Right on buddy Waters. It's a it's not a bloodbath
everywhere but mate, is it? Is it bloody risk off today JDI?
Think it could be mate seems to be the the feeling in the
market. We're going to chat a bit about
it. There's a few big moves and a
few more more subtle ones. But I think, I think we're we're
going to talk about the, the mood in the market.
Mate, it was risk on when you were in Darba, mate, the the
punting was the best ever. It was all gold.
You know when like everything's about gold exploration, she's
risk on. But when people are.
Honed in on $5 million market cap companies then.
It's all go that all was, but look, uranium down most things
down near 10% overnight in the US and that's flying through
those X. And anyway you're going to go,
we're going bloody. We've got a macro segment from
JD and we've got a Uranium 1 from me.
To very, very excited to listen to that one.
It's a huge move in Encore. Oh no, but like and because I
suppose that encore story is headlined around, you know,
these project restarts. A lot of these aren't
greenfields operation. We're seeing them in every
commodity, JD but don't do a restart project and keep the
shitty camp get grounded to sex it up for you.
But that is number one bloody rule and a lot of these restart
issues could be the fact that the people want a better camp.
It's true. They're just so might just make
the smart choice. They'll work harder, you'll make
more money and your share price probably won't go down.
So. When I crack open one of these
DF s s, you know, and they're talking about a restart or maybe
they call it an optimization or what have you grounded.
They're the words I'm looking for.
Oh, no. And the words that follow that
JD grounded that because they it's built on trust and
delivered with Sicilian excellence by Paul Natali.
Yeah. So anyway, Encore Energy
absolutely hammered last night down 46%.
I was actually just before I went to bed watching the the
open and I think they were down 18%, but then just continued
through the night. So yeah.
And you can so I. Listed up in North America for
those. Yeah, they're on, They're on.
Can't find it? And they're on the TSXV and the
NASDAQ. Yeah, so project in Texas.
Oh yeah, that's they got a big gun.
They got a big gun on down 62% in the past year.
So now what has actually happened, like there was the the
production miss and the fact that they had to essentially
sell pounds they purchased to fulfil contract obligations.
But the last line of the actual announcement let me.
Was a kicker. Oh my, I'll I did this every
time user away now mobile view I'm sorted.
You say the last bit here, I'll bring up the board of directors
appointed Robert Willett, the colour current Chief legal
officer as acting CEO effective immediately and the existing the
previous CEO Paul Goranson just says no longer serving as I say,
all the board of directors, no context, no nothing given and
like from what you hear, Paul is very well regarded in the US out
of 30 years in the industry was yeah, you look at yeah done a
lot of ISR work. So it was came across very
negative to the market as you see.
So I'll think, yeah, I think the, I think the share price
decline is much more weighted towards this than the actual
production. So possibly both whatever.
So yeah, like because, you know, they're appointing a, a lawyer
to be the CEO of this ISR company now.
So it yeah, so it was sent tremors across.
But then, and I'll get into it later, like, like, you know,
next Gen. was down 10%. Like everything was down
significantly because you had a bit of word coming out of the
Trump office for a change regarding tariffs, but we'll get
into the impacts of that. So for the Encore side
specifically, it said, it said for 20.
So this is a lot of the Q4 results and then the full year
results that they released in tandem with announcing the
change in management. So it said they, they had sales
totalling 720,000 lbs at an average sales price of 81 bucks
a pound. But they used 580,000 lbs source
from purchased uranium to, to fulfil that.
So because I actually acquired 825,000 lbs during last year.
So they've, they've got £358,000 left in inventory.
But it just shows the the missing production and the I
guess the struggles they're having in the ramp up and
considering they actually had contracts in place to to fulfil
so. Yeah, that's when it really
comes back to to bite you and you see that in the strategy
with a few of the other race that players have.
They're leaving themselves some some breathing room for the
potential misses and these sorts of things.
So you're not locked in similarly to how we've spoken
with people that have to hedge, you know, to get the financing
and these sorts of things. When you you're obligated to
make it and you can't make it, maybe that hedge book becomes
100% of your production as opposed to 30%, whatever.
Anything like that, you know, can really swing around your
numbers. Yes, very much, very bloody much
size. So well I'll give a just, we've
talked about them before because Encore are the ones that Boss
have done the JV with at the project level for the Alta Mesa
project in South South Texas. So they're in they've it's a one
and half £1,000,000 project per annum that ramping up to that
not there yet. And they've got like 3 separate
processing facilities there, 2 of race started, there's a third
one scheduled. And then they've they've also
got development projects in South Dakota, Wyoming, New
Mexico. So there's a, there's a bit
going on, but they've just been absolutely hammered so.
So this Alta Massa project was sort of slated to hit nameplate
Route 26. Yeah, Yeah.
So it was it was it was destined as a slower ramp up.
But like, I think you could you could just tell the fact that
they've had to sell a lot of the pounds they've purchased for
inventory. It just shows the ramp up is
like and the considerable amount of them just shows it's not
really not really hitting the mark.
And look, you can I guess when we're talking about US mining
projects at the moment and saying the market moves, you got
to think right, how much is influenced by the mining itself
and how much is influenced by big Trumpy because there was
plenty of news out from him last night as well.
So because is essentially moving forward with the 25% tariffs on
Mexico and Canada slapped another 10% tariff on China on
top of the 10% that was already there.
And you got the 25% tariffs for steel and aluminium imports
kicking in in March 12. And then also paused bloody
military aid to Ukraine after that.
The what would you say, the Oval Office cluster fuck?
God how many good AI videos have come out of that?
The less said about that, the better.
Mate, Yeah. So if we can then tie that into
US uranium or even just North American uranium and the effect
that because as I said, uranium just got absolutely hammered
last night on the equity side. And it's a look, it's been on a
decline in the spot price, which is it's just the the weirdest
how you get your head around it. Term prices, even term prices
stayed flat even though there was only apparently one term
contract signed in February. But the spot the term price
hadn't moved. Spot prices continue to go down
since it's at about 20% below the term.
So that's obviously feeding the equity sentiment.
So we're. Talking to mid 60s spot.
Yes. Yeah.
So I guess right? What's, what do these tariffs
mean for a bloody if you're looking to invest in a frigging
US uranium producer, like I think there's two sides and you
don't know what balance, which way it's going to bloody tilt
the, the scales. Because you could say that, OK,
if it's all about right, if you're not US, you're going to
be tariffed. So that would think, right.
If you're buying AUS based project, you're like, OK, there
should be demand to buy US based projects because you are going
to have better conditions, not tariffed to sell internally
within the US and you will be a preferred supplier of whatever
product you're making. Could that lead to increased
investment in US bloody operations or companies or
whatever? But then you got, OK, if those
companies are, you know, building a project or restarting
a project and they're relying on imports from other parts of the
world for plant equipment, bloody any other material, OK,
Well, they're getting tariffs. So that's going to probably what
lift their CapEx and OpEx for that.
So that's a that's a negative. You could have supply chain
disruptions because of those tariffs.
Like we don't even know yet what the trade retaliation is going
to be from other countries against the US.
So there's just a lot of a lot of uncertainty and it could go
either way be a bloody positive or negative for AUS company.
So short summary, I don't know. But not just.
Do you know JD? Not just you mate, there's a
there's a lot of question Marks and a lot of water to go under
the bridge. And I think the other one, we
haven't talked about it yet. The I think it was over the
weekend we saw and in terms of what's happening in Canada, we
saw the Supreme Court of Canada dismissing the Saskatchewan
government's appeal against the medic nation of Saskatchewan.
So I guess assuming there that's a lot the one of the traditional
owner groups so that was allowing them to proceed the
medicination proceed with legal action against the province over
these are the words alleged inadequate consultation
regarding uranium exploration permits issued to Next Gen. near
Patterson Lake in 2021. So this.
This Rook 1. Yeah, not Rook one.
There's a lot because there's a mutual benefit agreement with
medicine and next Gen. for the development of Rook one.
They sound like they're separate exploration permit permits does
set a bit of a precedence going forward and in giving a bit more
power probably to the traditional owners for this,
these negotiations for other projects that don't have these
mutual agreements yet like Paladin's PLS project for
instance. But didn't say Paladin really
get hammered on the back of this?
There's still a bit of uncertainty of what this
actually means. But anyway, if you put all that
together and we look at the actual financial state of Encore
and whether they're thinking right, is this bloody massive
drop in Encore share price takeover target opportunity for
them or not? Or what the investment sentiment
is like for those U.S. companies, they've got their
market caps going from 1 billion Canadian in November to about
368 Canadian as of last night. So and they've only got US
Piplow 40 million in cash in cash equivalents in regards to
the 200,000 lbs that they owe Boss Energy that was loaned to
them when BOSS did the 30% investment into the Alta Mesa
project. That was actually that loan
agreement was amended on 21st of February.
Then I'll bring up the SEC filing here.
So based on the dates that said February 26th, which is you know
last week they would would have paid BOSS US 11.8 million cash.
So that 40 million US cash is based on December 31st.
So they've had another 11.8 million cash go out the door
because and that that was paid 119,000 lbs of uranium at 100
and $100 a pound, which is what the price was agreed on when
they actually loaned it to them. And then they've also got to pay
another 100,000 lbs outstanding at $100 a pound before June
27th. And then at the election of boss
will be if that's either paid in physical uranium or the
equivalent cash value. So unless the uranium spot price
goes up above $100 by March 15th, which is my birthday by
the way, I'd say that I'd say that boss will be taking that in
cash. So I think you, you put that
together, they don't have doesn't allow have any debt
besides that because they did have the previous debt with
Energy Fuels after which so they bought Ultimates off.
But that's I think 40 million of that was repaid of the
convertible debt and then 20 million remaining was converted
into Encore shares. So that's all been finalized.
So you look at that down out the door and the ramp up dramas
outside, they're under a bit of financial pressure at the
moment. I mean to get to the the crux of
your point on whether they're a takeover target though, I think
there's a lot of unanswered questions on the production miss
today, what the read through is and what that really means for
the assets that they hold, whether they don't quite stack
up. You know it's quite UN quote
cheaper now that The thing is halved but the assets nowhere
near as good as you thought. Then it's not really cheaper
exactly. And and you don't know what what
contracts they've committed to either like going forward, I'm
not sure if that is fully like if the markers of the
contracting market. So I'd Pike, we don't know if
they're what they're committed to.
So like if you go in as you said, like you're struggling
with ramp up, but they've got a shit load contracted out to
these utilities and you want to take them over and take on those
contracts. What do you what?
Do you think of the opacity in in contracting and do you think
it's right for companies to withhold that info from
shareholders? It's not.
It's not up to them, it's the utility.
Like it's all dictated by the utilities because the, because
the utilities don't want everything they're doing known
by the market because it could have such an impact on what
they're going to pay for their next bit of bit of uranium.
So whether it's, yeah, it's actually not the company's
choice is my understanding. It's all in the when they do
these contracts, the utilities all say what they can and can't
disclose. The the different one was what
next Gen. were able to disclose when they did.
I think it was a contract last year, but they're obviously
allowed to disclose that. I've seen I've.
Seen that, you know, that sort of disclosure a bit more.
Not nothing too specific, there's just ranges and sorts of
things, floors and ceilings. But yeah, it's, it's an
interesting one. I find it frustrating if you
know as a say, prospective uranium shareholder to not have
a firm understanding of what the company could own.
You know, it's the top line, it's the top line.
You're kind of keen to know what that could look like.
Well, and that. That's why they all have to
raise capital a lot. Not many of them can.
I think it's very hard to get debt as a uranium developer
'cause you've got, no, the lender hasn't got foresight of
what you're actually going to be selling everything at whether
the contracts are in place yet or not.
So, and whether that's disclosed or not.
So anyway, like, you know, what are they, they got one and a
half million pounds hopefully eventually coming out of the the
South Texas operations at Alta Mesa.
That that's from the Alta Mesa bit the the Rosita plant that's
licensed for £800,000 a year, which is expandable under the
current license, but I can't find how much it's expandable
by. They've also got that Kingsville
dime ISR plant, part of the South Texas that's licensed.
They've got that Dewey book thing in South Dakota.
So that's going to be £1,000,000 a year for a £17 million
resource. But then it's got like, you
know, pre production CapEx there of US 86 million still needing
final API approval. And there's a couple other
projects in New Mexico and Wyoming.
I suppose the logical, the logical player based on their
involvement already will be boss considering they have the ISR
experience. They've got 30% of Altimasa
already. But look they're they're sitting
under A1 bill market cap and if you weigh up a bloody merger
ratio on that and they got to pay over frigging 5600 mil
Aussie for Encore, it's like and they're already struggling.
It's like, would they see actual benefit in it or not with 2/3 of
a pro forma or less? Like who knows?
Who knows? And based on everything that
we've said, we don't know. Like in terms of the US
companies still like, yeah, who knows, Like God that they might
get bloody bought back by who they bought it off.
Who knows, but depends how. They they view the value of
their own paper as well. Obviously that's fluctuated
massively over the past year. I think when I look this morning
we're sort of around 2 bucks 40, but they'll you know, that'll
that'll form a key part of how they approach any M&A and
whether that's a, you know, a heavy use of paper in that M&A.
But like I say, remains to be seen in this kind of an occasion
uranium environment it's. I would love to know a bloody
over the ditch tariff expert if like your first pass analysis of
everything right now. Do you want to own Would U.S.
companies want to own more US assets or less at the moment?
What's the first pass thoughts. Send me your ideas because it
sounds like it could be either way.
It just the ball bank was on bloody some follow out of the
Trump administration was on Oh, CNNI think the other night
saying, oh, this we're going to start the next nuclear
renaissance in this administration.
So you got that that sort of those bullish comments and then
the like, as you said before, the thesis has never been better
for uranium. But look, the underlying well,
you you you could say the underlying price has gone down,
but the spot price isn't really the underlying price.
I'd say the term, the fact that the term price has gone up is
even more positive, but it's just these, the equities haven't
gone back to what they were the other year.
So yeah. I'm not sure I'd say the the
broader narrative has has never been better.
You know, since the last friggin.
Yeah. Yeah, there's, there's a sort of
long, long history there. But it is, it is rather enticing
and it's much more enticing now than it was last year.
I think that's exactly how I'd say it.
But. Yeah, that's why you need a CFD
hedge fund, JD. You got to you got to hedge this
risk out fucking Long Island. It's risky stuff.
Yeah. I.
Mean, I think the, the real lesson is just to understand if
you are going to invest in these companies where you sit in the
cost curve and be predicted by that seeing how brutal downturns
in in uranium can be and how long they can kind of last.
So you need, you need protection.
And I think by nature, these these restart projects are
always a bit riskier. So you want to make sure you're
sitting in Q1Q2 and you're buying those projects at an
attractive price just to sort of protect your investment because
commodities are super sort of cyclical and uranium is as
opaque as they come. But I think even if you're at
the front of the cost curve and uranium shits itself, you still
fucking lose money anyway. Absolutely.
That was in the context of if you're.
In it or you're not. That's in the.
Context of if you're going to be in uranium, you know, you need
to understand where you are in that curve.
Yeah, if you want. To have not 0 and liquidate if
you want to, if you want to stay alive anyway, we'll I think
there's going to be plenty more coming out of I'll be interested
to see what happens on on. On call tonight on the TSX and D
and the NASDAQ under the. Cent mate, there's one certainty
in the world of ISR mines. What's that?
That. Certainty is that you need mud
Rotary for the well fields and there is one name to go to for
all this right and. It doesn't even make sense at
the moment, but it will. WA Waterboards Gerald James is
back in the house and he is up for a name change if needed
because he's the foundation of mud Rotary for him come from
find him water for everyone. But his skills can be
transferred as you said JD to RIP it into paleo channels for
ice art. So maybe you want?
To get ahead of the curve as well mate, right?
Can you imagine? Gerald James said to me, I am
not dying until I drill a well field in WA.
So maybe if that gets changed this century, Gerald James is
ready to go. He'll do it when he's 110 if he
has to, but he's not. Then go out, not go on and.
Shake the big follows end up top until he's smashed at Paleo
Channel in WA. So mate, WA water balls.
They're back bigger than ever and they're ready to take on the
world of water and uranium drilling.
Go, Jerry. James, good.
Thanks. For coming back mate.
I bloody missed it, right JD? Great title and it says exactly
what this topic is about. Macro risk off question mark.
But I was, I was looking at the screens this morning and there
was there was a bunch of drilling results out there was a
few production numbers as you kind of spoke to there overseas.
But what, what sort of really grabbed my attention as well as
over the weekend was what's happening in a macro level and
the sort of change in, in nature or the change in attitude toward
risk. And I think there's no shortage
of standbytes and interesting events.
And I think we kind of in part got a step back from those
things because it can be pretty, pretty interesting what's coming
out of the White House and other parts of the world.
But I thought it'd be kind of handy from a personal
perspective to boil down my thinking and do a bit of
digging, kind of organize my thoughts in a few areas.
So firstly I'm. Sorry to interrupt, but I feel
you would. Whether you are hosting a
podcast or not, you would have done this anyway.
It was a long weekend. I had a bit of time you could be
on to something there. What I wanted to get into,
Maddie, was how the the market's attitude toward risk is changing
what the kind of temperature is right now on that regard as well
as just a broad kind of China deep dive.
And of course, pulling that back into to metals and mining
specifically on the investment side as it kind of relates to
what we talk about all the time on the podcast and kind of just
see where it got got me. And I'm, I'm not sure I have any
more clarity at the end of that process, but I thought I'd chat
about it regardless, mate. And is this.
Today. Today.
Well, this is what the temperature is today that you
feel. Yeah, I'm, I'm.
Kind of the, the school of thought of big macro calls are
incredibly hard. I've, I've got as little chances
as anybody or perhaps less chance of, of calling these
things, but I think it's much easier to, to kind of get a
feeling of where we are right now as opposed to what's going
to happen in, in six months, in 12 months.
That's, that's an incredibly hard game to play.
But you can get a bit of a gauge for, for what different people
are saying, what different companies are saying, what
different countries are doing and the actions they're kind of
taking right now to sort of get your bearings about yourself
right. I'm.
Lied on me, JD. Well, I thought.
I'd sort of go around the grounds and sort of call out
what we've seen in various markets and indexes over the
past little while. So to start with the NASDAQ down
8 1/2 percent over the past couple weeks.
NVIDIA great proxy for risk assets is down 19% in the past
couple weeks. You've got the S&P 500, so
perhaps not quite as frothy, not quite as sort of tech centric,
down about 5%. The ASX 200 is down 5% as well.
And you know, perhaps to an extent people are thinking that
buying the likes of CBA and other type businesses at 26
times earnings is a a bit steep as sort of Romano spoke about on
our show and many other people have spoken about and is.
That is that DM 5% in because there haven't been many big
XTV's come through for your big big caps which can drive the ASX
200 down but that they. They haven't come through in
this period. A lot have been announced but
they'll only get, you know, they'll only go ex dividend in a
month ish, maybe six weeks or so.
True 5. Percent.
Yeah, that's the sort. Of total return kind of basis on
which I'm looking at it, you've got Bitcoin as well, down 18%.
I think that's one of the best risk proxies you can get out
there in the market. And then on the other side of
that, gold in U.S. dollar terms down just a smidge in Aussie
dollar terms. That's a very impressive looking
chart. We are at 4640 bucks in Aussie
dollar terms, which is, you know that's a hell of a gold price.
So every. Gold miner should make money
this quarter every. Gold miner should make money
this quarter. Yeah, there's there's very
little exception for that one. What?
What do you reckon, Maddie? You, you speak with a lot of,
you know, brokers and heaps of people in the market, in and
around markets. You, you know, you had a
conference a couple weeks ago. That's always a great place to,
to get a feel for what the, the mood is like.
And, you know, we were chatting just before how the, the moods
kind of changed in the last two weeks.
What do you reckon? Oh.
And as I said, when user in and DABA, it was just and you had
those three few gold exploration companies RIP, which is what
Ozorum, Kalgold and Caprice like that was just it just you could
just feel the bloody. There's like, Oh, this is risk
on time, like this is really, really pumping and whether it
wasn't dictated as much by something on the macro.
So I but it's just like it just felt like gold was really
pumping. Then you even like on the back
of, you know, just even Hastings rare earth thing with Wiley
lights. Oh, rare earths are back on.
And then there's, you know, more talk about bloody batteries and
people bullish of the lithium turning around.
Like you just felt that. But then like just within
fricking 2 weeks and and this room today reminds me of
diggers. Remember the Japan stuff that
diggers and like there was just bloodbath.
It was carry. Trade meltdown.
Yeah. And it was.
Just two days worth of bloodbath and there's just if there's
unless there's like some big macro theme and whether it was
the tariffs last night that just overtake everything from
individual commodity base, it just and I feel that market
temperature today, just today feels like that's what's
happening. But then you look at, you know,
BHP and Ray are pretty flat today.
I think they're .3% downside whether the hey flower funds
from the specky to the big stuff to which is sorted a bit of the
hemorrhaging out there. But I'll just yeah, I'll just
feel as it. Do you think this time of the
market, with just the fact that Trump's in and then the
geopolitical stuff with US, China, Russia, Ukraine,
everything, do you feel like this is one of the hardest times
to have some sort of macro outlook because it's such a
freaking dynamic environment globally I'd.
Probably say no. Times are times are always
interesting. They're always tough.
Things are always hard to call. There's always, you know,
there's 8 billion people on the planet.
There's always interesting stuff going on.
It's it's never easy. And you know, funds management
is a super hard industry, super competitive because there's so
much stuff going on, so many people competing for a sort of
limited set of opportunities. So I think it's, you know, a bit
out there to say it's the the hardest time ever, but it's, you
know, it's still not easy. It's never easy.
There's, there's always a lot to
kind of taking and I think, you know, stepping back and seeing
what the big picture is, you know, the, the, the tariff
stuff, for instance, China's been talking about this forever.
Like it's, it's not new. It's almost like this is the the
thing to point to right now. Is it because?
He's taking action, but it's a bit different now perhaps.
Perhaps, Yeah, I think, I think you could be right.
And I think that's a good sort of segue into into China because
heaps is going on in China. There's loads we could talk
about on this front. Just just this morning they came
out with some retaliation tariffs after the US slapped on
those 10% tariffs. Obviously there was the stuff in
Mexico and Canada as well. But China's got their biggest
political get together starting today.
It's called the sort of two sessions.
There's kind of two government bodies meeting that's sort of
overlap in timing and they are sort of outlining the strateg,
the strategy for the nation. There's an expectation the
government will set the bar at 5% growth over this year to help
them hit that target. It's anticipated that they will
move their official budget deficit target to a three decade
high by they're going to borrow more money to to fund this.
And you can sort of see it on the chart we're showing now on
YouTube. If you're hone in on that fiscal
deficit to GDP number, they're talking about lifting it to 4%
from 3%. People that are sort of steeped
in this will will know we're at about 7% in a similar ratio in
the US. So we're far below that.
You can also look at it from this augmented fiscal deficit
number, which is approaching 17%.
So it's kind of up and to the right this this deficit in China
as well as the US, although in the US it's on a bigger scale
that has been for some time now isn't.
It, I'll just remember how China was touted as always the 10%
growth in China. And you just say by that graph
here, that is just gradually now becoming 5%'s the number.
Yeah, yeah, yeah. And which like you know, on a
percentage terms like a global scale, that is a lot of stuff
that affects a lot of countries, specifically Australia one
point. 3 billion people it sure is on on the inflation side as
well. They, they are lowering their
target from 3 to 2% and inflation, very different to the
Western world, has come in beneath the target every year
since 2011, which is kind of mind boggling if you're sitting
here from Australia or if you're in the US and thinking about it
on the stock market side of things.
You'll remember we spoke a bunch about this sort of September,
October last year when they were talking about these big stimulus
projects that we're going to do. They're going to boost the
equity markets, which was a very different take for the US and
their markets have performed really strongly.
So Shanghai has sort of held its level after that 25% surge in
the space of a couple weeks last September.
If you look at the Hong Kong index that is up about 21% in
the past six weeks alone. Now if you if you zoom out and
you're looking on a on a 20 year horizon, it doesn't look that
stellar. But there is a, you know,
there's a, there's a moment in time now where things are
looking quite positive on, on that front in.
China. So what about if you're going to
go down a level to the metals themselves?
JD Yeah. So to to reference that
discussion we had back in September and October, again,
there was a lot of focus and a lot of desire from people in the
middle's world to want to see big fiscal stimulus as opposed
to this monetary action. They wanted to see
infrastructure projects getting built.
They wanted to see property projects going ahead because
this needs a lot of vinyl, a lot of METCO and all these sorts of
things to build things. And that would be the kicker
that all last get by punting on on mining stocks.
So a bit has happened on that front.
So the local government debt ceilings have been relaxed and a
few other things are going on. But right now we're not
expecting any massive stimulus because of that trade war.
They want to keep a bit of ammo up their sleeve to see what
happens over the next few months.
You know, Trump is coming out, he's whacking them around and
that's, that's the sort of ammo that's how he operates.
And they'll have this big get together.
She and Trump will meet in I think in May or sometime.
And they want to sort of soften them up before they before they
shake hands and and knock out a deal.
So they're going to keep a bit of ammo up their sleeve is what
I'm sort of saying there. In in short, the fiscal stimulus
does have competition from another angle as well, though,
and that's the Chinese desire to reduce their reliance on
property and infrastructure and focus on other parts of their
economy. They want to build out tech,
they want to build out manufacturing, they want to
build out healthcare and all these other parts of the economy
and they just don't use as much materials as property and
infrastructure. Not to say they don't use
anything but that. That's so weird to say like
that. You say that like they're going
to build that out more in there, but they're so renowned for
being the place everywhere goes for tech and manufacturing.
So to think they're going to expand on that's pretty, it's
pretty confronting to hear exactly.
What you've just said really speaks to what they've done in
the past decade or two and the, the dominance that they've built
by honing in and focusing on those industries.
It's, it's fascinating. Like I still think there will be
lots of say, infrastructure investment.
They need to build out the grid. This uses lots of copper and
those sorts of things. That's a part of their, you
know, independence from the rest of the world.
I think it's really guided by this policy of wanting to be
self-sufficient. They don't want to have to rely
on any other country for for anything.
That's why they've gone so hard at EVs.
They, you know, take the reliance.
And and I assume uranium as well to take the reliance of
importing coal exactly. Nuclear, you can say the same
for, you can say the same for a whole bunch of other sectors.
They don't want to be reliant on anyone and that's how they get
themselves there. Mattie, you spoke about robots
last week. Check out this chart for for
people listening to the Potty. You can see on the on the Y axis
the amount of industrial robots installed in the top five
countries around the world and we're looking at a sort of 15
year time on the X axis. China.
Just wipes the floor. They clean up Japan, the US,
South Korea, and Germany. It it looks like those countries
haven't even haven't even gone forward.
Maybe they're sort of double while China has 10X over the
past 15 years. Yeah, it's it's just crazy.
Build it out. Even more, that's phenomenal,
the build out. Is happening it's just not
happening in the West. It's it's crazy and yeah, I mean
on on EVs and tech specifically, it is insanely impressive what
they've done. And, you know, we think of them
as a sort of socialist country, but it's the most capitalistic
top system. That kind of is, especially if
you compare it to the big three auto manufacturers in the US or
the the the European auto space who are sort of begging for
handouts from the government at the moment to protect themselves
from what was an industry with hundreds and hundreds of car
makers. That has been sort of whittled
down as the government kind of turns the screws on a you've now
got the the best car makers in the world.
The best cars are coming out of China.
You know, they might not have that luxury brand associated
with them just yet, but they are making the the best electric
vehicles in the world. They they make an.
Ayds around here. You.
Sure do.
And they're in in some parts of the world, they're cheaper than
ICE vehicles. It's seriously impressive what
they've done. And to your point, Maddie,
they're doing the same in nuclear.
They're going to do the same in batteries.
They've already done it solar. That's another great example of
where they've done it. It is it's crazy.
It's crazy impressive in my in my eyes to to put that
infrastructure slash property sector stimulus in a bit more
context as well. It's worth talking about the
consumption side of GDP. You know, when you when you
learn economics one O 1, you kind of think of consumption
plus investment plus government spend plus net net exports to to
kind of get to your view of GDP And the a western style economy
focuses much more on that consumption part.
That's pretty services heavy. Think of things like Netflix and
stuff in China. For a long time, it's been much
more investment heavy, these projects to build roads, to
build property and these sorts of things and they want to move
themselves away. Last year actually saw
consumption being the lowest part of that GDP makeup in over
20 years. So why I'm sort of mentioning
this is it's just another kind of the headwind on that that
property and investment, that property and infrastructure side
of things. And again, it's not as metals
heavy. You're wanting to build out an
economy that's more focused on services and these sorts of
things. It has a a little bit less
metals demand than the alternative might have.
But who knows if the if the aggregate grows, metals demand
could be still marching forward. So it's just another kind of
lens to to look at this at they. Still got the restrictions on
how many kids they can have over there, weren't they?
Wasn't it what you could so? It was one for a long time, then
for a brief moment in time it was 2, I think the space of a
few years. And then they lifted it up to
three. I want to say they've wiped it
completely. The the demographics don't look
great. And that's why people sort of
frame it. It's frame the debate in this
like will they get rich before they get old?
Context. And everyone compares it with
with Japan. Yeah, getting a bit out of my
pay grade, but could listen to people chat about that for a
long time because it's really fascinating.
Well, it sounds. Like from what you're saying,
with the rise of the robotics over there, they could build out
of expand a lot of these industries without needing shit
loads of people in the country to facilitate the expansion.
Yeah. And the.
Knock was, you know, that label was always much cheaper there.
But that's not really the case anymore.
If you're you're going to look at building a factory around the
world, you want to do it where the cheapest labour is.
China's not top of the list anymore.
They're they're competent and they're really effective
factories that can do it at an efficient price, not purely
because of that cheap labour component.
They're just good at what they do, Yeah.
Yeah. And now are you?
Oh God, few times I'm, I'm starting to understand a lot of
stuff that you've said. Historically, it was all over me
head. I'll get there one day.
JD, the Belton Rd. initiative, yes, that you've spoken about
before. The Belton Rd. initiative is
it's, it's massive. It was China's way of building
infrastructure and trade across the world.
It was this sort of strategy to to do this.
It was launched by XI, the the current president back in 2013.
It was designed to sort of influence trade and build
relationships all around the world and sort of took the form
of loans, the construction deals and project purchases and that
sort of metals and mining. Think buying copper projects and
all these sorts of things all around the world and getting the
off take, securing the supply. That's how it's really relevant
to to our world. And I think it's super, super
interesting. Just recently the numbers came
out for the investment in 2024. So I thought it was worth, I
thought it was worth sharing a few of those numbers and kind of
chatting through them with, with you to, to help us kind of grasp
what they've done and just the scale of their investment
overseas. So you got 2024 being the
highest ever engagement for China through its Belton Rd.
initiative. So 51 billion U.S. dollars was
made in investments and 71 billion in construction
contracts. They're the two baskets and oil
and gas, that's the the biggest component of this with metals
and mining coming in seconds. So $22 billion mostly made-up of
investments. So that's them going and buying
copper mines of copper, cobalt mines, all these sorts of things
all around the world. And I'll just point out quickly
that coal, they do a fair bit in coal as well, but that's sort of
put under that energy basket. So in actual fact, mining if you
can in coal is, is even bigger. The numbers are even even
bigger. The energy side, which is
massive is often made-up of construction spend as well.
Whereas in mining you're buying those those stakes.
So whenever we've talked about these Chinese companies often
state owned entities doing M&A that will fall into this basket
of. The Belt and Road Initiative,
yeah, right. If you, if you zoom out and look
all around the world where they're focusing on where
they're focused over 2024, you've got Latin America hitting
its lowest point in 10 years and the Middle East taking out
number one spot. So the most amount of dollars
went into the Middle East, which is very interesting.
The three countries to hone in specifically by investment was
Indonesia. That's the nickel investment.
Obviously Saudi Arabia, they're big energy projects that they're
doing there and Kazakhstan actually.
So I thought that was pretty interesting.
And then the biggest thing is the.
Kazakhstan it'd be, would any of it be in the fat lot, the
farming and agriculture industry?
Because I know that's. Absolutely.
That is bigger than the uranium industry because they got the
preference for sulfuric acid. So, yeah, so.
I'll check out this chart now and you can see on the right
hand side there's 2024 how the investment is split out by
sectors. So like I said that green is the
the biggest one that's energy projects, the the darker colour
there is metals and mining tech swung up massively transport,
you know, roads, these sorts of infrastructure type projects,
massive as well. And then you've got sort of
smaller ones, chemical plants, these types of things.
So. So energy is the the chunky.
That's a good chunk of it. That's the biggest, yeah.
And it was a lot bigger. But yeah, it shows you how much
metal, metals and mining still less than energy, but it's
really frigging amped up. It's massive.
It's. Massive because it's so core to
what they do back home because they want to secure that that
supply. Interestingly, the the the
country that shot up the most year on year was Guinea.
That's obviously on the back of SIM Andu yeah.
So that went from, you know, next to next to nothing because
23 yeah and it's you know, it's year on year.
So it's always you're comparing it with the year before.
If the year before with quite small, then you've got a a
blowout year, which is pretty crazy.
I don't think I. Don't think the predictive
investments going to swing the needle much compared to what
Samando did. Not yet.
In terms of the the scale, you
know, if you, you want to try and quantify what they've
invested purely investments, not construction over the the past
11 years, we're talking about half a trillion U.S. dollars in
investments. So that's, that's chunky and I'd
love to see if you combine the Western world's investment, what
that comes out at. I don't think it'd be coming out
quite as high, but I, I don't know the numbers on that front.
So you know, that I, I, I found that really interesting reading
through that, getting an understanding for it.
And, you know, there's a, there's a lot of critics of the
Belton Rd. initiative as well. Obviously a lot of them would
come from competing countries. Not all those loans that the
countries received were, you know, the the best loans.
You know, there was a lot of accusations that China is
putting these sort of debt traps on smaller countries,
undeveloped nations who won't be able to pay them back.
And China, I'm sure dusted a fair bit of money in the
process. A lot of them would have gone
bad. And maybe they scoop up some
sort of security on on the loan itself, but that's not really
what they were there for. So it's it's refined its
approach over time. It has looked at actually
smaller projects to what it did back in 2013 when it came out
with just these enormous projects all around the world.
And they have looked a bit more at ownership in the past couple
of years as opposed to this construction type contract,
which is another interesting kind of trend to to to think
about. So.
Based on all of that, I assume is your conclusion sort of is
the West doing it, not doing it wrong, but just really falling
behind the rise of China in all those areas or it's it's?
Like you, you know, you'd get this as much as anyone, Maddie,
we're, we're watching this stuff every day, but it just doesn't
feel like that much of A priority here.
People talk about it here and there and we're, we're very
honed into the industry and we're, we're looking for people
to say these things in a way, but it, it just doesn't stack up
that high as a priority for the West.
You know, Australia's not really going to do this.
And if it ever does, it's a very small extent, even even the US.
Like it was interesting hearing the US Secretary of State, Marco
Rubio talk about this last week. And he sort of said that Trump
is looking to sort of forge more of these deals around the world
to counter China's dominance. So they're not, you know,
they're, they're seeing what China has done and they, they
want to kind of counteract that and they want to be pretty
strategic about it. They've sort of put a bit of
pressure on Panama as an example and got Panama to back out of
the the Belt and Road Initiative.
But I'm not convinced on the whole, it's a big enough
strategy and maybe a big enough priority rather.
And maybe it comes back to, to bite us in a few years.
But yeah, it's, it's a very, it's a very hard one to, to kind
of ping governments on when there's a lot of problems in, in
your own backyard. That's certainly what the US is
talking about a lot lately. They're trying to sort out their
own shit in, in the States, you know, look after jobs and these
kind of things in their budget deficit and all these sorts of
things. And soon as you go overseas and
start buying copper mines and all these, you, you run the risk
of being accused of getting everyone at home.
And China had this as well. They, they had people in China
accusing the government of being more focused on creating jobs
and all these sorts of things overseas.
And yeah, that in a, in a country like the, the US or here
where you have a sort of Free Press, I'm sure those, those,
those cries will be even louder. So who knows?
But is it? What about, like, how much of a
factor do you think what the government's stability plays
into it? Like, you know, I look at China.
How Long's Jay been the premier president?
President. Yeah, over a decade now, getting
on 13 odd years and it doesn't look.
Like he's like, there's going to be anything that's going to get
rid of him so he can he can commit to a a long term plan.
Whereas, you know, Australia, like each government's bloody
whatever decision they make is just freaking.
You got the news is hammering them from the other side, the
opposition, and it's just like back and forth.
And it's like, what long term decision for?
Like it's like they can only make something that's going to
benefit us for four years. Yeah.
And we'll get, we'll get real philosophical, Maddie, but
finding out what the the best type of government is and the
best structure is a, is a huge question.
And no one's clearly perfected it.
But there's clearly benefits of the way that China operates.
And, you know, and she came in he he wasn't meant to hang
around this long. He changed the rules so that he
could he could still be here and be in power today.
So, yeah, there's there's obviously downsides to it, but
there's, there's certainly pros about it.
And the the strategy that they've had and the way they've
been able to build out these industries like the electric
vehicle and the other ones are ratted off before is very, very
impressive. And I think there's a good shot
you could say it's more capitalistic than what we've
done in in many industries in the West.
But yeah, I'm sure that's a that's a sort of point or a
question for somebody far smarter to to speak to and
there's. You can't say it's better to
have it public or private because you look at, you know,
when we've tried to do things, China was like the Kwinana,
Kwinana facility. Like that's obviously hasn't hit
the mark yet. And that's obviously got a lot
of press from because, you know, RGI is a public company.
Like, there's obviously been a shit load of investment into
rare earths, but that's yeah, money money.
Doesn't just on its own solve the problem?
No, that's. Where I've learned from.
But then even if it's, you know, not to do with public companies,
look at snowy hydro like that's blown out from what, 2 billion
to 12 billion and still hopefully like so, yeah, I don't
even know what the answer is there.
You need you need it like bloody Chinas hydro.
I was watching because, you know, it's Snowy's pumped hydro,
whereas that China one, the the next expansion they're looking
to, I think it's a $60 billion project.
They're just going to hopefully bloody smash this tunnel through
a mountain from the top part to the low part.
And it's just all free flowing hydro from the top of the Tibet
mountain. So yeah, I mean you.
You need to have a certain type of geography to be able to to
pull that off. But I mean, yeah, three gorgeous
dam and another type infrastructure projects such as
insane. Oh mate.
I can't wait to be if bloody, if there's a government changing,
imagine if that nuclear thing happens in Australia, that's
going to be the next big talking point if there's bloody huge
talking. Point, I've got a yeah, a lot of
a lot of thoughts about that. It's a yeah.
It'd be be a really interesting one.
And you, you said yourself about the snowy hydro challenges and
the, I think we're currently at a 6X cost blowout on that one.
And Can you imagine if, if the government kind of has to do
something that's on many multiples of that sort of scale,
what a cost blowout would do to our government budget would be
pretty catastrophic. So it's a really, really
interesting and important topic to talk about.
But what do you think our scale is?
Australia. We're just such a small player
compared when you class the West.
We're just such a small player compared to what the US can do
to day China themselves, compared to what we can do to
day China ourselves, what we just don't have the money to.
Yeah, we don't have the money to do it obviously at the at the
scale of the US, but I think in a way it's a bit of a cop out as
well. Everyone's kind of got to do
your part and you're doing it for yourself.
You're not necessarily doing it for the US.
You've got to tackle the challenge that you face and
tackle it head on, right. You can't wait for the US to
help you out. Maybe you can spare them along
and try and have a chat. That might not be the easiest
conversation to have, but you just got to think about it.
I'm not, I'm not saying definitively the answer is for
us to go and invest overseas and buy these projects and do all
this sort of stuff. That's yeah.
That's not I mean. Investing locally to build out
as China similar China stuff yeah, it just.
Needs a a strategy that's very well thought out and yeah, sort
of more speaking to what, what I notice at the moment as opposed
to any sort of solutions out there right now.
But we're we're bloody good at mining and maybe that's what we
should hone in on. And maybe thinking about how we
permit projects and speeding up that side of things is the way
we tackle this this China dominance and go about future
proofing out ourself. There's, there's very different
ways to do it. And the playbook that works for
the States and the playbook that works for China is not going to
work for Australia. Yeah.
Last question from me, JD, since we're on macro, this is going to
really get philosophical for you.
I reckon you've thought about it, all this Dodge stuff that's
happening, all this claims of fraud and, and talking about
listen to Musk on Joe Rogan, which is, you know, a macro
podcast talking about like finding $1.8 billion that was
funding some NGO by the government, which is effectively
a government funded organization, not an NGO.
Like all those like, yeah, add up all this savings that they're
going to make and all this spending to people that it's
going somewhere, it's going to someone when they stop giving
all this money out and reduce their debt.
Is it, what do you think the effect globally is on all these
places around the world or people around the world that
aren't getting this money now? Is it going to flow in a
positive or negative way globally?
Try to tread carefully, not get into into politics.
Why not? I think, I think that the broad
strikes are a positive trend, mate.
That's, that's kind of how I think about it.
I think about the, the cleaning up.
I think the overarching desire to, to fix up for the, for the
US, you know, obviously not American, so they can do
whatever they want, but their desire to fix up their balance
sheet is, is a good thing. I think that's a direction the
country should, should kind of head in for the, for the, for
the future of the country. And I think we've been, we've
been very lucky in Australia. We don't face problems to the
same extent. Our debt to JDP ratio is nowhere
near as extreme as it is in the, in the US.
But we've seen what can kind of happen if you spend beyond
humans. And I kind of think spending
within humans is, is the way to go, especially in, in times that
aren't super tough, you know, quote, UN quote, like we're not
in a recession and not in a downturn or anything like that.
So to have your, your deficit to GDP being 7% is, is pretty
crazy. But they've got, they've got
problems they need to tackle in the very, very near future.
You know, they need to refinance 1/3 of their like $35 trillion
in, in government debt within the next year.
And, you know, the way you kind of want to go about that is to
do it obviously at the lowest rate as possible for as long as
you can, you know, term it out as as the people on Wall Street
kind of say. But that is a pretty tough thing
to do when rates are where they are.
You know, it might have been a whole lot easier.
You would have done it two or three years ago, but no use kind
of thinking about that. So I think what they're trying
to do cut down their spending is is a is a positive move for the
country. Well, the current.
What about globally? I mean, yeah, that the, the US
is a strong ally of Australia, right?
And my thinking sides much more with their thinking than it does
with Chinese thinking. So I think a strong US is, is a
good thing to kind of have. And yeah, for for that sort of
matter, you kind of hope Europe does the same and sort of sorts
their their problems out as well.
Bit less confidence on on that front.
But I think for a sort of Western world that it would be
very much in our interest to to have the US get there, get their
house in order and have that remain the sort of status quo,
Then it would be the alternative.
But this is it's very sort of big picture, big, big thinking
stuff. So just.
Feels like if they're saving money, someone else is going to
lose money. I'll just be interested to see
if someone files on the back of them spending a lot less around
the world, yeah. Maybe it's an opportunity to
sort of reorganize and everyone can sort of think about their
own business or whatever it is. I mean, NGOs are kind of
different type example, but if you're a newspaper, which some
newspapers were getting getting funding, maybe you need to think
about things a bit differently and think about your business
model a bit more and a bit more innovative.
Yeah, just tackle the problems as they as they come toward you.
I've never. Been so interested in this shit.
It's like I'll just, I'll just think if let's pay less, money's
going out, unemployment in somewhere is going to rise
significantly perhaps. In the short term, but in the in
the long term, it's a it's a better trend in my eyes.
Maybe that is the the short term answer, but it it creates a new
playing field and you just go forward from there.
Love it. JD Bloody The new playing
field's being set by Mineral Mining Services in Open Pick
Contracting. I want to And before I say that
I'll be checking out the underground playing field in
Adelaide, 7th to 9th of April. The underground operators.
It's a playing. Field you want to be 100.
Bucks off your tickets MOM 100 is the code link of the shy
Knights mate grounded sort out the bloody camp field bloody
Sandvik ground sport, Loveland CR insurance, kaydrum, Gerald
Jones and WA water balls swig 70 million meters what Rd. project
engineer and cross boundary energy and they are the partners
that bloody love Odoro Odoro say how quick I'll finish that off
for you. Like it?
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