Righto Bunny Bonners Thursday Special big going on today,
boys. Some big cash getting changed
hands at Pilbara. Holy Snapp and Dutchie, you boys
are going into a behemoth of a freaking copper gold project as
well. Yeah, very.
Interesting. It's an interesting part of the
world, yeah. And it's a name there not too
many people really know or care about.
But yeah, it doesn't mean that we're not interested, Maddie.
They'll care after today, Trav, because if you care, everyone
cares. And the you deal.
Look what Look what happened with Sierra, Ruta and I.
Still know what it is delisted today so there's like it was
complete. People cared for a bit.
It'll go back to no one cares about.
That you're gonna touch on the big fission power.
Yeah, very open ended. Nothing provided there, but
there's there's just a bit going on in that deal and whether it
will happen. Oh bloody, who knows, The thing
that will happen, and probably already has happened this week
is probably MMS should have secured open pit mining contract
'cause we bloody we throw it out there to the companies that
they're right, they're available, they're ready to go,
they're ready to start moving dirt and start making your
money, whether it's for a bloody contract or AJV arrangement.
And I I assume their phone's been going off the hook this
week, but doesn't mean you still can't call them.
Mattie, you, you put it out to the companies, I reckon you put
it out to the shareholders to put pressure on the companies to
be like, hey, you, you got, you got approval to minister and why
are you just sitting on it and minister right there.
They got the fleet like after. The fundies we've interviewed
that are like on the register of these small companies bloody put
the boot in and tell them to get MMS, mine and the dirt straight
away. Every cash is good for everyone.
So boys, what is going on with Pilbara?
Big chunky block trade today and mate, yeah, to be honest I
didn't stupidly didn't even know this mob was a shareholder, but
I do now, thank you very much. Now you know.
Yeah, I, I forgot to be honest too.
So no, no, no worries at all, Maddie.
But there's a, there's a back story, right?
It's actually a pretty interesting story.
So AFR they reported that a giant $271,000,000 block trade
of Pilgrim Minerals was being fished out yesterday.
That represents a nearly nearly 3% interest in the, in the stock
of the, you know, lithium miner, which still has like a healthy
$10 billion market cap. Here's the bit that was really
interesting to me in the article that Straight Talk put up says
the trade was under a 4% discount to the $3.31 last
close. Forces said the block trade was
a secondary share sale stemming from an equity colour
transaction for China's Ganfeng, which owns 5.7% of Pilbara.
Secondary share sales stemming from an equity colour
transaction is. I spent my morning figuring out
the mechanics of how an equity colour transaction happens.
Why is there a block trade anyway?
What did you find out? If it's, if it, if it's it took
me water up my head around it. But I think I kind of get the
mechanics now. But basically Ganfing have owned
stock in Pilbara dating all the way back to 2017.
That 5.7% stake has been like basically the same shareholding
at least for like the last four years in Pilbara.
As early as May 2023 I found a Ganfing release where they talk
about their trading approach and it explicitly talks about
potentially using these equity colours.
I'll read this bit out. It says the trading approaches
include but are not limited to utilising derivatives portfolios
such as a colour position to protect the value of shares,
such as the shares of Pilgrim Minerals held by the company.
The derivatives that the company will trade involve both offshore
and over the counter contracts. The counter parties for the
company's derivatives trading will be limited to financial
institutions with prudent operations and sound credit
ratings. So if, if Ganfing has has been
using these, these colours, like, because I found that that
release was like 2023 and so over a year ago, but I don't, I
don't know if there's any indication that they've ever
used these kinds of colours before.
In fact, kind of today might, might actually be the first time
that we've actually kind of seen this, this happened by them.
But you know, but, but it does pose a bit of a question like
what's with the block trade, right?
If, if you're using on derivatives and options and all
that sort of stuff, why does it involve a block trade?
There's a secondary part of that.
And before I answer that question, there's one other
detail that's kind of worthy of of pointing out to that really
caught my eye and that's the fact that the AFR article says
it was at a 4% discount to last. And normally when you see these
block trades, they're kind of priced with a bit more of a
discount than a 4%. Remember the FMG 1 was like, you
know, a fair bit more than that. And FMG is a bigger company than
the. Spartan one.
That was probably more than 4%. Yeah, I.
Think, yeah, I mean Spartan's a much smaller company, but but
FMG is like, you know, like much bigger than Pilgrim.
I think there was like a six odd percent one.
It was all set out in stages, depending on how much interest
there was in these things. Yeah.
Yeah, so the 4% really caught my eye.
And there's even like you got Bloomberg, you can find this
thing called the TCA general impact model.
That's like a on a theoretical kind of transaction cost impact
model, which can be used to sort of help price block trades of
these large, large caps. It's essentially kind of like
modelling what, what the transactional cost impact you
would have by selling kind of X percent of a stock that has, you
know, why, why volume or liquidity or whatever like that.
What what I've been told by someone who actually has a
Bloomberg Terminal, because I don't Bloomberg, if you want to
give me one, I'll take it. Got.
The cable drug in the car. Is that the the TCA model shows
that the the market impact should be 10 negative 10%, but
the blocks down at a 4% discount, which which I'm trying
to figure out these mechanics. I was like, that's, that's a bit
of a discrepancy. All right, so on game Fang, what
what's the kind of deal with these equity colours?
What did you find out a bit more and what are they actually doing
in in the scenario? An equity collar is a a trading
strategy that involves options that Ganfeng has used to protect
their downside. Is the easiest way to think of
it. A typical collar for for someone
who who owns stock and Ganfeng, they own stock it it and they've
just watched the share price go up a lot.
What you do in a, in a collar is you would, you would sell a
bunch of out of the money call options and simultaneously buy
out of the money put options. And it's a kind of, you can
think of it as like a bit of a, a bearish to neutral strategy
that you can employ. Your, your, your loss is limited
because you know, the, the put options protect that you've got,
you know, protection to the downside there.
But your upside is also now limited because you, you sold
call options and you have to pay the other side of that.
If if the price climbs, you know, into the, into the, into
the payout there. It's the name colour.
Colour a true a true colour is kind of you know is is is doubt
and neutral but like if if you are confused, I don't blame you
and don't worry too much. This is like this is wacko shit
that. Really end up if you're
confused. You like, you don't really have
to know about this stuff. It really happens in our world
and you know, the like ASX stocks don't even have a real
options market like you can get in the in the US.
But even even options of this scale, like the the the quantity
of this you, you basically need an investment bank to to write
the product, or in this case multiple investment banks
because you know, like the liquid options markets don't
don't don't even cut it for but this sort of size.
It's bespoke, right? Super.
Bespoke gang Fang going to the investment bank saying yeah, I
want to do this. That means to execute the trade
like, you know, they, they've in this case, they've lent on both
of Bank of America, B of A and Morgan Stanley together, those
investment banks, they use the balance sheet to underwrite the
other side of the trade for, for Ganfang, they'd make these kind
of synthetic instruments and, and they price them for Ganfang
to enter into. And in in this case, because
Ganfang has has bought an out of the money put option as part of
that colour, Morgan Stanley and B of A they they don't they want
to protect their own kind of downside.
And and in the case that Hilbro stock sufficiently falls, they
need a way to hedge that out. The process of the underwriter
being the banks to actually hedge out their exposure in the
case that they're on the hook because people share price fell
too much involves them selling Pilbara stock today.
Well, hence the block trade. The block trade is actually the
banks selling Pilbara stock. This is a, a weird one to wrap
your head around, but this, this block trade of the 82,000,000
shares that's been done, that's being done by the underwriters
and they've borrowed the stock from Ganfeng.
It's Ganfeng stock the banks have borrowed and the banks are
placing it out of that 4% discount, which is why it's a
bit tighter than you'd expect if it was a true block trade.
They do this to hedge out their own downside exposure.
Because if, if, if Hilbert share price fell too much, Ganfeng
could could, you know, they're, they're put now in the money in
the process of that they've got the right to sell their stock to
the underwriter. So their underwriter wants to
sell it today so that their, their, their own kind of, you
know, hedging situation is, is neutralised.
So did you say that they've put it out on gang fan of like done
what insta does? They've borrow like put it out
on borrow like a a fucking institution would if someone
wanted to short their stock. It it's but then.
They put it out on borrow, but then the bank's selling it.
It's it's not like it's put out on, but it is it is it is, it is
their stock that is sold been put out.
And it's instead of it being like another Insto that's short
selling, it's actually the underwriter, the bank that's
done it for them because they're trying to hedge out their
potential exposure because they've created the product
that's allowed protection for game thing.
So is game thing going to end up with to 250 million bucks less
amount of stock in Pilbara by the end of this?
No, no, it's not necessarily. It's just, but they still have a
beneficial interest in the 5.7%. Yeah, because they can.
They can call that back at any time from, from, from the banks.
There you go. OK.
So they're not selling them down?
No, Well, they they. There's not yet.
They there, there's a couple of interpretations of this, right?
And I think like, that's why I wanted to go deep in the
mechanics because I'm trying to figure out what is gang thing's
view here? Are they, are they bearish
lithium? Are they bearish Pilgrim
minerals? Are they just, or do they
themselves just need the cash? And I think there's, there's two
ways to interpret this. The, the 1st and more likely way
to interpret this, I think is I think gang thing like on their
own kind of books, they, they record their stake in Pilgrim
Minerals kind of mark to market, which, which means it comes up
as a, as a loss or a profit depending on what Pilgrim share
price sort of did. And you know, that could be
problematic in in and of itself. So they're, they're just trying
to hedge the impact of that because it's, you know, pretty
substantial loss on their kind of last reporting period.
But also Ganfang still has a fair whack of their own CapEx
ahead of them. There's still more ahead with
Gulamina. Practical completion was
expected 30th of September, which is a couple of days ago,
but there's still more capital outlay Gulamina ahead before
it's sort of cash flow positive combined that too.
I think they've still got a fair whack of CapEx, you know, a
project in Argentina as well. And with like depressed lithium
prices, cash matters. So the transaction in a weird
way, it actually frees up some cash for gang thing.
It's a bit wacky to wrap your head around here because gang
thing has sold call options. Selling call option actually
gives you income. They've also bought put options.
And so buying the put options isn't you're, you're paying out
there. But the mechanism which gives
them cash today is the fact that there's this loan arrangement
with the underwriter of the bank where you know, they've lent
their shares to the bank, bank sold them.
But in exchange, Ganfeng gets gets a bunch of cash today as
well. So there's, there's basically
cash or capital freed up the Ganfeng to allocate to the, you
know, CapEx objectives and plans that they do have ahead of them
at some of these projects while the lithium markets are
depressed. Yeah.
So it's it's the same as any any mob that lends out their stock
when they to be sure that they get the money.
Yeah, there's, yeah, yeah, there's, there's mechanically
kind of a similar thing going on here.
Yes, yeah. Sorry, I've got that wrong.
When someone takes when a shorter activates a short
position, they get the money, yes.
Yeah, not the person that borrows it out, lends it out.
They just get the yes premium. On yes, yes.
Right. There's another interpretation
which oh, I, I fleshed out first, but I think, you know,
I'm sort of coming back to and think this is less likely.
But let's just entertain, you know, this other theory for a
moment too. Gun thing could be pretty
nervous about the potential downside, more downside in the
value of Pilbara stock. And they could have used this
bouncing sort of lithium price to, to hedge edge here, which is
kind of clever move if you think there's more pain on the
horizon. And look, if, if, if Ganfeng
thinks there's more downside from, from Pilbara, from here,
What like why, why would they think that?
We talked about this little kind of thing in our conversation
with YJ, which we put up on Friday last week.
Basically, Ganfeng, they are, they are best in business for,
for converting even crack spot into, you know, high grade kind
of battery material. They've notoriously dealt with
Minrez's, you know, Marion spot, which is, you know, pretty,
pretty low, low, low grade kind of product.
That's what gone that they put out there.
I've plucked this kind of cost curve from S&P.
So I'm, I'm sure there's a few issues with it and people point
out why it's wrong in a lot of different ways.
But just kind of take it with a grain of salt for now, because
this is the S and PS cost curve for 2025.
And I wanted to point out these, these are, I've highlighted the
S and PS highlighted before Lithium projects producing in
2025 that Yanfeng actually has an equity interest in.
I've added labels to the ones that Marion and Gulamina on
there just to sort of illustrate things because Gulamina is the
interesting 1. You know, like I said, Gulamina
practical completion was expected for that project on the
30th of September per kind of the latest announcement I could
get out of Leo Lithium talking about it.
And that's intriguing, right? Because Gangfang gets 100% of
the production Gulamina and other self, I wouldn't be
surprised to see, you know, gang thing eventually get their costs
from Gulamena to sort of, you know, and even the kind of lower
unit cost. And then Pilgrim was able to do
it. Pilgrim Gore I just.
So the ore body's phenomenal. That's why it's like Kathleen
Valley, but an open pit. Like in terms of the thickness
and, and everything. Well, it's pretty friggin
unreal. Yeah.
I wouldn't, you know, I've got no doubt that the Chinese will
have a way to get costs far lower than, you know, we can
imagine. Yeah, they're good at that shit.
So, you know, that's the other theory is there that that, you
know, maybe gang gang Fang have have a view on where the lithium
market's going to be for a period of time.
And then they're looking at Pilbury stock relative to all
that. They're looking at looking at
the cost curve and they're looking at where, where new
production is coming online, all that sort of stuff.
Even my gang thing, they currently take up to 310,000
tonnes of of spot from hill Gangora for for 2024-2025 and 26
and that's their current off day.
But but yeah, I think there's a few different ways you can
interpret it. But then you know, the more one,
the kind of yeah, like and maybe it's a little bit of both.
Maybe it's a little bit of both in those theories.
Yeah. Do you think that do you think
there's any chance that they're throwing up capital to buy more
of a project? They they, they did something
really recently where they picked up 30% of an interest in
a projects. The 15% of an interest in a
project any anyway they you know, yeah, there's a bunch of
different competing objectives, I'm sure.
And the truth is like on a multiple basis, Pilbury still
does screen pretty expensive. Like that's why it's got such a
high short interest that it does because you're trying back out
the earnings and you're like, does this make sense?
I don't know. Do you think that ever trying to
get it past fur? But do you think that ever buy
more of Mount Marion off Min res?
I don't think Feb will get there.
No, because she's about maxed out now, yeah.
Yeah, I'd lean towards the the former rather than the latter,
just freeing up capital to invest in, in projects have that
flexibility like that they have been, you know, smashed on on
kind of all fronts over the past year.
They've got a heated debt in their own cap structure.
It's not like they're, they're somewhat like a lot of lithium
players, you know, they're, you know, distressed kind of period
of time. Yeah, good, good in the weeds
trap. It even confused the fuck out of
you. I think I.
Mate, I didn't fit the fuck I couldn't piece it all together
until the end anyway. It's like our back to the start
of the pod. Very good.
Right Next up, we're going to talk about an absolutely
freaking huge copper and gold project in Mongolia that I don't
think we've ever talked about before.
Yeah. I was scratching my head, I
can't remember. I think maybe a long time ago we
got might have given a dimension.
Oh no, but just there's never forget money miners.
Before project gets bloody huge, it has to be started.
That is philosophical. The first thing you need to do.
You've got a clear land, right? Exploration, drilling dams
before we get these rigging, billion tonne resources and
bloody Australian earthworks and haulage on the team to get it
done, isn't it? Too right?
You know another earth moving company does all this stuff, no?
No, the AES. Yeah.
Oh, they're tied in a EH. AEH.
And IES, there's a bit of bloody, there's a bit of mutual
stuff going on here. You know the only two acronyms
you need to know if it starts with.
AE, it's good. Yeah.
That's all you need to know. Look at this bloke.
We we gave Sheamus enough of a run.
We're going to give this this follow a run.
The main man of AEH, Reese Spatolni.
He's when he's not dressed up like this on the weekend, as you
can see he looks like this HD fitter covered in shit working.
He's bloody mate, he owns it, he operates the machinery.
He's the man, he's mate, he's the son of AGL and I've got it
on good authority that he was crushed rock was mixed with his
milk as a child. He is grew, grew up on dirt and
has now decided to move it. Bloody shits on Orem pisses gold
Nuggets like he is all over at this fella.
You need any earthwork job he's done?
Bloody premium mining post mining in the great state of WA
Give bloody race and the team at Australian Earthworks and
Haulage a friggin ring. Good.
Details are in the show notes. How good?
How good is this black cheesy? I trust him to move rock.
But he can move rock really well, funny, beautiful.
So we are talking about how do you pronounce this Xanadu?
Xanadu. Xanadu.
That's the closest I've ever got
to pronouncing something correctly.
You know the ABBA song we're playing, What's the next line?
It's an old classic movie as well.
But anyway, what we're talking about is copper and gold in
Mongolia, like you said, Maddie, so Mongolia right at the top
drawer. So these guys had an
announcement out yesterday which sort of piqued our interest.
And as you can see, it's been a a hell of a ride on the on the
spark chart been up and down. They I had a bit of a deal that
they announced a couple years ago now and there was a sort of
second iteration of that deal last year.
So we're going to get into the weeds on all of it.
But firstly, why it's kind of interesting.
So these guys are $100 million developer out there like like a
good few with substantial CapEx bill, but they have a PFS that
is imminent IE this month and they have a sort of potential
liquidity event. They've already got an
arrangement with Sage in which we're going to get into the
weeds of later on. But there's, yeah, there's some
key reasons why this one could to have some action happen in
the, in the nearer term rather than the the later term when you
kind of think of all those other copper hopefuls out there on the
ASX that just praying for somebody to come in and scoop
them up or help them out. So let's get into the the
project itself, because I think this gives the the overview that
you kind of need to know to understand how the the potential
deal machinations could work. But I remember about this
project, JD is it's, it's like it's enormous.
It's huge, but it's really low grade.
Yeah, in Mongolia and that's all I remember.
I. Always thought of it as like a,
you know, a smaller, not quite as good.
Oh you totally. So they both previously were
part of Turquoise Hill but back in the day and this one sort of
spun out a decade ago now in 20/20/14.
Turquoise Hill. Yeah, it sort of sits a couple
100 KS away in southern Mongolia there.
So a scoping study came out in 2022 that was actually an
updated one. There was one a few years before
that. The 2022 one was based on a 2021
one resource that was 1.1 billion tonnes for 3,000,000
tonnes of contained copper and 8,000,000 ounces of gold, about
half of that in the indicated category.
Then the scoping study from 20/22.
The numbers I'll quote here are 100% basis.
Xanadu at the time owned 76.5% of the project.
They were talking about an average annual production of
50,000 tonnes of copper and 110,000 ounces of gold, more
than sustaining costs of US $1.00 a pound.
Obviously netting off the byproduct credits from the the
gold there and an IRR of 20%. The 30 year mine life NPV using
8% discount rate of US $630 million.
So a couple other details that are important to know is that
they were first going to have a throughput of 15,000,000 tonnes
per annum. That was going to jump up to 30
million tonnes per annum CapEx of just under 700 million US net
revenue, which we'll touch on a bit later on why it could be
interesting of US $16 billion with the important price
assumptions of US $4.00 a # copper and US 1700, yeah, 1700
an ounce. So they're, they're the kind of
key numbers that you you want to know from the scoping study.
But obviously it's been a couple years since then, a lot of
waters gone under the bridge. They've expanded that resource.
The contained copper is up some sort of 30 ish percent.
The gold is up to over 9 million oz contained.
Importantly on the Met side, they've done a fair bit of work
because they were building in a scenario with the top sort of 20
or 30 metres, about $100 million of pre strip was just waste.
Essentially, they've been looking just do a heat leak and
actually make a bit of money from that as opposed to just
being a $100 million liability the.
Other thing that stands out there.
So it's got some grade in it, really low grade.
It's not complete waste. Exactly.
Yeah, yeah, we've got Australian earthworks and haulage job.
He bothers sounds and I'll move it.
I don't think it stands out there mate.
Just on the like those numbers on the scoping study is, I mean
like a copper is a fair bit different and the gold price is
a fair bit different today to what is assumed there.
But but also just the the the CapEx like it was the scoping
study coming out before Zijin was was a board because that's
right. Zijin would probably be able to
deliver a project build kind of like below, whatever your
western kind of. Very very important point are.
Able to to construct something for two.
Yeah, 100%. You can call that a Western
style CapEx number, which Sage in, you know, being neighbours
and just being operators at scale.
You know, they've got a heap of mining operations around the
world if they've done this, you know, partnered with Ivanhoe in,
in Kamal Kakula and these sorts of things would be able to
deliver that cheaper than than sanity would.
Yeah, it's pretty bloody, isn't it?
Funny looking at these, I think what was BHP's one they did the
long aisles for Bloody what? Oak.
Damn. Which in in South Australia,
Yeah, yeah. Oh dear, like like coming back
at you know this point 3.4% copper just it might be the
thing now like it's. The scale game.
Yeah, yeah, so it's and look pretty unbelievable to get
frigging half a billion tonnes of indicated material that is
freaking huge reeks of a Cadrill standard.
Sure it does Martha Bill indicated bloody.
I can confirm that Cadrill didn't drill this mine out, but
it's possible of leverage someone of a similar standard
might have. They leverage their IP because
you're trying to Yeah, I. Think they were consulting over
the phone to Mongolia. So yeah, it's don't know.
There's no no bloody limitation to the bloody capability of K
drill. So because if I had a resource
like that in my backyard, I would make the correct life
decision to call Drew Harvey and call Ron O'Sullivan and get
bloody cadre to start pumping Arsene diamond holes in there
ready to go also ready to go for a contract right now.
So bloody don't don't be a snoozer and be late.
Call them right now. Drovers numbers in the show
notes. You know the safety standards
will be elite. You know they'll punch the
metres in the most efficient way possible.
You know the sample management is 6 star level above 5 star.
They're like one of those hotels that to get a six star rating
and not many of it 7/7 right. Yeah, J and you know the
resource will be bloody actual indicated because.
Yeah, straight away, Yeah, straight away.
It's absolute no brainer. So JJ, what about the Z Gin
side? What is going on there?
All right, so. Like I said, Maddie Z Gin really
interesting base. I have to sort of double check
that there are $100 billion in Aussie terms market cap company.
They're a big, big, big beast. Yeah, nearly as big as a bit
smaller than Rio. Yeah, yeah. 100 Bill Aussie.
Aussie, yeah, good, good. Bit smaller than Rio but firmly
one of the the biggest miners in the world, no doubt about it.
So they are 19.4% shareholders now.
They first took a 9.9% stake in 2022 and they listed out this
sort of staged investment process.
It's going to be a sort of second and third phase that
would follow that would sort of see them logically lift to just
under 20%, and that happened. They went to 19.4% in early
2023. Which Ferb had to approve as
well, by the way. Yeah.
Importantly, Ferb approved that. So in March 23, at that point,
they created a 5050 JV which held what was previously the
Xanadu State. So that holds 76.5% of the
project. Z Gene put in US $35 million
into the joint venture that was to fund the PFS as well as some
exploration which would take 18 months, which kind of brings us
to today. Xanadu would remain the operator
during the PFS phase. And at the end of that 18 month
plan, Z Gen would become the operators, which again is where
we're kind of at today. And this came at a pretty
important time initially in 2022 for Xanadu.
They were in the doldrums a bit. They announced the deal at a 30%
premium to what the stock price was at.
So that was sort of circa 3%. Deal came in around 4%.
So it was a bit of a pick me up for the stock at the time that
went on for a bit of a run. Make such a different equation.
You go from being like a micro cap that's got a project with a
giant CapEx and you've got no way to actually find it.
All of a sudden, you know you now have a funding partner
that's serious. 100%, So we should touch on yesterday's
announcement before we get into where they kind of go from here.
So the update yesterday says they're in the final stages.
You can expect the PFS by mid October.
So in a couple weeks time. Cash is running a bit low.
There's about 5,000,000 bucks within Xanadu, another further 5
million within the joint venture.
They're planning for a BFS, which is kind of interesting
because the the earlier wording gave an indication that they
might not even really be considering.
They might just go straight from BFS to, you know, kind of
construction engineering work and and yeah, just power
straight ahead like season. By all accounts that came to
press on at some speed. You know, the operator
transition is underway. So the GM and chair of the joint
venture board is now Zeigen's nominee.
So this is a sort of four person board, two people from each
company. But importantly, any new budget
needs to be jointly agreed. So you can't have the kind of
classic trap where the major money, the major minor can just
flush out the junior by just spending more with a commitment
that the junior can't even meet. So that that's quite an
important detail that shouldn't be glossed over.
Totally. And heck, in that same part of
the world there was yeah, I think, you know, Turquoise Hill
would would, would remember a lot how challenging it is when
yeah, you've got a a major mind with the the money and the
challenges that come with being a minority joint venture party
party in the dynamics too, just. Drag you along the floor?
Yeah. Who's money?
Who says money doesn't buy happiness?
Though all righty. So this it lays out the
situation where we are kind of at now today.
So in March of 23, they put forward 3 potential ways for
this Zegin Xanadu relationship to advance.
And the sort of wording is post the PFS coming out, Xanadu has
the following options. Option A, they can fund 50% of
the construction bill themselves.
Option B, they can sell their 50% to Zegin for US $50 million.
Option C, they can sell half of their interest to to Zegin. the
US $25 million plus A0 cash loan carry for the remaining 25% to
commercial productions. I they can get Zegin to give
them debt to fund them through so that they don't have to stump
up and raise it to their equity, and that would.
Be pay back with free cash flow when it comes.
Exactly. Now there's sort of 1/4 option
here, which is not mentioned for Xanadu to look at, which is do a
deal with a third party or get creative in how they can try and
maximise the value for their shareholders.
And this is where I think we should kind of start, start a
bit of a discussion to start with.
I think option B, selling your stake for US $50 million would
be a bit of a travesty. I think the the company should
just come out and say that is not what we're going to do.
There's a whole lot more value in this project than just giving
it to to Zesian for $50 million. So it was a good thing at the
time when nobody liked the stock, but a bit of a, a bit of
a flaw under it, you know, gave them a bit of support.
But I don't think that is what they should look at the
renegotiation angle. I guess option D there is a kind
of interesting 1 and I want to play a little snippet from Colin
Moorhead, the the managing director of the company when he
spoke about this in a podcast earlier this year.
How other options are, you know, for us to go and fund our own
half? You know that that can be done,
but it's not really our preference or or to do some sort
of other deal with the gym to take the project.
Yeah, they're, they're at a, they're at a junction, right
where this is, this is kind of game time.
Like, you know, PFS is coming out so that Xanadu's in charge
of the PFS. They put the number out.
The number, the number in the PFS is like, we're going to be
big, big kind of part of the negotiations.
And so there'll be some gamesmanship going on there.
But it's super like there's an obvious deal that happens and
that's where like, you know, Asian acquires the other the
other half of the JV from, from Xanadu or just acquires Xanadu
outright at the premium or whatever it is.
Yeah, there's, there's, there's, can you get competitive
attention? It's tricky because you've got a
20% more nearly a 20% shareholder there in, in if
there was any change of control that is ZG in owning like, yeah,
19.4% of the stock in, in Zanadu.
It's kind of no one else kind of comes to play normally in those
situations unless you did another strategic placement to
someone else at a premium. That is a very interesting
point. Could they do another deal at a
premium with, I don't know, an IGO, someone like that to try
and. Create different.
To try and create a bit of tension and I had to do a bit of
digging into this one and they they.
Have the full right to like Zijin.
Can Zijin? Do they have any power over
them? So I went back to the 2022
announcement and found in the footnotes some wording around
this. The company, being Xanadu, has
granted Zijin the right to a reasonable opportunity to
participate in future capital raisings.
A reasonable opportunity. So that gets very legally and
it's not. It's not a top up, right?
That's not yeah. Yeah, I you'd have to be a
lawyer to sort of fight that one out.
I don't, I don't know, get loose.
Yeah. Because they say, you know,
subject to the limitations and conditions, they would give them
very short notice in which decision would have to reply,
yada yada yada. So OK, yeah, I don't that that
seems like a a hard one to kinda get done and stay within the
bounds of the agreement. But who?
How many? Mobs are going to be find it
palatable to go into bed with Seijin as well.
No, Yeah, well get. That enough to limit.
You're not quite going into bed, but like, let's say you did a
strategic placement at a premium, then Seijin, I now know
that they have to pay up. So you, you basically you kind
of just get a short term trade on it or, or you go into bed,
but you have to be open, open minded too.
Let's say if you can sort of have good line of sight on to
getting an uplift within sort of a relatively short amount of
time, that's why you would kind of do it.
I'm not necessarily thinking another mining house to to come
in and buy a stake in the business because that that gets
a bit difficult. It's not that like it's not that
bad if you, I mean if you think about it like if, if you don't
have to be operator of it, but you get the copper exposure like
heaps of people on copper exposure and they don't have to
do any work. And what else is Zagin like?
Because looking at that option C like where it would sell half it
said as Zagin and pretty much provide an IRU that obviously
shows how bullish Zagin are on copper lot.
They're they're obviously wanting the copper exposure.
They've obviously got it with Ivanhoe.
They produced over a million tonnes of copper last year.
They're one of the biggest copper producers on the planet.
Yeah. So it'd be wonderful.
And and now it's a link back to the old Freeland as well with
Turquoise Hill and everything. But do you think like Ivanhoe
would be interested in something like that with the Sage in
existing partnership? It did pop in my mind.
I'm just not as close with with Ivanhoe.
I know they've got a lot on their plate and like we've sort
of said with other miners focusing on getting what you've
got on your plate right, expanding, that is where you're
gonna see the most amount of value uplift.
And you know, especially considering KK now at 600,000
tonnes per annum. It's like, yeah, totally
different quality asset to this one, yeah.
Yeah. Brio's in the area you've got.
It's that they used to be called Poly metal, and they've just
left Russia and now they have. Yeah, Now every name's a solid
core. And then go and ham on
Kazakhstan. It's all right next door.
Yeah, maybe. It's nearby.
They want, yeah. It's got to be.
Yeah. So one of the other things to
raise again, which you mentioned, the sort of Western
versus Eastern, if you like CapEx build, that'll become a
part of the negotiation. And it's a, it's a good thing in
my opinion, that Zetan will build it because I think they
can build it cheaper, you know, and the, the number that we're
going to see in the PFS won't be the number that Siegen, I think
will believe that they can build the thing in.
So that's something to, to kind of bear in mind, I reckon.
So it's a, it's a kind of fine line.
Now for Xanadu, like you said at the beginning, it's, it's game
day. You know, if they've got a short
amount of time or hopefully a short amount of time where they
just really need to fire up and try and get maximum value for
their shareholders, They're only kept at 100 million.
Like I said, it's a, a project with AUS 600 million plus NPV
with, you know what you'd kind of call a modest copper price
assumption, a modest gold price assumption.
Obviously costs will have gone up a bit.
But then again, you do have siege in, in the in the driver's
seat and the process could come a bit, become a bit drawn out,
but it's a super interesting one.
I think we should stay, stay focused.
On yeah, I was trying to figure out if asymmetric, like like if,
if the nice, the more upside or downside.
And it's I can see from both ways because like the way you
describe the JV now, Zijin's kind of in control of that.
And whenever someone else is in control, like kind of, you know,
they're in control of the jet. I know there's like equal rights
on the budget and all that sort of stuff, but you always get a
bit nervous in those sort of JV arrangements without knowing the
full details of how the JV structured and everything like
that. On the budget side, you could
see like, you know, the big gamesmanship, you might even,
yeah, you might even not approve the budget and drag things out
and go slow ball and try get an outcome that way.
I'd love to see a royalty spun out like or a royalty retained
by Xanadu. I just.
US $16 billion of revenue over the base on the base case.
I know they're hard to negotiate, but like no, like we
talked about the potential of having a royalty with kind of
the fuel low transaction that never came to fruition.
But yeah, those those kind of like transactions that result in
like they would say Hosanna do sell their interest in the JV
but return to royalty like that's such an interesting
vehicle, you know, but it probably probably probably ever
happened. Yeah.
I mean, you could kind of call that 25% project ownership in a
way a quirky kind of. Yeah, Royalty.
Vehicle. Yeah, it's interesting, Yeah.
Yeah. I should be getting a bloody
royalty from live wire with this friggin hat on.
You should. You should chase enough for that
mate. No, they're offset by all the
bloody the negative comments on the Uranium 1.
Can we have the more polite lady back rather than this?
I did, I did. I'll get that on for you.
I didn't see that but I did see a comment saying where can I
pick up one of those snazzy live wire hats.
You did. You did drum up a bit of his
mate. Before I get on to the Paladin
fission things, Z Gin just reminds me what the wonder what
the hell is happening with AVZ if that's going to come to some
court sort of outcome soon. I did hear some juicy word on
the decline. I'm not sure if should be
disclosed, but things are things are in motion on a on a sort of
legal front. So I think there's some sort of
timeline on things now at least until the next decision is made.
You know that's what happens after that, but.
We haven't forgotten anyway, I Speaking of just something else,
hell of a vision deal, so that the not not much to report here,
but just it's just not going to plan.
It appears and I remember when we said like fuck, once the
votes over the line, like you're pretty much home, but not not
the case in this one. So and and it's for the fucking
weird, right? I wouldn't say weird.
It's like, yeah, it's hard to properly substantiate this, but
they're trying the artist. And so because the final court
here in Canada that's still ongoing expected to deliver a
decision in the coming weeks. But then yesterday the Canadian
Minister for Innovation, Science and Industry ordered a national
security review of the scheme of arrangement.
So and it's to do with China's CGN mining being a 11 and a bit
percent shareholder in vision. How does that make sense?
Because you normally object if it was the acquirer that had the
Chinese interest. Well, I think they're talking.
About what the pro forma is going to be, which is going to
be significantly less than 10. Such a stretch.
Yeah, yeah. And I think because it's and
they're going to be a, you know, a minority shareholder by the
end of it. So you're diluting the Chinese
ownership in the pro forma and yet you're objecting to that?
Yeah, but then and but the most interesting thing is that CGM
were voting against the deal, yes, because, because.
I don't know if you like, we peeled through the scheme Doc,
the information circular and someone else had bid for
fission, Maddie, which we our theory was it was CGN had said
for fission earlier this year. Yeah.
And it didn't, didn't, didn't go ahead.
So that's why they were objected to it.
Yeah, yeah. So they're they're the sort of
the cause of this, but they were voting against the deal anyway,
which makes it so just a. Quick one, Maddie, this Canadian
minister from, you know, the the Office of Innovation, Science
and Industry ordering a national security review, is this
analogous to a Ferb review or is this a different thing to what
they call Ferb over there? I can't give an answer.
This is that Investment Canada Act.
Remember all that all? That is the investment.
Canada is the investment because I know that's what they
mentioned. Earlier, that was the stuff that
was all talked about like two months ago, yeah, ramped up and
that that. Was what was mentioned
specifically in the announcement subject to Canadian Investment
Act? Approval.
That's what this is, yeah. So there and there and because,
but and this is a part of it. This was the Curry wrote it in
the far article, but not sure if this is a part as well that
because you got Chinas CNNC also hold 25% ownership at a project
level of Langa Heinrich, which would be obviously part of the
pro forma on the paladin side. So like I don't know if they
look at it right. If you had that project
ownership, it's fun. It's out there and it's like a
last straw tempt on who's driving this.
If it's purely can it regulatory driving it or yeah, because
because the pro forma is going to be dual listed on TSX and TSX
and Chinese minority shareholder with the project, it just might
this might just be where Canada is heading like which we saw
about you know the previous news about you know foreign
investment in there. Like this might be the sort of
first little play it really. It's such a it's.
Like battening down the hatches a bit, but it's, it's friggin,
as I said, the fact that that votes got over the line just
which was, and there was some scepticism on what shares were
used in to do that, like employee shares and everything,
because I just got over the line.
And now, now this, it's, it is blowing out.
And it'd be interesting to see if these regulators have the
final say on it. It's such a defensive
protectionist perspective that they're, they're kind of taking
as opposed to, you know, building a solid foundation for
all of your miners to operate and be successful, whether that
be through tax benefits and, and these sorts of things.
It's, it's so much more, you know, protectionist saying that
you can't do that, you can't buy this, you can't get involved
here. I think there could be a a
different way to kind of look at this without getting too
political to build a solid foundation for your miners to do
well as opposed to just saying, you know, because this could
damage exploration. Like we sort of discussed in the
past, if there's less exit opportunities, you know, have
less potentially less money going to exploration and these
sorts of things if they think half the potential buyers are no
longer allowed to buy the projects.
So. Any other thing I can think of
is if they're they're trying to minimise the Chinese ownership
so they can keep the uranium in North America in the future so
it's not obligated to go there, but how do you control that?
You can still sign an off take with.
China, if you want it, would make if.
They're not a shareholder. It would make so much more sense
to have that, you know, the stuff being mined in your
country, streamline the permitting processes, you know,
do all that more effectively. So there are, you know, a couple
more mines or bigger scale mines in your country as opposed to
just slapping their hand when they're trying to buy something.
God, you, you can see our bloody weird.
What you thinking is imagine running the companies and
liaising with these people. God, pick your eyes out.
Yeah, bloody out there. What?
You what? Essentially I've provided
nothing off you. It's like I just don't.
It's just weird. Yeah, the only way could make
sense to me is if the JV partner at Lang Heinrich who they have
the off take. Right.
I don't know if they've got all of it.
I'm not. Sure.
Yeah. So what if they had the if only
if they had like to write a first refusal on any other
future production from Paladin and any operation that would
include that would include vision if they did.
That's the only hypothesis that could actually.
But I don't think that just seems like such a strategy too.
Yeah, it's like are they going to ban exporting uranium to
China? Like that's it.
I don't know. Who knows.
Who knows what laws are going to come in.
Sounds like there's going to be that many independent fricking
countries and geographies in the world coming up soon possibly if
Russia detaching itself from Russia bloody this.
They don't want anything to do with China here.
It's it's very weird, but unfortunately they're all
connected in the vertical integration of all this stuff at
the moment of everything. So.
Bring on the West Australian secession.
Yeah. Well, we're at it.
I'll be right. I'll sort it out in Parliament.
So right now, good work boys. Love you work.
Enjoy tomorrow's episode everyone.
She's a bit of a Corker, JD interviewing one of the old
school mining magnates of. Australia.
You know who else we love? Maddie.
Who do you love? JD Love MMSI love them too.
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