Maddie in this chat Spartan and Middlesex gets mentioned and
Ding Ding Ding for JDI. Righto money miners.
Another bloody great yarn delivered by Axis Mine and
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Right. Let's rip in, mate.
We have got a bloody brilliant little fundy chat coming with
Maddie Gryphon from Maple Brown Abbott.
Mate, I've been watching Suits. Can we get your name on the
company? It's all about getting your name
on the door. Maple Brown Abbott Gryphon.
It could be after this. Yeah.
The business was founded about 40 years ago and by Mr Mabel
Brown and Mr Abbott. So I think I've probably got
very little to no chance of that happening.
So it's a. It's a pretty good name in the.
Industry and don't give up hope. Don't give up hope.
Oh mates were girl ripping you in so you're buddy.
Actually I won't read the boys notes about what you do because
that'll that's degrading to them.
Boys, lay the land about who this Maddie Gryphon Fuller is.
Oh, let's, let's root straight in.
So we've, we've tried to get Maddie on the show for a little
while. Then we've finally managed to
make it happen, which we're very pumped about.
So Maddie, I wouldn't speak too much for him, but he runs the,
the Aussie small caps fund. So a generalist, but quite a,
quite a bent at the moment, about 1/4 of the portfolio in
resources and a lot of the names that we love to chat about.
So in honour of you, Maddie, Michael, I thought we'd start
with uranium. So Paladin and Boss Energy both
in the portfolio and I heard you do an interview maybe 8:00 or so
months ago talking about the the supply side narrative that sort
of sits behind uranium. We've sort of talked about it
quite a bit on the potty. But yeah, keen to keen to hear
how you came across picking these two names to start with in
the the wider world of uranium. Yeah, that's right.
I mean, you know, uranium has been talked about a lot in your
show by a lot of smart people. So I guess the the difference in
where my view is versus what a lot of the rest of the market
is. I'm probably less of a Super
Bowl on the demand side. I don't see sort of uranium
reactors being rolled out like they were in in the 70s or 80s.
I just think it becomes very hard politically in a lot of
Western countries given these very expensive builds over 10 to
15 years sort of programmes and you really need to have that
industrial base in place. So I think that becomes a bit
difficult. What we'll probably see in the
Western world is extension of lives continue and then you
supplement that with Chinese, Indian, Middle Eastern roll outs
which come online. So I think that leads to some
slight growth in uranium demand over the kind of the next 10 or
15 years, noting that uranium demand over the past 30 years
has gone pretty much nowhere. I think that probably steps up
to maybe one or two percent a year.
The interesting thing we're starting to hear a bit more of
recently is in the US particularly these capacity
upgrades. So the ability for existing
reactors to add, say 5 to 10% on top of existing capacity for
pretty low CapEx, the likes of Constellation, some of those US
producers are starting to do that.
So that's probably some incremental positive news for
the space. In terms of the stocks, Boston
Paladin, it's quite simple actually.
Our process is pretty earnings focused.
We don't go too far down the value chain in terms of
exploration. We want to see production and
cash flow within two to three years.
So Boston Paladin were effectively Aussie uranium
stocks which fit the bill. We did get quite a lot of
comfort on the projects on the restarts there, spent a lot of
time with management and sort of related companies around space
to get comfort on that. But essentially it's a pretty
limited subset of stocks in uranium.
They will kind of have hairs on them.
So you've got to put up with the a few issues and all of them,
and I'm sure we'll talk about some of those, but that that was
a decision driving past the Paladin into the fund over the
past couple of years. Well, we'll start, start on
Paladin, start on Paladin then as a as an equity holder, what
was your, I guess initial reaction to the Fission merger?
Yeah, it's an interesting one. I look, it's long dated, so that
project's probably only going to be in production post 2030.
Taking a view on the project, it's it's a difficult part of
the world. It's provided there's obviously
a lot of permitting challenges to get through and there's
issues around kind of freezing, you know, the ground there to
get, get the production ramping up.
So it's not without challenges. Having said that, it is a very
high quality project, high quality deposit should be very
low cost, reasonable size producer.
I can see value in excess of where Paladin's paid.
So I think they've, they've bought it quite well, added a
pretty, you know, depressed time in, in the short term cycle of
your earning. I just don't, I don't think
taking pounds out of the market or consolidating supply is a bad
thing either. I think that can only sort of
lead to better things on, on a pricing dynamic.
So reasonably positive overall, noting that it is quite long
dated. I think Paladin just becomes
kind of the, the growth uranium option for many investors.
It's, it's big, it's got hundreds of millions of pounds.
There's plenty of optionality there.
So I think if and when we start to see the spot price, spot
price tick back up, Paladin probably sort of attracts some
of the global investors to that growth pipeline.
It was, it was looking at the the fly over thing of the
fission project. It looked bloody easy.
It was all green and everything. They don't put all the snow on
the, on the animation of what the project project looks like
there and, and, and it looks like, oh, that's pretty easy to
get to. But from what I've heard that
those projects are so remote and the logistical challenge of
developing them is, you know, something not to be
underestimated. But then you look at the Fission
project being right next door to next Gen.
So you got two projects very close in a very remote area.
It just makes obviously so much logical sense that there'll be
one stand alone operation there instead of two.
How do you see all that possibly tying up crystal ball tying
mate? No, good point.
And I mean, you know, the remoteness and, and the
challenges around location, weather, all that sort of stuff.
When you look at the project, it's the 350,000 tonne per annum
mil and it's going to cost over a billion dollars at the moment
to build. So that just kind of goes to the
challenges of how expensive and how difficult it's going to be.
Absolutely agree with your point.
Right next to next Gen definitely makes sense.
Should be a lot of synergies in finding those operations.
Having said that, you know, not covering the mining space for a
long time. There's been a lot of sensible
acquisitions over time, things that make sense, but it depends
on the people at the time, depends on whether you guys get
involved, you know, board type sashes, that kind of thing.
So on on paper makes sense, but let's see how it plays out.
There's still kind of a long time to go on those projects.
Matt the, the, the, the, what's on boss is obviously what I want
to talk about. I actually, I, I listened to as
a poddy you, you must have done years ago.
I think it was 2019 or something, but you would you
were talking about the importance of of founder LED
businesses. You you spoke about at the time,
you know, selling all of your PA and, and putting it all in the
fund. And, and and that's like that's
alignment to you is you're fully aligned with yeah, and you know
where I'm going with this line of comment, you know, you're
going yeah. So how do you how do you like,
you know, there's only I get there's only a limited number of
of places you can allocate your capital given the given what you
articulated with uranium. But when you see the MD and two
other directors selling, you know, 70 plus percent of their,
of their shareholding in, in, in BOS, What's the read through on
the on the alignment kind of factor for you?
Yeah, look, I, I, I completely get the point of Boss management
and boards selling big stakes. Stakes and companies is always a
red flag and it's never a good thing.
So would I prefer to see them sell 20 or 30% of the holding
and do that over stage period? Absolutely.
So I think that was, that's definitely an issue and that's
created some problems. I think it's worth just
remembering where BOSS has been on the journey.
Duncan joined that company in early 2017.
He put 100 grand in his own money in at the start at four
cents. So that's a pretty good
indication of just sort of the value that's been created over
the time that he's been there over that several years.
He took over a project which obviously didn't work under your
rating. One had a lot of issues around
the drilling side, the flows, the plant.
So all those problems have been solved over time.
I certainly don't begrudge him taking money off the table,
especially considering you did put more in and during COVID and
in a placement post that as you say, the quantum's problematic,
but it's, it's done now. So we've kind of got to move on
and assess where we're at. I think the, the update they put
out the other day, along with the guidance for the next three
years is kind of exactly in line with the ramp up profile they
previously communicated to the market.
There's obviously a month or two delay at the start there, which
is not unusual in a lot of these Commission projects.
But all the early signs seem pretty positive.
I was up on site probably six or nine months ago.
I got a pretty good read through about what they're doing
differently, how that ramp up profile looks.
So I'm I'm fairly comfortable with that, noting that it is
still quite early on in these ISR mines do take 2-3 years to
ramp up fully. So there's it's not without
risk, but I think a lot of those boxes have been ticked.
Now the the other thing I'd probably say in defence and you
know at the time that Duncan and the board sold, the price is 550
or 6 bucks. So there was a lot priced at
that point. Were you assuming you're running
price over $100 kind of forever clear ramp up and commissioning?
We had sell side numbers, which still we're assuming some sales
in, in Fr 24 and 25 looking a bit too optimistic.
So to be honest, we were actually trimming our position
at the same time. So selling when when price is
expensive is kind of kind of what you do.
And we're looking at the now saying, well, the share price
has retraced 35%. There's been a pretty good start
to commissioning. Not even still the way to go
there, but I actually think it's something worth another look for
people in Mississippi the first time and something that we've
added a little bit to the position in recent weeks as
well. So if they're, if they're down
35% now, like 'cause the, the, the whole thing about these
uranium equities was trying to back solve, you know, the free
cash flow they're gonna generate to what they're being valued at
the moment. And it just didn't seem it was
adding up. And especially considering boss
isn't like a multi decade operation, it does have a no the
it's yeah, it's it's not a 20 year life, but it's coming back
down to where it is now sub sub 4 bucks.
Is it starting to maybe make a bit more sense about what
they're going to make and what it's being valued?
Yeah, definitely. Yeah.
I think the valuation is a lot more reasonable now.
Look, longer term, I do think there's upside from Ghouls Dam
and Janssen, some of the other ground they've got around
Honeymoon, which will either be tied in or have a separate
plant. So I think that probably does
provide you a 20 year view. And I know there's a lot more
work going on in terms of drilling studies out there at
the moment. So that hopefully will eventuate
over the next 6 to 12 months. So you get a bit more visibility
on that growing production profile.
But yeah, going back to the point, I definitely think
there's, there's more value now. The cash flows over the next
couple of years will take some time to ramp up.
But when you're looking at sort of two to three years time when
they're at full production, you're probably getting to a
kind of 10% free cash per yield, which is not too bad.
Uranium's interesting though. I mean there is a very limited
set of uranium companies to invest in.
So we're positive on the uranium price.
I do think we're kind of one or two years into what will be a
five to seven year cycle. Where can you play that is
essentially some of the majors like Camico and Kazanoprom,
which have got a lot of that contracted.
So there's not a huge amount of spot price leverage.
Boss has got a lot of spot price leverage.
Paladin's got a fair bit as well.
And I think just trying to in certain valuations on these
things can be a bit troublesome given they will just trade the
spot price sentiment. We've had a fairly weak six
months in uranium spot price feedback I've got is that people
have been more focused on securing enrichment capacity and
that and that's led to sort of weakness in contracting over the
first half of the year. I think that'll flow through
into better contracting in the second half.
I do think we'll see a step up in spot price and it's probably
important to note that the actual term price has kept
ticking up. We're at about 80 bucks a pound
now on the term price with ceilings up, you know one 25130.
So again that that just probably goes to the underlying strength
of that market and just the dynamics we serve the next few
years. Hard to hard to put evaluation
of these things. I think once the spot price
starts to recover if when that happens, I think a lot of these
things if you're given and the equity starts to recover in mind
with that. The the obvious stock that's you
know, not, not, not in your portfolio there is next Gen.
And is that just a function of the fact that you you have to
own something that you think will have earnings 2 years from
now? Yeah, Yeah, pretty much.
I mean Next Gen's interesting look, it's 1:00.
We we could own if we wanted to. Generally on the on the earnings
certainty side, we want stuff in in production or profitability
within two or three years. I think when it's a project as
high quality and as obvious as Next Gen that it will be in
production, I'm more happy to take that risk on getting
involved a bit earlier that that's kind of an interesting
one. I mean, we're sort of at a, a
bit of a stage now where they need to progress some
permitting. What happens with CapEx
estimates, how does the funding come through?
There's some milestones that can take off over the next 6 or 12
months, which could rewrite that project.
But I, I do think over the next few years, that's just going to
be more driven by the uranium price than anything.
The, the broad parameters are kind of set.
There's not too much they can do in terms of construction issues
or, or massive delays in terms of project that could derail it
over the short term. So again, I I think that just
comes back to being driven by where the spot price heads in
the next 12 months. JD, out of respect, I'll stop
talking about uranium. I could keep going, but I'll let
you keep things moving. I, I was just came to hear your
thoughts, Matt, obviously you're an Aussie fun going at ASX
stocks, but we've mentioned a few names with Canadian
relations. I just wanted to hear if you had
any thoughts on the news we've heard about, you know, them
clamping down on M&A and just how you see Canada as a as a
jurisdiction for mining projects?
Yeah, it's, it's an interesting one.
I haven't, I saw the headlines. I haven't read in huge amount of
detail what's what's happened there.
But look, I think basically what'll happen is if, if Canada
cracks down on M&A, you know the capital for elsewhere, the
companies are listed on other exchanges.
I know one of the things the ASX has been doing to arrest the
sort of decline in IP OS and the amount of companies leaving the
board through through M&A is actually incentivizing some of
these companies to dual list. So we've seen the likes of
metals acquisition, capstone, It sounds like that process of dual
listing is becoming a lot easier on the ASX.
So I do think we see probably more companies gravitate
towards, towards Australia's investment destination.
I, I think it probably just hurts, hurts Canadian stock
exchanges to be honest. The money will flow somewhere
and Canada is going to be too restrictive in terms of who can,
who can take over companies. And that's sort of seeing the
companies. We'll, we'll just move to other
exchanges is my view. NextGen dual listed as well.
It's amazing when you see these these companies on other
exchanges dual list on the ASX they because the ASX is
obviously like their their incentivize to get more, more
ASX listings. That's how ASX reaches their KP
is, but they will, they will offer all of these like pretty
insane waivers to these, you know, Canadian listed companies,
etcetera to dualist. And that means that they don't
have to comply with the same like there are certain listing
rules that they'll be exempt from.
It's kind of, it's interesting, you know, they play, you get to
play by a different set of rules when you get the dual listing on
the ASX because ASX just wants you over here because you're a
big company. Pretty much, yeah.
And that's the issue. I mean, there's just been a
complete lack of new companies listing on the ASXA lot of
especially in the industrial space.
We've seen the whole building material space pretty much get
hollowed out through through M and A lately.
So the ASX wants to get listing numbers up.
I think their approach has been, look, if you've good enough to
list in Canada or the US or or New Zealand, then you should be
good enough the ASX. So it's always interesting
though seeing just the the differences of reporting
requirements, the differences in some of the waves you talk
about. So you've got to be comfortable
with that sort of stuff before you can actually invest in those
companies. One of those ones that is now
listed here is Meadows Acquisition Corp that you've,
you've mentioned you're a holder coming from the New York Stock
Exchange where they've got another listing and they were
super, super well received when they came on.
I think they up the, the IPO amount of money that they took
in twice and then they had a bit of a, a sort of bumpy start,
obviously getting a lot of love on the, the copper thematic side
of things. But the last quarter on a
production side of things was you know, a bit how you going.
How do, how do you see the the company going forward?
Obviously a high pedigree sort of management team with an asset
that a lot of people have taken a liking to.
What's your sort of view of it? Yeah, we're we're pretty
positive on the name. Look, I've got no great insights
into where Copper's heading. You know, we're, we're taking
three sitting in Sydney. So for us to have a a huge
hugely differentiated view on copper is pretty difficult.
But we're pretty comfortable with the commodity and and the
drivers there. So finding copper exposure has
been quite difficult on the on the ASX, especially ones of
screen value, which I think metals acquisition does.
We've done a fair bit of work there around kind of the
structure, the the turn around. There is complexity in that
story and I think that's probably led to the opportunity
and where the valuation is for some other copper peers.
In terms of the quarterly production numbers.
Look it is going to be lumpy. It is a pretty high grade, low
volume mine going through a turn around.
So no surprise they're going to have good quarters and bad
quarters based on when high grade Stokes come into the mine
and different other things. I think there's there's quite a
lot of work that's gone into that three year production ramp
up. They show on the plan.
I would back Mick and the team to turn around.
I mean, you know, hearing about how Blinkle operated that mine,
some of the challenges there. I think getting a good operator
in really does provide a lot of a lot of opportunity, although
it's not a quick fix. I mean clearly the constraint
there is ventilation that's going to take a couple of years
to get rolled out fully through the mine and that's really where
you start to see those productivity gains.
There's some other interesting upside angles there.
I mean you've got you've got a zinc resource, you've got a
bunch of remnant areas which kind of aren't in the reserve or
the mine plan, You've got a very underutilised mill which
probably needs a little bit of CapEx to get back to those
levels. But I think once once the team
gets into good operating rhythm, starts to deliver some pretty
consistent quarters, that's when we can start to think about kind
of what's next. I know the market's concerned as
well about potential acquisitions.
It is called Mills Acquisition Corp system.
I I don't think they're going to blow their brains out on doing
anything too stupid. I think it would have to be
pretty value accretive. You've got quite aligned and
incentivised management team there.
So I think the quick wins for them are really fixing up CSA.
Maybe there's some some other things they can do in the region
which are kind of smaller deals which add a bit of value.
But I think to do something bigger in a step out would have
to be quite compelling for them at this stage.
It's. Got to be it's hard to find the
quality. Like they are very deep, but
the, it's the quality of that ore body is just miles ahead of
everything else. Like finding quality copper.
Unless someone finds a frigging bloody VMS deposit at 5% in the
next frigging month. It's there's nothing just
jumping out. It's like, do you look at it and
think, would you do M&A just for the sake of it or is it going to
be more detrimental? Yeah, good point.
And I guess that's the problem with having a high quality asset
that's kind of better than anything else out there.
You're always going to be diluting.
We've probably seen that with Duterra lately.
You know, Duterra is quite an interesting one, the terrible,
one of the best, probably the best royalty stream in the
world. But anything you're going to buy
is going to be dilated to that. It was, it was similar to
Sandfire years ago. You know, Sandfire had one of
the best copper assets. In terms of grading costs and,
and anything that we're going to buy was going to be diluted.
So that led to some indigestion there.
So yeah, it, it's going to have to be something pretty good for,
for Mac to to buy. I think the quality angle is
interesting. I mean, definitely the quality
of of these all bodies is decreasing and you've got to
make trade offs between how low you're willing to go on the
quality side compared to where sort of valuation is.
We love to spit ball. You know what?
What? What's Mac going to buy?
And there's so many like, you know, players in that cobar
region. And when you look at the lay of
the land of the, the, the, the juniors out there, where can you
sort of, you know, see the most value of creative synergies at
the moment? Yeah, in the Cobar region, I
mean the obvious one's really I find it hard to see Mac
Bollinger really I think there's probably some asset type deals
to do the the great cobar asset that I really have would fit
quite nicely with Mac. I think potentially some of the
zinc that that Mac has could go through really is peak mill.
So I think there's probably more synergies in terms of how those
assets come together and which mills they go through rather
than needing to do full kind of M&A.
Other than that, I mean there's some interesting exploration
ground. I think having having a mill
that operates well in that region will provide power over
time. It's just going to be a matter
of I think metals acquisition needs to sort out how big CSA
can get. It's still quite early in the
journey there of cutting resources and reserves and just
planning out probably five to seven years because they may
well have enough of the raw material to fill the mill
without needing to get anyone else's product through there.
And but it's just the it's the life risk there in terms of how
deep can you go and keep the keep the ground from bloody
squeezing in, like keep extending the ventilation to
that's it's, it's very similar to Gualia.
Like it just everything just slows down so much at frigging
1800 metres deep. Well, the future of DSI is
looking great with bloody everything getting deeper in the
cobar region. Isn't there bloody any M And I
more DSI bolts, the deepest CSI guys, more DSI bolts, more DSI
bolts per metre per depth. So exponential bloody growth for
DSI coming. And when I was setting up the,
when I was setting up the call with Matt Gryphon, I was
speaking with him and he said he'd, you know, he's been on a
site visit out out to the cobar there and he just knew, sort of
bakes it into his model. Once they get the DSI orders in,
they come and fill this place up and they'll be gone 345
kilometres deep there. Not a problem.
Rest. Assured why don't they what JD
but the the DSI bloody portal sets will be just getting
that'll that's how they'll be holding up CSI.
So look my queries about CS as depth and the finite life.
There not a problem because DSI making it happen holds the mind.
Together and it holds the model together.
Go Derek Head. That's they've got.
It's like but it's offset by the grade.
No, that it's a great point, Yeah.
And, and look, we are in Genesis as well, which owns Gwalia.
I went out to Gwalior last year, went all the way down, 1800
metres down decline to the bottom.
And you can see the challenges that depth has.
You know, we got stuck behind a broken down truck coming up.
So, but, but again, that's, that's the opportunity for these
guys to, you know, make it meals acquisition, rally, Genesis, the
guys who good operators get good people and they're that's the
opportunity to turn around some of these deep minds, which have
challenges. I think with Gualia as well,
just taking the pressure off Gualia in terms of the tonnes
bringing USC and I think that's kind of a game changer there.
So there's always risks with Zeke minds.
You know, you can have seismic events, you can have other
issues happen at any time. But again, that's just part of
the the risk involved in investing in resources.
And we we certainly take all those risks into account upfront
and that really drives position sizing.
So high risk companies get a lower weight in the fund for
that reason. And it means that if something
does go wrong or blow up, hopefully it doesn't wipe out
our returns. I just came up with a deal idea,
JD and Maddie, and it's I'd love, I'd love to bounce it off
you off your mat. So obviously IGO where where
the, where the well, they weren't really under bidders on
Mac, but the deal blew up because it got late, but it was,
you know, IGO where there and thereabouts in the in the
process when Glencore was selling Mac and and now more
than back then, IGO is desperate for copper.
They need, they need a bloody, you know, they want copper.
They've got an identity crisis. What if IGO acquired Mac today
and Mick McMullen runs the vehicle?
Would you, you guys that? Well, that's not too bad, trap.
I I put one reason why it wouldn't happen because Ivan
just got into the hot seat six months ago.
Yes, there's a, there's a couple of soft issues there.
A big payout would make a few problems go away.
That's all right. Take the hard drive on the way.
Home. I was about to say that.
Matt, what are your thoughts on that one?
Oh look, interesting one. I'd probably say the where Igos
at the moment Nova, Nova obviously operates pretty well.
I don't think there's too many improvements to be made there
with the Green Bush's JV that's sort of non operators there.
So it would be hard for someone else to come in and make huge
operational improvements to Igos assets.
I would have thought given Igos in large cap index we it sort of
fell out of a universe few years ago.
So not as close anymore, but interesting, but unlikely I
would say. We can always dream Travers
like, hey, Maddie, we've got a thing.
As long as it's recorded, we've got it in case it happens.
So like probably a good segue into Genesis that you mentioned
before, another one of your holdings there.
And, and probably in line with the, you know, silver, like Red
mergers gone through Genesis, you know, big, big future growth
coming from Tower Hill. And it looks like, you know,
they've got a plan to, you know, change that location of that
terminal for the, the, the terminus for that railway
instead of extent diverting it. But the, the big question is for
that growth of that company is the consolidation with Red 5.
Do you, what horizon are you putting on that?
Because that will be a game changer for that region.
And it's. I'm sure it's going to happen
eventually. Yeah, it could.
Do I look, I don't think it's near term.
I actually think Genesis has got more than enough on their plate
organically that they don't really need to look at M&A.
If you look at that five year growth plan, there's a lot to
exceed on Tower Hill approvals is really the key one.
And I think that's, to be honest, that's probably where
rally's spending like 70% of the time just trying to get those
approvals done because that is such a big value driver.
My, my sense is that it's probably more likely you'll see
bolt on M&A around the, the JC mill of Mount Morgans around
that area. And then you can potentially
look at maybe a new mill at, at Gualia just to put the Tower
Hill stuff through. And that's right there.
So longer term, I'd expect maybe maybe a new bills at Gualia,
potentially a Red 5 takeover if there's still if there's a bit
of value there and we can see the synergies and then bolting
on some of some of the other deposits around Labour to
interfere through that mill. Look, there's a lot going on
there. I think the thesis really is
that it's not cheap on this year's earnings or next year's
earnings, but it's one of the few Aussie gold companies with a
good growth profile, which is severely lacking in space.
Certainly back the team there, you know, we were with them on
the journey through the Saracen days.
I know how conservative they are and setting numbers.
There's just always some some level of upside and some things
they're not telling the market there that always tend to just
lead to small beats and small upgrades.
And the execution has been second to none over the the
period in the market. So that makes Genesis a really
attractive proposition for us without needing to look at any
sort of M and AI think they can easily get to 400,000 oz, you
know, potentially 500 on what they've got.
And you look at the resource base there, there's 15,000,000
ounces in resource across that group with I think only three in
reserves. So a high gold price, a bit more
work in some of these other deposits.
And you could see a lot of that kind of shift from resource to
reserve and really build up that production profile.
Sounds like they need bloody K drill to convert that bloody 13
million ounces of resource into reserves.
A bit more pepperon needed. Get it up to indicated and
measured. Get it into reserves.
The future of Genesis is hanging by a thread for K Drill to take.
I can feel it. Mate, you know, get get some
indicated answers, get some, get some more than 30 answers while
you're there, get some measured answers.
Mate, that might have 20 million oz by the end of it.
Get some uncategorized answers in the mine plan.
Actually, don't do that. That's.
Just Genesis either, fellas. You you think about all those
explorers and as soon as Matt Gryphons, you know he's talking
about them, All of them. I can already feel the phone
buzzing for Ryan O'Sullivan. They all want to get taken out.
They want Genesis to take them out.
All they need to do is pepper in a few more holes.
And who else would you rather have do it than Buddy K Drew?
Yeah, and look, Ryan's been given a lot of love, but Drew
Harvey's email is in the show notes.
Give Drew some love as well, and he'll introduce you to the team
and you will get answers. That's all you need to know.
And more answers, JD. More of a takeover premium.
You don't have to worry about Drew not going hard at the footy
mate. He he goes real hard at the at
the footy go Australia. But how would that magic like
that combination come together? Because now to be, you know,
red, red fives are bigger market cap than than Genesis.
So that obviously creates some who's getting the premium.
Yeah, no, exactly. And there's obviously a lot of
other stuff in in red now with the Silver Lake assets and sugar
zone in Canada. So I, I think it's just too
difficult in the near term. I wouldn't probably expect that
to to really happen. I think Genesis has got more
than enough to to execute on over the next sort of three or
four years in their own plate. I would just think, you know if
you look through the history of Saracen and Northern Star, the
Big M and A, there was kind of a pretty very attractive prices,
distressed assets coming out of large companies.
They were kind of no brainers there rather than having to
really pay up for assets. So I probably wouldn't expect
anything huge out of Genesis on the M&A front in the new term.
But do you think, do you think they would do any mill upgrade
or mill expansion at Gualia knowing that the most optimum
case is getting that king of the hills massive new mill and
possibly expanding that a bit? Could do.
I mean, it comes back to my earlier comment that there's a
lot of things that make sense in resources.
And a lot of the time these obvious deals don't happen
because of personalities that he goes evaluations.
So you get these situations where 2 brand new mills are
built right next to each other when one could have done and
that's just the way it is. But yeah, it it's going to come
down to I guess the the relative share prices of people at a time
whether any of that happens or not.
Yeah, right. What are you and what do you
think about the M&A? So we're talking when you're
talking about Hoover and UPS and around the Laverton and that
sort of things like just literally pinching the few of
the juniors to get a bit of extra feed and is, yeah, they're
not, they're going to just sort of what would you say a bit more
bit like Remelius historically before the Spartan thing, like
just taking little dribs and drabs instead of big deals.
I think, I think that's probably it.
I mean the one the one reasonable sized one there is
magnetic which looks like a a very good deposit and and that
could go through probably either the Granny Smith mill or through
through the Daisy mill unless they go loans.
So otherwise there are a number of other small junior sort of
operators around there. The other, the other potential
is that W Australia undergrounds could be revisited and that
could could be more economic now given gold price and in a
different operator. So there's just lots of
optionality in Genesis. I just think the five year plan
they've laid out is probably unlikely to end up in that form
in five years. I think it's a good base case,
but there's a lot of optionality around other things, how they
could, you know, reroute different deposits through
different mills. And I think any of that's just
pure upside to where the company's trading today.
Then if you, if you kind of look, look elsewhere in the the
ASX gold landscape, if if there was ever, you know, producer
that is just being easy for investors to sit and forget over
the last like I don't know, eight years it's been Perseus,
they've yeah, created tremendous value there and it makes a lot
more cash than than other other golds when you look across the
board. What's, but what's the
investment like case for, for holding it now after a period of
you know, great operational delivery?
Yeah. I mean, you say first, this is
certainly get, I mean it, it does operate in interesting
parts of Africa and there's always things going on in in
different parts of Africa. There's lots of risk there is,
that's true. But the operational delivery has
been great, yeah. Yeah, no, well, that's the
thing. And actually, you know, to give
credit to the whole African sector, the, the operational
delivery has been far better out of African producers and has out
of the Aussies over the last 5-10 years.
You look at what Wax's been able to do, what Resolute's been able
to do recently in Perseus, they've navigated very tough
economic times, a very tough country risk over there to
deliver great results. And I think that's, that's
really shown through in the cash that generated.
Whereas you look at the Aussie producers and Aussie gold prices
have been going up. The costs have been kind of
going up in line with that. So there hasn't been that
operating leverage come through Perseus today.
I think the the Aucorp deal was very smart, done a very good
time without much of A premium being paid.
You know that that stock would probably be a lot higher today
if it had kept trading. So I think they've done very
well there. That adds to the growth profile.
I think you'll see some life extensions out of Edican, out of
EARE, even Sisigre maybe. And then once you layer in nine
Zaga on top, you're up to kind of 700 and seven 50,000 oz for a
few years and it can be funded purely through through cash.
The other benefit is that all court being a kind of
underfunded junior had to go optimise around open pit
underground, bit of a challenge in terms of how they were going
to mine that. Whereas process can probably
come in, spend a bit more CapEx, take a big open pit, get more,
get more answers through and probably a low cost base.
So I think economically it makes a lot of sense to them as well.
And the relationship with the terms of your government seems
to be pretty good too. Trades at three 3.4 times next
12 month EBITDA, which is yeah like and has been a better
margin preservation than the ASX also then then the WA based
Goldie's who yeah, Yep, command command a high multiple.
But that's just the the way that the the market is willing to,
yeah, I guess like reward the the geopolitical, you know, risk
aversion. Matt, have you looked in in West
Africa? Obviously you've picked Perseus
there, but Resolute's been a really strong performer of late
and West African also in comparison with Perseus has a
sort of great operational track record since they brought
Sambrado online a few years ago. Have you looked into them and is
like one of the reasons that they have a bit of a spread
across a couple W African geographies the winner there?
Are there other sort of reasons why?
Yeah, we have owned West three to Zambrado construction and
ramp up did very well out of that stock.
Resolute One is one that I've been following for 15 years
without owning and then eventually pulled the trigger
probably 18 months ago. Didn't own it up until pretty
recently. So it was a pretty good
contributor for us. I, I definitely think Percy is
having to spread across different African countries does
help, especially when you look at the political landscape, the
influence of Russia, some of the other, you know, activities
going on in Bikini Faso and Mali, does see those countries a
bit challenged. I think people have the
perception that the African risk is probably greater than it
actually is. When you look through all the
coups that happen, all the terrorist events in, in these
countries, gold is kind of the one industry that just keeps
going. The government doesn't really
nationalise assets unless there's an ownership dispute.
So if you've got clear ownership over an operating asset, that
stuff through and production's been pretty consistent.
So I'm probably less worried about the political side, but it
does. It doesn't help when you've got,
you know, Mali building their own gold refineries and forcing
everyone to sell to them. And what does that mean in terms
of price? Mckenney's raised royalty rates
harder to get money out of the country there.
So, so they post Resolute and WAFF have done very well, still
look fairly cheap, but processes the peak just because they've
got the spread. I think they're in more stable
environments over there and and they've got the growth lever of
Nine Zahu coming through, which I think adds a lot of value.
Then there's the two premier undeveloped projects, Spartan
and the Grey. And you own, you own both of
them. And they're obviously like
pretty, pretty different projects in almost every single
way. Like what's, what's the kind of
like the rationale for holding both?
Yeah. Look, to be honest, it's, it's
stock specific on both of them. So again, with with gold, we're
pretty positive on the gold outlook.
But the reason we own these 4 gold stocks is because we like
the stocks, we like the management teams.
We think there's plenty of upside as long as the gold price
kind of holds in line with where consensus is.
So Spartan, we got involved in the, in the raising $0.40 last
year. So we did miss, you know the 1st
300% of the run up, but that's typical for us.
We want to see some runs on the board.
We want to see things get a bit dearest before we get involved.
I, I do see substantial upside to where that is.
I was up on site there a couple of weeks ago.
The what's been underappreciated I think is just the value of the
infrastructure in place there. It's effectively a new mine that
only operated for a few years, ready to be restarted with
permits, everything in place. So just need to get some trucks
and work out what they are going to do with the mill in terms of
the expiration side. I think it's going to be
important to see what the indicated number is at never,
never out of this upcoming resource.
That really then drives thinking around how big production could
be, how long the mine life is. You layer in pepper on top of
that and you know, you can start to model up really attractive
cash flows for at least a sort of 6-7 year period.
So I still, I still think there's more to go there.
And I the other thing with that story is that exploration
decline will be a game changer for them.
Once you're underground, they, they can drill twice as fast,
half the cost. So delineating those ore bodies
will be a lot quicker and a lot easier.
The exploration decline effectively ends in or never,
never. So you've done your whole
development. You can just start mining and
then allows a bit of focus on some more regional targets as
well. And just given how that old gas
coin, they just completely sort of misread the geology on that
site, you'd have to think there's potentially more repeats
of the structure and potentially more expression can be done
there. So still very attractive to
Spartan. I think Simon's done an
incredible job. The mentality he's got running
our company, the team he's built underneath them, very part of
that Northern Star school. So he's certainly been been the
right man there. Degray is an interesting one.
We took part pretty recently in the last placement of the dollar
ten. The view there on Degray is
that, look, that funding was probably a bit of a shock to the
market. I think people probably expected
the equity raise to be done after the debt had been locked
away. That was maybe the opportunity
for us coming in being new to the register, just seeing that
the funding now is effectively in place, provided they can
convert this debt, which sounds quite likely, they'll have about
a 2 to $300 million buffer on top.
So there's not. Too many concerns about another
raise or or anything for the next couple of years until they
start to really get towards commissioning.
But that stock really has just been left behind in the gold
rally. You've got 10 million oz
resource, 500 five, 50,000 oz a year, production completely
unhedged and the stock's gone nowhere.
So to us that is a tier one asset.
I think you you're obviously in the wrong part of the lesan
curve now where you're financing and building to counter that.
You still do have some news flow to come out on studies around
with Neil in terms of that maybe adding another hundred 150,000
oz. So by the time you get that
through, you're at call it 700,000 oz a year for at least
six years. That does become a very
attractive asset, especially in a goal space where the majors
and mid tiers have, you know, stable production assets,
complete lack of growth, complete lack of new projects
that have been built and very good cash flows coming through.
So it just seems like quite an obvious MMA target to me over
the next couple of years. Because it'd be it's bloody
risky if they try to build a 10 million tonne operation with a
brand new company, brand new team.
That's fucking recipe for disaster I reckon.
Absolutely, no, fully, fully agree.
I mean, I do think there's, there's been a huge amount of
detail and a lot of work that's gone into those studies.
There's good people they've they've got on board who've
who've built the projects in the past.
You can manage that well. But look at great like the
history of the, the gold space over the last four or five years
in terms of bringing on new projects has been pretty tough.
Building something that size with the pox plant up in the
Pilgrim is not going to be easy. So I whether we own it into
commissioning in 2-3 is time I'm not so sure about, but I can see
some catalysts in the short term.
I can see a share price that's really like the gold price and I
can see some potential MMA appeal out there in a in in the
gold market that I think we're going to see a lot more in the
next year or two. Odie Reckon's going to have a
look at it. There's look, there's two that
stand out for me. The first one is ACNECO.
They've been up at conferences in the past saying there's kind
of three premium mining destinations in the world of
which one is WA and they don't have anything.
Wai believe they operate epoxy plan or two in their portfolio
as well. So they've got experience there.
So I wouldn't be surprised if they were if they were
interested. And the other one is Gold Fields
through kind of Gold Rd, they own half of Greer already.
They own a stake in Gold Rd. I understand there's been some
management changes in in Goldfields internationally and
in Australia and they might have more of a growth mindset.
So rolling up gold road and degrade would potentially make
sense at some point as well there.
They probably, I don't think they've got the POC's
experience, but do they at? Any of their operations?
No, but I mean you can, you'd hope you can bring in people to,
to kind of take care of that. I kind of look at SSR, the old
Lassa when they started up Sherpa, the sulphide plant
there. And I don't think they had any
POC experience before, but that kind of commissioned really well
and and produced what it should. So I think if you've got the
right people there, it's it's known technology.
It's not as much of black boxes as people may think.
Nothing that Nathan Stewart has can't fix.
Bloody God, love me back back. Just to finish off on Spartan
when you talked about the value of the infrastructure there and
that and that probably bodes well for the Spartan investment
if they don't get taken over. But it's looking like more than
not that Remelius is going to get them eventually.
Well, they've got the foot on them at the moment, but do you
think that actual infrastructure may not be used at all if
Remelius takes them and they're gonna just send it all to
checkers and maybe expand checkers to take everything
instead of having Dalgaranga and checkers?
Yeah, it could, It could do I, I kind of haven't worked through
the full mass and where all that that would go.
I mean, having having the mill right there at Delgaranga is
quite useful and also having just the flexibility around
having multiple mills in the region would help.
Remilius, I think they're going to build Rebecca as well.
They might need to build there so they could move some
equipment down that way. I do think for Emilius, it does
make a lot of sense to to have Spartan in their portfolio at
some point. They've got two years left at
Penny, which is really the cash cow in the next couple of years.
And then that production profile starts to drop off from the back
end of FY20 6. I don't know what the expiration
upside is there where that can be extended, but to have
something like a a Spartan a plug in from FI 27 on would to
me it looks like it could make a lot of sense to combine those
two, obviously at the right price and assuming assuming it
can happen there. Given you're a generalist, Matt,
I'd, I'd be keen to just pick your, your brain on, on the
wider sort of things you're seeing in regards to labour
inflation, cost inflation across the economy and how this sort of
plugs into resource projects, whether that be through mining
services companies or just, you know, construction bills.
What are you sort of seeing on that front?
Yeah, sure. So the labour pressure is really
heavies quite a lot. One of the things I do is
actually track the mining services job ads for all the
listed mining services supplies. I've been doing that for quite a
few years now that the job openings really did peak around
early 2022 when the labour shortages become the most acute
as we're coming out of the COVID period.
There was a lot going on in lithium, iron ore, nickel and
that kind of thing. And since that peak 2 1/2 years
ago, we've actually seen the job openings fall about 40%.
So that heat really has completely come out of the
labour market. If you talk to the gold players,
who generally are the marginal users of labour, like the gold
companies get a bit squeezed in tight markets because iron ore
companies, lifting companies offer much higher salaries,
better working conditions, all that sort of stuff.
There's much less of an issue in terms of staff turnover,
absentees and that kind of thing.
So I think from an Aussie perspective, we're starting to
see some better results flow through.
I think there's much better chance of going, it's now being
hit costs coming in on budget, just given that labour and that
productivity side's getting a lot better.
And across the economy generally we we're seeing that too.
I mean, the building construction side, you've had
this huge pipeline of residential homes, which is now
coming to an end given home building and things through
COVID. So you're starting to see
tradies and like free up a little bit.
Some of the areas that are still a bit tied around hospitals,
aged care, childcare, it's moving in the right direction.
So that that sort of things has eased.
I think the labour pressures aren't really there anymore.
I don't think it's going to necessarily translate into a
lower costs. You're still seeing wage
pressure, wage rises going up three, 4% a year.
That will flow through. I think where people will get
the benefit is on productivity, less in terms of recruitment,
less staff absenteeism, less turnover that that should really
help across the mining sector and just industrials more, more
importantly. Madam, I'm kind of keen to, to,
to peel into some of your, your energy stocks that you've got on
the on the oil and gas side. There's, there's our two year
flag to us Cooper Energy and and Karoon, yeah, Karoon, Karoon,
you know, screen sort of pretty, pretty absurdly, you know, load,
load multiple at the moment. There was a recent activist
campaign to yeah, prevent like for them to introduce this
Capital Management framework and pay dividends.
Looks like their cash flow is going to be, you know, quite,
quite attractive. But there's some, some doubt in
the market that the, the, the board of management team are,
are actually going to allocate that in a way that's best for
shareholders. Do you take a, a, a view on,
there on, on the Capital Management of Karuna?
You just, you basically just look at the the value
proposition, the cash flow and look at the multiple and just
think this is as good a place as any to allocate capital right
now. Yeah, that's that's the main
thesis really is just the cash flow that can be generated from
these assets provided they are producing it at the rates they
should. There's obviously been some
challenges that both assets lately.
I think, you know, playing devil's advocate, one of the
reasons for the acquisition of the US probably was to diversify
way a bit from the Brazilian asset, given some reliability
issues there, which probably weren't well known to the
market, given it had a couple of good years of operations. the US
being, you know, relatively small in terms of value
accretion and and IRR probably just goes to the fact that
you're coming from Brazil buying the Gulf of Mexico, you're gonna
have to pay more and and those assets trade on on high
multiples. So that that was always kind of
the valuation differentially and why they were never going to get
much accretion on that, that asset.
When I look at the activist campaign, I kind of do agree
with it with quite a lot of that.
I think as shareholders we do want to see Capital Management
especially given where the stocks trading now if cash flow
does what it should, it's on like you say absurd multiples in
terms of free cash flow yields. I think a lot of that can be
diverted to paying sustainable dividends to shareholders and
potentially share buy back. Certainly I'll be pushing the
company to to buy back shares rather than do any more M&A at
least to the levels. I do think though, if they can
again, it's it's just about getting the operating rhythm,
getting some good quarters out, showing the cash flow come
through. the US had a bit of a false start, but the large part
of the production downgrade there was actually on the gas
side, just given the Henry hub gas price had fallen so low.
That's actually very low value in terms of the the volume that
comes out of that. So it wasn't actually a big, it
wasn't as bad as a headline rate.
US gas prices have recovered a fair bit since then.
So we may actually see, you know, top end of guidance.
So even upgrade just with gas coming back in, which could be
good for optics and there has been a bit of exploration to
success and a couple more wells that drilling now, which if
successful, just kind of adds that, that great profile over
there and could turn sentiment a little bit.
So it's, it's, it hasn't been an easy one.
I, I do think they're good operators.
I do think Julian's a very good CEO knows the regions very well.
It's they've just had a few issues in terms of reliability
and some other problems going on.
But I don't think it's anything that that can't be solved or
turned around and. Then and then Cooper different,
different play. Is this like basically just the
the East Coast gas crisis has a has a the obvious beneficiary of
of that? Pretty much, pretty much the,
the macro side in the East Coast gas market is pretty well known
to people. I don't think I'd be telling you
anything to you there to say that, you know, there's a gas
shortage coming up and spot prices are sparking in, you
know, in Victoria when the weather's cold and the wind
doesn't blow. So that's all very supportive of
the gas price over the medium term.
I think what's happened on Cooper, again, this is a company
I followed for a long time. We've only got involved in
probably 6 or 12 months ago now that we've seen a lot of the
negative catalysts come out of the way.
The BMG decommissioning was a massive overhang on them that's
done gone Orbost. I think they've made some some
very good productivity improvements there coming from
the the CRO they hired a year ago that looks like it's
operating more consistently at high rates.
There's more they can put in the spot market that is actually
quite accretive to earnings there.
So I think that all bust asset as that just operates more
consistently over the next couple of years.
You see the cash flow generation profile of the group.
The way I view Cooper is you had a, they've got a fair bit of
debt at the moment, but there's very minimal CapEx to spend over
the next couple of years. If they do what they should do
on cash flow, the debt gets fully repaid over the next two
years and you're then the situation where they can start
thinking about gross plants in the Otway Basin where they've
got an extremely underutilised plant.
They've got resources in the basin there that are kind of
ready to develop and that could come to the mix kind of towards
the back end of the decade. And I don't think that's being
valued by the market at the moment.
I think essentially what you're getting at $0.20 is current cash
flows with a bit of a discount, not assuming anything improves
at all, boss, not assuming any of the growth projects work or
have any value. And I think that'll probably be
realised over the next couple of years.
The one thing I would say though is oil and gas is becoming a big
boys game like it is the cost of rigs, the cost of developments
is serious dollars. Now we've seen with Cooper that
BMG abandonment programme blew out to I think $380 million at
the end of it, and that's just to abandon the field that's not
producing anymore. So I think at some point we need
to see a bit of consolidation there.
I wouldn't be surprised that ends up as part of Beach or one
of those other players down there, but just think Oil and
Gas is becoming a real scale game.
Matt, given given you're a generalist, how do you think
about sizing all of these positions and and sizing the
energy component, the materials component, the the mining
services component as a portion of your portfolio?
Yeah, good question. So we we generally earn around
40 stocks in the fund position sizes.
We don't go below kind of one one half percent positions.
We just want to have a bit of conviction and things.
And then the top end, some of the more stable industrial
compounding type businesses can get up to five 6% positions.
What we do, our process comes down to trade off between what
the upside is, what the quality of the company and the assets
are and the corporate governance and then overlying risk factors.
So when we think about resources companies, the quality is
generally quite poor, the price takers, there's a lot of
exogenous factors that can affect results that are
completely out of control. They've got limited lives.
So they generally score pretty poorly on that, that quality
philtre. And then overlying some of the
risks, again you've got commodity price, currency,
whether political risks, you know, high capital spend, so
score quite high on risk. So that generally means for us
to resources companies are lower on the on the weights.
We try to identify risks and and quality upfront and position
size appropriately for that. Some of the biggest stocks in
the fund are you know, an example would be a defensive
tech company that grows earnings 15% a year and has a 10 year
growth runway structural growth driver where we can we've got a
pretty narrow distribution of earnings.
You can be pretty certain where they can come in and you can see
them expanding into a bigger market over time.
Whereas something like a gold company, the gold price moving
up a couple of 100 bucks or down a couple 100 bucks really can
blow out the earnings and the cash flow.
And that that's a struggle for us on earning certainty because
we really do value the earning streams of these companies more
than anything. Really interesting mate.
The the I'll let you go, JD, because I was going to pivot to
an overrated, underrated. Get mining services in there.
Yeah. Yeah, I mean, go for one of the
two of the names that you sent through SRG.
They do a lot of construction and sort of services work.
And then PRN, you know, a more kind of traditional mining
services name. What's the what's the thesis
there? Tell me how they fucking make
money, Parenti specifically and how you analyse it because I do
not understand it. Especially when you're talking
like the big quantums of debt that they hold and bloody low
margins and how do you get a bloody see the value in it?
Great point. And look, I've been covering
mining services stocks for kind of 16 years since I started the
industry. And it's been a really tough
bunch of companies to cover. Like every year something blows
up on a contract or there's too much debt or there's the work
dries up. So it's been this kind of death
spiral for a lot of these companies over time.
What's been a big change over the last few years, and I think
COVID and labour shortages really drove this, was a lot of
these companies seeing the value they actually provide to clients
and actually starting to charge a bit more for that and, and get
more favourable terms. So the pendulum's definitely
swung back towards contractors. A lot of the contracts now are
alliance style, you know, cost plus type things.
You're not taking big fixed cost risk or risk on, on items that
are outside your control. So that risk of blowing up on
projects kind of isn't there anymore.
For the most part. They they've also seen investors
want better returns. I mean, these things have been
operating at 510% return on capital, which just isn't good
enough for the amount of CapEx and debt they spend.
You're seeing a lot of companies now moving towards 15 to 20% on
the return side. So I think overall for mining
services, that has been a big tailwind over the last couple of
years. I think there's probably more of
a a rewrite in the sector to come as people just come back to
the sector and see the quality of the earnings and the returns
have actually improved and they're a lot more discipline on
the on the capital side. The risk with that is there's
not a huge amount of work around at the moment.
So the contract has dried up a bit.
Does some of this pricing discipline start to dissipate
and it gets more competitive? You're the way it returns.
I think the other thing you've got to be aware of is mining
services. Just a cycle of the pendulum
swings between the miners and contractors.
And at the moment we're heavily in favour of the contractors.
But as soon as you start to have rental companies making 20%
returns, contract miners making 20% returns, labour hire
companies making those returns, by the time it gets to the miner
it's almost so expensive. They just go, well, let's go
back to doing ourselves. So we're at a good point in the
cycle now. I think there's still a bit more
to go, but I'm getting a bit more weary on the medium term.
Parenti is an interesting one. I mean, Barminco is by far the
biggest driver in that business. They've been on the same journey
as everyone else in terms of big CapEx, a lot of debt, a lot of
new projects. They've really pulled back now
to being more focused on returns, driving free cash flow
through that business. The guidance they've got, the
FY24, which you should see the results in a month or two, are
for free cash flow to be 100 million bucks.
That's a 10% free cash flow yield.
And then next year, you can probably get 150 plus debts,
really been managed down to a very appropriate gearing level.
And I think we're at the point now where you actually need a
bit of debt in these businesses to drive returns.
So extra cash that comes out of these operations can be invested
into good growth projects where they've got good tenure with
good clients or we'll start to see capital returns.
I think Parenti will probably reinstate a dividend they've got
to buy back ongoing, which there's more to do there.
So that one kind of has flown under the radar a bit.
You know, you look at some of the other contract miners like
in RW demands that have had big RE ratings, Parenti's kind of
got nowhere. I think the proof will be in
free cash flow coming out, a couple of contract renewals
which have been coming through which are positive.
I think the market's kind of missed that one and that's
that's probably a good pick for the next six months for.
US, yeah, I think and like bombing goes the interesting one
because you could see where they were heading in terms of trying
to, as you said, part partner with bigger companies probably
on more favourable terms like they've just extended.
They've obviously got a good partnership with Regis.
The IGI ones really fallen off a Cliff with Cosmos getting
canned. Nova's and Flying Fox and Nova
and Forestonia are finishing soon so it's sort of opened them
up a bit. You might get the double whammy
if they they're front runner for Spartan so that'll bloody help
things along. But have you got much insight
into how those contracts are structured?
Like is there more less scheduler rates because I know,
I know they wanted were at Agnew with Goldfields.
I think that was full schedule of rates.
I'm not sure about the other ones if there's much cost plus
coming in yet or not. You'd know more than me.
No, sorry. Yeah, on the contract mining
side, it is more schedule of rates.
The my comment around the fixed price to cost plus is more in
the instant construction jobs, which is the guarantee.
So, yeah, sorry, I should have clarified that.
But I, I think in terms of their contract book, they're they've
had some issues with nickel mines and IGO coming off.
So that's been a bit of a headwind.
There's been some renewals. There's there's some opportunity
I think in Africa as well to grow in, in places like
Botswana, even even Tanzania, some of some of the East and
West African countries. So there is a bit of growth
potentially there, but I would view that as being a lower
growth proposition for the next few years, but more of a capital
return story. I think once you start, once the
market starts to see the cash flow generated there that gets
returned to shareholders in meaningful amounts.
That probably drives the rewrite rather than.
I'm not really expecting big earnings upgrades over the next
few years for that one. They make more money in Africa,
a lot of those companies than Australia.
The DDH 1 acquisition, that's probably like, I know it's
probably not as big as Barminka, but it's still a pretty big arm.
Now considering DDH one bought Swift before Parenti bought DDH
one, how do you think that's going to be sort of value or
creative eventually? Like as I know there was some
knocks on that takeover by a lot of.
Holders, yeah, it was an interesting one.
I mean, the market probably hasn't had a favourable view of
drilling companies quite a while now.
A lot of them listing drilling, listed drilling companies have
had issues over the years. It's super cyclical and and
provided a lot of challenges. So the market wasn't that
positive on that one. I I do think it makes sense over
time. I mean, they, they did have a
small OS drill kind of fleet there, which there are some
synergies and some costs they can take out.
It gives them a, you know, operating base to utilise tax
losses in Australia as well. So from a purely financial
sense, they've got a lot of tax losses in the parenti group in
Australia bringing on a a big Aussie earnings base and DDH can
utilise that and and get some better cash flow in the timing
probably wasn't ideal. We have seen expiration ticked
down. So I think there's that
expiration side of it's probably struggling a bit.
I'll probably say that, you know, I wouldn't be surprised
that underperforms the acquisition case.
But having Swift there, having some of the, the iron ore
business I think is called Ranger, which is a bit more
stable in terms of production drilling that is that's a pretty
good base to that business. And if and when the expiration
cycle resumes, there's quite a lot of leverage there on the
upside. And when that'll be, I don't
know. I'd be kind of surprised how
weak exploration spending and and junior capital raises have
been given the Aussie gold prices at 3500 bucks.
But you have to think at some point the the rig start turning
again and DH will be one of the beneficiaries.
Can they definitely use the tax losses of Barmingo with the
entity they bring in? Yeah, my my understanding is I
can. Yeah, OK.
Yeah, yeah. Interesting.
Matt, you ready for overrated? Underrated.
Well, here we go. Let's do it.
All right, We'll, we've, we've JD and I have beeped out a big
list here, So I reckon we'll we'll go with the the succinct
version. But if you you know, if, if any
of us are just want want you to elaborate why, we'll ask why or
if you feel the need to, to give A1 sentence of why, then then
please Chuck it in there as well.
Sure. All righty, overrated,
underrated Matt Gryphon, you ready?
Owning physical uranium or gold bars instead of the miners.
Look, given I run a equity fund, I have to say that's overrated
to be honest. It's been, it's been the best
strategy over the last probably couple of decades.
But I do think we're at a point now where you get more leverage
out of the equities and there's big valuation disparities there.
Yeah. Participating in IPOs for mining
companies. Probably overrated.
We don't really do many IP OS in general.
I haven't, yeah. A lot of the mining companies
have listed kind of exploration size if it's too small for us
anyway. So it's not a huge pipeline
there for us. Passive investing's distortion
on financial markets. Look, I think that's probably,
that's probably fairly rated. I think there is a fair bit of
distortion and I think it probably does get overplayed a
little bit. But in terms of active
management, you know, if there is distortion from passive, it's
it should be great for us because it just means there's
more opportunities that that aren't being picked up.
So potentially a positive tailwind.
African risk as a sort of broader jurisdiction.
I think it's overrated. As I said before, I I think a
lot of these African risks are kind of overstated, especially
in the gold space. I just don't see too many
impacts to gold mines over time. Iron ore staying above 100 USA
tonne for the next 24 months. Yeah, interesting one.
And I know, I know you guys did the thing at the end of last
year where everyone's bearish fit for the US iron ore and it's
still over 100 bucks. Look, I don't know.
I know. Yeah, we're not.
We're not macro guys. It's hard to make a call.
I've been probably a bit surprised it's held up so well.
But given how weak China's been, if China does turn the corner
and start to get more positive, you have to say probably, it
probably does hold up to these levels.
So maybe that's underrated, I guess.
The the influence of the recent Aussie government funding on
critical minerals and and downstream processing and
whatnot. Yeah, I think that's overrated.
My quick view on that is I think the government's probably going
to lose a lot of money on this stuff.
You know, there's always money around for good projects, and a
lot of these projects need government funding, need it for
a reason, because equity markets and debt markets aren't willing
to fund it. I don't really get the whole
point of building out all this critical infrastructure in
Australia or parts of the supply chain and not the full thing
without the operating base here. So overrated for me.
Short selling. I think that's fairly right.
I think shorties have a place we're we're long only.
I think shorting's very hard. Probably not something I can do
successfully. But I've got no issues with
short sellers. I've got no issues with people
taking different views to me. The debate's healthy, I think,
at least in good markets. We've never met a short seller
in Australia. No, they don't exist.
None. Of them, they're all everyone's
long only apparently on the show anyway.
We believe you. But Maddie?
Yeah. Similar to the the iron ore
question, what's your view on 6% SPOD being under or over 1500
USA tonne in let's say in two years time?
Yeah. Look, I'm firmly convinced to
view that lithium's going to be challenged for a while.
So I think it'll be under. The views are based on a couple
of things. I just think hybrids are taking
over from full electric vehicles and there's much less lithium
needed. I don't think some of those
Chinese supply sources like Africa or the pedilites really
turn off necessarily where people think they're doing this.
So I do think in two years we probably have a pretty tough
market for lithium. Buying instead of building.
Yeah, I think that's underrated in terms of I think buying over
building is better strategy at the moment.
If you look at building, it is getting a lot harder.
Permitting, native title, environmental, those timelines
are just massively blowing out. So the value in having existing
infrastructure there is huge. I think that goes to the
starting point as well. And you look at some of these
projects like Mick Philomise from Regis, which has just been
caught up in permitting for so long.
It's kind of destroyed the project.
Like they built it when they thought they would be making
really good money now. But we're now at a point where
the economics are challenged just because it's taken so long,
the permitting and and the construction side's really blown
out so a bit hard. How about going on site visits?
Oh, underrated. I try to go to as many sites as
I can. I think there's a huge amount of
value in getting out there, seeing things first hand,
getting a sense of the people on site, you know, the next labour
management down, what sort of people are, what their
incentives are. And yeah, I think it's time very
well spent. Is it sometimes detrimental but
and clouds your judgement when you get the fluff fest up there?
Yeah, but you get that meeting management in in an office
anyway. You know, you've got to take
everything with a bit of a grain of salt.
In this industry, one of the things we do is just
consistently meet people over time, go to sites.
Over time, you build up a track record of knowing people,
knowing who you can trust, who's conservative, who's aggressive.
And I don't think you get that from one side visit to one
meeting. I think that's really something
you've got to build up over time.
Regis. Oh, resources, I'd say probably
overrated. I I just see a bit of a
challenge in terms of jigs and ending.
I think they've probably got to acquire something given
Philomise looks a bit tough. So look, nothing against the
team or the company, I just think there's better
opportunities than gold at the moment.
And the and the royalty climb. Yeah, yeah, that's hanging out
too. Who knows where that goes.
That's that's really interesting, the history on that
one. How about sand fire?
San Fi's probably overrated just on valuation.
I think I really like what Brendan and the team have done
with that company. I think they've got got the
operations humming build bringing on that Mathura project
and ramping it up has gone really well.
I struggle to see what the next level of growth is post FY25.
So there's there's maybe some more M&A that has to happen
there or or some other some other projects that come in.
But I just think on a valuation perspective, we prefer metals
acquisition vibe, investing vibe.
Yeah. Yeah, look, I mean, it probably
has a space of people for us. We're we're very fundamental
bottom up. We enjoy doing the models.
I enjoy talking to people, getting as much information as I
can. Sometimes you do have to get a
vibe on things positive and negative, but 99% of what we do
is hopefully backed up by facts and information.
Although it does reach a point where, you know, the sort of
rule I think we operate on is if you think you've got about 70 or
80% of what you need to know, that's enough to invest.
Doing that extra 10 to 20% of work does take a long time, is
pretty hard, and you do miss out on opportunities.
So you can get a bit of a vibe in there as well.
Matey Griffith, if you ever need a vibe mate, I'll let you know
what the vibes are because I'm a vibe. 100% vibe here.
That in a similar sort of vein of thought, Fintwit, are you a
user? I'm not, but one of the other
guys on the team is, I give it all of him.
I'll try to steer clear, but I'd rather read like quality reports
and annual reports and other things.
But one of the guys on the team loves it.
So he he's on top of that and he takes care of that for us.
Capstone Copper. Look, I think, yeah, probably
overrated again compared to Mac. I haven't.
I've done a huge amount of work on them.
From a cursory glance, it's big, it's copper, it's got growth,
it's ticks all the boxes. There have been a few guidance
misses over the last few years and I'm just a bit worried about
the track record on a few of the assets and especially given
there's a ramp up phase coming on a couple layers.
So that could present a few challenges.
And it does screen as as recently expensive as well.
So not one for us at the moment, but one that might look
interesting at some point. How about Mada?
Yeah, maybe it's done an incredible job.
It's hard to say at the moment. I mean it's, it's been such a
good growth story. There's such a strong pipeline
of geographies, different parts of business they go can go into
my concern in the short term there is just around this labour
shortage easing and what that means.
I mean they've really been a bit beneficiary of that.
I think if they can get through the next 12 months and continue
this growth profile, then that's kind of that set the business
works, you know, there's no doubts in it.
So I think there's a pretty critical period coming up.
There are a few competitors trying to start up, you know,
small internal type major divisions which might eat away
them a bit. And then it's just a question of
do the miners start to see labour more freely available so
use more of their own labour compared to using major a bit
more. So it's going to be a very
interesting 6 or 12 months ahead for them.
I think that's really going to make a break the model and and
whether it can keep trading on the multiples.
It does ionic clay RAF deposits out of Brazil.
Yeah, interesting. Look, a lot of those are kind of
early stage for us. So I've met with most of them.
I haven't done a huge amount of work.
If they work, it's probably very bearish for anyone that's not an
ionic clay president, rarest producer, because there's so
much potential supply at such low cost to come out of there
that it might just suppress the price and destroy a lot of the
Hard Rock projects. Obviously, they face challenges
in terms of permitting, ramping up CapEx, Rarest, it's not easy
in terms of getting the processing all the downstream
right. So depending how far they want
to go on that track could be a bit hard.
I'd probably say fairly rated risks are probably evenly
balanced at the moment. What about what about the
payability of those rare earths by China?
Yeah, that's another question. I mean, you know, recoveries,
payabilities it all, it's quite no paid market rare earths, it's
been quite difficult from an investment perspective.
We, we don't, we have not held anything in space for quite a
while. Yeah.
It's just just too many questions, Sir.
OK. For us, that whole space.
Nickel mines. Interesting look.
I'm probably pretty bearish on the nickel price.
I just think the whole trend towards LFP batteries has taken
a bit away from the nickel growth story, as well as
probably the the more bearish view on battery sizes with plug
insurance. Nickel mines is interesting
because I do own the resource and I think that's becoming an
increasingly valuable asset because a lot of the stuff we're
hearing out of Indonesia is that they're going to be resource
constrained. So that becomes probably more
valuable than what the market gives in credit for.
There's a lot of risk there in terms of Chinese ownership.
Being in Indonesia just becomes a bit too hard for us at at the
moment. AIC mines.
Yeah, I haven't looked in too much details.
One I probably need a bit of work on.
I've heard good things about management and the operations,
potentially one of those next year of juniors to come through
in the copper space. The junior copper market has
been tough like those small scale producers have tended not
to make any money even in good copper prices.
So I'd have to check on their plans.
But I think you need a bit of scale in that space to make
money, but too early for me to make a call and it needs a bit
of work on that one. The last one for me BH.
PS Big bet on Podash. Yeah.
Look, I don't know the first thing about being Podash, to be
honest. I follow Podash loosely when,
you know, a few junior companies have Podash assets over the
years, again, that that's a big boys game.
It's a it's, it's a tough market to understand.
It's kind of up here, sorry. Meadows X.
Yeah, we've got a good history with Metals X actually, I've
been down to Renison in the past.
It's a, it's a great mine if you get a chance to go down there.
We did make a lot of money back back on it probably five or six
years ago. We've missed it this time just
given the the company's had probably some operational
hiccups, which has meant we've we've kind of steeped clear.
Haven't had a big view on tin really, but could be
interesting. Yeah, I think that's probably
underrating. Bloody beautiful.
Awesome. She's wicked mate.
Thanks for chatting with us. That was right in our
wheelhouse. Loved it.
I'm always so impressed by the generalist investors that can
talk in great detail across so many different sectors.
So thanks for making the time and chatting with us, Matt.
No worries. Thanks guys to be on the show.
Appreciate it. You beauty.
That was a fucking brilliant chat.
I love, I love talking. I'll say it every time we talk
about this sort of stuff. I love talking about shit I know
a bit about. I'll repeat myself.
That was what a bloody JC. Awesome.
It was great. Cutler Cutler partners to thank
Hey. Yeah mate at the bloody top of
the show we are great friends at Axis porn and tech Look at the
look at the great hat the traps got on and who who else we have
in the show. A bit of K drill gonna go bloody
powder, Leonora and Laverton region and DSI keeping Kobar
alive in the rest of the world. Also got CRE insurance.
WA waterboards get wet solutions.
Verify. Verify.
Mineral mining services Silverstone CRE insurance WA
water balls mate and use a spark shark spark.
Just mention them all twice. We'll say a few a few times.
How good Spark and how good is JD and Trap?
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or needs of any particular person.
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