Righto Buddy Waters. It's Lithium Day.
We've got bloody men's Lyontown Pilbara, Bloody and Maker.
Maker aren't mine and lithium. Good on you.
That's why the share price is going up.
Good stuff, Maker. I think this is the last day
live besides tomorrow's episode that we get to mention MMS at
the start of the show because pretty much they've done a lot
of work, but because of me, their business has got to a
point of getting contracts and it's just flying.
So I don't want to take all the credit but.
Keeps flying OK. Well done MMS they're just
they've taken off and thank them for the support lot.
Hey JC, money of mine, if you want to want me to turn you into
an MMS, what a bloody you can. What a bloody offer to the
punters out there, right? Let's start Mineral Resources,
the most talked about company on this show this week.
And if it keeps on giving, hey. And in the bloody newspaper,
quarterly's out bringing in some dosh for some gas, right?
Let me guess, Trevor, you'll be talking about this today.
No, Yeah, yeah. Take it away, sunshine.
What's going on? Yeah, mate, there's so much news
out today. Unfortunately, we can only like
talk about, you know, that like 4 stories or whatever, but if
you want to make sure you're getting all of the stories, make
sure you sign up to the director special.
Just go to moneymind.com, sign up and you won't miss any of
them because you know, we've got limited talking capability so
it. Can't be a more simpler web
address. It's.
Pretty easy, leave your email. Pick that every time.
Get it? First thing in the morning.
Moneymind.com. But Minres Maddie, there's,
there's a lot of talking points today.
It's, you know, the, the, the, the first one obviously is the
fact that the share price is up like 14%, which is amazing.
But why is it up? Well, it's, I think it's got a
lot the fact that there was a, a, a gas sale for with, you
know, mini raisers, like most of the energy business, this sale
like is I think being the driving force behind that, that
share price hike. But mini raisers effectively
sold. It's like entire interest in, in
the, the, the gas, in the gas assets that had sort of
substance to Gina Rinehart's Hancock Prospecting and it's,
and it's retained a 50% interest in the less kind of meaningful
Birth Basin and Kanabin Basin exploration assets.
For simplicity, just assume Minres has divested its gas
assets to, to, to GNA. In exchange, Minres is getting
paid $804 million in cash upfront and depending on how
some drilling results go with some of the the assets it's it's
divesting, there's no additional 300 million that min res can can
get paid from from Hancock. And if you just look at that
waterfall chart, some of that cash is like ring fenced for
drilling in the expiration JV that you know min retain with
Hancock in a 5050 ratio. So the number that really
matters in that waterfall chart is the $780 million upfront.
The CFO on the call guided to a 17% tax on that.
So in reality, there's like $650 million after tax cash coming in
the door shortly, which certainly helps the the fears in
the market around the balance sheet.
God. That'd be bloody pry, and Gina
finds something on those expiration assets since they're
very carried for their 50% interest.
Yeah, yeah. So yeah, go Gina.
Yeah. What?
What do you reckon of the deal, mate?
We, we spoke about it God, a couple months ago when it was
sort of doing the rounds when the, the balance sheet troubles
first started to, to hit home and we sort of quoted a few
energy analysts the numbers they'd kind of tossed up.
What, what did you could have come to?
And you're you're digging on the price tag.
I think it's like relatively healthy.
Probably, Yeah, probably, probably probably kind of par
like the numbers it was sort of thrown around like six weeks
ago. Soul Cabin excited 500 to 900
million and Adam Martin cited 500 million to equity research
analysts out there. What's changed in the interim,
though, is the WAS domestic gas policy emerged, which gave some
certainty of some exports from development, which I guess like
bolsters the the economics of these undeveloped assets here.
Because you've, you've got some, you know, I think, I think you
just, you changed your risk you're risking on, on these
undeveloped projects. It's like less risky now and
you've got more, more visibility on what the policy regime is
going to be that can help you get a higher, higher price for a
proportion of that gas for a period of time.
That point there on the on the gas policy was actually
explicitly called out in Hancock's own press release.
So actually just I think there's a few things in Hancock's own
press release that were worth pointing out.
I'll, you know, flash it up here on the screen.
But but the first one that like just stands out straight away is
this quote from Gina, which says I welcome the opportunity to
work alongside my friend Chris Allison and his Munra's team.
I think that's a telling sentence in itself, right?
I think just a. Couple of powers, how good?
Well, yeah, it's I'll let you suck I.
Think she She chooses her words pretty carefully, You know, in
media releases that that to me, suggests two things.
One, Gina believes Allison is hanging around to steam in Rez
into the future. And two, she's willing to lend
her own credibility by calling him her friend at a time when
his character is massively under the microscope.
Yeah, yeah, a lot that the only way you could you could other
interpret it as saying that working slot long my friend
Chris and his Minrez team which he created saying that they were
separate. But I don't I don't think that
is the case because that as as you said, if it comes out a week
later, that's not the case. It'll yeah, it'll yeah, choose
it. You've got to choose it
carefully. When you're that bloody rich and
powerful. I don't have to choose me words
carefully. The the same rhetoric is is even
sort of parroted by Hancock CEO further down in the release.
If you care to get to read the rest, you'll you'll also see
like some lobbying effort for enhanced export capability has
already begun because you know that that bolster the economics
of the development of these assets even even further.
One last thing on the gas though, I think you can you can
sort of see in this map here Gina's you know she's
consolidated some acreage near her existing interest in West
Erigala and Erigala deeps there those those that's where she's
got the JV with Strike Energy after the acquisition of
Warigal. Strike Energy an intraday winner
here on the On the News. Their their share price is up,
up 9%. Yeah, right.
So OK. The that's the that's the sale.
What about the the quarterly, which is lithium and iron ore?
Exactly. Yeah, mostly Mining services is
the the big driver of that too. And that's what the quarters
will be now, just lithium and iron ore because the gases.
Yeah, yeah, they'll they'll still separate the.
And mining service. Yeah, CSI, Yeah, Firstly,
there's like nothing on on Allison on the core or you know,
the core leak sort of has a has a snippet, but everything's just
deferring kind of any conversation around that or
questions around that or answers around that until Monday, which
was already flagged earlier in the week.
So like the call wasn't very juicy from like a drama
perspective, unfortunately. But to to I do think there's a
bunch of talking points here, Onslow in particular.
So now we're getting some ramp up data come through as at
October in res sites doing 10.6 million tonnes per annum
annualised, They say 35,000,000 tonnes per annum nameplate by
June is still expected. And the last stretch of the
whole Rd was just completed. So they're now using of all the
150 kilometres of that whole Rd. So the whole the whole the whole
Rd is completed effective. It's, it's completed from like a
practical perspective. There's still some, a bunch of
underpasses and things like that that are required for, for I
think, you know, drainage and stuff like that, which, you
know, with cyclone season approaching, like, you know,
it's kind of important to, to get that stuff sorted out too.
Yeah, there's a, you know, on on Onslow min Res.
They do claim that Onslow's now operating cash flow positive in
the month of October, if you include the mining services
business as well, operating being the, the keyword there as
well. And I'm, I'm curious what's
being capitalised, but there's still a bit of work to do like
on the underpasses. So there's still still a bit of
capital spend. Like I mentioned, there's a few
caveats to make here before kind of jumping for joy that that
that's all cash flow positive because you know, operating cash
flow excludes investing cash flow and you know, financing
cash flow and it's the interest repayments that we're, you know,
we're all that stuff matters, right?
So, yeah. And then the other point to keep
in mind is I kind of picked up in the call that the mining
services contract is sort of is structured to I think charge
higher rates during ramp up to kind of account for yeah, for
that. So physicals.
So you can't just if the mining services business is is an
outsized contributor during ramp up, you know, you expect that to
taper off as you as your volumes increase.
So, yeah, but on the plus side, like Onslow ramps the volumes
efficiency should lower unit cost too.
Another point is just on the realisations that they're
selling the the INR for out of out of Onslow.
This this surprise to the upside.
I was worried on this front, but they got 88% realisation of the,
the plat's 62% index at Onslow. And that's, you know, a fair bit
higher than the 81% realisation that they're getting from the
Yogan and Pilgrim hub as well. So it's positive front on the
product quality so far, albeit not much, not much volume has
gone there, but it's still still a plus.
And the Third Point I wanted to talk about there, it's actually
some, you know, clues on maybe like a reject in long term costs
as well. There was some verbiage in the
in the cold that like the, you know, $45 per tonne FoB at
nameplate might have some, you know, escalation pressure
applied to it, which was alluded to by the CFI.
So yeah, some some positive stuff there, but I think there's
enough there for the bears to to grab hold of too.
And what? So what about CSI?
The mining services business, this is pretty interesting.
Right on the call was also the, you know, the the head of the
mining services business. And as usual, there was a a
question from Ben Lyons, a Jardin, which is worth playing.
Oh. Yes, it's greatly appreciated.
Just in the comments, in the context of your comments about
the strong level of external customer inquiry, I also note
some other recent high profile wins by others, for example the
Rio Godadry contract which was won by DES Tech.
So it appears that the competitive environment may have
increased. And I'm also concerned about how
some of those high quality counterparties like Rio and BHP,
for example, might respond to the recent press disclosure and
those blink the internal and external investigations which
are currently under. So I'm not expecting you to
comment upon those investigations, but I'm more
concerned about what Minrez is doing to shore up CSI protective
mode and approved vendor status, the clients such as as Rio.
And secondly, if you can possibly confirm whether there's
any major CSI contract renewals coming up?
Yeah, I mean, I can talk to that, Ben, it's Mike.
Great question and it's an interesting environment, but
essentially I'll I'll just answer you the Cadogy question
that's two 2 1/2 years old that news.
And as you'd expect in the market when you got a
significant footprint like we do across multiple commodities, we
get tested and you know the environment creates competition
and that will that will always occur and that's actually quite
healthy for it to occur. So we live with that every day.
And there's, there's jobs that we win and there will be jobs
that we lose. But on, on the main, we, we, we
don't lose too many at all. And.
That was a kind of interesting question, right?
And the Des Tech contract point. Yeah, it's a, it's AI think it's
a, you know, kind of an interesting, it's an interesting
point. Even though it is 2 1/2 years
old, it's, it's topical at the moment, partially because of all
the other headlines that are going on.
But in in February 2022 Des Tech won a crushing contract with Rio
Tinto for for their $4.6 billion Good Audrey iron ore expansion
project. Then things appear to get a bit
spicy because Test Tech is led by Chris Allison's old Co
founder Steve Wyatt. They Co founded CSI together all
the way back in 1996. Minarez started suing Steve
Wyatt for alleged intellectual property misappropriate
misappropriation that was used to win that contract with Rio
Tinto. It all got a bit messy with the
Supreme Court giving the go ahead for Minres to rifle
through the files of Des Tech and even Rio got caught in the
crossfire getting subpoenaed for documents too.
And by the way, if you even if you go all the way back to like
Min Res's prospectus back when they listed in 2006, you'll see
Steve Wyatt in their name with Chris Ellison and, and Peter
Wade and some of the related party transactions.
So, you know, like you can make your own hypothesis about some
intertwinement that, you know, could, could be with the Far
East tax stuff too. But all of that's kind of
uncertain still at this stage. But you know, I'm kind of
digressing here because the, the, the mining services
business, I think is the backbone of Min Res.
And the broader point is interesting one is it, is it
getting more competitive like what's the what's the the
outlook look like for, you know, min rails to continue to to grow
that business, especially in the face of kind of the decline of
its more marginal operations in the lithium and ion all parts of
their business. Can they continue to, you know,
win and grow that mining services business?
Is the competition getting for you?
So do they still have the ability to to Jack up rights?
You know, what like how how does react into and BHP and the likes
Think about, think about that. That's a that's an interesting
question, I think. They didn't answer the ones
coming up for renewal, That's unknown, no.
Yeah. I think there's always ones that
kind of come up to renewal over time, although I don't have a
particular amount of, you know, colour on that There's but yeah.
It was a big talking point in the in the last quarterly, just
the the margins and I guess how how superior they are and the
fact that they continued to grow.
It's been a big part of the, the men's narrative.
So thank you. You're asking the right question
there. It's a tough one to answer
though. The the the last kind of, well
two last big talking points in the in the news today 1 is just
the severe kind of lithium business rationalisation.
I won't go into it in too much, but there's like it appears the,
the lithium business has been under a tremendous amount of
pressure. There's again, no detail on what
the unit costs are and they're reporting across their their
operations, but they said 570 employees have been, you know,
already laid off, which reflects the mostly the lithium business
and and some of the onslake construction sort of winding
down. It doesn't include the the yield
gun impact yet on Wodgina. That's yeah, had a had a hard
time with transitional oil. Transitional oil, Matt, Marion
Capital spends tapered massively like you know, even the
expiration decline client work on that sort of ending by the
end of the year. They're exercising like a no
fault early termination with develop on that one at.
The end of the year old heel, like the rhetoric there has not
changed in the in the 12 months they've had the project.
They keep saying the line, you know, we're still figuring out
what we've got and geologies, they're still getting their
heads around it, apparently spent 12 months now.
Well, yeah, laying off 570 people and putting all the
lithium business on two and one as well.
So that's all good. Yeah.
There's a lot of cost out initiatives going on.
There's a bunch of fleet that's been sort of freed up, which
this they said that was going to sell like 7060 to 70% of that
sort of fleet that's been freed up as well.
And which of course brings us to the last talking point which is
the balance sheet. I think like a notable omission
from the quarterly any colour on on leverage as at 30th of
September, even when when I asked on this point to see if I
mark said you know no comment where it is right now.
It was the first time I heard Minres speak to the PET
potential to refinance its first bonds, which they can do around
April next year marks it at par. And I think those first bonds
are the $700 million bonds which are due to be repaid in May
2027. It's I think it's worth pointing
out that the credit rating agency, Fitch, they downgraded
Min Reza's credit rating last month from from double B to
double B negative, the minus there being the, the outlook.
So, you know, any refi is likely going to be a much more punitive
interest rate than you know, we see in Min's bonds to to date.
And but likely a much lighter maturity day.
Yeah, that's the. You can roll it, but yeah, you
pay higher interest right there. Yeah.
I mean, so, yeah, pay more in interest, roll it, refi it.
Yeah, that's, that'll be the the play.
And then when when kind of asked, the CFO rattled off the
remaining leavers if things get more skinny on the cash front,
which I I thought was worth playing as well.
It's something we're looking at in terms of other levers.
We've said for quite a while that we've had levers in the
business that we could pull in terms of, yeah.
And we've got, I don't know what the number is, maybe 10-12
different things on our list of things we can do.
I mean, if I needed to, I could sell the other half of the whole
Rd as an example. Not that I want to do that.
I'll need to do that. We've got other opportunities in
terms of releasing capital from surplus fleet.
We've got some lithium investments that are listed.
We could sell if we absolutely had to, still got the Onslow JV
carry loan receivable, which is got real value and we've had
interest from third parties in relation to that.
We've got other divisions we could make.
So there's a range of choices. That we have.
What do you guys make of of that list?
He rattled off. At least he's got, they've got
gold exposure with delta lithium now, so at least they're in
that. I mean, I think the the overall
market reaction today is a sign of slightly less concern about
the balance sheet. I think that's the the main
driver in, in the tick up that we're seeing obviously on the
back of the the transaction as to the other ones, you know, you
yeah, yeah, you might be saving yourself for foregoing earnings
in the long term, but that's, that's the situation they kind
of find themselves. And just just to comment quickly
on the on the bonds as well, they might catch a bit of luck
as well as rates decline, US rates decline that is that might
offset the potentially more expensive rates that they have
to pay. So I'm sure that's another thing
that we're hoping for. I.
Yeah, I know that rates are declining, but like you look at
that what Fitch did on the on, they said that pre they'd
previously forecasted net, net leverage to be at 2.2 times and
it was 4.9 times. So you can see the ratings
agencies have had a pretty big kind of pivot in, in, you know,
leverage expectations. I don't think that that will be
paying. I didn't say I was going to I.
Didn't say I was going to save them.
I said it's just, you know, there's one.
Thing going in. There.
Yeah, yeah. Yeah, I think, I think it'll be
a higher interest rate if they can refire.
But on the look at the. Lithium, the lithium stuff is
like, you know, we'd talk about kind of cyclical investment,
which is what would buying lithium be right now?
Is it the same if you hold it? Keeping it versus disposing of
it? Probably just more a safe facing
thing, a face saving thing in some way.
So yeah. So it's like, would you get rid
of them at the lower prices or would you like?
Well, that's we're we're in. I think.
Yeah, I think it makes her in a super interesting chat and maybe
worth bringing up again after you speak about Lion Town and we
we mentioned Pilbara as well, because you know that each of
those companies have made decisions as well that, you
know, market condition dependent makes it very, very interesting
time. Yeah.
And that's the. Like I think that's the like I
don't think that their equity positions in the like lithium
companies are really moved the dollar too much if you if you
sold them, but the one of a billion maybe.
Yeah, and the one. The one interesting one there is
like the opportunity maybe for, for Pilbury to actually like,
you know, be kind of cyclical and buy the, the Wildcat stake,
for example, you know, where they can probably choose some
synergies in some respect. So that, that that's the one
that sort of stands out to me is kind of interesting if, if
people were being a bit opportunistic.
But yeah, the, the, it was the first time I heard Mark talk
about the carry loan receivable. So there's just like the way the
carry loan is structured with the JV partners at Onslow,
there's the ability to actually have a third party acquire that
receivable. So min res gets money in the
door, but then the, the the early cash flows out of Horsley
actually got to that third party instead.
So that's another interesting 1. I don't think it's going to be
cheap if they did that though. But boys are what what he means
when he talks about levers, they it's, you know, he didn't
actually mention selling any of the, the lithium assets.
So that was that was kind of interesting in terms of like the
actual processing facilities or anything like that.
But yeah, regardless, like there are levers, I think there's also
enough sort of, you know, doubt on the on the ability to kind of
really move the dial too much on, on, on, on the things that
he mentioned there as well. If if iron oil price came under
a fair bit more pressure too. It didn't.
Mention an equity raise, yeah.
Yeah, yeah. Yeah, I mean it it.
Is a genuine lever. As much as they don't want to do
it, you know it is something that would hold them out of a
bit of trouble. So yeah, we'll sort of see, but
obviously they're not going to be flatten the intentions to do
that the last. Thing I, I wanted to sort of ask
you guys is any, any predictions for what comes out on Monday as
a result of the, you know, the clues that we've, we've, we've
had so far? Oh the other the other one,
which before you say that was just looking at the map.
Imagine if Jana bought Wodgina their.
Share of it to send. Andover down there.
Maybe. Maybe it's just South.
Of South of Headland. I don't know how far it is, it's
a bit, but wonder if that's another lever.
Maybe because that'll be. That's a processing.
I would say that is a processing solution.
Well, just keep that, it's recorded.
Yeah, and she'll be running the numbers.
For sure. And that's like a.
Talking point too, right? It's like, you know, Gina's sort
of signalling that, yeah, she's pretty supportive of of Allison
and and they could do deals. Together in some ways.
There's a, you know, like maybe, maybe min shareholders feel a
bit protected from the balance sheet front knowing that, you
know, Gina might save the day in some respects too if things got
too dire. But yeah, can't count on it.
So yeah, all right, predictions for Monday, What are you, what
are you putting more weight on him retaining the MD position or
being removed from the MD position but still being in the
company of some capacity? Either one.
I think he's probably the the same thing, which is Chris is
still steering the business. I think everything is we've seen
today and you know is setting up, it looks like to be setting
up a strategy that is going to be a Monday announcement that
he's either directly or indirectly still steering this
business. I don't think you'll be I think
you'll be fired. Like that's the reader I get in
genius comments. I wish they had this on being
removed from the board. I I that's like, I think that's
maybe possible. Like I don't yeah, I don't know.
I think the in the in terms of like does anything really change
from the way that business is right run whether he's on the
board or not? Probably not, but Hammer.
Like do you think that it appease the media?
Like not appease, but in terms of removing as much of A
spotlight. I suspect it might light a fire
up the media. Like the big unknown is like,
what's the media still sitting on?
Like what's the, what's left to come out?
You know, because that that that's, yeah, it's, it's
appeared like there's been a strategy to strategically
release information, wait for the board to respond to that
information, and then discredit the board by revealing more
evidence he was sitting on. That basically shows that the,
you know, the board's initial comments are maybe not
particularly truthful in all respects.
It's not like. Every article's just been
researched after the last one was released.
Yeah, it looks like it's all been strategically drip fed as
you said and I think. There's still plenty of risk
that the, you know, what what might be yet to come out is is
is worse than what's been out so far.
And that could put, that could put, you know, renewed pressure
on his spot contrary to, to, to, you know, the strategy that
appears to be for him to, to hang around.
But, you know, you can't comment on the likelihood of that until
it comes to the market or, or to the media.
Yeah. Oh God won't be able to sleep
this weekend. It would.
Be a big deal. I think you guys have nailed it.
I'd love if they had it on like Polly Market or something.
You could see the odds of him sort of staying in the business
or even the business on sports. Pet.
Oh, it should be. It should be like if the.
Election. This is pretty much the federal
election in the mining industry, right?
This is huge, you know. It's this huge Maddie Lion town
that was a very, very highly anticipated quarterly.
What did you sort of get at in your in your findings and how's
it sort of looking well? First quarter of production
results, as I said, they did, you know, it was like started I
think July 31st was like the sort of the start of what they'd
say production. So this was, this was going to
be the telling quarter. But remember ramping up a whole
of all flotation circuit is pretty much like telling me to
learn Mandarin in a couple of months.
Like it's frigging, it's like, I don't know, maybe I could do it.
You know what I'm like when I put my mind to something.
So they threw in. It's just one of them things,
not no matter how much bloody planning goes into it now.
Good, they reckon they've built the bloody thing.
It's always gonna be very hard work.
But it appears there it's going in the right direction 'cause I
threw in 282,000 tonne of dirt in two months, produced 28,000
tonne of dry metric spot con. So recoveries of average have an
average of 51% in September. So last couple of weeks of
September they were hitting sort of the 55 to 56% mark.
They said in the call there's been some days where they're in
the 60s. They didn't, they didn't
disclose what the actual feed grade of the dirt is.
I don't think couldn't find it. So we're unsure what if they're
putting through 1% lift or one percent, 1.2% or whatever.
We just know the the grade of the con that has been coming
out. So remember they aren't stopping
yet. So they it it's just open pit or
a little bit of underground development or I'd say it was
only 19,000 tonne of development or for the quarter, June quarter
did say first development or was going to be hit in August.
So and it also said in the June quarter that first stopping was
to commence at the end of this year calendar year.
But no comment in this quarterly about when stopping will
commence. They didn't reaffirm that or
anything. So if you're look at even
though, look at the waterfall chart, even though the title
reads cash increase by 140 million, that's as a function of
the convertible note issue. But expenditure for the quarter
was 231 million. So closing cash 263,000,000 that
come in a bit under some of the analyst models that they had of
what they're closing cash would be deposition 662,000,000.
So it appears all the construction costs of the
project will be completed by the end of the December quarter.
So another about this own about another 65,000,000 outflows for
that December quarter that includes like 13 to 15,000,000
for the PACE plant. That sounds like that's about
91. I've been over 91% complete not
required for first production, but only for when you start
filling the bloody Stopes. Still got to get the re tick and
the ball holes and all that in place, but you can start ripping
the arse out of the Stopes. Well, well ahead of that going
in. So it it appears the that
updated mine plan has been delayed I think just in terms.
Of the cost guidance, everything like that, everything.
Like what? What what they're going to do
Like the what the cons going to be like everything because I
because I remember hearing all I thought I was told it was sort
of going to be potentially close to when this quarterly come out.
But they've said in the announcement though it'll be an
update by the end of this calendar year.
So that might have been though we are getting close.
So it might be another fucking month and a half away.
By the sounds, the trend has been they've.
Just kept pushing this back though.
Remember it was going to be before the and that got pushed
back and it was going to be, you know, around the con and then
con note and then it just kept getting pushed.
I think you what I mean, like, obviously the actuals are pretty
variable and improving. You're trying to figure out
where where steady state's going to be there.
But you're also like, you don't really want to put out numbers
to the market to show you're losing a fair bit of money on
every time, like while the market's still kind of busted up
from a realised prosper. Yeah, and.
I think there's there's a lot to come out of that and there's
obviously a lot of iterate iterating to do to figure out
the balance that of what it is at the moment, which they
probably never thought they'd have to fucking do.
Because I thought probably just kind of we're going to make so
much money out of this joint when the prices were high.
Things like are they going to hone in on because it's
underground, so much more flexibility to go down down here
instead of going over there. If that's high grade like you
got, they got a lot more flexibility so that that's the
advantage of the underground, whereas a pit you got to it's
all in the sequence effectively. So are they going to hone in on
high grade areas and high grade it to reduce the, you know,
reduce the all in sustaining cost effectively?
Are they going to other one is around the con?
Because if they produce a lower grade con, so low fives or could
even go lower if they want, you can, you can throw more tonnes
through and get a better recovery for a lower grade con
at the expense of the concentrate sale price.
But Tony, I did mention on the call that it's whatever method
yields the highest amount of lithium units.
He said if it doesn't produce more lithium units, it doesn't
make sense. So you could, you could produce
a low grade con and smash the tonnes through as quick as you
can and create more lithium at a, at a low sale price per con
tonne. So it'd be interesting to see
where they strike that balance of what that products going to
be. Yeah, $2 billion company at
these prices. Still.
I, I just, and we've mentioned it before, I just don't think
the market would sneeze if they raise 300 bucks plus right now
to de stress the balance sheet. Because having $662,000,000 in
debt for a single asset producer in a depressed pricing
environment that in a way is living on a bit of hope at the
moment. The prices are going to turn
around sooner rather than later. It just doesn't sound right.
It's not sustainable, those numbers not sustainable.
What sort of discount? Do you reckon they'd have to do?
I mean, it's a bit of a sign that.
You know. You're not quite getting there.
And to incentivize investors to come on board, you're obviously
you're going to have to do. I think it'd be a healthy
discount. What do you reckon?
Don't I? 20% 15 or maybe 1520 Nah that
that's. Your stock standard, I reckon
it'd be I reckon it'd be heavier, but it but it's.
Try like, yeah, it's trading at the price at the moment.
It's based on what they're doing.
Like that's the market's valuing at $0.80 right now.
I. Hear.
Yeah, yeah, I mean, it kind of, it kind of puzzles me that it
still trades where it kind of does.
But I think there's a bit of a, you know, unquantifiable backer,
you know, you got Gina there and other sort of forces and just to
sort of belief that it kind of gets through.
Yeah, and. Like because as I said, like the
Platts and Fast Market spot prices have haven't moved still
at 7:50 to 750 bucks a tonne. So maybe on the back of Pilbara
taking out effectively 150,000 tonne out of the market with the
pay 8:50 to pay 1000, maybe another operation going on care
and maintenance could be a catalyst for a bit of a spot
price lift. But at the moment it's all just
a bit of a waiting game and a gamble for things to turn around
the. Zimbabwean.
Asset came offline as well. Yeah, the.
The, the, I don't think they're limited to doing a cap raise to
relieve kind of, you know, pressure, but they, they, they
can sell Baldania. They can also sell like a colour
30% interest in Kathleen Valley if they wanted to and end up
with the JV and both would bring in some some, you know, short
dated cash that that might be handy for a period of time.
But you brought a point. It's like, you know the IT
wouldn't just. Perceived that bad?
The status quo is not sustainable.
Yeah, it's like you, you kind of yeah, yeah, yeah, you're playing
the way the game is. Yeah, it's like a it's a tough
strategy when there's a bunch of other, you know, things in the
market. The point to depress prices for
longer. Like what?
Bloody Pilbury just did as well themselves.
So yeah, do you think? Do you?
Think the we're talking different commodities here, but
we're saying sort of the equity interesting gold at the moment.
There's a lot, there's a lot of rises going on.
Do you think that is commodity agnostic?
No. No, I don't think so.
Do you think it's a broader? Market thing that it might be a
good time that equity will you'll be able to fill books
pretty easily across the market. I think Pilbara could.
Sorry, I think Line Time could fill their book.
I mean, their short interest is like sort of just sub 10% I
think. I mean, it's a bit over, a bit
over. So I mean like 10.9 or
something. Like, yeah, you're gonna fill a
book just with a good chunk of the shorts closing out, you
know, in a placement. So yeah, no stress on the
discount. On Bodania, you mentioned there
Trev, do you, do you think they'd get more than a few bucks
for that is? IT 15,000,000.
Tonnes at 1%, but no. No, no idea to be honest.
Surely there's some? Frigging gold rights down there
or something. Or maybe something next to the
tenement that's got gold potential they could get some
cash of cash out of. Ask Shannon McMahon, I reckon.
Or or Shannon McMahon's kids I know and also know tenements
anything. The word with McMahon in it
means historical tenement expertise so hence the name Mine
McMahon mining title services. So mate, bloody not.
Not just Shannon. Mate doesn't doesn't stop there.
No bloody. Look, Eva, Helen, Shannon, if
you're bloody listening, fire up that friggin Generation 7 AI
driven quantum computer and go just check Baldania.
Check around Baldania, give Lontown a call.
Just see if there's any ways they can get a bit of cash in
the door. Lontown, get your hand on that
landline right now because MMTS are probably going to give you a
buzz very shortly with something that'll blow your mind.
Even gold rights near Kathleen Valley.
Yeah. Yeah, there'll be.
Something there, there's something somewhere, probably,
probably actually would be Eva. Call me first.
Spin it out. Oh, right.
Pilbara. JDPLS.
Yeah. The lithium trend continues, but
a slightly different sort of tone here.
So they came out with the Cordly and they a quick update on the
the midstream venture that they'd signed a year and a bit
ago now. So quite a bit going on.
But in short operations were pretty solid, but there was some
big sort of calls that they made that outweighed the operational
performance that they had this quarter.
So starting on operations and then I'll go through some of the
the bigger talking points. Volumes were kind of down just a
little bit. Mining rates ahead of their
internal plans. So looking good on that front.
Significantly more waste has moved this quarter and that'll
sort of help them unlock new ore bodies all kind of as planned.
Recovery's ticked up a bit. So 75% up, 3% pretty decent and
partially that's thanks to all sorting.
So the P680 commissioning is all done, then our rampant that up
and P-1000 is 80% complete. And the, the messaging here is
that they're, they're in way too deep.
There's no turning back. They've got to spend the rest of
the CapEx, get that finished and sort of get it online.
There was another line that sort of stood out to me.
Maddie, you'll love this one. Water exploration and production
board drilling needs to be done to meet future expansion.
Water requirements will continue.
Oh, hi is. That Greenland's on the phone,
Bloodies that that'd be. That's how that conversation
went. JD No.
Doubt about it we know there are good, good operators up in that
area and it's it's sort of no hard in the fact that you need
water to run these mines, don't you Maddie right you need.
Water to run mines. Sometimes you need to get rid of
water to run mines, if that is also.
Something that Greenlands do, if the word.
Water is in your problem. Greenlands are the solution.
Turn key solution Turn key Martin.
The bloody. Oh, what a service to the
industry. Thank you, Carla.
Get up. Get up to bloody.
He loves the Pilbara, loves flies, loves heat, loves
cyclones, loves dust. He is your man.
Green lands are the men and women.
They sort it all the works. Beautiful.
Yeah. Anyway, we digress.
We digress. So getting into the cash and
kind of I think it's interesting to to bear in mind the other
operations we're kind of talking about even though they're a bit
short on on details, but the unit operating costs for Pilbara
were US 480 bucks a tonne. That's your price including the
CIF I'm quoting there. So including your freight and
your royalties, that's relatively steady quarter on
quarter. So pretty solid.
It's even less than the revised guidance that they've given,
which I'll get into. So I mean they they did sort of
preface that with these aren't indicative of what the rest of
FY25 costs will be like. Unfortunately on your sales
side, revenue was down over 30%. So the sales volume were down
marginally and your price was US $682 for their 5.3% product.
So all up that leaves you a margin of about $50 million.
But if you're talking about your cash margin minus you capitalise
development costs and you're sustaining CapEx, which kind of
has to be done, you're losing money or you're sort of
marginally break even. So that is the problem that they
had to address essentially and that's why they've made the
decisions that they've made. That culminates in the first
sort of three big talking points I've got with putting the
smaller plant they've got on care and maintenance.
So the Pilgrim plant is going to be prioritised.
That's the lower cost, better plant that they've got.
Unfortunately, this means 50 jobs will go.
It also means 100,000 less tonnes of spod will go out
versus their previous FY25 guidance.
And if you're looking at over a full financial year, say FY20 6,
it becomes P850AS opposed to P-1000, but you've got your cash
flow benefits. So the company's talking about
$200 million in cash flow improvements.
If you're taking into account AUS $700.00 spod price and this
is a factor of the mining fleet gone from 7 fleets down to four.
That'll save you 45 bucks a tonne and reduce CapEx.
Another $63 million saved there and then a couple, you know,
bucks saved in reduced corporate costs as well.
Interesting. They said it'd take four months
if they want to reverse that decision.
But ultimately, like you were saying with Lion Town, Maddie,
this is tonnes coming out of the market and it's something some
of the other operators out there are going to be pretty, pretty
happy about I reckon. Good to, good to.
Say even with 1.4 billion in the bank, they're being prudent on
the millions? Well, yeah.
Absolutely. I want, I want to talk about
that more in, in a moment. So the other, the other big
talking point is price realisations.
And I've, I've got a neat chart here that Citi put out.
It's no sort of secret, but Pillbro gets, you know,
relatively bad price realisations.
You can see they're sort of bottom of the pack there.
So US 682 bucks that, you know, you compare that with what RGO
put at US 872. That's on an FoB basis.
It's not sort of perfectly comparable, but it's a pretty
big difference by what that's partially a factor of them
having their shipments waited to the September month.
So the last of the three in a sort of downward trending market
that doesn't do them any kind of favours.
And then on the balance sheet, like you said, Maddie, so about
1.35 billion Aussie in cash, 370 million is what they last
reported in debt. So it leaves your net cash of 1
billion. This came off 270 odd $1,000,000
over the quarter and mainly due to CapEx.
So that again just tells you that they're about kind of break
even at these prices roughly. And of course, they did sort of
sign up the $1 billion in debt, but it sort of leads into the
the, the decision making which the company's kind of gone
through and the decision to shut down the plant and what.
About So what about the the the down string?
Our goods down string? Oh.
It's not as flash, although it could be worse.
So of course they've got the, the POSCO downstream, Train 1
coming online did 50% of nameplate in August.
Train 2 is completed, that's in commissioning.
They've got a bit of debt. Remember they sort of own 18% of
that JV with the option to go a bit higher.
And then on the midstream with Calyx, that's essentially just
been been paused. So they're in a very
conservative kind of mode now. There we go.
It's it's. Super interesting though, right?
Like the the, the rhetoric up until I felt like this quarterly
was from from people who was yeah like continue the kind of
CapEx lower, lower unit costs and survive the cycle that way.
And this is, and now you're seeing, yeah, like
rationalisation on quantity, which is a bit of a bit of a
detour from from, from prior. But you know, if you if you just
look at all of the the produce appears of there's still the
kind of maybe best equipped from a balance sheet perspective to
ride out a storm. Like, yeah.
I think, I think start of next year is going to be D day for
lithium or it's going to be action packed I reckon because
all these other producers can't, you can't survive like this.
They won't. They won't be able to do this
forever at these prices, which will either mean or the lithium
global bloody demand increases. Something's going to happen
which will be a catalyst for something like because if they
can't survive, tonnes are going to come out of the market, which
will be that's what's going to bring in the prices or exactly
as you said, the it's the. Distress, it's the distressed
care maintenances that are the kind of required to sort of, you
know, take enough tonnes out of the market to you know, low
prices. The cure flow prices because it
can take curtail supply. You need more of that supply
curtailment, absent demand, just, you know, go on, go on,
bonkers again. It's like, who's going?
To blink first, Yeah, I think. I like I, yeah, agree with what
you guys are saying. I had to kind of go back to
basics in in thinking about what what all this kind of means and
you know, is it good? Is it bad?
And just just going back to the the cost curve again, that's
what that's what really matters. And that's sort of implicitly
what you guys are talking about. Like you say, Maddie Pilgrim
have a strong balance sheet relative to all the other
players in the in the market and they've got, you know, decent
enough assets. If you sort of think about
Pillgang and the and the smaller plant for a moment separately,
because it's kind of how Pilbara thought about it here.
It is kind of puzzling. Or maybe maybe conservative is
just the right word or maybe discipline's the right word that
these are the guys that are curtailing production.
I had sort of similar thoughts when when it happened with Green
Bush's half a year or so ago. I find it super interesting that
these are the, the, the players that are doing it before the
higher cost peers. And essentially the, the
decision they've made today is to save money in the short term
and forego earnings in the long term.
Pretty much every broker has come out and marked down the,
the price target and the, the NAV for this company for the
decision. The share price rallied though,
but it yeah, it, it did and it sort of divided analysts out
there because a lot of them, to your point, Trev, we're happy to
see that they're responsive to market conditions and pulling
supply out and not just going for that volume decision volume
over cost. Whereas others, you know, not
too many, but there were a couple analysts sort of who were
not quite as positive about this decision because they think the
company's just being overly conservative because they are
the pre eminent player in the market.
So I mean, maybe given everything Pilbara's been
through, it's a pretty hard one lesson to be conservative and
see yourself through no matter what, even if that means you get
a bit less of the cream at the other end.
And you know, who could kind of blame them given how how close
things got a few years back for them making that decision, but
they. They could turn this back on
pretty quickly, yeah. 4:00-ish months is the the kind of
guiding that they've given, but you'd only do that after an
indicator that the market's improved prices have picked up.
So you you're sort of implicitly there missing out on on some
earnings I think taking. Taking 150,000 tonnes out
yourself, they're thinking would they?
Would they? I don't think we might get paid
more for the other 850. I don't.
I don't think that it's a big enough impact back in the day
that's well with your market like, you know, I think what
I've heard is that was the way album model used to think about
the market was that could sort of you know, their their own
curtailments here or there influenced the market a hell of
a lot and they thought they could still do that.
That was the green Bush's decision.
You saw earlier in the year was sort of album miles aren't
thinking on a niche, you know chemicals business, but it's
it's much more fragmented kind of market these days and and I
don't think you can move it too much with 150,000 times.
Yeah, I think the. The the last sort of thought
that comes off the back of talking about Pilgrid there is
just relating it in the context of other commodities and other
companies out there and, and gold is the one that comes to
mind. Can't help but think now is the
time to secure your balance sheet.
You know, you've seen some of the, the smarter companies out
there, some of the better operators grab at the
opportunity and just raise the capital while you can.
It's it's not applicable to everyone, but it's something I'm
sure all of the companies are seriously considering.
You know, you've got to kind of take the cash.
All these 13 players wish they would have done more of it back
in the day. And yeah, I think it's just a a
lesson as an investor as well to sort of carry in and think about
how how commodities sort of cycle.
Right, Good work, JD. Next stop, Maker, the bloody
prospective gold developer. First thing I saw here.
I'm like fuck they're raising money again.
Like because they just raised 35 bucks at $0.05 on the 3rd of
September. I mean that.
Exactly my thought. And they put the. 26 mil gold
loan and 12 mil gold stream in place, but as you can see on the
Spark chart, since that raise, maker's been on a bit of a run
along with the other gold. He's actually hit 9.2 cents
after raising at 5:00. But today they're raising 35
bucks, a minimum 35 bucks. Yeah, at 7 cents.
And they'll accept overs and also possibly put in a share
purchase plan, so might end up raising a bit more. 9 1/2%
discount to the last close price.
Why you're about to ask Travis Ricciardo, I can guess.
I'll tell you. Well, in a move positive moves
similar to what we talked about with Black Cat on Tuesday,
they're effectively removing the Oremic Gold line and gold
stream, which they put in place early September to fund the
Merchants and Gold project. Now, why would they do that?
What is it worth? Why don't we go for a trip back
in time? Because if I talk about it, it
doesn't do it justice. When we've got the merchants and
gold expert Ally JC in our building everyday, why don't we
listen to the wise words of her? Essentially, regardless of the
gold price, Auromet give Maker 26,000,000 bucks to get $35
million roughly worth of gold over a 12 month period.
So that's a 35% return in a year?
For auromet. For Auromet.
Yeah. And.
That's not including, but they've sold them some gold call
options as well, and they're also getting 25,000,000 warrants
from Maker, so that would sort of juice up their return even
more as well. That's a good deal, yes.
So then moving on to the gold stream, which we sort of touched
on before, Maddie's Maker get $12 million from Oromet.
In exchange, they have to deliver 4.25% of the total gold
that they produce to Armet until 5000 ounces in total is
delivered to Armet and Armet by those oz at 20% of whatever the
prevailing spot price is at that point in time.
Then they've actually got sort of an additional stream on top
of that. Once the 5000 oz from the main
gold stream is delivered then there is a what's called a tail
stream. So 1 1/2 percent of gold
produced for whatever the remaining life of mine
production profile is, they can purchase at the same price of
20% of the spot price. Make actually have the option to
buy back 80% of the tail stream. So that 1 1/2 percent component
I spoke about for $5,000,000 to reduce it to .3% of gold
production rather than 1 1/2 as well.
So if you assume the same Ford gold price we spoke about for
just shive 3900 Aussie. Armet.
Basically giving make it 12 million to get back 15 and a
half million, you know, sort of worth of gold that that that's
the first 5000 oz. My very rough excel calcs on the
gold loan and the gold stream inclusive of the tail stream
based on the DFS production profile and that gold forward
price we discussed earlier. Just show 3900 and oz have aura
met generating at least a 30% IRR over the life of mine.
And that does not include, you know, the the call option and
doesn't include the warrants 'cause that was too hard for me
to figure out so. Good work, Ali.
GC plagiarism at its best, Matthew.
So that's effectively, as we established Oramet do these
things, People like Oramet do these things because they make
money out of it. So raising the dosh now has
removed like all that extra margin that we're going to have
to pay Oramet for that funky, funky debt, you'd say.
Obviously don't have to issue the 25,000,000 warrants now
either. And Ormed also had first ranking
security over the maker assets as part of that gold line and
gold stream. So no one has security over it
now. So yeah, I don't.
I don't mind. That to be honest, like, yeah,
we've seen so many times and like yeah, WA Gold history where
there's just troubled negotiating with whoever's got
the senior secured. Like alone it's just they've got
all these covenants and I'm not saying this won't have that, but
yeah, it's just it's just better and easier and you have more
flexibility to ride whatever comes at you without that in the
cap structure. Yeah, so.
Like pending though, you assume they're going to fill the book
and which you could, you know, bet me bottom dollar on that
they're obviously saving a good chunk of future cash that would
have otherwise went to Oremet, removed any risk association,
risk associated with delivering the gold and security over the
assets, fully equity funded, completely unhedged.
And they've done this rise at a 40% higher price than the
previous capital rise. So that because that 27 1/2
bucks worth of cash 29th October add another minimum 35 bucks to
come in the door here. So 62 1/2 pro forma.
So 22 mil of that is for working capital buffer contingency,
other working cap and corporate costs.
Those big chunks still allocated for that set up 5,000,000 bucks
for an accelerated underground mining strategy.
So it looks like they'll be re establishing and rehabbing and
getting back into Andy well early next year.
That's obviously where the, you know, your high grade dirt is,
higher grade dirt is. So if they can raise even more
than 35, they're going to be in a pretty bloody good spot.
So first goal will be due start of bang on the scheduled FY20 6
Yeah, but you to be anticipating they'll be pushing like
motherfuckers to get poor and before then.
So, yeah, I think, I think good equity support that we're saying
in the gold junior miners at the moment.
Great. All right, great for the
industry in terms of because the equity funding removes so much
risk for the developers themselves, more tents for them
succeeding, a lot less risk for the mining services companies
that are supporting those developers and working for them.
Because how many situations have you seen recently where a
developer is debt funded, the lender calls on the debt, the
mining services companies are at the bottom of the barrel trying
to get paid. This is what we call a true win
win. Yeah, and Caledis is like the
distressed example that comes to mind, right.
In that case they they put so much debt in there.
I think it was maybe an intentional strategy, but they
also like getting the equity was hard Yaka for them it was like
they could their market cap was so kind of de minimis relative
to you know it was it was always a bit on demanding that the way
that could actually get that bill was with a maximum debt
funding kind of structure. So I don't like things are
different now because gold price is humming to the extent where
you don't you can just fully equity fund the the restart and
and development here, which is yeah, I just don't you're not
going to get situations like calories, right because it's
equity. It's just worst case scenario
you raise more money. Good on them.
Good work. Oh, go under the fucking
underground. Love it, love it.
Love mineral mining services, buddy.
Tell you what maker you want. Another mention, highly
recommend giving MMS to the contract.
Means a screenshot. Fuck.
Can't make it any simpler boys. Who else?
Who else should they get on board mate?
Well, they should grounded for a bit of a refurb of the camp or
an expansion. If they find more gold cross
boundary energy for the hybrid power station up there, that'd
be a wise move. Obviously Sambic Ground supports
what's going to be going into Andy Well mate, Steve Tarr will
broker probably the best insurance policy with absolutely
no holes in it for the merchants and gold project Greenlands.
I have feeling they've been used already up at Maker so well done
Maker Kay Drill. Hey, you can't find it.
You can't find too much gold, can you go find a bit more buddy
MMTS. They probably got the tenements
for him when they chucked it in the back door to into the shell.
Anyway, that's a given buddy race will get up there.
He'll he'll start clearing for whatever they need just to get
this humming. So first goal before FY20 6
easily, if Australian earthworks and all that you're helping you
And as we said, we've just watched the maker share price go
up on the spark chart. Who drew?
Who drew money minus and in this episode of Money of Mine is of
general nature only and does not take into account the
objectives, financial situation or needs of any particular
person. Before making any investment
decision, you should consult with your financial advisor and
consider how appropriate the advice is to your objectives,
financial situation and needs.