The Current Commodity Supercycle (Paulo Macro)

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My bigger take away was how
unsynchronized the global

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economy seems to be now in terms
of where we are in the cycle.

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Usually it's, you know, US
catches the cold, the rest of

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the hill gets the flu, maybe
with a lag.

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I don't know if that's true this
time because Hong Kong and China

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seem to be reflecting off the
lows.

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Alan Macro, thank you so much
for for joining us again mate.

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It's been a while since we last
spoke and there has been heaps

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happening in the world of, of
metals and mining and markets

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more broadly.
One of the, one of the big

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themes that I'm keen to jump
into first is your idea of the,

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the present super cycle we're in
and how that kind of contrasts

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with the China bull market that
we saw in the 2000s where you

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really sort of cut your teeth
in.

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So I'd love to kind of start
right there and, and hear your,

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your evolution on thinking in
this, this super cycle, the the

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rolling crack up thesis that you
have and, and everything

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related.
Oh wow, well, First off, thanks

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fellas for having me back.
I guess it's, I can't believe a

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year has gone by.
If I think it's been a year and

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I, I, I, I'm sorry.
I know you guys have been

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reaching out for for a while now
to, to have me back and it's

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I've just been completely snowed
as I think you'd always like to

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say, although it never snows in
Australia.

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So I don't know why you guys say
it, but you're taking me way

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back.
This is kind of one of my first

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framework notes when I first
moved to Substack.

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So it's it's like really big
picture how I think about the

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world and comparing today or
more like comparing and

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contrasting today versus the
2000s.

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So happy to jump in right there.
I think for me and starting out

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in the 2000s, especially with a
commodity bent as a kind of a

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young bloke starting in the
business and actually one of my

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first assignments was Australian
equity.

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So I've got a very soft sweet
spot in my heart for you boys

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down under and been there many
times.

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And in my 20s starting out, the
cycle was just getting going.

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But there were a couple of key
points that were different than

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versus today.
For one, you had a very clear

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demand pull from the emerging
China.

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We all know that story.
But that kind of measure of a

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rise, a rising tide lifting all
boats did some interesting

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things to a space that had been
mostly cast aside for, you know,

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the better part of 20 plus years
going back all the way to the

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70s, which was kind of our last
big commodity secular bull.

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In this case with China's coming
out party after the WTO and the

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rise of China and Chinese demand
hitting that kind of S curve of

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GDP per capita that a lot of
people talk about when they

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think about global South India
and Southeast Asia today.

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You had a situation where two
things happened at once.

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You had that kind of general
demand pull where the entire

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demand curve pushes out into the
right.

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And you also had an interesting
exercise come out I believe

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around 2004 where McKinsey
dropped a a a research note

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report arguing that if you took
your typical equity in bond,

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fixed out fixed income
allocation and added a passive

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commodity exposure via futures
to those two, even around the

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edges, what they found was 2
amazing things.

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One, the returns from
commodities historically were

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uncorrelated near 0 to either of
those asset classes.

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So it made sense as a bolt on to
6040 and more importantly that

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as all of these curves which
naturally want to sit in

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contango.
If you want to store a

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commodity, you need a contango
where the near term price is

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cheaper to the farther dated
price to pay for shipping,

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storage in particular storage
and insurance.

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Then as you backwardate, which
is the curves way of punishing

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stores and calling supplies out
to the market, you passively

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begin to collect the yield.
So you were basically ringing

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the dinner bell for pension fund
allocators who are looking for

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other options.
And remember, this is in the

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early mid 2000s when hedge funds
and alternatives were just

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starting to get going.
So, you know, hedge funds were

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in an allocatable asset class
the way private equity and

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credit is today among
universities where 40% of their

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their billion dollar endowments
are in in privates.

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Back then, it was really stocks
and bonds and a little around

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the edges and the David Swenson
Yale University CI OS of the

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world were playing with
alternatives around the edges.

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But the mass market kind of long
dated saver insurance companies,

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pensions, what have you were
only starting to wake up to

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this.
And this McKenzie report woke

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people up to the fact that you
had non correlated A and

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positive ruled yield B.
And if you basically tell

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somebody that you have an
uncorrelated asset class that

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generates a positive yield in an
environment like the early mid

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2000s when the Fed had cut to 1%
and basically kicked off the

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real estate bubble in the US,
that was like ringing the dinner

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bell for large allocators.
And so commodities arose as an

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asset class and we saw $300
billion of AUM flood into the

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space during that boom in the
2000s, which all of course was,

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you know, miraculously crowned
and ended with the demise of

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Lehman Brothers and the
financial crisis in O8.

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There was a an echo boom coming
out of that.

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But by 2011, that was the
ultimate top of commodities in

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emerging markets and we were
done.

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The difference this time kind of
setting the table with that is

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you don't have a very clear
demand pull in one particular

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place per SE.
The dollar has been gradually

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strengthening for 10 years,
which has kind of been a boot on

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the neck of EM since 2011.
As we know.

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More recently, Trump seems to
want to change that.

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The debasement trade is
underway.

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It's starting to catch fire as a
longer term narrative.

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Weaker dollar will, you know, be
a kick in the butt for emerging

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market demand.
That's all great.

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And maybe India owns the
second-half of the Twenty 20s or

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the Twenty 30s.
And some of these economies very

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large, are hitting their S
curves now, you know, as they

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kick through 2500.
Three, $1000 GDP per capita.

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But the real driver so far of
commodities has been the supply

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constraint that followed the
boom where basically the tide

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went out for 10 plus years via
underinvestment.

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And that underinvestment shifts
the supply curve in as opposed

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to the China story which pushed
the demand curve out.

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The outcome is the same.
You get a general appreciation

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starting in the price level, but
it reflects in the market in a

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different way.
Whereas the backward dating

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curves driven by China is a
rising tide that lifts pretty

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much all commodity boats at
around the same time.

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Here what we're seeing is
different commodities run into

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the wall of shortage or, you
know, a production crack up or a

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slip up at different points in
time, which actually is

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Christmas for an active
commodity manager or someone who

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wants to take a longer short,
you know, active approach.

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And I, I call this also the
forcing function in commodities.

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They seem to do nothing for a
long time and then suddenly

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they'll work 50% out of nowhere
over a few weeks or months.

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And that forcing function in
commodities is expressed because

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someone has a problem somewhere
or needs delivery tomorrow.

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They're pricing sensitive and
they need to pay that price.

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It's the opposite effect of
what's happening in fixed income

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inequities where the forcing
function for fixed income, for

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example, you know, nobody does
fundamental work on rates

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anymore.
I mean, they do, but they're

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wasting their time.
You talk to a rates guy or a

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credit guy who used to do this
20 years ago, he'll tell you he

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used to build fundamental models
around rates, you know, growth,

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inflation, what have you.
Today he spends almost all of

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his time wondering, what's the
Fed going to do?

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What's the Treasury going to do
with the TGA, the RRP at the

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Fed?
The interplay of liquidity up,

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liquidity down.
What does that do to bond

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prices?
The, the changing mix in coupons

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versus T-bills, how that changes
bond prices.

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It's all flow in equities.
You guys are well aware of the

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drive of passive, the buybacks
that chew through the float and

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the more that you can quickly
buy back stock, the more that

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momentum kicks in, puts you in
the mega cap territory.

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The inelasticity as these
companies get bigger in terms

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of, you know, $1.00 moving their
market caps, ten 20-30 bucks

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only makes them more big, which
means that passive needs to buy

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more.
Around and around we go in that

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kind of positive reflexivity of
momentum and size that all

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argues in equities and fixed
income for a passive approach

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because alpha or value just does
not work in commodities.

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It's the exact opposite.
The forcing function that I

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described where this stuff goes
nowhere and then suddenly it

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pops or it starts to trend and
move, argues for the return of a

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commodity active manager as
opposed to blindly allocating

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$300 billion to the space.
Because the space in general, if

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you look at the Bloomberg
Commodity Index, the Bcom or

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what have you, hasn't really
done anything.

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But individual commodities have
been rock'n'roll over the last

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few years, including during this
bear market and several things.

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By way of example, when the
light bulb went off on these

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rolling crack UPS remain
commodities.

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We saw European natural gas, the
TTF contracts go nuts in the

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fall of 21 along with thermal
coal.

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Then in February of 22 we saw
that wildest shit Chinese guy

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get caught short on the LME in
the nickel contract and nickel

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went to 80,000.
They had to bust trade so you

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don't even see some of the
prints.

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And then within two weeks, oil
moons because Russia invaded

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Ukraine.
We went to 120 in 23.

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You saw uranium go nuts from,
you know, the 50s up to north of

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100 in 24.
We've started to see, you know,

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kind of copper with fits and
starts.

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Like there's there are things to
do.

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And I think part of it is that
as we run into a temporary or

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structural supply constraint
that manifests from, you know,

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several years of deficit finally
showing up in price discovery,

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you see moves happen really big
or trend for far longer than you

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can think possible.
But the compression until it

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happens is very difficult to
predict.

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You just kind of have to hold
your nose and be there on some

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of this stuff.
Like I know guys were pitching

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platinum early last year.
They had to wait over a year.

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And then when they got paid,
they got paid 60% in the last

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three months, right?
Four months.

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So it's it's Christmas for an,
an active approach as opposed to

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what we see in fixed income
inequities where the passive

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approach just does not seem to
want to relent and doesn't stop

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rewarding the lazy or the lack
of analysis.

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So that's kind of the light bulb
going off for me on how this

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super cycle is different.
What's going to really be

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interesting and what I've been
wrestling with more recently I

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haven't even written about yet
because it's been hard for me to

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articulate all this is I'm
starting to see signs that all

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commodities are starting to move
together again, like the 2000s.

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I'm sure you noticed as well.
You know, oil and tankers will

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work on the same day.
That's not what the experience

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has been over the last few
years.

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But Nat gas is working too.
Uranium is off the mat.

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You know, metals are starting to
work.

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It kind of feels like on some
days everything is going, you

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know, and then we chop wood in
different kind of corners of the

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commodity space.
I wonder if the rolling crack up

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story is kind of marrying and
having a bastard child with

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India and these other places in
the demand statement also coming

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into its own here.
Maybe it's a little early to say

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that, but now that I'm seeing on
a more consistent basis where

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the entire asset class will move
together, it's hard to parse

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whether what I'm seeing is a
demand pull statement where that

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curve is moving on to the right
in conjunction with the supply

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curve removing up and to the
left, or if it's really just as

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simple as meh.
Like it's debasement, bro.

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Like, you know, Trump is, you
know, annihilating the dollar.

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You know, we're speaking
Portuguese.

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We look like, you know, I like
to say this is Africa, you know,

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like the Leo DiCaprio gift from
Blood Diamond.

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You know, maybe it's all three,
you know, as Forrest Gump says,

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like maybe it's both.
But it, it's a fascinating time

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to be involved in commodities,
but you got to stay on your toes

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00:12:08,400 --> 00:12:11,800
as well.
It, it's a lot to track for me

226
00:12:11,920 --> 00:12:14,480
who was around in the 2000s
where you, you know, especially

227
00:12:14,480 --> 00:12:17,400
because I was, I, I was passive
back then like you.

228
00:12:17,400 --> 00:12:19,360
You can make money buying almost
anything.

229
00:12:20,160 --> 00:12:22,440
Being more active in your
research and in your trading

230
00:12:22,440 --> 00:12:25,760
has, can yield a lot of results.
But it's, it's not accessible

231
00:12:25,760 --> 00:12:28,320
for most people because you
really got to commit time and

232
00:12:28,320 --> 00:12:31,160
energy to, to staying on top of
everything, you know, Plus then

233
00:12:31,160 --> 00:12:34,000
you throw geopolitics in the mix
and what to fade, what to go

234
00:12:34,000 --> 00:12:36,240
with.
It's a, it's, it's a wild time.

235
00:12:36,240 --> 00:12:39,600
But yeah, that's the framework
of how this time is different.

236
00:12:39,880 --> 00:12:41,720
It's a, it's a similar super
cycle.

237
00:12:42,000 --> 00:12:45,120
It'll eventually all work.
But a more active approach I

238
00:12:45,120 --> 00:12:48,080
think is yielding much more
interesting results and more

239
00:12:48,080 --> 00:12:51,520
alpha than the typical kind of
blindly allocated to commodities

240
00:12:51,520 --> 00:12:53,720
as an asset class.
And if anything, commodities are

241
00:12:53,720 --> 00:12:57,400
so small in relation to S&P and
global fixed income markets,

242
00:12:57,920 --> 00:13:00,280
it's almost like there's no room
in the space to handle.

243
00:13:00,440 --> 00:13:03,040
Like if somebody wanted to send
$300 billion the way they did

244
00:13:03,040 --> 00:13:07,520
into the S&P GSCI index in the
early 2000s, the space can't

245
00:13:07,520 --> 00:13:09,520
accommodate it.
It's like elephants through a

246
00:13:09,520 --> 00:13:13,720
keyhole.
Inshallah that money comes, you

247
00:13:13,720 --> 00:13:16,200
know, then we can all retire
together.

248
00:13:16,280 --> 00:13:18,880
But for now, that's kind of how
I see it.

249
00:13:20,560 --> 00:13:22,760
Yeah, that that's, that's a
wicked framework, Paolo.

250
00:13:23,120 --> 00:13:26,440
I'm not sure I see like the,
the, yeah, all the commodities

251
00:13:26,440 --> 00:13:29,360
moving together just yet.
I think, I think like my, my

252
00:13:29,360 --> 00:13:32,080
observation so far is, is
there's, there's a lot of

253
00:13:32,080 --> 00:13:33,840
fragmentation.
There's there's froth which is

254
00:13:33,840 --> 00:13:35,720
correlated.
And then there's other parts of

255
00:13:35,720 --> 00:13:39,240
the, of commodities markets
which are, are getting no love.

256
00:13:39,320 --> 00:13:41,720
But I totally, totally kind of
agree with the characterization

257
00:13:41,720 --> 00:13:46,440
of their, their pockets of, of
these of, of certain commodities

258
00:13:46,440 --> 00:13:49,520
where, where supply is the story
and that supply looks incredibly

259
00:13:49,520 --> 00:13:53,240
tight and it doesn't take too
much to really move the needle.

260
00:13:53,800 --> 00:13:58,280
Let's start with copper because
this is this is this is a, a

261
00:13:58,520 --> 00:14:03,400
copper supply story right now.
Sure.

262
00:14:03,400 --> 00:14:08,560
So copper I'm I'm very excited
about I have been bullish for

263
00:14:08,560 --> 00:14:11,520
the last few years.
It's felt like just chopping

264
00:14:11,520 --> 00:14:17,400
wood in a wide range, but we've
been we I I had the front row

265
00:14:17,400 --> 00:14:20,960
seat in the 2000s for when we re
racked the copper price stack

266
00:14:20,960 --> 00:14:25,720
from you know kind of $0.40 on
the bottom to $1.50 on the top

267
00:14:25,720 --> 00:14:29,680
for two decades.
And then we moved, I believe it

268
00:14:29,680 --> 00:14:35,240
was in 2005 or 6 into that new
range where we finally took out

269
00:14:35,240 --> 00:14:40,520
kind of 13150 and we reset a new
range of kind of $1.50 to 4

270
00:14:40,520 --> 00:14:42,800
bucks.
And we've been working that

271
00:14:42,800 --> 00:14:45,760
range now for 20 years pretty
much.

272
00:14:47,000 --> 00:14:51,360
We've tested this kind of 11,
you know, ten $11,000 level on

273
00:14:51,360 --> 00:14:57,200
the LME, you know, $5 a pound
equivalent several times over

274
00:14:57,200 --> 00:15:00,360
the last few years.
It has been kind of a fight.

275
00:15:00,720 --> 00:15:04,160
You know, you get excited.
We're finally going to go.

276
00:15:04,400 --> 00:15:08,480
The industry all agrees if we're
going to incentivize Greenfield

277
00:15:08,480 --> 00:15:12,320
investment, we need to see north
of 10,000 bucks a ton and it

278
00:15:12,320 --> 00:15:16,000
needs to stick right That that
importantly is what guys want to

279
00:15:16,000 --> 00:15:19,320
see.
And we've never quite gotten

280
00:15:19,320 --> 00:15:24,360
that sort of come to Jesus
shortage moment where the curve

281
00:15:24,360 --> 00:15:27,360
firmly backward dates all the
way through.

282
00:15:27,360 --> 00:15:32,360
We've had the farther dated
curve sitting backwardation for

283
00:15:32,360 --> 00:15:35,360
a little while, but there's
always a little hump in the

284
00:15:35,360 --> 00:15:37,320
front which tells you like it.
It's almost like that.

285
00:15:37,720 --> 00:15:40,120
I guess it I think it's Thomas
Aquinas, you know, like give me,

286
00:15:40,640 --> 00:15:45,080
you know, chastity or whatever
and but not yet the curve is

287
00:15:45,080 --> 00:15:47,600
playing with there is a
structural issue, but in the

288
00:15:47,600 --> 00:15:49,600
fronts, you've always had a
couple of months of contango

289
00:15:49,600 --> 00:15:51,400
where it's like, but there's no
shortage right here.

290
00:15:51,400 --> 00:15:54,120
So we're not going to price in a
backwardation and and like

291
00:15:54,120 --> 00:15:57,480
really show the market that we
need metal out of storage

292
00:15:57,520 --> 00:16:01,560
wherever it is.
What's interesting is the drama

293
00:16:01,880 --> 00:16:07,120
and the kind of bifurcation, I
guess is the word or the this

294
00:16:07,200 --> 00:16:11,720
the carving up of the world and
this sort of supply chain crack

295
00:16:11,720 --> 00:16:17,120
up that started with COVID now
rolling into a multi polar, you

296
00:16:17,120 --> 00:16:20,880
know, we hear that word a lot,
multi polar kind of regime that

297
00:16:20,880 --> 00:16:23,440
Trump's kicked into high gear
with, you know, the return of

298
00:16:23,440 --> 00:16:26,160
this Monroe Doctrine.
Like these are the Americas,

299
00:16:26,360 --> 00:16:28,840
Latin and North America, that's
ours.

300
00:16:29,320 --> 00:16:33,680
China, you worry and you do you,
you know, Europe, whatever.

301
00:16:33,680 --> 00:16:37,040
You guys are a museum anyway.
But like, don't come into our

302
00:16:37,040 --> 00:16:38,800
backyard.
Now we're flexing on Venezuela

303
00:16:38,800 --> 00:16:40,360
and just send aircraft carriers,
right?

304
00:16:40,360 --> 00:16:43,480
Like just to make sure that
everybody else in Latin gets the

305
00:16:43,480 --> 00:16:46,040
message.
Like, you know, we don't play.

306
00:16:46,360 --> 00:16:48,760
This is our yard.
You're just sitting in it.

307
00:16:49,360 --> 00:16:52,480
And, you know, we'll fuss less
about Taiwan and what have you

308
00:16:53,000 --> 00:16:54,960
while trying to keep Australia
in the fold.

309
00:16:56,120 --> 00:16:59,640
It's interesting because this is
having like real effects, like

310
00:16:59,640 --> 00:17:02,800
not all supply is created equal
anymore and jurisdiction is

311
00:17:02,800 --> 00:17:06,599
mattering more than ever.
And you're seeing even in the

312
00:17:06,599 --> 00:17:10,359
case of comics versus LME, where
the premium on comics blew out

313
00:17:10,359 --> 00:17:12,400
in a huge way.
And then Trump came out and

314
00:17:12,800 --> 00:17:15,680
backtracked on his tariffs and
comics crashed and had its

315
00:17:15,680 --> 00:17:19,119
biggest down day ever.
Felt like, I guess like a buck

316
00:17:19,119 --> 00:17:23,920
in a session back this summer.
But the premium is still there

317
00:17:23,920 --> 00:17:26,160
and it's still wide.
And it makes you wonder like if

318
00:17:26,160 --> 00:17:28,880
tariffs are off the table, why
is COMEX still trading at a

319
00:17:28,880 --> 00:17:33,120
premium, Especially when there's
an ocean of metal now, like 2/3

320
00:17:33,120 --> 00:17:36,920
of exchange metal for copper now
sits on the COMEX.

321
00:17:37,480 --> 00:17:40,240
And the comics used to be just a
backwater rounding gear to LME

322
00:17:40,240 --> 00:17:45,040
in Shanghai, and yet 2/3 of
visible inventory is sitting in

323
00:17:45,040 --> 00:17:48,240
the US.
Like how is the COMEX not

324
00:17:48,240 --> 00:17:50,320
trading at a discount to LME?
Right?

325
00:17:50,920 --> 00:17:55,000
And you know, I I wish I had
easy answers.

326
00:17:55,000 --> 00:17:58,400
I'm sure metal guys do.
Maybe it's just the optionality

327
00:17:58,400 --> 00:18:00,960
that Trump, you know, pivots
again and says no tariffs are

328
00:18:00,960 --> 00:18:04,800
back on Like, I don't know.
But it it's showing you that

329
00:18:05,120 --> 00:18:08,200
there are mechanics at play.
It's Christmas for physical

330
00:18:08,200 --> 00:18:10,400
traders, right, The Glencorbros
of the world.

331
00:18:10,400 --> 00:18:13,080
They're, you know, they're
minting it, but they're also,

332
00:18:13,400 --> 00:18:15,560
you know, they're also taking
losses when they get it wrong in

333
00:18:15,560 --> 00:18:17,240
a big way.
Like mistakes cost a lot of

334
00:18:17,240 --> 00:18:20,920
money in in metals trading now.
But I don't know, man.

335
00:18:20,920 --> 00:18:26,200
Like for me, we're living in a
new regime where not all

336
00:18:26,200 --> 00:18:28,320
jurisdictions are created equal.
And it's not as simple as

337
00:18:28,320 --> 00:18:31,040
saying, oh, it's in Africa so it
should trade it four times.

338
00:18:32,160 --> 00:18:34,040
You know, Canada should trade in
a premium.

339
00:18:34,040 --> 00:18:36,000
Like there are other things now
in the mix.

340
00:18:36,320 --> 00:18:38,560
When you look at the equities,
you look at what should be

341
00:18:38,560 --> 00:18:42,040
developed, what could become a
mine versus like where the

342
00:18:42,040 --> 00:18:45,680
premiums are.
And more interestingly, you guys

343
00:18:45,680 --> 00:18:49,480
asked me before we we started
about my recent trip to Asia.

344
00:18:49,840 --> 00:18:52,720
The one thing that struck me
that many things struck me going

345
00:18:52,720 --> 00:18:57,200
to Hong Kong and Shenzhen.
But my bigger take away was how

346
00:18:57,200 --> 00:18:59,960
unsynchronized the global
economy seems to be now in terms

347
00:18:59,960 --> 00:19:03,520
of where we are in the cycle.
Usually it's, you know, US

348
00:19:03,520 --> 00:19:06,480
catches a cold, the rest of the
world gets the flu, right?

349
00:19:06,480 --> 00:19:09,040
Like maybe with a lag.
I don't know if that's true this

350
00:19:09,040 --> 00:19:12,320
time because Hong Kong and China
seem to be inflecting off the

351
00:19:12,320 --> 00:19:15,480
lows, even just at the margin.
When I talk to the expats in

352
00:19:15,480 --> 00:19:18,240
Hong Kong, for instance, a lot
of them haven't come back yet.

353
00:19:18,520 --> 00:19:21,920
But the ones who are there seem
to suggest to me that like the

354
00:19:21,920 --> 00:19:26,120
vibes are getting better, things
are improving, they're off the

355
00:19:26,120 --> 00:19:29,640
lows, business has momentum.
It feels like they're just kind

356
00:19:29,640 --> 00:19:32,840
of getting going into a cycle
like kind of early ish mid

357
00:19:32,920 --> 00:19:35,240
cycle.
Whereas in the US it feels

358
00:19:35,240 --> 00:19:37,760
really long in the tooth, right?
And all hinges on fiscal and

359
00:19:37,760 --> 00:19:41,840
stimming and what have you.
So we're on synchronized in Asia

360
00:19:41,840 --> 00:19:44,600
versus the West and who knows
where Europe is.

361
00:19:44,600 --> 00:19:46,520
They just seem to be stuck in
the mud forever.

362
00:19:47,200 --> 00:19:53,520
But that's also playing into how
metals demand flows through

363
00:19:54,200 --> 00:19:58,520
where if you think about post
COVID, the dollar strengthened

364
00:19:58,520 --> 00:20:00,400
and a lot of commodities rallied
with it.

365
00:20:00,920 --> 00:20:04,600
It was clear that it was a
Western demand story driving the

366
00:20:04,600 --> 00:20:09,040
narrative around US consumption,
goods consumption, some

367
00:20:09,040 --> 00:20:11,240
infrastructure investment, chips
act, what have you.

368
00:20:11,680 --> 00:20:14,200
Now all the metal is here and
the prices still trade in the

369
00:20:14,200 --> 00:20:16,760
premium.
But something else is going on.

370
00:20:16,760 --> 00:20:19,160
Like the rest of the world is
starting to feel a little

371
00:20:19,160 --> 00:20:20,840
tighter.
When I look at time spreads on

372
00:20:20,840 --> 00:20:25,080
LME, when I look at stocks
remaining low on Shanghai and

373
00:20:25,080 --> 00:20:29,160
LME, this medal on comics is not
going back out.

374
00:20:29,160 --> 00:20:31,560
So there's exciting stuff I
think happening in copper that

375
00:20:31,560 --> 00:20:34,720
suggests to me we've we've
tested this $5 a pound level

376
00:20:34,720 --> 00:20:40,240
enough or should I say LME, you
know, ten, $11,000 mid 10s,

377
00:20:40,560 --> 00:20:43,640
thousands a ton.
You know, an old buddy of mine

378
00:20:43,640 --> 00:20:45,880
used to say if you knock on a
door enough times, eventually it

379
00:20:45,880 --> 00:20:47,200
opens.
Like we've been knocking on this

380
00:20:47,200 --> 00:20:49,080
level a lot over the last few
years.

381
00:20:49,440 --> 00:20:51,960
And I think we go, and I think
when we go, we're going to re

382
00:20:51,960 --> 00:20:55,760
rack to a new price tag in the
same way that we re racked that

383
00:20:55,760 --> 00:20:58,680
price tag in the mid 2000s and
never looked back.

384
00:20:58,680 --> 00:21:02,760
So what if, you know, a $4.00
ceiling for so many years now

385
00:21:02,760 --> 00:21:07,080
becomes like a $354 floor with
A7 or $8 ceiling.

386
00:21:07,720 --> 00:21:10,760
You know, guys on Wall Street
are already working with $5 long

387
00:21:10,760 --> 00:21:13,120
term copper, you know, $10,000
long term copper.

388
00:21:13,520 --> 00:21:16,360
And the economics for a lot of
projects, especially advanced

389
00:21:16,360 --> 00:21:22,480
exploration look OK at 4:00.
They look really attractive at

390
00:21:22,480 --> 00:21:25,600
five.
And Oh my God, they I mean, you

391
00:21:25,600 --> 00:21:30,480
start running five and a half
six, like it's really exciting

392
00:21:30,480 --> 00:21:33,640
for a lot of stuff on the Comm.
And there are shortage of

393
00:21:33,640 --> 00:21:37,520
projects out there as well that
like are large scale, you know,

394
00:21:37,560 --> 00:21:40,680
higher, higher IRR.
Sorry guys, it's late here.

395
00:21:40,680 --> 00:21:45,320
I've been drinking it it, you
know, things that the majors who

396
00:21:45,320 --> 00:21:48,040
have been sitting on their hands
for 10 plus years doing buybacks

397
00:21:48,040 --> 00:21:50,680
and dividends and focused on
capital returns can really sink

398
00:21:50,800 --> 00:21:53,720
sink their teeth into.
So it's an exciting time.

399
00:21:53,720 --> 00:21:56,360
And that kind of dovetails into
another note I wrote recently

400
00:21:56,360 --> 00:22:02,280
when the tech Anglo tie up came
out, I wrote a a note called the

401
00:22:02,280 --> 00:22:05,040
ultimate mining Contra.
For me, Anglo is the ultimate

402
00:22:05,040 --> 00:22:08,240
mining Contra.
And you know, I can point to

403
00:22:08,520 --> 00:22:12,760
buying Achy Batista's, achy
Batista's iron ore assets in

404
00:22:12,760 --> 00:22:18,760
Brazil literally a month before
Lehman, buying the beers in 2012

405
00:22:18,760 --> 00:22:22,320
or 13 right when lab made
diamonds were becoming a thing.

406
00:22:22,320 --> 00:22:26,040
And you know, what a disaster
that's been, you know, selling

407
00:22:26,040 --> 00:22:29,240
out of their Thungela, you know,
South African coal assets

408
00:22:29,520 --> 00:22:32,040
literally right at the lows
coming out of COVID.

409
00:22:32,520 --> 00:22:35,800
And now more recently selling
out of, you know, platinum.

410
00:22:36,000 --> 00:22:40,240
We're spinning it off with
platinum having coiled, you

411
00:22:40,240 --> 00:22:43,600
know, around 1000 bucks an ounce
for, you know, got 15 years.

412
00:22:43,600 --> 00:22:46,280
It's the longest basing I've
ever seen on on any commodity, I

413
00:22:46,280 --> 00:22:49,000
think.
So these guys, their timing is

414
00:22:49,000 --> 00:22:55,120
impeccable.
And the fact that this deal is

415
00:22:55,120 --> 00:22:57,760
happening now would normally
give me pause.

416
00:22:57,760 --> 00:23:00,200
Like, is that a top?
And it's actually quite the

417
00:23:00,200 --> 00:23:02,160
opposite.
It's the end of chapter one in

418
00:23:02,160 --> 00:23:04,960
the cycle.
Usually you see the bigs try to

419
00:23:04,960 --> 00:23:08,840
rationalize in stage one of a
mining cycle.

420
00:23:09,160 --> 00:23:13,400
Stage 2 is defined as guys
starting to do targeted MNA of

421
00:23:13,400 --> 00:23:17,160
junior producers or even some
advanced exploration plays that

422
00:23:17,160 --> 00:23:22,360
are ready to go with a view
towards replenishing reserve

423
00:23:22,360 --> 00:23:24,320
life.
Because the price deck will

424
00:23:24,320 --> 00:23:26,360
eventually answer the reserve
life question, right?

425
00:23:26,360 --> 00:23:29,800
If you're BHP and you're sitting
on X number of years of reserve

426
00:23:29,800 --> 00:23:32,800
life at 4 bucks a pound and you
take copper to 5 bucks a pound,

427
00:23:32,840 --> 00:23:36,040
voila, reserve life got extended
just because the copper price

428
00:23:36,040 --> 00:23:37,800
went up because there's more
copper in the ground.

429
00:23:37,800 --> 00:23:39,240
That's economic at that price
point.

430
00:23:39,720 --> 00:23:42,440
But as long as the price tag
hasn't firmly re racked into a

431
00:23:42,440 --> 00:23:45,480
new range yet.
Then once you kind of tapping

432
00:23:45,480 --> 00:23:48,200
into the edge of the range and
you're starting to show signs of

433
00:23:48,200 --> 00:23:50,600
breaking out.
You will see major start to bid

434
00:23:50,600 --> 00:23:53,960
on junior producers in the space
so that they can just add

435
00:23:53,960 --> 00:23:58,640
production quickly at what's
still perceived low multiple and

436
00:23:58,640 --> 00:24:00,720
accretive for these guys because
they tend to trade at higher

437
00:24:00,720 --> 00:24:02,440
multiples than the junior
producers anyway.

438
00:24:02,920 --> 00:24:06,120
We're just starting to see fits
and starts of this.

439
00:24:06,120 --> 00:24:08,920
I mean, there was the big the
Kunia district deal where BHP

440
00:24:08,920 --> 00:24:11,400
and Lundeen teamed up to buy
Jose Maria and Filo.

441
00:24:12,040 --> 00:24:14,600
Obviously, that's a blockbuster
project kind of in its own

442
00:24:14,600 --> 00:24:19,400
category, but there's signs that
these guys are starting to move

443
00:24:19,440 --> 00:24:21,080
on.
Junior producers.

444
00:24:21,080 --> 00:24:25,560
And I think what we saw in 2005
and 6 was that cleaning out of

445
00:24:25,560 --> 00:24:27,360
the middle.
There's almost no middle to

446
00:24:27,360 --> 00:24:30,400
speak up because very few people
have risen into that stage.

447
00:24:30,720 --> 00:24:33,680
But back then it was Falcon
Bridge, Inco, Phelps Dodge.

448
00:24:33,720 --> 00:24:35,440
You know, those three names
actually tried to get together

449
00:24:35,440 --> 00:24:38,280
in a three-way at one point.
But there's like a whole nine

450
00:24:38,280 --> 00:24:41,040
month saga where, you know, it
was bid, counter bid.

451
00:24:41,040 --> 00:24:43,800
Eventually Falcon Bridge went to
Extrada, which is now Glencore

452
00:24:44,840 --> 00:24:51,320
Volley took Inco and the Boise
Bay assets, Sudbury and I

453
00:24:51,320 --> 00:24:53,760
believe the last one, Phelps
Dodge went to Freeport.

454
00:24:54,360 --> 00:24:57,880
And you don't really have these
kind of large cap, you know,

455
00:24:57,880 --> 00:25:00,280
mid, large cap mids getting
cleaned out.

456
00:25:00,800 --> 00:25:04,280
So you're left with an Anglo
trying to do their thing, but

457
00:25:04,280 --> 00:25:08,240
Anglo always the end.
What the smart guys do in the

458
00:25:08,240 --> 00:25:13,720
beginning and doing a large cap
merger is precisely the

459
00:25:13,720 --> 00:25:16,080
definition of the end of phase
one for me.

460
00:25:16,080 --> 00:25:19,040
Like this is the sign that we're
moving into Phase 2 and that's

461
00:25:19,320 --> 00:25:22,760
the cleaning out of whatever
middle is left and dipping into

462
00:25:22,760 --> 00:25:27,280
advanced exploration plays where
it's large long life, high

463
00:25:27,280 --> 00:25:31,120
CapEx, 50 year, you know,
potential mine life, you know,

464
00:25:31,120 --> 00:25:32,920
the grandkids will be mining
this stuff.

465
00:25:33,760 --> 00:25:38,200
That's I think what is we're
about to see over the next year

466
00:25:38,200 --> 00:25:42,080
is a wave of M&A and the names.
You know, I'm not making

467
00:25:42,080 --> 00:25:45,880
recommendations, but I would be
surprised if Taseko is still

468
00:25:45,880 --> 00:25:49,520
independent in 18 months.
I'd be surprised if HUD Bay is

469
00:25:49,520 --> 00:25:52,320
still independent in 18 months.
Like I'm talking about these

470
00:25:52,320 --> 00:25:57,040
kind of, you know, 1 to 8
billion market cap names that

471
00:25:57,040 --> 00:26:01,000
are already producing.
Capstone, rally capstone.

472
00:26:01,080 --> 00:26:08,200
I mean, yeah, there's exactly.
And it's just get me the pounds,

473
00:26:08,480 --> 00:26:10,480
you know, they're already
producing.

474
00:26:10,720 --> 00:26:13,640
I'll pay what's optically a
premium, but it's going to look

475
00:26:14,000 --> 00:26:17,320
really smart if copper, you
know, goes to five and a half

476
00:26:17,320 --> 00:26:20,720
six, you know what I'm saying?
So I, I think that's what comes

477
00:26:20,720 --> 00:26:23,680
next now.
And, and with that, I'm, I have

478
00:26:23,680 --> 00:26:26,120
a very high level of conviction
that that's what we're looking

479
00:26:26,120 --> 00:26:27,800
at over the next kind of 18
months.

480
00:26:27,800 --> 00:26:31,320
So, you know, call it, you know,
it'll be fits and starts, but

481
00:26:31,320 --> 00:26:33,720
then there'll be a headline deal
and you'll see like two or three

482
00:26:33,720 --> 00:26:36,760
all tip over within a year and
they'll be names that we all

483
00:26:36,760 --> 00:26:39,920
know.
To to wrap on on copper with a

484
00:26:39,920 --> 00:26:43,320
real specific one.
Paolo, you have written and been

485
00:26:43,320 --> 00:26:45,640
thinking a lot about what's
happened at Grasberg Free

486
00:26:45,880 --> 00:26:48,280
reports, you know, half odd
owned Grasberg.

487
00:26:48,280 --> 00:26:49,440
How's your thinking evolved
there?

488
00:26:51,160 --> 00:26:58,080
So the moment that happened, I
sat up because it's not every

489
00:26:58,080 --> 00:27:01,760
day that a block cave creates an
underwater flood and kills

490
00:27:01,760 --> 00:27:04,480
miners.
And it, you know, one of my

491
00:27:04,480 --> 00:27:08,840
favorite gifts to use on Twitter
is that built that Biff Tannon

492
00:27:08,840 --> 00:27:12,440
back to the future to 1 where
he's the old man in 2020,

493
00:27:12,440 --> 00:27:14,280
whatever.
And he says there's something

494
00:27:14,280 --> 00:27:17,840
very familiar about all this.
The thing that was familiar for

495
00:27:17,840 --> 00:27:21,720
me was, you know, I, I worked in
Latin markets for a while when

496
00:27:21,720 --> 00:27:25,360
Valley had the disaster at
Mariana and then the really bad

497
00:27:25,360 --> 00:27:28,920
one at Brumaginho.
The two, you know, mountains

498
00:27:28,920 --> 00:27:33,040
that collapse their tailings
dams and, you know, volley is

499
00:27:33,040 --> 00:27:36,520
still billions and billions of
fines on the hook and they'll be

500
00:27:36,520 --> 00:27:41,320
paying these fines forever.
What was interesting then was,

501
00:27:42,240 --> 00:27:45,200
you know, tailings dams didn't
regularly fail.

502
00:27:45,200 --> 00:27:49,240
And suddenly you had two of them
at scale fail in catastrophic

503
00:27:49,240 --> 00:27:52,360
fashion, including caught on
video where you're seeing, you

504
00:27:52,360 --> 00:27:57,560
know, people driving those, you
know, huge, you know, open pit

505
00:27:57,560 --> 00:28:00,640
sized mining trucks for their
lives, like ahead of a, a, you

506
00:28:00,680 --> 00:28:04,520
know, a mountain just tumbling
into a, you know, a river.

507
00:28:05,000 --> 00:28:10,520
And it's terrible to watch.
And you, you realize like, OK,

508
00:28:10,520 --> 00:28:13,840
these guys are going to spend
years just rehabilitating every

509
00:28:13,840 --> 00:28:15,960
tailing dam going back to the
science.

510
00:28:15,960 --> 00:28:20,800
Like, how did this happen?
And nobody really cared when the

511
00:28:20,800 --> 00:28:23,440
first one happened.
Not, not a lot of people died.

512
00:28:23,440 --> 00:28:27,240
With Mariana, it caused a lot of
damage, but you know, people got

513
00:28:27,240 --> 00:28:29,480
over it quickly.
Burma Junior was like a real bad

514
00:28:29,480 --> 00:28:33,360
one.
And with Grasberg, you know, I,

515
00:28:33,360 --> 00:28:37,440
I, I can't say like, I have
every blockade collapse tallied

516
00:28:37,440 --> 00:28:40,320
on a piece of paper, but I don't
remember when I heard the last

517
00:28:40,320 --> 00:28:43,800
one happening.
And when it happened, the amount

518
00:28:43,800 --> 00:28:46,720
of silence in the immediate
aftermath was very disconcerting

519
00:28:46,720 --> 00:28:50,320
because it suggests to you that
they don't even have a handle on

520
00:28:50,320 --> 00:28:53,560
the scope of the problem.
And then a few weeks later they

521
00:28:53,560 --> 00:28:57,640
dropped the presser before the
open where they, you know, gave

522
00:28:57,640 --> 00:29:01,200
their official kind of first
pass and they were still looking

523
00:29:01,200 --> 00:29:05,120
for seven disappeared and now
presumed dead miners.

524
00:29:05,120 --> 00:29:09,160
I believe they found their
bodies and, and basically said,

525
00:29:09,280 --> 00:29:14,160
you know, 2026, we're hoping to
start ramping back up and by 27,

526
00:29:14,200 --> 00:29:18,680
yeah, we'll be up and at them.
Look, I'm, I'm not a block cave

527
00:29:18,680 --> 00:29:21,240
expert by any means.
I'm a generalist that has, you

528
00:29:21,240 --> 00:29:25,040
know, just a background in
commodities, but I've seen what

529
00:29:25,040 --> 00:29:26,680
this thing looks like
underground.

530
00:29:27,480 --> 00:29:32,040
Imagine like, you know, the
movie Resident, you know, the

531
00:29:32,080 --> 00:29:35,240
video game Resident Evil and the
Hive underground where like the

532
00:29:35,240 --> 00:29:38,000
tunnels go in every direction.
Like this thing is a city

533
00:29:38,000 --> 00:29:41,600
underground with thousands of
workers running for miles.

534
00:29:42,040 --> 00:29:45,720
And this is a wet climate.
You know, a lot of us have read

535
00:29:45,720 --> 00:29:48,200
up on this, that people have
commented on Twitter on this who

536
00:29:48,200 --> 00:29:53,120
are way smarter than I am.
But that presser hit and the

537
00:29:53,120 --> 00:29:55,920
copper price was flat.
And it kind of makes you wonder,

538
00:29:55,920 --> 00:30:00,040
like, is anybody doing any work
in commodities anymore?

539
00:30:00,040 --> 00:30:03,440
Are we all just passive?
You know, NVIDIA rules the

540
00:30:03,440 --> 00:30:06,520
world, you know, in this
marketplace where there's nobody

541
00:30:06,520 --> 00:30:10,160
left with any level of brain or
expertise, you know, no one is

542
00:30:10,160 --> 00:30:14,880
paying attention.
You have an 800,000 ton a year

543
00:30:15,120 --> 00:30:21,080
in call it 25,000,000 ton a year
market, so 3% of global

544
00:30:21,080 --> 00:30:23,520
production.
It's not all offline grant you,

545
00:30:23,840 --> 00:30:27,680
you know they're looking at two
250,000 still to produce, but

546
00:30:27,680 --> 00:30:30,640
you've just knocked call it half
a million tons, 2% of global

547
00:30:30,640 --> 00:30:33,160
production off in one wallop.
You couldn't say that about

548
00:30:33,160 --> 00:30:35,320
Burma Junior Mariana with iron
ore.

549
00:30:35,360 --> 00:30:37,640
You know these things were
nowhere near as big of a

550
00:30:37,640 --> 00:30:39,560
percentage of global production
as this is.

551
00:30:39,840 --> 00:30:42,400
This is also the largest gold
mine in the world, by the way,

552
00:30:42,800 --> 00:30:45,200
in addition to being the second
largest copper mine after

553
00:30:45,200 --> 00:30:48,520
Escondida.
And they just told you that

554
00:30:48,600 --> 00:30:53,760
they're hoping to start ramping
back up late in 26 to be back to

555
00:30:53,760 --> 00:30:56,640
full production in 27.
But how do they know?

556
00:30:56,800 --> 00:31:00,000
You know, like, a couple of
weeks is nowhere near the amount

557
00:31:00,000 --> 00:31:03,080
of time to get in there.
And then you also have

558
00:31:03,720 --> 00:31:06,880
significant risk around
Indonesia.

559
00:31:07,200 --> 00:31:10,280
The fact that they had protests,
there were several killings,

560
00:31:10,440 --> 00:31:13,560
deaths during the protests.
The government has been shaky.

561
00:31:13,880 --> 00:31:18,240
Prabowo is Subianto.
The president had to shuffle out

562
00:31:18,240 --> 00:31:21,360
his security minister, his
finance minister, because in

563
00:31:21,360 --> 00:31:24,640
August the the Congress, the
parliament decided to give

564
00:31:24,640 --> 00:31:28,440
themselves a raise and people
went crazy and a taxi driver was

565
00:31:28,440 --> 00:31:30,240
run over by a police car and was
killed.

566
00:31:30,480 --> 00:31:32,520
And so there were mass protests
across the country.

567
00:31:32,760 --> 00:31:35,360
Nobody cared, obviously, like
nobody, nobody watches this

568
00:31:35,360 --> 00:31:37,320
stuff.
But this was a thing in August.

569
00:31:37,320 --> 00:31:39,080
It kind of quieted it down by
October.

570
00:31:39,560 --> 00:31:42,040
But now you have this and then
you start to read between the

571
00:31:42,040 --> 00:31:45,240
lines, right?
And for for one, specifically to

572
00:31:45,240 --> 00:31:49,640
Grasberg, look again, I can't, I
don't speak for the company.

573
00:31:49,680 --> 00:31:51,840
I'm not short the stock.
If anything, it's kind of like

574
00:31:51,840 --> 00:31:54,200
Kamiko when Cigar Lake flooded
in the 2000's.

575
00:31:54,400 --> 00:31:56,360
The stock's going to work
anyway, even though it's their

576
00:31:56,360 --> 00:31:58,920
problem because this is going to
tighten the market and they'll

577
00:31:58,920 --> 00:32:01,640
make more money on the rest of
their production than they do

578
00:32:02,000 --> 00:32:03,880
leaving money on the table
through lack thereof.

579
00:32:04,400 --> 00:32:06,240
But there's a point of
vulnerability here where like

580
00:32:06,240 --> 00:32:08,600
this is, this is an emerging
market, man.

581
00:32:08,600 --> 00:32:11,320
Like Volley's lucky that some of
these assets were nationalized

582
00:32:11,320 --> 00:32:12,560
in Brazil.
They're just going to tax the

583
00:32:12,560 --> 00:32:15,720
hell out of them and find them.
But Indonesia has a history,

584
00:32:16,600 --> 00:32:20,200
especially recently of keeping
production in country.

585
00:32:20,200 --> 00:32:23,120
So they, you know, have
prohibited Freeport from

586
00:32:23,120 --> 00:32:26,000
exporting concentrate in the
past, encouraged them and forced

587
00:32:26,000 --> 00:32:28,040
them to build, you know,
treatment and refining in

588
00:32:28,040 --> 00:32:30,680
country so that they're shipping
finished metal.

589
00:32:31,080 --> 00:32:34,960
They started cracking down big
time on illegal tin mining this

590
00:32:34,960 --> 00:32:36,400
year.
In fact, they outright

591
00:32:36,400 --> 00:32:41,320
confiscated several smelters and
tin elite like 1000 illegal tin

592
00:32:41,320 --> 00:32:44,440
mines and threw those assets to
PT Tema, the national company.

593
00:32:44,680 --> 00:32:47,280
Like nationalization is a non 0
risk here.

594
00:32:47,280 --> 00:32:49,240
I'm not saying it's a base case
for me, far from it.

595
00:32:49,440 --> 00:32:51,680
But like it's a left tail
affair, right where the, the

596
00:32:51,680 --> 00:32:55,080
country like, you know, just
gets out of control or something

597
00:32:55,080 --> 00:33:00,080
comes out about this.
Like what if, right Freeport cut

598
00:33:00,080 --> 00:33:03,240
corners on gravity testing
'cause this thing is soaked in

599
00:33:03,240 --> 00:33:04,600
water, right?
It's in the tropics.

600
00:33:04,920 --> 00:33:08,720
You got to test the ore body for
for water.

601
00:33:09,200 --> 00:33:14,320
What if they missed something
and the block cave collapsed and

602
00:33:14,320 --> 00:33:17,680
flooded everything and killed
some locals and the country?

603
00:33:17,760 --> 00:33:20,320
The company's at fault.
There's an independent

604
00:33:20,320 --> 00:33:22,240
investigation.
The unions are asking to be

605
00:33:22,240 --> 00:33:25,000
involved in that.
What if something untoward comes

606
00:33:25,000 --> 00:33:28,040
out and these guys are shown to
be at fault and it wasn't just

607
00:33:28,040 --> 00:33:30,440
an accident?
They, you know, they're, they're

608
00:33:30,440 --> 00:33:33,200
liable.
You know, what if that leads to

609
00:33:33,400 --> 00:33:36,840
in the context of them going
after the tin industry, you

610
00:33:36,840 --> 00:33:40,680
know, they decide to just tax
the hell out of this entity or,

611
00:33:40,920 --> 00:33:44,960
you know, force a 30% ownership
stake for the, you know,

612
00:33:44,960 --> 00:33:49,080
additional stake for the state
at Freeport's expense to pay

613
00:33:49,080 --> 00:33:52,400
for, you know, the, the
environmental clean up.

614
00:33:52,400 --> 00:33:53,800
And, you know, as a fine or
what?

615
00:33:53,800 --> 00:33:56,320
I, I have no idea.
I just know that this is, this

616
00:33:56,320 --> 00:33:59,280
isn't a developed market.
You know, this is an

617
00:33:59,280 --> 00:34:01,600
unpredictable emerging market
where things change.

618
00:34:02,040 --> 00:34:06,800
And I don't know, man, I, it's
just for me, it's, it's, it was

619
00:34:06,800 --> 00:34:08,360
invisible.
Nobody cared.

620
00:34:08,360 --> 00:34:10,560
Even on the day off after I read
the press room, like, how's

621
00:34:10,560 --> 00:34:12,440
copper flat?
I immediately bought futures

622
00:34:12,639 --> 00:34:14,840
started to rally and we haven't
looked back from there.

623
00:34:14,840 --> 00:34:17,320
You know, we kind of gradually
tightening the market and the

624
00:34:17,320 --> 00:34:19,600
sell side then goes on a
conference call with management

625
00:34:19,600 --> 00:34:23,040
recently and just buys this
hook, line and sinker guidance

626
00:34:23,040 --> 00:34:25,400
for management that this is all
going to come back online, that

627
00:34:25,400 --> 00:34:26,639
they've got their arms around
the problem.

628
00:34:26,679 --> 00:34:30,639
I'm sorry, like I, I just, I
just don't believe it's going to

629
00:34:30,639 --> 00:34:33,360
be that easy.
I would be skeptical and nobody

630
00:34:33,360 --> 00:34:36,719
is right.
That leads me to other trades as

631
00:34:36,719 --> 00:34:38,159
well, some of which I haven't
written about.

632
00:34:38,159 --> 00:34:39,520
So I'll kind of keep them to
myself.

633
00:34:39,520 --> 00:34:45,719
But this is a this is a
potential problem that is now

634
00:34:46,320 --> 00:34:50,760
tightening the market in the way
that even Cobra Panama and and

635
00:34:50,840 --> 00:34:53,040
it it's it's it almost seems
like 1 after another, right?

636
00:34:53,040 --> 00:34:56,719
Like this is kind of maybe the
Cigar Lake equivalent, not in

637
00:34:56,719 --> 00:35:02,520
scale, obviously, but in sort of
shock value eventually for this

638
00:35:02,520 --> 00:35:07,160
cycle in copper.
You know, you had Kumo, Kukula,

639
00:35:07,160 --> 00:35:11,440
had that earthquake, they were
offline for months, The Cobra

640
00:35:11,440 --> 00:35:15,800
Panama issue last year.
There are a lot of misses and

641
00:35:15,800 --> 00:35:18,840
significant assets in a market
that's already kind of tight.

642
00:35:19,560 --> 00:35:22,680
I don't know, like it.
It feels like to me like if ever

643
00:35:22,680 --> 00:35:25,600
there was a moment where we
finally say goodbye to a $4.00

644
00:35:25,600 --> 00:35:28,400
copper, the stars are kind of
aligned and I just want to be

645
00:35:28,400 --> 00:35:31,800
there.
And the way I express it mostly

646
00:35:31,800 --> 00:35:34,880
is in that junior producer in
advanced exploration area

647
00:35:34,880 --> 00:35:39,800
because the reaction function of
the majors will be to add pounds

648
00:35:39,800 --> 00:35:45,560
quickly through M&A as that
price tag finally reacts.

649
00:35:47,800 --> 00:35:51,000
By the time we air this, it
might actually be another update

650
00:35:51,000 --> 00:35:55,240
out by, by Freeport.
My, my, my Intel.

651
00:35:55,240 --> 00:35:57,720
I've been asking around, just
trying to introduce what what

652
00:35:57,720 --> 00:35:59,440
reality looks like with, with
Grasberg.

653
00:35:59,440 --> 00:36:02,920
And what I've heard is
Freeport's likely to come out

654
00:36:03,160 --> 00:36:06,080
saying that they can ramp
volumes from the non block cave

655
00:36:06,080 --> 00:36:08,400
areas.
But the actual, yeah, the the

656
00:36:08,400 --> 00:36:12,080
block cave area itself, there's
like between 7:00 and 9:00

657
00:36:12,080 --> 00:36:14,080
kilometers of rehab that needs
to be done.

658
00:36:15,760 --> 00:36:18,760
Yeah, I think risk is certainly
to the downside on your ability

659
00:36:18,800 --> 00:36:21,720
to to, to, to ramp volumes from
the block cave.

660
00:36:23,160 --> 00:36:26,200
This will that's a really good
point.

661
00:36:26,200 --> 00:36:32,640
They will pull levers wherever
they can to try to manage the

662
00:36:32,640 --> 00:36:37,840
guidance because the last thing
they want is, you know,

663
00:36:37,840 --> 00:36:40,920
Freeport's the only copper
producer in the S&P 500 that

664
00:36:40,920 --> 00:36:43,200
suits them, right?
In the same way in uranium, like

665
00:36:43,200 --> 00:36:45,320
Chemico's the only super liquid
name.

666
00:36:45,320 --> 00:36:47,640
And no matter what the multiple
is, if people are hot for

667
00:36:47,640 --> 00:36:51,200
uranium, that's where the pod
shops and hedge funds and real

668
00:36:51,200 --> 00:36:53,040
money will go to buy first
because that's where the

669
00:36:53,040 --> 00:36:56,800
liquidity is.
But it's it's kind of a not

670
00:36:56,800 --> 00:36:59,000
dissimilar case with what's
happening with Camaco and

671
00:36:59,000 --> 00:37:01,080
MacArthur River cutting their
guidance.

672
00:37:01,120 --> 00:37:03,800
You know, they've been slow
walking this problem since the

673
00:37:03,800 --> 00:37:06,520
second quarter result where they
first whispered that mining is

674
00:37:06,520 --> 00:37:08,920
hard.
MacArthur River, you know, clay

675
00:37:08,920 --> 00:37:11,600
in this new zones.
This might take some time.

676
00:37:11,760 --> 00:37:13,920
And then a month later in
August, I guess it was they

677
00:37:13,920 --> 00:37:16,600
dropped the bomb that it's not
going to be 18,000,000 lbs.

678
00:37:16,600 --> 00:37:20,080
It's 14 to 15.
But just like you said, you

679
00:37:20,080 --> 00:37:23,480
know, we're going to try to flex
Cigar Lake and we can do

680
00:37:23,480 --> 00:37:26,720
£1,000,000 from that.
So there's no crisis here.

681
00:37:26,720 --> 00:37:30,440
And it's like this isn't like
when the uranium mill broke two

682
00:37:30,440 --> 00:37:32,880
years ago and you needed parts
and some labor in a few months.

683
00:37:32,880 --> 00:37:35,440
It was back up.
Like this sounds, this sounds

684
00:37:35,440 --> 00:37:37,760
like geology to me.
Like this sounds like there's an

685
00:37:37,760 --> 00:37:39,920
issue here that may take longer
to play.

686
00:37:40,400 --> 00:37:43,760
And what it like what is the
guidance for 26?

687
00:37:43,760 --> 00:37:46,280
Oh, you know that we always
release that in February.

688
00:37:46,600 --> 00:37:52,120
OK, but so you know, the the
cigar Lake like we can flex here

689
00:37:52,120 --> 00:37:55,320
thing.
I I get it a lot like it's you

690
00:37:55,320 --> 00:37:57,480
know, it makes sense to me that
Freeport's going to do what they

691
00:37:57,480 --> 00:38:03,000
can around the different ore
bodies there to they don't want

692
00:38:03,000 --> 00:38:05,320
to be in force majeure for
years, right like the these guys

693
00:38:05,320 --> 00:38:06,680
are in the business of mining
copper.

694
00:38:06,680 --> 00:38:11,080
I'm just saying that like this
story is just getting started.

695
00:38:11,120 --> 00:38:14,040
There were rumors also recently
within the last week that there

696
00:38:14,040 --> 00:38:16,960
are kind of press reports or
articles on the Comm that the

697
00:38:16,960 --> 00:38:20,680
situation there is a lot more
serious than Freeport so far as

698
00:38:20,680 --> 00:38:22,160
let on.
But hey, it's just smoke for

699
00:38:22,160 --> 00:38:23,600
now.
We'll see what they actually say

700
00:38:23,600 --> 00:38:26,520
and what happens.
I just, this is a point of

701
00:38:26,520 --> 00:38:30,240
vulnerability that the market
can't can't just dismiss and it

702
00:38:30,440 --> 00:38:34,640
like geopolitics and fading Iran
and Israel and all this other

703
00:38:34,640 --> 00:38:38,560
stuff in the oil market.
We're so immune now to supply

704
00:38:38,560 --> 00:38:42,040
disruptions that the market
didn't even react when they

705
00:38:42,040 --> 00:38:44,960
issued a press report saying
this thing might be offline for

706
00:38:45,000 --> 00:38:48,800
a year.
You know, because Komo Kukula

707
00:38:48,800 --> 00:38:51,640
had their issue didn't seem to
affect the market.

708
00:38:52,000 --> 00:38:54,520
Calgary, Panama had their issue,
didn't seem to affect the

709
00:38:54,520 --> 00:38:57,760
market.
Cheese tech guiding down at, you

710
00:38:57,760 --> 00:39:00,280
know, QB 2 like that was a big
one.

711
00:39:00,800 --> 00:39:04,320
Didn't seem to tighten the but
like, again, like nobody's

712
00:39:04,320 --> 00:39:07,040
paying attention.
And yeah, I guess like what

713
00:39:07,040 --> 00:39:08,560
we're going to need is the
forcing function.

714
00:39:08,560 --> 00:39:11,280
And suddenly somebody's going to
miss a big shipment and go into

715
00:39:11,280 --> 00:39:15,320
the spot market or like, you
know, take 200,000 tons out of

716
00:39:15,320 --> 00:39:19,040
LME and not be able to get it.
And then people realize, oh

717
00:39:19,040 --> 00:39:21,920
shit, the market's tight and you
know, here we go.

718
00:39:23,320 --> 00:39:25,640
It's, it's often the smallest
thing that's you know, it's a

719
00:39:25,640 --> 00:39:27,200
snowflake that sets off the
avalanche.

720
00:39:27,360 --> 00:39:31,200
This was a big snowflake.
I'm waiting for the little one

721
00:39:31,200 --> 00:39:33,440
that nobody sees coming.
And then we know we got it.

722
00:39:35,080 --> 00:39:37,960
It's such a, it's such an
enticing market, the, the copper

723
00:39:37,960 --> 00:39:39,920
market.
And yeah, it does feel like

724
00:39:39,920 --> 00:39:41,480
we're, we're kind of closer than
ever.

725
00:39:41,720 --> 00:39:44,280
I'm, I'm keen to touch on a few
other commodities as well,

726
00:39:44,280 --> 00:39:47,200
Paulo, uranium being one of them
that you've spoken a bunch

727
00:39:47,200 --> 00:39:50,040
about.
And I know you've got a, a, a

728
00:39:50,040 --> 00:39:52,880
long history with, with uranium
and you've thought about it

729
00:39:52,880 --> 00:39:55,480
pretty deeply.
You wrote a piece three or four

730
00:39:55,480 --> 00:39:58,680
months ago, I think it was
titled Uranium in the 20s is

731
00:39:58,680 --> 00:40:03,360
what silver was in.
In the 2000s and you know, that

732
00:40:03,360 --> 00:40:05,360
kind of sets the scene.
But I, I actually want to ask

733
00:40:05,360 --> 00:40:08,720
quite a specific one about how
you're thinking around next Gen.

734
00:40:08,720 --> 00:40:12,160
has changed to start, because
when we did last speak, you

735
00:40:12,160 --> 00:40:15,560
were, you were more on the
bearish end that that arrow gets

736
00:40:15,720 --> 00:40:18,520
gets developed or gets developed
in any kind of orderly time

737
00:40:18,520 --> 00:40:21,160
frame.
But lately you've written more

738
00:40:21,160 --> 00:40:24,120
to the point that you've been
accumulating and, and building

739
00:40:24,120 --> 00:40:26,640
that position again.
So how, how has your your

740
00:40:26,640 --> 00:40:29,080
thinking changed in, you know,
what is the most meaningful

741
00:40:29,080 --> 00:40:31,600
asset in the development space
in uranium right now?

742
00:40:33,160 --> 00:40:36,920
Yeah, that's a a bit of a loaded
question for me because I got I

743
00:40:36,920 --> 00:40:41,240
view next Gen. on paper.
You know, if I were a broker, I

744
00:40:41,240 --> 00:40:44,720
could pitch this all day.
You know, it's a liquid name in

745
00:40:44,720 --> 00:40:48,760
terms of investability from a
liquidity perspective.

746
00:40:48,800 --> 00:40:51,240
You know, I mentioned Camico's
like Freeport.

747
00:40:51,240 --> 00:40:53,040
That's where the big money will
go to play first.

748
00:40:53,520 --> 00:40:57,040
But if big money needs a second
name to rotate into that can

749
00:40:57,040 --> 00:41:01,600
torque and has a narrative to
it, next Gen. is it.

750
00:41:01,600 --> 00:41:05,920
You know, next Gen. reminds me a
lot of Twiggy and Fortescue in

751
00:41:05,920 --> 00:41:08,640
the early 2000s.
I met Twiggy before he had a

752
00:41:08,640 --> 00:41:11,120
mine.
He, you know, he was years

753
00:41:11,120 --> 00:41:16,280
removed from Anaconda Nickel and
he was pitching his project in

754
00:41:16,280 --> 00:41:21,320
New York and the name of the
presentation deck was the 4th

755
00:41:21,320 --> 00:41:24,360
force in iron ore.
And I loved it 'cause it was,

756
00:41:24,400 --> 00:41:26,720
you know, iron ore was volley
BHP in Rio.

757
00:41:26,720 --> 00:41:30,080
It they had just switched over
from annual contract

758
00:41:30,080 --> 00:41:33,720
negotiations to a spot market
and Japan was, you know,

759
00:41:33,720 --> 00:41:36,800
flipping to the Chinese in terms
of the demand driver and who was

760
00:41:36,800 --> 00:41:40,160
driving the negotiations.
And uranium kind of reminds me a

761
00:41:40,160 --> 00:41:42,360
little bit of that now, not in
the sense that it'll go from

762
00:41:42,360 --> 00:41:44,880
term to spot.
That's not going to happen

763
00:41:44,880 --> 00:41:48,000
because as much as we would love
that kind of level of price

764
00:41:48,000 --> 00:41:51,440
discovery in action simply
because of the, the lead time on

765
00:41:51,440 --> 00:41:54,640
the product for the natural
commercial end buyer, the

766
00:41:54,640 --> 00:41:58,800
decisions to take a core loading
start years before, you know,

767
00:41:59,080 --> 00:42:01,840
the, the uranium that goes into
the core loading is mined

768
00:42:01,840 --> 00:42:04,320
several years before the fuel is
loaded.

769
00:42:04,360 --> 00:42:08,080
So because of that just lag in
the cycle of of production,

770
00:42:08,920 --> 00:42:12,120
you're you're always going to be
predominantly a turn market.

771
00:42:12,480 --> 00:42:16,160
But yeah, as opposed to, you
know, iron ore, put it on mine

772
00:42:16,160 --> 00:42:20,000
it, put it on a boat, put it in
a blast furnace, ship steel,

773
00:42:20,280 --> 00:42:22,920
couple of months, right.
It's a short cycle product.

774
00:42:23,640 --> 00:42:28,200
In this case though, like
NextGen is sitting on a deposit

775
00:42:28,200 --> 00:42:32,040
that will wildly move the needle
and they're kind of he's kind.

776
00:42:32,640 --> 00:42:34,640
He is a little bit of scorpion
versus the frog too.

777
00:42:34,640 --> 00:42:37,080
Like Twiggy, you know, he's like
the disruptor in the space.

778
00:42:37,080 --> 00:42:40,560
Here's like Stodgy Tim and Grand
over at Kamiko.

779
00:42:41,000 --> 00:42:44,880
Like nobody wants to admit we
over contracted and got eager in

780
00:42:44,880 --> 00:42:49,000
21 and 22 and we look stupid
when uranium goes north of 100

781
00:42:49,000 --> 00:42:51,160
because we're realizing prices
at 60.

782
00:42:51,320 --> 00:42:54,240
But we've been conservative
bringing, you know, production

783
00:42:54,240 --> 00:42:57,800
back online and our contracting
strategy, yadda, yadda, yadda.

784
00:42:57,800 --> 00:43:01,520
It's like, OK, at least you
survived without going bankrupt.

785
00:43:01,520 --> 00:43:03,800
Like I'll give you that over the
last 10 years.

786
00:43:04,120 --> 00:43:07,400
But on the flip side, you know,
Lee is the kind of Twiggy, sharp

787
00:43:07,400 --> 00:43:09,200
elbows, you know, sort of
character.

788
00:43:09,520 --> 00:43:13,760
You know, he's out there like,
oh, yeah, I'm sponsoring Formula

789
00:43:13,760 --> 00:43:16,560
One in the Canucks because,
like, that's what the Saudis

790
00:43:16,560 --> 00:43:19,120
want to see, you know, and like,
I want them to buy the pounds.

791
00:43:19,120 --> 00:43:21,640
They were like, you know, anchor
my next raise.

792
00:43:21,640 --> 00:43:24,520
Like whatever, you know, he's
he's living.

793
00:43:24,600 --> 00:43:28,320
He's living the life.
But the more I've kind of honed

794
00:43:28,320 --> 00:43:31,440
in on this guy and it is it is
loaded for me as well because I

795
00:43:31,440 --> 00:43:36,600
wrote this kind of comparison to
Fortescue last April or or so.

796
00:43:36,600 --> 00:43:39,920
And that was right when uranium
was coming off the boil north of

797
00:43:39,920 --> 00:43:42,960
100 on spot.
And then he popped that convert

798
00:43:42,960 --> 00:43:45,520
and that raise where he, you
know, with MMM cap where he took

799
00:43:45,520 --> 00:43:48,520
a couple £1,000,000 and just,
but like, kudos to him.

800
00:43:48,520 --> 00:43:50,160
Like he raised like right there
at the top.

801
00:43:50,160 --> 00:43:53,800
And that was the end of the
uranium cycle for a while,

802
00:43:53,800 --> 00:43:56,240
right?
So his timing was impeccable.

803
00:43:57,080 --> 00:44:00,120
The more I kind of looked at the
asset look, I the asset still

804
00:44:00,120 --> 00:44:02,120
has problems.
It is nowhere as easy.

805
00:44:02,480 --> 00:44:05,600
It's like 25,000,000 lbs is not
a shoe in.

806
00:44:05,600 --> 00:44:08,120
I, I get the pitch.
This is an ISR, it's not as

807
00:44:08,120 --> 00:44:10,360
complicated.
A lot of this is still under a

808
00:44:10,360 --> 00:44:12,880
lake.
Like, it's not going to be easy,

809
00:44:13,280 --> 00:44:17,080
but I'm starting to see hints
that there's like some madness

810
00:44:17,080 --> 00:44:20,160
to the seeming throwing money
about.

811
00:44:20,840 --> 00:44:23,440
I like the fact that he's been
trying to keep a low profile

812
00:44:23,440 --> 00:44:26,360
recently because he wants the
federal permits to go through

813
00:44:26,360 --> 00:44:28,840
without an issue.
I I questioned, for example,

814
00:44:28,840 --> 00:44:31,520
when he popped the $600 million
raise he did two months ago.

815
00:44:31,840 --> 00:44:34,160
It was like, God damn it, Lee,
again, like you just did this

816
00:44:34,160 --> 00:44:35,760
last May.
You don't need the money now.

817
00:44:36,000 --> 00:44:39,200
Wait for 120 bucks a pound with
the stock at 12.

818
00:44:39,440 --> 00:44:41,800
Then pop the raising.
Like make one raising higher

819
00:44:41,800 --> 00:44:42,880
than the last.
You know what I mean?

820
00:44:42,920 --> 00:44:45,120
Like do it the right way and
stair step that thing up over

821
00:44:45,120 --> 00:44:46,600
the cycle.
But.

822
00:44:48,280 --> 00:44:52,440
I think it came close to a
billion Australian, yeah.

823
00:44:52,720 --> 00:44:54,600
Over.
I was, I was saying 600 US.

824
00:44:54,640 --> 00:44:58,800
Yeah, yeah, yeah.
So it's 300 there and 300 in

825
00:44:58,800 --> 00:45:01,960
Canada.
US and anchors in both.

826
00:45:02,720 --> 00:45:05,040
I mean, it's kind of an open
secret who anchored the

827
00:45:05,720 --> 00:45:09,120
Australia line, but let's just
say yeah.

828
00:45:09,600 --> 00:45:15,240
Hancock Prospecting.
So supposedly of the 300, she

829
00:45:15,240 --> 00:45:18,640
put her hand up for two more
than.

830
00:45:18,720 --> 00:45:21,040
Half 150.
It was like it was, I heard it

831
00:45:21,040 --> 00:45:29,120
was 200 and another super man, I
got to check my notes.

832
00:45:29,720 --> 00:45:33,120
A major super also put their
hand up for 100 and the book was

833
00:45:33,120 --> 00:45:36,480
basically spoken for.
So they had to upsize to kind of

834
00:45:36,560 --> 00:45:39,360
fit people in.
There was an anchor also on the

835
00:45:39,400 --> 00:45:42,240
US side who I don't know who it
is.

836
00:45:43,160 --> 00:45:48,560
It's a very big, very real name.
So what that suggests to me is

837
00:45:48,560 --> 00:45:52,640
that the Canadians who are all
holders of this thing, all the

838
00:45:52,640 --> 00:45:55,760
top guys in Kamico and you know,
there's crossover with next Gen.

839
00:45:55,760 --> 00:46:00,320
holders got barely a starter and
there's more buying to do in the

840
00:46:00,320 --> 00:46:02,440
coming weeks and months for them
to actually get a position.

841
00:46:02,440 --> 00:46:07,240
But also Kamico has done so well
over the last nine months.

842
00:46:07,800 --> 00:46:11,640
Imagine being a Toronto based
asset manager with $100 million

843
00:46:11,640 --> 00:46:13,720
position in Kamico that went to
300.

844
00:46:14,400 --> 00:46:18,240
Like the case is pretty easy to
then say, let me take 50 or 100

845
00:46:18,240 --> 00:46:20,760
million out of Kamiko and throw
it to NextGen just to kind of

846
00:46:20,760 --> 00:46:24,040
spread the bet, especially since
Nextgen's the one with actual

847
00:46:24,040 --> 00:46:27,320
production growth.
Meanwhile, like Kamiko, to their

848
00:46:27,320 --> 00:46:29,720
credit, despite the fact that
they're, you know, kind of over

849
00:46:29,720 --> 00:46:33,720
contracted on the on the look
back and having problems with

850
00:46:33,720 --> 00:46:37,440
MacArthur River and knock on
wood, like I, I, I don't know

851
00:46:37,680 --> 00:46:40,080
this for any kind of there's a
points of vulnerability at Cigar

852
00:46:40,080 --> 00:46:43,000
Lake and I'll leave it at that.
But production there's been

853
00:46:43,000 --> 00:46:48,240
fine, their pivot.
And and I underplayed this at

854
00:46:48,240 --> 00:46:50,400
the time because I thought the
acquisition was kind of silly,

855
00:46:50,840 --> 00:46:53,800
but the Westinghouse thing
clearly paid dividends.

856
00:46:53,800 --> 00:46:57,360
And now what I think you're
going to see very successfully

857
00:46:57,720 --> 00:47:01,800
is Kamiko pivots from being a
mining company to being a

858
00:47:01,880 --> 00:47:05,440
vertically integrated company
that's actually an engineering

859
00:47:05,440 --> 00:47:07,880
construction firm and a
developer of nukes.

860
00:47:08,200 --> 00:47:10,520
That's Trump adjacent, yada
yada, yada, through

861
00:47:10,520 --> 00:47:12,960
Westinghouse.
When you run unit economics on

862
00:47:12,960 --> 00:47:19,480
what an AP1000 is, you know,
numbers 1.2 billion revenue, you

863
00:47:19,480 --> 00:47:23,440
know, 2 to 50 million EBITDA
per, you know, put ten of these

864
00:47:23,440 --> 00:47:27,240
together, you're talking, I
don't know, 2 1/2 three billion

865
00:47:27,240 --> 00:47:30,840
of EBITDA obviously stretched
over time, but and that's

866
00:47:30,840 --> 00:47:36,440
attributable to them.
Man, like you slap like a, you

867
00:47:36,440 --> 00:47:40,720
know, 15 EBITDA multiple, like
like a top end engineering

868
00:47:40,880 --> 00:47:44,680
multiple on something like that.
Suddenly you're at thirty $35

869
00:47:44,680 --> 00:47:46,160
billion.
Like that's almost the market

870
00:47:46,160 --> 00:47:50,680
cap of Cameco like so they can
pivot their story away from low

871
00:47:50,680 --> 00:47:54,760
multiple mining is hard.
We missed again or like we

872
00:47:54,760 --> 00:47:58,120
screwed up, you know, to
actually being a downstream

873
00:47:58,120 --> 00:48:00,160
company.
And and mind you, the more

874
00:48:00,160 --> 00:48:05,680
successful there ENC is right
there AP 1000 is the more their

875
00:48:05,680 --> 00:48:09,640
mining company looks better,
right, Because their production

876
00:48:09,640 --> 00:48:13,320
needs to feed those things.
So they can also, you know, have

877
00:48:13,320 --> 00:48:16,160
line of sight from this
construction in this development

878
00:48:16,160 --> 00:48:21,400
track to filling that pipeline
with, you know, MacArthur River

879
00:48:21,400 --> 00:48:25,160
expansion, Rabbit Lake coming
out of care and maintenance and

880
00:48:25,160 --> 00:48:26,400
other things that they need to
track.

881
00:48:26,480 --> 00:48:30,760
Eventually, the deal that needs
to happen here over time is

882
00:48:30,760 --> 00:48:33,840
going to be Kamiko Byangaro,
right?

883
00:48:33,840 --> 00:48:37,520
Because Lee doesn't have a track
record of actual mind

884
00:48:37,520 --> 00:48:40,800
development in production.
It makes sense for this thing to

885
00:48:40,800 --> 00:48:45,600
be developed by Kamiko Orano.
But Kamiko and Next Gen. like,

886
00:48:45,600 --> 00:48:48,480
there's no love lost there.
You know, the guys at Kamiko,

887
00:48:48,480 --> 00:48:50,920
they can't even be on the same
panel at a conference as Lee.

888
00:48:50,960 --> 00:48:55,840
You know, it's old school
versus, you know, hot action

889
00:48:56,440 --> 00:48:59,360
these two.
I mean, they'll make an offer

890
00:48:59,360 --> 00:49:02,880
for next Gen. if Lee stubs his
toe and his stock is on his

891
00:49:02,880 --> 00:49:06,200
knees, but like it won't happen
otherwise.

892
00:49:06,640 --> 00:49:09,120
What's fascinating for me is I
still think next gen's asset has

893
00:49:09,120 --> 00:49:12,200
problems, but I see another
strategy taking hold here also

894
00:49:12,200 --> 00:49:14,760
because it started drone on
about this.

895
00:49:14,760 --> 00:49:15,880
But there's so much to think
about.

896
00:49:16,480 --> 00:49:20,480
You know, Lee is actually pretty
sharp guy as his conference call

897
00:49:20,480 --> 00:49:22,320
also this week was pretty
interesting to listen to.

898
00:49:22,320 --> 00:49:25,400
I encourage people to to have a
listen because it's clear that

899
00:49:25,400 --> 00:49:28,760
he's kind of one O 1 ING what
next Gen. is and kind of

900
00:49:28,760 --> 00:49:30,960
simplifying it for people to
understand.

901
00:49:31,640 --> 00:49:33,920
But there's so many interesting
directions this thing can go.

902
00:49:33,920 --> 00:49:37,640
For example, he could decide to
do the 1st 10,000,000 lbs first,

903
00:49:37,640 --> 00:49:39,080
right?
For a few years.

904
00:49:39,560 --> 00:49:42,720
You know, everybody's got
25,000,000 lbs penciled in for

905
00:49:42,720 --> 00:49:45,840
2031, but you know, he could
make it OK.

906
00:49:45,840 --> 00:49:48,360
So he's got £5,000,000 or
whatever of offtake 6,000,000

907
00:49:48,360 --> 00:49:51,640
lbs, something like that.
He can bring on £10,000,000 in

908
00:49:51,640 --> 00:49:54,800
the first few years and just
squeeze the market, or you can

909
00:49:54,800 --> 00:49:58,240
say I'm going to do £15,000,000
to start but I'm going to

910
00:49:58,240 --> 00:50:01,320
sequester 5.
I've got access to Saudi money.

911
00:50:01,720 --> 00:50:03,280
You know.
Sprott clearly doesn't.

912
00:50:03,280 --> 00:50:07,520
Do you know the best job And
yellow cake in the UK is

913
00:50:07,760 --> 00:50:10,960
completely grossly incompetent
and destroys value.

914
00:50:11,160 --> 00:50:15,000
Why they're not buying back
stock with the premium down 10%,

915
00:50:15,320 --> 00:50:19,480
the discount of 10% today after
dilutively adding 50 million

916
00:50:19,480 --> 00:50:22,800
bucks to the last race to pay
for the Kaz Adam Brown pounds is

917
00:50:22,840 --> 00:50:24,680
beyond me.
Sorry to be passionate, but like

918
00:50:24,920 --> 00:50:29,400
I've multiple guys into YC as
management like use the excess

919
00:50:29,400 --> 00:50:32,480
money to go buy back stock and
show that you can manage this

920
00:50:32,480 --> 00:50:34,120
discount because Sprott can't do
that.

921
00:50:34,320 --> 00:50:36,800
You can actually make a name for
yourself as a real product in

922
00:50:36,800 --> 00:50:38,960
the space.
So that guys are an orphan on an

923
00:50:38,960 --> 00:50:41,680
exit.
Down 10% in a uranium price

924
00:50:41,680 --> 00:50:44,000
that's actually showing signs of
starting to like with fits and

925
00:50:44,000 --> 00:50:46,520
starts to work.
Anyway, back to next Gen., like

926
00:50:46,800 --> 00:50:49,120
Leah's talked about over the
last two years about doing a

927
00:50:49,120 --> 00:50:52,200
sequester vehicle himself.
You know he lives in Adelaide,

928
00:50:52,200 --> 00:50:54,640
right?
What if he were to do one in

929
00:50:54,640 --> 00:50:59,560
Australia now the locals down
where you are and superfunds

930
00:51:00,080 --> 00:51:04,360
could buy uranium yellow cake a
la Spat without having going to

931
00:51:04,360 --> 00:51:07,720
Canada or the UK.
What if he seeds that and then

932
00:51:07,720 --> 00:51:11,400
spins that out, right?
Like, I don't have any Intel on

933
00:51:11,400 --> 00:51:14,400
this, I'm just speculating, but
I've read some of his public

934
00:51:14,400 --> 00:51:17,680
statements and I hear how he
talks kind of bottom line.

935
00:51:18,280 --> 00:51:22,120
I could see many ways where he
uses this kind of, yeah, I said

936
00:51:22,120 --> 00:51:25,520
fourth force and iron ore, the
third force in uranium right

937
00:51:25,520 --> 00:51:34,160
after Cap and Kamico where he
says, listen, if I don't get 125

938
00:51:34,160 --> 00:51:39,280
or 150 bucks a pound for Arrow
production, I'll sequester it.

939
00:51:39,760 --> 00:51:42,640
And you know, he's got the dual
listing for the stock in

940
00:51:42,640 --> 00:51:44,040
Australia as well.
But you always bugged me like,

941
00:51:44,040 --> 00:51:45,560
why are you raising in
Australia?

942
00:51:45,560 --> 00:51:47,320
Like who cares?
Like it trades by appointment

943
00:51:47,320 --> 00:51:49,040
anyway.
It's not like institutional

944
00:51:49,040 --> 00:51:50,480
Aussie money's really trading
there, right?

945
00:51:51,040 --> 00:51:53,840
It's kind of a it's a planted
flag, right?

946
00:51:53,960 --> 00:51:57,440
Like it never made sense from a
capital efficiency and

947
00:51:57,440 --> 00:52:00,680
allocation perspective.
But like, you know, he has

948
00:52:00,680 --> 00:52:03,040
talked about launching a
sequester in the past and nobody

949
00:52:03,040 --> 00:52:06,840
has one in ounces.
So what if he were to do 1 and

950
00:52:06,840 --> 00:52:10,360
spin that out and like, you
know, next Gen. has a stake in

951
00:52:10,360 --> 00:52:13,760
the spun out sequester, right?
And if he doesn't like the

952
00:52:13,760 --> 00:52:17,600
pricing and the term contracting
he's getting from utilities, he

953
00:52:17,600 --> 00:52:20,960
just sells to the sequester and
says, OK, like, you know, I'll

954
00:52:20,960 --> 00:52:24,080
wait, right?
But he's doing it in a, in a, in

955
00:52:24,080 --> 00:52:28,640
a way that I, I didn't give him
enough credit for his like

956
00:52:28,760 --> 00:52:32,920
ability to read how to piece
this market together and squeeze

957
00:52:32,920 --> 00:52:39,000
it to motivate utilities to see
the problem that Brownfield's

958
00:52:39,000 --> 00:52:41,200
overcommitted.
Mining is hard.

959
00:52:41,600 --> 00:52:45,480
The guys who, you know,
restarted, contracted at the

960
00:52:45,480 --> 00:52:48,200
wrong price.
Utilities don't want to pay up.

961
00:52:48,520 --> 00:52:51,480
What's worse is they didn't want
to do anything last year because

962
00:52:51,480 --> 00:52:53,800
of the election.
Now they haven't wanted to do

963
00:52:53,800 --> 00:52:56,000
anything this year.
And that we're well below

964
00:52:56,000 --> 00:53:00,200
replacement rate contracting for
25 because they're waiting for

965
00:53:00,200 --> 00:53:05,640
Trump to do his thing.
And if they screw up and there's

966
00:53:05,640 --> 00:53:09,000
not enough uranium and or it's
late and, you know, we have a

967
00:53:09,000 --> 00:53:13,640
problem, we'll just point the
finger at evil speculators and

968
00:53:13,880 --> 00:53:17,400
plead with Trump for, you know,
for salvation or something, you

969
00:53:17,400 --> 00:53:18,960
know, like just go to the
government and make it their

970
00:53:18,960 --> 00:53:22,400
problem.
Utility should be moving.

971
00:53:22,840 --> 00:53:26,600
There only seem to be one or two
guys in at least in the US who

972
00:53:26,600 --> 00:53:29,360
have their own independent
research that all pointed in the

973
00:53:29,360 --> 00:53:35,560
same direction that we need
higher pricing in uranium to

974
00:53:35,560 --> 00:53:39,480
incentivize Greenfield,
nevermind future brownfield or

975
00:53:39,560 --> 00:53:41,160
bring stuff out of care
maintenance.

976
00:53:41,600 --> 00:53:44,880
And as with everything, I think
it just comes in waves.

977
00:53:44,880 --> 00:53:48,680
And we've chewed through the rat
and mice production over the

978
00:53:48,680 --> 00:53:51,800
last two years of consolidation
after we had that first big run

979
00:53:51,800 --> 00:53:56,400
in kind of 21 and then 23.
And the third wave is now upon

980
00:53:56,400 --> 00:54:00,680
us.
Volume and contracting will be

981
00:54:00,680 --> 00:54:03,680
get price discovery on the top
side.

982
00:54:03,720 --> 00:54:06,960
It's not going to discover to
the downside, the noise and spot

983
00:54:07,200 --> 00:54:10,520
where traders bank it down like
this move just recently in the

984
00:54:10,520 --> 00:54:14,680
last two weeks from 82 down to
77, almost no pounds traded.

985
00:54:14,920 --> 00:54:18,440
This is a highly opaque market
that's just clamoring for price

986
00:54:18,440 --> 00:54:20,560
discovery.
And unfortunately, unlike iron

987
00:54:20,560 --> 00:54:23,080
ore in the early 2000s, it's not
going to get it with some

988
00:54:23,080 --> 00:54:25,160
transformation from term to
spot.

989
00:54:25,440 --> 00:54:31,440
It's going to take, you know,
adults in the room or my kind of

990
00:54:31,640 --> 00:54:35,400
conspiracy theory getting into
the beauty that is Trump.

991
00:54:36,920 --> 00:54:39,920
You probably heard me talking
right about like stay Trump

992
00:54:39,920 --> 00:54:41,800
adjacent.
The guy is clearly pointing the

993
00:54:41,800 --> 00:54:43,960
fire hose at critical minerals.
We all know this.

994
00:54:44,320 --> 00:54:47,160
I got this joke early in July,
August after he did the mountain

995
00:54:47,160 --> 00:54:48,760
pass deal.
He was just like, who's next,

996
00:54:48,760 --> 00:54:51,160
who's next, who's next?
And it's all started to roof

997
00:54:51,440 --> 00:54:54,040
come off the boil recently.
Big crashes and a lot of names

998
00:54:54,280 --> 00:54:57,880
doesn't matter.
There are points of contact here

999
00:54:58,120 --> 00:55:00,000
where Trump is clearly going to
throw money.

1000
00:55:00,320 --> 00:55:03,240
Chris Wright in Vienna six weeks
ago.

1001
00:55:03,480 --> 00:55:06,120
We are going to do a strategic
uranium reserve.

1002
00:55:06,640 --> 00:55:10,760
Amir Adnani from UEC teams up
with Goldman Sachs.

1003
00:55:10,880 --> 00:55:12,640
They initiate on his stock in
August.

1004
00:55:12,840 --> 00:55:16,760
He pops the following, does his
first real conference call after

1005
00:55:16,760 --> 00:55:21,440
the result a month ago.
The guy sounded on the

1006
00:55:21,440 --> 00:55:24,880
conference call like he had the
cat had just eaten the Canary,

1007
00:55:25,560 --> 00:55:28,160
talking about how things are
imminent with the government.

1008
00:55:28,160 --> 00:55:29,640
And then we got the federal
shutdown.

1009
00:55:30,480 --> 00:55:31,840
Commerce Department's been
closed.

1010
00:55:31,840 --> 00:55:35,080
They've been doing deals, but
it's all been DoD, right?

1011
00:55:35,080 --> 00:55:37,960
Like awards to critical minerals
from Department of Defense

1012
00:55:37,960 --> 00:55:39,280
because they're open for
business.

1013
00:55:39,840 --> 00:55:43,200
As soon as Lutnick is back in
the chair and the DOC is open,

1014
00:55:44,040 --> 00:55:46,880
we will see a plethora of deals.
Guess what?

1015
00:55:47,080 --> 00:55:49,760
The federal shutdown is set to
end either tomorrow or Thursday,

1016
00:55:49,760 --> 00:55:53,400
according to Polymarket.
So I think we've got a lot of

1017
00:55:53,400 --> 00:55:57,320
pent up action in the Department
of Commerce handing out and

1018
00:55:57,320 --> 00:56:00,520
signing contracts.
I think we're about to hear

1019
00:56:00,920 --> 00:56:04,280
either the announcement of a
strategic uranium reserve, which

1020
00:56:04,280 --> 00:56:08,880
will is basically the
announcement of 1/3 sequester on

1021
00:56:08,880 --> 00:56:15,640
the playing field, only one who
has unlimited ammo or I should

1022
00:56:15,640 --> 00:56:20,400
say and or a minimum floor price
like they did with Mountain Pass

1023
00:56:20,400 --> 00:56:23,120
and Niodymium and some of the
rare earths in the first deal

1024
00:56:23,480 --> 00:56:27,080
where they say we want to
incentivize US based uranium

1025
00:56:27,080 --> 00:56:29,360
production.
We used to do 10s of millions of

1026
00:56:29,360 --> 00:56:33,040
pounds a year 50 years ago.
Now we do like a couple of

1027
00:56:33,040 --> 00:56:36,680
£1,000,000.
We are a £50 million a year

1028
00:56:36,680 --> 00:56:38,400
market.
We are wholly dependent on

1029
00:56:38,400 --> 00:56:40,640
foreign supply.
We need to 10X production.

1030
00:56:40,640 --> 00:56:44,200
Now there are a handful of
players that can do this and

1031
00:56:44,640 --> 00:56:48,320
they need, they tell us that
they need, I don't know, 100 and

1032
00:56:48,320 --> 00:56:52,320
10120, a $130.00 a pound, let's
call it 125 a pound.

1033
00:56:53,400 --> 00:56:57,360
We will buy unlimited if you
produce in the US at 125 a

1034
00:56:57,360 --> 00:57:02,280
pound.
I am high delta that either of

1035
00:57:02,280 --> 00:57:05,000
those announcements are coming
in the next few months and it

1036
00:57:05,000 --> 00:57:07,320
feels to me with the federal
shutdown ending that it could be

1037
00:57:07,320 --> 00:57:10,080
weeks rather than months.
I don't want to say days because

1038
00:57:10,080 --> 00:57:12,040
who the hell knows.
I'm not in the business of

1039
00:57:12,040 --> 00:57:16,920
trading 0 DTE options, but
weeks, months, definitely the

1040
00:57:16,920 --> 00:57:21,360
stuff is in the crosshairs.
And if it's a focus on US

1041
00:57:21,360 --> 00:57:23,000
production, will that help the
Canadians?

1042
00:57:23,640 --> 00:57:26,600
Can't hurt.
I mean, Gina already owns Next

1043
00:57:26,600 --> 00:57:28,640
Gen.
We know she anchored the Rays.

1044
00:57:29,120 --> 00:57:32,480
Gina got a membership to the Mar
A Lago resort so that she can

1045
00:57:32,480 --> 00:57:34,440
hang out there and try to get an
audience with Trump.

1046
00:57:34,440 --> 00:57:38,080
And she's down there like all
the time from what I did, right?

1047
00:57:38,360 --> 00:57:42,640
And she she's, you know, very
right wing leaning.

1048
00:57:42,960 --> 00:57:45,440
So she's simpatico to the
message.

1049
00:57:46,480 --> 00:57:49,320
And Next Gen. is the horse that
she's chosen to back.

1050
00:57:49,320 --> 00:57:51,360
And we know that she loves to
have a seat at the table when it

1051
00:57:51,360 --> 00:57:56,440
comes to talking M&A.
You know, once Carney and Trump

1052
00:57:56,440 --> 00:57:59,040
finally figured their end out
and Trump stops beating up on

1053
00:57:59,280 --> 00:58:02,360
the 51st state and decides to do
the deal, I think he's waiting

1054
00:58:02,440 --> 00:58:04,840
for Canada to do them last,
right?

1055
00:58:05,000 --> 00:58:07,040
Because they're the easiest to
do with because, you know,

1056
00:58:07,040 --> 00:58:10,000
they're they're our neighbor.
But we need everything they they

1057
00:58:10,000 --> 00:58:11,920
have, right?
Like, you know, what are we

1058
00:58:11,920 --> 00:58:13,840
beating them up for?
Like, we need heavy crudes.

1059
00:58:14,160 --> 00:58:16,360
We really going to get it from
Venezuela, I guess like we're

1060
00:58:16,360 --> 00:58:20,040
going to try now, you know, and
knock out Maduro and get into

1061
00:58:20,400 --> 00:58:23,040
jungle guerrilla warfare for 10
freaking years.

1062
00:58:23,040 --> 00:58:24,920
I'm sure it'll all work out with
the Orinoco.

1063
00:58:24,920 --> 00:58:29,600
But Canada's easy, you know,
he's just waiting to do them

1064
00:58:29,600 --> 00:58:33,320
last.
So yeah, I see a a special spot

1065
00:58:33,320 --> 00:58:36,720
for next Gen. and all of this.
You know, it's got it's got room

1066
00:58:37,080 --> 00:58:41,880
and with $120.00 price deck,
Yeah, I know it's not cheap and

1067
00:58:41,880 --> 00:58:45,160
it's a big asset, you know,
that's five plus years away from

1068
00:58:45,160 --> 00:58:49,440
production.
But I mean, UEC at 7 1/2 billion

1069
00:58:49,440 --> 00:58:51,360
market cap.
Jesus.

1070
00:58:51,400 --> 00:58:53,240
Yeah.
That, that doesn't quite make

1071
00:58:53,240 --> 00:58:54,800
sense to me.
But that starts to make sense

1072
00:58:54,800 --> 00:58:59,320
too, with a triple digit price
tag and A and a floor price from

1073
00:58:59,440 --> 00:59:03,480
the US and maybe like a
sprinkling of, you know,

1074
00:59:03,800 --> 00:59:06,080
strategic uranium reserve.
Like, why don't we have one?

1075
00:59:06,080 --> 00:59:08,320
It doesn't make sense.
Like, as with everything Trump,

1076
00:59:08,320 --> 00:59:10,840
there's a kernel of truth
wrapped in the giant cartoon of

1077
00:59:10,840 --> 00:59:13,080
noise.
And you know what?

1078
00:59:13,160 --> 00:59:15,400
What is it called?
A flooding the zone but like the

1079
00:59:15,400 --> 00:59:17,880
kernel of truth is like we need
a strategic uranium reserve.

1080
00:59:17,880 --> 00:59:20,440
We need a floor price above the
market to incentivize domestic

1081
00:59:20,440 --> 00:59:22,120
production.
Like why aren't we doing this?

1082
00:59:23,160 --> 00:59:26,040
So I'm here for it.
And yeah, uranium, I'm I'm size.

1083
00:59:26,320 --> 00:59:29,560
Yeah, yeah, time to do homework
on a lot of those American based

1084
00:59:29,680 --> 00:59:33,560
names was was many months ago
and you know, no time like the

1085
00:59:33,560 --> 00:59:36,160
present to to get underway.
I'll close another one I've got

1086
00:59:36,160 --> 00:59:40,360
to ask you about though, Paolo,
Like just just crazy what what

1087
00:59:40,360 --> 00:59:42,960
has happened.
And I think in the last month

1088
00:59:43,000 --> 00:59:48,040
it's off 40 odd percent.
But it's, it's so interesting in

1089
00:59:48,040 --> 00:59:51,200
the uranium world because it
it's a big part of a few of

1090
00:59:51,200 --> 00:59:54,760
those Atfs that a lot of people
kind of play in, which is it

1091
00:59:54,760 --> 00:59:57,840
says, you know, something that
just makes, makes me think about

1092
00:59:58,480 --> 01:00:01,240
what correlation turns to when
when people run away from these

1093
01:00:01,240 --> 01:00:03,480
things.
But yeah, there's, there's,

1094
01:00:03,560 --> 01:00:06,040
there's a lot of kind of moving
parts to it, isn't there?

1095
01:00:07,320 --> 01:00:10,400
I'm sure with OCLO for one,
because I, you know, I wasn't

1096
01:00:10,400 --> 01:00:13,160
involved in, hey, if it's going
to go up 10X like I want to be

1097
01:00:13,160 --> 01:00:14,400
there, I don't care if it's a
Ponzi.

1098
01:00:14,880 --> 01:00:19,920
But yeah, it's also hard because
it is in the URA, which is

1099
01:00:19,920 --> 01:00:22,960
largest ETF.
You know that OCLO is, you're

1100
01:00:22,960 --> 01:00:24,800
going to crap when you hear
this.

1101
01:00:25,680 --> 01:00:31,440
OCLO is the largest weight in
the Russell 2000 value index

1102
01:00:33,800 --> 01:00:37,760
value.
It's also it's it's a top, you

1103
01:00:38,240 --> 01:00:42,280
know, it's a key weight top ten,
I think in the Russell 2000 full

1104
01:00:42,280 --> 01:00:45,880
stop, top 20.
I have to double check there.

1105
01:00:46,600 --> 01:00:49,720
But in the Russell 2000 value,
it's the largest constituent

1106
01:00:49,720 --> 01:00:52,480
like we really need that, you
know these, you know, it's like

1107
01:00:52,480 --> 01:00:54,760
when you talk about broadening
out and getting in the small cap

1108
01:00:54,760 --> 01:00:57,880
like you just can't take this
this stuff seriously anymore.

1109
01:00:57,880 --> 01:00:59,280
It.
Was half a size of.

1110
01:01:00,720 --> 01:01:04,200
Yeah, And, and this isn't going
to be a product for years, if at

1111
01:01:04,200 --> 01:01:06,640
all, but I guess we're going to
throw billions at it and we're

1112
01:01:06,640 --> 01:01:08,600
going to make it work.
You know, where there's a where

1113
01:01:08,600 --> 01:01:10,280
there's a will, there's a way,
especially when you throw

1114
01:01:10,280 --> 01:01:12,520
billions at it.
But the problem is that like

1115
01:01:12,520 --> 01:01:18,400
this pollutes this space needs
money, but it needs money like

1116
01:01:18,480 --> 01:01:22,560
where it matters, right,
Enrichment, conversion and

1117
01:01:22,760 --> 01:01:29,840
especially U3O8 that matters,
pie in the sky technology that

1118
01:01:30,120 --> 01:01:32,040
maybe works.
And listen, I don't want to

1119
01:01:32,040 --> 01:01:35,840
speak bad and like really crap
all over it because there are

1120
01:01:35,840 --> 01:01:39,560
hitters there and, you know, the
management team like they're no

1121
01:01:39,560 --> 01:01:42,320
dummies.
Like this stuff could work.

1122
01:01:42,760 --> 01:01:45,280
It's just like it feels like
we're skipping a step, you know,

1123
01:01:45,280 --> 01:01:49,960
and AP1000 works just fine.
And the Chinese equivalent, they

1124
01:01:49,960 --> 01:01:51,640
build these things for $2
billion.

1125
01:01:51,640 --> 01:01:55,920
Like our, you know, Votel in
Georgia cost 15 plus billion

1126
01:01:56,480 --> 01:01:59,880
because we spent 1520 years
building it and every two years

1127
01:01:59,880 --> 01:02:02,600
they had to go back for new
permits and redesign stuff and

1128
01:02:02,600 --> 01:02:04,600
oh, the cement is wrong.
We need to do that again.

1129
01:02:04,600 --> 01:02:07,560
Like, you know, if you cookie
cutter this and you say, and

1130
01:02:07,560 --> 01:02:09,640
this is kind of why I like the
Brookfield deal as well.

1131
01:02:10,320 --> 01:02:11,960
The first few are going to be
really expensive.

1132
01:02:12,360 --> 01:02:15,600
But once the supply chain and
the labor is retrained and set

1133
01:02:15,600 --> 01:02:18,520
up like the first five to 10 are
hard.

1134
01:02:19,160 --> 01:02:21,040
The economy, it's not even
economies of scale.

1135
01:02:21,040 --> 01:02:24,160
It's the experience of doing
more than a few of these.

1136
01:02:25,080 --> 01:02:28,160
You know, Georgia can't do 2 and
then, you know, it all works

1137
01:02:28,160 --> 01:02:29,000
out.
But then you stop.

1138
01:02:29,000 --> 01:02:32,240
Like you there, this needs a
Marshall Plan where, you know,

1139
01:02:32,240 --> 01:02:35,680
the first few are going to be
carried by the government as a

1140
01:02:35,680 --> 01:02:38,560
public loss because it's going
to take a few of these to do

1141
01:02:38,560 --> 01:02:41,720
economically.
Then why?

1142
01:02:41,720 --> 01:02:45,880
Like just expect that, you know,
the latest tech is going to be

1143
01:02:45,880 --> 01:02:49,040
the answer, you know, like or.
Yeah, I mean, it'd be even crazy

1144
01:02:49,040 --> 01:02:51,480
if we were like, oh, we're going
to make molten salt thorium work

1145
01:02:51,480 --> 01:02:52,840
and then we're going to do it in
three years.

1146
01:02:52,840 --> 01:02:56,000
OK, I guess.
But like, isn't it just so much

1147
01:02:56,000 --> 01:02:58,800
easier to take 50 year
technology that's been wildly

1148
01:02:58,800 --> 01:03:01,120
improved on the margin from a
perspective of safety and

1149
01:03:01,120 --> 01:03:04,560
efficiency and just learn how to
do that all over again while you

1150
01:03:04,560 --> 01:03:06,760
work on that other stuff for the
next 10 years?

1151
01:03:06,760 --> 01:03:10,280
Like it almost feels like it's
kind of like what they're, you

1152
01:03:10,280 --> 01:03:13,600
know, like in Africa where guys
said, let's skip this step of

1153
01:03:13,600 --> 01:03:17,320
building fixed line telephones
because cell phones are so much

1154
01:03:17,320 --> 01:03:20,560
easier and more efficient.
Like that I get, but like SMRS

1155
01:03:20,560 --> 01:03:23,760
have aren't even a thing yet.
You know, like let's let's focus

1156
01:03:23,760 --> 01:03:26,240
on SMRS if they exist and
they're cheaper and more

1157
01:03:26,240 --> 01:03:31,120
efficient, have a proven case.
But the problem is like it

1158
01:03:31,120 --> 01:03:34,000
memed.
It's now the largest constituent

1159
01:03:34,000 --> 01:03:40,160
in the Russell 2000 value index.
It is a top holding in URA, the

1160
01:03:40,160 --> 01:03:43,200
largest uranium index.
So it's like the fire hose of

1161
01:03:43,200 --> 01:03:47,560
passive as well as government
money got pointed in a direction

1162
01:03:48,360 --> 01:03:51,760
where the payback is going to be
a lot harder and take longer.

1163
01:03:51,800 --> 01:03:55,840
I'm like willing to be
surprised, but like the payback

1164
01:03:55,840 --> 01:03:59,200
is so much more immediate on the
stuff that's proven.

1165
01:04:00,560 --> 01:04:02,440
But I guess like it's kind of
spaghetti against the wall.

1166
01:04:02,440 --> 01:04:03,520
Like they're throwing it at
everything.

1167
01:04:03,520 --> 01:04:05,040
The Brookfield deal that made
sense.

1168
01:04:05,040 --> 01:04:09,000
That sounds smart.
A strategic uranium reserve and

1169
01:04:09,320 --> 01:04:12,640
subsidizing or guaranteed
pricing on US production.

1170
01:04:12,640 --> 01:04:15,240
Like that makes sense to me.
I I don't love the fact that

1171
01:04:15,240 --> 01:04:18,000
government's getting involved
in, you know, the economy like

1172
01:04:18,000 --> 01:04:20,760
this, but you know, there are no
atheists in foxholes.

1173
01:04:20,840 --> 01:04:23,080
You know, where else are we
going to get this stuff from?

1174
01:04:23,760 --> 01:04:28,320
So sorry to drone on about it,
but the OCLO cases pollute.

1175
01:04:28,320 --> 01:04:32,640
You know, they have OCLO single
name 2X ETFs now.

1176
01:04:33,080 --> 01:04:35,240
So like they have Leverty ETFs
just on OCLO.

1177
01:04:35,840 --> 01:04:40,520
They, you know, like NVIDIA,
they, they have, you know, heavy

1178
01:04:40,520 --> 01:04:43,600
weights and all these ETFs.
The fire hose is pointed in the

1179
01:04:43,600 --> 01:04:44,960
wrong direction.
Like that's a point of

1180
01:04:44,960 --> 01:04:48,400
frustration for me, compounded
by the fact that, like, I should

1181
01:04:48,400 --> 01:04:51,440
have known better.
It's tech, it's AI adjacent.

1182
01:04:51,600 --> 01:04:53,960
A lot of the guys own it who are
in that AI world.

1183
01:04:54,120 --> 01:04:56,440
So it's going to mean and
retail's going to love it.

1184
01:04:56,560 --> 01:04:58,800
And then the leverage is going
to pour in and the ETFs are

1185
01:04:58,840 --> 01:05:01,640
going to buy it blindly and take
it up waiting wise, blah, blah,

1186
01:05:01,640 --> 01:05:03,880
blah, blah, blah.
You know, could have, would

1187
01:05:03,880 --> 01:05:05,880
have, should have.
But it's, it's frustrating

1188
01:05:05,880 --> 01:05:08,320
because it doesn't address the
more acute issue at hand over

1189
01:05:08,320 --> 01:05:11,920
the next five years, which is we
need to invest in supply chain,

1190
01:05:12,200 --> 01:05:14,720
we need enrichment.
You know, we we certainly could

1191
01:05:14,720 --> 01:05:18,760
use some more conversion and you
know, we need more yellow cake.

1192
01:05:19,920 --> 01:05:22,880
Yeah, absolutely.
And I think those, you know, the

1193
01:05:22,880 --> 01:05:25,760
double and the triple levered
products that you you mentioned

1194
01:05:25,760 --> 01:05:30,040
there, I'm curious to see how
they viewed upon 10 years, 20

1195
01:05:30,040 --> 01:05:33,640
years down, down the road.
There's, there's one more

1196
01:05:33,640 --> 01:05:36,320
commodity I've got to ask you
about, Paolo.

1197
01:05:36,560 --> 01:05:39,360
There's, you know, the, the
copper narrative, uranium, what

1198
01:05:39,360 --> 01:05:41,480
you've spoken to, they're all
pretty tantalizing.

1199
01:05:41,480 --> 01:05:44,920
But you made the comment a
little while ago that oil is to

1200
01:05:44,920 --> 01:05:48,640
2026 what gold has been to to
2025.

1201
01:05:49,000 --> 01:05:52,200
I'm keen to to hear as much or
as as little as you want to talk

1202
01:05:52,200 --> 01:05:55,520
about this one because I I find
it a super enticing space to

1203
01:05:55,520 --> 01:05:59,280
play in.
Yeah, I remember I went on a

1204
01:05:59,280 --> 01:06:02,200
long diatribe about oil a year
ago with you guys talking about

1205
01:06:02,200 --> 01:06:04,800
like long oil sands, short
Permian.

1206
01:06:05,560 --> 01:06:08,200
And then of course, Trump beat
the shit out of Canada.

1207
01:06:08,200 --> 01:06:10,680
And, you know, kind of, well,
sands have been coming off the

1208
01:06:10,680 --> 01:06:17,920
mat, I guess.
But I I like the fact that oil

1209
01:06:17,920 --> 01:06:20,880
has been so relentlessly kind of
beat up every time a Prairie

1210
01:06:20,880 --> 01:06:26,280
Dyson pokes its head up out of
the ground that it's just, it's,

1211
01:06:26,280 --> 01:06:30,040
it's not quite left for dead.
It's just it can't possibly work

1212
01:06:30,040 --> 01:06:31,520
because Trump doesn't want it to
work.

1213
01:06:31,520 --> 01:06:33,520
So if it rallies, he's just
going to beat the hell out of

1214
01:06:33,520 --> 01:06:35,680
it.
And, you know, he wants lower

1215
01:06:35,680 --> 01:06:40,440
oil prices by hook or crook.
OK, I guess like the future of

1216
01:06:40,440 --> 01:06:42,120
the world is totally in his
hands.

1217
01:06:42,120 --> 01:06:47,080
But there there is a quote
spring issue going on in the oil

1218
01:06:47,120 --> 01:06:50,280
that I'll try to distill down in
as few minutes as possible.

1219
01:06:50,280 --> 01:06:58,680
And basically it's that with the
Saudi or the OPEC cuts being

1220
01:06:58,760 --> 01:07:05,480
unwound, a buddy of mine over at
HFR Research who's a real barrel

1221
01:07:05,480 --> 01:07:09,600
counter driven by the data, he
always called it the Saudi cut

1222
01:07:09,960 --> 01:07:13,480
as the Saudis unwounded.
The first kind of couple 100,000

1223
01:07:13,480 --> 01:07:15,960
barrels earlier this year were
easy because they were doing it

1224
01:07:15,960 --> 01:07:18,320
in advance of the, you know, the
cooling season in the summer

1225
01:07:18,320 --> 01:07:21,640
where it's 100 plus degrees.
They, you know, have oil fired

1226
01:07:23,120 --> 01:07:24,920
electricity for AC, what have
you.

1227
01:07:25,440 --> 01:07:28,320
And the rubber was always going
to meet the road after the

1228
01:07:28,320 --> 01:07:32,640
summer passes.
And we are seeing builds.

1229
01:07:32,840 --> 01:07:37,200
Generally speaking, how much of
that has to do with demand not

1230
01:07:37,200 --> 01:07:42,760
keeping up in the West versus
Ukraine just bombing the hell

1231
01:07:42,760 --> 01:07:46,480
out of Russian refinery capacity
and products not getting to

1232
01:07:46,480 --> 01:07:49,120
where they need to go?
You're seeing crack spreads

1233
01:07:49,120 --> 01:07:52,000
moon, right?
Like we're at 30 refining stocks

1234
01:07:52,000 --> 01:07:56,280
are on a tear.
The refining is actually, if you

1235
01:07:56,280 --> 01:08:00,480
look at products right, diesel,
gasoline, like crack spreads

1236
01:08:00,560 --> 01:08:05,640
right now, just the spread looks
like it's doing what it did in

1237
01:08:05,640 --> 01:08:08,240
the lead up to the invasion in
22.

1238
01:08:08,800 --> 01:08:12,120
Like those guys are have are
reliving the same cycle where

1239
01:08:12,120 --> 01:08:14,200
they're just mooning and it's
never been more profitable.

1240
01:08:14,400 --> 01:08:19,600
But oil can't get off the mat.
And we're in a window here where

1241
01:08:19,600 --> 01:08:22,040
the equities have already
started to sniff out of recovery

1242
01:08:22,600 --> 01:08:26,240
and guys were selling oilfield
services stocks like Weatherford

1243
01:08:26,279 --> 01:08:33,160
that got to 135 two years ago, a
year ago in the 30s, just six

1244
01:08:33,160 --> 01:08:38,560
months ago, we're back at 7275.
Schlumberger, same thing.

1245
01:08:38,560 --> 01:08:41,800
Like we've seen even the
offshore guys, you know, like

1246
01:08:41,800 --> 01:08:45,319
Valeris was I think 20 handle
now it's in the 50s.

1247
01:08:46,160 --> 01:08:47,640
A lot of the stuff has already
bounced.

1248
01:08:47,640 --> 01:08:51,359
Tidewater went to north of 100.
So I don't know, 30s now in the

1249
01:08:51,359 --> 01:08:54,600
50s, equities always kind of
smell at first because there's

1250
01:08:54,600 --> 01:08:57,200
the optionality of a turn that's
kind of being sniffed out.

1251
01:08:59,120 --> 01:09:04,080
But what I think is interesting
here is we are in kind of the

1252
01:09:04,080 --> 01:09:10,720
last bringing on the available
surplus capacity as exhibited by

1253
01:09:10,720 --> 01:09:15,160
OPEC like we're down to I, I
personally have believed and

1254
01:09:15,160 --> 01:09:17,920
continue to believe that the
Saudis don't have the

1255
01:09:17,920 --> 01:09:20,640
wherewithal to take production
above 10 and a half million

1256
01:09:20,640 --> 01:09:23,040
barrels a day.
This is evidenced by the fact

1257
01:09:23,040 --> 01:09:26,120
that they did it during COVID
and the moment they got above

1258
01:09:26,120 --> 01:09:29,880
that number 10 and a quarter 10
1/2, they started to draw above

1259
01:09:29,880 --> 01:09:32,680
ground inventory.
They have to, they, they're

1260
01:09:32,680 --> 01:09:35,399
capable of doing more, but they
have to invest for it.

1261
01:09:35,960 --> 01:09:39,800
Funny enough, they've started to
send up players about bringing

1262
01:09:40,160 --> 01:09:44,880
shallow Jack UPS back on.
They're starting to tiptoe

1263
01:09:44,880 --> 01:09:49,840
towards some CapEx in laying the
groundwork for what I think they

1264
01:09:49,840 --> 01:09:52,960
see two to three years out,
which is we don't have a lot of

1265
01:09:52,960 --> 01:09:55,520
runway left.
You know, they've got, I think

1266
01:09:55,520 --> 01:09:58,120
they're kind of mid nines now.
So they have less than, you

1267
01:09:58,120 --> 01:10:01,600
know, call it a million barrels
of capacity to go.

1268
01:10:02,840 --> 01:10:06,720
UAE has a bit of spare.
Iraq is almost there.

1269
01:10:06,960 --> 01:10:08,360
Key players are pretty much
there.

1270
01:10:08,680 --> 01:10:13,120
Non OPEC, you know, Brazil,
Guyana, there's not actually a

1271
01:10:13,120 --> 01:10:14,960
surprising amount of room there.
That's where the growth has

1272
01:10:14,960 --> 01:10:16,880
been.
There's not a ton of room there.

1273
01:10:17,800 --> 01:10:21,720
I kind of shake out into like
the maybe two to two and a half

1274
01:10:21,720 --> 01:10:26,440
million barrels left, not even.
And that's not a lot of room in

1275
01:10:26,440 --> 01:10:30,760
the market doing 100 and 405
million barrels a day.

1276
01:10:30,760 --> 01:10:32,920
And according to others, like
we're doing more than that.

1277
01:10:32,920 --> 01:10:36,800
We just don't see it.
And the biggest thought to me is

1278
01:10:37,000 --> 01:10:40,600
China is the the best physical
oil trader in the world because

1279
01:10:40,600 --> 01:10:43,440
they have to be right.
They've been building out new

1280
01:10:43,440 --> 01:10:45,680
tanks and they've been filling
them with oil.

1281
01:10:45,680 --> 01:10:48,200
In the 60s.
If they thought that we were

1282
01:10:48,200 --> 01:10:50,760
going to see 40 or 50, they
wouldn't be buying.

1283
01:10:50,760 --> 01:10:54,000
And they've been waving it in.
I don't know.

1284
01:10:54,000 --> 01:10:57,040
For me, I'm finally kind of
seeing us get to a point where

1285
01:10:57,560 --> 01:11:00,120
especially with a weak dollar
debasement, Trump, what have

1286
01:11:00,120 --> 01:11:02,880
you, the dollar rolls over
again, you're going to have one

1287
01:11:02,880 --> 01:11:07,040
hell of a demand push in
emerging markets, which is where

1288
01:11:07,040 --> 01:11:14,480
that S curve of 3030 five, $100
per capita GDP, you know, GDP

1289
01:11:14,480 --> 01:11:20,960
per capita kicks in and the kick
definitely shows in OpEx

1290
01:11:20,960 --> 01:11:24,120
commodities like energy because
the guy goes from taking a

1291
01:11:24,120 --> 01:11:26,040
bicycle to buying a scooter,
right?

1292
01:11:26,040 --> 01:11:30,000
Like that whole kind of step
function where the intensity of

1293
01:11:30,000 --> 01:11:34,760
energy consumption stairs stair
steps higher.

1294
01:11:34,960 --> 01:11:38,160
So to put a bow on it, the
equities are clearly sniffing a

1295
01:11:38,160 --> 01:11:41,920
turn.
There's we're transitioning to a

1296
01:11:41,920 --> 01:11:45,480
world where for decades OPEC
always had millions of barrels

1297
01:11:45,480 --> 01:11:49,560
of spare market would rally, you
know they bring on production

1298
01:11:49,560 --> 01:11:52,800
market would fall.
We're kind of getting to a world

1299
01:11:52,880 --> 01:11:59,640
where there's got to be a lot of
expenditure to bring on supply

1300
01:11:59,640 --> 01:12:02,320
growth at a time where demand
could go from that kind of

1301
01:12:02,320 --> 01:12:10,400
steady Eddy million barrels of
growth per year to a pop as you

1302
01:12:10,400 --> 01:12:15,080
run into this S curve in the
global South in the next two

1303
01:12:15,080 --> 01:12:20,200
years, precipitated or helped
along by a weak dollar that, you

1304
01:12:20,200 --> 01:12:22,840
know, like the US doesn't really
grow on the products front.

1305
01:12:22,840 --> 01:12:26,760
Like we, we're, you know, GDP
per capita here, like we're past

1306
01:12:26,760 --> 01:12:28,760
the S curve.
The developed market is already

1307
01:12:28,760 --> 01:12:33,040
consuming.
It's, you know, 10121320 barrels

1308
01:12:33,040 --> 01:12:38,360
per per capita annually.
You know, China's doing 4.

1309
01:12:38,880 --> 01:12:45,960
You know, we're, I think Korea
does 13 US, Australia's at 20.

1310
01:12:45,960 --> 01:12:48,600
I have to refresh my notes and
again I'm a bottle of wine in,

1311
01:12:48,600 --> 01:12:53,960
but there you know, India's at 1
1/2 a billion people.

1312
01:12:53,960 --> 01:12:58,320
Like let's do maths.
If India goes from 1 1/2 to 2

1313
01:12:58,320 --> 01:13:02,440
barrels of per capita
consumption annually, just a

1314
01:13:02,440 --> 01:13:13,880
half a barrel per capita, that's
5700 million barrels in a year

1315
01:13:13,960 --> 01:13:19,240
of growth dude.
Divided by 365, that's 2 million

1316
01:13:19,240 --> 01:13:21,800
barrels of incremental on one O
5 million barrels a day.

1317
01:13:22,120 --> 01:13:23,600
So you go from one O 5 to one O
7.

1318
01:13:23,600 --> 01:13:25,600
Maybe that happens over two or
three years, but like India's

1319
01:13:25,600 --> 01:13:29,880
growing man.
So there's not an awful lot of

1320
01:13:29,880 --> 01:13:35,600
spare to basically what I'm
saying is we've got Hacienda

1321
01:13:35,600 --> 01:13:38,640
hedge in Mexico to do here.
You know, between Thanksgiving

1322
01:13:38,640 --> 01:13:42,160
and Christmas.
We've got builds which nobody

1323
01:13:42,160 --> 01:13:44,920
likes to see because we should,
you know, you know, refineries

1324
01:13:44,920 --> 01:13:46,280
have come out of turn around,
right?

1325
01:13:47,160 --> 01:13:49,880
We we should be seeing I guess
we should, you know, we're going

1326
01:13:49,880 --> 01:13:51,520
to be building into the winter
months.

1327
01:13:52,120 --> 01:13:56,880
That's fine.
But there we better build a lot

1328
01:13:57,640 --> 01:14:04,840
because if EM comes out in 26
with some punch and the Saudis

1329
01:14:04,920 --> 01:14:08,200
unwind the rest of their cuts,
like mid next year or later next

1330
01:14:08,200 --> 01:14:13,720
year, oil is going to run into a
situation where, you know,

1331
01:14:13,800 --> 01:14:16,520
incremental 20,000 barrels,
50,000 barrels from private

1332
01:14:16,520 --> 01:14:18,040
players is not going to move the
needle.

1333
01:14:18,600 --> 01:14:22,160
And the key players are not
going to have the spare.

1334
01:14:23,040 --> 01:14:26,520
Yeah.
Plus, like, you know, Russia's.

1335
01:14:27,480 --> 01:14:29,760
Yeah, I I tend to think that
people overdid it on the whole

1336
01:14:29,760 --> 01:14:33,040
fear of the CapEx is all going
to flee and their production is

1337
01:14:33,040 --> 01:14:34,320
going to immediately tank.
It didn't.

1338
01:14:34,720 --> 01:14:38,040
But they're now three years into
this, you know, five years of

1339
01:14:38,040 --> 01:14:40,880
underinvestment in these fields.
Like, yeah, you start to see it.

1340
01:14:40,880 --> 01:14:44,440
So the equities are smelling a
turn.

1341
01:14:44,440 --> 01:14:47,480
The way I'm playing it
personally, I'm in December

1342
01:14:47,480 --> 01:14:49,560
27th.
So I've got like 2 years left on

1343
01:14:49,560 --> 01:14:54,680
this stuff, $100 calls on WTI
futures.

1344
01:14:55,360 --> 01:15:01,080
You know, for a buck, dude, like
can oil and the curve is flat

1345
01:15:01,080 --> 01:15:04,440
basically, right?
Like in the 60s, can oil rally

1346
01:15:04,840 --> 01:15:09,200
50% to 100% in two years?
Of course, like in the situation

1347
01:15:09,200 --> 01:15:12,880
where we start to bump up
against global capacity, Yeah, I

1348
01:15:12,880 --> 01:15:14,400
could.
I'm not saying it'll moon like

1349
01:15:14,400 --> 01:15:16,640
'cause you get demand
destruction above like 1/25,

1350
01:15:16,640 --> 01:15:19,160
1:50.
But dude, for a buck, like,

1351
01:15:19,160 --> 01:15:22,560
yeah, I'll take let's let's
skate to where the puck is going

1352
01:15:22,560 --> 01:15:24,240
to be.
The curve starts, the backward 8

1353
01:15:24,760 --> 01:15:27,760
gets tighter and tighter as we
work through 26 in the 27

1354
01:15:27,760 --> 01:15:29,760
world's growing.
They're running it hot.

1355
01:15:29,760 --> 01:15:32,560
Everybody's running it hot.
Everybody's in the fiscal, EMS

1356
01:15:32,560 --> 01:15:35,360
are on fire.
And now oil's 1:30.

1357
01:15:35,440 --> 01:15:37,360
That's 30 to one man.
It'd be in the money.

1358
01:15:38,520 --> 01:15:40,040
And like, would that be so
crazy?

1359
01:15:40,040 --> 01:15:42,160
Like we were just at 125 three
years ago.

1360
01:15:42,880 --> 01:15:45,520
It, it just, it seems like
longer dated options are

1361
01:15:45,520 --> 01:15:48,120
mispriced.
But the way to do it for you,

1362
01:15:48,200 --> 01:15:51,680
you know, for most people is
some of these equities like you

1363
01:15:51,680 --> 01:15:54,800
can two or three bag, right?
Like for me, I just I like to

1364
01:15:55,280 --> 01:15:57,160
tuck stuff in the back of the
book that won't bleed on me

1365
01:15:57,160 --> 01:16:00,640
because I've got so much time.
But the equities right now like

1366
01:16:01,360 --> 01:16:05,200
have already smelled the turn
and are telling you that we

1367
01:16:05,200 --> 01:16:08,360
either like need a real serious
globally synchronized recession

1368
01:16:08,360 --> 01:16:13,960
to, you know, kind of preserve
that buffer in in supply or, you

1369
01:16:13,960 --> 01:16:15,920
know, the price tag is going to
have to move as well.

1370
01:16:16,360 --> 01:16:21,960
And I guess like for me, gold
worked this year.

1371
01:16:21,960 --> 01:16:24,680
The miners like felt like they
should have worked a long time

1372
01:16:24,680 --> 01:16:26,640
ago.
They've re rated with the gold

1373
01:16:26,640 --> 01:16:28,840
price, but they're still kind of
trading similar multiples like

1374
01:16:28,840 --> 01:16:32,200
they're gushing cash free cash
flow yields are high at 4000 an

1375
01:16:32,200 --> 01:16:34,080
ounce.
Like nothing's really changed

1376
01:16:34,080 --> 01:16:35,880
except that they just kind of
tracked and somewhat

1377
01:16:35,880 --> 01:16:38,880
outperformed the gold price, but
they had margin expansion

1378
01:16:38,880 --> 01:16:42,240
because of cheap oil.
But gold was invisible a year

1379
01:16:42,240 --> 01:16:44,480
ago, despite the fact that the
price was already running, you

1380
01:16:44,480 --> 01:16:47,600
know, with post Israel, Hamas
and and all that stuff.

1381
01:16:47,600 --> 01:16:51,640
Like we were already knocking on
2000 a year ago.

1382
01:16:53,240 --> 01:16:55,400
Then suddenly the gold miners
woke up in 25.

1383
01:16:55,400 --> 01:16:56,880
I don't know what made people
wake up.

1384
01:16:56,880 --> 01:16:58,800
Like I guess people just saw
that they were cheap.

1385
01:16:59,600 --> 01:17:00,800
You know, oil equities are
cheap.

1386
01:17:00,800 --> 01:17:02,680
Like they're invisible.
Like oil is invisible.

1387
01:17:02,680 --> 01:17:04,160
Like it's not even contentious
anymore.

1388
01:17:04,160 --> 01:17:06,280
Just nobody gives a crap because
it never works.

1389
01:17:06,360 --> 01:17:08,480
You know, it's been in a slow
bleed forever.

1390
01:17:08,480 --> 01:17:11,080
At some point it'll start to
work and then the equities will

1391
01:17:11,080 --> 01:17:14,120
look really cheap and suddenly
like, I don't know.

1392
01:17:14,120 --> 01:17:18,200
That's why I say like for me,
the meme is oil is to 26 what

1393
01:17:18,200 --> 01:17:21,880
gold was to 25.
You know, you know, oily MP in

1394
01:17:21,880 --> 01:17:23,960
oil in 26 is what gold was in
25.

1395
01:17:23,960 --> 01:17:26,560
Changed my mind like that silly
guy, like sitting on the campus

1396
01:17:26,560 --> 01:17:31,160
with his little sign.
So I I think that's not to

1397
01:17:31,160 --> 01:17:35,160
impugn gold, but like doesn't it
also fit like the gold oil ratio

1398
01:17:35,160 --> 01:17:39,520
is really something right now,
right, Kind of like. 60 or 65

1399
01:17:39,560 --> 01:17:40,920
or.
Yeah, Like are we really going

1400
01:17:40,920 --> 01:17:42,280
to live in a world where it's
100?

1401
01:17:43,120 --> 01:17:46,320
Like did we really get that good
at drilling for oil?

1402
01:17:46,400 --> 01:17:49,400
Like bravo to the industry.
I get it longer laterals, bro.

1403
01:17:49,400 --> 01:17:53,400
But like and that's the other
thing also there is this debate,

1404
01:17:53,480 --> 01:17:56,320
it shouldn't even be a debate
that a lot of the Permian

1405
01:17:56,320 --> 01:18:01,080
production which is plateaued,
we had a pop guys are clearly

1406
01:18:01,360 --> 01:18:04,840
harvesting a lot on the Iran
hedges since June.

1407
01:18:05,200 --> 01:18:08,200
But now we're coming back down
and we went from suddenly

1408
01:18:08,400 --> 01:18:13,320
spiking about 14,000,000 barrels
a day and IEA data for August

1409
01:18:13,320 --> 01:18:16,960
and September to like now back
to like mid thirteens on the

1410
01:18:16,960 --> 01:18:20,120
weekly.
And what's interesting about all

1411
01:18:20,120 --> 01:18:24,440
this is like this was very clear
in June on the Iran pop when

1412
01:18:24,440 --> 01:18:28,360
when they bombed Iran that
commercials were hedging like

1413
01:18:28,360 --> 01:18:30,960
crazy.
It's natural for them to do

1414
01:18:30,960 --> 01:18:32,760
this.
But those hedges are now like

1415
01:18:32,760 --> 01:18:36,680
they're they're playing through
and it's something that we see

1416
01:18:36,680 --> 01:18:40,240
in natural gas drilling as well.
Like it's a free option to hedge

1417
01:18:40,240 --> 01:18:45,520
for these guys in the Permian
because and equivalently in the

1418
01:18:45,520 --> 01:18:48,840
Haynesville for that gas.
Think like let's say you do

1419
01:18:50,120 --> 01:18:55,720
100,000 barrels a day, you get a
pop in the price, you go out and

1420
01:18:55,720 --> 01:18:58,800
you hedge 100,000 barrels 6
months out.

1421
01:18:59,680 --> 01:19:03,840
If the oil price is rallied, you
go out because this is short

1422
01:19:03,840 --> 01:19:07,400
cycle stuff.
You spud, you frack pad a ton of

1423
01:19:07,400 --> 01:19:11,080
stuff real fast and you now do
200,000 barrels a day and you

1424
01:19:11,080 --> 01:19:14,840
deliver 100,000 into the hedge
and you sell your original

1425
01:19:14,840 --> 01:19:18,440
100,000 at the higher spot and
your income statement looks

1426
01:19:18,440 --> 01:19:21,800
amazing.
If the price collapses and you

1427
01:19:21,800 --> 01:19:25,280
hedged properly, you just
deliver into the hedge, but you

1428
01:19:25,280 --> 01:19:27,480
don't grow your production from
1 to 200,000.

1429
01:19:27,680 --> 01:19:32,040
So hedging actually introduces
optionality for the commercial

1430
01:19:32,040 --> 01:19:34,840
to flex.
And that's clearly what happened

1431
01:19:34,840 --> 01:19:38,360
after Iran in June.
But like suddenly the numbers

1432
01:19:38,360 --> 01:19:41,240
are reversing pretty fast.
So it shows you that the hedges

1433
01:19:41,240 --> 01:19:44,720
are, are running off and guys
are not reinvesting in the

1434
01:19:44,720 --> 01:19:47,720
patch.
On top of that, you know,

1435
01:19:48,560 --> 01:19:52,680
there's a lot of baking soda in
the nose candy guys like the

1436
01:19:53,000 --> 01:19:57,440
natural gas liquids that, you
know, keep getting talked about.

1437
01:19:57,800 --> 01:20:01,280
The I, the EIA is, is totally
silent on this stuff.

1438
01:20:01,280 --> 01:20:05,960
They've been passed point blank.
You are you misclassifying Ng LS

1439
01:20:05,960 --> 01:20:10,720
as crude like I don't understand
why they just won't come out and

1440
01:20:10,720 --> 01:20:14,120
clear this up.
But when I talk to guys who

1441
01:20:14,120 --> 01:20:16,960
operate pipelines, they're
seeing this content.

1442
01:20:17,240 --> 01:20:20,400
They're seeing paraffin in a lot
of the grades that they ship as

1443
01:20:20,400 --> 01:20:21,880
well.
You got to heat those pipelines

1444
01:20:21,880 --> 01:20:25,520
to keep the oil moving.
Their games being played to

1445
01:20:25,960 --> 01:20:28,640
quote UN quote maximize volumes
around the edges because tier

1446
01:20:28,640 --> 01:20:30,280
one has been largely drilled
out.

1447
01:20:30,320 --> 01:20:32,520
It's not just longer laterals
and more efficiency.

1448
01:20:32,520 --> 01:20:36,280
That was a lot of it.
But now they're they're cutting

1449
01:20:36,280 --> 01:20:41,400
the crack cocaine with crap to
keep the product volume up.

1450
01:20:42,000 --> 01:20:44,760
And that's a game that you can
only play temporarily before

1451
01:20:44,760 --> 01:20:48,480
refiners push back and you see
the Ng LS come out of the

1452
01:20:48,480 --> 01:20:50,320
process on the other side and
they're not usable.

1453
01:20:50,320 --> 01:20:54,960
So the, I see enough here to
suggest that the Permian is

1454
01:20:54,960 --> 01:20:59,400
tapped out and we're going to
need a higher price stack to

1455
01:20:59,880 --> 01:21:04,960
make Tier 2 acreage, you know,
gush the way Tier 1 acreage has

1456
01:21:04,960 --> 01:21:07,440
gushed for the last, you know,
eight years.

1457
01:21:08,680 --> 01:21:11,400
But like in the context of the
global supply picture, we talked

1458
01:21:11,400 --> 01:21:14,360
about OPEC and how much spare
they might have and the Permian

1459
01:21:14,360 --> 01:21:18,720
and how much they can flex.
I just don't see us going into

1460
01:21:18,720 --> 01:21:21,640
the 40s.
And if demand gets a kick,

1461
01:21:22,480 --> 01:21:27,080
there's not a lot of low hanging
fruit to bring on to, to

1462
01:21:27,200 --> 01:21:31,320
restrain a trend in a market
that's been getting beat up for

1463
01:21:31,320 --> 01:21:33,320
three years running now.
So.

1464
01:21:33,960 --> 01:21:35,880
Yeah, yeah, I'm, I'm with you
there, pal.

1465
01:21:35,880 --> 01:21:38,760
It's such a, it's such a hated
space and that and that's why

1466
01:21:38,760 --> 01:21:41,360
it's your hated oil, in your
words, invisible.

1467
01:21:41,440 --> 01:21:42,640
And that's why.
It's invisible.

1468
01:21:43,040 --> 01:21:46,000
I prefer invisible to hate it
because hate it is contentious.

1469
01:21:46,520 --> 01:21:48,120
Invisible like just nobody
cares.

1470
01:21:48,120 --> 01:21:50,400
Nobody cares, Yeah.
Nobody cares.

1471
01:21:50,400 --> 01:21:53,280
I, I, I So nobody cared about
gold a year ago.

1472
01:21:53,280 --> 01:21:57,000
And Iran and Israel were already
kind of kicking the shit out of

1473
01:21:57,000 --> 01:21:59,400
each other and, and nobody
cared.

1474
01:21:59,400 --> 01:22:00,920
And you're sitting there and
you're like, how's gold not

1475
01:22:00,920 --> 01:22:04,600
mooning?
And then we woke up to 2025 and

1476
01:22:04,600 --> 01:22:06,880
here we are at 4000.
Like suddenly it works.

1477
01:22:07,000 --> 01:22:11,600
I can't explain it.
I'm, I'm totally, totally with

1478
01:22:11,600 --> 01:22:13,920
you there, Paulo.
It's been, it's been great to,

1479
01:22:14,000 --> 01:22:17,000
to chat again, to hear your
thoughts and, and get up to date

1480
01:22:17,000 --> 01:22:20,040
with everything you're thinking.
I'd, I'd highly encourage

1481
01:22:20,040 --> 01:22:22,040
everyone listening to to check
out your sub stack.

1482
01:22:22,040 --> 01:22:24,960
We'll include it in the show
notes that people can find it

1483
01:22:25,280 --> 01:22:27,160
nice and easy.
And yeah, thanks.

1484
01:22:27,160 --> 01:22:30,720
Thanks once more for making time
so late at night over your ways

1485
01:22:30,720 --> 01:22:32,080
on the East Coast of America
there.

1486
01:22:32,920 --> 01:22:35,480
Yeah, I'm I I'm sorry to drone
on.

1487
01:22:35,720 --> 01:22:39,040
You know, I'm already guilty of
talking too much, but you catch

1488
01:22:39,040 --> 01:22:43,200
me at 9:30 at night, you know, a
bottle of wine deep and an hour

1489
01:22:43,200 --> 01:22:45,320
turns into an hour and a half.
And I apologize to your

1490
01:22:45,320 --> 01:22:48,160
listeners for that, but that's
just, that's just me.

1491
01:22:48,240 --> 01:22:50,120
That's that's why we like having
you on the show, Paolo.

1492
01:22:50,120 --> 01:22:52,000
Much appreciated.
Mate, thank you so much.

1493
01:22:52,000 --> 01:22:54,480
Paolo, my pleasure.
Good being with you guys again.

1494
01:22:54,480 --> 01:22:56,840
We'll talk.
Oh, it's great to get Paolo back

1495
01:22:56,840 --> 01:22:59,120
on the show, mate.
Flesh out in in sort of long

1496
01:22:59,120 --> 01:23:01,920
form some some pretty big ideas,
some things that you need to

1497
01:23:01,920 --> 01:23:03,040
kind of think through in our
space.

1498
01:23:04,320 --> 01:23:05,920
Big stuff informs the little
stuff, mate.

1499
01:23:05,960 --> 01:23:09,360
And Speaking of big stuff, we've
got some big partners that we

1500
01:23:09,360 --> 01:23:11,360
could not do this without.
Sure do mate.

1501
01:23:11,400 --> 01:23:13,040
Sandvik Ground support the
legends.

1502
01:23:13,040 --> 01:23:14,560
Check them out details in the
show notes.

1503
01:23:14,800 --> 01:23:16,560
Focus the platform by market
tech.

1504
01:23:16,560 --> 01:23:19,680
Check out the Wicked platform
that they have put together.

1505
01:23:19,800 --> 01:23:21,840
A local Aussie team doing God's
work.

1506
01:23:22,280 --> 01:23:26,920
Mate, it is a great place to to
trade, to dissect, to analyse.

1507
01:23:27,400 --> 01:23:30,240
It is, yeah, it's a it's a
institutional platform at a

1508
01:23:30,240 --> 01:23:31,200
retail price.
Thank you.

1509
01:23:31,480 --> 01:23:34,280
It sure is, and there's a free
trial in the show notes as well.

1510
01:23:35,080 --> 01:23:36,960
And last but not least,
Intralinks.

1511
01:23:36,960 --> 01:23:38,920
Check out those legends as well.
Hoodoo mate.

1512
01:23:39,080 --> 01:23:42,200
Hoodoo.
Now remember, I'm an idiot.

1513
01:23:42,440 --> 01:23:44,920
JD is an idiot.
If you thought any of this was

1514
01:23:44,920 --> 01:23:47,440
anything other than
entertainment, you're an idiot

1515
01:23:47,800 --> 01:23:49,000
and you need to read out a
disclaimer.