I've even adjusted, you know, for currency to be fair, this is
like for like basis total shareholder return.
So it accounts for dividends, those sorts of things.
Over the last 10 years, Z gin plus 679% like years away from
the entire pack. And in second place, this is how
far away 2nd place is. Farley lost 372.
Percent rhino money waters we're going to we're going to China,
we're going to North America today we're going to you boys
are covering a couple of big dogs that are big and warrant of
discussion. Behemoth.
Behemoth in the mining world that we just haven't haven't
really unpacked until today. But we're gonna be the wiser for
it. Thank God for you too, because
I'd never look at those two in detail.
It's just I'll just assume they're good, but we're not.
Look forward. To this we're not gonna neglect
the WA mining community either. Oh, mate, there's made a,
there's made a share price plummet and we're gonna go in to
see what the Hell's going on. Oh, let's do it.
Of course I'll freaking own it too.
So tell you what mate, tell you what's going to bloody lift me
spirits from a share price decline?
The GRX Conference, the Global Resources Innovation Expo, It is
coming up 20th to 22nd of May in Brisbane at the Convention
Centre. It's hosted by Osman in
partnership with OSIM. What is it?
It is the absolute nucleus of mining tech innovation.
What the future of the mining industry is going to look like.
You're going to have 150 exhibitors showing you
everything and it is going to look cool.
Have a look at this is this is look at those photos, look at
those tech discussions in action.
You are going to see shit loads of these.
Look at these two. That is a highly engaged
discussion about the future of the mining industry.
And mate, tell you what? Conference is a portal to the
future of mining. Oh mate.
Good pun there. Good pun.
It gets better though, Maddie. Why does it get better?
For money mind listeners. Mate I love saying the word
exclusive. Exclusive discount via US 190
bucks off. The standard rate for members.
160 bucks off if you're not a member, which means look, it's
worth the extra 30 bucks discount to become a member.
Follow the links in the show notes.
This conference is bloody going to be unreal.
You got to get there. Go to Bruce Vegas, see what the
future of mining is going to look like and oh, just.
I'm up. What's it?
Like Rusty and Bryce should go, yeah.
Yeah, yeah, I'm. Sure they will.
They will. Probably keynotes.
Bryce is probably gone. Keynote speakers, yeah. 100%.
I reckon if we could get the JRX logo on Rusty's nails, that'd be
the guy. That'd be the perfect marketing
material. All right, let's get into it.
What do we got? Take it away, Trev.
Which Chinese company are we talking about today?
The mighty Zigin. Mighty not not BYD, not BYD, no.
Yeah, I would call him a miner, but we do talk about him a bit.
But mate, Zigin is a massive mining company and it and it you
know, it, it takes a bit for us to understand that, I think.
And yeah, upfront I think I'm admitting that that I'm probably
going to be be be wrong or a little bit, a little bit off on
some of my takes about decision because up until today, frankly,
I haven't done the work to try and understand this company, but
it absolutely warrants that it's massive.
They have growing influence literally fucking everywhere in
all the commodities that that matter.
And it's a company that has grown enormously over the last
decade to kind of conceptualize just how rapidly this mining
company has grown. In 2014, they produce 1.1
million ounces of gold, 10 years later, 20242.35 million ounces
of gold, so more than double the gold production.
In 2014, they produced 138,000 tonnes of copper. 2024 they
produced 1.08 million tonnes of copper.
Like that is just enormous copper growth when yeah, when
every, every, every, everyone's been trying to grow copper.
They've just excited that. Far out.
I think I'll I'll let you get to it, but I'll assume where a lot
of that's come from. Kamala.
Yeah, yeah. Amongst others, yeah, No other
major has, has, has come close to generating the sort of
shareholder returns along that same growth journey at that XI
Jin has over the last decade. Keep in mind this is a Chinese
company listed on the Hong Kong Stock Exchange in a, in a, in a
decade where capital markets have been very punitive towards
Chinese equities, they've been, if you look at any performance
of Chinese equities over the last decade versus Western
equities like atrocious returns. So, you know, but what I've done
here, I, I'm actually comparing XI Jin, who, who is amid that
kind of capital pool, compare their 10 year total shareholder
returns with the majors, BHP, Rio Tinto, Glencore, Anglo
American Valet. I've even adjusted, you know,
for currency to be fair, this is like for like basis total
shareholder return. So it accounts for dividends,
those sorts of things. Over the last 10 years, Z gin
plus 679% like he is away from the entire pack and in second
place. This is how far away. 2nd place
is Valet plus 372%. It's not a time frame thing
right? I I haven't just cherry picked a
time frame. Here's the last five years.
See Gin plus 592%. Second place is Glencore Miles
Away plus 192%. Oh, and that's bloody
considering Glencore in the last month or two, it's like 280 last
night. Yeah.
It's like they're just, yeah, yeah.
Here's the last three years, right, a different time frame,
CGN plus 51% in first place. Second place, BHP miles away
down 1% is that, you know, coming off the back of elevated
commodity prices back in 2022. Here's the last one year, CGN
plus 11%. Second place is Anglo, who keep
in mind in that last 12 months received a buddy, a bid from BHP
up 8%. So on every single time frame,
no matter which one you use, the relative performance of the
others, the pack always changes. It's a different company in
second place. But the constant on every single
one of those time frames, Z Gin has outperformed the rest.
And well, I just find that utterly fascinating.
So I, you know, I've tried to spend some time today to to
understand how Z Gin has such an edge over the Western incumbents
that has seen it compounding at a vastly higher rate on every
single time frame. And that and that total return
that takes it for BHP Raya, that takes into account the dividends
as well. Exactly, exactly.
Reinvest dividends. Yeah, yeah.
Yeah, let's let's crack into to why.
Mate, this is super, super interesting.
I think you framed it well and there's some really, really
important reasons why to understand like and put it into
context, I reckon. I got secret sauce and I I think
I can pin it down to, to to 55 areas that, you know, Z gin, but
that gives it gives Z gin a like a massive edge that like
honestly, I don't think is it's an egg, an edge that is not
replicable by, by any western mind.
And those reasons are number one.
Zijin has a cost structure that is vastly lower than its Western
peers #2 Zijin's cost of capital is so much lower than any of its
peers thanks to its access to China state owned bank debt at,
you know, very low cost #3 Zijin has an envious track record of
aggressive, shrewd and bold acquisitions while remaining
tremendously disciplined on the price that they pay #4 Zijin's
geopolitical positioning has enabled it to go where Western
miners hesitate to conduct business, and they do it in a
way that Western miners probably can't.
And #5 capital allocation of Zigene has really prioritized
reinvesting for more production growth as opposed to capital
returns to shareholders that we've seen other Western miners
participate in. Yeah, for sure.
Let's unpack that cost structure one, because that's maybe the
most important. I mean, they're all, they're all
pretty important, but that one's like kind of, you know, once you
kind of see it, you can't Unsee it in a way.
There's so much to, to, to this. And, and, but if you, if you
think about a mining company, just like conceptually think of
a mining company, they can't control the commodity price,
right? They're, they're, they're price
takers. They can't control commodity
price. They, they can to an extent
control their production units. And you know, it requires
expectations and skill to do that.
And they absolutely can control their costs.
So I can't emphasize enough how important it is for a for a
major mining company to manage their costs.
In the case of Zijin, I think their cost structure is a, is a
true competitive advantage enabled by the fact that A, they
have their own in house engineering team to design,
build and expand projects. They avoid, you know, third
party ABC contractors and then the margins that come with it
clearly, you know, like like disappear.
So they, they can move much faster as a result of that as
well. B, they have access to the
entire Chinese supply chain. They source most equipment,
material services primarily from domestic suppliers who are right
on their doorstep, doorstep. C, lean overhead, unlike Rio
Tinto or BHP or Anglo, etcetera, all the rest.
But they all have enormous corporate overheads, right?
Teams on teams on teams that do nothing productive.
Z jeans lean right. They run a flatter structure
with centralized control and lower corporate costs.
In fact, it's it's it's got it's major shareholder is the
provincial government and they really discourage corporate
bloat. D this is a big one project
location arbitrage Sijin has prioritised countries with low
wage costs and permissive regulatory regimes, think DRC,
Serbia, Colombia. Western peers have been, you
know, constrained by the ESG investors or, you know, or the
permitting dynamics in Tier 1 jurisdictions and they face
longer timelines with higher community and environmental
costs, both be it both value and timing.
And those locations have much much higher wages like these
FIFO workforces are not cheap. JD we were in the the the DRC we
visited at the Chinese on mine, not as a gene one, but they they
weren't there was no FIFO rosters there.
They were flying back to China once every six months, like.
Completely, completely different, right?
It's yeah, it's, it's mind blowing.
And like it can only kind of be done some of these things from a
kind of Chinese perspective or other kind of similar countries.
Like you say, you just can't compete on a lot of those
numbers. And the cost discipline it, it
runs through the company in a way that I don't think others
come close to. Just when you hear the rhetoric
out of out of management, I'll just play an excerpt from the
latest results call that shows you how obsessed with cost
discipline this company is. This is this is English
translation audio over the over the top of the the call that
I'll play. So we have operations in five
continents and what we do is that we build a comprehensive
logistic and procurement network for our project across the world
in order to reduce our costs. And we have two concrete
measures. For example, we use open price
negotiation to buy some frequently used equipments,
which also help us to reduce procurement costs.
And we also take measures to control investment in
construction. We set up an overseas cost
settlement centre. It is responsible for managing
our prices and expenses early in the process overseas.
And we through this settlement center, we had put forward some
feasible plans which is quite helpful for us to improve our
construction investment management.
So we are we have managed to involve our management in
overseas construction investments early in the process
and we also continue to optimize our designs and engineering.
So basically, we have formed a very conducive cycle for cost
control. And we also have this kind of
full chain cost control measures.
We also look into some abnormal prices in our contracts.
Through this kind of management, we identify problems and lower
them. And 4th, we step up our
performance assessments regarding cost control.
We set clear targets and we also break them down into specific
tasks. And for major operations, we
also customize plans for their cost control.
And we also introduce a sharing system to in order to share our
best cost control prices among our operations.
And also we will be able to improve our performance in all
on all fronts. And we also introduce a reward
and panel gear system to ensure accountability and improve our
cost control results. So basically these effective
measures will be continued to roll out across our entire group
in order to further improve our cost control performance.
And also and also and also and also.
There were so many things there, right?
It sounds exciting. Yeah.
It was a female show I show you.
Yeah, translator was pumped. Yes, yeah, yeah.
Yeah, that, that was fascinating, mate.
And that and that flies in the face of the the other ones,
right? Because this is something
Western companies can compete on.
And I just love that dedication to cost competitiveness.
That is, you know, that that's what really stands out in in any
sector, right? And mining's obviously no
different. It's perhaps even more amplified
because you're you're a price taker.
What A So what about their, I guess their M and A track record
and their, and you speak of geopolitical appetite.
We mentioned the Congo. They were obviously very heavily
involved in the AVZ saga, which was fascinating.
So yeah, yeah. Give us a rundown of that.
The two the 2GO hand in hand and you know, M and a geopolitical
appetite Zijin, they've undoubtedly leveraged global
diplomatic and financial reach to facilitate their expansion,
right. Many, many of its projects
aligned with China's belt and Rd. initiative or or national
resource security goals. They're their largest
shareholder is a provincial government effectively, in my
mind making Zeigen an extension of state policy.
This government alignment I think has provided access to to
State Bank funding support when investing abroad think host
countries often welcome Zijin's investment due to China's ties
or infrastructure deals in other parts of the country and
government backing. It also helps Zijin weather
risks in these jurisdictions in in developing countries, it can
negotiate like favourable tax or partnership terms and it often
partners, you know, with government owned enterprises or
or offers host government's equity stakes to to align those
interests. Just think about the deal of the
century. Zejin paid US $412 million for
half of Kamoa Kakula from Ivanhoe in 2015.
Friedland himself has literally called this the best deal ever
in mining. And you know, he was on the
selling side of that deal, right?
He's no mug in negotiations either.
So, you know, if it was more value to be had, I'm sure he
would have found a way to to get it.
But but Ivanhoe needed a gin and they they brought not only the
in house engineering capability, but also a pathway to finance
the mine too, but also a counterparty that has hasn't
managed to actually, you know, deal and negotiate and get
things moving in the DRC in a period of time when no western
miner was going anywhere near the DRC.
And that's probably the one of the most things that's
misunderstood about Z June and I'll acknowledge my ignorance is
that engineering capability that they're a a project builder,
which is and they don't think would be as well known.
And they can do it cheaper than anyone like you know, yeah,
they'll run their own numbers over, over an undeveloped
project and come up with their own CapEx, which is way lower
than the study of the the Western mind and put out for the
Western project. And and that can you know, kind
of support a case to pay, pay X dollars or or whatnot.
It's it's totally not appreciated.
Yeah, I, I think now a lot of people would be quite critical
of Zegin in the way their geopolitical influence may have,
you know, let them achieve outcomes that are unobtainable
to, to Western minors. And those critics probably have
a damn good reason for their criticism, too.
Just ask any AVZ shareholder what they think of Zegin mining.
You'll be, you'll be, you'll be having that conversation for 15
minutes and not one positive word will be said.
And I've no doubt that Zegins, you know, achievements in some
of the spicy jurisdictions have been facilitated in part by are
doing things that no Western company can do.
And yeah, also I wanted to convey how Zegin is also
tremendously disciplined though, when it when it comes to deal
making. Can you can you guys think of a
single deal where Zegin has been known to have overpaid for an
asset or a company? Can't think of one, right?
How many, how many, how many major miners can you?
Can you say that about like you just can't every like at some
point in time in some companies history, some management team
and it happens relatively often, they get very excited or too
excited about 1 certain opportunity.
They pay too much and it's a disaster.
But I can't, I can't say I can't think of that as it relates to
to Zijin and I just to capture, you know, that part of the DNAI
did just want to play a snippet from Chairman Chen talking about
MNA in the current environment. This is a quote from less than
two weeks ago. Want to say is that even with
such high prices, there are also there are still some good offers
available. So for a company if it does not
has any increase, then it won't be able to for the company to
achieve growth. So we will definitely continue
with our M and A strategy. The Zune has this feature which
is that we won't go for very expensive project, we won't bet
on just one projects at all costs.
For example, when we decided to enter the lithium markets, that
time lithium prices has been quite high, but we still
evaluate projects at the cost of 100,000 per tonne.
So this is our benchmark price internally.
Basically, it means that we will still remain prudent in our
investment strategy. So we have some considerations,
for example, in terms of the selection of minerals, we will
go with go for minerals that is optimistic in the future.
In in recent years, we prioritized copper because it's
critical to renewable energy. And also artificial
intelligence, the application of AI also consumes a lot of
electricity and geopolitical factors are having greater
impacts. Almost all central banks across
the world are printing money. So money is cheap and that is
why we are seeing rising gold prices.
So GOAT is a very important target for us in our future M&A
activities. Gotta get Jim and Shannon the
translator on the show. That'll be a bloody.
Wouldn't it, wouldn't it, it would be a very, very
interesting, very interesting conversation I reckon, Maddie
Yeah, but like you can, you can hear the discipline there,
right? Like how many how many companies
were were running 100,000 CNY per ton lithium carbonate in
their long term price assumptions when when it got to
six times that, you know, Oh no, I certainly didn't.
What, what do you, what do you think is going to be some of
their next moves? Like if you're going to throw
some darts around, what are they?
Is it going to be heavily focused around copper?
They had a massive swing in, in lithium, yeah, relatively
massive, almost 2 billion U.S. dollar deal.
Yeah, Chinese lithium for for zangay.
Yeah, they've got that. He, he spoke after that quote.
You know how he's pretty happy with the, the quantity of, of
lithium resources that they have.
And I'm sure that, you know, they're, yeah, you know, they've
got a view on the, the extent of the Monono deposit they'll be
able to bring online. They've also got Argentinian
brine which they're bringing online as well.
So there's, you know, they're, they're, they're quite
comfortable with their lithium deposits, but they're happy to
look at more gold said was a big priority.
I think gold is actually like high priority that copper based
on my interpretation of the translation.
I also think where they are going to like look for they
just, they just bought Newmontchem mining in, in Ghana,
by the way, paying a billion dollars for that.
And but I think they'll they'll find a lot of opportunities in,
in South America, you know, places like again, spicy
jurisdiction of Colombia, those those sorts of locations.
You know, I wouldn't be surprised to see, you know, a
lot more activity from from the likes of the gym in those parts
of the world. What about Ecuador?
It's. Entirely possible.
Yeah, Yeah, yeah, yeah, Absolutely.
Yeah. Mate, that's fascinating.
That is super, super interesting.
Obviously that with the the MNA aspect of it, they haven't been
around as as long in, in such scales, so very keen to see how
they do through the next cycles in in staying to that
discipline. But the track record is super
impressive. Yeah, it is.
And I mean they're, they're even in in Australia in like fire.
It's mostly owned subsidiary Norton Goldfields, which yeah
is, is a is a funny one, a bit of a head scratcher.
I think they've got a pretty high kind of cost, cost basis
that they, they run things out there.
But you know, have also shown a willingness to, to divest for
the first time in a, in a long time by way of selling bullet
bullying recently to to MI 6. So just, I'm paying more
attention to the gin. Yeah, paying a lot more
attention. And I I'm kind of convinced that
they do have a competitive advantage that Western miners
can't imitate based on, based on all the factors that I talked
about, for better or for worse. Very bloody good, very good, JD,
we're going. We're going international again.
We're heading to North America for you.
But before we do this, I have a bit of an itch to scratch that I
have not done. Please.
Done for a while check this out. ITSITSITS more ITS flying out
the door for KCI. It's bloody good to have them
back. And tell you what these IT
numbers have just grown since we've had them.
Where are they going to 38? IT 3-8 more coming in six months
and that is going to compliment the fricking underground AG
coming in the next month and the bloody underground charge wagon
coming in the next month mate. All available for hire.
A new grader on the way, mate, they're going to be an
underground operators. I cannot wait to see him.
It's great to have him back and they've even just amplified the
recruitment team. All your blue collar workers for
underground open pit civil construction, they're just mate.
Whenever in doubt in your life, what do you do?
Just call KCA. Yeah, call KCA.
Very simple. Great to have the team back.
How good is that? He's flying out the door, right,
JD? Where we go, North America.
This is a big humdinger of A use.
Love this company. Use love it.
Oh no use. Love it.
I do I've got I've got to sort of turn the volume up after
you've just done the ad again. So normal very good.
We're we're talking about Franco Nevada.
So they just had an investor day.
I'm not sure if you guys saw this one, but I thought it'd be
worthwhile just tuning in and trying to learn a bit from the,
the royalty behemoth that they are.
So I think everyone kind of knows their returns a first
rate, they're pretty stellar. Their share price performance
since since the IPO kind of knocks it out the park.
And I was, I was kind of curious to hear how they're thinking in
like a, a frothy precious metals market and some of the other
perspectives on, on debt on the market and sort of funding
structure more broadly from from juniors to to developers.
And yeah, I thought it'd be good just to chat with you lads about
about the big takeaways. I'm very curious mate, where
should we start? I've, I've sort of jotted down a
few points and it's actually interesting to, to look
afterwards. There's, there's a, a sort of
relation between all these points, which I think the money
miners will kind of notice as we go through.
But I'll start with how royalty funding has its sort of place
versus your, your traditional debt and equity sources.
And what you kind of take away from this is the, the time
frames when Franco in certain commodities will get really
active. So I'll play a snippet from the
CEO to to start us off. That we can provide capital to
the industry at a consistent cost.
There'll be times when debt is very cheap and then we can't
compete and, and, and we're happy not to compete on that
level. There are other times when when
debt is far more expensive and then we can compete.
So we prefer to think, you know, both when we're competing with
debt and and also with the equity markets that we're a
consistent cost of capital. The equity markets probably even
more open and shut than than the debt markets.
There. There there's some periods where
they they're wildly undervaluing assets and the other periods
where they're overvaluing it. So my, my interpretation came to
hear what you guys think, but that was just speaking to
discipline, like discipline, discipline, discipline through
the cycle. You've got to, you've got to
stick to it. You can't change your strategy
kind of halfway through. And he, he ended up following up
that bit there by sort of saying when people really need our
capital is when we get deals done.
And I just, I found that fascinating.
You guys can kind of chime in if you've got thoughts or we can
jump to the next one. I totally like that, that you
know what comes to mind when he said when people really need us?
I think I think of Sabanya late last year when they they did the
the stream, which was like, yeah, pretty, pretty onerous.
But it just kind of speaks to the value of a royalty company.
AB AB absolutely. And it's, it's, it's going to
tie and I've got, I've got more thoughts that I'll I'll sort of
piece into what you said as as we go, but I'll I'll speak to
their view on debt. And in simple terms, they avoid
it. It's, it's as simple as that.
The, the goal is to be the one with capital when you're in
those cycle troughs and some of the best deals that these guys
have done when other companies are distressed.
So thinking like Glencore 2015 sixteen, those sorts of deals
that they do stand out and they make your money for years and
years and years afterwards. So they view not holding debt as
a competitive advantage in the business.
And it's, it's Berkshire esque and that is a, you know, kind of
the, the utmost compliment in my mind, but it's really how they
view the world. And they got asked this question
pretty early on or they actually spoke to it actually without
being asked because debt must be such a such a tantalizing
prospect for a business like them, right?
And the idea that you could just spruce up your returns ever so
slightly year in, year out is, you know, super, super appealing
given that the profile of this business.
But they clearly acknowledge we are in one of the most cyclical
industries that exist. And they view that financial
flexibility and the ability to move quickly when it really,
really counts far exceeds the the ability or the the earnings
in the long term that you're going to get from a few extra
percentage points here and there.
So I'll play another snippet now.
The second is financial flexibility and it's how we
think about our balance sheet. A lot of folks say to us when
you lever up the company debt is a lower cost of capital, you can
get better returns that way. That's not our approach.
We put more importance on financial flexibility than we do
on cost of capital. What we found over time, the
industry is highly cyclical. That points in the cycle where
the industry really needs capital.
That's where you get your best deals done.
For us, that's happened twice. The first was 2008 financial
crisis. We had the capital available.
We made some super investments. Palmeria Guadalupe was one of
those. The second time it happened was
20/15/2016. Trying to slow down.
Many of the diversifieds were caught off side with their
balance sheets. We were able to get stakes in in
terrific assets, Candelaria and Tamina and to Pakai.
Right. That's, that's really
interesting. I think it kind of it speaks to
the, the optionality that that that cash has, but also, I mean,
they're in a competitive industry where the ability to
act fast in those moments of, of distressed opportunities matter
so much, right? You've got A and, and imagine if
you've got a peer royalty company who doesn't have a debt
covenant in place and they've got just, you know, like, you
know, cash that could be deployed, but you've got a debt
covenant. You've got to, you've got to get
your lender to look over because you want to kind of, you know,
maybe maybe allocate more than you, you thought you could for
all of those sorts of reasons. So yeah, it's, I think it's a
function of, of their, their outlook and also the competitive
nature of what they're doing. So that that flows on, you know,
flowing on from that, you've got investment cycles.
And I just underline what, what Paul said.
They're investing opportunistically in the weaker
parts of the cycles, in particular for non precious
metals. They've got a slightly different
outlook for gold. But the, the Detour Lake deal, I
just want to under score to put it in numbers for people to
understand how good a deal this kind of was.
They got a 2% NSR on it for US, $35 million.
This mine did 670,000 oz last year.
They they call that a 250X. It's, it's just kind of
phenomenal. And then there's, you know, the,
the Big South American copper assets that they, they spoke to
goes well, which are kind of stellar.
And gold, like I said, is, is viewed a bit differently, which
I'll get into in a moment. But the way they sort of talk
about this is investing through the cycle and they always
present their board 2 price decks, 1 is more or less the
spot price and the other is consensus.
So it's, it's a bit of a different take to the other
commodities and to piece it together for people, they kind
of want to maintain gold and precious as 70% of their
portfolio and 30 as other commodities.
That's predominantly energy as well as as well as copper.
So the 4th point is ignoring the rate of return and this one is
super, super interesting. So the upfront investment will
always seem to have a low rate of return is how they frame it.
And adding to that, they say whatever you put in the
spreadsheet is going to be wrong.
So their process is kind of two step.
Firstly, are you highly confident that you get your
money back? And secondly, have you picked a
property that can be multiples of its current size in future?
And they sort of say that in this business that's where you
make all the returns. So I'll play it from from then.
Key thing when we're looking at projects are we highly confident
that the project is economic, that we will get our money back.
The number one thing that we think about as a business as I
said up front is it's not the rate of return that you see on
what's there today. It's investing in the right
properties that can be a multiple of their size over time
because if there are multiple of the size that ultimately is, is
where you make your returns in this business there.
You go don't fluff up your study too much if you want Franco to
come in. If there's like one kind of word
that describes how this company thinks best, I think it's
optionality. That's what they that's what
they prize over almost everything else.
And you know, you're, you're targeting projects, assets that
will last multiple, multiple cycles.
And it, it actually reminds me of this paper that I think we
shared a little while ago from Kaepernick, this, this US fund
on how many, many people out there have flawed valuation
methods for, for mining companies.
And they don't appropriately value the longevity and the
optionality that you get in these top quality projects.
And I think it's just, it's something super interesting to,
to hear and acknowledge from them.
They've always sort of spoken about it, but to hear it is just
reinforces it in my mind. I think if who who benefits from
that optionality the most that come like it's, it's actually
not the miner because their costs creep up as time goes on.
The royalty company captures so much of that in a in a non
linear fashion of that optionality because as a matter
it doesn't matter if mining costs go up.
It doesn't matter if inflation, you know, happens on costs
because royalty is percentage of top line. 100% mate.
Is there? So if this is such a good
business, how is it perceived? If a mining developer or company
has financing from Franco and a royalty for them forever, is it?
Or if it's so good for Franco, is it?
So this. Is bad for them.
What's the? That's a really interesting
question, Maddie, and it ties into my final point on, on gold
versus other commodities. But to answer your question
directly that they are trying to stamp projects these days and
kind of have a bit of brand power, which I never thought
we'd kind of speak about on a on a mining podcast.
But they want to like give projects that the Franco stamp
of approval and they try and frame it as that having positive
flow on effects for a company's cost of capital because Franco's
done the work now, you know, take it with a bit of a pinch of
salt. They're getting the better deals
there. And the miner is going to pay in
any case to get that stamp of approval, right.
But yeah, it's, it's a double edged sword, right?
It means that Franco's done the work.
And I think this project is going to be around for a long
time. If they're, if they're buying a,
a royalty directly, you know, if they're tearing one up with with
the company, it goes both ways. So we go back kind of 20 years
ago and they're one of very few royalty companies around.
It's a less competitive space that is that has changed quite a
bit. There's more royalty companies
around today and the little royalty companies that are
around are even bigger. And then you've got also got
more competition from the likes of sovereign wealth funds and
like these alternate sorts of capital, your, your Orions of
the world, your Appians of the world, those sorts of guys that
are coming in to try and compete.
But at the same time, you've got a dearth of gold funds.
So the number of pureplay gold funds or mining funds that are
around now is a much smaller number than it was 20, even 10
years ago. And the capital that they're
managing is substantially smaller than it was.
So the landscape has has changed quite a bit.
But as these guys, Franco's position has grown, as they've
become a bigger company, their cost of capital has sort of gone
down, they've become even more competitive.
So they can kind of do deals a little different.
But yeah, it's a it's a fascinating kind of landscape
and you can just sort of view how how mining finance has
changed as these guys have grown.
Yeah, right. It's a It sounds that.
Was that was a long answer to your question.
But it sounds like a good marketing strategy to say, look,
just attach us to it. It just looks better because we
sound like we've done the DD on it, but we're going to make shit
loads over the long term. Yeah, it's, it's fascinating,
isn't? It I don't think we'll ever look
at a, you know, a royalty on a single asset developer royalty
finance and be like, yeah, this was a great finance.
You know, we're just like because of the way that it
inhibits a project into perpetuity.
But sometimes a single asset developer or even multi asset
development. You think in the case of First
Quantum bringing on copper Panama, like they had to put it
be, you know, royalty stream, yada yada on that.
Thanks to Franco too. Sometimes you have to do it to
get the deal done. Yeah, is it?
Is it perceived Goes. To the first point, this goes to
the first point. You know they do the deals when
you know you need the capital, you being the minor.
Yeah. Is it and is it possibly
perceived a less risky option than conventional debt or
dilutive? And that's so it's a short term
benefit, but Franco gets the huge, huge long term benefit of
it. How's it perceived from a
funding dynamic? There's a, it does have elements
of that for sure like you don't have to to pay it back, right.
So that's not going to come and sting you at the bottom of the
cycle the same way high cost debt will, no doubt about that.
Yeah, it's a fair comment. Yeah, in, in and in another
perspective it it makes your corporate appeal a lot lower
too, because it it might just going to be less less hungry to
buy something because the world here out lives.
Yeah, the corporate outcome. You can always, you can always
spin a narrative as well, mate. You can sort of say, oh, we're
a, we're a copper miner. We weren't getting credit for
our gold anyway, so we just streamed off the gold.
That's, that's exactly how Savannah framed it.
You know, they're saying nobody cares about the gold that we
produce in, in the Bushveld. We're a, we're a PGM minor.
That's how people think of us. So we'll stream off the, the
gold. So you can you can spin it a few
ways. Yeah, yeah, that's bloody
interesting. Very, very interesting.
Good digging, Good digging as always.
You want to know another bloody stamp of approval that's
probably worth its weight in gold up at Franco levels.
MMS stamp of approval. Tell me Maddie, but if haven't
them associated with your project.
Look, Black Cat has cracked a dollar and that is either to do
with one or both of MMS open pit mining expertise at Myri or the
tech services arm that complements it, which is
probably been a significant driver to why they've got to the
ORSO early and they're just going to finish it that far
ahead of schedule. So you're talking about stamp of
approvals that are actually hold some merit in Australia.
It's Bloody mineral Mining services doing your open pit
mining. It's amazing when you think
about it because, yeah, like, I don't know, maybe even just only
be focusing on Polsons. If it weren't for the innovation
that came from MMS, help them kind of get that going.
And then all of a sudden, like it's like, heck, we might
actually buy a meal here because there's a, there's a fair bit of
upside going on. The flow on effects like mate,
that's like great decisions for perpetuity.
It's like open pit mining royalty.
And look, they will acknowledge that MMS were instrumental in
that process. So mate, just do if you want to
follow a similar trajectory, get MMS doing your bloody open pit
mining, mate. There's going to be, I don't
know if they're going to be doing mining here or not.
Oh, no, you got, Oh, you got a bit more final thoughts, JD or
do you? Yeah, I I had a couple just to
to wrap up on. Ripping me up mate.
On Franco, so real quick, I didn't speak about Cobra Panama
because we touched on it, but that was 15% of the company's
NAV not too long ago. You just go back a couple years
and things are heading in the right direction there.
So watch that space. And finally on on Franco, you
know, their strategy has been superbly executed to date and
they've outperformed almost every Goldie as well as the the
metal price since they listed. So came to see if they can
maintain that discipline going forward.
You know, you'll constantly have to kind of do do new deals here
and there that knock it out the park.
So we'll we'll see on that front.
But the stock itself can be super, super pricey.
Hence they pay dividends. They don't buy back their stock.
I think that's a bit of an acknowledgement in that there
there are opportunities though in times where these guys have
done deals like they said 2008 and 2015 sixteen, their share
price has been pretty depressed as well.
So you can here and there, you know, it's kind of once a decade
type thing get an opportunity. But in normal times, I think as
an investor, if you are looking at kind of investing in Franco
Nevada's stock, you are paying up quite handsomely for the
optionality in their portfolio, which ironically I think it's
something that Franco's management team themselves would
would never do. So it's a kind of interesting
paradox to to leave it on, I think.
Very good God got us all thinking, JD.
Nice work, right everyone's? Thinking let's talk exploration,
mate. Exploration.
Jeez, everyone's thinking why the Hell's this going down
bloody 30%? Oh, Caprice, one of the early
gold exploration bolters as UN bolted a bit or sort of back to
where it was before the assays. These assays come, let's go.
There's a pretty interesting sequence of events here.
So they've got the ground up near Remelius's break a day up
in the Murchison. So one now that gold gold's 5000
bucks an ounce today Aussie, which is fascinating that the
gold prices, gold stocks haven't moved that much.
So whether old Trumpies are the the fear of tariffs on the whole
world is offsetting the increased gold price could be a
reason. But it was yeah, it was
fascinating. Not so the the equities move as
much so Caprice in the leader that a busiest a busy 28th of
March. This was which was last week.
They they put out a because I was sort of running.
On no news pending assays, they got up to like 8 and a bit since
and they they released this these incentive securities for
the directors 2 and a half million performance rights each
and half a mil to the cosec as well, I think.
And but on the same day the price was running, they went
into trading halt pending price query and assay announcements.
Everyone's thinking Jesus Christ, there are bloody issue
on performance rights just before assays.
Looks a bit airy gown. But then on the same day, the
28th of March, buddy. They then withdrew the proposed
incentives. So they and those those
incentives were based on the company shares trading above
$0.10 for 15 days and at least one year's service.
So it was nearly approaching $0.10 so but but it has retraced
today it's back down 30 odd percent on the release and when
it come out of trading hole in the release of the assays.
So you look at look at the first page and you think it oh, 11
metres at 6.7, that doesn't look too bad. 20 at 1 1/2, not as
good 28 at 6.4. But that was the previously
reported result. And then then they had a few
other results at Baxter and everything 10 meters at 3G.
But if you look at I guess you bring up the cross sections and
say, right, what's what's new, what's old and how's it all
looking? So the, I guess the main one
they were going off was this Vadrians Hill that that was
where the 28th at 6.4 is. And you see the new results are
coming out in the yellow. So you head north of there, it
goes to well, I guess the the follow up hole of come back at
20 at 1 1/2. So looks a lot right.
The grades dropped off there. They did a bit of drilling on
the surface in another spot. They all come back as Dusters 5
at .38 at .2. So and then that Baxter
prospect, they again going deeper results of 7.46 and 3
meters at .4. So it's sort of just the results
today didn't really match the I guess standard of the initial
results that came out that sort of saw the share price triple.
So it's just looking like that's, that's their phase one,
phase two program complete of 5000 metres.
They've got a phase three follow up of 5000 metres scheduled to
start next month. So there's obviously this is
early stage the volatility of expiration.
So there's plenty of ground there they're going to pepper
holes into, but it just shows hype can quickly, very quickly
turn into unhop when this gold exploration mania market.
So I'll be interested to see if these performance rights, if
they when they do get granted, if they're still on the exact
same conditions. Yeah, because the share price is
a fairway way now. Yeah, it's down 30%.
So you would hope they come back out at $0.10 as well.
So very interesting. We will wait and see.
So that's you. Saw the series of events and you
thought oh there must be something good to come here but.
Yeah, yeah, it's it was funny. Yeah, very interesting.
So Nah. Anyway, see what they do in
another 5000 meters on site. There we go.
Go gold, go expiration. 5000 bucks an ounce.
LGC is freaking off her head. She just can't sit still today.
She's flying. It's gold coming out of her
ears. That's what the alley G is going
to be. The G stands for gold.
Now alley gold of Edis. Oh, right, that's where we'll.
See where We'll see where Gold finishes the week on this insane
run. You can tell I just whipped that
up right at the end just to put something in the complimentary
or extensive segments. Anyway, I got to give a bit of
love to everyone, right? Hey, let's go through the
bloody. The friggin Speaking of, it's
flying out the door. We've got ticket discounts
flying out the door. We've got the JRX conference,
which we mentioned at the show. 160 or 190 bucks off the future
of mining innovation at Brisbane in May.
Get your tickets to that, Oz. I'm in underground operators
conference next week. I've got the bloody and the
gather round heading to that. The resource rise and sail one
after that will be a bit hoarse apparently on bloody paddling A
hosting a panel with Koshi. Well, me and it I'll be like,
hey, but young corner of the days of sunrise.
For a conference. Mate, you're in my world now,
Koshi. I'll be doing the I'll be doing
the Carl Koshy roll on that one. Touch him a thing or two.
Yeah, right. I'll show him those boss in the
mining industry. Right.
Who are those all these bloody bosses of the mining industry?
Mineral Mining services, Grounded Samba, Groundsports, AR
Insurance, WA Waterboards, Quattro, Project Engineering,
KCI Site services, Black Diamond Drilling Services.
Love that. That sounds Black Diamond and
Cross Boundary Energy Rd. Rd.
Road Rd. guys.
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