Travis Ricciardo We've got a bit of a different episode today,
don't we? It is, it is a bit different.
We've we've coached our good friend Anthony Cavanagh, Cav as
as we call him of, of Chester. I think he runs the Chester
Opportunities Fund 1 of Cavs. You know, things he's been
talking about a fair bit. In fact, he, he alluded to this
stock and this company, this opportunity when we when we
spoke to him a year ago when we did our like Fundy predictions.
This is a a, you know, a copper junior that Cav he's he's had a
long history with. We're going to peel that out.
Why it's interesting to him, why he's sort of, you know, why he
thinks there's a special situation on hand right now and
probably just got to get out of the way.
Disclaimers upfront, mate. We own stock in this company,
which is have all the resources. Ding, Ding, Ding.
We're conflicted. Ignore any of our perspectives
from that angle, or just just take that grain of salt.
But I I think it's super entertaining for a number of
reasons. Kev has wanted to do this
episode for a long time. It's a fascinating company.
As he explains in the whole story, he got involved quite
some time ago, but he's just that's an interesting thinker to
understand and hear from him. How we try to sort of create
value here is both entertaining and insightful.
And for that reason, I'm pretty keen to to share this story on
the back of obviously the deal with Sandfire that's come out.
Yeah, mate, I I totally agree. Hopefully money mind as you get
some value. We invite a bit of feedback on
this one. If you've got a a contrary
perspective to us and Cav, drop a comment, let us know.
Let us know why why our view might be with the wrong view.
I'm sure it'll come back one way or another.
Yeah mate, we've got a new partner as well, Switch
Technologies. I'm very excited to share this.
Yeah. Tell me about switch mate.
Mate Switch, an engineering company based right in the heart
of Perth. They've got 5000 square meters
in the middle of North Bridge. There's an old Toyota facility
there and what they do is really cool. 25 engineers working in
the company and they are a bunch of problem solvers mate.
So if you are running a process plant, you're at a mining
company in one form or another, and you've got problems you want
solved, which is the team you need to get in in touch with.
So they turn ideas into. Into solutions, that's it.
They execute the ideas and I'm sure there's people at mining
sites right now that have a bunch of ideas and they just
don't have the bandwidth to execute on them.
So Switch are the team you need to get in touch with.
They've got Mike's details in the show notes which you can
check out, but they've also got a bunch of solutions that
they've put into the market out there right now.
So they had this Wicked project with Pilbara Minerals.
They retrofit a CAT78550 ton dump truck, put this wicked
hybrid system in there. So a bunch of.
Really existing mechanical yeah truck with with a hybrid hybrid
retrofits it's. Really.
What happening here in Perth mate?
Cost savings off the back of it. And that is that is a big part
of the message here, mate. These are cutting edge kind of
tech where there's a commercial business case and it saves
dollar per ton because this is their expertise, their
capability. JD, I thought here's here's
here's my pitch to switch. This is to you, Mark.
I've got some gears myself on how you might be able to save
some dollars per ton in your processing facilities.
First one, I call this one the stop running it till it explodes
alert system. So you have a little sensor box
and it warns you when a pump or a gearbox, it's about to become
a crime scene instead of being run proudly into the ground
because it survives, survived the last shift.
That sounds like a problem Switch can help you with.
Second one, I don't know if this ones better.
I call it the stop over grinding everything meal whisperer.
So it's just just a control overlay system that stops the
meal from, you know, turning decent 200 Micron feet into baby
powder. Not bad, not bad, I'm sure.
I'm sure the folks out there at the mine sites have hundreds of
these problems. They're probably better problems
than economic. They're probably very real world
problems mate, and it's a good thing we've got people like
Switch solving these problems for us.
If you've got an idea, just e-mail
mike@switchtechnologies.com. We will come up with well, that
will come up with the solution for your problems to save you
money. Go switch.
All right, let's RIP in.
We've got a hell of a story to tell.
How do we, I don't know how to intro this story other than to
say, Kev, through knowing you've lured us into the appeal of a
very intriguing South Australian undeveloped copper stock called
Havila HIV. We are in stock in this.
We are conflicted. Anything that comes out of here,
like just assume that that, you know, we have every incentive
for the for, for an outcome higher than where the share
price is today. So just count everything we're
going to say from that perspective.
But we bought shares on market with our own money.
So hopefully there's some alignment on that front.
I don't even know where to begin here mate, because.
I actually did check my notes and I'm like, where did it begin
for me? Like it was kind of one of those
stories as a S Australian and someone who's caught up in the,
I guess the man year of copper and everyone trying to find a
copper asset to develop. You kind of look at everything
that's available, right? And it turns out the first I
guess instance that I had with the company was actually April
2022. And it was in kind of the
madness of it was one of the lockdowns in Melbourne where a
lot of people couldn't actually get out of the state.
And I was in Adelaide at the time with my family and UBS had
organised a, a visit to some Adelaide companies.
A lot of them were at the time you'd say subscale and semi
economic. But amongst it, you know, when I
saw I was minerals and we saw an aspirin, a few of the other
larger plays, but in the mix was Havilah.
And so at the time it was like a $60 million company.
And I remember going out there and seeing all the optionality
of the assets and just turning to a few of the guys going.
That was really interesting. But like, it's a $60 million
company. Like, what the hell is going on
here? And as a family member of mine
who'd previously mentioned it to me and I called them up and I'm
like, what? What were you telling me about?
Haven't they like, oh, yeah, it's my only PA position and I
think you should really take a look at it.
I'm like, oh, look, it's probably too small for us,
really subscale. And on that same day, we saw Oz
Minerals later in the Arvo. And Oz Minerals was talking
about how they've done these deep dives and all the copper
assets literally globally, not just in Australia.
And I couldn't help but think to myself, maybe there's something
in it. Like the conversation we'd had
from Havilah needing a big capital partner to help develop
that asset to Oz Minerals needing a ready to develop
copper asset that literally had done all the exploration work,
they just needed to get into production.
I was kind of like, at the time, it was one of those thoughts you
never really do anything about. It's just like, geez, there's
something probably there, but nothing's going to happen.
And I can't remember when exactly the deal got
consummated, but it would have been say six months later down
the track that OZ Minerals ended up kind of putting an offer on
to that asset in Kakaru. Yeah, there's an option, an
option agreement that they they entered there from memory.
Yeah, 100%. And at the time I was just like,
wow, like one of those instances where just fortuitously you saw
the two companies in the same day, both South Australian
companies. You thought maybe you'd be great
synergies to see those two together, one needing capital,
one with capital, one wanting a growth project, 1 needy
desperately a growth partner. And then they come together and
you're like, oh, wow, we were there.
And I'll send a message to some of the guys that are on the same
site because they're going. Isn't that neat that that kind
of happened together and kind of nothing came of it at the time.
And just like, yeah. And I mean, I think at the time
it was probably around a $400 million deal.
I know there was different structures to it.
The, the recent Samphi deal has been announced.
But lo and behold, obviously the BHP as minerals takeover
occurred and in the mix was kind of like this small asset that
probably didn't really fit within the BHP portfolio,
obviously didn't the way kind of transpired.
But at the time you're like, what's going to happen with the
with that asset? And I started getting interested
probably as the potential investment thesis when I've got
a feeling that Havilah had gone to $0.27 at the time, which
would have been, I'm going to say about 100 million market cap
maybe. No, no, probably even less.
When it was kind of almost, it felt to me 5050 almost where the
BHP was going to kind of progress with that option that
that OZ Minerals originally entered into once they'd taken
over OZ Minerals. But yeah, and then BHP kind of
reneged from that option. And it kind of, I think I, I, I
should pull up my chart, but from memory, Haveler went down
to like, I think 15 or 16 cents. And everyone just thought
there's, there's nothing here. But all the information that I
was hearing from everyone involved was that Haveler was
going to be, well, technically it stood up.
It's just that it was too small for BHP.
It had no technical flaws. There was a lot of interest in
the asset because of the grades, because of the oxide layer that
sat on the top, because the location and because of some of
the exploration hits nearby that almost, you know, became a
province play in have a look. But it kind of nothing really
was ever going to happen at that stage because it just was became
one of those small cap companies that just didn't have the
capital and didn't have the eyeballs And no offense the
management team, but I don't think it was marketed
appropriately. So we I'm having to have to go
whatever direction you want to take those kind of comments,
but. I remember, I remember you first
like mentioning it to us like, yeah, must must have, must have
been subsequent to that option lapsing that would that BHP let
lapse. And I remember you saying like,
I still think it was a good trade because you know, what was
the probability that BHP exercised that option or not,
yada, yada. And even if the stock failed,
like you still remember articulating to ask that you
still thought that was a good, a good, a good bet to have made.
Then another bit of context on this.
I'd heard from someone that the, the, the BHP, like, you know,
deal with Oz Minerals is part of the rationale why OZ Minerals
signed the option agreement in the 1st place.
Would have like maybe, maybe that option agreement was
actually part of the defense, you know, value negotiation
stance from, from Oz minerals in the 1st place.
Maybe they didn't actually necessarily have the view to
exercise that option, but at least having that on the table
gave them some links to negotiate an uplift in price
from, from BHP, which ultimately did come to fruition.
But you still zoom out and you think there were two 22 copper
projects in Osmond's backyard that they could have chosen
from. And, and the knock on both of
them for the longest period of time is that they haven't come
knocking on, on either of them. And that was that was Rex
Mineral Hillside and that was Havilus Kalkuru.
And the one that they they did A at least a paper deal on was was
Havilus Kalkuru. Yeah, I I definitely heard
something similar. So in amongst my interest in
this company, I've spoken to most of the key players I think
that have been involved with it. Excellence Mineral staff
members, other people associated with the deal, geologists who've
who've looked at the data, people within the South
Australian government, all types of different parties.
Just to understand why this asset still sat there as like
this undeveloped asset that has approximately .9% copper
equivalent grade for another pit.
It almost became a semi obsession of mine to understand
why this asset was still left undeveloped.
I think it might have those conversations might have
progressed one night over dinner when there was another money in
mine guest that kind of been on your show when I was discussing
with him what his thoughts were and potentially trying to
progress a deal with them. And, and I could, I could take
you through a story, but I don't necessarily want to reveal who
that was in case they, they don't necessarily want their
name to be associated with it. But certainly worked our own
angle to try and help the management team, I guess
liberate value from this asset. And there was probably, I would
say at least three different approaches so that for the
management team of this company between let's say 2020 like 2023
and probably early to mid 2025 in different forms.
And that's three from three from you and and your group Kev, not
to mention the the others that we correct that have sort of,
you know, we've been inferred that have approached the company
with with alternate proposals. Yeah, correct.
So I would say that I, I kind of almost had a investment
consortium and I was inspired by someone I'd saying that put
together a few deals of a similar type of, I guess
methodology to what I was thinking.
And that like, if we could help them, I guess build out their
management team a little and also kind of help capitalize the
balance sheet. It might give them a bit of a, a
stronger footing to go approach the investment community with a
more institutional type of company than than what they,
what they have. I mean, they've, they've
operated a pretty shoestring budget as long as I've known
them and gone by piece meal with their own drill rig.
And I kind of thought to myself, well, if you can actually have
the money behind this company and actually be well capitalized
with a pathway to getting a, a fee completed with your own
capital and you actually bulk out the management team.
You know, there was a few guys at Oz Murals.
I would have loved to say that we were able to get Andrew Cole
and convince him to come join the, the board or the, OR the
management team of Haveland, which was my original, original
thought. It wasn't to be, but there was a
few guys in the mix. And I don't, I don't want to say
who they were in in case they didn't want to be named either.
But we've spoken to a few guys that we thought might have been
appropriate to, to help with the management team there and, and
thought what, what we had was a good proposal, including maybe a
corporate that might have given some added credibility to the
project and to the asset. And so, yeah, the most recent
approach, and I might have alluded to it on your Christmas
crackers special like I, I did mention the fact that I was, I
was pretty interested in a couple of cover plays and, and
one of them was this potential deal that we were, we were
thinking about at the time. But obviously that deal didn't
eventuate. And at the time I was kind of a
bit confused as to why management would rebuff such a,
such an approach. I mean us potentially helping
them fund their balance sheet and and take that project to A
to a PFS level and also do some further exploration drilling,
which is kind of what the Sapphire dealers look like.
So maybe they did learn something from from our our
approaches is kind of what the Sapphire dealers kind of come
out with. But we were going to help them
to basically develop that to a, to a PFS sage themselves or to a
prefit Sage themselves. Yeah.
So there's a lot to it, but what I think is transpired ultimately
is that there's been a lot of people that have have looked at
the asset and most of the feedback I've had is that
there's been no technical flaws with the asset, which is the
same feedback that we've had from our independent technical
experts that have looked at it they've.
Had an open data room for for a very long time here, right?
Yeah, correct. They have had an open data room
and there's been quite a number of parties I believe that have
gone through that data room. Our fund had personally been
approached by two or three of those parties asking for
opinions, advice, asking for someone that might actually be
able to push management in a certain direction.
So I was certainly around diggers expecting that maybe
something might occur of, of this type of standing.
That's not to say we're 100% happy with the price or the way
the share price has reacted since, but there's certainly
been a number of parties that have expressed interest and done
the detail as far as I'm aware on, on the asset.
And I mean, my, my, my business colleague and I, Rob, we, we
were in Perth 12 months ago, I'd say now.
And I remember having the meetings with most of the
companies in Perth. You know, your, your standard
companies and you know, your S 30 twos, your sand fires, your
even some of the gold names. And the consistent feedback we
kept getting was that everyone would have loved a developable,
developable copper asset in Australia, right?
And it just was consistent over and over again.
Oh, we just love a 50,000 tonne per annum asset in Australia for
copper. And obviously, you know, Mac was
there, but you know, that was already developed and you, you
had to pay a pretty full price tag is what we're seeing in
Harmony to acquire that asset. But everyone just consistently
said we'd love a developable copper asset in Australia.
And I just kept thinking to myself, well, has anyone
actually looked at this asset? I mean, I know that there's been
some assets up in Queensland that have transacted and
obviously the Rex Minerals deal. But my understanding of Rex is
it's, you know, probably more pristine pastoral land than than
what they have in Broken Hill. The Gray is probably a little
bit lower and it's probably a bit bit more complexity in the
build it at Rex's project and there is a Kakaruso it was it
was that. Coming.
Yeah, it was that Rex deal that got JD and I very interested in
Havelock because the moment you saw this, you know, yeah, $400
million deal for Rex, it was like, well, if Oz thought that
Havelock was the better asset then and and this company's got
a market cap, I think at the time was like 6065 million bucks
or something like that. We touched on the the winner one
as well, which you. Know has got.
Strengths to it, but. You stole my winner Thunder,
right? I think I was half the winner.
Deal got announced. I think I sent you a message
similar to the line of if we know he's worth XXX, then Kakaru
is worth dot dot Don. I think he used that and put out
a tweet at the time. But at the time you were trying
to kind of, I guess yeah, he he discrete the fact that like
paddler and Kakaru were the companies and the and the copper
name that I was talking about in my Christmas crack.
But anyway, yes, what will be will be, but unless we see that
today, I mean, we could we could delve into the deal because I'm
I'm still sitting here going. Before the deal, let's talk
about the the share registry of have a lot like why has there
been an impediment to to, I don't know, do a deal like
what's the the shareholder dynamic and the influence on the
company. And it's not necessarily like a
bad one. There's just a hold out on on
value, yeah. Someone actually asked me about
this today and they're like, oh, what can you tell me about the
the havless share registry? And I'm, I'm like, well, he's
pretty devoid of institutions. I think there might be one or
two. Some of them aren't necessarily
institutions in your black and white scheme of institutions.
There's an interesting character called Bob Johnson.
And I, I don't think we've got enough time to go through the
whole history of Bob, but Bob was the founder of, of Haveler,
also the founder of Chemical Map Tech, the company.
The company. Yeah.
And Bob has a lot of influence within the company to the point
where I had presented to the board previously some of my
thoughts on on Habler and Bob was in the room at the time,
which I thought was interesting because I think he he's
basically as a material shareholder and an ex founder of
the company, he still has a fair bit of sway with the with the
current board and the management team.
So sometimes to the point where it's extremely influential.
So and he's his position on the share register has been
questioned at times in terms of how much stock he actually
controls. So I think that's an interesting
aspect to the whole register. And I think sometimes the
companies end up doing some things that aren't necessarily
interested of all shareholders might be the best interest of
Bob. But when you're a founder of a
business, sometimes that's what happens.
We've seen plenty of examples of founder LED businesses doing
some things this, this year in particular that might not
necessarily be for all shareholders, but I think he's
gotten really interesting past Bob.
And I think I, I believe when I presented to him and the board
that we shared some similar philosophies and into what
Haveler and Kakaru could be for particularly SA and, and the
industry at large. I generally see kind of Kakaru
and the province that they're in has kind of almost been a
foundational asset for copper in SA beyond obviously there's
Olympic dam, prominent hill and Carapatina, but I, I think SA
could be a lot more than that. And, and this province, the
Carapatina province that sorry, the Kunamara province that
they've got has the potential for a couple of Kaparu look
alikes. I mean, we've seen some really
interesting hits that have been there that just haven't been
followed up because they've had the capital to drill.
And I'm really excited as to what could actually transpire
from some of the some of the drill holes that might be
drilled with the expiration money that Sanfi is throwing it
at the province. So, yeah, like, I mean, there's
so much, so much to it, but I think that, yeah, Bob.
Bob Johnson is very super. Interesting to, to, to the the
credit of management, it's not like they were like spending a
crazy amount of money and, and diluting, diluting existing
shareholders a massive amount along that way.
They've just been there's been a holdout for a deal that has been
somewhat comparable to the one that was was tabled by by Oz
Minerals. And and now as of a couple weeks
ago, we've finally gotten a deal that is comparable to the the
one that was tabled by Oz Minerals in 2022, which you want
to run us through what what that deal was Kev with sapphire?
Yeah. I think, I think as to your
point, some of the challenges have been that like that deal
being a couple of years old now, that was at a copper price I'm
guessing now about 3 bucks, 50 a pound and obviously we're about
5 bucks today. And I'd say gold prices are
probably 1500 US and and we're you know 4th around 4000 today.
So you've had a pretty strong commodity price environment
since the OZ Minerals deal when the deal implied was $400
million. So I can understand management's
I guess anchoring to thinking that maybe they should be
holding out for a $600 million type of price tag.
But this probably comes to your original point, Trev, when you
mentioned that some people had suggested that HAVA was almost
used as a bargaining chip to BHP where some people might have
suspected that maybe the price tag that which OZ Minerals have
struck that that deal might have been probably 100 or $200
million higher than. So what might have otherwise
been the case if BHP wasn't lurking there as a, as a
takeover bidder that they were trying to I guess push in One
Direction. So that probably created some
issues for management and the expectations from I guess
shareholders and even themselves going well, geez, $400 million
price tag with copper price and gold price now higher, you know,
how can we how can we transact on anything in you know, and
some of the price tags that I suspect have been floating
around have been two $300 million, right.
So this this deal that they've now got with, with Sandfire $105
million upfront script and cash. So that 105 does swing around a
bit with a Sandfire share price that literally gets them an
option to potentially acquire another or 80% of the asset for
another $105 million. So that in itself is I think
extremely interesting for have the shareholders.
I think the price tag itself, even though the headline looks
like it's $210 million for 80%, you've got to remember they're
also funding Atfs which could be anywhere $50 million, I think
could be a little bit higher than that even they're they're
putting $30 million into expiration into into ground that
otherwise wouldn't have seen that that type of capital spent.
And then at the end of all of that, people have said to me
that the biggest risk is that Sam file might do all that work,
work and then walk away. I mean, if they did spend that
money, let's call it 100 and what, $185,000,000 including the
PFS costs and the expiration costs and then walked away, I
mean, is that a risk to tablet? Because then they would end up
with 100% of this asset, right, That has had a fair bit of
interest beyond just sand, fire and oz minerals.
That upfront is non is non refundable.
They get to keep. Worth, yeah, 100% is binding,
yeah, and it's non refundable as long as at the EGM the
shareholders vote for it to occur, right.
So yeah, that is itself extremely interesting.
If then Sand Fire wants to progress with the 80%, they then
need to spend another $105 million in cash and script,
which is in itself extremely interesting.
So that then sets the price tag 85 plus 105, he goes, what
what's that 200 and a bit, let's call it $300 million for round
numbers and that's for 80% of the asset, right.
So then Havla are then free carried on the remaining 20%,
almost like the Onslow situation for the joint venture partners
to min res. Now you'll need to pay back the
capital. So let's let's say that this is
AI don't know $1.2 billion project 20% of that, you're then
going to be talking $250 million that needs to be repaid from the
cash flow of the asset might take two years to to repay it if
I'm I'm being optimistic and generous, but.
Importantly, Havlet don't have to fund that.
They don't have to. Havlet don't have to fund right.
So you're talking about a company that's, you know,
literally gotten by on a shoestring.
And you rightly pointed out that I think management have done a
really good job in controlling costs.
Like people can call this a lifestyle company, but it's not
a lifestyle company that's going been going out there and
spending a lot of money. I think Chris has done really
well for the the budget that they've had.
I just, I just think maybe at times they could have been a bit
more market facing and kind of driven a lower cost of capital
for themselves and had the ability with more capital.
But what will be, will be that's in the past, but they've done
really well with the, with the budgets they've got.
They're now in a position where they're going to be fully funded
for that asset, don't have to put any dollars in themselves,
gets to a point where they're going to have 20% of it.
That's free carry, don't have to put in any capital.
And you're getting a 20% stake in what is originally going to
be probably a 40 to 50,000 tonne per annum project, maybe could
get upscale to an 80,000 tonne per annum project with a 20
million tonne per annum mil. I don't know.
But at the same time, in a small cap copper space, you know, as
well as I do, there aren't a huge amount of ways to play it
like we're playing develop because you know, we, we love
everything that Bill's doing. Maybe not so much the Woodlawn
ramp up today, but I think it's going to come good.
But there's not, there's not many ways to play copper, right.
And this is kind of almost to look through it a stand fire
type of asset, a non operated position in an asset that's
operated by Sand Fire in Australia.
So yeah, I still think at these prices, if the look through
before you even think about the 20% is $300 million for that 80%
stake. And then that 20% stake you'd
assume would get transacted close to MPV.
You know if you've got Japanese or Korean money looking to buy
into that project when it gets to an FID decision, I'd assume
it a transactor close to NPV. Now our MPV are the project
using gold prices close to where they are now and and long term
commodity prices in line with consensus like a copper price of
4:50 to 5:00, we get $1.5 billion Australian and 10%
whack. So that 200, so that 20% sorry
could be worth as much as $300 million in its own right, which
gets you to about a $600 million type of valuation.
Now, this is a small cap company that has always struggled for
capital and, you know, has got a, an interesting register, as
you said in the management team that I guess a lot of people in
the market don't necessarily bat.
So you've got to trade a discount to that $600 million.
But I was still seated today and I think I said it to you guys
the day of the deal. I thought the day after the,
the, or the day the deal had been announced, particularly
when it opened up at I think 3334 cents was cheaper than it
was the day before. Even I was up 30%.
I think it's a funny thing to say, but on a risk reward basis
when the asset is potentially now going to be operated by sand
fire with a clout that they have and and their ability to develop
projects as as we've seen with Mathiary, I I just think it's a
completely different company to what it was before.
So Kev, with, with all the work you did over over the years
looking at it, the the proposals you put together, what did you
actually think of the deal that that Sandfire and and the
company agreed to? I've had a couple of people ask
me this and I, yeah, I, I don't want to go too detailed as to
why I got asked this by someone in particular, but I actually
said to this person, I, I thought it was a really good
deal. I thought it was a really good
deal in the fact that Sand Fire have entered into a binding
situation. Whereas the Oz Minerals deal,
there was an option over the asset for one or two years.
He kind of was sitting half pregnant.
Whereas this, once the EGM gets voted on, assuming it hasn't
been an interlope bar, then it's binding, right?
So Sand Fire are obligated to give Havilah that that that
capital upfront. Yeah, you can still say there's
a question mark where they're going to take the other 80%, but
that puts Haveler in a very strong position at that point.
I would say that the the the fact that they've still been
able to retain some of the southern tenements 100% owned
like that was one of the sticking points with anyone
trying to approach the company for a full company takeover.
Is that the management team and and Bob genuinely believe in the
southern tenements. There is going to be a cavalry
look alike. Now I haven't seen all the data.
I, I, I can't confirm or deny whether that's going to be the
case, but like Bergscape for them stands as a really
interesting prospect. And, you know, they almost have
dreams that it could be bigger than Kakaru.
I think the fact that they're still able to retain a stake in
Muturu, which I haven't even mentioned when I was talking
about the $600 million in value they've potentially got at
Kakaru. Muturu for me, you know, 20
million tons plus, you know, one plus percent copper or some
cobalt and a little bit of gold I think stands as a really
interesting asset as well. And JX Advanced Metals from
Japan have been negotiating with them on that asset.
I think the exclusivity period has expired on that, but I still
think there's optionality for a deal to occur there and maybe
that could be $100 million of value in its own right.
We certainly see value 100 plus particularly thing come up with
a an infrastructure solution. So I actually think the deal
picks a lot of boxes in my mind. I would have loved to see a
higher price, but at the same time, you know, compared to the
Oz Minerals deal, you know, we can, we can argue how I've just
cut it that maybe there is $600 million worth of value here,
which you know, means that Bob and Chris did the right thing
in, in not kind of selling out the company for a cheaper price
or selling the asset at a cheaper price than what they
have. Because you know, if they if San
Fi can get this project to an FID decision.
And then if they did want to sell that 20% stake, which is
free carried and maybe you can get 200 million plus for it,
then yeah, maybe we can see five $600 million worth of value,
which with where the share price is trading.
Like I get it's a small cap. I get that there's been a
discount for this team and and everything associated with it,
but I don't know what the appropriate discount is.
I just think it's way too much at the moment, right.
Like, yeah, I mean. I think of the data trading the
day the trade was announced, it was $0.34 and the upfront
consideration alone was it's $0.30 per share on the on you
know, it's just it was a it's a table banger.
And now it's like like trading like 4340 ish 4344 cents per
share. And yeah, the C, the C through
even after tax you can you can be constructive on and.
But yeah, yeah, $150 million, right.
So, you know, you're literally paying for the upfront capital
and maybe mood row not even like you're paying for the upfront
capital, you're paying for the expiration that you're going to
spend and you're paying some of it TFs costs.
So yeah, like you've literally got a free option at their 20%
free carried holding. You've got a free option that
sand fire comes on, gives them another $105 million, which was
what's that is $0.22 I think. Yeah.
So like I, I still see kind of a dollar as being reasonable line
in the sand, right? And that's 350 million bucks at
this stage of where they're at. But maybe the market's waiting
for the EGM vote to go through. Because I know if you look back
at the the history of this company, there has been some
some funny situations with assets in the past where deals
have been voted back. But yeah, I mean, it's extremely
interesting where it's sitting today There's.
An EGM vote end of Jan and and if there's, if there, if there
were any other like interest in the asset, you've effectively
got a you've got to move before that EGM. 300% So like when I
said I like the deal, I think another aspect I like about the
deal is there's been question marks whether the process that
they've run has been as thorough as it could be and whether it's
create enough competitive tension.
I don't know the insurance and outs of that whole process
because it's you know, subject to confidentiality agreements.
But now we've got a very live option, right.
So if you are really interested in this asset and you want to
acquire it, you've got until the end of January.
And what will be will be, right as as a shareholder, like if no
one else bids for the asset and it comes the end of January,
I'll say then Sanfi won the auction and fair play to them.
It's still a really good price and the share price certainly
doesn't reflect what that price is.
But if someone else is interested, then we're gonna
find that out hopefully before the end of January.
And yeah, and and and we'll see what what will be.
One, one of the other interesting details here is that
the stock just doesn't trade that much.
The, the liquidity is pretty low and obviously you've got the
massive shareholders and, and a few others speaking for a good
few percent here and there, which all culminates in a good
few. But as always is the case on the
day of the deal, you see heightened volume.
But even on that day it wasn't massive.
It's, it's a few percent of the company and that's completely
died down. So to that end, if, if somebody
were to come in and, and try and buy a stake there, they're not
going to have an awful lot of luck without pushing the share
price up, in my mind at least. Do you see that the same way?
Yeah, I think that's right. And I think, yeah, what can I
say? I would suspect that maybe
parties might have tried to consider acquiring the whole
company and, and maybe that might have been a bit too hard.
Hence they've had to negotiate in this type of fashion.
Like if, if I was San file, I would have thought it'd just be
easier to, to try and acquire the whole business, right?
And I, I don't know if they approached him with that
proposal. I, I know other parties in the
past have done so and it's been harder because of like some of
the desires of and Chris and, and you know, they pretty much
don't want to see this asset go at almost any price, but
eventually they've got to realise the limits of their
capital and, and, and other shareholders desires.
So, yeah, I think that the right, if the right approach was
made, I think they'd have to entertain the consideration of
the whole company being acquired.
But I mean, if we can see $600 million worth of value in that
deal, like you're going to have to see a price a fair bit higher
than where it is today to at least entertain an offer.
Can we talk about Knox? Knock Knox to the thesis, Kev,
One that comes up a bit is, is is met?
What do you say to that critique?
I'm just going to say I'm, I'm not technical, I'm, I'm not a, a
Geo, I'm not a, I'm not a engineer or any, any stretch of
the imagination that the people that I have spoken to and, and I
have kind of, I wouldn't say what's the, what's the correct
word. I've certainly asked a lot of
people who've looked at this in detail, their opinions and
people that I trust, family members that have the expertise
and the technical know know how. And I'd say that a lot of the,
the commentary that I received back is that a lot of the, lot
of the mistakes that get made is that people just think you can
just blend the oxides and the sulfides at the same time, the
carbonates and the sulfides. And it just, that's probably
where you're going to get tripped up.
Like you, you probably need 2 separate processing circuits for
the oxides and, and for the sulfides.
And if you are to process them separately, it's my
understanding and, and all the, the work that has been done on
recoveries and even probably the work that BHP did that supports,
you know, some reasonable recoveries.
You're not talking high 90s, but you're talking 90% types of
recoveries comes from processing those in, in, in separate kind
of circuits. But yeah, I mean, a number of
people have mentioned it, but it's not a like the reason why
the asset is where it is. It's is, it's not as simple as
as it could be. You know, if it was an amazing
piece of geology and it was an A grade asset, it would have
already been like bought by someone.
I would say that we've heard plenty of other, I guess assets
that, you know, during certain markets that most people
question them, right. Like I think we've thrown out
different examples where people questioned Doug Ranger, people
questioned, you know, Capricorn's color window asset,
right? Like a slow grade, it's, you
know, tough ore body, whatever. But like in the right
environment and the right operators, you find solutions to
these types of things, right? There's plenty of examples
where, you know, in the right priced environment that these
assets work. You know, at gold prices of 1000
bucks an ounce and copper price of 3 bucks 50 today, maybe
Kakaru would be a bit more of a challenging asset.
But like with that oxide layer that they've got on top, there's
500,000 oz there that's in the pre strip.
But if you can get the right processing circuit, that can
create a pretty attractive income stream to help you do the
pre strip. That can help you get into the
sulfides that you know. Then hopefully you can process
at the right economics. The the do you get get any
comfort out of the fact that like, you know, sand fire under
under Brendan Harris has obviously been looking at a
bunch of different growth options.
This is the first first deal that they've, you know, publicly
come out with since since Brendan's been MMD there, you
wouldn't think that they they pay themselves upfront non
refundable component of of of one O 5 without having some
degree of comfort on on the met themselves, even if they
they're, you know, proven to be wrong over time, like they
themselves must have a view that they're constructive on on the
met to pay a non refundable one O 5, right?
Yeah, I mean, I get that everyone wants to have an
opinion, but sometimes I'm I'm almost surprised that like guys
on X who'll come out and and knock the project fail to
recognize the fact that Oz Minerals, BHP, Sandfire and
probably at least three or four other parties that maybe can't
name at the moment have gone and done the network and said, you
know, give them the thumbs up. And yet, you know, they've
looked at old feasibility studies and some of the data
that they've seen and, you know, from from old announcements and
going, oh, the Met doesn't work. And it's like, well, to your
point, yeah, Sandfire invented a non binding agreement, right?
And people say, Oh yeah, it's $105 million, it's an option.
They'll go, yeah. But this is what they're putting
their name to, as you said, like they've, they've looked at, I
don't know how many projects they've looked at, but quite a
number of projects. And Oz Minerals, I, I sat down
and they've literally looked at every single copper asset that
was available. And, and whether or not it was
just a bargaining chip for BHP, you're not going to enter that
type of agreement if you didn't believe in it and you hadn't
done the work. So, yeah, yeah, I agree.
Like there's, there's, there's enough credibility and behind
the names that have put their name to it to go, well, you
know, there's enough detail to show that it does work.
So, so you've, you know, you've made the, the opportunity pretty
clear to us. We've spoken about it a bunch,
Cav It's it's super kind of interesting.
I'm, I'm really curious to hear about how you think about
sizing, positioning in, in the name right now, because we've
spoken about it for so long. But the story has really changed
the the past couple weeks. And you've always been very
disciplined about how you think about sizing and, and the like.
But obviously we touched on the fact that we, we personally
bought more after the the deal came out.
How do you think about that? Yeah.
I mean, like we kind of think twos, fours, sixes in our in our
fund and and this is this sits within our smaller opportunities
fund rather than a big fund that at times when we were talking
about potentially helping them with a capital solution, we were
entertaining the idea of, of, of maybe entering into our our
larger fund. But within our smaller
opportunities funds. It was originally a kind of a 3%
position. Like when we got comfort that
maybe they were going to come along and and potentially accept
our proposal to kind of fund the the company.
Then with with the capital raise, then we're thinking of
potentially taking it higher because I could see the
potential on the day of the announcement, even though I was
only a 3% position. I just, we just thought it was
just too attractive an opportunity with the risk reward
having improved from the deal and potentially like at least a
dollar worth of value sitting there at you know, 30-3 cents
that we just had to upsize it. Now whether it stays in the
upsize state. So it's got, it's gone above a
4% position now, which is one of the larger positions in that
opportunities fund. But yeah, it's not, we haven't
bet the absolute farm on it. We're not taking a 10 to 20%
position because that's just not how we we position size at
Chester, but it is one of the larger positions just because we
say the risk, risk reward is extremely attractive.
Yeah, I like it. Kev.
Is there is there anything in the, in the narrative, in, in
the story or in the thesis that we that we kind of haven't
touched upon? I'd love for you to guys do a
deep dive on Bob Johnson and and some of the interesting kind of
history that he's had with map tech because it is a pretty
interesting story. I think the whole map kept story
and then I think there was some interesting kind of court cases
that might have evolved revolved around Bob and I'm not quite
sure where they all got to, but there was there was certainly
some late night reading that I did that was pretty interesting
on the matter. I'm not sure how much that has
impacted havless decision making positively or negatively, but
there's certainly some interesting features around him
and what else, what else around the story?
I mean, I, I just think that maybe we might see some other
interlopers, maybe. I mean, that data room has been
open in a long time. And, and you know, we were
personally approached by a few parties that were, were
interested in that asset. And the conversations we'd had
with other parties in Perth suggest that maybe there are
others that are extremely interested.
And I don't, you know how things, these things work.
When one person's interested, all of a sudden you've got other
people interested. You know, like I remember when I
was a single guy, as soon as you had one girl that was interested
in you, all of a sudden you get a few more other offers.
So yeah, mate, maybe there's going to be a couple of parties
that come out, but I mean, you know, we've got two months and
it'll be interesting over Christmas to see what unfolds.
You know, if not, if nothing else unfolds, then I'm pretty
happy with the way that Sanfi deal looks on on paper, right.
And and hopefully we'd see that de risk over time as as people
see them kind of I guess enter into that, that binding and you
get hopefully get a Sanfi share distributed to you as a, as a
HABLA shareholder or, or, or whatever it is and see how
things play out from there. Yeah, absolutely.
How the the company goes about allocating the the funds is is
the kind of next step to think through if if no interloper
emerges. Kev, it's always awesome to to
have you on the show to to chat through your ideas and your
thinking. So appreciate you coming on
again mate. I, I do like to say that I, I, I
don't usually like to peg myself to one stock, but I mean, I did
promise you guys during the Christmas cracker special that
like whenever something transpired with this company,
because I was a bit mysterious about it.
I don't like being too mysterious.
I'm usually pretty transparent with everything that I do.
But I did say that when something happened with this
company that had come on. So this was as, as I promised, I
didn't expect to honestly take November till it occurred.
I honestly thought it was going to be a couple of months away at
the time when we filmed it. But as you know, with all these
things, sometimes everything takes a little bit longer than
you hope. But let's see what happens.
I, I seriously think there might be another chapter to this
story, but there certainly will be.
But it's just whether or not there's another chapter in
between kind of the end of end of January in terms of another
bid. So fingers crossed and let's see
how we go. Fingers crossed mate, let's see
if the the next Christmas prediction is as good as this
one. Crossed for a for a special gift
from Santa this Christmas. I don't even mind if it comes in
January. Well.
Yeah, I don't know what I mean, Maybe maybe getting an M and a
specialist on to to figure out what's the best kind of time to
lob a bid. But I know some people that have
tried over Christmas when it's, it's hard work.
It's it's pretty, it's pretty inconvenient for some people.
But you know, it certainly puts pressure on other parties during
that time. So we'll see what happens.
Yeah. Yeah, yeah, it absolutely does
put pressure on. No, Appreciate, appreciate.
What's the next Havilah, Kev, you got anything else in the
works? Anything for us to study?
Up. Oh, I can.
I can recycle some of the old names that we've got.
I mean, like we still think there's a deal to be done on
Comet Ridge and I, I get what you're saying about the trim
through, but I, I seriously think there's still a deal to be
done there. I think, you know, 400 BCF worth
of gas that you know, is still unencumbered apart from one
small contract on it. I'm also really interested in
this Equus gas that's coming into the market in December.
I think that looks really interesting.
You know, it's almost 2 TCF worth of gas with 40 million
barrels of condensate that's coming on with a, oh, an EV of
maybe twenty $25 million, which I think might be a bit
mispriced. I think it's complexity with
that asset as well. But I think the price tag that's
coming on that is it's pretty attractive.
I still think there's a lot to come from, from developing bill
or just was without a Woodlawn. I guess I did kind of make a
joke about his, his ramp up, but I, I think that's back on track
now. I think I think the, the ramp up
is looking pretty good and I'm, I'm looking forward to the next
couple of quarters that they produce there.
Oh, what else? There's, there's quite a few.
I mean, Antifa, we're still waiting on some, some resolution
there maybe. So there's a few.
There is indeed, mate. I need to read up on there,
appreciate. Appreciate you.
Yeah, being being willing to Bang Bang the table on this.
One mate, there's there's one thing I'll I'll never stop doing
that's banging the table on on the on the stocks.
I know I should have, I should have done the big Ding Ding
Ding, but obviously you can tell I'm a shower, so.
Ding Ding Ding around. If that is not completely
obvious, just. Put the dinging gong through the
whole episode, all right? Just make sure that people
realize that this is a completely biased opinion.
Yeah, but. Like brought to you by biased
people. Yeah.
Like I'd love to, I'd love to hear some retort like because
when you see it on paper and you see it's binding and you see
like the deal that's been struck, I mean, obviously there
are retorters because people are selling the stock at 4243 cents.
But I just kind of think the risk water here is pretty
pretty. Pretty attractive, I think
putting your views out there is the best way to get the feedback
mate. So keen to hear what comes back
our way after. This I'm sure.
I'm sure I'll get some stuff. One way or another.
See how we go. Ding Ding Ding if it wasn't loud
and clear. There we go mate.
Fantastic to have Cav back on the show.
It's been far too long. I always love chatting with our
good man and all made possible thanks to our fantastic
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