Right home money miners talk about a bloody aluminium and
alumina and bauxite spectacular coming your way.
And tell you what, if you want to move an absolute shit load of
bauxite, MMS would friggin move that for you.
Or any other bloody blasted Rock You can think of.
They are the movers of it. That's all you need to know.
Give them a bell. They move it, they mine it, they
make you money. They can be a bauxite
specialist, right boys? You've got the absolute OG
legend of those three things I just said.
This is aluminium Allen. There's no better way to to talk
about him other than this is the guy you want insight into a
market, which is pretty damn kind of nation requires like,
you know, decades and decades of expertise to understand and and
tentacles into China. This is the guy Aluminium Allen.
He wasn't named Alan by accident from.
Perth he was. Destined to be an aluminium
expert. That was it's our boy.
It was sensational yarn. We RIP it in or you want to give
a bit of context. 2 bit two things one is this was probably
top three favourite conversation I've ever had on this show like
it was it was just freaking awesome.
You can probably tell JD and I are frotham the whole way
through it. The other, the other thing I'd
point out is we actually recorded this right before the
day before the news came out that, that, you know, this GAC,
this bauxite miner in, in, in Guinea, which is owned by sort
of the Emirates countries was having issues exporting bauxite.
And so Alan in some ways is a bit prophetic when he talks
about, you know, some of the some of the tightness in the
market and some of the the challenges that come around the,
you know, the world's addiction to Guinea, Guinea in particular.
Well said. Alan is a true Gen and I think
we've said enough. Let's cut to the cut to the
show. It was a truly awesome
discussion. Awesome, here we go.
Alrighty, we've got aluminium Au with us here today and I think
the the natural place to start this conversation now is why
should people give a shit about bauxite alumina aluminium?
That's a very good question. Why should they give a shit?
A lot of people would say, well, they shouldn't.
But I think when you look at the role that aluminium plays, you
know, in society, look at the the different markets that
aluminium feeds into. This is one of the things that
differentiates it from, you know, from steel or from copper
or from, you know, some of these other metals is that now it's
used all over the place. I mean, I'm holding a can here,
right, which is aluminium, of course.
And so it's packaging, it's construction, it's
electrification, it's transport, it's consumer durables, all
this, all these different applications, which makes it
quite a versatile metal. So and kind of no matter where
you look, you're going to see it somewhere.
So people should care a little bit more about it, I'd say.
Yeah. I think that the, the care
factor is somewhat proportionate to the, you know, ability for
people to get it like, you know, financial exposure.
There's not, there's not like 20 aluminium stocks out there that
people. To gamble on.
Stocks for people to gamble on, gamble on literally.
Yeah, that's true. Maybe if we're in like, yeah,
Zorgo or London or wherever the traders are, there's a bit more
not knowledge in this area. But here in Perth, like where
people care, like interested in mining, despite the fact that we
have a, a, a pretty substantial, you know, bauxite mining
industry here and, and you know, refining industry here, we kind
of don't follow this externally as much as we should.
Well, maybe that will all change now.
Because I think like one of the reasons those those sorts of
people are interested in it as well, Trev, is because it's a
market of serious scale. Like it's you go down the, the
metals, you sort of have, I guess energy and all to start
with. And then maybe iron ore, which
has been a tough one for commodity traders to kind of
crack in a way, but books out the whole complex, you know,
aluminium complex is there because it's of serious scale.
And you, you hear about trafficker and and other sorts
of groups playing around and LME types of dynamics because it is
a a market of serious size, right?
Well, it is. I mean, last year I think 400
million tonnes of books aren't mined worldwide, so fairly
substantial and 100 million tonnes of that was here in
Australia, so 4. 400 million tonnes of bauxite. 400 million
tonnes of bauxite. Yeah, how much bauxite is
required to get to like? Well, that's a very good
question. And that's half the problem I
think with bauxite when you use the word bauxite because you
kind of think of this generic kind of this mineral, right?
Yes, Bauxite is not a mineral. It's just a it's just a generic
term we we bought in a few props.
Some samples. A couple a couple different
samples. Of that's right, one from
northern Australians, a couple there from Guinea.
But this is this is northern Australia bauxite.
Yeah. The thing about the thing you've
got to remember about, you know, the word bauxite is actually
refers to three different minerals, right, Gibbsite,
Baumite and diaspora, they're all bauxites and they're all
very different. And so how you treat them is
very different. So you know your the alumina
refiner, it's going to process that those different types of
bauxite now that has to be built purpose built for that
particular bauxite. Maybe you start changing bulk
sites and alumina refineries and it's a disaster.
So is that that the the fact that the the downstream is so
like like spec built to what whatever is being mined?
Is that why the industry's evolved in such a way where you
see so much of the the vertical industry integration is like so
immediate. There's like mind, mind to mouth
strategies of the of the. That's right.
I mean it's called the mind mouth to refinery model, right.
So what that means is that the that the refinery is designed,
it's purpose designed for a particular bauxite.
So the three refineries that are operating here in WA, Darling
Range bauxite can't put, you can't put Queensland that stuff
there in the jar. You can't put that into a
Western Australian refinery. That's like putting diesel into
a petrol engine. It's not going to work.
And it's also. We all.
Have to, to go one step further from the the sort of tailored
specification of the refinery. It's also that much more
uneconomic to do so and to to look into the seaborne market,
which is a a threat that we might talk about a bit more.
Yeah, yeah. I mean, I think to get to that,
we've got to kind of wind back time a little bit to to to see
how we've maybe got to that seaborne market and try to
understand what the seaborne market really is today, because
I don't think it's what people actually think it is.
No, wait, wait. Like an aluminium like well, you
know aluminium industry evolved relatively recently as well,
right? Like what's the history with the
emergence of it? Because like, I'm a student of
commodity, commodity markets, but even I don't know much about
this. All I know is that Rio paid too
much at the top of cycle for. Sure.
We'll get to that. Yeah.
I mean, well, it's recently in that sense.
I mean, you know, when it was first produced, you know, using
electrolysis, you know, all those years ago, 1880s, it was,
it was more valuable than gold until somebody kind of figured
out how to make it cheaply. And now it's not.
And it's so. So as a as a tech breakthrough
that enabled. Yeah, well it's a whole Rd
process. It's electrolysis.
I mean the some things just some basic things about aluminium,
right. I mean you know, you, you smelt
it from its oxide AL2O3AL2O3 is is corundum.
I mean you think of most scale of hardness, right?
This stuff is incredibly hard. The bonds are very strong.
So to bust it, you need a lot of energy, a lot of electricity,
you know, to break it apart. And it's broken apart in the
cell where it produces the, the metal and carbon dioxide because
the anodes are the anodes are carbon.
All right. So it's a big producer of carbon
dioxide that in the now in the, in the technology that's used
today. But it, I mean, having said
that, if it's, if you know, you, you place a smelter somewhere
where you've got access to low cost electricity and you've got
access to alumina, then it's a low cost process.
And you know, Australia's got a, you know, it's got a huge
history in the, in the aluminium sector.
We've had a smelter in in Tasmania since 1955 still
running today, running very well and it's running on hydropower
owned. By South 32.
Owned by Rio. Rio.
Sorry. Yeah, Sorry.
Yeah. Bell by smelter.
Yeah, yeah. And then if we we'll check a map
up right now, if we look around the around the world, we can
sort of point to the other kind of pockets where cheap energy
and yeah, refineries kind of go together.
Let me talk through that for a moment.
There's China. Yeah.
Then there's China. Yeah.
Then after that there's China. I mean, China's producing 60% of
the world's primary aluminium today, right?
It's very different to 20 or 30 years ago.
Very, very different. I mean in that period, right.
And we'll get into the history a bit later, I'm sure.
But if you think of the the, the period between about 2006 and
2016, maybe a bit later than 2016, but China basically
doubled the world's aluminium smelting capacity.
So it would have taken the world sort of 100 years to build.
The Chinese doubled it in 10 years.
Same with aluminium refiner, because you need the aluminium
obviously, to feed into the smelters.
They basically built, you know, the world's aluminium and
smelting capacity 10 years. Powered by cheap coal.
Powered by mostly by cheap coal. Now there's smelters, hydro
smelters and, you know, yeah, or hydropower and, you know, so the
smelters have kind of relocated and they're putting in a lot of
renewables right now. It's a gigawatts of.
It's a industrial strategy that we've seen them roll out kind of
subsequently in, in emerging industries too.
Yeah, you know, like lithium, they overbuilt the the, the
downstream kind of capacity before there was either demand
on or, or, or supply availability.
They, they overbuild it and then kind of kind of even in some
ways form a, a competitive advantage in that process, which
creates a, a, a complete reliance on, on their expertise
too. Yeah, it's a it's a very tricky
issue. You know, looking at, you know,
China overcapacity, there's been a lot set in the aluminium
industry over the years about, you know, China deliberately
building more capacity than they need to, you know, to export to
the world. I think you've got to also look
at it in the context of, of China's industrialisation and
its urbanisation. We were talking about this
earlier, you know, these two, these two phenomenon that
happened together meant that demand for, you know, for iron
ore and demand for aluminium and copper and so forth.
I mean, it, it just, it was double digit growth for a
decade. And so, you know, how do you
kind of regulate how much capacity you build when you're
at double digit growth for that long?
And so, you know, in in some ways I kind of see it as them
just keeping ahead of the curve, you know, maybe a bit, maybe a
bit too far ahead of the curve at times, but maybe not as well
just wanting to keep up with their own, you know, their own
domestic consumption. There's a sort of analogy to
lithium today and you, you fluctuate from surpluses to
deficits kind of massively in a, in a growth market, right?
Yeah. Well, it's true.
Although I kind of look at the lithium market and think, you
know, I get a bit hum about it 'cause we're talking about a
market that's 10 million tonnes, right?
Yeah. And on smaller scale and when
you're talking about 400 million tonnes, yeah, or or, or it's,
it's not a lot. Yeah.
And we, we see the capacity, the, you know, the conversion
capacity being built in China for lithium.
I'm talking about yeah, it's a bit ahead of the curve, but it's
low cost as well. You know, it's not the capital
cost to build the conversion and the purification capacities.
Not that, not that much of A of a constraint.
And the the bulk site that China has used in the past 20 years,
yeah, a lot of that has come from China, right?
But that's sort of changing over time and could look a bit
different, you know, looking forward over the next decade or
two. Yeah, a lot different.
Again, we've got to kind of wind the clock a bit back a bit here.
And you know, kind of look at, you know, when this, you know,
when this phenomenal growth period kind of started.
I mean, China's got a lot of a lot of bulks on.
It's diasporic bulks on right, which is monohydrate and it's
like gravel. I mean, the first time I saw it
when I went to, I mean, you know, here's me the box I'd
export right turn up to China and there's a truck goes past
before all this grey rocks on the back.
I said, what's that? Actually, they kind of look at
me. That's that's the local box on
aluminium. Alum.
Yeah, that's right. Well, I.
Shot myself there. But I mean, it's very, very
different, right? You to look at it's different
that doesn't have the same iron content, but it's also up to
like 60% alumina yeah so it's high high grade bauxite.
Problem with it is though, that, you know, to dissolve it because
one of the things, you know, the Bayer process requires that, you
know, you crush it and dissolve it into caustic soda and to get
it into solution when it for diasporic bauxite at the
temperature's kind of 260 two 180°, Whereas if it's Ipside,
it's, I'm 40 or something like that, somebody out there is
going to say to me, actually, you've got those numbers wrong.
You know what I mean? It's a lot higher, right?
And, and if there's silica associated with it, when you're,
you know, when you're dissolving at such a high temperature, the
silica dissolves as well. And, and so the silica content
of the bauxite is absolutely critical to understand because
it can dissolve into the caustic.
That just puts the cost up because when you strip it out,
you strip the silica out, you strip alumina with it and you're
losing caustic. So, you know, I come back to
kind of Western Australia versus Queensland, right?
When you think about the, the differences in the bulk sites,
the, the, the, the really attractive feature about the WA
bulk site is there's virtually no reacting silica in it.
Like maybe one 1%, there's quarts in it, but it's gypsydic.
So you know, you're dissolving it at a low temperature, which
means you don't get much silica, which means your caustic soda
consumption is way, way lower than other refineries, which
means it's a, they're low cost refineries.
So you might have, you know, the, the, the, the alumina
content might be, I don't know, 3233% something like that.
But the silica is like 1. So that's why these refineries
in WM and they're running well, they're Q1Q1 refineries.
Queensland Bauxite is completely different.
That stuff there is, it's got, it's got it's, that's what ends
up. Yeah, yeah.
Yeah, this turns into that. You know, the Queensland bauxite
is, has got Bolmite in it and that dissolves at a higher
temperature. So you've got to dissolve it's,
it's Gibbsite and Bolmite together, right?
Mostly Gibbsite, but if you want to get all of the alumina then
you've got to dissolve it at a high temperature and then the
silica comes with it because there's much more silica in the
Queensland bauxite. So it's, you know, it's a
different, that's why I say, you know, diesel versus petrol,
very, very different. Before, before China had this
intentional strategy of of, you know, building out their, their
in country kind of, you know, capability both on the mining
and the refining. Like what did that landscape
look like over the the preceding decades?
If you go back to the, the, the in the early 2000s, I remember,
you know, we, we started, you know, I started our office
originally in China just at the end of the 90s, right?
So we were there kind of watching this unfold.
And you know, China's aluminium refineries to start with were,
were rudimentary because they only had some, you know, they
had sort of basic knowledge of the, of the Bayer process and
they had all diasporic books on. So they weren't importing any
books on in the early days. And so all of these refineries
were all high temperature refineries because it's
diasporic bauxite. Right when you get to about
2006, 7-8 was when this demand for alumina in China really
started to take off. Then China went to the world to
find alumina and they wasn't there, not in the not in the
volumes they needed. So what did they do?
They built a alumina refund that they knew and then they went out
to find the bauxite. The 1st place they landed on was
Indonesia. Yeah, right.
So the, the period between about 2008 and 2000 and I think the
the first minerals export ban came into Indonesia maybe
January 2014, right, the first ban and running up to that
period, you know, China was importing books out up to about
I think the last year 2013, they maybe took about 40 million
tonnes out of out of Indonesia. So it had really started to, to,
to, you know, gather some momentum and at the same time,
their own diasporic bauxite was starting to deplete, right.
And I mean, like I said before, there's plenty of bauxite in
China, but it's, it's this AS ratio, it's the ratio between
the alumina and the silica. But once that gets down to about
3 or 3 1/2, I mean, you know, when you've got 15% silica in
your bauxite, it's just not economic anymore.
Is that? Is that a?
Like I say that it's a function of depth.
If you go as you go deeper or deplete the resource, it just
gets. No.
Or is it a function of just? These resources were.
Well known where they are and they're just limited.
Yeah, there's some of that for dice bike book sites, there's,
there's some of that, but it's really just in the formation.
So some of it's got more silica associated with it, and yeah,
some of it doesn't. And it's not the sort of
commodity where you're going to have exploration success because
we're talking about bulk mining operations here.
Like, that's right, Whatever's there is known.
And and I would advise you against using the word
commodity. OK.
What should I use? I would just call it bulk side
of diaspora for now. But I mean that's one of the
things there people think about bulk.
So you do think about it as a. Commodity in the sense of it not
being completely fungible. Yeah, fungibility is an
important part of it. It's it's like, you know, can I,
if I buy a cargo of bauxite in Guinea, then well, can I replace
it? Can I buy a, a cargo books
already from Queensland in six months time?
And it's yeah, OK, Absolutely no way.
So to I'll do it to negate the the challenges when you don't
have the direct mind to refinery sort of model.
I assume you tie them up on long term contracts.
So you know you're getting supply from that mine even
though it's in Indonesia and you're in China for a long, long
time. Yeah.
Yeah, what? What you want coming through the
gate of your refinery every single day is exactly the same
Bauxite. Consistent.
Right. Just every time.
It's like steel mills. It's like.
That's right. I think for, for, for
refineries, it's, it's accentuated a lot more.
I mean, because there's such a huge variation in bauxite, it's
much more than there are, let's say on ores, for example.
So you absolutely need the same thing.
When when, by the way, when China went through that, that
period of, you know, enormous growth, they were out scouring
the world for bauxite everywhere.
You know we trip over them in also to we wonderful parts of
the world looking for bauxite. Where's an example?
Oh, Jamaica, Yeah, we talked about earlier, yeah, there's
books on Madagascar. Yeah.
But now he's getting out. It's very, very difficult to get
it out. Obviously here in Australia,
Indonesia, Vietnam has got a lot of books on.
Guinea. Well, we kind of gravitate back
to Guinea because Guinea has got the biggest, you know, bauxite
deposits in the world and they're, you know, reasonably
high grade and there's enough there to keep every refinery on
earth running for the next 100 years.
There's a lot. What's the catch with Guinea?
Well, it's Guinea. I mean for China, what's the
catch with Guinea, it's the other side of the earth, right.
So there's always going to be a huge freight component.
So the books are priced today on our on our index is probably
about 77 bucks for a, for a standard use that term
advisedly. But for, for our reference rate
of Guinea and books that's about 77 bucks and you know probably
30 that's freight. So that's one of the drawbacks.
But the other? Drawback, of course, is that you
know, it's it's not an easy place to, you know, to operate.
But the, the export profile, it's just been dramatic the last
decade coming out, yeah. Well, again, I'll, I'll, I'll
bring the clock back to say 2014, right, because you know,
the, the Chinese model, right? So they shifted, they couldn't
have the, the mind mouth refinery model.
It didn't work because you couldn't get the mind mouth.
You couldn't, you couldn't put your foot on enough bauxite to
make a mind mouth refinery model work.
So they went to Indonesia and the model then was Indonesian
bauxite into refineries in China.
And that's the way we'll we'll apply it for the next decade or
so. But the Indonesians introduced
the minerals export ban in 2014 and that was the end of that.
So then they had to go looking, right.
The next place they landed on was Malaysia.
And Malaysia introduced not an export ban.
They introduced a bulksite mining moratorium, which is
like, you know, get your act together.
If you're going to mine bulksite here, then you have to do it in
a certain way. And so they banned bulksite
mining temporarily. And then they just moved the ban
about six or seven times, which became years, right?
And so, you know, the, the, the, the Chinese then thought, well,
we're next. This kind of plays back into
Alcan, right, which I will come back to because Australia was an
A choice back then, right? But where did they go?
They went to Guinea because if it's high grade and it you know,
it's and, and the volume. How village operate they built
out rail in that time to. You know, they built one rail.
Yeah, yeah, they that came online between 23.
Yeah, yeah, yeah. There was already an existing
railway there because, you know, one of the world's biggest
bauxite mine, CBG, which is owned 49% of the Canadian
government, a group called the Halco Partners, which is Rio
Alcoa and Dadco. And so that's been there for a
long, long time. And there's a railway there and
some other companies use that railway as well.
So that had been established, right?
But it was 2015 when Chinese companies arrived and the
exports, you know, from Guinea to China went from like
1,000,000 tonnes per annum probably in 2014, 2015 to 100
million tonnes, you know, in, in about 8 years.
It's phenomenal. It was.
That's mind boggling it. Wasn't so it wasn't a resource
issue that that, that all, you know, eventuated in there in
Malaysia and Indonesia, not quite any expectations.
It was just political regimes. Well, yeah, it was there It was.
I mean, you know, the Indonesian minerals export ban was bought
in specifically to, you know, to, to have companies add value.
Indonesia, I mean, we've seen what's happened with nickel,
right? I mean, it's, it's gone crazy.
It it worked, it worked. It worked with nickel.
It didn't work. Well, it was.
With, with, with. I wouldn't say it didn't work.
I'd say it was less successful at the time.
I mean, what the what the Indonesians did in 2017 was they
introduced some amendments to the minerals export ban and the
amendments, I'll paraphrase them, right, But basically what
they said was right. We're going to give you a 5 year
window to build Illumina refineries and during that that
five year period you can export on a pro rata kind of quoted
basis. So we're not, we're not going to
remove the minerals export ban, but we're going to give you an
opportunity for some cash flow so that you can build
refineries. And then we're going to audit
your your success, you know, for if we're building the
refineries. And then in 2022, we're going to
close the window again. And so, you know, books and
exports started to flow out of Indonesia again.
And some projects were genuine and some weren't.
But the bauxite started to flow again into China.
Then came then, you know, with COVID delayed it by a year.
But in 2023 they said, right, that's it.
We're closing the window again. And, and, and what we're seeing
now is that there is a proliferation of Illumina
refinery projects in Indonesia right now.
Yeah. So you, you can't look and say
what was the, you know, has it been effective or was it not as
effective as it was for nickel? I mean they're different
industries in that there. You know, you just look at the
capital intensity for an aluminium refinery, you know,
it's a one $1.5 billion to build a refinery.
So it's not, it's not cheaper and, and so you have to, you
have to want to commit to that. And I think, you know, over the,
the last, I don't know, maybe 5 or 6 years ago that a lot of
Chinese companies have been a little reluctant to do that.
They were building, still building refineries in China.
So it wasn't an easy decision to say we, we go to Indonesia.
But now I think things are starting to change and we are
seeing more, more interest. So you know, I'd argue that the
minerals export bans actually been pretty successful for
aluminium as well. Yeah, it's just taking longer.
Just takes longer, yeah. Well, it doesn't take longer to
get ground support if Sandvik and your ground support
supplier. That's one thing that does not
take longer. The quickest way to get ground
support on site to keep your underground mine humming is
having Sandvik is the vendor for it.
That's bloody Jada. If you were an underground mine
manager, who would you pick as your ground support?
Support Sandvik, Mate Sandvik. Trav yourself.
Sandvik JJ So do I need to ask who you would think if you were
running an underground mine? Sandvik That is the consensus we
want anyway. Let's get back to it.
That's that's kind of yeah, fascinating.
So that's, that's like the Chinese part of the market over
time, which of course you can't have a commodity story without
what China's been doing. But the but simultaneously, what
have the Western companies been doing?
What's the what have the Russians been doing?
What's? Well, very little to nothing.
I think the honest answer, when you look at how much capacity
has been built in China, yeah, you know, I'm talking about
aluminium refining capacity and smelter capacity.
I mean, there's been some has been built over the period, but
you know, China has just eclipsed a lot.
There's been some, some, you know, a few refineries built,
but there's been, I'd argue, I think there's actually been more
Catalan than there has been built.
So the refineries that are that are owned by like the South 80
twos, the Alcoas of the world, the Rio Tintos of the world,
they're basically all the same refineries that were around 30
years ago. Correct.
Yeah. You've seen not a lot of pro.
There's been, there's been a few, there's been a few built in
Vietnam, but they were built by the Chinese.
You know, one of the biggest refineries in the US, Port
Comfort, which was owned by Point Comfort, owned by alcohol,
was shut down and the bauxite sent to China.
Gove, if you remember, you probably don't remember, there
used to be an Illumina refiner at Gove in NT.
Yeah, shut that down. 2015, I think shut it down, sent the
bauxite to China. So capacity has sort of come out
more than it's been or it's been built.
Aluminium refining. I'm talking not, not smelting.
But the the what what that like, what is the story with Alcan
right? Like, I mean, it's just like
everyone knows. You can wait too long, no?
But so if if like I don't know if like if if if if the story is
that I have to. Change my beer to answer this
question. So thanks for the Coopers by the
way. That makes me feel like I'm at
home. We've got to look after the SA.
Thanks to whoever I can't remember who bought Coopers for
us. But anyway, thank you for.
That, yeah, the Alcan story, it's, it's, it's, it's
intriguing, but it takes you back to, you know, the heady
days of sort of 2000 and six, 2007, right?
We were talking about this, you know, this this period in time
where I think the rest of the world realised that what was
happening in China was real. And that was, you know, reports
coming out of China that iron ore was going from sort of 15
bucks a tonne to 70, which, you know, that was that's a hell of
a, an increase back then. And is it real?
Is it not real? Is this whole idea of
urbanisation real or not? But I think it was about that
time that it was, you know, people could see that this was
actually happening and demand was just, you know, it was, it
had skyrocketed, particularly for iron ore.
But now there was a, there was a, a thought that aluminium
would go with it at A at a similar kind of pace.
Where did that come from, that perception?
I think the, the general idea of industrialization, I mean we
were talking before about the different market sectors, right,
for aluminium. So it's construction is a big
one for aluminium as well. So you know, construction starts
to pick up, then aluminium demand starts to pick up and you
know, infrastructure and you know transport and so forth.
So there was some, there were signs of demand, you know,
increasing quite significantly in China at the same time the
Chinese were out looking for alumina.
So these kind of things were all coming together at a time when,
you know, markets became very frothy and bubbly and, you know,
people got a bit sort of over rejuberant.
Yeah, just to some degree. And, and, and when you think
about Alcan, come back to Alcan, right?
So at the time, so in 2007, there were a number of companies
that were running the ruler over Alcan.
It wasn't just real. Yeah, yeah, BHP was too, right?
Well, BHP had a look, but they'd never come out and said
anything. They hadn't come out and made a
bid. And Alcoa bid.
Alcoa did first, yeah. And that and that turned
hostile, right? Yeah.
And that was that was rejected. And Rio came way over the town
well. No, there was one in between
which was valet. Valet as well.
Formerly known CBRD, Yeah, yeah. So CBRD made a bid, right?
And and so the, and so Rio trumped it.
But, you know, I remember the time because we were doing some
work for VHP and some other companies.
We were kind of looking at the, the valuations that would go
with these, these crazy prices that were being offered.
And you kind of think, you know, you look at, you think, how the
hell did they get to that valuation?
What are they assuming? Yeah, yeah.
I mean, there's only so many numbers you can change in a
financial model to get it moving up.
It's got to be aluminium price, right?
Or it's got volumes or you know, whatever it is, so.
Many parallels to lithium. Yeah.
I mean, but the prices were, I mean they in the end they paid
36 billion for it, right US, which in today's money is
probably about, I don't know, 55 to 60 billion, but it's a lot of
money. And it was higher than
significantly higher than Varlow, which was significantly
higher than any of the other valuations that we kind of saw
at the time that, you know, people look and go how did they
get to that number. They debt funded it and like.
Well, they debt funded it and remember though that it was also
the time at which BHP had made a bid for Rio.
Yeah, yeah. So there's a lot happening, and
this is all coming. You know, you come back to,
well, this is China, this is this incredible growth rates,
these companies trying to position themselves to take
advantage best they could. And so Alcan was kind of the
obvious target. What's the ultimate?
Was it a bit of a poison pill for Rio to to, you know, pay too
much for Alcan so that they had defensibility from actually
being acquired by BHP? Yeah, well, like, you know,
plenty of sorry, there's plenty of speculation, right?
Oh, now I got my own view. Do.
You reckon the the government would ever have let that happen?
What? They asked me to take Rio.
No, it's not just the government here.
I think there would have been foreign investment review boards
all over the world who would have looked at and said we're
not going to. I think it was always, yeah, it
was always kind of kind of struggle just on that alone.
Yeah. Yeah.
But I mean, you come back to the poison pill.
The idea of the poison pill, right, is that, you know, you,
you swallow it for a large sum of money and, and therefore
you're less attractive, you know, as a, as a takeover
target. And, you know, my view at the
time was that there was, there was plenty of that in it.
My personal view, there's plenty of that.
It wasn't just, yeah, it was, it was a factor for sure.
There was, like I said, there's all this froth and bubble about
the aluminium industry and, and aluminium demand growth sort of
going crazy. But by the way, we're, you know,
we've got, we've got a suit all. And this is a, dare I say, a
convenient way of making it more difficult.
It's kind of amazing. They're like the, the, the, the,
the wonderful cash printed that is sort of Pilgrim iron ore can
kind of, you know, paint over those pretty horrendous
blemishes in, in kind of, you know, corporate history.
Like a well, like a 35. Today's all is $50 billion plus
acquisition. Well, I come back to the, you
know, the, the, the, the comment that I made about, about Guinea
and about bulk sign, right? Because when, you know, after
that acquisition, you know, taking place, then you wind the
clock forward by maybe four or five years.
And Rio had written off most of it, right?
So I think everybody looked and said it was a bad deal.
It was, it was a bad deal. It was about 5.
They wrote off most of it. Yeah.
But I think they did another they wrote off.
I think they wrote it all off. Did they?
Yeah, I I made the impression it was actually.
At least, yeah, at least 2/3. Yeah, yeah, it was a big, it was
a big write off, right. But you can imagine what that
did inside Rio. I mean, you've got iron ore
prices going crazy. You've got a company that just,
you know, one of the better term wasted a lot of money, you know,
share a lot of money on, on this, this acquisition that had
gone terribly. And so, and then I remember at
the time because I was, you know, I was advising them that,
you know, we would put forward a forecast for bauxite imports
into China, which was double digit growth.
And they'd kind of look at it and say, yeah, that's really
interesting. Thanks very much.
And that's what you'd and they'd kind of leave it at that because
it was very, very difficult for the aluminium, you know,
business unit to to attract the attract funds away from iron ore
from anything else, especially after the disaster that was
alcant. My, my view is that had that not
happened that, you know, Rio is incredibly well positioned to,
to, to build out WEIPA so that a lot more bauxite from Australia
right now would be going into China than that's coming from
Guinea, right? That made it more difficult.
Plus the, all of the difficulties that go with just
approvals processes in Australia make it incredibly difficult as
well. But it could have just, you
know, the industry could have just turned left instead of
right then. So as a result, the Western
producers stand still, China brings on its own internal
capacity that depletes like like, you know, Malaysia,
Indonesia fizzle. Guinea is the new source.
What's the status of of Guinea supply into China today?
Between Guinea this year will do about 100 million tonnes.
I'll do, I think it might do 115,000,000 tonnes of bauxite
into China this year. Total imports this year will be
about 150 and between Guinea and Australia you're probably about
95% of the total. So all the rest of the kind of
rats and mice? Where Where does the bauxite
come from in Australia? That oh from wiper, from from
Rio and from Metro Metro. Yeah.
WA here. Alcoa did explore a little bit
here a few years back, but it's hard, right?
Because it's, I mean, it's 30 three, 3233% alumina.
So there's a lot of stuff in there that's not alumina that
you know, you're importing choice.
It's good. It's a blending kind of books
because it's got very low silica.
But you really need to have, you know, a refinery like Worsley or
wager up built in China to, you know, to to to make the most of
it. And that's not going to happen.
Are there any constraints on the supply out of out of Guinea for
any, any reason or like you said, there's there's hundreds
of years, but are there like are there reasons to be trepidatious
about what can actually come out of Guinea?
Yeah, I think they're starting to emerge now.
I mean, now that we're up at sort of 100 million tonnes plus,
written into most of the concessions for bauxite
exporters from Guinea is the requirement to build an
aluminium refinery. Gotcha.
So the Ghanaian government, right, it's a military
government at the moment, right? But they're very, they're
becoming more and more, I guess I want to say aggressive, but
you know, they're the pressure is is mounting on bauxite
exporters in Guinea to build aluminium refineries.
They want to do the Indo playbook.
Well, you kind of you kind of both is my view.
Why is that? I mean, well, because then
you've got too much aluminium refining capacity.
See what's happening in India in in Indonesia right now is my
view. We're going to see another 3 or
4 refineries built in Indonesia between now and the in the end
of 2030. So, you know, although it kind
of makes sense to build a, a refinery close to the bulk site.
So it kind of makes sense in Guinea, although they've got a,
they've got an energy problem to solve.
You've got to do it when the time's right.
And it seems to me now that the time is right in Indonesia and
then at some point after that because there's only so many
alumina refineries that Indonesian bauxite will support
and then I think it's kind of Guineas turn after that.
Yeah. So that's a constraint you.
Don't want too much, too much refining capacity at the same
time because. Well, it'll just kill the price.
Yeah, refining margins. And it's got to be in the right
part of the world, right? There's kind of two mark the
Pacific and the Atlantic market. So, you know, you build your
aluminium refineries in Guinea, you're kind of feeding into the
Atlantic market that doesn't might need them in the future,
not necessarily now. What?
What's the state of the Russians then, Russell?
What sort of scale do they operate at?
In Guinea or in, well, I mean, they're quite the biggest
producers of primary aluminium, the biggest primary alum
producers. And there was recently the ban,
I'm not sure how effective it is.
Maybe you can expand on it was an LMA ban that they couldn't
trade in in Russian. Yeah.
Effective at all? It's not, well, no, I think
there's there's there's some sanctions, but there's also a
lot of a lot of companies are self sanctioned when it comes to
dealing with the result. So a lot of companies said,
well, we just won't take their medal.
It's not illegal, but we just, we just won't do it.
So. Just go fire middle men then
like. Well, it can, it can, it can it
can go fire middle men. The thing about?
It's fungible. Yeah, that's right.
It's difficult to, you know, to, to, to keep it out.
If you, if you, if you want it, you can, you'll get it right.
But the thing about Russian aluminium is that it's, you
know, it's green credentials very, very good because it's all
hydropower. So you've got this conundrum,
right. You've got, you know, people
want, well, I want green metal. Well, there's plenty of it for
Russell, but well, can you, can you take it?
Can you not take it? It's almost down to like a
company by or or consumer by consumer decision of whether you
want to use that that meddler or it's not.
The E but not the not the S. That's right, That's right.
So, you know, it's yeah, they're in a, they're in a tricky spot.
And of course, they lost the, the, the big refinery in Ukraine
and they, and they lost, you know, 700,000 odd tonnes of QIL
alumina. So they've been out in the world
trying to source, you know, 3,000,000 tonnes of alumina to
make up for what they've lost, you know, since the, since the
Ukraine conflict. And most of that's come from
China. So to round out on sort of
supply and demand, recycling is a pretty real thing.
You know, it goes well beyond a lot of the other metals that we
that we talk about. Can you sort of expand upon kind
of percentage and size that recycling plays in the aluminium
market? I'll do my best.
I'm not a huge recycling expert, but what I can tell you is that,
you know, post consumer scrap. So I mean, most of the aluminium
that's been produced in the world is still used in its first
application, right? So, you know, scrap the
attractiveness of scrap now, of course, because it's carbon
footprint is so small, like the number is, you know that you'll
hear from most people is 5% takes 5% of the energy to
recycle aluminium relative to to primary production, right.
I don't quite buy that, but it's not a bad, you know, it's close
enough because the problem with recycling, I mean, you take
these cans, right, you recycle them with a whole bunch of other
aluminium, all sorts of stuff gets in there as well, usually
iron, which means you've got to break it back with you've got to
alloy it with some pure metal as well.
So it's not quite 5%, but it's it's not a bad, it's not a bad
number. So it's very attractive from
that perspective, given its carbon footprint.
So you see a lot of companies that are, you know, who are
prepared to pay more for scrap because it can get down, get
their carbon footprint down. If you look at scrap rates,
recycle rates around the world, they're all, you know, they're
all fairly high. Well, I mean, it varies country
to country, obviously, but the one that's the laggard is China.
China's recycling rates for aluminium significantly lower
than the rest of the world for what they consume, and they're
trying to change that. Now you might have heard that
you know China's got a a cap on its primary aluminium smelting
capacity, 45,000,000 tonnes, right?
Yeah, I'm keen to go deeper on that as well.
Yeah, well, it's really interesting because, you know,
in our view, you know, aluminium demand just continues to, you
know, on its slow burn. So where does the aluminium come
from? It comes from recycle.
I mean, that's the China plan, right, Is they actually increase
their their recycle rights so they can feed into the into the
increasing demand rather than building more smelters.
So yeah, recycle is the future for aluminium for sure,
especially given the, you know, the, the, the carbon footprint.
Well, if recycling's the future for aluminium boys, I'd say this
fella here, Reece Patoni, He is the future for earthworks and
knowledge. Just look at him.
Across Australia. Look at his face.
Does he look like he wants to move dirt?
Dashing. Oh Jesus Christ mate, I've got
something for you with races an AEH as partnership with the
great Seamus Murphy for many time exploration.
Like it's not just clearing and for bloody mining exploration,
dams or anything mate they could get Seamus could get the
fieldies and the geos out there to supervise the whole project
as a turn key earthworks and haulage solution.
Is that? Have you ever heard of that
before? Never.
Normally you pitch ludicrous propositions as 10K, but this is
a, This is actual. And this is a true one.
I cannot believe it mate. As I said site clear and dam
building post mining rehab, rain, hail or cyclone.
He works through the whole thing mate.
He even uses the cyclone's energy to move to the freaking
dirt quicker. But that is how good this guy
is. Everyone else would be parked up
on the piss at the pub. Not race.
Not Australian earthworks and haulage.
Maddie, you had me at 10 K Oh. Jesus Christ, give him a bloody
bell for Christ's sake. So why did China self impose
these alumina and aluminium restrictions?
Yeah, that's a, that's a very good question.
There isn't why in there actually isn't a cap on
refining. It's kind of like a proxy cap.
If there's a, if there's a cap on primary aluminium, there's
kind of a cap on alum because there's nothing else you can do
with it, right. So the 45,000,000 tonne cap was
bought in to stop alumina, to stop primary aluminium smelters
being built because you know, there was if you know that
period that that huge growth period that I spoke about before
and the overcapacity that came with it was becoming a problem.
And so the 45,000,000 tonne cap was introduced to stop
refineries from being built to, you know, to increase net
capacity. What I mean by that is that if a
smelter closed somewhere, let's say a smelter 200,000 tonnes
shut down, then that 200,000 tonnes of smelter capacity could
be like horse traded to another, another province somewhere,
right? So you could still build new
smelters, but you couldn't there couldn't be a net increase.
And so you know the, the, the purpose of that of the the cap
was to stop new smelting capacity which.
You dampen the profitability of of existing.
Yeah. And I, I was getting out of
hand, right. Smelting capacity was growing
faster than than demand. So that that cap of 45,000,000
tonnes by the way, is going to be hit any day.
I think we're, I think it's about like 122,000 tonnes a day
and I think we're in like 120 or something like that.
So we're not far away from it, yeah.
We're at, because my understanding is, you know,
Australia, for example, we mined the bauxite and we have
refineries that turn that bauxite into alumina, but we
don't do any smelting. We do.
Yeah, we do. Yeah.
Yeah, we've got some. Where's the smelter?
Well, it's Born Island Smelter and time ago.
OK. And Portland in in Vic.
Become a dickhead. And, and also but, but place to
your first point though, right? Yeah.
We just don't know much about the industry.
You it's hard to get, you know, to how do you invent?
How do you play it? Yeah, all those things you we've
had, you know, we've had we, we closed the smelter in in
Victoria many, many years ago. Point Henry in Geelong, yeah.
It's also a big smelter in New Zealand, that's how many smelter
so. But you dominate the smelting.
Oh, for sure. Yeah.
What?
What percentage are they? They're about 6060% of the
world, roughly OK and Illuminas not far behind.
The one in Rio made headlines earlier this year, just signing
a new power deal, is that right? So they could.
Get that? I think.
Get that? Locked in and then they could
stay open get. Security, yeah.
Well, I mean, more recently, Portland just did the same
thing. Yeah, another, I think it was
450 megawatts or so, I think to 2034, something like that.
So I mean, smelting is about electricity, right?
Yeah, one of the ways somebody said to me very early in my
career, when you look at aluminium, you look at an ingot
of aluminium, think of it as coagulated electricity.
Explain. That's what it is.
I mean, you're pumping the, the electrolysis process, you know,
is about, you know, breaking the, the, the bonds open with
electricity. So you know, it's, it's, that's
what it is, right. So, you know, it kind of changes
the way you you think about aluminium, right, that that's
it's energy. It's a representation of
expended energy. That's right.
And there's an awful lot of energy in it.
You know, aluminium is used like powdered aluminium is used as a
fuel as well because it has so much energy in it.
I used to work at like smelters in days gone.
But you can cut this bit out in smelters, right in days gone by,
right where you worked in a smelter and there'd be, there'd
be a powder plant next to it, right?
Aluminium powder plant. So there was one in Belle Bay
and there was one I worked in Anglesey in North Wales all the
time. This little powder plant next.
So they would take molten metal and then I would solidify it in
a way, you know, through like a nozzle that would make it into a
powder as it, as it solidifier. So you walk into the, you walk
into these buildings like they're all the same around the
world. You walk into the, the front
office of a, of a, you know, of a aluminium powder plant.
And then you walk through the front door and then you turn
right, then you turn left and then left and then right and
then right. And it's like a maze, right?
And you finally make it to a lab and then you go left.
It's a labyrinth. And then you end up in the, you
know, in some, some person's office.
And then he's talking about this power.
I, you know, I pucked up the courage instead of them.
Sorry, why did I have to walk through a maze to get to your
office? And they said, this guy said to
me, seriously, when there's an explosion, then the energy is
dissipated, you know, through the corridors rather than just
blowing the officer like he didn't say if he said when, when
no explosion. Sorry, what am I doing here?
But that's energy. It's the energy.
Now let me That's what it's used for as a powder, as a, as a, as
an explosive, as a fuel. I'd love to hear about energy.
Some of the other operations you mentioned before we started
recording in in Argentina. You've had a spell in in
Northern Wales. Yeah.
Oh, straight. Yeah.
Well, I mean, I, I worked in, at the smelter in, in North Wales
and, you know, I left that smelter with a lot more than I
bargained for IEA wife. And, and so and she's a Welsh
speaker, a Welsh speaking wife. So I had to, so I had to learn
how to speak Welsh. But then I, which I do badly by
the way. But then I, I ended up, you
know, I was invited to do some work down at the Agua smelter
in, in Argentina. And yeah, they speak Spanish and
you know, the place called Plato Madrin, which is Welsh, Welsh
name. And so they spoke Spanish and
Welsh. Never thought my Welsh would
come in handy anywhere, but it did.
So in Argentina 4. Places, of all places,
Argentina. That's right, yeah.
Yeah, and the bauxite there is sourced.
Like, well, it's a smelter, so it's so the alumni it's bringing
in alumina from, you know, from wherever it can.
But yeah, the bauxite, the bauxite it probably, you know,
the alumina could come from one of probably Jamaica because
there are, you know, quite a few refineries.
And it's hydropowered. For I'm not sure about how you
are probably. Yeah, it was.
I was in prayer. It's a really well run smell.
What what with all of that, I guess like historical context on
the the alumina aluminium box like complex like where are we
today? Well, that's a yeah, that's a
very good question. I kind of come back to the to
the markets, right and then kind of project that forward
aluminium for me, it's just still on slow burn.
All of these different markets that aluminium feeds into are
all growing around the world. And so aluminium, you know, the
demand for aluminium is just like they just keep tracking
higher and higher and higher, which means that we will need to
recycle a lot more, but it will mean that we need to produce
more primary aluminium as well. And, you know, we're kind of
looking out over the next sort of five or ten years, you think,
well, where's that? Where's the growth?
Where's the smelting growth going to come from?
Because China's now got its cap, right?
So they're done. I don't think they'll change it.
I think what they might change is the thing about aluminium
smelters is that they have a history of capacity creep,
right? Because you can, you know, over
time, you know, if you look at the, the, the, you know, the
current that's used in these, it smells 200 KA, 300 KA 400K, but
they always manage to get go a bit higher.
And so, you know, for the same footprint, for the same smelter,
you can actually produce a bit more primary.
I kind of look at the, you know, the, the, the cap in China and
think, well, I don't really think it kind of fits the, the
purpose of not building any smelters, right?
To to, to be, to not improve efficiency as well.
Do you know what I mean? I find it hard to believe that
they would say, well, OK, you can't improve your efficiency
because we're going to cap you at 45,000,000.
So I think maybe you see some creep.
Existing ones to be to. Be.
Profitable, especially when. They're worried about as
efficient as efficient as possible.
Reminds me, by the way, just coming back to Alcan, just for a
moment. Yeah, it stuck in my head.
I don't know who it was. Somebody from Rio who said that
within 18 months of the Alcan transaction, China will be a net
importer of primary aluminium. Fuck.
Never happened? Yeah, never happened.
They they drank the blade. They, that's right.
They, I mean they built, you know, 20-30 million tonnes of
smelting capacity themselves. So it was great.
Sorry I'm off on a tangent, David.
That's amazing. It is.
So where we are today, China. China will never, that will
never change their I mean, but it was a policy set yonks ago.
Well, the 45 cap, yeah, not that far.
A few years back. A few years back, yeah.
Yeah, right. But you're you're.
I, I think what you, you know, what we're seeing in China now
in terms of investment into the sector, it's all recycled.
OK. And it's the systems that they
need to put in place to collect the recycle and get it back into
the system. So it's a very, very strong
emphasis on getting that up to the rates of other countries.
So, so China's smelting capacity, let's let's assume you
know, won't change for a while, but demand is growing.
So you kind of have to look rest of the world, Guinea.
Want. It they want it.
For a Lumina, they don't even you know, it's always back to
smelting, right? I mean where the smelting, the
smelting capacity goes, where you've got low cost electricity.
So you know, one of the hot spots in the world is obviously
the Middle East big produces a primary aluminium, not alumina
primary aluminium. And I think we'll see more
capacity going to the Middle East based on gas, right,
because it's got a a lower carbon footprint than coal.
It's still not net 0, but it's. Lower and they're importing
alumina from wherever. All over the place.
Australia, yeah, a lot of the WA, a lot of the, the, the
alumina from here goes to the Middle East.
That's interesting. Africa and to the Middle East,
yeah, yeah. So I think you see more smelting
capacity in the Middle East. You might see more smelting
capacity in Southeast Asia. As well they, they do have an
aggressive policy to build out, you know, a big industrial
sector there right. Like, I mean we've.
In the Middle East, Yeah, Well, especially where it's, I mean,
you know, they, they've been looking to to, you know, change
the, you know, the means by which they generate wealth for
for quite a while. But they've been active in the
aluminium ministry for a long, long time.
Their first smelters went into the into the Middle East, went
down. When I started in the
industries, that was decades ago.
Where are the marginal bauxite tonnes coming from?
Well into China, so it's a China market, remember so and remember
also because now you guys know a lot about books, I right.
So know that the whole idea of value and use, when you look at
these samples, see the whole idea of value and use is
absolutely critical. Whether it's 33% alumina from WA
or 45 from from Guinea or 55 from within China, you've got to
do that value and use calculation, right to see who's
sitting at the margin on a value and use adjusted basis and on
our analysis, right. Now on that value and use
adjusted basis, so it's basically like, yeah, how how
many units of aluminium can you actually or alumina or alumina
can you actually? Think of it this way, right?
If I've got a, if I've got a refinery sitting in China,
right, and I've got some choice, not a lot of choice because now
you know how a refinery works, right?
So you want to keep the, the variation down.
But if I've got the choice of, of, of processing a book site
that comes from Guinea or from say Brazil or from just say
Malaysia, for example, right now, am I better off paying 75
bucks for the book site from Guinea or am I better off paying
50 for the Malaysian book site Now the answer is probably 70
from Guinea because it's that value and use adjustment.
It's the fact that you've got the high available alumina,
you've got low reacting silica in the in the Ghanaian bauxite.
So you're consuming less caustic soda.
You're you know, you're dissolving, you know at a lower
temperature. So your energy costs are lower.
And so you've got to take all of these things into consideration
and then bring it back to the cost curve right then go well,
OK, on a value when you suggested basis who is sitting
in the margin and on our analysis right now, it's
actually some of the Ghanaian the low lower grade Ghanaian
producers. So.
Every every refiner has a different cost curve if they're
if they're looking to source seaborne.
Every refiner has a different cost to produce alumina.
Yeah, absolutely. Yeah, Hugely different based on
the bauxite that they're processing and the amount of
cost that they're consuming and the amount of energy.
Because remember, if you're, you know, if you're dissolving at
120 or 130° versus dissolving it to 80, then your energy loads
are very different, but you're getting more alumina, right?
Because typically if you are, you know, if you're, you know,
if you've got like a high temperature type of books, I
think it's got more alumina in it.
Otherwise you wouldn't bother chasing it.
So, you know, there's a lot of, there's a, there's a lot of
moving parts to a, you know, to understanding how that that cost
curve kind of fits together. And to just to touch on the, the
contracts, so how the dealers are negotiated between the, the
books that producers and the refiners, are we talking
contracts that'll be signed for a few years at a time and the,
and the pricing dynamics it will sort of be measured against
spot. It takes a while to react.
What are the sort of characteristics of a contract?
It's well, first of all, you have to slice out of that the
all of the vertically integrated production because it's just
coming across, you know, here's my books like my mind mouth, the
refinery model. So we'll slice all that out of
the way, right, because that that happens.
Then the next layer is long term contracts.
So you might see, you know, books on this going from from
Queensland into China. Some of it can be like on a 10
year contract. Some of the stuff that can come
from Guinea can be on multiple year contracts as well.
And those prices will be bilaterally negotiated pretty
much. With like floors and ceilings or
is there a? Yeah, there's, but there's also
there's bonuses and penalties around grade, all the sort of
stuff that you expect, right? I see.
Yeah. But about, I don't know, about
10 years ago we kind of looked at it and said we can see it
moving to an index at some point.
It will move to index pricing. But the barrier has always been
the whole idea of value on uses because they, you know, these
books sites that vary so much in grades.
But now we're starting to see that happen.
You know, Rio's been out to tender for bauxite in the past
year or so. They've, I think they've put out
two or three tenders for bauxite from you know, from Govan, from
Queensland, from from Guinea as well.
So I think we're now at the point where indexes will start
to play a role in setting the price some, some spot deals, I
mean and then that will flow through to the longer term
contracts. And and that that's an index
that's adjusted based on the value and use of.
Well, we do we. So we publish 2 indexes at the
moment. We publish a Guinea, what we
call the G Bix index, which is a standard grade of Guinea and
bauxite. So 45% total alumina and 3% I
think total silica. And so you know, you can take
that as your reference point sort of like 60 to 65, yeah,
same sort of thing. And then you would just sort of
bonuses, penalties, you know, up and down from that.
And we do the same for an Australian book site as well.
So yeah, I think with time now we'll we'll start to get some
traction on it. It'll find its way in the
contracts. Very interesting.
Will the will the the like? There's not many.
Producers of sort of seaborne oxalate, for all intents and
purposes, will that change? Do you think it becomes more
fragmented or do you think there are just like constraints why
that's a challenge proposition in the first place?
Look, you know it, I think it depends on what happens in
Guinea to a, to a large extent. I mean, Guinea now you know,
115,000,000 tonnes worth. The number is, it's, it's almost
as if that's, I mean, you know, Chinese, China's aluminium
industry is addicted to getting in bauxite, right?
And where else can you get it from?
Because you know, it's, if it's an addiction, I mean, I mean, I
think you know, the Chinese have come out themselves.
Some refiners have come out in the past, I don't know, six
months or so and said we need to diversify.
But where can you get it from? You can get some from Australia,
but getting new mines started in Australia is just takes such a
long time. So it's hard.
And you know, does Australia want to be in bauxite mining?
I mean, I think that's an open question at the moment.
I can't understand why it's an open question, but it is.
Where else in the world can you go?
It's there's just not a lot of options out there.
Vietnam is has got really great bauxite, but they have a
minerals export ban, effectively a minerals export ban as well.
They can't get it from there. But China has been out like all
these crazy countries that they've been out trying to find
and source large volumes of bauxite from now I mentioned
Jamaica earlier. I mean Jamaican, Jamaican
bauxite. If I had a, if I had a like a
jar of Jamaican bauxite, it would be dust, right?
And it would be 17% moisture. And then and if you dropped it
below 17% moisture, it'll dust. And so when you load a vessel
which it comes out of the ground 25% right moisture, then it's
it's tried. And so and if you try to load it
onto a vessel less than about 7 and it just I mean massive
plumes of of bulk sites. Actually problematic.
Yeah, the first time a bulk side vessel went to China with
Jamaican bulk site, right? Yeah.
When they had started unloading it at Qingdao Port, they
basically shut the port down because everybody in the
neighbourhood complained that all their body washing was
turning orange because there were just these massive plumes
of, you know, of books like dust is they, they picked up, you
know, they're picking it up with grabs and just dropping it on
the on the port, right. It's just all these poems.
This guy, I remember this guy rang me and said, this is crazy.
They've had to shut down the whole of Qingdao port because
this, you know, this box I'm unloading is terrible.
And then, you know, two or three days later, the same guy called
me and then he started talking about something completely
different. I can't remember what he said.
And I said to him, sorry, just go back to the what what
happened at Qingdao? He said, oh, no, no, they solved
that problem. What they do.
He said, oh, they did it at night.
Yeah, he says, but when I mean, when that stuff made it to the
refinery, right? The, the, and, you know, you can
imagine how much got lost in the waggons because it went inland,
right? So when it finally got there, I
mean, I'm, I'm, I'm going to paraphrase the refinery manager
here. He basically said, how many of
these, how many boatloads of this stuff did you buy?
They said, I don't know, 3 or 4. And he said, well, I don't care
what you do with the other two or three, but don't bring them
to my refinery because it's just so difficult to handle.
You don't have the handling system set up for dust, you
know, because that fine, right? I mean, the, the the refineries
that traded Jamaican bauxite have got no grinding circuit.
You don't need it. All right.
So you can imagine that if they want to try and take bauxite
from somewhere else, they're going to install the grinding
circuit. That's.
Crazy. It's a great story.
I think it's in the world for sale.
And I think Long story short, Mark Rich, Mark Rich and Co,
Glencore negotiate a deal to have the off take to all of
Jamaica's bauxite because the government has run out of money,
if I remember it right. And they call Mark Rich at two
or three in the morning and he transfers the money that the
government needs by the next day or whatever, he signs a 10 or 20
or 30 year deal. Yeah, amazing.
That's the good old days, Yeah, You need to talk.
If nobody's told you before, you need to.
Have you heard of a guy called Jim Lennon?
Yes. Macquarie, Macquarie.
Macquarie Yeah, yeah. I mean, Jim is one of the
legends of, of, of our industry. Yeah, but but he he knows Dick,
but he was a mate of Mark Richards.
Yeah, right. Jim.
So yes. Jim, that'd be a fascinating.
Conversation. Yeah.
Hell of a gentleman, Jim. Yeah.
I think we should talk a bit about WA specifically in the,
the challenges that the industry has kind of faced in in recent
times like you, like you outlined, we've got a long
history with oxide and alumina refineries.
So, but the the challenges have sort of really come to the fore
in the in the recent months years so, so.
Yeah. I mean, I remember it's the
start of this year. It was like really early January
where Alcoa announced our kitailing Kwinana.
Yes. January I think.
And then I mean that then the a whack deal kind of ended up
going through and all of a sudden.
See. Alcohol is this even more kind
of you know distant company in some ways and then and then S 32
faced their. Right.
It's right down at Worsley in June, July.
So how have you sort of seen that the challenges, you know,
positioned from outside the state, but we've sort of deep
into 3 expertise? Concerning I think would be the
word ideas. I mean you, you know these,
these refineries with the exception of Quinana, I mean
Quinana's closed and and it was a high cost refinery.
So you'd expect it for the for for Alco to take that decision
at some point my rational economic decision in my view,
the other three refineries here are all on our assessment Q1
right, alumina producing. The other three Worsley.
Wager up, Pinjara. And the latter 2 are both Alcoa.
Yeah. And Worsley S 32.
Gotcha. Yeah.
So they're all low cost, you know, Q1 refineries, but they
find themselves in this, you know, this odd position where
they're accessing the bulk site that they need to remain Q1
producers is becoming more and more difficult for them.
And as they do, then you know, what do they do?
Well, you know, as you're going through the process of, you
know, of, you know, compliance and, and licencing and so forth
to, to shift your mind to different places, which they've
known they've needed to do for a long time.
All right, that as that time gets extended, then you've got
to do something. You can't just shut the
refineries. Refineries don't work that you
shut the refinery. That costs you a lot of a lot of
money you don't want to shut. So what do you do?
Well, you have to go back to where you mined it before and
where you've where you've spent a lot of money to kind of
rejuvenate and. Rehab and everything.
And rehab. Dig it up.
So, so all right to spell that out the, the, the the political
situation is 1 where the the environmental permitting has
been so restrictive or or. Well, tedious.
Tedious and and and unclear. That they don't have approval to
necessarily mine where they where it makes sense to mine or
yeah, because there's maybe unnecessary delays.
Yeah. Well, I mean, I, I would call
them unnecessary delays in that if the, you know, if the, if
the, if the process was well documented and the process was
followed, then it would be clear and you would know, you know how
long it's going to take and you can plan accordingly.
Remember, these are assets that you know, that, that they need
to run for, for decades, not the next, you know, five years or
so. They've got a plan for decades,
especially if they're going to, you know, transition to sort of
net 0 by 2050, right? They, they require massive
investment. So you need clarity.
You need clarity about, you know, oxide supply and what
that's going to be and, and, and what impact that's going to have
on the, on the refinery. And so, you know, they find
themselves in a situation where with that, that that process is
not clear, what they have to do to satisfy the requirements is
changing sort of on the fly. So you still have to keep the
refinery running. So, you know, what do you do?
You have to feed in bauxite that's of lower grade and just,
you know, you just kind of March up the cost curve as a result
because now you're treating, you know, bauxite that's probably
got a grade that starts with A2 and not a three.
And that just has an immediate impact on on costs.
And that, you know, that brings into question the yeah, you
know, the the industry. And all like you know both of W
as miners are in a a similar predicament.
In Yeah, yeah, I think so. I mean, for different reasons.
They're not, you know, they've. I I think when you look at
what's actually happened, nobody comes out of it sort of smelling
of roses. Yeah, but they're in a tough
spot. I mean, the Q1, the Q1, for what
reasons is it? Is it the quality of the box
that they might have, but also that the energy cost is quite
low here because of our domestic gas reservation?
Well, it's all of those things. Yeah.
I mean, remember, that's that, you know, the bauxite grade is
low. Yeah.
It's only sort of meant to be sort of 3233% available alumina.
So excuse me on a world stand. That's pretty low.
Yeah. There's no silica.
Yeah, I mean, there's sand, but you can take that out.
But there's no reacting silica. It's not much clay.
So you're not you're not consuming much caustic soda and
because Gibbs are it's low energy.
So it's a low it's a low temperature refinery.
So you tick a lot of boxes there and then they will managed
refineries as well. So you know, that's why they
that's why they're sitting in Q1.
There's there's also the challenge that that energy
component, albeit maybe lower than some other refineries will
tick up in time given the domestic gas policy and other
sort of challenges we've faced as well.
Yeah, it's true. And I mean they've got to,
they've got to face that, got to face, you know, converting their
boilers to to, you know, renewables as well.
I mean, it's cost and it pushes the, you know, pushes the the
cash cost up, but you need line of sight on your future to be
able to make those sorts of investments.
You need to know that you're going to be doing this for the
next 20 or 30 years, not the next 5.
As Maddie would say, just Chuck an SMR in it collie mate.
Get a reactor going. So, so the the key aspect of
this then is does our government here, WA and and Australia
understand that? Are they, you know, do they
understand that the challenges that the industry is kind of
facing? Do you have any insight on that?
Do you? Have a on that.
I mean from our experience and you know, some of the work that
we've done for the, you know, for the Australian Aluminium
Council would suggest to me that they don't.
You do get the feeling as sort of policy on the run here,
especially when you look at it through the the lens of critical
minerals because you know in in Australia, we don't consider
bauxite, aluminium, prime aluminium as critical minerals,
but US does and the the EU does, but we don't it is it's odd
because. But the reason I think they give
is because of the scale of the operation here.
Yeah, and and because. Our own, yeah, our own supply
means that when we don't, that's.
And our supply chain? I mean, it's fucking critical
anyway. Met call is fucking critical
anyway. Easy, easy.
But I mean, I, I agree. I mean, I think it it should be,
it should be a critical and that kind of changes the approach,
changes the rules a little bit for for you know, the aluminium
upstream aluminium place. And I think that it should be.
I think we should be taking the same approach as other similar
sort of countries. How about in in Queensland?
What's the we hear much more of the WA situation?
What's the picture like there? I mean, it's a little, I mean
the refineries in, in Queensland, I mean they're
processing a different bulk side.
It's a high temperature. So their costs you would expect
to be a little bit higher, the bulk side's high grade.
But you know, if you take UAL as an example, it's a reasonably
old refinery relative to other refineries around the place, so
that you'd expect the costs to be a bit higher.
But they still come across the same, you know, issues in terms
of, you know, government understanding or, you know,
government support of the industry.
It's, it lacks just as much in Queensland as it does in W.
I. I mean, I think if you had the
guys from Glencore City here have got their, they've got
their foot on the Arakun Bauxite export project.
I would say that, you know, the requirements for them to get to,
to permitting and licencing are just so cumbersome that it's
tight. You know, it's taken them years
to to get to where they are and there's still no guarantee that
project will go ahead. So, you know, they're suffering
similar sort of issues. I think we should paint a bit
more of a picture as well because I think we could
probably come across as being a bit biassed.
You know, we're a mining kind of podcast and we're, you know,
probably by default more pro mining.
Like to think we understand or want to hear both sides of the
the argument but there needs to be a more nuanced conversation
here because the ramifications of the refineries not operating
in WA is that in a growing aluminium market they it will
happen somewhere else. Around, without doubt.
And it will happen somewhere where there are far worse
environmental standards, worse emissions.
Well, less certainly, yeah, yeah, I mean if the refineries,
if it, if it, you know, you would hope it would never come
to that. But you know, if we lost more
refining capacity in Australia, the world needs it.
So where's it going to migrate to?
And you know the, the, the outstanding candidate is
Indonesia. So I would expect that we would
see even more capacity go into Indonesia than what we're
already forecasting should Australia's refineries, you
know, closed down. It's.
Such a, it's such a, a kind of chilling thought in some ways,
like we've just watched in real time in the last, call it 18
months, every nickel producer in Australia just like go broke or,
or go into care maintenance, with the exception of like 1
mine, an entire downstream kind of component of that industry
completely obliterated to. And then OK, and where's what's
what's happened in Indonesia's rapid?
Like Indonesian policy is translated into the, the, the
build out of the downstream. And that also facilitated, you
know, the the upstream expansion to feed that downstream industry
as well. But there's a huge caveat here
in that we can be more cost effective when it comes to this
group of commodities as as opposed to nickel where we set
higher on the cost curve and it wasn't economic.
That's true. We have the ability to be in a
position here where we're lower on the cost curve as well as
reducing a end commodity that is of lower total emissions that's.
Right. I mean, that's the irony here.
We should be building refineries, not shutting them
down, especially in WA, 100% that's what we should be doing.
And we can't have the view that if we drop the aggregate or the
sort of total Australian emissions that it's a good thing
for the world because they just go overseas and they go overseas
at potentially a multiple. The world will, the world needs
what we're producing. We don't produce it.
The world will produce it somewhere else without a doubt.
So that's, you know, it's now is a pretty important time I think
from a, from a policy perspective to get it right and
set it and let the industry, well from my perspective, let it
expand. This isn't just an Australian
problem. I think I cannot.
I know there's the Australian context, but yeah, I think I
think broadly there's, there's a, there's a lot, there's a,
there's a lot of this, there's a lot of this in the US There's
that. There's more than this, more
than this in the US There's, there's a lot of this in in
Canada too. There's like, you know, Western
jurisdictions over a long period of time, Australia's hopefully
had some sheltering for, for a while, but things are changing.
But there's been a, a tendency to a want to export kind of our
emissions and industrialization to to China and other parts,
just not, not in my backyard. And, and, and be a kind of a, a
disconnect in what actually kind of happens as a, as a result of
that. And, and, and then an
environmental, an environment of kind of policy settings that
makes it like challenging to encourage investment because you
need certainty like, like, you know, investment.
If there's one thing that just like scares investment away,
it's it's uncertainty. Uncertainty can, can manifest in
a lot of ways. It's like timelines that blow
out when they should have been certain or it's, you know,
regime change that where you previously had certainty, all of
a sudden, you know, things can get rug pulled from you.
Those things kind of massively undermine any any, any
investment. Why would you invest somewhere
where those are risks? Yeah.
It's interesting you kind of say that in the, you know, you think
about what's happened in this industry with respect to Guinea.
Yeah, right, Because now we have, now you think of it as you
know, China's producing 60% of the world's primary aluminium,
right. And so the bulk site required to
produce the Lumina that produces that primary aluminium is
probably now running about 45% of of China's needs.
So there's an addiction there, right.
But that means that it's 30% of the world's primary aluminium is
now reliant on one very small politically unstable W African
country that you look at and you think from a supply chain risk.
I don't think I've seen that level of risk in the aluminium
industry as long as I've been in it.
Is that and there's is the fear probably probably in China,
probably globally people who who require the metal it's that the
fear is that like it just takes one bit of political instability
can kind of compromise that for 12.
Months. Yeah.
Well, I think that's why, you know, you're starting to get
signals out of China that they should be diversifying more, you
know, in terms of their supply. But where?
Where? Where do you get it from?
Yeah. That's the problem it.
It could get to a a risky kind of point where a small group can
have control in a country and and hold a a world at.
And industry. Is to to ransom in in a way sort
of knock on wood that doesn't kind of happen, but it's a risk
when you have such concentrated supply.
That's right. I mean, there's a lot of talk in
the industry that at some point thinking in government will, you
know, increase the royalty or do something different because they
do have such a such a huge control.
But I think right now the lever that they're looking to pull is
to, you know, is to force companies to build refineries,
you know, in in country. And that to me, like I said, I
mean, I, yeah, it kind of makes sense, but you know, get in the
queue, get when your, your time is not here yet, but your time
is coming. And so prepare yourself for
that. But it's true, you know, there,
there is a, there is always the, the risk that they can, you
know, they can have more of an influence on price that they
have at the moment. That there's a there's a
positive to that as well with SIM Andu going ahead in in
Guinea and you know, Rio Tinto being in and interest there as
well as I'm sure there's some overlap with Chinese parties as
well. They can sort of say it.
They can say we're not going to put in all this amount of money
if you're going to muck around with other part.
I mean, there's a yeah, something sort of channel to
think about down there is right? But usually complex and
component of the whole Guinea story, yeah, is what's happening
with Simeon do and the role that, you know, Chinese
companies are playing in that. How do you say that?
I see see men do I mean, it's going ahead, right.
It's you know, we get updates regularly because we got a we
got an office in Guinea. So you know, you see it coming
and it's high grade, high grade iron ore and it will, it will
come out in some fairly substantial volumes over time.
And you know, we're kind of cost curve fundamentalists.
So you look and think just displaces whatever sitting at
the top of the curve goes, you know, whether it's 100 million
tonnes or whatever the number is, but. 180 is what we've been
told is the that the high cost. Is the tough it's target volume.
It's well the, the I know cost curve is, is step, but you've
got the high cost miners that kind of keep, keep price where
has been for a good period of time.
But that that high cost proportion is 180 million tonnes
worth. Simon do maybe by the end of the
decade could be 120. Yeah, that's something I don't
know if you believe that. I think they could ramp it as
fast as they they possibly. Could well I think what they've
demonstrated with bauxite is that they can do it yeah.
So I have no doubt that, you know, whatever the number is
that they're going to target that they'll.
I'll get there. The Excuse me.
The thing about cement do is though it is a long way yeah.
So, you know it's like 600 and I don't know 3600 and 36140
kilometres. Then you've got a trend.
I can't remember whether they're translating or not, but on our
numbers I think we did. It was about maybe 40 bucks if I
be, so it's 70. Ish.
The grade landed grade, the grade that's right via you back
to the value in use, right? What, what impact that has?
That's right. And then for the low, I think
about the low cost producers as well.
It's like you don't just get punished on a proportionate
basis to your grade, your realisations disproportionately
get punished. Yeah, yeah.
But thankfully that's not box I'm illuminated just yet.
Not yet, yeah. What do you think the industry
will look like in in, you know, I mean, you've been doing this.
Yeah, for too long, 30 years, I'm the only one left in the
everybody else's. You know, natural nutrition has
taken everybody else except me. 30 years from now, what does it
look like and who are The Who are The Who are the big winners
and who are the big losers? Quite a hell of a question from
an aluminium perspective, I think.
I think China solves it's, it's it's a carbon issue for for the
production of electrolytic. Yeah, aluminium.
Recycling and. Recycling renewables, nuclear,
whatever it is that they, they will, they will solve the
problem and then we'll see the, you know, the, the, the
footprint, the carbon footprint for the aluminium industry will
plummet as a result of what they I.
Mean that's the answer in the room we didn't even talk about
today was the the the the 6% of carbon emissions come from come
from the refining. Of smelting.
Smelting. Yeah, Yeah, Yeah, that's right.
Yeah. So, you know, China has to
address that. They are at the moment, but I
think they'll take some some pretty big steps in the future
to reduce, you know, the carbon footprint for their own primary
aluminium. So I think they I think in that
sense they they, they kind of win.
But I think you also see other countries where you've got
availability of low cost energy, you see smelters, you'll see
more smelters start to, to pop up.
And whether that's the Middle East, you know, or you know,
some hydro around Southeast Asia or some other parts of the
world, I think they, I think they start to, to win a bit
more. I'd love to be able to say that
we Australia wins as well. We build more refineries and we,
you know, we, we have more refineries sitting in Q1 because
we have the, we have the raw material to do it.
We have the capability as a, as a country to do it.
So you know, you want that to happen, but whether it happens
or not, you know, we'll see. But the other big change will be
recycle. See much, much more recycle come
back into the into the aluminium world.
And the efficiency get better that.
Yeah. Well, the green aluminium, you
know, whatever that means, you know, you'll just see the demand
for that increase more and more and that will pull in more and
more. Recycle, recycling systems will
improve. Recycling capability will
improve. Do you think it'll be like a, a
market that will like generally be balanced most of the time
because there are these like large long life reserves that
can be tapped into, but we'll just have have intermittent
periods of being like, you know, tremendously imbalanced and
price. Yeah, I think that's the, I mean
if you look at the history of the industry, I mean it is a
capital intensive industry, right, smelting, refining and so
forth. And you know, if you look at the
sort of the supply demand balance, the history of supply
demand balance, it doesn't really change that much.
You guys are too young to remember what happened in the
90s with the, with the, the, have you ever heard of the MOU
in the aluminium industry? The MOU was when, when the, when
Soviet Union collapsed primary aluminium flooded into the, into
the rest of the world. And so the, the aluminium
producers at the time, the rest of what they had to get together
and, and, and sign what was called an MOU to cut their
production to, to compensate for the amount of primary element
that was coming in and, and the industry as a whole.
I mean, they did it. Yeah.
Effectively, all of the big producers at the time got
together and said, OK, we're going to for our own survival,
we have to have to make some cuts.
Curtailment curtail behaviour in some.
Ways an OPEC style thing but more for survival then for more.
Amazing survival. That's right.
And they kind of weathered that
storm, but that's the only, you know, other than that, the
market sort of, you know, goes in and out of balance.
You might see some refining capacity come out somewhere or
some smelting and, and things might go out of balance for a
while. But the industry tends to work
together, you know, to, to to sort of compensate if that
happens. In 2018, the largest alumina
refinery outside of China, which is any Norte in Brazil, was
forced by the Brazilian government to cut half its
capacity for a whole bunch of reasons.
And so the alumina price, you know, sort of up to sort of six,
$700.00 a tonne. And so there were a lot of
smelters that were short aluminium all of a sudden.
So the industry kind of came together to make sure that the
smelters that needed the aluminium got the aluminium
rather than force them to close because that's a disaster in the
army industry, right, if the force a smelter to close.
So the point is that it's, you know, it's more or less balanced
when it gets out of balance, the industry tends to kind of work
together to, to make sure that nobody kind of really that you
don't lose anybody because it's a, it's a big deal.
It kind of, I can see that continuing to be the case that
things are more or less in balance.
You know, when it comes to Illumina, the way that the world
has kind of worked over the past, I don't know, 10-15 years
or so, is that China's kind of acted as a bit of a sponge.
If there's been surplus alumina, China tends to kind of soak it
up and that keeps things in balance as well.
So from that perspective, the industry kind of works pretty
well together and you would hope that that would continue to be
the case, you know, for the next 1020 years or so.
Let's hope so. Yeah, let's hope so.
We'll see. There's one last like I don't
even know if it's a derivative of the complex, but it's it's
one of those sort of actually made the critical minerals list
before alumina bauxite or aluminium ever did high purity
alumina. What should we, what should we
think of that? OK, the way to think about high
purity alumina is that the world that that.
I mean, first of all, you have to define high purity alumina.
Yeah. How?
Many NS. How many NS?
That's right. And so we would say you start at
four. Yeah, it's 4 N and above.
That's what we would call hyper alumina. 3 N yeah, that's
industrial mineral. The N is how many 99 point?
99.99 is 3 NS and so forth. So if you look at just the high
purity market today, including China, I think it is one large
boatload of alumina. Oh, it's about 60,000 tonnes,
5560, something like that, right.
But the thing about, about HPR high purity alumina is that
there's so many different applications for, for hyperity
alumina, whether it's, you know, sapphire for, for LE DS or, or,
or, or polishing of semiconductor, you know,
whatever it is, there's lots of, and, and every one of them has a
very specific requirement of the HPA.
So it's not as if, you know, you can't think of it as a, as a
commodity or like a, there's this thing called 4N or 4N plus
alumina and that this is what it looks like.
It's just absolutely not the way the market works.
It's more like a pharmaceutical product, that's the way to think
about it rather than like a commodity, you've got to think
about it like a pharmaceutical. And so it's almost produced in
batches for particular applications and those
applications are changing rapidly.
So therefore the requirements of the HPA are changing rapidly as
well. So you've got to kind of get
yourself as far away from thinking sort of commodity and
cost curves and marginal time as you can possibly get, right?
Gotcha. And think about it in those in
terms of those very specific applications and what they're
prepared to pay for it. Very specialised but potentially
a high margin business if you can do it well.
Well, not potentially, I call it a high margin business now.
Yeah, if you can do it, well, if you can provide, if you can, if
your technology, because it's about technology, right.
Your technology can produce the, the requirement for that
particular application, whether it's a polishing, you know,
application or whether you're growing the sapphire for the LED
or you know, whatever it is. Then if so long as you can, you
can meet that specification. And by the way, you've got to
become qualified to to supply that market and the
qualification process can take you a year, right.
So it's a, it's a very, very specific market that you know
that like I say is is far away from smelter grade alumina as
you can. And then your.
Best businesses are someone not much smarter than me.
So the best types of businesses are when you're a small but
important part imperative part of a big inexpensive process.
So you have phenomenal price well.
Hopefully. Semiconductors, yeah, you know,
or, or LEDs for that matter. So pricing power is something
that most commodity producers don't have, you know what I
mean? Like, like, I mean that's the
definition of a, of a commodity in that sense that you, you
know, you've got a terminal market, yeah.
And that you, you know, you can't control the price.
You it's just all about where you sit on the on the curve, on
the cost curve. HPA completely.
Yeah, that's right. I mean, I like that, that
analogy. That's, that's that's where HPA
is today, I think. Yeah.
That's riveting. What?
Is there anything you want to, you know, leave our audience
with or thinking about Alan? I mean, yeah, what, what, what,
what sort of, you know, views haven't we traversed today that
you're kind of, you think would be kind of worth, worth hearing.
Although we haven't traversed. Yeah, well, that's a good
question. I think Jesus were covered a
lot. Yeah, I'd like to bring you back
from manganese and Tungsten and. Yeah, and every other yeah Mag
I've I've. Magnesium.
Magnesium is I'll I'll leave you this to think about right just
for a magnesium this can right every alloy like the alloy of
the body, the alloy of the top and the alloy of the tab are all
different, but every one of them contains magnesium, right.
So the biggest use of magnesium is the alloy in aluminium Yeah.
So if you can't get the mag, can't produce the alloys that
are required to make all of these sorts of things, window
frames or you know what, all the stuff around here, that's all
aluminium, right? China produces today somewhere
between 85 and 90% of the world's primary magnesium.
Seriously. That's something to think about,
right? You talk about critical minerals
and so forth. I didn't know that.
It's quite amazing. That's going to give us a rabbit
hole to to go. Yeah.
Well, it's an interesting one to, to, to dive down that.
I mean, so I was going to say from a like from a, from a, from
an aluminium perspective, I think, you know, some takeaways
here that I think people don't really understand all that well.
It's just the versatility of the, of the, of the, the metal
to start with right at, at the one end, but at the other end,
this massive concentration of where the raw material now comes
from for the world. You know, it's a an interesting
situation right now. Amazing could be set of many.
Many medals as well. Yeah, one last.
One hello. Sorry, go.
For it keep, I'll keep going. I want, I just want to include
this misconception. Sure.
We had a bit of a chin wag before we recorded you.
I, I'd spoken to you that I'd heard that, you know, aluminium,
if you own Alcoa, you kind of get exposure to Freeport or vice
versa because in some ways these are substitutable metals.
They're both pureplay and they're hyper correlated kind of
stock. So if you, if you're exposed to
copy, you're exposed to Ali because you know, heck, at some
point these markets are very substitutable and you took issue
with that immediately. I did.
I'm not a big fan of the, of the of the argument of substitution.
And in, in some respects it kind of comes back to to, you know,
we were talking about mag before as well, because magnesium is
substitutable aluminium in die casting and it's an easy
substitution. You know, if you compare it
with, you know, substitution of, of aluminium for copper, for
example, it's, it's complicated. It's not just, you know, you
look at the ratio of the prices and you know, get up the next
day and say, well, they look at the Ali price, look at the
copper price. I'm going to switch it just it
doesn't happen that way. And you think about the
applications that the copper is being used in, for example.
And if it's a if it's a, a motor, like if it's a wound
motor or whatever it is then. And if it's sitting in a car, an
EV or you know, or whatever, then that that car has been
through a process to have it, you know, legally on the road.
That process has to be replicated if you're going to
swap out of copper and swap into into aluminium, for example, not
only have you got a whole bunch of materials issues you're going
to have to deal with just in the the differences in weights and
you know, and conductivity and so forth.
Then you have to go through the whole compliance, you know,
issue as well. So to say that, you know, look
at prices and you know, get to certain ratios and you kind of
flip out of one, I just think is a nonsense.
I think it takes some applications.
I would agree that you know that that that are not non critical
kind of applications. Maybe you might see a bit of
substitution, but in big, you know, big chunky kind of uses
for those metals, substitution takes a lot of time and I just I
don't see it happening. I also sort of take issue with
the fact that, you know, that that copper prices might move,
you know, relative to alley prices, for example.
You know, one moves without the other.
So you know what what kind of what kind of drives that?
Why would one move? They tend to move in some
respect together, not, not, you know, not a strong correlation,
but they'll move. What's affecting one often
affects the other. So, you know, I just I, I, I
can't see it. I mentioned mag because, you
know, die casting is something that you can switch from ally to
mag. You know, I want to say
reasonably hassle free, but if a die cast ever heard me say that
they would shoot me. More hassle free than switching
for it. That's right.
It's more hassle free and even they find it difficult to
because they've got to retool, they've got to change their
furnace, they've got to change everything over to another metal
that, you know, in six months or a year's time it might reverse.
What's the price? So you have to have a, you know,
you have to have a long term view that Ali price is going to
be significantly lower than copper for the next decade
before you seriously consider, you know, you know, switching
some, you know, high volume critical kind of applications.
Supply chains don't turn quickly these processes.
Change long time that that's right.
So you know, I I do take issue a bit with that.
So yeah. Yeah, this has been amazing.
How long have we been going for? No idea.
I've learned. I've learned a complete
boatload. And I'm just on boatload.
Let me say one more thing. Boatload's interesting.
You know, we're talking about the different types of bauxite,
right? Yeah.
I just, I just, I had this thought this morning that
there's there's a vessel you should look up.
It's called the the the bulk Jupiter.
Do you know what liquefaction is?
No. So liquefaction happens when
you've got a solid, a solid material that's got maybe a high
moisture content that when you start to move it, it becomes a
liquid. Yeah, yeah.
OK, So that's liquefaction and at least two bauxite vessels
have sunk and I think they were coming from Malaysia.
The bulk Jupiter was one of them, right?
Because it, you know, you hit some rough sea and the bulks
like because the, the, the moisture content of the bauxite
was greater than 20%. So you know, this vessel moving
on the ocean liquefied the cargo, so changing from solid to
liquid, right? And so once that happens, you've
lost control. The vessel, it sinks.
So the weight was just. It was moving, sorry, it was
moving with the, you know, as the, as the mess vessel moved in
on the ocean and it and it tipped.
But it comes back to this, you know, this whole idea of books
and we're sort of where we started, right, That, you know,
there's bauxite and there's bauxite, there's bauxite, but
you know, you pull it out of the ground as a like, as a, you
know, just ESO onto a boat. It's got 20% moisture.
You know you're out and seeing, you know the bloody thing sunk
because it because the cargo liquefied.
That's incredible. Yeah, it's amazing.
Anyway, there it is guys. Thank you.
I hope that's been of some value.
This has been a phenomenal. Value to you.
Don't look, I mean I've got 2 cans of people's hairs on I
seriously can't go wrong. I mean, you had me at free Beer
by. I'm very much looking forward to
doing MAG and every other. Yeah, Tungsten and Molly in a
few of them. Yeah, can't wait.
Thank you so much for your. Time.
It's a pleasure. Good stuff, boys, Jay.
They'll go to the the Interview marathons these days.
But tell you what, you probably could have gone for another hour
if you want. Part of me feels bad that we're
taking so much of their time, but it's I want them to go so
good. I learnt so much in that
discussion. So it's, yeah, a real, real
treat to share that one with the money miners.
JD, when you're old and grey mate, you're going to be given
back to the young, young fellows as.
Well, I'm not sure I'll get to Alabini mouse level, but let's
hope so, Maddie. I don't think you'll ever go
grey, you'll just like you'll just be young and fit forever.
But ah, good work boys. Sensational.
Hope everyone enjoyed that and I enjoy talking about MMS every
day of my life. Just like I enjoy talking about
Grounded Cross, Boundary Energy, Sandvik Ground support, CRE
Insurance, Greenland's equipment, K Drew, MMTS,
Australian Earthworks and Haulage and Sparkmatty.
I enjoy you doing that for me, JD.
Have a good weekend. Money.
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