G'day, money miners. We've got a exciting chat here
with the King of Copper, Ahmad. And Speaking of the the kings of
industry use Axis mining technology.
The kings of true hole orientation and surveying give
Sean a call. They always pick up the phone.
Not good enough, JD. It goes like this.
Access mine and technology of the trusted advisor and drill.
I'll survey instrumentation. You need more access in your
life 'cause you just know exactly where everything is in
space. Thank God you popped up Maddie.
I'll hand it back over. So let's get into, let's get
into some copper now. Thanks for coming on.
No worries, I'm going to say the same thing I say every time I
come on here. You're only as good as your last
performance, so. If I farm here.
You'll never see me again. You're putting the pressure on
yourself there. So we've been, we've been
planning actually this, this copper chat for quite a while.
It's an exciting one for for so many different reasons.
There's so many big companies, small companies, analysts, you
know, buy side, sell side that are just bullish about copper
and it's a it's a super interesting space.
You got from a geological perspective, different deposits
you've got, you know, from the smallest miners to the biggest
out there looking for these these projects.
It's probably the most reported about metal, I'd say, you know,
by none out there. So I'm very excited and I think
the kind of logical place to start this discussion is exactly
they're just talking about those demand projections that we're
seeing how the world is kind of going to get there, whether
those projections are in fact going to eventuate.
So you know, plunking that all on you.
I want to kind of hear what do you make of this whole, you know
there is a complete dearth of copper projects out there kind
of discussion point. I mean, I think as far as
commodities goes, I, I don't think there is a higher premium
in any commodity right now for finding a significant deposit in
copper. I I think that is yeah, like,
and, and a lot of that is driven by the demand and, and whether
you believe the demand curves, like the timeline of the demand
curves, all of those things, you can make a rational argument for
both, both of those sides. All right, Like we are
definitely going to use more copper.
Are we going to use it as quickly as some people are
projecting? You know, probably maybe, you
know, like copper is kind of directly tied to infrastructure
and some places it takes a while to build infrastructure.
So I don't think it's going to, you know, like you can make a
rational argument that some people's projections are
aggressive. You can make an argument that
some people's projections are conservative, but in the end I
think. You know, like to your point
that. There is I think no other
commodity that has the an actual as well as a perceived premium
tied to finding a deposit that will that will that will be a
company maker or you know like a return significant value.
And I don't think we need to sort of flesh out the the kind
of bull side of it too much. I think the the audience, you
know, very well understands that that is the the widely held
view. Yeah.
But I'd love to hear from you. And we were speaking about this
before we recorded today, the kind of contrarian take in it.
There are a few of these out there.
There is a few of these sort of takes emerging.
And I think the yeah, so the so the current view is that, you
know, we're not finding enough copper deposits and that's going
to create this gap in the supply demand that we're going to have.
And that's true. You know, like we we are
definitely not finding new copper deposits at at at the
same rate that we were say 10 years ago or 20 years ago.
I guess one of the contrarian views that that we talked about
and I guess is the kind of the, the thing that we wanted to talk
about here is that the sexy bit is, I think everyone says that
we should make new discoveries. But there's a, there's a like a
body of work that's going to come out.
And it's not my body of work. It's by two people named Richard
Shoddy, who's who's a consultant on the Minix Consulting, another
guy named Pietro Gouge, who works at the centre of
exploration targeting at Ewa. And their study will be it's an
upcoming paper in a journal called Geosystems and Geo
Environment. So that'll come out later this
year. But Richard will also present
this work at I mark. So if you're going to I mark,
you can go watch his talk. I think it's called What's the
real story of copper? And I guess what they've, you
know, the work that they've done shows that if you look at
existing assets, those, the, the resource growth on these
existing assets is actually meeting the copper demand that
we've had since 2010 till now. So, so the resources on these
existing assets, so we're talking about mines that are
already in production, you know, like we call them delineation
projects. So, you know, so they're
delineating more resources or adding more resources to the
inventory. And that has delivered twice as
much the amount of copper as new discoveries have in the last or
since 20/20/10. So the last decade or last 15
years now, you know, they've delivered twice as much on
existing assets as they have now in that parlance of what we talk
about, you know, this is say call it brownfields discoveries
or you know. Expansions.
Really. Yeah.
Like resource expansion, drilling.
And so there's, so there's a few things and you know, like
sometimes you call it exploration upside.
You know, you have a resource and then you drill it out and it
becomes double the size. But the initial resource was
what you built the mine on. So you know, so, so new
discoveries haven't quite filled the demand that we've had in, in
the past. And they're not likely to fill
the demand that we will have in the short term either.
Because if you make a copper discovery now, you know, it's
probably going to be 10 years if it's a substantial copper
discovery of mine for it to come into full production.
And 10 years is probably pretty aggressive, like it'll probably
be somewhere in the order like 12 to 15 years that
realistically that you can kind of put it into production.
And I think, I think QB is the the case in point that a lot of
people have in their mind and that was 29 years off the top of
my head from when they first discovered it in I think 1992 to
when it comes online and. That's why I'm and there's a lot
of these. So I mean, the Lost Bronzes is
another angular one that was stuck in development hell, you
know, kind of like that Hollywood term of development
hell for like, what, five years I think it was.
It still has challenges. Now Resolution's another one.
You know, it's been stuck in this thing for decades.
Several, you know, Supreme Court cases on that stuff.
And these, these aren't, you know, I mean Chile, they're
developed countries, you know, but it's not the quote unquote
Western world we're actually talking about.
And there's been a lot of, you know, arm raising about what's
going on in Australia in the past couple weeks and what's
been going on in Canada for some time now.
But can we just knuckle down for a moment on, on what's really
holding up these these projects? So I mean, to start with, it
takes a long time to draw them out and actually get a solid
understanding, right? Yep.
And then and then following that, you've got the same as in
Australia, you need to get native title, right?
You need to get government approvals.
Water is a big challenge. Yep.
Are there specific areas that you think are or challenges that
are under weighted by by the market at the moment that just
take a long time? For, for, for.
Like, yeah, I guess this is more a large, I guess it's more a
porphyry type question. Yeah.
So I think that the the two major challenges in porphyry
tend to be usually community or environment, you know, like they
they tend to be an environment, I'll use the bucket term like
water being one as well. Because the end, if you're
taking water from one source, you're probably affecting
someone else's ability if you use that water somewhere else.
You know, so things like Pebble pebbles are really big copper
deposits that's been stuck in Alaska because it's close to an
environmentally sensitive area. It has Native title concerns as
well. But I feel like, you know, like
we're kind of getting into a point now where community and
environmental issues, I think we understand the risk with land
access or native title, but I think we're probably now
starting to understand that environmentally and community
wise how these things can be affected.
And the environment is, I think, just a function of that.
When you build these big minds like you can go to Google Maps
and look at how big an. Escondido, Chuki Kamada are, you
know, like they affect a significant amount of real
estate on on this earth. So, so the chance that you're
going to affect the environment in a certain way or community in
a certain way is just higher when you're building such a big
thing. Yeah, yeah.
And sort of anecdotally, given your experience in in Africa,
can you comment on on development timelines as they
sort of compare with with Latin America?
Well, yeah, that's a good question.
I mean, Latin America, I think it's probably becoming harder
because, you know, particularly in Chile, you know, air, the
water is an issue. The other is like, you know,
anytime you're building something on the side of a
mountain that's 4 or 5000 metres high is, is problematic as it
is. Yeah, like just from a labour
force like, you know, like if you're asking people to work at
4800 metres or something like that, you know, like there's a
whole another problem that you have to manage in Africa.
It's been, I don't think the development challenge is, is as
big, but it's just more jurisdictional in that, you
know, like the the government is not as stable as in places like
Chile. So it's always a trade off.
You know, you trade off the fact that you can develop things
really quickly because the government is happy to take your
development dollars and and the revenue that comes out of it.
But then the government, you know, like it may not have the
same residency time as your asset does.
And so how you how you kind of play with that?
Actually on that jurisdictional risk side of things, and we sort
of touched on this in our chat with Jon Ronsky as well.
Do you think there's also a bit of another reason why there's a
lack of copper discoveries in the last decade is because
perhaps more of this sort of copper prospectivity is in these
risky jurisdictions and, and mining companies are too scared
to to go there and commit the dollars and, and, and tap into
that? Yeah, completely.
I think, you know, like if you're, yeah, a company like BHP
Real, you know, Anglo, Yeah, like your appetite to go into
places like the DRC is probably low.
You know, like that's why you see companies like Ivanhoe that
go into these places and and they find a Chinese kind of SOE
that becomes partner with them because their risk appetite is
different. So I think that's definitely the
case where, I mean, I think, you know, like part of the
cannibalization of assets in places like Chile and South
America is because everyone wants to kind of work there and
so. You know, so everyone's kind of
fighting over the same. You know, like same assets, it's
the red ocean, blue ocean kind of thing.
You know, it's red ocean, it's fixed assets and everyone's kind
of fighting over them. And so the risk appetite for
people to go and, you know, explore where others aren't, I,
I don't think is as high as it's probably been in the past.
Yeah. Do you think that's going to
change over time? We we had a discussion with
Sheppo and a former investment banking analyst out of South
Africa and he was very pro. The development of places like
Zambia may be a bit less so DRC that's probably one step further
in its challenges for a BHP or one of these sorts of companies.
But do you see a world where BHP is in Zambia for example?
Yeah, I think so. I mean, like, to be honest, if
you're serious about copper, you're going to have to go to
some of these places, right? Yeah, I would advocate that your
whole portfolio shouldn't sit in, in a, in a jurisdiction like
Zambia. But I think you should be able
or you should be willing to take that risk, you know, to go into
these places. You should be willing to take
the risk and to go to like places like IRI and Jaya or, you
know, like PNG and things like that.
Because you know, like otherwise you're, you know, it's kind of
like to some degree it becomes a know sum game, you know, like
you're fighting over the same assets.
So, so if you're happy to pay the premium to, to kind of push
someone else out of the way, you know, like a BHP could probably
do that, right? Like they could pay a higher
premium and, and, and push other bidders out of, out of that kind
of race. But that's not a strategy that's
going to work for everyone. You know, like the Techs or the
Anglos, you know, like these guys wouldn't be able to go
compete against the real big majors if they really had to get
in that fight. So to, to pull the the chat back
on the path of where discoveries have sort of happened and where
expansion in copper production has happened in the past few
decades. I've seen you've, you've put a
chart here which will Chuck up on, on the YouTube talking about
the, the changes in cut off grades.
And you know, specifically as it relates to some of the biggest
operations in the world. Just a handful of these
operations can change the landscape or add a huge amount
of production in a, in a real global sense.
Can you, can you kind of talk us through and like what the
takeaways are from your perspective?
Yeah, yeah. So, yeah.
So you can put this graph up and this is again from Richard
Shorty's work, you know, so he had this graph where he looked
at the top 12 porphyry mines in 1929 and then he showed, you
know, like so at that time in 1929, they had 50 million tonnes
of contained copper at that time.
Yeah. So, so 3 billion tonnes at 1.5%
copper and so then you go to today with like and today was
2008 in that time and you know see these same mines now have
more than 61 billion tonnes of .6 and so and that is purely a
function of them dropping the the cut off grade.
And so my earlier comment about, you know, like existing assets
have provided twice as much as twice as much copper inventory
as new discoveries in the last 15 years.
You know, one of the things that people will argue is they say,
well, is that just a drop in the cut off grade now from 1929 to
now? That definitely is a drop in the
cut off grade. You know, like we were mining
probably 1% copper or 1.5% copper then and now we are
mining, you know, substantially lower grades.
But when you look at this inventory over the last 15 years
that's been added on the existing mines, that hasn't been
due to cut off grade. Yeah, that's been at pretty much
the same kind of average grade that these mines have had for
the whole time. So that's not a function of
people just dropping cut off grade and just making the
resource bigger. That's a function of them just
finding this similar material they're mining, but just more of
it. And the, and the point of it was
that if you look at these top 12 mines in 1929, I think it's like
8 or nine of them are still in production now, right?
So like, you know, so for example, Bingham Canyon is still
in production. Chuki Kamata is still in
production. Morenci.
Yeah, El teniente Morenci from Miami.
Yeah. So a lot of these are still
still operating. And this kind of goes back to, I
guess one of the other things that, you know, we'll kind of
get into is that, like, why do big companies look for these
things? Right, it's because they exist
for 100 years and you can keep mining them for for essentially,
you know, 100 years and you because you'll keep finding more
and more material, you know, like for example, in the chart
that which is made like you know, you look at it and you go
so the total. Resource in 1929 in these top 12
mines was 50 million tonnes. And so from 1929 till now we
have mined 136 million tonnes of copper out of those.
So, so we've mined three times the amount of resource that was
listed, you know, like in 19301929.
All right. I was just going to say quickly
for the benefit of the money miners as well, just explaining
what what a cut off grade actually is as well.
Yeah. So, so cut off grade, and it's
like layman's terms is basically your economic threshold above
which you think you can make money.
So, so if a cut off grade, you know, like if you read it, if it
says 1%, what you're effectively saying is that any raw material
below 1% copper is something you're not likely going to make
money on. So that's your economic line.
And so as copper prices have increased, that line drops as
well. So you know, say if the unit
value of 1 tonne of copper increases, you can then mine
lower grade material because you're getting a higher unit
value. Out of it.
Right. And the example of this is like,
you know, like things like diamonds or gold or higher unit
value. So you can mine less gold for
exactly the same economic payoff as mining something like copper.
Perfect. So I'm very keen to go down the,
the path of M&A and what the the major companies are looking for
and you know Philo, these sorts of things that we've seen
lately. But to round out on the, the
point about the, the shortage, you know, the the big question
out there like are we going to have a shortage?
What is the kind of consensus you come to?
Perhaps not. I mean you can maybe break it up
into a short, medium and and longer term time frame.
I mean, like, so like, I mean, Richardson Pietro's work shows
and in the short term, existing assets will fit, will fill any
copper demand we're going to have.
Now, that doesn't mean that they're going to like fill this
demand forever, right? Like resources are, are finite
resources, You know, they're, they're not renewable.
So at some point they will hit a line where we're not going to
mine them anymore and they're going to shut down.
So, so, so the, my, my point is that we don't need, it's not
that I'm not saying that we don't need new copper
discoveries. I'm just saying that I think we
have to be a little bit realistic about that.
Our copper discoveries that, that this kind of rhetoric
that's out there now that we got to go and find new copper
discoveries, Are they really going to fill the demand that we
have in the short to kind of medium term?
You know, like I think that's unrealistic, but we do need new
copper discoveries to fill the medium to long term kind of
demand that we're going to have of copper going forward.
Do you think copper recycling will have any material sort of
impact on perhaps filling that more medium to longer term
shortage? I think it will, you know, like
it recycling. I think if you look at kind of
like when recycling programmes work and how they work, I think
recycling programmes work when your demand is kind of fixed to
some degree, right? Like so you can, you can recycle
material and you can fill the the fixed demand that you're
going to have going forward. I think recycling will never
really be a substantial thing if your demand keeps increasing
because, yeah, like, yeah, like, and also, I mean, I think JD,
you made the point, right? Like a lot of copper goes into
infrastructure. So in order to recycle that,
that would suggest that you have to take down infrastructure to
to use that in new infrastructure.
And what we're saying is, you know, like we don't have the
amount of copper infrastructure we need to build more.
So I'm just not sure recycling is ever going to be a
substantial amount in in that sense.
You can't recycle your way to growth.
Yeah, exactly. Like, yeah, I mean, like the
recycling will, I think fill the void.
And I think it's it's a good thing we should do.
If that means we have one less copper mine in the world because
we can recycle enough copper to to fill that demand, then I
think we should. And universally, I don't think
we recycle. Yeah.
Like, we're not very good at designing things in the way that
we can recycle metals efficiently.
But I think, yeah, definitely we should go down that path.
But it's never going to be more than like a small slice of the
pie, really. Right.
So let's talk about the exploration strategies of the
major miners and following on, I guess we can talk about why
specifically they are always looking for these porphyry style
projects. And maybe, you know, you can
throw in a couple of critiques of the way in which they size
their beds or maybe why they're opting to to buy this build
projects themselves. Yeah.
So they, I mean, so you know, like as a kind of a general
view, you know, like there are several copper deposit styles
you can go for and it and I find like, you know, someone that
kind of views this market or has to comment on it, I find that it
seems to be very like a bimodal distribution, right, That, you
know, majors only go for very, very select deposits.
Like yeah, like they will go for pool free deposits.
And for people that don't know, like, you know what we mean by
pool freeze, Pool freeze are, you know, like these large kind
of high tonnage, you know, big deposits, but they tend to be
low ish grade, you know, like you're talking about.
Like half a percent to a percent copper.
If a pore free deposit tends to be bigger than that, you know,
it's quite a unique kind of deposit in that sense.
And for, you know, like for anyone that's a part time
geologist, you know, pore free deposits are essentially things
that formed in volcanoes Once Upon a time.
So yeah. So that's kind of like their
link. So, yeah, so majors are like
predominantly only really looking for pore freeze and
these large sediment holster deposits like the copper belt in
in Africa. And there's a fundamental
reason, you know, these things tend to be really big and they
tend to have a great profile that they can mine these things
for like 50 or 100 years. And and so majors aren't
interested in copper deposits that are say small but high
grade, you know, so like things like what sand fire kind of goes
after things like that in Spain. You know, these tend to be high
grade, but quite small. Doesn't mean they're not
economic. You know, they're quite
economic, but they're not going to have the like the mine life
that that interests a BHP or something like that.
And so, yeah, so I think it's, you know, like over the last
kind of, I could say like 1020 years, I think there's been like
a very like quite a divide in the industry in that sense.
You know, like, you know, like we were talking about this, you
know, there's not a lot of copper meteors now, you know,
they've all been swallowed. So you have this kite like
dichotomy. Like, you know, majors will only
look for porphyries in a certain type of deposits and they're
only interested in those assets. And then there's juniors who
realistically can't build a big porphyry mine at like 4 or $5
billion CapEx. So they'll go look for these
small things, you know, like and then that's kind of divided the
market really, really clearly I think.
Yeah. I mean, it sort of seems to come
from a place and this is probably far too blunt an
assessment, but bulk commodities tend to to make serious money
and, you know, smaller operations.
Yeah. You know, perhaps they're a bit
more cyclical. Yeah, as one way to kind of put
them. But you, you look at all the
majors and it's, it's iron ore and it's cooking, cooking and
thermal coal. At least it has been for a long
time. That's right.
And I think, you know, like you can understand, like, you know,
a company like BHP really for it to kind of add the, the gravitas
that it wants inside its organisation.
You know, it really only goes for bulk commodities.
And my view is that I think mages really look at copper as a
bulk commodity, right? So the sort of go after assets
that filled the, that filled the kind of bulk commodity view of
the world, right? They're not looking for things
that have a mine life for 1020 years.
They're looking for something that you know will will exist
for 50 years or something. So we're talking about
porphyries. What other sort of styles of
copper deposits are out there sort of for for the non
geological minds and sort of what, why, why are they sort of
what are the differences between that those and a porphyries as
far as you know the grades and scales and sort of economics you
can expect from each of them? Yeah.
So that's a good question. Yeah.
So porphyries tend to be, like I said, yeah, it's kind of like
like a continuum, right. So like porphyries will be at
one end, you know, they tend to be really, really big, you know,
kind of lowish grade that usually tend to be.
Not very, you know, like they don't tend to have a lot of
elements in them. So, you know, so they tend to be
the copper or they'll be copper, gold or copper Molly, something
like that, which which makes them easier from a processing.
Point of view because you don't have to figure out where all the
elements are going. And so, you know, sediment
hosted tend to be on on the same spectrum that they, they can be
really big, they can be also small.
That's a genesis kind of thing like how they get formed.
But they tend to be usually copper or cobalt.
You know, like and they don't get a lot of other elements
attached into them. So these are the the Africans,
the DRC. The yeah, that's fine.
Yeah. And yeah, like in their yeah.
And then they kind of fit. I mean, like the Central African
copper belt is kind of like the type example of them, but
there's also like the Cooper Shifa, which is one in Poland.
Yeah. So they tend to be this big
deposits that can be mined for a long time as well.
And then we've got the, you know, the Spanish examples, the
the Matzes, Rio Tinto, the original sort of project.
That's right. Yeah, that's right.
So they tend to be more of these deposit style called VMS or
Volcan volcanogenic massive sulphides.
And they tend to be like much higher grade usually on that
spectrum, but they tend to have other things, you know, so
they're often lead or zinc associated with silver, gold,
you know, like all of these things kind of come in.
So they tend to be smaller, you know, metallurgically usually a
little bit more complicated, you know, like they, they are a
little bit harder to find as well because they tend to be a
smaller deposit to find. So you what you find is like,
you know, they're they're the deposits that you know, smaller
to mid tier kind of companies go after.
Companies that can't spend, you know, billions of dollars
building a mine. And that's the other thing you
know, like sediment hosted and pull freeze, you know, the CapEx
required for them on the economic side, it's almost
always a billion plus that you know, like you're kind of
looking to build. And then you know, like you have
other things like, you know, some people target copper
deposits which are associated with with nickel and mafic
intrusions, you know, like that's another end member.
So some people target them, but that's like, you know, most
people don't do it. Primarily they're looking for
nickel, copper and PG ES and that that type of stuff that
they find there. Olympic Dam type IOCG.
Is that the other one? Yeah.
So IOCGS are another where you
know, like there's some some IOCGS that can be mined almost
like a bulk kind of operation. And so, so again, majors are
interested in them. I think a little bit of that is.
You know, majors go in them, like particularly BHP goes into
them because they hold Olympic Dam.
So you know, so it's a deposit style, they understand, they
understand the processing of it, they understand the
complications of it. So you know, so they go down
that path. But so like I said, like you
know, to answer your question, there's deposit styles like
IOCG, sediment hosted Porfree, that's it on one then which are
CapEx intensive, you know, usually lowish grade but high
tonnage. And then there's another
spectrum which is more the BMS and carbonate hosted and a few
other deposit styles that fit in there and they tend to be higher
grade, but much smaller, but very low CapEx intensity.
Great. That's good summary.
So I want to pivot the the conversation briefly to
commodity price forecasting and I guess this layers in with what
we'd initially discussed. We're we're pretty critical on
the show about anyone's kind of ability.
And I mean, we just just listening to calls this week,
you kind of heard it. You know, I think Chris Ellison
said on the min raise, cool, I've got no idea where lithium
is. It's going.
I certainly didn't think it was going under 1000 bucks a tonne.
And yeah, you can you can kind of see that across the spectrum,
even some companies who pump a phenomenal amount of money into
into the research side of things get it wrong.
And you showed me this this fascinating chart, which again
will will pop up on the YouTube about long term copper
forecasts. You know, I think they're kind
of clumping together a whole bunch of analysts sort of
forming a consensus view. But what what's your sort of
take away and how you think about companies forecasting the
the price of commodities? Yeah.
I mean, I think as a general statement, I think we do it
pretty badly, I think. And that's not, not just
commodity price forecast. I think if you look at forecasts
of other commodities like orange juice and things like that, you
know, like similar problems exist in in that space as well,
is that generally most commodity forecasts tend to be really good
in the short term, but they tend to be horrible in the long term.
And and it's just because, yeah, part of that I think, I mean,
this is just my opinion. Part of that is I think some
commodities don't really have a relationship to supply demand
curves. They have more of a relationship
to the futures that people are investing in them and
speculation of what they think the future price of certain
commodities is going to be. I think that's driving commodity
price more. But the challenge for I think
mining companies is that, I mean, the reason why I always
like showing this graph is like, you know, when I worked in
companies, we looked at consensus price forecast
religiously, right? And we would use those as a way
of deciding whether we would build things.
And then when I see this graph, which you guys report, and just
to explain it, yeah, in that graph, the black line that you
see is the actual copper price. And the coloured lines that you
see that end up with a dot are the consensus price forecast of
what people thought was going to happen over the next five years.
Right. So just as a general reference,
the black line is what was the actual price.
And if you connect all the dots that you see, the blue dots,
that is what people thought was actually going to be the copper
price. Yeah, in the future.
And so you see that there's absolutely no relationship
offset by about five years. It's a consensus price forecast.
And for example, on the graph you can look at like, you know,
look at December 2005. So just after that, you know,
the the price was nearly $5 per pound.
And the forecast had predicted a couple of years before that it
would be close to $1.00, right? Like that's not really like a
sound mechanism to actually develop, you know, like whether
you should go ahead with the decision to build things or not.
But, you know, we used to use these things as like, you know,
like gospel, like, you know, we could not not touch these things
at all. And then when you go and look at
this, I mean, you go actually our ability to predict this
stuff is we're in this, you know, like we're, we're going to
be. Out by a factor of 5.
Like, yeah, that's not really a good way to kind of operate.
And that's. Pretty business.
Pretty scary thing, right? Because, I mean, this is one of
the main tools companies are using to make decisions on, you
know, whether to develop things or not.
And most of the time it's wrong. Yeah.
No, no, no. That's right.
And so, so, yeah, so the, the, I guess, I guess I don't have an
alternative to what you do, right.
Like I wouldn't put you on the spot like that.
Yeah. And and so this so this is where
I think kind of the problem comes and, and to back to, you
know, like one of the topics we talked about is why do companies
like why are they buying assets that I say producing now versus
buying things that could be put into development is because you
don't know what the future kind of looks like.
Yeah. So, so it's much better to buy
something now and you know that the price is probably going to
be right for the next year. So you know what what you're
what you're kind of buying and how you can kind of optimise and
then go and then. And if that works financially, I
think then yeah, you hedge on on the price in the future doing
something and and you can then make the the alpha that you want
on that. By the time the sales process is
closed, most that year is kind of gone and then it's all yeah,
yeah. Yeah.
I mean, there's also examples, like there's a classic example
of when BHP sold its coal asset in I think is in Colombia, you
know, like, and Glencoe bought it, you know, like, and by the
time that the deal actually got finished, you know, Glencoe had
made so much money out of out of just the coal price moving that
they could just like they could pay for the purchase of the mine
through just that year's worth of price movement and, and the
revenue they got out. Of what a champagne problem to
have, because I was going to say actually, while we're on that as
well, I mean, I mean that's also sort of, you know, one reason
why we're we're seeing a lot of people, you know, buying rather
than, you know, slash building discovering.
And we saw, you know, so the recent manoeuvres this, you
know, the BHP and Anglo and then it went, you know, BHP London
and and the fellow assets as well.
Do you say that sort of continuing going forward like
that that focus of you know, sort of, you know, buying rather
than building in in discovery? Yeah, I think so.
I think, I think there's more risk in developing these big
assets and and I think some of it is perceived, but some of it
is is real. Yeah.
Like I think it's hard to build these things.
It's hard to build them on time, you know, without having cost
blowouts and things like that as well.
And there's plenty of those, you know, stories around the traps.
So I think, you know, so companies I think are now, you
know, like probably happy to pay a premium to pay for something
that's already in production that like that they don't have
to worry about how, how they're going to make it work and they
can expand it along the way. And that kind of goes back to
the, you know, the research that Richard and Pietro have done,
which shows that, you know, like when an asset is already there,
it's it's much easier to grow that resource base and add it
into into production rather than have to go find a new mine and
go through the permitting process of building it and doing
all of all of those things as well.
So, yeah, so I I think people will happily pay a premium now
for something that's already in production it.
It makes the Phyllo example particularly interesting because
the the the stab they had at Anglo was for producing assets.
The Phyllo 1 is, you know, very family development.
Yeah, that's right. It's, I mean, it'd be
interesting to see how that goes along.
Like, you know, I mean, you know, like I'm not completely a
fait with what Filo has done from a permitting side of things
or whether they've gone down that path, but I think that's
more of a play as well. Like, you know, you've got a
number of substantial deposits close by.
So if you can kind of put them together, you know, like that
kind of gives them the scale of operation that probably a
company like BHP is looking for. So I think it's more of a play
and you know, like how can you kind of put all of these things
together so you're not completely dependent on one
asset kind of working, You know, you can kind of make them work
in in a hub kind of model. On, on the point on commodity
price for forecasting once more, do you, do you think this is
something that people from other industries would kind of look in
at the the mining sector and just not be able to wrap their
head around how you know, you can't control, you know, P in
your P * Q equation or you can just be so horribly wrong in, in
forecasting. I guess it just hones in focus
on controlling your costs, but that should be a staple in any,
in any kind of business. But I mean, do you think there's
sort of gaps like that that lie in in other sectors that perhaps
I just haven't spent too much time looking at?
Well, I mean, yeah, like I'll kind of say this.
I mean, one of the most challenging things about the
mining industry is that the companies are price takers and
not price setters. You know, like the, you know,
like if you're, you know, like if you're Apple, you can kind of
set the price of your consumer goods to some degree.
And, and you know, you can back it up with some level of
marketing and things like that. You know, like if you had gone
to set to, to, to say to someone that you could charge $2000.00
for a phone, you know, like, prior to the advent of
smartphones, like people would have thought that was
ridiculous, right? But, but they have created the,
the marketplace. I think now that that you can
kind of do that, you know, whereas commodities, you know,
like as a company, there's very few companies that get to set
their own price, right. So I mean, companies like
Glencoe can kind of benefit from the commodity trading point of
view on the other side, but but you're fundamentally not setting
the price for genuine for a good reason, you know, like you know,
otherwise it would be a monopoly kind of set up which which which
wouldn't work for anyone. I suppose the, the kind of
saving grace or one of the, the factors that the mining industry
has in its favour is that there's probably a lot more
continuity. Like if you're if you're getting
a world class iron ore operation, you know the the set
of companies that had them 50 years ago are still around,
whereas the set of top tier tech companies as your example was is
completely different. That's right.
Yeah, Yeah. I mean, I think that's, I mean,
that's a really good point in that, you know, like, I mean,
this is where I think This is why people like these long life
assets as well. Like, you know, they exist for a
long time. Yeah, it's hard to replace them
as well. Like, you know, if the Pilbara
didn't exist, you know, like it'll be pretty hard to replace
that amount of iron ore coming from like, you know, like 10
different kind of kind of mines as well.
And that's also, I think, you know, like this is maybe more of
a, like a personal point of view is that I just think, you know,
also if you're the executive for a company like BHP, you know,
like it's, I would think it's much easier to have one or two
kind of assets in your, in your portfolio that produce rather
than having 20 assets that you have to manage and like produce
the same amount of copper. Like, you know, like
operationally and logistically, that's a much bigger problem
than, you know, like, I'd much rather take something like
Escondida. I just have 1 copper asset that
runs for a long time rather than have, you know, like 20 assets
that produce the same amount of copper.
But you are at different stages where you got to build this
thing out, you got to expand this thing.
You know, that's I think a much more challenging kind of
operation as well for a large company.
I'm just churning in light, but as Ahmed mentioned, verify.
Yet he's always been a serial verify mentioner.
He. Has, although is there a verify
model for Eskandida? How good that is?
I've seen the one for for Kamal Kakula that's pretty good.
Yes, yes, but yeah, that's well if it's good enough for Kamal
Kakula, it should be good enough for Escondida.
Well, and as he's didn't he say like once in a one in 100 year
discovery? Yeah, one, one in a 100 year,
you know, And if you got people like, you know, Robert Friedland
using it, why aren't you? Why?
Why aren't you trying to find the next Escondida with a verify
model? Escondida verify model would
started small. It's growing into Escondida.
Verify models grow proportionally to how much you
drill and find. You know what Escondida means in
Spanish? What does it mean?
Hidden. Verify it means hidden.
Yeah, it does. Yeah, yeah, because it's like
500 means below the surface. Unlike you out love for verify
which is not hidden. So prevalent.
Explain your story. Simply go for news.
Verify. News verify and go get an
Escondido India. And the verify AI to actually
find these hidden deposits. Yes, email Grant and even
better, go have a beer with Grant 'cause he is AGC.
If you're in Perth as well, Nathan.
Oh, big knife, yeah. They're all over.
They're all over the world. Yeah, yeah, you'll see him at
the bloody IGIS and everything. They're just everywhere.
Go verify. Yeah, I think it's a kind of
reflects on the the management and the CEO and how they are in
their headspace and how they think about things.
It was interesting to listen to the the call with Brendan Harris
at Sandfire and he held a similar view to to you there
talking about not wanting to develop Black Butte unless it,
you know, reaches substantial scale because it adds another
time zone. There's a whole another
workforce. Yeah, another office.
And, you know, it's kind of refreshing to to hear that it's,
yeah, like you said, it's so much harder to have all these
moving parts around. You actually hone in on BHB, for
example. And it's perhaps not as
confusing as people may initially think.
You know, you've got 2/3 of the revenue iron ore, then you've
got cooking coal now and you've got copper and there's bits.
They're trying and they're sinking money into potash here
and there. But they've done well to to
simplify the kind of narrative in.
The yeah, and I think that's the adage, right?
You know, do do less, but better, right like, you know,
like really know the businesses you're in.
And I think that's that's that's a much more effective strategy.
And I think this like simplification also I think
leads to why, you know, like to your comment about like
geographical spread. I think, you know, This is why
also people concentrate on certain geographies or certain
deposit styles maybe is because it's, it's much better like, you
know, you remove degrees of freedom, you know, like, so if
you're a company like BHP or you're Anglo, you know, you're
in Chile, you know, like there's not a huge incentive to go take
on the risk of like trying to develop something in the DRC or
like sub Saharan Africa or things like that.
You know, like geographically, you know, you probably
concentrated become a little bit more conservative because you
know, that jurisdiction, you know, the way of how to work
with parties and things like that, you know, like why
complicated by trying to take on, you know, like 10 different
jurisdictions. So yeah, so that I think
realistically, if you're a business, you know, you want to
take complexity out of your business.
So it makes total sense why you want to do that.
I want to dive a bit deeper on on BHB.
So you know, Olympic Dam is been there since they took over
Western mining 20 some years now and then they've pulled in the
the odds assets and they've recently for the first time come
out with a resource at Oak Dam. So to start with, what were your
thoughts on the the resource that that came out there?
I mean, to be honest, I think it was probably a little bit lower
grade than I thought it was going to be.
Yeah. Like, I know they have a high
grade component, but I thought that high grade component would
be a bigger portion of the overall deposit.
The overall deposit is is quite big.
It's it's, you know, it's probably the size of deposit
they would probably look at as A at a minimum.
But I think at that depth, you know, like it's probably.
Needed to be a little bit higher grade.
But they'll probably still get developed, you know, like as an
asset, you know, maybe in the BHP world that asset loses
money. But overall, the business will
probably do really well out of having having something like Oak
Dam in there. Yeah.
And and for those curious, the the numbers that sort of came
out were 1300 and 40 million tonnes at .66% copper with .33
grammes per tonne in gold and the, and the ore body was
starting at 650 metres sort of depth.
Yeah. So around that 6700 metre kind
of depth. But this is where I think, you
know, like, you know, there's some synergies in how there's
some synergy in BHP taking over Oz because Oz is going through
the process of developing Carapatina, which is roughly the
same depth. You know, it's roughly the same
grade profile as well. So you know, so they're going to
probably learn their lessons there.
So hopefully Oak Dam should go a lot smoother because you know,
like they've already kind of learned that lesson and have
that corporate knowledge to, to how to mine Oak Dam.
You, you talk about synergy from an IP sort of sense there,
right? Yeah, because I, I mean, you
know, like a BHP probably as a company, you know, like they're
pretty good at large open pits, you know, like they're not, I
don't think they have many assets that do large
underground, you know, like bulk kind of mining.
Yeah. So that's where that expertise
from Carapatina will kind of come in, so.
We're going to apply the learnings there.
Yeah, that's right. So that makes sense, right.
Like, yeah, they're the same deposit style, same like
geological domain really. It's going to have probably the
same level of complexity. So it makes sense.
I think deep, I think underground, I think DSI and I
think of like the deeper you go, the more concentration you need
of DSI bolts in the ground to keep that bloody joint humming.
Right. Bloody DSI set up a factory in a
bloody SA with all this shit happening.
Oh damn is oh it's pretty. Pretty deep 1,000,000 bucks a
drill is isn't it? Every every drill hole was like
a yeah, kilometre date, but I think the world works out.
It's like 750. Oh mate, there's going to be
millions of bucks worth of DSI bolts and mesh down in that
joint because who else would you buy them off?
I don't trying to think. No, I can't think of anyone.
It's just DSI. Thank God we've got them.
Take off. Thank God we've got DSI in
Australia. Go Australia.
Go DSI, go, Derek heard. Get on the front foot, BHP.
And So what are your thoughts about on sandfires, that
position of Metsa and that sort of whole Spanish region as well?
So this is like, you know, like stemming off from our
conversation, like if you're a company like Sandfire, like, you
know, like what type of assets could you go and buy in, in the
copper space? You know, like you're probably
not going to be able to buy like, you know, an Escondido or
or something like that. You're probably not going to be
able to buy something like Oz, you know, like the assets they
have. So, so I think you know, like
Matsa kind of fits, you know, like if I had to recommend an
asset that that Sanifi would have to buy, you know, that's
the type of asset that that you'd probably go for along with
the company that they bought in Botswana mod, you know, like so
you know, so they kind of fit in that right kind of profile.
Very different price tags, yeah. Yeah, I know, I know.
So, yeah. So I mean, I guess Spain is, you
know, like from a geological point of view, you know, Spain
is like it's the, the belt is called the Iberian pyrite belt.
You know, it's been mined since like the times of the Romans.
You know, it's where Rio Tinto kind of became Rio Tinto.
And so, so, you know, so Rio Tinto spent quite a lot of time
exploring that part of the world.
They didn't find anything big. You know, they found Las Cruces,
but it probably wasn't the right size for them.
So they sold it. So there's been a lot of
discoveries along that along that belt.
You know, there's about 8 to 10 kind of decent discoveries that
were had, but they're not at a size where, you know, Major is
going to go in and, and attack them.
So I think they're the perfect kind of area for for a meteor
like sand file, which has growth aspirations to kind of go and go
and take over. So I look at like, you know,
like why would you buy mats? You know, it's probably
worthwhile to buy mats where you have a processing kind of centre
as well. So you don't have to go down
that path. Then once you have the
processing centre, it's the old kind of WA gold adage that you
know the person that has a milk and then they'll have gold from
all these small things kind of coming through.
Yeah, what happened? Spoke.
Yeah. So that's I think maybe the
like, you know, I'm I'm just saying this as a external person
that that's I think maybe their angle is that, you know, the get
a foothold would get a keystone kind of anchor.
And then a lot of these kind of other deposits start becoming
live because you know you you are the only party that they can
sell to are. You surprised that we haven't
seen any of that consolidation yet or is that just a factor of
how much debt sand fire kind of took on and the fact that they
might need to just you know balance the.
Yeah, I guess, yeah. Like again, assuming that they
would have probably predicted copper price to have peaked by
now. So, so they would have been able
to kind of go and and you know like a either pay off the debt
so the balance sheet looks better or be able to go and and
transact on these things. So maybe they're kind of holding
the powder dry until, you know, the market kind of allows them
to to expand as quickly or as aggressively as they want.
And actually on that consolidations sort of strategy
as well, I mean do you think you know Sapphire as a say or just
more generally a mid tier is perhaps the more capable sort of
size company to do that sort of regional consolidation then
perhaps a major? Yeah.
I just think, yeah, like the major would, it'll be too.
It wouldn't be cost effective for them to do like a lot of
these small things, you know, like even think like, you know,
things like, you know, like when even a company like WMC couldn't
kind of hold Cambaldo together, you know, like even those assets
kind of became too small for a company like WMCWMC at that time
was probably a mid tier, you know, like maybe a upper tier
kind of mid tier. But yeah, so I think they're
just too small. Like, you know, you there, there
would be so much lost between the the seat cushions for for
company like BHP to try to put all of that stuff together that
just wouldn't be worth it for them.
There there was also speculation back on sand fire that they
would scoop up Comic cow. Yeah, they ruled themselves out
relatively early in the in the process there.
But the company that's ended up buying at NMGI think you have
experience with back in in the mid sort of 2010.
So have you, did you make an assessment at the time of what
you thought of the, the price they paid the, the asset and
these sorts of things? Yeah.
So I think, I mean, you're right, Like I, I would have
predicted if they'd gone after like a company like MOD, they
would have gone after some of the other assets there as well.
Yeah, like I'm not sure exactly why they didn't.
I mean, I think, I think they could have gone for it, you
know, like the MMG asset is maybe not the same, same level
as as the mod assets. So, so maybe they would have
gone for that, like they went for the the best thing they
could go for. But yeah, I'm not sure.
Like I think, you know, like that's also another space.
You know, there's a few deposits there that found in that belt.
You know, they've grown significantly since then, you
know, like, so someone can come along and kind of put that back
together. But the general view that I have
is I think, yeah, like in principle, I think it's easy to
say people should go and kind of put these things together.
But I think the, you know, like the timing of when like the deal
window for all these assets kind of aligns.
You know, it's kind of like the Swiss cheese model, right?
Like all the holes have to kind of align.
And I think that's, that's sometimes a little bit hard
unless someone goes and is ultra aggressive and is happy to pay
premiums to kind of get deals done because they know it'll
it'll kind of amalgamate and, and, and there'll be the benefit
down the line. How do you think about, you
know, given you've got a a few years of experience on, on me
that the the timing of you know, acquiring the assets as well as
getting the financing done to to develop it if we're talking
about acquiring it? Yeah.
So I think one of the risks that's kind of coming in now is
that, yeah, like as a development timeline blows out,
you know, the risk you have. Is that if?
If you if you're developing an asset and you miss commodity
price boom, then it's really hard to get that that money
back, you know, like all over the time.
So I think that's why, you know, people are aggressively going
after assets that are already in production because then when,
you know, it's much easier to expand a mine and you know, I
can mine more while you're sitting on the asset than having
to worry about trying to get a government to hurry up or, you
know, like trying to push environmental permitting through
when when kind of the price is kind of booming as well.
So, yeah, so there's always these like windows where I think
people are happy to pay that premium in M&A because they know
that, you know, like when the the market flips, you know, like
they're in the perfect position to kind of, you know, like take
advantage of that price, price spike that comes along.
And one of the classic examples of this is, you know, like when
when BHP bought WMC, you know, like, like for all intensive
purposes, BHP wasn't buying WMC for for it's nickel assets, you
know, but they bought it the you know, the deal was done in 2004,
2005 and then 678 was probably one of the the biggest nickel
booms we've ever seen. So, you know, at one point
nickel W was probably making more profit than other parts of
BHP just by pure not not coincidence.
But yeah, it wasn't probably something that they had planned
for nickel. To go to 50. $1000 per tonne and
yeah and just be creamy money out so yeah.
So they you know, so like the the numbers that I heard is
like, you know during that time the the nickel business would
have like far outpaid any of its costs for trying to buy that
business at that time just over a couple of years.
And that was purely because all those assets were in operation,
and all PHP had to do was sync the capital to expand them.
And they did that pretty quickly, pretty aggressively.
And then, you know, they were kind of off to the races. 11
region we haven't spoken about is, is Mongolia with obviously
the OT being the the flagship asset in the area there.
Now that's got a a long and interesting history with with
Ivanhoe and then Yep, Turquoise Hill and Rio Tinto.
What what are your thoughts? Not on OT itself, but on juniors
in in the area. In Mongolia you mean?
Yeah, in Mongolia. I mean, I think that's, I think
that's a classic kind of case of your question in that, yeah,
it's probably a terrain that majors are probably not going to
go into. So it creates a space for
juniors to go in and then and then, you know, like, and that's
I think the part where the really aggressive kind of
juniors that are happy to go into those terrains, you know,
they can kind of do that work. And that's where I think their
space kind of fills in really well is that they're happy to
take that risk. You know, like they don't really
have much on the line, so they can kind of go and do that
stuff. And so the question really
becomes is, you know, like when the junior finds something
that's bigger than his boots, like what are they going to do
with it? Like are they going to be able
to raise the money? You know, like if you're 100
million like market cap junior and you got to build a mine for
$2 billion, like how how are? You going to?
How does that work? Yeah.
Like how are you going to do the even the like 6040 debt kind of
equity thing, like how are you going to do that?
Like you're just going to blow the company up if you go down
that path. So, so I think, you know, like
sometimes, you know, like I, I, I think it's like, you know,
sometimes juniors say they're going into elephant country to
catch elephants, but you know, you got to be careful because if
you catch 1, like, what are you going to do with it Are?
You going to get paid for it On, on the, the theme of, you know,
juniors rolling the dice in, in Montgoli, is it kind of right to
assume, given the, the depth and the scale of these, you know,
elephants that you're, you're looking for?
Yeah, that exploration is a bit more expensive, not to mention
the, the remoteness and, and all these sorts of things.
Is it harder to kind of roll the dice?
Yeah, I think they, you know, like this is kind of I guess a
dichotomy, right? Like juniors are, are not the
best agents to go explore in these areas because you know,
it's remote, it costs more, you know, like especially if you add
in the depth component, you know, that costs more as well.
A junior company that has to that has no revenue and has to
raise their money to go and and search for things that are
expensive, you know, like are they the best entity to go and
kind of do this work? So, yeah.
So in reality, the best entity for to do this work would be a
major. Yeah.
Because they like they can go spend this type of money and
then it will be a rounding error in the stationary budget.
It's so they would like nobody would care this happened and
they have. To roll the dice a lot of times
to prepare the fruit, which, yeah, it's hard to wear.
Yeah, that's why it's and this is where I guess I'm, I'm a
little bit critical about when, when major sometimes say that
they're looking for these, you know, when they say they're
looking for an Escondido or something like that.
Is that I think, I think like genuine, like genuinely like
we've had one Escondida discovered in the last 100
years, right. That's probably not a great
thing to go and explore for, you know, like what you should look
for is slightly smaller things that could probably become an
Escondida. Alright.
And then that's a strategy that Rio is kind of adopting now.
Yeah, they look for Tier 2 like large tier twos, and they're
hoping that they become a tier one while they're working on it
along that lines. Speed it into shape and make it
a Tier 1 exit of the time. Yeah, yeah.
Or or like, you know, like market conditions change and
from like it becomes an economic tier one, right where where you
can kind of mine it and then and then pass it on.
But then, you know, like that kind of conflicts with with this
strategy of having a mine that can just, you know, look exactly
the same for 50 years, you know, like that, that that's the
problem for them. I like that.
An economic tier one. Yeah, Yeah.
Not a geological Tier 1. No, because I mean, once you've
found the resource, like, you know, like the resource
relatively doesn't change, right?
Like it's, it's, it's fossilised a long time ago, but it's, it's
just our, our economic perception of it or our ability
to mine it and all those things that, that change over time, you
know, like, so the resource is a resource.
It's like, you know, if it's 1% copper, you know, like there's
not much you can do to get it to 10%, right?
Like, you know, like it is what it is.
You also think it's a bit of a, you know, let, let explorers do
what explorers do well. And then, you know, when it
comes to that Inflexion point of, oh, the multi billion dollar
CapEx bill has come come through because they've discovered this
big thing. Then that's that's the time for
these big guy or mid tiers or majors sort of to to step in.
Basically, yeah, completely. I think, I think it's like,
yeah, it's a fundamentally different skill set, I think to
go and do like grassroots exploration as opposed to mine
development. You know, like I wouldn't
advocate people that are good at doing grassroots exploration to
go become mine developers, and I wouldn't advocate mine
developers to go to grassroots exploration.
You know, there's fundamental drivers in that in that sense.
So I think like, you know, so companies that have historically
been really good explorers, you know, they tend to be explorers,
you know, they tend to hold on to that kind of kind of moniker.
Whereas, you know, large companies tend to be really good
at building, you know, assets and building mines and running
them. You know, like they're probably
not the best agents to go go and explore in certain areas.
So I think that there has to be that kind of dichotomy.
It's just a question of how do you incentivize each party along
along the path? Like how do you incentivize
juniors to do that? How do you incentivize large
companies to to accept that, you know, maybe they're not going to
be the best explorers, so they should create an environment
where other companies, juniors do a better job, but they still
get to benefit out of it? Have you got thoughts on the the
framework that we discussed with with John Ronski, his aggregator
kind of model? Is that something you've spent
time thinking about? Yeah.
Yeah, quite a bit, yeah. Like I think, I mean, I think
John's model is it's probably the a good jumping off point,
right, That the, you know, like a John's model really comes from
a part of you. And you know, like him and I
have had these conversations a number of times that, you know,
like we've had these conversations on this show as
well. Is that the funding model
doesn't incentivize people to go find things in an appropriate
time frame or to actually find the right things either, right?
Because juniors can't raise the the amount of money that they
would realistically need to go find something.
Alright. So, so, yeah, so if you could
take that funding imperative out of their hands and you could
fund them appropriately, then you could get to a point where
they, they could hopefully be better at what they're finding.
And you find this in, you know, like this is not a novel idea.
Like you find this in the startup world about and, and,
and most of the VCs or accelerator programmes that are
really good at, at taking companies through, you know,
they fund companies all the way to an appropriate point for them
to develop their product. You know, they don't go, we're
going to give you a million then, you know, come back to us
in a year, we'll think about whether you're doing things
right not and then we'll give you some more.
You know, like often the best accelerator programmes are like,
you know, we buy a story, we're not going to give you $5,000,000
to go execute it. Now, if you crash the car along
that way, that's OK, We take that risk on, but you know,
we're kind of incentivizing you to get all the way to the end of
your your kind of product line. Yeah.
And also taking the the appropriate amount of bets,
right, If you, if you look at like, I don't know, Y Combinator
or something like that, Yeah, yeah, when you're taking two
batches of whatever it is 20 twice a year.
I mean, I did the numbers. So Y Combinator is probably got
to be somewhere around 4000 companies now that they're that
they're invested in, right. I mean, that's over a long time,
but still, yeah. And then out of that, I think
there were at last time I counted there was somewhere
around the 3000 mark, 3200 mark or something like that when they
had done 11 unicorns, a billion dollar companies out of that.
Yeah, one strike, one Airbnb, a few drop boxes and those kinds
of. Companies and it pays so.
But that but that, yeah, like, and you and you talk to people
in Y Combinator, you know, that was their strategy.
They were going to take a lot of bets.
Like that was the whole model. And that means they were going
to burn a lot of cash along the way as well.
But along the lines, you know they they have made far more
back by just taking a lot of bets.
Yeah. We've sort of seen that in the
mining world to some extent with BH PS Explore programme, which
you've sort of spoken about before.
But I mean, could you also say that playing out more with
majors or mid tiers during strategic investments or JVS or
you know, something along those lines into juniors and sort of
having the exposure having or some sort of smaller level of
exposure and then sort of wanting to take that further.
Once you know safe something's discovered or something gets to
a more economic size and they can sort of step in and and take
it from there. Yeah, I think, I mean, I think
there's people that have done that, you know, like a company
like South 32 at one point I think had so few people in this
exploration department that that's the model that they had
to use. You know, they, they work with
other companies, you know, they funded them to do the work.
And then if it got to a point where it looked interesting
enough for them, then they would kind of take over.
So, yeah, so people have done those as a as a general
statement. I'd say people haven't done it
at enough of a scale or for long enough to actually see that kind
of fruit come through like Y Combinator has been running for.
Yeah, it's been like 12 years or something now.
All right, So they've done it for well over a decade
consistently. Yeah, even even longer, I think.
Yeah, I think so. I mean, like it's at least a
decade old, right? Like it's got to be more.
And you know, so like you said, you know, they take two cohorts
every year, you know, without fail, they fund them, you know,
they go down that path. And, and if you look at, you
know, like the early years, you know, they didn't have much
success for, for a while, you know, because they have to get
their own ecosystem of how they're going to help founders
to kind of go down that path. And, and so I think, you know,
like one of the things that we haven't been very good at doing
here is that I think people do it for a while, but then when
they don't have early success, I think it's harder to maybe
justify running them and and people end up bailing out of
them. So, so I think, yeah, like maybe
a bit of residency time in those would be good as well.
Yeah, it's fascinating how many sort of things could be learned
from a process like that. Like it's very structured in
that they always took 7%. I forget what the exact number
was. Correct.
Yeah. They.
Might have been like they pay you, I think it's like, I mean
these numbers might be changed now, but they pay you $125,000
to get 7% upfront depending on what stage of company you're in.
And if you meet a certain hurdle, then they'll put in
another amount which is again for another 7%, you know.
So all of these things are kind of fixed along the way and.
Then they pass you on to the the set of growth and investors and
they they make that sort of connection.
That's right. Like quite simple.
Yeah. I mean, the the idea of a group
of these sort of wealthy individuals as well as
endowments and everything to potentially come into the mining
industry and, and change the game.
And you know, another feature of them being private companies is,
is another attribute where you see the, the markup in
valuations is, you know, a much smoother line.
You know, it might be an artificial line, but it, it's
another potential learning that could get investors more
comfortable with, that's right, with mining.
So. I mean, this is like, I mean
like, you know, to back to like John's kind of aggregator model.
This is something that you know, like I think him and I both
agree with is that I think some of the early capital will
probably be better to be private.
You know, like I think it's hard for junior companies to go and
do you know, such, such risky things and, and have to like you
provide market news and all, all of that type of stuff.
You know, like I think that ends up being maybe a distraction not
just in their execution, but also financially ends up being a
distraction in the amount of money they raise and things like
that as well. Probably not the best use of
their capital as well. Yeah.
I mean, I think, yeah, like, I mean, it's not the best use of
the capital if they're not appropriately funded.
You know, like if they're raising, you know, $3,000,000
for say, three years, you know, like half of that money is
probably going to go into listing costs and all, all of
the other things that they have to do, you know, like auditing
and all of that stuff. You know, like, is that the best
use of of kind of like money in that sense?
And yeah, like, and there's people that have looked at, you
know, like how companies have spent money.
And what you find is that, you know, in a in an environment
where capital is not that available, you know, like the
the part of the company's costs that get cuts is the in ground
spend. You know the rest of the stuff
has to be a baseline cost that has to be maintained.
To keep them going. Yeah.
So then, you know, so in times where capital, when when people
think capital is least efficient because and then they take it
away from the market, you actually incentivize the
companies to become even more inefficient because now they're
just spending that money to just survive for the next little
while. The the time as well, the amount
of time that a geologist running these companies might be
spending on the road trying to drum up more capital if that
could. And yeah, it's, you know, there
are similarities for private companies.
They still need to raise money and stuff.
But that's why the amount of flow on benefits.
And we do have a lot of the things that the US have.
We have got wealthy people, a phenomenal superannuation system
here. We have the mining expertise.
It'd be. I mean, the one fundamental
difference here is obviously is that the amount of like the
quantum of money that it takes to to get to a decision point as
a junior exploration company on the project is quite a lot more
than what a lot of startups can do, right.
So, yeah, so that like I, I fundamentally understand that,
you know, they especially if you're like a technology company
that has a SAS product like a software as a service product,
you know, like you're talking about a few $100,000 to get to a
point where you could have a product that you can take to
market. And, and, and do that, you know,
like that's probably not realistic in, in exploration,
you know, you're talking about a few $1,000,000 to get to to at
least a minimum kind of output. And so, you know, so to back to
John's kind of model, that's, that's part of the reason that
the aggregator model was that it's like, you know, if you
know, you're going to have to spend this much money to get to
a like a realistically conceivable proof of concept or,
or key decision point, like, you know, why wouldn't you try to
make that money as, as efficient as possible rather than wasting
half of it on listing fees and all this other stuff that goes
on. Beautiful Ahmad, I think we
almost solved all of Manning's problems there.
But yeah, thanks again for for coming on.
It was great to chat about proper and I'm interested to see
what we chat about next time. Sounds good, thanks a lot for
having me again. Here's Aman.
Also a huge thank you to Axis mining technology, mineral
mining services, verify smack power and technology, DSI
underground, Silverstone, CRE insurance, Greenlands equipment,
K drill and use a spark chart. While you're at it, Odoru.
Money miners. Odoru.
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