only mining company in
the world that controls it from

1030
00:54:28,120 --> 00:54:30,680
the mine to an actually the ship
sailing off.

1031
00:54:31,320 --> 00:54:34,880
You know, even BHP and Rio and
FMG, you know, have got issues

1032
00:54:34,880 --> 00:54:38,560
around, you know, they don't
control the ports as an example.

1033
00:54:38,560 --> 00:54:42,920
They've got dedicated births and
the like there, but you know,

1034
00:54:42,920 --> 00:54:46,400
they actually control every step
of that process.

1035
00:54:46,400 --> 00:54:49,120
So it's within their control and
they've shown themselves to be

1036
00:54:49,120 --> 00:54:50,400
innovative.
But there'll be some hiccups

1037
00:54:50,400 --> 00:54:52,000
along the way, no doubt, when
you're going from zero to

1038
00:54:52,000 --> 00:54:55,600
35,000,000 ton per annum and
you're using some revolutionary

1039
00:54:55,600 --> 00:54:58,520
technologies like the the Trans
Ocean shippers, they're using

1040
00:54:58,680 --> 00:55:01,440
the way they're using them.
So be some hiccups.

1041
00:55:01,440 --> 00:55:04,880
But I think over time, I think
it'll be incredibly lucrative

1042
00:55:04,880 --> 00:55:06,400
for him.
And I think what it also does

1043
00:55:06,400 --> 00:55:09,600
is, as Chris has come out and
said is a couple of billion tons

1044
00:55:09,600 --> 00:55:12,360
of stranded iron ore there.
And we saw FMG today move on Red

1045
00:55:12,360 --> 00:55:14,720
Hawk, which is interesting.
I recommends one of that.

1046
00:55:15,720 --> 00:55:17,160
Sorry.
I recommends one of that

1047
00:55:17,160 --> 00:55:18,160
eventually.
Yeah.

1048
00:55:18,160 --> 00:55:20,120
Look, quite possibly.
But you know, there's still a

1049
00:55:20,120 --> 00:55:24,200
lot of strategy deposits there
that that couldn't be opened up

1050
00:55:24,200 --> 00:55:25,840
now that Onslow is up and
running.

1051
00:55:26,200 --> 00:55:29,440
You know, there's a pathway to
get a 50 million tonne per

1052
00:55:29,440 --> 00:55:31,080
annum.
And then from there beyond I

1053
00:55:31,080 --> 00:55:34,200
think as they start to do deals
with other with other juniors

1054
00:55:34,200 --> 00:55:36,560
here.
Yeah, Yeah.

1055
00:55:36,560 --> 00:55:40,920
I think part of their base case,
mine plan actually includes part

1056
00:55:40,920 --> 00:55:44,400
of the APIJV which they
currently don't have, you know,

1057
00:55:44,400 --> 00:55:46,640
the full economic interest in
which kind of kind of needs to

1058
00:55:46,640 --> 00:55:49,480
be bended in.
Yeah, there, there's, there's,

1059
00:55:49,720 --> 00:55:52,400
there's that and of course
there's, yeah, some some other

1060
00:55:52,400 --> 00:55:56,160
stuff further out.
So we'll keep watching what what

1061
00:55:56,160 --> 00:55:57,920
happens there with great, great
interest.

1062
00:55:57,920 --> 00:56:01,400
It's sort of, yeah, a period of
maximum pressure.

1063
00:56:02,120 --> 00:56:04,560
Yes, absolutely.
Debts peaking right here right

1064
00:56:04,560 --> 00:56:07,800
now.
At the same time, as you know,

1065
00:56:07,840 --> 00:56:09,760
the annual price has been a
little bit of pressure.

1066
00:56:09,760 --> 00:56:12,600
It's rebounded now.
So yeah, they've got to Aussie.

1067
00:56:12,600 --> 00:56:14,600
Dollars is well.
You guys just helped.

1068
00:56:14,600 --> 00:56:18,000
Them intuitively you think it
it's very helpful, but then you

1069
00:56:18,000 --> 00:56:21,320
remember their debts in in USA.
Very good point in the servicing

1070
00:56:21,320 --> 00:56:25,080
costs that did create.
What a company an interesting

1071
00:56:26,000 --> 00:56:29,640
even even a year ago was
fascinating before all the you

1072
00:56:29,640 --> 00:56:32,080
know, the ESGS you put it kind
of topics came to the fore.

1073
00:56:32,080 --> 00:56:34,800
It's such an interesting
business in different parts of

1074
00:56:34,800 --> 00:56:37,880
the the sector that we follow.
So came to keep following that

1075
00:56:37,880 --> 00:56:39,840
one.
But let's talk about a couple of

1076
00:56:39,840 --> 00:56:43,560
the the Goldies that you've
spoken about in the past and

1077
00:56:43,560 --> 00:56:45,560
another one that's another
company that's building

1078
00:56:45,560 --> 00:56:49,520
something is West African with
Kiaka, not too far away from

1079
00:56:49,960 --> 00:56:52,000
First Gold.
How do you think about the the

1080
00:56:52,000 --> 00:56:54,240
market sort of changing its
perspective of the business as

1081
00:56:54,240 --> 00:56:58,440
it goes from 200 ish to 400 ish
1000 oz per annum?

1082
00:56:59,880 --> 00:57:02,400
Well, some broker reports have a
valuation of sort of north of

1083
00:57:02,400 --> 00:57:07,080
350 on on, you know W African
trading what, 160 on 155 today.

1084
00:57:08,440 --> 00:57:10,400
It's all about the West Africa
risk now.

1085
00:57:10,600 --> 00:57:14,760
And you know, when I start out
30 years ago, Kina Fast was just

1086
00:57:14,760 --> 00:57:17,720
coming out of a civil war and
five years after that Burkina

1087
00:57:17,720 --> 00:57:21,760
Faso was, was a place that you
wanted to invest.

1088
00:57:22,000 --> 00:57:24,680
And, and 10 years after that was
like it was the go to place in

1089
00:57:24,680 --> 00:57:26,200
West Africa.
Now we're going full circle

1090
00:57:26,200 --> 00:57:29,600
again and, and we're starting
to, you know, have a lot of risk

1091
00:57:29,600 --> 00:57:31,560
around it.
I think you've got a form of

1092
00:57:31,560 --> 00:57:35,040
view on Mali and what happens
here as to whether or not you

1093
00:57:35,040 --> 00:57:38,560
invest in West Africa.
We have trimmed our position in

1094
00:57:38,560 --> 00:57:40,360
West Africa.
We're holding our new one

1095
00:57:40,400 --> 00:57:42,200
probably about 40% of our
holding.

1096
00:57:42,480 --> 00:57:45,560
It's what it was and we've
trimmed our risk purely on, on

1097
00:57:45,560 --> 00:57:48,920
the the sovereign aspect.
You know, you cannot fault

1098
00:57:48,920 --> 00:57:50,600
management, you cannot fault
that asset.

1099
00:57:50,600 --> 00:57:53,560
It is an absolute crack of the
strip ratios, the operating

1100
00:57:53,560 --> 00:57:55,200
cost.
It is probably the best of just

1101
00:57:55,200 --> 00:57:58,480
about I've ever seen.
So it is an absolutely cracking

1102
00:57:58,480 --> 00:58:00,400
assets.
You've got a form of view to say

1103
00:58:00,840 --> 00:58:05,160
do things degenerate further.
You know you've got Bikini Faso,

1104
00:58:05,160 --> 00:58:08,360
Mali and Senegal.
I think it is we've we've got

1105
00:58:08,360 --> 00:58:10,640
this sort of unofficial military
pact there.

1106
00:58:10,640 --> 00:58:13,720
So you'd expect that what
happens in one may flow through

1107
00:58:13,720 --> 00:58:15,880
a little bit.
But I think actually what we're

1108
00:58:15,880 --> 00:58:20,440
seeing now with Marley on
Barrick is that they've probably

1109
00:58:20,560 --> 00:58:23,720
poked the bear and they'll
probably realize that unlike

1110
00:58:23,720 --> 00:58:27,680
Resolute, we can, you know, put
the CEO and his staff under

1111
00:58:27,680 --> 00:58:30,920
house arrest and I'll come back
to Australia And, you know,

1112
00:58:30,960 --> 00:58:34,320
they've got no choice but to pay
what you've asked of them.

1113
00:58:34,600 --> 00:58:36,720
I think Barrack has said, well,
you know, you're 70% of our

1114
00:58:36,720 --> 00:58:38,440
production yesterday.
It's a big impact.

1115
00:58:38,440 --> 00:58:41,880
But guess what, we have to call
your bluff here because if we

1116
00:58:41,880 --> 00:58:45,680
don't guess what that happened
next to your neighbors and, and

1117
00:58:45,680 --> 00:58:49,080
it's going to progress.
And so I think that Barrick will

1118
00:58:49,080 --> 00:58:51,600
call their bluff.
I think that Mali's probably

1119
00:58:51,600 --> 00:58:54,400
overstepped the mark.
And I think that we've in, in

1120
00:58:54,400 --> 00:58:58,200
our assessment and you can never
say anything with certainty in

1121
00:58:58,200 --> 00:58:59,640
West Africa, but wouldn't in
Africa.

1122
00:58:59,640 --> 00:59:03,280
But in our assessment, we think
that the pendulum is, is at its

1123
00:59:03,280 --> 00:59:06,760
maximum point of fear and that
things start to improve from

1124
00:59:06,760 --> 00:59:08,080
here.
We think that it goes a bit

1125
00:59:08,080 --> 00:59:11,760
quiet and we start to see Marley
steps back a bit from the edge

1126
00:59:11,760 --> 00:59:14,080
and realize that they can't
operate gold mines and it

1127
00:59:14,080 --> 00:59:16,400
doesn't make sense to repatriate
nationalized assets.

1128
00:59:16,400 --> 00:59:19,600
And you know, it, it is a
symbiotic relationship.

1129
00:59:19,600 --> 00:59:23,040
We do need these guys here.
And and as that happens, I

1130
00:59:23,040 --> 00:59:25,720
think, you know, you'll start to
see the, the discount applied to

1131
00:59:25,720 --> 00:59:30,200
companies such as West Africa
start to, to narrow as well.

1132
00:59:30,480 --> 00:59:33,080
So that's why we've kept a a
good portion of our holding, but

1133
00:59:33,080 --> 00:59:36,400
we also have taken some good
profit there because there's no

1134
00:59:36,400 --> 00:59:37,840
doubt the sovereign risk has
gone up.

1135
00:59:39,560 --> 00:59:42,400
On the construction side of
things, ticking away is normal.

1136
00:59:42,400 --> 00:59:45,560
Every every announcement to date
has indicated that there hasn't

1137
00:59:45,560 --> 00:59:48,640
been a any sort of concern on
that front.

1138
00:59:48,640 --> 00:59:52,760
Do you think they just get there
and you know ramp it within a

1139
00:59:53,000 --> 00:59:54,760
within a sort of range of being
pretty comfortable?

1140
00:59:55,080 --> 00:59:58,000
Yeah, absolutely.
I think if you know if you've

1141
00:59:58,000 --> 01:00:00,600
got to give management benefit
out given their track record

1142
01:00:00,600 --> 01:00:04,160
over the last six years or so
and it has been absolutely

1143
01:00:04,160 --> 01:00:08,000
sensational and.
You know and operating Simrata

1144
01:00:08,000 --> 01:00:10,280
and so forth.
So I think absolutely, I think,

1145
01:00:10,280 --> 01:00:14,600
you know, I think they probably
if anything they surprise on the

1146
01:00:14,600 --> 01:00:19,400
upside in terms of timing.
And in time when they're sort of

1147
01:00:19,520 --> 01:00:24,520
generating cash to capital has
been spent, what's your, what's

1148
01:00:24,520 --> 01:00:27,640
your recommendation return that?
Would you encourage them to look

1149
01:00:27,640 --> 01:00:31,280
at assets in neighboring or you
know, I mean, I think they stay

1150
01:00:31,280 --> 01:00:35,520
in Africa, but perhaps not so
neighboring, but countries in

1151
01:00:35,520 --> 01:00:38,320
other parts of of the continent.
Is that what you kind of guide

1152
01:00:38,320 --> 01:00:39,840
them to do or how would you
think about that?

1153
01:00:40,240 --> 01:00:42,280
Yeah, I think, I think they're
going to get that.

1154
01:00:42,280 --> 01:00:45,160
That is so cash generative.
You're going to have the

1155
01:00:45,160 --> 01:00:48,560
opportunity to do both.
You know it's a it's a 20 year

1156
01:00:48,560 --> 01:00:50,280
mine life to start with.
And I mentioned before about

1157
01:00:50,280 --> 01:00:52,800
gold, you know, gold mines.
So we start with a 8 to 10 year

1158
01:00:53,160 --> 01:00:55,360
mine life.
It starts with a 20 year reserve

1159
01:00:55,360 --> 01:00:57,000
life.
Extraordinary.

1160
01:00:57,040 --> 01:00:58,600
And there's a lot more drilling
to be done there.

1161
01:00:58,600 --> 01:01:01,640
So I don't think they need to.
It's not like other companies

1162
01:01:01,640 --> 01:01:04,720
like even Percy's where they
need to replace those assets.

1163
01:01:06,200 --> 01:01:11,120
They they can opportunistically
add to the portfolio, but

1164
01:01:11,240 --> 01:01:14,280
there's no great, the the
clock's not ticking on them.

1165
01:01:14,680 --> 01:01:19,120
So I'd, I'd like to see some
pretty strong Capital Management

1166
01:01:19,800 --> 01:01:22,720
question marks over what they
can and can't do the other what

1167
01:01:22,720 --> 01:01:25,320
we'll see in time.
Why question marks?

1168
01:01:26,040 --> 01:01:28,000
Getting out of the country.
Getting out of the country just,

1169
01:01:28,200 --> 01:01:30,840
you know, and, and I think too
like, you know, I think if

1170
01:01:30,840 --> 01:01:34,680
anything, and I hate to be
always a skeptic, but the kind

1171
01:01:34,680 --> 01:01:37,880
of fast say government, you
know, they're not going to put

1172
01:01:37,880 --> 01:01:40,680
pressure on West Africa as
they're about to bring on a

1173
01:01:40,680 --> 01:01:43,160
200,000 oz print of mine and
they're spending, you know,

1174
01:01:43,160 --> 01:01:45,360
hundreds of millions of dollars
in the country.

1175
01:01:46,040 --> 01:01:50,040
So I think post that, I think in
the end of the year, there might

1176
01:01:50,040 --> 01:01:54,320
be another, you know, issue
potentially arising about them

1177
01:01:54,320 --> 01:01:56,080
trying to extract the
government, trying to extract a

1178
01:01:56,080 --> 01:01:58,480
bit more value from West Africa.
But I think that's, you know,

1179
01:01:58,480 --> 01:01:59,520
that's tomorrow's.
Problem.

1180
01:01:59,960 --> 01:02:03,320
Yeah, yeah, makes sense.
Capital Management would be

1181
01:02:03,320 --> 01:02:04,400
great.
Yeah.

1182
01:02:05,040 --> 01:02:11,720
The Australian W Australian gold
gold producer that come comes to

1183
01:02:11,720 --> 01:02:13,800
mind, which you talked about a
fair bit a year ago too.

1184
01:02:13,800 --> 01:02:17,240
Was was was Regis.
It had been out of love with a,

1185
01:02:17,400 --> 01:02:19,800
with a, you know, hedge book
overhang for a long time.

1186
01:02:19,840 --> 01:02:23,680
Hedge book scorn stocks up.
It's printing, printing cash.

1187
01:02:24,280 --> 01:02:25,400
Yeah.
What do you think of Regis

1188
01:02:25,400 --> 01:02:26,440
today?
Yes.

1189
01:02:26,440 --> 01:02:28,560
I mean, we were there because,
well, we're there actually

1190
01:02:28,560 --> 01:02:29,760
because we bought it much
higher.

1191
01:02:29,760 --> 01:02:31,840
And so we just there for the
ride really.

1192
01:02:31,840 --> 01:02:33,920
But we did, we did average a few
down.

1193
01:02:34,320 --> 01:02:36,160
And I think probably last time
we tried to, I'm assuming the

1194
01:02:36,160 --> 01:02:38,520
stock would have been well below
$2.00 and it's at 3 bucks on

1195
01:02:38,520 --> 01:02:40,760
today.
So it's a different proposition

1196
01:02:40,760 --> 01:02:42,360
now.
I mean, you know, it was clearly

1197
01:02:42,360 --> 01:02:45,040
undervalued there.
As a 400,000 oz producer, you

1198
01:02:45,040 --> 01:02:47,960
would take, it was the cheapest
in the marketplace by a mile.

1199
01:02:48,400 --> 01:02:50,680
And yeah, the, the company was
people so in love with

1200
01:02:50,680 --> 01:02:53,800
management, the company that
you, you really couldn't buy a

1201
01:02:53,800 --> 01:02:56,080
friend.
I think now we've seen a

1202
01:02:56,080 --> 01:02:58,160
recovery, it is putting out good
cash.

1203
01:02:59,360 --> 01:03:02,320
We have trimmed our holding as
well, but we are still holding a

1204
01:03:02,320 --> 01:03:05,720
chunk.
I think the bigger issue now is

1205
01:03:05,720 --> 01:03:08,880
it's gone from being super evade
to being still undervalued, but

1206
01:03:08,880 --> 01:03:11,520
not as dramatically undervalued.
I think the bigger issue is what

1207
01:03:11,520 --> 01:03:15,960
I do with that cash, right?
We personally would love to see

1208
01:03:15,960 --> 01:03:19,280
Capital Management again there.
We'd love to see him sell off

1209
01:03:19,280 --> 01:03:21,360
Mcfillimy's.
They've just heard today I've

1210
01:03:21,360 --> 01:03:23,760
just released saying they've got
another plan they're looking at

1211
01:03:23,800 --> 01:03:27,520
by July for Mcfillimy's.
We'd like to see them sell that

1212
01:03:27,520 --> 01:03:30,000
asset off and just keep going
underground.

1213
01:03:30,000 --> 01:03:32,280
Like, you know, they've just
gone underground in Duketon,

1214
01:03:32,960 --> 01:03:34,960
right?
And people say, well, I've only

1215
01:03:34,960 --> 01:03:38,640
got five years reserve life.
Well, most underground mines

1216
01:03:38,640 --> 01:03:40,520
only ever have five years
reserve life and you just keep

1217
01:03:40,520 --> 01:03:43,520
drilling them out.
It's not like, you know, while

1218
01:03:43,520 --> 01:03:46,480
you're deep or you know, some of
these mines where you, we've

1219
01:03:46,480 --> 01:03:48,840
been going for 20 years and
you're 2 kilometers underground.

1220
01:03:49,280 --> 01:03:50,800
These mines are just getting
started.

1221
01:03:50,800 --> 01:03:56,720
So I think Capital Management
put what you need to see back in

1222
01:03:56,720 --> 01:03:58,760
the ground to keep it going, but
the rest put it back to

1223
01:03:58,760 --> 01:04:03,200
shareholders.
You do you, you make your

1224
01:04:03,200 --> 01:04:05,400
comment on most underground
mines kind of keep going, but

1225
01:04:05,400 --> 01:04:08,320
most underground mines probably
aren't as low grade as what

1226
01:04:08,320 --> 01:04:11,920
they're sort of, you know, broad
underground plant plan is.

1227
01:04:11,920 --> 01:04:17,600
Do you have I guess a degree of
confidence in, in the, you know

1228
01:04:17,600 --> 01:04:21,320
their, their, their, their unit
costs on a go forward basis from

1229
01:04:21,480 --> 01:04:23,480
from transitioning to these low
grade underground mines?

1230
01:04:23,480 --> 01:04:24,600
Yeah.
I mean, you always need to look

1231
01:04:24,600 --> 01:04:26,360
at, you know, oz per vertical
metre.

1232
01:04:26,360 --> 01:04:28,120
So you can you can look at
grades one thing.

1233
01:04:28,120 --> 01:04:30,080
Then you also look at uniformity
and continuity.

1234
01:04:30,080 --> 01:04:32,880
And I think that's where they do
make up some of those points.

1235
01:04:33,760 --> 01:04:39,200
I think the bigger issue is
really about management, about

1236
01:04:39,200 --> 01:04:42,680
how hard at it they are and how
they sweat those assets.

1237
01:04:43,200 --> 01:04:45,520
And and that's, you know, that's
probably a question mark.

1238
01:04:45,520 --> 01:04:48,200
I think they've had a bit more
new focus they've had to on, on

1239
01:04:48,200 --> 01:04:50,280
the assets.
I think if they, you know,

1240
01:04:50,320 --> 01:04:54,120
there's enough gold there, it's
still a relatively new gold

1241
01:04:54,120 --> 01:04:55,880
province.
I think it's going to be a lot

1242
01:04:55,880 --> 01:04:59,240
more answers discovered over the
next 123 decades here.

1243
01:04:59,800 --> 01:05:01,840
And you know, I've already got,
you know, three mines

1244
01:05:01,840 --> 01:05:03,600
underground that they'll be
there could be more underground

1245
01:05:03,600 --> 01:05:05,600
mines here.
And then over time some of those

1246
01:05:06,320 --> 01:05:11,240
start to link up that some of
those deposits underground and

1247
01:05:11,240 --> 01:05:15,040
you've got you know and you get
cheap exploration shafts and

1248
01:05:15,040 --> 01:05:19,560
away you go.
So look, given how much gold was

1249
01:05:19,560 --> 01:05:24,920
at surface and some of the
incepts I've released so far,

1250
01:05:24,920 --> 01:05:29,480
we're pretty confident I've got
many years ahead of them, much

1251
01:05:29,480 --> 01:05:30,800
more than five year reserve
life.

1252
01:05:31,760 --> 01:05:34,680
Any other mining companies out
there we we haven't touched on

1253
01:05:34,680 --> 01:05:38,480
catching your eye at the at the
moment or past few quarters?

1254
01:05:39,320 --> 01:05:41,080
Yeah, I mean, Santos is one, we
haven't touched on this.

1255
01:05:41,080 --> 01:05:45,680
So we you know Santos, we, we do
like it's obviously well the oil

1256
01:05:45,680 --> 01:05:46,960
and gas that just out of favour
there.

1257
01:05:46,960 --> 01:05:48,760
But we do think they're an
inflection point.

1258
01:05:48,760 --> 01:05:51,040
They've been developing two big
assets.

1259
01:05:51,600 --> 01:05:53,680
They're about to go into cash
change of mode.

1260
01:05:53,680 --> 01:05:56,960
They've obviously pulled out of
the Dorado or not pulled out of

1261
01:05:56,960 --> 01:06:00,360
that the deferred feed on, you
know, Dorado with with Canavon,

1262
01:06:00,360 --> 01:06:01,960
so.
Investor Day was a big statement

1263
01:06:01,960 --> 01:06:05,560
though, late last year, right?
Yeah, focus on focus on capital

1264
01:06:05,560 --> 01:06:07,160
returns to shareholders.
Absolutely.

1265
01:06:07,160 --> 01:06:09,800
We're going to abandon our, you
know, growth for growth sake

1266
01:06:09,800 --> 01:06:12,240
sort of strategy. 100% and
they've got enough assets coming

1267
01:06:12,240 --> 01:06:15,080
on where they will have enough
runway where they don't have to

1268
01:06:15,080 --> 01:06:17,640
invest in a hurry, which you
don't always have the luxury of

1269
01:06:17,640 --> 01:06:19,520
being an oil and gas company
because you know they are.

1270
01:06:19,680 --> 01:06:22,160
All those assets are short
production assets.

1271
01:06:22,560 --> 01:06:25,680
So we do like Santos.
We've done a fair bit of work on

1272
01:06:25,680 --> 01:06:29,360
West Gold.
Another call today with the CEO,

1273
01:06:29,360 --> 01:06:35,680
Wayne Bramble there.
Tempted, honest, well beyond

1274
01:06:35,680 --> 01:06:36,880
tempted.
We have actually bought a few,

1275
01:06:36,880 --> 01:06:40,280
OK, just just in the last week
or so, mainly because we've had

1276
01:06:40,280 --> 01:06:43,280
such a good run on the gold
space with the Grey and and

1277
01:06:43,400 --> 01:06:48,800
Regis Tiero before that Northern
Star And what are the ones?

1278
01:06:50,160 --> 01:06:52,440
Woof woof of.
Course, yes, we've had such

1279
01:06:52,440 --> 01:06:55,000
should run.
We're sort of drawn back there,

1280
01:06:55,000 --> 01:06:57,400
but like a moth to to a flame,
aren't we?

1281
01:06:57,400 --> 01:06:59,840
But so we've been working
through, you know, the

1282
01:06:59,840 --> 01:07:02,520
Bellevue's and the West Golds
are the ones that have lagged

1283
01:07:02,600 --> 01:07:06,480
and, but have still have size.
And we think West Gold is

1284
01:07:06,480 --> 01:07:10,080
probably worth a bit of a bit of
a place.

1285
01:07:10,080 --> 01:07:11,680
We've just started buying a
handful.

1286
01:07:11,680 --> 01:07:15,240
We're not going to go hard yet.
You know, if he can turn it

1287
01:07:15,240 --> 01:07:18,520
around and he's, you know, he's
got another strike with the last

1288
01:07:18,520 --> 01:07:22,000
quarter, but this next two,
these next two quarters are big

1289
01:07:22,000 --> 01:07:25,040
quarters for them.
If they're going to be 4000 oz

1290
01:07:25,040 --> 01:07:27,000
producer, there's not too many
on the marketplace.

1291
01:07:27,000 --> 01:07:29,480
There's certainly not too many
with a valuation of what 2 and a

1292
01:07:29,480 --> 01:07:32,920
bit billion?
So worth a, worth a bit of a

1293
01:07:33,240 --> 01:07:37,760
punt, but it's, it's not, you
know, it's not quite investment

1294
01:07:37,760 --> 01:07:40,400
grade yet, but but certainly
worth doing the work on.

1295
01:07:40,840 --> 01:07:44,760
I mean, one of the the obvious
themes is that the gold price

1296
01:07:44,760 --> 01:07:49,520
went from 1300 a few years back,
U.S. dollar terms to something

1297
01:07:50,240 --> 01:07:53,280
like double that.
If you could, would you, would

1298
01:07:53,280 --> 01:07:55,520
you just buy gold or is it
always the the companies and the

1299
01:07:55,520 --> 01:07:57,720
talk you get with the companies
that it attracts you?

1300
01:07:58,360 --> 01:08:00,960
Traditionally it's always been
the companies because they

1301
01:08:00,960 --> 01:08:04,320
they're leverage, right?
So in every dollar gold price

1302
01:08:04,320 --> 01:08:06,280
goes up.
That's straight through the

1303
01:08:06,280 --> 01:08:08,120
bottom line.
So as a percentage of profit can

1304
01:08:08,120 --> 01:08:10,760
be a bigger impact.
So in theory you got, you know,

1305
01:08:10,840 --> 01:08:12,680
you always have leverage through
your gold plates.

1306
01:08:12,680 --> 01:08:14,760
It hasn't played out that way to
date.

1307
01:08:15,240 --> 01:08:17,880
It has with some stocks, you
know, I mean, you have seen

1308
01:08:17,880 --> 01:08:20,040
companies that are up more than
100%, which is what the gold

1309
01:08:20,040 --> 01:08:25,680
price up, as you say.
But on, on mass, we haven't seen

1310
01:08:25,680 --> 01:08:26,800
it.
And I think part of it is

1311
01:08:26,800 --> 01:08:32,319
because there still hasn't been
this acceptance that A, the gold

1312
01:08:32,319 --> 01:08:34,479
price is, is going to
sustainably stay here, it's

1313
01:08:34,720 --> 01:08:37,600
going to roll over and B, that
gold companies are going to do

1314
01:08:37,600 --> 01:08:38,960
the right thing with the with
the capital.

1315
01:08:39,479 --> 01:08:43,880
So I think as both those things
start to to sort of play out, I

1316
01:08:43,880 --> 01:08:47,560
think we'll start to see a
rewriting in an ongoing

1317
01:08:47,560 --> 01:08:50,720
rewriting in stock prices.
I don't, I don't think stock

1318
01:08:50,720 --> 01:08:54,439
prices where they should be for
gold at 2750 USA an ounce,

1319
01:08:55,359 --> 01:08:57,200
especially in Aussie dollars
where we've made a record high

1320
01:08:57,200 --> 01:08:59,920
of 4400 Aussie.
That's an extraordinary.

1321
01:08:59,920 --> 01:09:01,920
Price, that is a big, big time
for us.

1322
01:09:01,920 --> 01:09:05,439
Yeah, yeah, big time to to.
To round out on the portfolio

1323
01:09:05,439 --> 01:09:09,359
you, you hold, I think from the
last report 13% cash, which is

1324
01:09:09,800 --> 01:09:13,399
relatively sizable.
Is that just pause given the

1325
01:09:13,399 --> 01:09:16,399
earlier part of our conversation
on web brought evaluations,

1326
01:09:16,399 --> 01:09:18,960
right?
That's actually good for us.

1327
01:09:18,960 --> 01:09:23,840
So, so we've we traditionally
held 15 to 35% cash and we've

1328
01:09:23,840 --> 01:09:26,479
made a conscious effort to
reduce it so that our new

1329
01:09:26,479 --> 01:09:28,040
whitings will be sort of 10 to
20.

1330
01:09:29,160 --> 01:09:33,000
So you know 15 will sort of be
our our new benchmark.

1331
01:09:33,000 --> 01:09:35,880
So we're market neutral for us
is 15%.

1332
01:09:36,920 --> 01:09:40,040
So yeah, 13, you know, that's
that we're, we're quite happy

1333
01:09:40,040 --> 01:09:41,880
with that.
Getting paid a good percentage

1334
01:09:41,880 --> 01:09:44,479
on that at least beating out
inflation for the men.

1335
01:09:44,920 --> 01:09:46,920
I think we're getting, we're
earning better in our cash than

1336
01:09:46,920 --> 01:09:49,880
we have on some of our stocks
this past 12 months.

1337
01:09:50,000 --> 01:09:51,479
It's just so much management
know that.

1338
01:09:52,200 --> 01:09:54,400
It's just optionality too for
when bargains are on.

1339
01:09:54,600 --> 01:09:55,560
Yeah, absolutely.
Yeah.

1340
01:09:55,720 --> 01:09:58,200
And being being an open-ended
fund, so we always have to allow

1341
01:09:58,200 --> 01:10:01,520
for redemptions.
And so that's part of the part

1342
01:10:01,600 --> 01:10:03,240
of the mix.
You have to pay distributions.

1343
01:10:03,240 --> 01:10:07,440
So we have to pay out five 6%
each year in distributions and

1344
01:10:07,440 --> 01:10:10,520
then build that back up.
Fantastic.

1345
01:10:10,520 --> 01:10:12,480
This has been an awesome
conversation.

1346
01:10:12,480 --> 01:10:15,440
Romano, appreciate you coming
in, sharing your your view of

1347
01:10:15,440 --> 01:10:18,600
the world, Macro company
specific.

1348
01:10:18,600 --> 01:10:20,560
So I hope we can do it again in
a year's time.

1349
01:10:20,560 --> 01:10:23,400
And yeah, fingers crossed 2025
is a Ripper.

1350
01:10:23,720 --> 01:10:25,320
Yeah, thanks for your time.
Great.

1351
01:10:25,480 --> 01:10:28,200
Great to be here.
James, I really wanna give me

1352
01:10:28,200 --> 01:10:30,280
money to him.
Like he bloody see, he knows

1353
01:10:30,280 --> 01:10:31,160
he's shit.
Romana.

1354
01:10:31,160 --> 01:10:35,000
He's very smart fella.
That like, look, I know I'll Mr.

1355
01:10:35,000 --> 01:10:37,400
Barrages, you got a bit of cash
tied up with him, but would you

1356
01:10:37,400 --> 01:10:41,400
consider tipping a bit of the
Alley GC ETF into the into the

1357
01:10:41,400 --> 01:10:44,120
Cortana ETF?
I better do my homework.

1358
01:10:45,560 --> 01:10:46,200
Love it.
Oh.

1359
01:10:46,480 --> 01:10:49,840
Very good and thank you to all
the partners that have made

1360
01:10:49,840 --> 01:10:52,680
Romano coming on possible.
Technically, otherwise we

1361
01:10:52,680 --> 01:10:55,520
wouldn't run the show because I
just wouldn't make money.

1362
01:10:55,520 --> 01:10:57,960
So just wouldn't do it.
And that is due to Mineral

1363
01:10:57,960 --> 01:11:02,760
Mining Services, MMS contract
Ready grounded Sambi Ground

1364
01:11:02,760 --> 01:11:06,760
Support, CRE Insurance,
Kaydrill, Daesak, Saltbush

1365
01:11:06,760 --> 01:11:10,200
Contracting and Get Wet
Solutions EDRE.

1366
01:11:10,200 --> 01:11:14,720
Money Miners EDRE.
Information contained in this

1367
01:11:14,720 --> 01:11:17,440
episode of Money of Mine is of
general nature only and does not

1368
01:11:17,440 --> 01:11:20,080
take into account the
objectives, financial situation

1369
01:11:20,160 --> 01:11:22,120
or needs of any particular
person.

1370
01:11:22,440 --> 01:11:25,480
Before making any investment
decision, you should consult

1371
01:11:25,480 --> 01:11:28,560
with your financial advisor and
consider how appropriate the

1372
01:11:28,560 --> 01:11:32,240
advice is to your objectives,
financial situation and needs.