The Art of Commodity Investing (Taylor McKenna of Kopernik)

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Miters make 80% of their money
20% of the time.

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You didn't want to make sure
your mine life is around long

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enough to benefit from that 20%
if it comes in 10 years time.

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Gold's been money for thousands
and thousands of years, and we

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think it likely will be going
forward.

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It doesn't lose value like a
dollar does over time.

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It's incredibly hard to build a
mine and pull this out of the

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ground.
Paper money eventually returns

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to its intrinsic value 0.
Patient capital is a blessing.

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Prices have gone from $5000 a
tonne to $75,000 a tonne so.

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I love the strategy of buying
out of favour commodities when

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they're below incentive price.
It's very simple commodity

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investing when you think of it
like that.

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Mate, we've got a wicked chat to
share.

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How's your week?
Catch me off guard, mate.

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I'm super excited to to share
this conversation with

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Kaepernick.
They're they're a group that

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I've wanted to speak with for
for quite some time.

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They've done some wicked
research in into the mining

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space and they're super, super
value oriented guys.

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I think if anyone writes a paper
about a sector 6, five years

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before it gets hot and you know,
they love trolling around for,

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for trash, unloved stuff and,
and they're patient.

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Yeah, they're patient.
And eventually it sort of comes

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good.
So in that in that case, I'm

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referencing uranium.
They they started writing about

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this 20/17/18.
They have been sort of frothing

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at the beat about platinum in
recent times.

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They've got some punchy, punchy,
punchy comments when it comes to

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to gold and yeah, Fiat
currencies for for that matter

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as well.
And yeah, whilst they might call

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themselves a, a small fund,
that's very, very much by US

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standards, because these guys
are.

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Measly 6 billion.
US so these guys are a a

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behemoth by the standards of the
the groups and the investors

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that we speak with mate.
And yeah, they their, their

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views on why mining companies
are undervalued is sort of music

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to the ears of us and I think to
a lot of our listeners.

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So I reckon this is a a ripping
chat that that all the folks out

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there are going to really enjoy
and and take a few Nuggets from

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mate. 11 big take away
reflecting on this conversation,

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mate.
And and frankly, it's a style of

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investing just resonates with
the both of us.

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And that's that's value
investing.

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Like at its core, that outlook
that Copernic lives by it can't

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compromise on value.
At least that's that's how I

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like to to think and reflect.
Yeah, Yeah, I think you're right

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mate.
And if you're if you're thinking

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about building mines as well,
that same philosophy applies and

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especially when it comes to
energy.

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That, JD is where Cross Boundary
Energy comes in.

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These guys finance, build and
operate renewable energy

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systems, solar, wind, battery
for mines across Africa and

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Australia.
Yeah.

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And I think it's super important
for this to cut home.

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It's not just the ESG sort of
fluff or whatever you might sort

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of call it.
We're talking about real cash

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savings, real performance and
long term thinking.

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You know, these operations that
these guys put in place, the

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power systems are designed to
save you dollars per tonne.

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Not just your emissions mate,
It's it's it's if your site has

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like a 10 year my life and
you're and you're still running

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Gen. sets, you're leaving value
on the table.

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We care about value.
Cross boundary energy.

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They'll fund and deliver the
renewable system off balance

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sheet and you only pay for the
power you use.

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That's it mate, if you value
aligned like Taylor like

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ourselves here, if you've got a
project in the works or if

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you've got a project running
right now, get in touch with Tim

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Taylor details in the show
notes.

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Tell them money of mine sent you
and thanks a lot to cross

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boundary energy.
We're value investors and that's

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first and foremost.
So we invest in usually equity

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securities around the globe.
We're bottom up fundamental

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analysts first and a core of
tenants of our company are

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certainly that we are committed
to remaining small.

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This we we want to be nimble.
We want to be able to invest in

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in some of these small and
medium cap businesses that offer

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a lot of value.
We also view the market as

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inherently inefficient and we
like to take advantage of these

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inefficiency and having a global
opportunity set really allows us

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to do this.
I'll also mention that we have

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industry tailored valuation
metrics.

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I know we're going to get into
some of that when we talk about

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mining for sure, but we think
this is a a big advantage for us

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as well.
So those are some of the big,

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big picture tenants of, of of
what we do here.

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The the point on being small is
quite interesting.

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I think a small fund manager in
the US is a pretty substantial

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manager down here in in
Australia.

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If we if we expand on your sort
of tenants there.

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The one of the reasons I sort of
cottoned on to the work you guys

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did was these white papers you
guys shared.

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There was a couple around mining
sort of spaced out over a four

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or five year period as well as
some on optionality.

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I'd love for you to sort of talk
to to some of those to help us

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sort of understand a bit better
the the way you sort of view

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cycles in in markets.
Sure.

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Well, cyclicality, volatility
and this is another aspect of

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our investment mandate.
We, we view this as opportunity,

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right.
So cyclical businesses can offer

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a lot of value when the cycle is
down.

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And as we know mining goes
through that a lot, right.

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So there there's, there's
usually opportunities in various

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parts of of the mining sector.
And getting to the, the, the

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mining white paper, what's
interesting to us is that most

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in the industry, and this is
across most industries, most

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sectors I should say, use NPV or
DCFS to value securities, right?

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And we think that that has
worked well for some investors

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for a long time, but due to
central bank manipulation, due

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to being a slave of the inputs,
we think that they have less

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appeal now and certainly likely
less appeal going forward.

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Now this is particularly true
with natural resource companies,

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right?
We, we think that actually most

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in this in the industry have had
it flipped upside down when when

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valuing these.
And there's a few key reasons

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why.
First, I'm happy to go into

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them.
The, the first one is that when

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you think about a mine, right,
and let, let's use platinum as

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an example.
If you're gonna, if you have an

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actual mine and you have a 10
year mine life and platinum is

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undervalued in, in, in your
analysis and you start and

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you're mining your platinum now
and you have 10 years to go,

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right.
That, that on an NPV or DCF that

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is preferred to another company,
Company B, we'll call them, that

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has a platinum deposit that will
be developed in five years, but

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has a 20 year mine life, right?
So we think platinum's

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undervalued, but the DCF, the
NPV will prefer a, a company

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that's bringing it out of the
ground now in this undervalued

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market, right?
And Rick Rule has a famous

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saying that he says the worst
thing he he likes, the worst

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thing he wants a miner to do is
just to pull stuff out of the

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ground.
When, when, when the metal's

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cheap and and DCF tend to reward
those type of investments.

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The other thing that's
interesting, back to the

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cyclicality and volatility, but
80% generally of of miners make

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80% of their money 20% of the
time.

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So again, if you're off with
your timing, the whole model can

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be misconstructed.
And then the last point I'll

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make here, which we think is, is
very, very important is DCFS by

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nature factor in time value of
money and actual natural

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resources over thousands of
years have actually appreciated

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in, in dollar terms or in Fiat
currency terms, right?

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So if you look at ADCF model,
when you're looking at a

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platinum minor over the course
of the 10 years, generally that

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platinum price is coming down,
right?

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We we think the opposite.
The opposite is true, and

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history has been a guide for
that.

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There's a lot there.
And I, I, I'd love to expand on

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your point on, on, on
optionality, OK, like because in

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a lot of ways then the dynamics
for a mine with a much longer

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life also benefit a lot more
from the optionality that comes

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from the cycles.
If you're making money in in 80%

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of your profit in 20% of the
time while you you didn't want

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to make sure your mine life is
around long enough to benefit

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from that 20% if it comes in 10
years time.

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Exactly.
And that's how I think that

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we'll talk about uranium.
We don't know exactly when again

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using platinum as the example,
the price will rise but it but

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it will be it's below incentive
price supplies coming out of the

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market right now, right.
And we want companies that have

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these long mine lives that will
benefit when that actually

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happens.
So how do you go about the sort

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of macro component like you just
said, you don't know, it's very

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hard to predict when these
commodities actually move.

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Will you guys do do the work on
building up a sort of rough

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global demand supply balance to
to see where we're at to see to

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give you guys a bit of an
indication of when that might

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happen?
Sure.

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I mean, I mean we'll look at
supply and demand and maybe

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we'll switch gears and use
uranium as an example, right.

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And when we one of the key
tenants that we look at is the

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incentive price.
And by incentive price we mean

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what price does it take for a
new mine to be built?

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And so you have to make money on
pulling it out of the ground,

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but you also have to make a
return on your capital, right.

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So what price will incentivize a
new mine construction or I

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should say a lot of new mine
construction that makes a

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meaningful dent in the supply
picture?

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When we were talking about
uranium, we're looking anywhere

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from 70 to $80 per pound.
So when, when uranium was in the

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mid 20s, we really liked it,
right, Because we, we, we knew

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that over time commodities,
metals tend to approach their

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incentive price.
And while we were very early

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with uranium, about 7 or 8 years
early, the, the, the gains even

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with waiting were, were quite
astronomical.

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Some of the Iranian companies,
especially the smaller ones

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went, went up over 10 times,
right.

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So we like buying in, in those,
those environments.

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And again, we don't know exactly
when the cycle will change, but

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the supply demand signifies that
it that it will with platinum

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right now it's in deficits, it's
well below the incentive price.

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There's there's actual supply
leaving the market.

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So again, the timing is is
uncertain, but I would have.

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But as value investors we're, we
currently we certainly have the

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advantage of being much buying
much closer to the bottom than

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than than perhaps other
investors.

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So we think that the downside is
very minimal now.

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And if it if it goes much lower,
some of the largest producers

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like Anglo American Platinum now
called Valterra or Impala will

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actually act to curtail supply
even more and the supply

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deficits will grow.
So we think the downside's

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minimum with with a lot of
potential optionality as you set

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from here.
With the supply curtailment of

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some of those substantial
producers, how do you think

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about the, the softer issues in
relation to that?

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Because a lot of those
producers, they're produced in

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South Africa and there's, it's,
it's not as simple as if the

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mines aren't making money, they
stop production.

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In fact, they'll endure, you
know, negative cash flow for a

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very, very long time because of
the huge employment kind of, you

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know, requirements that occur
with with with operating in that

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area.
That's a very good point.

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And some of the supply that
we've seen come out is actually

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in the US at the Stillwater
operation owned by Sabania.

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But what, what they can do in
South Africa is they can defer

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expansions or they can defer new
shaft build.

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So as a shaft is drying up,
they'll defer building another

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one, right?
And that's, that's, that's what

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they're doing.
So supply isn't necessarily

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leaving the market yet in South
Africa, but they're deferring

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expansions and they're certainly
going after the lowest cost

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metal that they have right now.
But you also bring up another

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important point and it's goes
back to our our analysis.

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00:12:19,240 --> 00:12:22,840
When we're investing in these
companies, South Africa for

226
00:12:22,840 --> 00:12:25,400
sure, we would need a much
larger margin of safety to

227
00:12:25,400 --> 00:12:28,080
invest in these miners in South
Africa than we would say in your

228
00:12:28,080 --> 00:12:31,200
home country of Australia.
So if we're if we're looking at

229
00:12:31,200 --> 00:12:32,640
a gold miner, let's just use
that.

230
00:12:32,640 --> 00:12:34,320
There's a lot of gold miners in
Australia.

231
00:12:34,960 --> 00:12:35,920
There's no platinum.
Ones.

232
00:12:35,960 --> 00:12:39,760
There's no platinum ones.
Unfortunately, exactly.

233
00:12:39,760 --> 00:12:43,440
That's that's that's why I
switched to gold for for this

234
00:12:43,440 --> 00:12:47,360
example, perhaps in Australia we
we might need a 30% discount

235
00:12:47,400 --> 00:12:50,720
right to, to to get excited.
But in in South Africa, we'll

236
00:12:50,720 --> 00:12:55,840
need a 60 or 70% discount, yeah.
To to sort of flesh out the

237
00:12:55,840 --> 00:12:58,520
argument in greater detail if
you're on the Barry side of the

238
00:12:58,520 --> 00:13:01,280
PGM trade.
And I think we're we're kind of

239
00:13:01,280 --> 00:13:03,360
family in in your camp here,
Taylor.

240
00:13:03,360 --> 00:13:07,600
But the the bears to this
argument would talk to the the

241
00:13:07,680 --> 00:13:11,520
the fading demand narrative.
So the rise of electric

242
00:13:11,520 --> 00:13:17,280
vehicles, the the sort of
shedding or the waiting, like

243
00:13:17,280 --> 00:13:20,920
ultimately the amount of
platinum or Palladium needed in

244
00:13:21,200 --> 00:13:24,800
a converter.
How do you sort of respond to to

245
00:13:24,800 --> 00:13:26,320
those arguments or think about
them?

246
00:13:28,200 --> 00:13:31,600
Well, we one, one way to think
about it is that's why we're,

247
00:13:31,600 --> 00:13:34,200
that's why the, the prices are
where they are, right.

248
00:13:34,800 --> 00:13:37,080
So that's, that's exciting for
us.

249
00:13:37,080 --> 00:13:42,560
But on some of those for sure
with Palladium especially 80%

250
00:13:42,560 --> 00:13:46,360
of, of Palladium demand is, is,
is for what what you're

251
00:13:46,360 --> 00:13:51,280
describing that and the risk
are, are are valid there, right.

252
00:13:51,960 --> 00:13:56,360
And then on platinum, it's only
about 25% of the demand and the

253
00:13:56,480 --> 00:13:58,960
other 75% of platinum continues
to grow.

254
00:13:59,400 --> 00:14:02,280
So we certainly when we're
comparing the two, we would, we

255
00:14:02,280 --> 00:14:05,240
would likely like platinum a lot
more, but things can swing

256
00:14:05,240 --> 00:14:07,880
wildly, right?
Palladium 2 1/2 years ago was

257
00:14:07,880 --> 00:14:12,320
over $3000 an ounce.
You know, perhaps in the next

258
00:14:12,320 --> 00:14:14,840
run, again we we don't forecast
perhaps in the next run that's

259
00:14:14,840 --> 00:14:18,080
platinum that goes to 3000 and
and Palladium stays, stays

260
00:14:18,080 --> 00:14:19,560
lower, but you have the same
benefit.

261
00:14:19,960 --> 00:14:22,480
So the future is certainly
unknown.

262
00:14:22,480 --> 00:14:26,920
The other thing I'll point out
is that it seems likely that EVs

263
00:14:26,920 --> 00:14:31,800
will continue to take share, but
that could be pushed out longer.

264
00:14:31,800 --> 00:14:34,800
That looks like it is the EV
growth slowed considerably last

265
00:14:34,800 --> 00:14:37,520
year.
Personally, I actually drive a

266
00:14:37,520 --> 00:14:39,280
plug in hybrid.
I I really like it.

267
00:14:39,280 --> 00:14:41,440
I think it's a happy medium
between the two.

268
00:14:41,840 --> 00:14:46,120
And what's really beneficial for
PGMS there is they, they

269
00:14:46,120 --> 00:14:48,960
actually have higher PGM loading
than internal combustion

270
00:14:48,960 --> 00:14:51,480
engines.
So if hybrids continue to take

271
00:14:51,480 --> 00:14:54,040
share, which they'd have the
last few years, that's that's

272
00:14:54,040 --> 00:14:56,600
positive and certainly not
priced in into the market.

273
00:14:56,600 --> 00:15:00,440
It seems at current prices
everyone is assuming that EVs

274
00:15:00,640 --> 00:15:03,600
take all market share within the
next few years and we we think

275
00:15:03,600 --> 00:15:06,160
that's unlikely.
And and how do you think about

276
00:15:06,160 --> 00:15:08,200
the the precious component of
Platinum?

277
00:15:08,200 --> 00:15:11,360
Do you put much stock in that?
Great point.

278
00:15:11,360 --> 00:15:13,000
And I'm, I'm, I'm glad you
brought that up.

279
00:15:13,600 --> 00:15:16,680
Yes, we do.
And it's, it's interesting that

280
00:15:16,720 --> 00:15:20,520
you've probably heard this, that
Costco started selling gold

281
00:15:20,520 --> 00:15:23,640
about a year and a half ago here
in the US and, and they ran out

282
00:15:23,640 --> 00:15:25,520
of it quickly.
Then they, then they'd restock

283
00:15:25,520 --> 00:15:27,920
it and then now they move to
selling platinum, right?

284
00:15:27,920 --> 00:15:31,000
So it certainly has a lot of the
characteristics and, and

285
00:15:31,000 --> 00:15:33,160
Palladium does too of, of, of
gold.

286
00:15:33,720 --> 00:15:38,520
So we certainly think about it
as, as a way that investors can

287
00:15:38,520 --> 00:15:41,520
invest in, in, in something
that's precious and long

288
00:15:41,520 --> 00:15:43,880
lasting.
So personally, I, I own physical

289
00:15:43,880 --> 00:15:47,560
platinum at these prices, the
long term ratio to gold is 1 to

290
00:15:47,560 --> 00:15:50,680
1 / 50 years.
We're currently 1/3 of the price

291
00:15:50,680 --> 00:15:54,400
of gold, right?
So you're seeing, you're seeing

292
00:15:54,840 --> 00:15:57,440
it being sold at Costco, you're
seeing jewelry demand grow

293
00:15:57,440 --> 00:16:00,360
considerably in Asia this year
because it's at such a discount

294
00:16:00,360 --> 00:16:02,440
to gold.
You're also seeing the Russian

295
00:16:02,440 --> 00:16:04,360
central bank buying physical
platinum.

296
00:16:04,600 --> 00:16:08,240
So it has a lot of the same
characteristics as gold and

297
00:16:08,240 --> 00:16:11,120
historically as traded on par,
on par with it.

298
00:16:11,480 --> 00:16:15,360
So it we we certainly think that
that demand continues to grow

299
00:16:15,360 --> 00:16:17,760
over the long run that
investment demand.

300
00:16:17,920 --> 00:16:22,080
And and when you talk from, from
Copernic's position, given the

301
00:16:22,080 --> 00:16:26,600
geopolitical risks in the PGM
space, will you like, I know

302
00:16:26,600 --> 00:16:29,200
you've invested in the likes of
Impala as you mentioned and

303
00:16:29,360 --> 00:16:32,400
Amplatz of Alterra.
Now will you guys just play the

304
00:16:32,440 --> 00:16:36,560
the ATF, the metal physical at a
point in time or will you focus

305
00:16:36,560 --> 00:16:40,360
on the equities?
So we, we, we think about it as

306
00:16:40,440 --> 00:16:42,840
what, what, what has more
upside, what's the opportunity

307
00:16:42,840 --> 00:16:45,440
set right?
And if, if prices were go.

308
00:16:45,440 --> 00:16:48,080
So we, we think that from an
incentive price perspective,

309
00:16:48,080 --> 00:16:52,960
$2000 is what's needed for, for
PGMS for major new mine

310
00:16:52,960 --> 00:16:55,040
construction.
There's, there's one mine being

311
00:16:55,040 --> 00:16:58,520
constructed right now, but even
when that's at full capacity,

312
00:16:58,520 --> 00:17:01,640
that's only going to be about 5%
of the market and you'll have

313
00:17:01,640 --> 00:17:04,280
some come off.
So it's, it's, it's likely that,

314
00:17:04,280 --> 00:17:07,680
that, that we're flat.
So $2000 is really what it, what

315
00:17:07,680 --> 00:17:11,440
these companies need to
materially increase production.

316
00:17:11,720 --> 00:17:13,480
And that's a double from here,
right?

317
00:17:14,200 --> 00:17:18,839
But if prices go halfway there
to say, let's say 1500, these

318
00:17:18,839 --> 00:17:23,800
miners, Impala Volterra, they,
they have five to seven times up

319
00:17:23,839 --> 00:17:25,839
upside in, in, in that
environment.

320
00:17:25,839 --> 00:17:28,960
So prices don't have to go to
incentive price and we have a

321
00:17:28,960 --> 00:17:32,200
lot of optionality.
So right now we see a lot more

322
00:17:32,200 --> 00:17:34,240
upside in in the miners for
sure.

323
00:17:35,240 --> 00:17:37,400
I don't have a crack at pitching
a different one to you.

324
00:17:37,800 --> 00:17:40,320
And yeah, I want to know why you
don't own this, right?

325
00:17:40,320 --> 00:17:42,440
And disclosure, I don't, I don't
own this.

326
00:17:42,440 --> 00:17:44,240
So I'm pitching this and I don't
own it, by the way.

327
00:17:44,240 --> 00:17:45,360
So I don't know why I'm pitching
it.

328
00:17:45,360 --> 00:17:53,480
But if, if so, Zimplats is a
listed like ASX ticker, 87%

329
00:17:53,480 --> 00:17:56,840
owned by Impala.
The remaining 13% supposedly

330
00:17:56,840 --> 00:17:59,960
kind of quoted on, on the ASX,
but it's got tremendously kind

331
00:17:59,960 --> 00:18:01,760
of low, low float.
There's a few big shareholders

332
00:18:01,760 --> 00:18:05,840
that don't really change there.
However, their operations in

333
00:18:05,840 --> 00:18:10,240
Zimbabwe are amongst the lowest
cost mines of Impala and Impala

334
00:18:10,240 --> 00:18:13,280
needs the cash from those
operations upstream.

335
00:18:13,280 --> 00:18:15,720
So you can kind of bank on
whatever free cash flow that

336
00:18:15,720 --> 00:18:18,040
comes out of that being paid as
a dividend.

337
00:18:18,560 --> 00:18:21,040
Why not own Zimplats instead of
Impala?

338
00:18:23,360 --> 00:18:26,440
Well, we, we do via Impala as
you said.

339
00:18:28,600 --> 00:18:32,000
But when you talk to Impala and
you ask them about Zimplats,

340
00:18:32,000 --> 00:18:33,640
they, they say exactly what you
just said.

341
00:18:33,640 --> 00:18:36,840
If we could build more capacity
in Zimbabwe, we would.

342
00:18:37,680 --> 00:18:39,680
They really like the workforce
there.

343
00:18:39,680 --> 00:18:42,440
They actually like the, the
situation geopolitical.

344
00:18:42,600 --> 00:18:46,440
Also, what's really interesting
about Zimbabwe is it's all, it's

345
00:18:46,440 --> 00:18:50,360
all green energy there, right.
So from an ESG perspective, as

346
00:18:50,360 --> 00:18:52,840
they're trying to hit these
mandates, it's, it's very

347
00:18:52,840 --> 00:18:54,960
positive.
So they, they love Zimbabwe from

348
00:18:54,960 --> 00:18:57,760
a mining, mining perspective.
And if they could grow there,

349
00:18:58,120 --> 00:19:01,120
they could.
We'll have, we'd have to take a

350
00:19:01,120 --> 00:19:02,880
look at it.
Of course, we we do value it

351
00:19:02,880 --> 00:19:04,480
because we own it.
We own Impala.

352
00:19:04,760 --> 00:19:08,280
But I'm not sure to your point
on, on, on liquidity, if we

353
00:19:08,280 --> 00:19:11,160
could have a meaningful position
or not.

354
00:19:11,520 --> 00:19:13,000
Yeah.
Liquidity is is awful.

355
00:19:15,360 --> 00:19:19,000
Yeah, but but it's certainly a
great mind.

356
00:19:19,160 --> 00:19:22,560
Yeah, yeah.
One of the reasons the Zimplatts

357
00:19:22,720 --> 00:19:26,280
operations lower cost than
Impala's platinum mines in South

358
00:19:26,280 --> 00:19:30,040
Africa, they're not as deep,
they're only about 300 meters

359
00:19:30,040 --> 00:19:33,280
deep versus 1000 meters deep
like is typical in South Africa.

360
00:19:33,520 --> 00:19:36,520
But both of these still need
ground support JD, which means

361
00:19:36,520 --> 00:19:38,760
it's time for Derek Herds and
the ground support minute of the

362
00:19:38,760 --> 00:19:41,040
week.
How would you explain split sets

363
00:19:41,040 --> 00:19:44,120
for a four year old?
A lot of people haven't been

364
00:19:44,120 --> 00:19:45,880
exposed to ground sport, so
taking him.

365
00:19:46,120 --> 00:19:50,200
Yeah, you can't think of.
No idea.

366
00:19:50,320 --> 00:19:52,320
A split set.
It's a fairly simple product.

367
00:19:52,320 --> 00:19:54,960
Or you know, friction bolt, as
we call it in ground sport.

368
00:19:54,960 --> 00:19:58,760
So it's basically what we call
hot roll coil steel.

369
00:19:58,760 --> 00:20:02,200
So it's flat steel.
We buy in a coil and we roll it

370
00:20:02,200 --> 00:20:03,920
through the machine and we make
a tube.

371
00:20:03,920 --> 00:20:06,760
We take the flat steel and we
roll it into a tube, But it's

372
00:20:06,760 --> 00:20:08,640
not quite a tube.
It comes out like AC.

373
00:20:09,440 --> 00:20:12,680
So we make it into AC and we cut
it to length.

374
00:20:13,200 --> 00:20:16,680
And we Weld a ring, so we have a
wire ring that gets welded on

375
00:20:16,680 --> 00:20:19,320
the end and then goes off to be
galvanized.

376
00:20:19,320 --> 00:20:23,200
So we have molten zinc.
We dip this 2.4m bolt in, the

377
00:20:23,200 --> 00:20:25,200
molten zinc comes out all nice
and shiny.

378
00:20:25,480 --> 00:20:27,440
We pack it up, send it off to
the customer.

379
00:20:27,440 --> 00:20:31,480
So that's our friction bolt in a
four year old.

380
00:20:31,920 --> 00:20:34,720
And it's funny though because
it's a simple product, but

381
00:20:34,720 --> 00:20:38,160
behind that is actually there's
a lot of complexity and

382
00:20:38,160 --> 00:20:40,920
manufacturing knowledge.
There's obviously that machine.

383
00:20:40,920 --> 00:20:43,800
I was referring to the welding
because the world strength has

384
00:20:43,800 --> 00:20:46,560
to match the tube strength.
There's the performance of the

385
00:20:46,560 --> 00:20:48,600
product has to be right in terms
of grade.

386
00:20:48,840 --> 00:20:50,360
There's pull testing.
Let's talk about.

387
00:20:50,360 --> 00:20:52,960
So there's there's quite some
subtleties that go behind the

388
00:20:52,960 --> 00:20:55,960
product as well that, you know,
I could talk all day about if

389
00:20:55,960 --> 00:20:57,920
you wanted to.
Thanks Sandy.

390
00:20:57,920 --> 00:20:59,720
Grant support.
Why don't we talk about gold

391
00:20:59,920 --> 00:21:02,880
next?
I reckon you guys have that sort

392
00:21:02,880 --> 00:21:08,640
of you're of the view that gold
is money and you speak to it in

393
00:21:08,640 --> 00:21:12,280
in fascinating detail and some
of your presentations and I've

394
00:21:12,280 --> 00:21:15,560
heard Dave Ivan speak about it
too at at length.

395
00:21:15,560 --> 00:21:18,040
What what is the the capanning
view of gold to start?

396
00:21:20,080 --> 00:21:23,960
Gold spent money for thousands
and thousands of years and we

397
00:21:23,960 --> 00:21:28,240
think it likely will continue to
be or or or or will be going

398
00:21:28,240 --> 00:21:29,360
forward.
And there's some key

399
00:21:29,360 --> 00:21:33,240
characteristics why we why we
think that it's incredibly

400
00:21:33,240 --> 00:21:38,440
scarce, right?
It's owned by most central banks

401
00:21:38,440 --> 00:21:41,640
around the world and that's,
that's historically been the

402
00:21:41,640 --> 00:21:44,200
case.
It doesn't lose value like like

403
00:21:44,200 --> 00:21:47,840
a dollar or, or like a euro does
over time, right?

404
00:21:48,160 --> 00:21:51,200
It's incredibly hard to build a
mine and pull this out of the

405
00:21:51,200 --> 00:21:53,680
ground.
So supply is pretty supply grows

406
00:21:53,680 --> 00:21:57,680
1 to 2% every year and that's
been the case for 100 years.

407
00:21:58,040 --> 00:22:00,360
And so there's a lot of
characteristics that we that we

408
00:22:00,360 --> 00:22:03,000
think about it from a money
perspective.

409
00:22:03,400 --> 00:22:08,000
And it it's, you know, actually
for most of recent human

410
00:22:08,000 --> 00:22:11,480
history, and they're certainly
not the last, call it 55 years,

411
00:22:11,680 --> 00:22:13,760
we've actually been on a gold
standard, right?

412
00:22:14,080 --> 00:22:17,440
So it's not that long ago there
for, for a longer period of

413
00:22:17,440 --> 00:22:20,080
time.
Even in the United States, you

414
00:22:20,080 --> 00:22:22,360
know, over its history, it was a
gold standard.

415
00:22:22,560 --> 00:22:24,000
People seem to forget that,
right?

416
00:22:24,600 --> 00:22:27,040
So we, we don't make the
argument that we're going back

417
00:22:27,040 --> 00:22:29,800
there, but the market can take
the price there itself.

418
00:22:30,480 --> 00:22:36,160
And actually when we, when we
look at going back to say a 25%

419
00:22:36,840 --> 00:22:40,560
backing of, of, of the currency,
that's one scenario that we use

420
00:22:40,560 --> 00:22:44,880
that, that, that was what was in
place since 1944 to 1971.

421
00:22:45,240 --> 00:22:48,200
So the market could possibly
could do that itself.

422
00:22:48,200 --> 00:22:53,160
It did in the 1970s and 1980s,
actually, the, the spot price

423
00:22:53,160 --> 00:22:56,840
was above the money price of at,
at 100% backing, which was

424
00:22:56,840 --> 00:22:58,360
interesting for a short period
of time.

425
00:22:58,920 --> 00:23:02,560
So, you know, as, as central
banks continue to print money,

426
00:23:02,560 --> 00:23:05,520
as debt continues, continues to
grow around the world.

427
00:23:05,840 --> 00:23:10,840
I mean, it's, it's, it's ironic,
maybe not necessarily funny, but

428
00:23:11,040 --> 00:23:13,960
for all the talk about the US
debt being under control or

429
00:23:13,960 --> 00:23:16,760
getting under control through,
through DOGE and, and some of

430
00:23:16,760 --> 00:23:18,920
the policies, I mean, they've,
they've basically thrown in the

431
00:23:18,920 --> 00:23:23,040
towel, it sounds like, right.
So we, you know, as debt

432
00:23:23,040 --> 00:23:25,360
continues to, to go, they're
going to have to print, print

433
00:23:25,360 --> 00:23:27,680
their way out of it.
And and and Gold is a store of

434
00:23:27,680 --> 00:23:29,640
value and it has has been for a
long time.

435
00:23:30,320 --> 00:23:32,640
You've got this punchy line in
one of the presentations.

436
00:23:32,640 --> 00:23:36,680
Paper money eventually returns
to its intrinsic value 0, which

437
00:23:36,680 --> 00:23:40,440
is a bit kind of ominous.
But factoring that into what you

438
00:23:40,440 --> 00:23:43,840
said earlier about how you value
these, these mining companies,

439
00:23:44,160 --> 00:23:47,240
how do you think about the, the
prices or perhaps a set of

440
00:23:47,240 --> 00:23:49,760
prices that you you flash
through these models that you

441
00:23:49,760 --> 00:23:52,840
do?
We, we think about it in, in

442
00:23:52,840 --> 00:23:54,480
scenarios.
So we like to do scenario

443
00:23:54,480 --> 00:23:57,560
analysis and we find this very
useful in all of our industries,

444
00:23:57,560 --> 00:23:59,200
right.
So we, we, we tend to look at

445
00:23:59,200 --> 00:24:02,040
multiple metrics when we're,
when we're valuing companies and

446
00:24:02,040 --> 00:24:04,320
that's certainly the case when
we're value mining companies.

447
00:24:05,080 --> 00:24:07,400
And some of the key prices we
would, we would use, we would

448
00:24:07,400 --> 00:24:11,120
use the incentive price of of
around $2000.

449
00:24:11,280 --> 00:24:15,800
That looks like it's possibly
going to increase soon.

450
00:24:16,880 --> 00:24:19,000
But if you look at one of the
reasons why we're hesitant to

451
00:24:19,000 --> 00:24:21,520
increase that incentive price
even with all the CapEx

452
00:24:21,680 --> 00:24:25,000
escalation around the world the
last few years is most mining

453
00:24:25,000 --> 00:24:28,320
companies still use under that
when they're when they're

454
00:24:28,320 --> 00:24:31,360
listing reserves and research
resources from an economic

455
00:24:31,360 --> 00:24:33,560
perspective.
So we're watching that, that

456
00:24:33,560 --> 00:24:35,160
would be that.
So that's one key input.

457
00:24:35,160 --> 00:24:38,400
One scenario in our model would
be incentive price of $2000.

458
00:24:38,760 --> 00:24:43,680
We would also use a money
scenario if we happen to go back

459
00:24:43,680 --> 00:24:47,320
or the market takes us to a 25%
backing of of of the gold price

460
00:24:47,320 --> 00:24:50,240
that that's a scenario.
We also look at spot price.

461
00:24:50,240 --> 00:24:52,040
What if the market's actually
correct today?

462
00:24:52,320 --> 00:24:55,520
How do we do?
And as you're probably aware,

463
00:24:56,040 --> 00:25:00,240
even with cost escalations all
in sustaining costs going up the

464
00:25:00,240 --> 00:25:02,680
way right now, the, the
difference between all in

465
00:25:02,680 --> 00:25:05,320
sustaining costs and the market
price is, is the greatest

466
00:25:05,320 --> 00:25:07,640
September been.
So the gold miners should be

467
00:25:07,640 --> 00:25:08,960
doing really, really well right
now.

468
00:25:08,960 --> 00:25:13,200
And, and they are and most of
them assuming gold prices stay,

469
00:25:13,200 --> 00:25:16,560
stay where they are or even move
lower, have a lot of value at at

470
00:25:16,560 --> 00:25:18,640
the spot price.
So we also really, really like

471
00:25:18,640 --> 00:25:21,400
them for that perspective.
We also look at a bear case.

472
00:25:21,960 --> 00:25:26,880
We look at the, the a scenario
where if the gold prices reduce

473
00:25:27,040 --> 00:25:30,800
or falls dramatically, how do we
do in that scenario too.

474
00:25:30,800 --> 00:25:35,560
So those are the key scenarios.
And if we look at like how, how

475
00:25:35,560 --> 00:25:39,240
quickly the gold prices showed
up in, in recent months and you,

476
00:25:39,320 --> 00:25:42,680
you look at the, the various
buyers in the market, you've

477
00:25:42,680 --> 00:25:45,600
clearly got the biggest one
being central banks.

478
00:25:45,600 --> 00:25:49,080
Central banks across the world
have been buying gold to the, to

479
00:25:49,080 --> 00:25:51,000
the hilt.
You know, whether it's China or

480
00:25:51,000 --> 00:25:55,440
Russia or whoever in, you know,
really since the, the Russian

481
00:25:55,440 --> 00:25:59,760
and Ukraine war kind of started.
But if you look beyond that at

482
00:25:59,760 --> 00:26:03,200
the the Atfs and the other
sources of gold buying about

483
00:26:03,200 --> 00:26:05,960
that because they they've not
really been massive and that's

484
00:26:05,960 --> 00:26:09,520
sort of reflected in the the
equities they have appreciated,

485
00:26:09,520 --> 00:26:12,480
but not to the same extent.
Perhaps some more bullish gold

486
00:26:12,480 --> 00:26:14,800
investors might have thought,
How do you think about the sort

487
00:26:14,800 --> 00:26:17,360
of broadness of the rally in
gold?

488
00:26:19,120 --> 00:26:21,040
We think that's opportunity
going forward.

489
00:26:21,040 --> 00:26:25,360
I mean, unfortunately the West,
the retail investors you know,

490
00:26:25,400 --> 00:26:28,280
tend to be late to it, right.
So we, we would think that

491
00:26:28,600 --> 00:26:32,160
that's, that's opportunity going
forward when it, when it comes

492
00:26:32,160 --> 00:26:36,480
to the, the miners, we, we think
that the mining companies in

493
00:26:36,480 --> 00:26:40,240
general overall in the gold
mining space are much, are much

494
00:26:40,240 --> 00:26:44,200
better managed now than they
were 10 or 15 years ago.

495
00:26:44,480 --> 00:26:49,120
And we think that there's a lot
of investor ache and they were

496
00:26:49,120 --> 00:26:52,320
burned by many management teams
throughout the sector.

497
00:26:52,560 --> 00:26:55,720
We think that's largely cleaned
up, especially at the companies

498
00:26:55,720 --> 00:26:57,960
that we own.
I'm happy to go in, go into the

499
00:26:57,960 --> 00:27:02,400
reasons why, but I, I think that
investors are skeptical if

500
00:27:02,400 --> 00:27:04,880
that's the case or not.
And I think they, what the gold

501
00:27:04,880 --> 00:27:08,080
companies specifically should do
is they should keep earning

502
00:27:08,080 --> 00:27:11,160
money at, at, at these levels
and buying back stock and

503
00:27:11,160 --> 00:27:13,400
showcasing that that, you know,
this is for real.

504
00:27:13,400 --> 00:27:16,240
They're not going to go out and
and make a bad capital

505
00:27:16,240 --> 00:27:20,760
allocation decisions and and
they're, they're not going to

506
00:27:21,040 --> 00:27:24,400
lever up right now, right,
because a downturn always comes.

507
00:27:24,400 --> 00:27:28,040
And so they're gonna can, if
they have that excess cash, you

508
00:27:28,040 --> 00:27:30,200
know, they can, they can
reinvest or that they can pay

509
00:27:30,200 --> 00:27:32,360
dividends.
But I, I think that that will

510
00:27:32,360 --> 00:27:35,400
that sentiment will change over
time as as these companies keep

511
00:27:35,400 --> 00:27:39,280
doing well, just wait there's.
Still, there's still duration

512
00:27:39,280 --> 00:27:41,240
left in this gold market.
You never know, they might.

513
00:27:42,080 --> 00:27:43,240
They might let you down
eventually.

514
00:27:44,800 --> 00:27:49,560
You know, they, they might
let's, let's use Newmont as as

515
00:27:49,560 --> 00:27:52,120
an example.
You know, Tom Palmer at, at

516
00:27:52,120 --> 00:27:56,160
Newmont, I mean we think he's a
very good CEO.

517
00:27:56,160 --> 00:27:58,160
He's got an operational
background.

518
00:27:58,440 --> 00:28:02,000
He's a, he's got a lot of
incentives, long term incentives

519
00:28:02,000 --> 00:28:03,680
in his comp, which we really
like.

520
00:28:04,000 --> 00:28:06,840
They've been after by active
buyers of the stock over the

521
00:28:06,840 --> 00:28:09,560
last year and a half very
opportunistically.

522
00:28:09,960 --> 00:28:12,760
They they purchased New Crest.
New Crest was our largest

523
00:28:12,760 --> 00:28:15,000
holding and we know it was an
Australian company.

524
00:28:15,000 --> 00:28:17,360
We thought that was a great
company, a lot of assets very

525
00:28:17,360 --> 00:28:21,800
undervalued.
And while we were scorned or you

526
00:28:21,800 --> 00:28:25,200
know, upset that Newmont took it
at the price they did, it was a

527
00:28:25,200 --> 00:28:28,240
great deal for Newmont and he he
really spearheaded that.

528
00:28:28,360 --> 00:28:33,120
So we, we think that Newmont has
increased its value a lot over

529
00:28:33,120 --> 00:28:36,000
the last few years through a
couple of key acquisitions,

530
00:28:36,000 --> 00:28:39,200
Goldcorp and then New Crest.
And what I really, really like

531
00:28:39,200 --> 00:28:43,480
about the team at, at Newmont
now I went on a tour.

532
00:28:43,480 --> 00:28:46,280
So they're, they're mine in
Mexico called Penasquito last

533
00:28:46,280 --> 00:28:50,840
year and this was at the, this
is in February of 2024.

534
00:28:50,840 --> 00:28:53,560
And if you pull up the charts,
the, the, the gold miners were

535
00:28:53,560 --> 00:28:57,560
pretty much at their lows.
At least Newmont was a private

536
00:28:57,640 --> 00:29:02,360
since 2000, early 16.
And everyone was really, really

537
00:29:02,360 --> 00:29:04,680
upset.
It was, it was not a very well

538
00:29:04,680 --> 00:29:06,840
attended.
Let's just say there were five

539
00:29:06,840 --> 00:29:09,480
investors on this, on this mine
tour of the biggest gold mining

540
00:29:09,480 --> 00:29:11,800
company in the world.
And I think they were expecting

541
00:29:11,800 --> 00:29:14,240
a lot more.
But Tom Palmer and the whole

542
00:29:14,240 --> 00:29:16,280
C-Suite was there.
And it was interesting.

543
00:29:16,280 --> 00:29:20,040
We were doing a tour of, of the
mine and we had, we were in a

544
00:29:20,040 --> 00:29:22,360
conference room, right?
And they had all the pictures up

545
00:29:22,360 --> 00:29:24,080
of what they were going to do to
this.

546
00:29:24,360 --> 00:29:26,920
They're, they're comparing it to
their Newmont mines.

547
00:29:27,400 --> 00:29:33,560
And they were also making sure,
sorry, they were also making

548
00:29:33,560 --> 00:29:35,560
sure that everything was
operating well.

549
00:29:35,560 --> 00:29:38,760
But what I loved about it was as
the mining manager was

550
00:29:38,760 --> 00:29:41,480
describing, Tom Palmer actually
took over, right?

551
00:29:41,480 --> 00:29:45,120
He explained in detail for one
hour all details of the

552
00:29:45,120 --> 00:29:48,360
operation, what they were going
to do to increase efficiency at

553
00:29:48,360 --> 00:29:51,040
that mine, right.
So he is dialed in operation

554
00:29:51,040 --> 00:29:54,320
unlike any big mining CEO I've
I've seen before.

555
00:29:54,320 --> 00:29:58,840
So I was, I was very impressed
with them and we think that

556
00:29:59,880 --> 00:30:02,880
they're going to keep going well
and they they did.

557
00:30:02,960 --> 00:30:07,600
A, you know, divestment program
on the back of the new cresting

558
00:30:07,920 --> 00:30:11,200
you sort of say that favorably
in terms of allocating capital,

559
00:30:11,240 --> 00:30:14,320
understanding the assets that
will meet the grade for them

560
00:30:16,400 --> 00:30:17,680
it's.
It's always interesting and you,

561
00:30:17,680 --> 00:30:19,880
you can make a lot of money.
We, we, we joke about this

562
00:30:19,880 --> 00:30:23,560
internally, Elisa, our Co CIO
and Dave Iben, our CIO.

563
00:30:23,840 --> 00:30:25,720
They, they both know mining very
well too.

564
00:30:25,960 --> 00:30:28,320
You can make a lot of money
buying from the majors, right?

565
00:30:28,600 --> 00:30:30,400
The, the one Dean certainly
have.

566
00:30:30,960 --> 00:30:34,280
There's examples of companies in
Canada that have that bought

567
00:30:34,280 --> 00:30:38,200
from Barrick in Newmont coming
out of the, you know, 20/14/15

568
00:30:38,200 --> 00:30:40,520
when they were 4 sellers due to
taking on so much debt.

569
00:30:40,520 --> 00:30:45,320
So you can certainly buy great
minds from, from the big guys.

570
00:30:45,520 --> 00:30:51,160
In this case, Newmont was almost
got so big that selling some of

571
00:30:51,160 --> 00:30:55,000
these smaller assets made sense.
Even though there's a company in

572
00:30:55,000 --> 00:30:58,280
Australia which got away from
us, but I really liked it,

573
00:30:58,280 --> 00:31:00,920
talked a lot to their
management, great land gold.

574
00:31:01,240 --> 00:31:04,120
I think that they've got, you
know, great asset from from

575
00:31:04,120 --> 00:31:07,560
Newmont and they'll they'll
likely do very, very well.

576
00:31:07,560 --> 00:31:10,360
So in a perfect world they
wouldn't have sold them.

577
00:31:10,360 --> 00:31:13,160
But I understand from Newmont's
perspective that they were just

578
00:31:13,160 --> 00:31:16,160
almost too big and and they had
to focus on their key assets.

579
00:31:17,680 --> 00:31:20,840
If if you look down the the
market capitalizations of these

580
00:31:20,880 --> 00:31:22,680
Goldies, how, how far down will
you play?

581
00:31:22,720 --> 00:31:25,840
I know you guys in the past have
mentioned quite smaller

582
00:31:25,840 --> 00:31:29,280
companies, but obviously you
dial up the the margin of safety

583
00:31:29,280 --> 00:31:31,920
that you need.
Exactly.

584
00:31:31,920 --> 00:31:35,360
We'll go down to very small
companies that have undeveloped

585
00:31:36,480 --> 00:31:39,520
deposits around the globe.
And to your point, while the

586
00:31:39,520 --> 00:31:42,840
margin of safety is, is much
higher, So if we're investing in

587
00:31:43,080 --> 00:31:46,640
Newmont, we need about a 30%
margin of safety, right.

588
00:31:46,800 --> 00:31:48,760
But if we're going to invest in
one of these undeveloped

589
00:31:48,760 --> 00:31:53,880
companies, we need a 70 to 80%
margin of safety before we get

590
00:31:53,880 --> 00:31:56,720
interested.
But even when we apply that we

591
00:31:56,720 --> 00:31:59,920
see multiples upside on some of
these, right.

592
00:32:00,400 --> 00:32:02,320
You know, we can get we can get
more into it.

593
00:32:02,320 --> 00:32:05,640
But one of them is Seabridge,
which is in Canada.

594
00:32:05,640 --> 00:32:09,480
They own a large undeveloped
deposit called KSM copper, gold

595
00:32:09,920 --> 00:32:12,560
or gold, copper depending upon
how you look at it.

596
00:32:12,840 --> 00:32:16,920
And this is a massive, massive
deposit, right.

597
00:32:16,920 --> 00:32:19,840
And if we're going to get to
some of the projections that

598
00:32:20,240 --> 00:32:23,960
some out there on, on copper, on
copper growth over the next 10

599
00:32:23,960 --> 00:32:27,440
or 15 years, these deposits will
have to be built.

600
00:32:27,440 --> 00:32:29,560
This is one of the largest
undeveloped deposits in the

601
00:32:29,560 --> 00:32:32,200
world.
So we we really like it.

602
00:32:32,200 --> 00:32:33,600
We've just got a great
management team.

603
00:32:33,880 --> 00:32:37,640
The other key metric I'll I'll
point out that makes this again

604
00:32:37,640 --> 00:32:39,400
a bit different.
We look at multiple metrics.

605
00:32:39,400 --> 00:32:43,240
So when we're grading management
teams, one of the, one of the

606
00:32:43,240 --> 00:32:46,120
metrics we like to look at is
reserves and resources per

607
00:32:46,120 --> 00:32:48,480
share.
How are they trending over time?

608
00:32:48,680 --> 00:32:51,240
So many of these small
undeveloped companies just

609
00:32:51,240 --> 00:32:54,920
dilute and dilute, dilute to pay
themselves and you they, they

610
00:32:54,920 --> 00:32:57,560
really destroy a lot of value.
So there's so many cases of

611
00:32:57,560 --> 00:33:00,800
that.
And Seabridge is, is almost the

612
00:33:00,800 --> 00:33:03,600
opposite.
The, the management team is

613
00:33:03,600 --> 00:33:06,160
invested alongside us.
They, they think about it as a

614
00:33:06,160 --> 00:33:09,840
business like, like we do, they
look at reserves per share, oz

615
00:33:09,840 --> 00:33:11,880
per share.
So when they're making capital

616
00:33:11,880 --> 00:33:14,560
allocation decisions, they're,
they're, they're thinking,

617
00:33:14,560 --> 00:33:16,600
they're thinking about it from
that perspective.

618
00:33:16,920 --> 00:33:19,400
And we think that that's, that's
very important.

619
00:33:19,840 --> 00:33:23,640
Again, Newmont, Tom Palmer in
his career, he's grown reserves

620
00:33:23,640 --> 00:33:26,240
and oz per share.
It's not the only metric to look

621
00:33:26,240 --> 00:33:28,960
at, but it is a key indicator
that that we like to focus on

622
00:33:28,960 --> 00:33:32,720
when when we're judging these
teams and, and Seabridge has has

623
00:33:32,720 --> 00:33:36,360
done a great job with that.
With these sort of smaller

624
00:33:36,360 --> 00:33:39,400
companies as well, have you got
a strong view on the ones that

625
00:33:39,400 --> 00:33:43,360
need to finance a build, whether
they do that predominantly

626
00:33:43,360 --> 00:33:46,040
through equity, debt, equity
kind of mixed?

627
00:33:46,040 --> 00:33:50,080
Do you have strong views on the
use of debt in these kind of

628
00:33:50,080 --> 00:33:54,600
single or smaller companies?
It's hard to say and it depends

629
00:33:54,600 --> 00:33:58,120
a lot on the situation, right.
So in our in our model, we're

630
00:33:58,120 --> 00:34:00,520
talking about Seabridge and
they're pretty outspoken about

631
00:34:00,520 --> 00:34:02,240
this.
They expect to form a joint

632
00:34:02,240 --> 00:34:04,120
venture agreement with somebody,
right.

633
00:34:04,400 --> 00:34:06,600
So that we factor that in into
our model.

634
00:34:06,600 --> 00:34:09,639
So net we would think that the
company ends up retaining around

635
00:34:09,639 --> 00:34:14,600
30% of the mine going forward
and some of the buyout that they

636
00:34:14,600 --> 00:34:17,800
that the other miner of the
large miner would where the buy

637
00:34:17,800 --> 00:34:21,199
in I should say would contribute
to Seabridge's portion

638
00:34:21,199 --> 00:34:23,360
proportion of the of the CapEx,
right.

639
00:34:23,679 --> 00:34:26,000
So that's one way we would think
about it with, with, with, with

640
00:34:26,000 --> 00:34:28,360
a small company.
But if you're looking at an

641
00:34:28,360 --> 00:34:31,760
Artemis, which which we've owned
in the past that has done really

642
00:34:31,760 --> 00:34:34,760
well and built the Blackwater
mine in Canada.

643
00:34:35,960 --> 00:34:37,520
They they did it very, very
sensibly.

644
00:34:37,520 --> 00:34:39,480
They made a couple of of key
decisions.

645
00:34:39,480 --> 00:34:41,400
They partnered with the great
streaming company Wheaton

646
00:34:41,400 --> 00:34:43,639
Precious Metals.
So who we have a lot of respect

647
00:34:43,639 --> 00:34:46,760
with as a key, key part of it,
it's nice.

648
00:34:46,760 --> 00:34:49,719
One of mine as as you're
familiar with has, has

649
00:34:49,760 --> 00:34:52,800
byproducts, right.
So in that case, silver was a

650
00:34:52,960 --> 00:34:55,760
perfect percentage of the mine
to, to, to stream out to wheat.

651
00:34:55,760 --> 00:34:59,720
And so they're a part of it.
They, they did call on debt, but

652
00:34:59,720 --> 00:35:02,200
they didn't take on too much
debt and they also financed

653
00:35:02,200 --> 00:35:04,840
some, some of the equity.
So we, we think a, a, a healthy

654
00:35:04,840 --> 00:35:07,240
mix in that case makes it makes
a lot of sense.

655
00:35:07,640 --> 00:35:10,880
The other key thing that they
did and Steven Dean, the CEO of

656
00:35:11,360 --> 00:35:14,240
Artemis is he's done it now a
couple of times.

657
00:35:14,240 --> 00:35:19,480
So he's a very successful CEO.
He always says Australians are

658
00:35:19,480 --> 00:35:21,760
better minors than North
Americans and he is Australian.

659
00:35:22,080 --> 00:35:26,240
So I'll point that out.
But and one of the key things

660
00:35:26,240 --> 00:35:30,080
that he described is that in
North America, everyone wants to

661
00:35:30,080 --> 00:35:33,000
build a big mine, right?
And he's, he's like, why not

662
00:35:33,200 --> 00:35:37,280
finance a starter or a smaller
project and use some of the cash

663
00:35:37,280 --> 00:35:40,040
flow to then build in phase two
and phase three.

664
00:35:40,320 --> 00:35:42,920
So that's, that's what he's done
very successfully a couple times

665
00:35:42,920 --> 00:35:46,600
in his career in Canada.
But the other important thing

666
00:35:46,600 --> 00:35:49,000
that he's done and now you're
seeing more companies do it, is

667
00:35:49,000 --> 00:35:52,640
he did fix price contracts for
construction.

668
00:35:52,960 --> 00:35:56,000
Now you pay a little more for
those upfront, but any cost

669
00:35:56,000 --> 00:36:00,080
escalations that happened for
any reason are a lot of that's

670
00:36:00,080 --> 00:36:03,360
formed by the contractor and in
an inflationary environment that

671
00:36:03,360 --> 00:36:06,760
proved to be a very smart move
on on his part.

672
00:36:06,760 --> 00:36:09,800
So I don't know if that answers
your question though.

673
00:36:11,320 --> 00:36:14,200
I know you mentioned your, you
think that the copper, sorry,

674
00:36:14,200 --> 00:36:17,800
the gold miners are going to be
disciplined with the with the

675
00:36:17,800 --> 00:36:21,080
capital allocation.
Do you not get the sense that a

676
00:36:21,080 --> 00:36:23,680
lot of them are pretty hungry
for copper assets though?

677
00:36:23,920 --> 00:36:27,120
And is that not a fear that you
have that because copper assets

678
00:36:27,120 --> 00:36:29,880
are highly sought after, they
might overpay for for them?

679
00:36:31,840 --> 00:36:35,160
Yes, it's a we, we, we go to a
conference every year and and

680
00:36:35,600 --> 00:36:39,440
until this year for you know,
the last three or four years,

681
00:36:39,480 --> 00:36:45,120
95% of the 90 to 95% of the
mining CE OS and CI OS thought

682
00:36:45,120 --> 00:36:47,440
copper would be the best
performing medal for the next 5

683
00:36:47,440 --> 00:36:49,960
or 10 years.
Now that switched to about 60%

684
00:36:49,960 --> 00:36:53,240
gold this year.
So it's funny, even smart people

685
00:36:53,480 --> 00:36:56,160
tend to follow the trend, right,
which is always interesting.

686
00:36:56,840 --> 00:37:00,280
But when everyone liked copper,
including all the gold mining CE

687
00:37:00,280 --> 00:37:04,520
OS we were, we were a bit
skeptical and volatility again

688
00:37:04,520 --> 00:37:06,520
is our friend.
So we were actually selling

689
00:37:06,520 --> 00:37:08,280
down.
We had a lot of copper exposure

690
00:37:08,280 --> 00:37:10,120
going it going in into that
view.

691
00:37:10,440 --> 00:37:12,240
We, we owned I've and home
mines.

692
00:37:12,240 --> 00:37:14,440
We owned Turquoise Hill, which
was Bopper, Rio Tinto.

693
00:37:14,440 --> 00:37:16,160
Those are two of our largest
positions.

694
00:37:16,360 --> 00:37:20,360
We got completely out of them as
everyone got pulled up on copper

695
00:37:20,960 --> 00:37:24,680
and was paying for copper.
And, but going back to your

696
00:37:24,680 --> 00:37:29,360
question, it's interesting when
you ask that to Mark Bristow,

697
00:37:29,360 --> 00:37:33,320
the CEO of Barrick, who
certainly hums that tune that

698
00:37:33,320 --> 00:37:37,240
you're suggesting, he says that,
you know, almost going forward

699
00:37:37,240 --> 00:37:40,960
to find a lot of gold, to find
big gold mines, they, they have

700
00:37:40,960 --> 00:37:42,960
to be in copper gold porphyries,
right?

701
00:37:43,280 --> 00:37:45,920
So he's saying going forward
the, you know, the, the, the

702
00:37:45,920 --> 00:37:50,040
large scale gold only deposits
have been found and you have to

703
00:37:50,040 --> 00:37:51,520
go for these copper gold
porphyries.

704
00:37:51,520 --> 00:37:55,160
So that's one reason he'll say
that he's going after it's not

705
00:37:55,160 --> 00:37:58,120
just for the copper.
He's saying that that's that's

706
00:37:58,120 --> 00:38:00,200
where the that's where the big
gold will be too.

707
00:38:00,520 --> 00:38:04,480
But it is it is a little
concerning that all of the major

708
00:38:04,480 --> 00:38:07,920
gold companies want more copper,
right That, you know, Newton

709
00:38:08,240 --> 00:38:09,400
Newmont is saying the same
thing.

710
00:38:09,400 --> 00:38:11,800
One of the reasons why they they
bought new crests for sure.

711
00:38:13,680 --> 00:38:14,560
It's fascinating.
I think some.

712
00:38:14,560 --> 00:38:17,080
Of them might be a bit shackled
in or there might be sort of

713
00:38:17,080 --> 00:38:20,640
institutional issues if they go
down that path given the the GDX

714
00:38:20,640 --> 00:38:24,480
or these these sort of indexes
that they're in that require

715
00:38:24,480 --> 00:38:29,280
certain amounts of gold being as
a big part of that the revenue

716
00:38:29,280 --> 00:38:31,640
isn't it funny how like.
How narrative changes as well,

717
00:38:31,640 --> 00:38:35,720
like you go back, I don't know,
12-12 months and it's like the

718
00:38:35,720 --> 00:38:37,960
narrative is why do we, why do
we mine gold?

719
00:38:38,040 --> 00:38:39,440
You know, it's just this bloody
metal rock.

720
00:38:39,440 --> 00:38:41,160
We spent all this money, we dig
it out, we put it in the thing.

721
00:38:41,160 --> 00:38:43,840
So there was this like the
narrative mentality around

722
00:38:43,960 --> 00:38:47,600
wanting to, to have a, a
usefulness to your actual

723
00:38:47,600 --> 00:38:51,000
purpose and mining, like as a
mining company, we need to add

724
00:38:51,000 --> 00:38:52,960
copper to the mix and then we're
attractive and people can

725
00:38:52,960 --> 00:38:55,080
understand why you would want to
own us.

726
00:38:55,080 --> 00:38:58,440
And we fit these ESG criteria
instead of fitting the GDX,

727
00:38:58,440 --> 00:39:00,320
right?
The narrative changes so fast

728
00:39:00,320 --> 00:39:03,120
all of a sudden.
Well, now values sound hard

729
00:39:03,200 --> 00:39:07,440
money.
No, it's, it certainly does.

730
00:39:07,440 --> 00:39:10,240
And we like to take advantage of
of that volatility.

731
00:39:10,240 --> 00:39:13,520
So as everyone was not looking
for gold and unhappy that

732
00:39:13,520 --> 00:39:15,760
they're mining gold, the gold
miners were very inexpensive,

733
00:39:15,920 --> 00:39:17,600
right?
And we were buyers of that and,

734
00:39:17,600 --> 00:39:20,320
and selling the copper miners.
And that's almost flipped on its

735
00:39:20,320 --> 00:39:21,840
head in the in the past year,
right?

736
00:39:21,840 --> 00:39:25,240
So the gold miners have
underperformed in some cases,

737
00:39:25,240 --> 00:39:28,200
but not, not all of them, right?
And now suddenly the copper

738
00:39:28,200 --> 00:39:29,920
miners are a lot more
interesting than they were.

739
00:39:29,920 --> 00:39:32,320
So, you know, we're, we're more
interested in, in, in some of

740
00:39:32,320 --> 00:39:35,600
those again.
If we, if we switch tack to

741
00:39:35,600 --> 00:39:38,640
another commodity that you
mentioned earlier, uranium, you

742
00:39:38,640 --> 00:39:40,840
guys came out with a with a
paper on this like you said

743
00:39:40,840 --> 00:39:44,040
seven or eight years ago, I
think 2017 or 18, is that

744
00:39:44,040 --> 00:39:46,480
remarkably early?
And it was it was fascinating to

745
00:39:47,000 --> 00:39:49,680
say the work you guys did and
then subsequently write about it

746
00:39:49,680 --> 00:39:53,040
again in the years later.
How do you see uranium here

747
00:39:53,040 --> 00:39:58,120
today after the the sort of tear
higher and then 30 to 40% peel

748
00:39:58,120 --> 00:40:02,240
off while the equities got you
know wiped out sort of sixty

749
00:40:02,240 --> 00:40:06,400
7080%?
Yeah, but we certainly like it a

750
00:40:06,400 --> 00:40:09,160
lot more than we did when it was
about $100 a pound.

751
00:40:09,160 --> 00:40:12,440
So as you said, we were, we were
buying in the mid 20s and and

752
00:40:12,440 --> 00:40:15,760
did did quite well as as
everyone got excited on it and

753
00:40:15,760 --> 00:40:19,120
and nuclear energy moved, moved
to the forefront as as we, we

754
00:40:19,120 --> 00:40:22,720
think it should be right.
And now that everything has come

755
00:40:22,720 --> 00:40:25,800
off a little bit, we certainly
like them more and we've we've

756
00:40:25,800 --> 00:40:29,120
been adding to you know or re
adding them to the portfolio.

757
00:40:29,800 --> 00:40:33,560
So you are seeing more supply
coming, but not a huge amount

758
00:40:33,880 --> 00:40:37,920
and the supply demand going out
10 years is very, very

759
00:40:37,920 --> 00:40:40,920
favorable.
So we think that prices are

760
00:40:40,920 --> 00:40:43,560
likely to move higher, but we
certainly don't like it uranium

761
00:40:43,560 --> 00:40:46,320
as much as we did when it was
$25 a pound.

762
00:40:47,800 --> 00:40:50,040
So so you how?
Do you filter out what what you

763
00:40:50,040 --> 00:40:54,920
do like and what you don't like?
Well, we pay attention of course

764
00:40:54,920 --> 00:40:58,040
to the incentive price, right,
for all of these metals.

765
00:40:58,040 --> 00:41:01,720
So you know, where is the metal
trading versus the incentive

766
00:41:01,720 --> 00:41:03,560
price.
So we like to buy when it's well

767
00:41:03,560 --> 00:41:06,720
below that because we think over
time history has been a guide

768
00:41:06,720 --> 00:41:09,440
that metals or, or commodities
move towards their incentive

769
00:41:09,440 --> 00:41:11,840
price.
So when oil's in the 30s or in

770
00:41:11,840 --> 00:41:15,120
the 20s, we, we tend to like oil
companies a lot.

771
00:41:15,120 --> 00:41:20,200
Then when natural gas is, you
know, a dollar $1.50, you know,

772
00:41:20,760 --> 00:41:24,360
we, we, we really like it when,
when platinum's $1000 and we

773
00:41:24,360 --> 00:41:26,880
think the incentive price is
2000, we, we really like it.

774
00:41:26,880 --> 00:41:29,000
So that's, that's how we filter
out ideas.

775
00:41:29,240 --> 00:41:32,040
Lithium is lithium is when we
haven't spoken about yet.

776
00:41:32,920 --> 00:41:37,480
And certainly when lithium was
50,000 to $75,000, we, we didn't

777
00:41:37,480 --> 00:41:39,840
show much interest when we
thought the incentive price was

778
00:41:39,840 --> 00:41:43,920
materially lower than that.
But now with it around 10,000,

779
00:41:43,920 --> 00:41:45,320
it's certainly a lot more
interesting.

780
00:41:46,440 --> 00:41:48,360
How do you think?
About selling, it's the sort of

781
00:41:48,360 --> 00:41:50,320
question that keeps ringing in
the back of my mind.

782
00:41:50,320 --> 00:41:52,960
You, you're so disciplined.
Is it you guys sort of sitting

783
00:41:52,960 --> 00:41:55,680
around the room and having to
remind each other when, when you

784
00:41:55,680 --> 00:41:58,040
see the the sort of narrative on
the front page of the newspaper,

785
00:41:58,040 --> 00:42:00,600
that's time to go it?
Or is it just sort of so

786
00:42:00,600 --> 00:42:04,640
ingrained in each of you?
Well, we, we stick to our models

787
00:42:04,640 --> 00:42:07,320
when it comes to this.
So, you know, just a

788
00:42:07,320 --> 00:42:10,760
hypothetical example, if our, if
our, you know, using, using a

789
00:42:11,520 --> 00:42:14,000
new Mon as an example, I mean,
this isn't, this could be any

790
00:42:14,000 --> 00:42:16,960
company we'll call company A.
If our, if our theoretical value

791
00:42:16,960 --> 00:42:21,400
is let's say $100, right?
And, and to invest in, in this

792
00:42:21,400 --> 00:42:26,760
company, we require a 40% margin
of safety, that would mean that

793
00:42:26,760 --> 00:42:29,360
anything below 60 we would get
interested, right.

794
00:42:29,600 --> 00:42:34,000
So if the stock is 30 and it
goes to 20, we would all

795
00:42:34,000 --> 00:42:37,440
fundamentals remain intact and
our, and our, our value is still

796
00:42:37,440 --> 00:42:41,480
60 risk adjusted value still 60.
We'll like it more if it moves

797
00:42:41,480 --> 00:42:45,120
from, you know, 30 closer to 50.
And, and we'll, we'll like it a

798
00:42:45,120 --> 00:42:47,040
lot less and we'll be selling
out.

799
00:42:47,040 --> 00:42:50,040
So we, so we stick to our models
when it comes to selling and,

800
00:42:50,080 --> 00:42:52,040
and also adding.
And I think that that's one of

801
00:42:52,040 --> 00:42:55,200
the hallmarks of what Dave and
Elisa have been doing for a long

802
00:42:55,200 --> 00:42:57,640
time is we're, we're very
active, right?

803
00:42:57,640 --> 00:43:01,520
So even though we we see a lot
of upside in in Volterra and

804
00:43:01,520 --> 00:43:05,560
Impala right now, we trim on
strength and we add back on

805
00:43:05,560 --> 00:43:08,800
weakness and we're very active
with this.

806
00:43:10,040 --> 00:43:13,200
It's a kind of interesting
contrast with a lot of value,

807
00:43:13,200 --> 00:43:16,280
real value investors out there.
A lot of them sort of sing to

808
00:43:16,280 --> 00:43:19,280
the tune of buying when it's
really cheap and then just

809
00:43:19,480 --> 00:43:22,280
holding in perpetuity.
So it's quite a marked

810
00:43:22,280 --> 00:43:23,600
difference as I kind of see it,
right?

811
00:43:23,760 --> 00:43:26,560
Patient capital is a blessing.
Yeah, it it.

812
00:43:27,040 --> 00:43:29,840
It really is.
And again, if we were sitting

813
00:43:29,840 --> 00:43:33,160
here 5 or 6 years ago, we had
less gold and we had a lot more

814
00:43:33,160 --> 00:43:35,480
copper.
So Ivan Home Mines was our

815
00:43:35,600 --> 00:43:38,960
largest position.
Turquoise Hill was also a large

816
00:43:38,960 --> 00:43:42,040
position.
And you know Ivan Home Mines

817
00:43:42,040 --> 00:43:44,600
where we, you know, we
eventually we're completely out

818
00:43:44,600 --> 00:43:47,120
of it, right.
Cameco in the uranium space was

819
00:43:47,120 --> 00:43:50,320
once our largest position and it
was and that was brought to to

820
00:43:50,320 --> 00:43:54,080
zero over time as as as the
market appreciated and we moved

821
00:43:54,080 --> 00:43:57,000
into natural gas.
So again, we're we're very

822
00:43:57,000 --> 00:43:59,600
opportunistic.
We take what the market gives us

823
00:43:59,960 --> 00:44:03,360
and in selling as it approaches
our value is something that Dave

824
00:44:03,360 --> 00:44:05,360
and Elisa always do.
Are there any?

825
00:44:06,000 --> 00:44:08,520
Very.
Yeah, cyclical commodities that

826
00:44:08,520 --> 00:44:11,120
we haven't covered today, which
are very out of favor that

827
00:44:11,120 --> 00:44:13,480
you're very interested in right
now.

828
00:44:13,640 --> 00:44:15,040
Taylor, I mentioned, yeah.
Sure.

829
00:44:15,040 --> 00:44:17,360
I mentioned lithium for for a
minute.

830
00:44:17,360 --> 00:44:19,200
I think I'll maybe I'll expand
on that.

831
00:44:20,040 --> 00:44:23,240
One thing that we do is we, we,
we like to travel, right.

832
00:44:23,760 --> 00:44:27,040
So Dave, Elisa, myself, Isabel,
who's also a member of the

833
00:44:27,040 --> 00:44:29,520
management team, we get out
there and we see these mines all

834
00:44:29,520 --> 00:44:32,920
over the world.
So we traveled to Morocco, some

835
00:44:32,920 --> 00:44:37,120
of us have been to Australia,
Canada, Alaska, Argentina.

836
00:44:37,120 --> 00:44:40,600
And a couple of summers ago we
were in Argentina and we decided

837
00:44:40,600 --> 00:44:43,800
to go to the Lithium triangle,
which is on the border of Chile

838
00:44:43,800 --> 00:44:46,720
and Argentina to where where a
lot of the lithium is produced.

839
00:44:46,720 --> 00:44:50,800
Some of the highest quality
deposits are there in, in, in,

840
00:44:50,800 --> 00:44:52,880
in brines, actually as, as
they're called.

841
00:44:53,120 --> 00:44:56,280
We went there when lithium price
was 50 to 60,000.

842
00:44:56,920 --> 00:44:59,960
We, we didn't think we'd, we'd,
you know, see any value anytime

843
00:44:59,960 --> 00:45:02,240
soon.
And, but we learned about all

844
00:45:02,240 --> 00:45:04,640
the operations there.
We, we learned about how it's,

845
00:45:04,640 --> 00:45:06,920
it's pulled out of the ground in
this liquid form and then it's

846
00:45:06,920 --> 00:45:10,080
evaporated over time and then
it's processed and, and turned

847
00:45:10,080 --> 00:45:12,440
into lithium that's used in
batteries.

848
00:45:12,440 --> 00:45:13,880
So we got really up to speed on
this.

849
00:45:13,880 --> 00:45:16,120
We went to an investment
conference and sell to

850
00:45:16,120 --> 00:45:18,480
Argentina, which were the mining
capital of the country and it

851
00:45:18,480 --> 00:45:20,800
was jam packed with people from
all over the world.

852
00:45:21,080 --> 00:45:23,600
Lot of excitement about lithium
and of course prices have gone

853
00:45:23,600 --> 00:45:27,200
from $5000 a ton to 50 to
$75,000 a ton.

854
00:45:27,200 --> 00:45:29,840
So of course everyone in the
industry was really excited.

855
00:45:30,120 --> 00:45:33,080
And, you know, Dave, Dave,
Isabel and I were on that trip

856
00:45:33,080 --> 00:45:35,560
together and we, you know, I, I
certainly left there thinking,

857
00:45:35,880 --> 00:45:38,960
OK, maybe we got a shot in a
five years or, or, or, or

858
00:45:38,960 --> 00:45:41,880
something like that.
And then 6-9 months later, the

859
00:45:41,880 --> 00:45:44,600
lithium price was, you know,
down to 25,000.

860
00:45:44,600 --> 00:45:47,600
And some of the large companies
like SQM and Arcadium, you know,

861
00:45:47,600 --> 00:45:50,560
we're down 30 to 40%.
And then all of a sudden we were

862
00:45:50,560 --> 00:45:53,600
down below 15,000 and these
companies were down 70 to 80%.

863
00:45:54,320 --> 00:45:58,200
So within a year's time, we, we
learned a lot about lithium.

864
00:45:58,760 --> 00:46:02,400
We did a huge industry template
on it here on the team.

865
00:46:02,400 --> 00:46:05,280
It took a, a lot of months of,
of, of work and back and forth

866
00:46:05,280 --> 00:46:08,080
with Dave, Elisa and the entire
investment team, but we came up

867
00:46:08,080 --> 00:46:09,640
to speed.
We, we came up with the

868
00:46:09,640 --> 00:46:13,160
incentive price that we would
use, which is around $15,000.

869
00:46:13,200 --> 00:46:16,840
So we think the industry you
need to move to 15 to 20,000 if

870
00:46:16,840 --> 00:46:18,960
some of the growth is going to
continue for some of these new

871
00:46:18,960 --> 00:46:22,800
projects like backer pass in
the, in the United States, you,

872
00:46:23,040 --> 00:46:24,560
you, you need much higher
prices.

873
00:46:24,880 --> 00:46:28,360
And then we invested in some of
these companies post that trip.

874
00:46:28,600 --> 00:46:31,320
So lithium is certainly
interesting at these prices.

875
00:46:31,320 --> 00:46:35,000
It's in Rio Tinto.
They continue to spend money on

876
00:46:35,000 --> 00:46:38,040
lithium.
They just just made another

877
00:46:38,040 --> 00:46:41,160
partnership in, in, in Chile.
So they certainly like it.

878
00:46:41,560 --> 00:46:45,560
And they we invested in both
Arcadium and SQM and of course

879
00:46:45,560 --> 00:46:49,200
Rio came out and bought Arcadium
pretty soon after, afterwards

880
00:46:49,440 --> 00:46:52,520
SQM is the lowest cost producer,
some of the best assets.

881
00:46:52,520 --> 00:46:54,040
So we really like that right now
too.

882
00:46:56,720 --> 00:46:58,960
That's that's fascinating.
And have you sort of ventured

883
00:46:58,960 --> 00:47:01,960
into the the Hard Rock space or
the spodumene space or do you

884
00:47:01,960 --> 00:47:05,160
just sort of find those ones a
bit high and yet you're happier

885
00:47:05,160 --> 00:47:09,720
in those brine projects?
We've certainly looked at a few

886
00:47:09,720 --> 00:47:12,760
companies and now on in the
spodumming space for sure.

887
00:47:12,760 --> 00:47:15,720
And of course you know, SQM and
even Arcadium did have some

888
00:47:15,720 --> 00:47:19,880
spodumming assets in, in, in
Australia and we're certainly

889
00:47:19,880 --> 00:47:23,680
not adverse to continuing to
look there.

890
00:47:24,280 --> 00:47:26,960
You know, it's been, it's been
fascinating to watch.

891
00:47:27,280 --> 00:47:31,120
One of the reasons, you know,
why the lithium price turned

892
00:47:31,120 --> 00:47:34,520
over is just how fast some of
these spodumene producers came

893
00:47:34,520 --> 00:47:37,000
on in Australia.
I think the market was pretty

894
00:47:37,000 --> 00:47:41,800
shocked that, that, you know, in
most, most cases to build big

895
00:47:41,800 --> 00:47:44,640
mines, I know these aren't in
most cases not huge mines.

896
00:47:44,640 --> 00:47:47,960
It takes 15 to 20 years, but
this happened in a, you know, in

897
00:47:47,960 --> 00:47:50,640
three to five years, right?
So I think some people were were

898
00:47:50,640 --> 00:47:53,480
kind of shocked with how quickly
that turned.

899
00:47:53,480 --> 00:47:57,080
But no, we, we certainly are
valuing spajamine producers and

900
00:47:57,080 --> 00:48:01,120
we're looking, we saw a lot more
upside in, in arcadium and in

901
00:48:01,120 --> 00:48:03,280
SQM.
And again, we're, we're paying

902
00:48:03,280 --> 00:48:06,240
attention to the risk adjusted
value, right.

903
00:48:06,480 --> 00:48:09,920
So and and how did you?
Adjust the risks for Argentina

904
00:48:09,920 --> 00:48:11,360
and Chile.
I'm quite curious because

905
00:48:11,440 --> 00:48:13,560
nationalism is definitely on the
on the rise in in Chile

906
00:48:13,560 --> 00:48:17,440
specifically and the the deals
around SQM's ownership change.

907
00:48:17,440 --> 00:48:21,240
How do you think about that?
Well, we assumed we were, we

908
00:48:21,240 --> 00:48:24,400
were conservative when we
assumed the deal goes through as

909
00:48:24,400 --> 00:48:27,120
being as being disclosed and
talked about now where

910
00:48:27,120 --> 00:48:33,680
essentially they give away 50%
of their deposit to to Codelco

911
00:48:34,200 --> 00:48:36,200
the the government.
So we assume that happens of

912
00:48:36,200 --> 00:48:40,280
course in our model and we
assume that happens in a phased

913
00:48:40,280 --> 00:48:44,440
out scenario by by by 20-30.
We also include all royalties

914
00:48:44,440 --> 00:48:48,400
they pay a hefty royalty to, to
the government as well.

915
00:48:48,400 --> 00:48:50,520
So we of course include that in
our model.

916
00:48:50,960 --> 00:48:55,040
But even when you assume all of
that and you take a big margin

917
00:48:55,040 --> 00:48:57,680
of safety for being in Chile,
there's, there's a lot of value,

918
00:48:57,880 --> 00:49:00,360
right?
So that's, that's one way to,

919
00:49:00,360 --> 00:49:03,480
to, to think about it.
My, it's interesting to your

920
00:49:03,480 --> 00:49:08,800
point overall, once the, the
government in Chile makes a

921
00:49:08,800 --> 00:49:12,600
deal, I mean, they, they have
pushed SQM, but to be clear,

922
00:49:12,600 --> 00:49:17,160
SQMS, a permit or concession
expired in 20-30, right?

923
00:49:17,400 --> 00:49:20,840
So that, so the government
didn't come in and say, give us

924
00:49:20,840 --> 00:49:23,760
50% now they came in and said,
we're not going to renew your

925
00:49:23,760 --> 00:49:27,360
concession in 20-30 unless you
negotiate with us, which was

926
00:49:27,360 --> 00:49:29,640
their right because that was
when their concession always

927
00:49:29,640 --> 00:49:33,480
expired.
So they, they just negotiated on

928
00:49:33,480 --> 00:49:35,960
the behalf of themselves when
they had the opportunity.

929
00:49:36,600 --> 00:49:39,560
So, and if you talk to, we've
asked this question to other big

930
00:49:39,560 --> 00:49:43,480
miners like like like Rio, they
like operating there because the

931
00:49:43,480 --> 00:49:46,040
government does negotiate and
they make a hard deal, but they

932
00:49:46,040 --> 00:49:49,080
tend to stick with it.
It gets tougher in places when

933
00:49:49,080 --> 00:49:52,520
governments try to try to
encroach and redo deals all the

934
00:49:52,520 --> 00:49:54,240
time.
Those are tougher situations.

935
00:49:54,800 --> 00:49:59,160
But even with all of that said,
compared to Australia, like I

936
00:49:59,160 --> 00:50:02,240
mentioned earlier, if we need a
30% discount, Chile may require

937
00:50:02,240 --> 00:50:07,080
a 50 to 60% discount, Argentina
would require require 70 to 80%

938
00:50:07,080 --> 00:50:09,320
discount.
So things are trending up in

939
00:50:09,320 --> 00:50:11,800
Argentina.
Certainly the Lundin's very,

940
00:50:12,000 --> 00:50:16,160
very successful investors over
the long term are investing a

941
00:50:16,160 --> 00:50:18,280
lot there.
So is BH PS and with their

942
00:50:18,280 --> 00:50:20,120
copper projects in the Baikuna
district.

943
00:50:20,120 --> 00:50:22,520
So there's a lot of optimism
about Argentina.

944
00:50:22,960 --> 00:50:25,720
Yeah, Rio was very comfortable
buying Arcadium and they're they

945
00:50:25,720 --> 00:50:27,560
were pretty, pretty outspoken
about it.

946
00:50:27,560 --> 00:50:31,560
But but with that said, we would
still require a big discount.

947
00:50:33,440 --> 00:50:36,120
I've enjoyed this.
Conversation immensely, Taylor.

948
00:50:36,920 --> 00:50:40,600
Yeah, there's a lot, a lot of
takeaways here and and I love

949
00:50:40,600 --> 00:50:45,280
the the strategy of buying out
of favor commodities when

950
00:50:45,280 --> 00:50:47,320
they're below incentive price.
It's very simple commodity

951
00:50:47,320 --> 00:50:49,920
investing when you think of it
like that, yeah.

952
00:50:50,800 --> 00:50:52,080
All right, well, thank you so
much for having me.

953
00:50:52,080 --> 00:50:53,960
I really enjoyed this awesome
mate.

954
00:50:53,960 --> 00:50:55,400
I was stoked to share that
conversation.

955
00:50:55,400 --> 00:50:57,880
I was stoked to have that
conversation and I am keen to

956
00:50:57,880 --> 00:51:00,480
hear what the money miners think
of that one, whether they like

957
00:51:00,480 --> 00:51:02,360
that sort of content.
There's a, there's a lot there

958
00:51:02,360 --> 00:51:06,080
that resonated with me, mate.
Wrap up a massive thank you to

959
00:51:06,080 --> 00:51:09,800
our wicked partners, Mineral
mining services, MMS, grounded

960
00:51:09,800 --> 00:51:12,960
sanded ground support, CRE
insurance, K drill, cross

961
00:51:12,960 --> 00:51:16,120
boundary energy.
How's your week mate?

962
00:51:21,200 --> 00:51:22,440
I don't even know.
Where to go with that?

963
00:51:24,960 --> 00:51:26,080
I.
Can RIP another guy I thought.

964
00:51:27,600 --> 00:51:29,160
You wanted to put personal.
Stuff in the.

965
00:51:31,480 --> 00:51:33,920
I've always thought that.
At the back end, I don't know

966
00:51:33,920 --> 00:51:37,280
why the back end seems to fit
well for that, Yeah.