Right eye money viters buddy trap.
Your screen here says it all for today.
Bloodbath mate, say bloodbath today there is a very few
companies with a little green square there, which tells me
it's a bad day the. Market.
It reminds me of that movie V for Vendetta where it's just all
black and white and then just red blood everywhere.
I can't say I ever watched that 10.
Mate, it's just, it's just that go, go Aurelia.
Yeah, up 10%. And this is just these
oscillated greens look pretty cool.
This is just the miners as well, right?
So you can picture a very similar graphic for the whole
ASX and most of world markets as well.
It's not not been a a great day for the old share market.
Yeah, I bet your stockbrokers wish they were like Trump and
they could just say something and move the market.
Right boys? What have we got?
We got Remilius Mount Magnet playing update today.
What have you got? Yeah.
I mean, I guess that's one of the, one of the stocks that is
most down today is Remilius. Yeah.
Another one that is most down is, is, is nickel mine.
So I'm going to talk about them and some potential royalty
changes on the way to to them and.
We're going to talk about Cobalt, the DRC and a bit of a
tie in with the LSE as well. Jeez, go love it.
It's all happening. Let's start in our patch,
though. Maddie Remelius.
Oh, you'd say like my patch considering I've got no idea
internationally so we'll I'll stick to.
Me, we can educate each other, mate.
So yeah, Remelius has said there, I think this graph says
down 14%. I think last time we checked
they were down about 16%. Obviously everything is down,
but they've outperformed the down.
So they released their new, it's hard to hard to win in mining,
isn't it? They're always being questioned
about mine life and now they've released a 17 year plan for
Mount Magnet and they've been hammered for it.
So they're probably like, oh, you can't win with this market.
What were the the the features that were most pronounced in in
the commentary and and your sort of analysis mate that.
Yeah, well, like you, you if you look at the it's all about
comparing these numbers to what they released in the previous
sort of long term plan for Mount Magnet.
So they're saying now 17 year period, 2.1 million oz.
The the big changes and the change that they hadn't
considered before, which has sort of changed pre production
and everything is the pit cut back at Erinitis.
So they've effectively committed to doing a massive bloody cut
back there, extending the life of that pit, delaying the
underground and avoiding sterilizing or so it's obviously
impacted them in the short term with the answer profile also
really blown out the pre production capital, but we'll
talk about that in detail. And yeah, so it's but there's a
lot of little gaps to fill and there's probably some read
through of what their intentions are going to be on possibly the
deal front. It's pretty gonna be pretty
obvious when I show you what their incentive will be.
So we'll go through it. It's bloody very, very
interesting bit of value wiped out.
So as I said, 680,000 oz pit cut back and there was a that's
replacing this 280,000 oz underground that they were going
to essentially earlier. So you look here upfront capital
of 15 mil, but pre production costs of 336 mil.
So effectively sign the pit cut back is 336 mil of cap like
CapEx. But the I guess the thing that I
talked about in the call which it it will become a bit of an
accounting thing with all in sustaining.
So they're they're classing that pit cut back if you scroll a bit
down at the cross section as pre production capital.
But it is going through low grade.
So it would normally be classed as an OpEx but there is lower
grade material that they will be mining and will be processing.
But it is classed as pre production.
So it's a bit of a bit of an accounting thing.
So I like that whole 3. It's essentially that 300 odd
mil of cut back is not just 0g per tonne.
Can you give us a a ballpark of what what sort of grey dirt
they're going through? Will it?
Well, yeah, if you look at the cross section here like it's you
know point the green bits are .3 to .5, yeah, yellow bits are
sort of half to 1. So it's sub 1g dirt and a lot
lower grade and there's different patches of it.
So it's how that'll all be handled on the all in sustaining
cost front. So it's not like complete waste.
But you know, the comments were, it's like look, we could have
gone underground earlier and we could have like sterilised, like
to think about the mine plan, you know, from sort of 27
onwards, 'cause you can see on here like FY20 7 on this current
mine plan, root drops from 200 to 136,000 oz for the annual oz
output for the group. So that's obviously when the,
the cutback and everything's gonna kick in.
So, but they've obviously said, right, if we do the cutback,
we're not gonna sterilise as much to in the long term.
And we're setting it up to be a, a 17 year plan for what they've
got at the moment. So it's, yeah, they're, they're,
they're taking a short term pain like, oh, essentially like over
a few years pain for the mount magnet hub for a longer term
view on getting the most out of the ore body, which is some
something you don't really see actually, like the, as always
said, the best between the client, the contractor and the
asset. It's hard to get 100%
utilisation out of more than one of them.
So what's best for the ore body ain't best for the share market
sometimes. So on a short term frame, So,
and they're also upgrading the mill.
So it's currently 2,000,000 tonne.
I'm pretty sure based on soft dirt, because it's very hard
dirt at mount magnet. You'll get all the bomb ball
index was historically it said 30.
That's saying at the moment it's about 20.
So that's like on the very hard scale.
So they're saying they're going to, they're going to add a
bigger crusher, a sag mill, bigger ball mill.
And so it'll effectively treat two and a half million tonne of
hard dirt all the way up to 3,000,000 tonne of soft dirt and
everything in between. So getting oxide material and
you can see how much the oxide material drops off following
that. Once I get deeper in the pit,
there's some big gaps of where they need some oxide dirt to
fill. So I think that's where the
appetite's gonna come. What do you?
Think in there, Maddie. Oh mate, take your pick around
the area essentially. Who Who knows, who knows?
We know they're pretty active on the deal front usually and I
think there's this is the base case of what they've got at the
moment. Doesn't discount what is around
the area. And we know when we say the
area, we know Remelius trucks dirt like so they're the area
can spend bloody 200 two 100K radius easily.
And they'll they'll track a dirt because the incremental value
they'll get out of increasing throughput from 2 1/2 to 2.8
with some oxide dirt that they can feed through will be where
the benefit will come. So who knows what they'll what
they'll look at. So yeah, it's the how do you how
do you predict a bloody 17 year mine plan?
You do it the best you can. You say like, oh, they're all in
sustaining cost spikes in FY20 9, but you just don't know
what's going to be in the portfolio then.
But they've taken AI like that. They've taken a long term view
of the ore body to set that up for long term.
They've got half a billion in cash.
You got 400 million in Spartan shares at at the moment.
What they do with Spartan shares?
Oh nice. Like I, I would think looking at
this, adding the Spartan dirt to be great because it lifts the
grade. But are they going to cough up
in whatever shape or form that amount of money to get the
Spartan dirt? Probably thinking not.
The easier win for them would be acquiring some oxide material
from somewhere, some easy wind pits to feed in and offset the
hardness of the mount, the Erinitus dirt.
So in the future, so do you remember?
Do you remember when they released the plan last time
around Mount Magnet it it actually came amidst the the
media speculation that they were going to do a deal with Corolla.
They were in exclusivity with Corolla.
Then they released their long term Mount Magnet mine plan and
at the time I thought their rationale for releasing it was,
yeah, it was actually related to, you know, just just just
some, some potential kind of, you know, deal deal strategy or
or requirement in some respects. So they're updating it now and
it's it's it's the market's sort of somewhat disappointed
relative to what it was before. But I wonder if there's, I
wonder if it's part of a, you know, a deal thematic that's
underway at the moment again with this company.
Yeah, yeah, who who knows? I'll just like could use I I
don't think they're going for Spartan to use.
Do you agree? Disagree.
What do you think? Ding, Ding, Ding, while we're on
it on, on Spartan. No, no, I, I don't think what I
think the market's just taken, you know, on board very heavily
today is that very near term production, that very immediate
term CapEx bill, you know that 300 + 1,000,000 and that all in
sustaining, you know, going up with to over 3000 bucks.
And I think it's that sort of short term mindset that the
market is purely fixated on. And to your point, Trev, and,
and what you said earlier as well, Maddie, it, it could very
well be something more in, in the plans.
You know, that's sort of my plan looks like it'll fit something
in quite neatly down the track. Just kind of remains to me
saying what that is and at what price that could potentially
come in. The war, yeah, I disagree with
you guys. I think, I think they're only
20% of Spartan like and yes, there's a scenario where it gets
too expensive to and you know, Spartan kind of have to go to
line, but Spartan on a relative basis has underperformed other
gold names last six months. Like you're going to move, you
know, you, you, you're going to, if you do want to move on them,
you want to convince the market that you're not going to move on
them and then they underperform and then you acquire them.
I think that's what I think that's what they're doing like.
Yeah, the biggest thing we'll go against them is Spartan resource
growth, I guess, because that'll help them perform.
So yeah, there's a bit of a bit of a tug of war going on there
which you think's going to happen.
Yeah, the the lens of them not pursuing Spartan isn't isn't you
know, I haven't arrived there from this mine plan that hasn't
changed the thinking massively. It's just a a sort of price and
dilution kind of piece. Yeah, I take your point on, on
the last sort of six months. But yeah, I mean, it's a, it's a
tough one to call. There's always so many moving
parts with these big M&A deals. And this would be, at this
point, essentially a merger rather than a takeover just
about, you know? Yeah, very much so.
And look, in addition to that mill expansion, which the
science is going to be about 80 million bucks, 5 for extra
water, tend to upgrade the power for it all.
Like looking to put in like a really up it to I think it's 32
MW hybrid power, solar battery, wind.
So Jesus Christ hasn't got that good.
Tim Taylor and CBA written all over it, lads.
Couldn't have, couldn't put it. Tim's probably already called.
Yeah, he's locked that one up. Yeah.
I think that is Remilius effectively talking to CBA in
that line saying, hey, can you just give us a call?
It's it's his bread and butter, right?
Oh mate, like if this is this is his wheelhouse bread and butter.
Mopping up the gravy off the plate.
Just stop standing. Bread and butter play for Timmy
Taylor and so very. I didn't.
I didn't appreciate how substantial cross boundary
energy are mate until having a beer with with Tim.
They do some big ticket power items mate.
Come from especially well years, would have probably seen a few
over in Africa in your trip. Mate, come on.
Cooler, Yeah. Enormous.
Just signed, just signed a big one there.
Oh mate, what more branding do you need?
How good's that? It's crazy.
I'll just get the copper as it comes out of the hole and Chuck
it in the power plant. It'd be bloody great.
Yeah. So that's where are we at?
So. Penny, you had some.
Oh yeah, there's always expiration potential, so and
that and that's probably what's not.
And they alluded to it on the call, like talking about, you
know, like break of day is positively reconciling at the
moment. Like God, I think the initial
open pit was coming out at 9 grams.
Still got the underground to come off that that they have
backed in. They've got drilling to the
north to do. They're like you look at the
tenement there, there's plenty of potential on that break a day
tenement like they've just hit, was it half a meter at 22 1/2
grams at the north of Penny. So there's, you know, potential
potential extensions there like just on on what they've got part
that's 50 meters past the end of the proposed development.
So might be a bit extra there and Simon Galaxy at mount
magnets. I like you don't even know you
don't know what they're going to get organically that they can
add to fill that gap in FY20 7 potentially.
You don't know what they're going to pick up for scrap or
cash for some potential oxide opportunities to both fill that
gap and lift the mil throughput from 2 1/2 to 2.7 if they can
blend some oxide with it when they're in all the hard stuff.
So yeah, that's pretty much where I think they're at.
So it's yeah, it's odd. They've given themselves mine
life, bro still then Rebecca Rose baked into this as well to
come on. I think it's FY20 7 when we're
going to see that. So that's so I'll get that
right. FY20 8.
Sorry. You feel that the market is
wanting that to to pick up the slack a little bit.
There's a bit more reliance on it.
Well, there there is on that on that chart.
Like that's the big contributor to their answer profile.
So I don't like God in terms of cash position.
Like, you know, they're still going to the cash they're going
to still make in the next in the with the penny break a day
should we hit together until penny runs out?
Like I think what the for Rebecca Rowe I think had pre
production of 200 and some 200 low 2 hundreds for the pre
production. So Chuck a bit of mail on it if
you need to. Their PFS was actually from the
streets at all. It was, you know, underwhelming.
But I've heard comments thought their costs that they actually
use for Rebecca Rowe were just a bit more realistic than some
studies use. So hence the low 20% IRR for it
though yeah, I think that's where they're at.
We'll see See what happens on the Remelius train.
I'd say. I'd love to see these.
I can with I think what is it, 60,000 BCM 6?
Sorry, 60 million BCMS. A waste to behold from Erinitus
for that cutback. If like a bloody MMS logos on
all those trucks, that'll make me happy.
Can you, can you think of extrapolating what they did at
my rate, like get into the ore early, like along to the scale
of 60 million BCMS? What that would mean for
Remilius's mind playing if MMS do the cutback quicker?
I'm connecting the dos mate and it's early a cash.
Flow unbelievable. So I just yeah, it's a no, it's
a no brainer for me. I'm pretty I'm pretty much
setting up the whole amount magnet with money in mind.
Sponsors today. Jeez.
Like mate it could make that production profile look sexy.
So you can already see it in the name.
MMS, Mount Magnet Superstars. People are mining Sims, Mount
magnet superstars. There's a lot of places you can
go with this one, but what I know is that when I need to mine
and move the dirt, I call MMS. And Trav, he pretty much every
weekend. Yeah, he's mining all the time.
Oh, I love it. Right up.
This is interesting. Cut the cobalt.
It's packing flavour. Yeah, I suppose this kind of be
called Cut Cobalt Unit Trust. They've gone with Cobalt
Holdings, but I think you could be on to something.
They matter. So we'll we'll get a bit of a
bit. I'm just going to leave that
there. We'll get a bit of a petition
going and maybe we'll get a name change happening, but.
Spot to cut. I'm going to talk about
everything going on in the, in the broader cobalt market and
then wrap up with the the cut piece of it, Maddie.
So no surprise to anyone, cobalt prices in the gutter and it has
been for for some time. I heard in inflation adjusted
terms, it's essentially at the the lowest price.
It really has been on on record. So that's, you know, centuries
sort of plus type of time frame. It's pretty, pretty bad and it's
led to some big decisions from from governments, namely the
DRC. Is the price in the in the
gutter just as a result of A the copper mine expansions in the
DRC and then B the, you know, nickel, nickel, cobalt kind of
lateral operations that rapidly got produced in Indonesia?
Yeah, more supply than demand at the end of the day, but demand
has grown. So it's just that supply has
grown so, so strongly. So we'll start with what's
happening in in the DIC. So in, in late Feb, the
government announced that they'd suspended cobalt exports for
four months. The DIC is the biggest producer.
They have about 75% market share of the world's supply.
So they're a massive, massive player to to the extent that not
many other countries are. When it comes to the various
commodities, the Hard Rock commodities out there, the ramp
up of mines like Seymox, Kisanfu was a big one. 10K from the room
as well is a big one. And then you've got the
expansions of all these other copper operations has flooded
the market. And to get a sense of the scale
so people kind of know that the rough tons we're talking about C
Mock, the biggest producer in the world produces 630,000 tons
of copper and 110,000 tons of cobalt.
That was the 2025 target, the midpoints.
And that's just across 2 operations.
The other key players are Glencore and Arg.
So that's Eurasia Resources Group, the the Kazaks the rest
of the world supplies. So roughly 25% is made-up of
bits and pieces all around the world.
You've got the Indonesian nickel mines moving from next to
nothing just a few years ago to about 10% of global supply.
That doubled in 2024 alone, just in one year.
Doubled again purely as a. Byproduct.
So it's, it's a byproduct in the, in the VRC assets as well.
I mean, they're, yeah, all those companies are hunting for the
copper, but the, the cobot's there.
Yeah, the the economics looked very, very good at say Kisanfu,
which is one of the heaviest cobalt to copper ratios in the
world. When, when Cobalt's it's sort of
50 thousand U.S. dollars a ton. Those economics look very
different when cobalt is down 7075%.
So they they, they alone kind of not many others were really
thinking so cobalt heavy, but 98% of cobalt is if you're, if
you're counting seem like in it 98 percent is by product supply.
So not many. Between nickel and Cobold in the
sheet, how Marin. Marin is still going.
Phenomenal, isn't it? Yeah, I don't think, I don't
think Marin Marin's moving the needle much on global copper
supply. But it's it's Australia's
biggest one. Go Australia.
Yeah, I'm not sure how profitable the operation is at
the moment, but it's it's still running as as far as we know.
So, yeah. And just to run out on on
demand, a lot of sort of forecasts were pointing to 20%
growth this year. That's very substantial.
You know, take any kind of forecast with a pinch of salt,
but that is substantial growth by by any kind of.
Measure demand goes up because the price came down.
You'd, you'd think, but you know, LFP has been the, the
chemistry winning outright, but that is a, a huge part of the
debate, right? How do you think about it?
If you're the DRC government? It's it's a balancing act
between not wanting to Jack up the price crazy high and
disincentivize OEMs, battery makers or car makers are
actually using the stuff as well.
I mean you got the Super alloy part of the market as well.
That's sort of 20 to 30% of the market, a bit less than that,
but 70% of the market is, is batteries.
So it's a, it's a balancing act. So the, I mean the cobalt price
did bounce on on the back of this.
You've got a few different exchanges measuring it in, in
Europe over the past couple weeks.
It's up about 25%. It's up in, in China as well.
Remains to be seen if the OEMs actually have the supply to last
them four months or if we're going to see a bit of a tick up
again as we get to the end of of that period.
And on the equity side of it, ERG isn't listed.
Glencore, it's kind of irrelevant, you know.
So Seamock's the only one we can really go off and they're up
about 15% actually since the end of February.
So they've had a tick up on the back of this too.
So what? What's the export being gonna
actually do? This is a, you know, kind of
open for interpretation, right? If you can think how this
impacts the market, Maddie. So we, we spoke a lot when BHB
were considering putting nickel waste into care and maintenance
and shutting it down at well over a year ago now.
And you know, you get into the realm of politics.
But at the end of the day, a government's ability to
manipulate a commodity and a smaller commodity than nickel.
This is cobalt in which it has a big stake.
You know, 75% is is pretty complicated, but you need to
take a long term view and I think that's the lens.
So what's going to happen over the next four months?
To start with the XDRC producers, the people in
Indonesia for instance, they're going to make a bit more money
and I've got Pretty Little doubt there will be some people in the
DRC making money out of this one way or another.
Well, I noticed the the price of hydroxide shut up because that's
coming from the the copper in the DRC.
But what you what comes out of Indonesia is MHP and where is
that prices that hadn't moved as much.
The Indonesian yeah, stuff, yeah, I didn't focus on that too
much. But I mean, let's kind of say
over four months what it kind of does because it's it's been a
bit complicated through actions that the Indonesians have
actually done, which you might, yeah, talk about soon as well.
But at the end of four months, right, you're going to have big
stockpiles from from all of these companies.
And this happened with C Mock in 2023.
There's a tax dispute with the DRC.
They built up, you know, nearly a year's worth of stockpiles and
then just washed them out through 24.
And that's part of the reason that the market came off.
There's, there's already massive stockpiles of, of cobalt
hydroxide. Like if the stockpiles aren't
currently with the miners and a lot of them, I mean, we, we were
in the DRC, we saw like all the mines we visited where they,
they're producing a cobalt byproduct.
It's just bags and bags and bags of cobalt hydroxide there.
And they're waiting for better prices before, before selling.
So we saw heaps of stockpiling happening at from the miners and
then talking to people at at, you know, CMOC or whatever,
they're selling it to the OEMs in China who are taking the
opportunity to stockpile themselves at very low prices.
So one way or another, there's a buildup of surplus of these bags
of cobalt hydroxide. And if it's not actually going
into an end product like it's an overhang on the market at the
end of the day. What's cobalt hydroxide look
like? Bags.
Bags of like a very dark coloured kind of powdered dust
and it unlike your lithium hydroxide and very long life as
long as it's in a moisture free environment.
So if it's if it's in a shed you can you can store it for ages
like. Happy days.
Those bags are those bags are like 1/3 cobalt.
They need a bit of work on them still to be done, but that's,
that's the product that's getting shipped from the DRC.
And to that point on stockpiles, the the Chinese state, I don't
know exactly in, in what form, but they were stockpiling over
six months ago, strategic reserves of cobalt.
We don't do that in the West, but that's a whole another kind
of topic. Longer term, if, if the DRC does
want to keep prices up, it's, it's pretty complicated, right?
Because so hypothetically they were able to, you're just going
to encourage people to go more down the LFP route, which
doesn't use cobalt or the various other bits of battery
technology or chemistry that are non cobalt based.
And you know, we've seen LFP dominance surge.
So in EV share, they're in the, the mid kind of 40s percentage
of all cars sold. And if you look specifically in
China, because they don't care as much about range and stuff,
we're talking about close to 70% relies on that chemistry.
And LFPS even gained market share in best in stationary
storage batteries, which a lot of people didn't think it would
for a while. They thought, you know,
basically on a, a sort of land space type discussion, you would
want to go with a denser chemistry because it wouldn't be
taking up and your real estate cost would be lower, these sorts
of things. But again, LFP is just becoming
dominant. So I'm very curious to see in
time what sort of market share the various chemistries have.
Nobody knows And it already looks every year it kind of
looks different. And it does seem LFP is winning
on all kind of regards and that's becoming the dominant
one. But this is a market that's seen
pretty significant changes from time to time.
So yeah, an open-ended one on on that front.
What's next mate? Like.
It's it's complicated at Travan. I think there's one more thing
we kind of have to to pace in here and it's the the
deteriorating, deteriorating situation in the Eastern DRC.
I don't don't talk too much about it, but again, heaps of
moving parts. But you know, suffice to say
it's not gone well for the DRC. It's a bit of a geopolitical
mess across the world really not, not just in that part of
the world. But the DRC urgently needs cash.
And it's probably not a complete coincidence that this has
happened now. And I've, I've got Pretty Little
doubt that, like I said before, that the DRC government one way
or another will try and profit off this somehow because they,
they need to kind of fund their efforts over there.
And I'm sure they're going to be looking at other type
discussions like we saw last week, potential conversations
with the US to try and tie up mineral deals like we saw with
Ukraine. Yeah, it's, it's a tough one.
There were rumors that they wanted to look for ex Chinese
support, which was very interesting because I think 2/3
of the cobalt producers and a lot of the miners in the country
are Chinese groups. Well, there they're certainly
majority non Western. You know, Glencore is really the
only one left there. So, yeah, very, very tough to
see where that goes on the specific cobalt kind of front.
Maybe they do an export quota. Maybe you're giving each company
a certain amount of cobalt that they can specifically export and
potentially to the point on the actual material that they are
producing, maybe they're forced them to go downstream like we
saw in Indonesia. Maybe they want more value add
in country. It's a kind of tough bargain to
kind of drive when you're not making any money on it, but it
remains the same Here we go on that one.
What about yellow cake 2.0 or brown cake 2.0 or dark dark
coloured cake? Too dark coloured cake.
This is, this is the interesting stuff, Maddie.
It's very interesting. Yeah, I found this fascinating.
So there's a group led by a guy called Jake Greenberg and they
want to list a cobalt holding company.
Like I said, at the top, Jake was part of the team that
founded Yellow Cake. Every uranium bull knows Yellow
Cake. They've got about £21.7 million
of uranium locked up in a, in a vault somewhere.
And he wants to repeat that recipe for cobalt.
And he's talking about this being out of loved.
He's talking about this, you know, he, he, he talks about in
the context of mean reversion being a moving kind of principle
in financial markets with cobalt being no exception.
So they're looking to raise £180 million and list in London in
May. So it's happening quite soon and
they've actually tied up a deal with Glencore, who reportedly
take a 10% stake in the company, as well as agreeing to sell
about US $200 million worth of cobalt to the company over a a
undefined long period of time. Yeah.
So effectively the same as what Yellow Cakes deal is.
Yellow Cake have the contract to purchase 100 million US of
uranium from Kazaam Prom every year.
So I assume they're going to structure a very similar thing
with Glencore. Would you check in, Maddie?
Jeez, you're not filling me with confidence, Copper.
With all those kind of thoughts in my mind, I kind of admire
that. The counter cyclical thinking
like I'd I'd have to do a lot more research but.
Well tipped in the fucking spot at the wrong time like your
soldered it went down bloody another friggin 50%.
Yeah, I mean, it's safe to say most people hate cobalt, right?
Like we've we've been saying it for for literally years now,
like battery makers looking to make batteries that don't have
cobalt because of all the the artisanal related challenges in
the DRC. You know, you can go from one
challenge to the next. So yeah, it's thinking outside
the box. It's thinking outside the box.
They're like, and usually, usually our industry is self
correcting, you know, lower prices and then you get a
contraction of of supply and then you and then all of a
sudden prices go higher again. But when 98% of your production
is by product, you don't have the same market forces in place
that constrict supply. If anything, supply is growing
because the world is demanding more or copper.
And as a result of that, yeah, you don't have the same mean
reversion as Jake would put it on on your side necessarily.
You've got to take that into account.
I'd I'd look at, if you look at the journey of yellow cake and
spat, probably pretty similar to this.
A lot of their pounds were purchased early on at lower
prices. So for 200 million, you're
getting a lot more cobalt. That's how they build the build
the size of the trust and yadda yadda.
And then sell the bloody thing. That's what you know about spat.
So it's it's a similar starting point of what when they probably
started the Sprott Physical Uranium Trust.
It takes tons out of the market. So to a, to a certain degree, it
helps their 'cause if they can do it, you know, but what degree
can you do that? And yeah, I just under score
what you just said there, Trev. It's a, it's a byproduct and
that adds a whole layer of complexity to this.
We haven't seen any supply response from what we've seen,
hardly any. I mean, they're stockpiling it
at mine sites, but limited in terms of minds being canned and
those sorts of things. Yeah.
So when's that or is it may, may watch this space, very
interesting, very interesting also.
So that 190,000,000 lbs. Sorry, in the flight that's
going to cover what they are going to buy off Glencore
effectively are there 200 US to 190,000,000 lbs with
roundabouts? Yeah, but they said long term,
so I'm not sure when those 200 would be paid.
Right up it's. It's light on details at this
point, but we'll see. Brought out Speaking of
something that makes cobalt as a bloody by product nickel.
If you check Nickel Industries and it's one of the companies
probably most, most punitively attacked for its market cap by
the by the gyrations today in the stock market, it is down in
today it was down about 19%. And this is a, this is like, you
know, before, before today's movement talking about a $3
billion market cap smashed down 19%.
So that's a, that's a whopping move for a company of that size.
And it was such a substantial intraday move that it triggered
a speeding ticket from, from the mighty ASX.
And it was the response to ASX's question that I think we have to
talk about because it kind of provided me to do some research.
Question 3 in the speeding ticket from ASX says, is there
any other explanation that the company may have for the recent
trading in the securities of the company to which Nickel
Industries pointed to? Firstly, there was a sale of
approximately 178 million shares by their shareholder called PT
Haram Energy in a block trade at about $0.69 per share.
And secondly, they point to, I'll quote this, the press is
widely reported that the Indonesian government has
released a proposal for public consultation that would increase
royalties for operators across multiple commodities, including
nickel. The current royalty rate on
nickel ore is 10%, whilst the proposed royalty range for
public consultation is 14 to 19%, depending on the prevailing
equal price at the time. Based on the information
released, the proposed royalty would be 14% of the current
nickel price. At this point in time, the
proposals have not been legislated.
However, should this change, the company will continue to fully
comply with Indonesia's laws. IS.
Is PT Haram energy Indonesian? It it is.
It's a yeah, it's a very interesting.
Coal company, Yeah. Nickel or that that wording.
What do you think? Well, I, I did a bunch of, of
research that and there's, there's varying kind of changes
to royalty regimes on all of the nickel products, including
nickel ores and metal nickel pig eye and MHP all, all of all of
the above. So is the conversation being had
that there'll be an increase in royalties on Matt, Pig Eye and
any any further processed metal? Yeah, I'll, I'll, I'll add some
context here. First, it was, it was Reuters
that led the Western media with the coverage of of this
potential royalty hike as I've highlighted here.
But the, the primary sources actually comes from Indonesia's
Ministry of Energy and Mineral Resources on the 8th of March.
So that was that was Saturday. So it was kind of fascinating
how nickel mines share price was largely unaffected all through
trade on Monday. And then Reuters story landed
kind of aftermarket Australian time, the clever shareholder
Haram, they block out their stock at $0.69 and when I last
checked the stock was about $0.63, so lower than they
blocked it out even though that the shareholder did a pretty
substantial discount to last. So breakdown this actual
government proposal that's been reported upon.
In a nutshell, Indonesia. They actually had elections last
year and as of October, the new president and administration was
sworn in. It sounds a bit abstract, but
the the the president who was sworn in, President Prabowo
probably saying that wrong, but his policies, they included a
lot of popular ideas such as free meals for school children
and pregnant women. And these kind of popular
policies are, you know, they, they resonate with the public.
But Indonesia's a huge country, right?
And there's over 200 million people.
So that's a lot of food. Especially pregnant women,
right? Too, I suppose the context of
this proposed royalty change is, is honestly like, think of the
budgetary implications of a new president's pretty substantial
popular spending agenda. You need more revenue to spend
more. So I've looked pretty hard to
find the, the actual kind of guidance put out from the, the
ministry itself in relation to these royalty changes.
But I, I failed in that endeavor.
I found pretty good secondary sources.
The articles that talk about this, even when you Google
Translate the Indonesian ones, they, they all source like
quotes from the director of minerals and coal at the
ministry by the name of our tree Win, win, win.
I know himself. So I think, I think there's
credibility to all of this. There's two regulations that are
suggested to be revised. 11 relates to the coal royalty
rates and the other one to, to the nickel product royalties
too. And like Nickel Industries says
in their response to ASX, that nickel ore royalty is proposed
to change from a fixed 10% to a range of 14 to 19% depending on
the, on the reference nickel price.
They, they, they referenced this HMA nickel price, you know, U.S.
dollars per ton. You can see that scale of, of
what the, the royalty would actually change to based on,
based on that, that rate sort of the, the higher the price, the
more you got to pay. And it doesn't stop at just
nickel or sadly lucky. You touched on JD, there's the
downstream is, is going to take a hit too.
So you've got royalty rates for ferro nickel and nickel, nickel
and pig iron are currently 2% and 5% respectively.
But this proposal would see them lift to a range of five to 7%
depending on the reference price.
And lastly, nickel Matt's windfall profit has been removed
under the new proposal with a fixed 2 to 3% royalty rate to be
revised to 4.5 to 6.5% depending on your reference rate.
To be clear, like these, these are, these are proposals at, at
this stage for public consultation as as as nickel
industry says. But the concerning thing for
investors is this is a proposal that has come from the new
government of the country. It's not, it's not like an
opposition party that is proposing something that has no
chance of kind of getting over the line in a legislative sense.
And, and also like this, the president of Indonesia, this is
the president of a country who was quoted last year describing
democracy as tiring, costly and messy and said there was room
for improvement. So make your own mind up on the
probability this proposal turns into legislation or not.
What is clear is equity markets are nervous in particular
investors in nickel industries. I I just pulled up the relative
share price movements of all the companies that produce a a
nickel product from from Indonesia that I could find and
check the relative sell off in in nickel industries versus the
other list of names I could I could find it, it leads to pack.
Substantially the one at the bottom.
Yeah, it is. It's pretty, pretty stark,
right? I think there's potentially a
few reasons for that. Yeah, substantial
underperformance, first, first peers.
They could also be oversold like you know, you've got to do your
own homework here. But if you look at the proposed
royalty changes, they punitively punish sales of nickel ores.
And if you, if you check nickel industries EBITDA for, you know,
full year 2024, USA 100 million comes from sales of nickel ore
mining. The other US 200 million comes
from their share of NPI and MHP produced from the downstream
processing. So there's, there's a fair whack
there on all fronts. And what probably hits them
again is you got to look at the balance sheet too.
So I got net debt of US 832,000,000 bucks.
And if you, if you thought of the status quo royalty regime,
they're like with that sort of net debt, no issues.
These are fantastic assets that are really low on the cost curve
like that, that amount of debts, no worries.
But the pros hike suddenly eats into a giant proportion of your,
your EBITDA and all of a sudden, you know that that gearing kind
of doesn't look as appropriate as it used to look under the
status quo. So I just thought I'd pose a
question to you guys like hearing this news, observing
this and the, the, the, the kind of out of nowhere implication
that hasn't stopped for us. What do you what do you think of
this? Got a couple thoughts.
Firstly, mining companies with single kind of assets with debt
are always risky and can often come from left field.
What hits you? You know, this isn't a single
asset company. They've got a lot of different
minds, but they're concentrated country risk.
So that's what I was referring to, a single jurisdiction
rather. And my other thought was trying
to tie it back to stuff I'd read about Indonesian nickel last
year. They obviously wanted to
dominate supply of nickel that was a, you know, pretty much
written in legislation there. But even these prices were
levels they weren't happy with. They wanted prices to be higher
so the government makes more. Revenue via via royalties and
taxes and all these kind of things.
So just trying to think kind of creatively, are they trying to
disincentivize potentially more? I know that's thinking like one
or two steps kind of ahead, but this would certainly be a big
disincentive. Like you guys remember the the
reaction to the coal royalties in Queensland and just how
disgusted BHB, Glencore and every other miner in the state
was. You know, companies don't like
this for a reason. You know, you want stability to
guide your mind, plans to rate the rewards for the CapEx you've
sunk into the ground a long time ago and the the reaction would
be pretty, pretty heated. Even even if they are Chinese
companies or whatever, you know, they're not going to, they're
not going to like this one bit. What?
Do you recommend? It's like, it's like Indonesia,
Nichols just, and the government, they're all just
fighting between themselves because they've gained control.
Like they're just, yeah, it's a lot.
They've caused the price. Well, they obviously have caused
the price themselves to be low because they wanted the market
control. And it's just, yeah, it's, it's
a weird concept to think of. I don't know, it's all happening
in one country. I don't know if there's like a
unified voice or opinion of Indonesia.
I mean, we're talking about changing government over this
period of time. And I, I, I, this is not just
going to apply to nickel, it's going to apply to coal in a, in
a different capacity to all of the other minerals they produce
in unspecified kind of, yeah, quantified royalty changes so
far and the other commodities. It's not just nickel, but I hate
seeing this. Like if you just take, so one of
one of Nickel Industries operations is, is the Oracle
nickel project, which nickel industries they have an 80%
interest in. And all of the flood of
investment that you saw go into Indonesia, a huge amount of that
was concentrated in what is called Morawali Industrial Park.
And the reason Morawali Industrial Park attracted
phenomenal sums of, of foreign capital is because like I, I,
the, the Indonesian government wanted to focus on the value add
in the downstream, but they also provided the necessary tax
breaks to warrant the huge upfront capital investment that
was required to develop and build out that industry.
You don't just get industry, decide to put a, put a smelter
there because you're, you're all of a sudden, you know, banning
the export you've got, you've got to create the conditions
that allow for it. So with Oracle nickel project,
for example, concessions, these these concessions include a 100%
corporate income tax reduction for 10 years from the
commencement of commercial production, followed by a 50%
reduction for the next two years.
And I also got a 10 year exemption from withholding and
tax collection by third parties on sale proceeds.
So those that's the environment that you know, let's you kind of
go to your board and and warrant the the huge amount to make a
very long term kind of capital investment because you're
thinking, you're thinking about an asset 30 year mine life
discount that back. It all works out if we get these
tax breaks and all of a sudden the royalty gets lifted.
So who gives a who gives a shit about your corporate tax break
because you've got no tax because you don't have any net
profit anymore. Like.
Is that is that a hell of a? Have they provided similar
concessions to other? There were similar ones, the
companies, there were inconsistencies by project, but
there were that they were same ballpark.
Yeah, yeah, yeah. It was one of a few.
Five different government. Industrial.
The same government. Same government?
Yeah, well, oh, sorry, you mean that?
When when they provided the tax breaks compared to now
potentially lifting the royalties.
I'm not sure on the differences in what the the previous
administration, administration kind of stand for, but.
It is a different government, though.
It's a different different. Government.
The joys of different governments.
Yeah, yeah. And yeah, this, this is.
And when you hear about the way that the majors are talking
about investing in, in Argentina at the moment, it's because that
that framework, the Riggy framework, actually provides
absolute certainty over a / a long period that is required to
amortize the huge amount of investment that you're embarking
on. If you imagine just like putting
hundreds of millions or billions of dollars into a project in
Indonesia and you get these tax breaks, happy days, and then all
of a sudden the royalty's up so you don't have any profit
anymore, like massive rug pool. But if you have certainty in a
regulatory framework for a period of time that you know
your downside is protected too, that actually lets you make the
infrastructure like investment that's required.
There is no, in my view, absolute certainty in, in
mining, you're building a project in someone else's
country. You can get as comfortable as
you want. And I think Riggy has done a
great job to, to get people to that level.
But you're building something in Argentina.
And when Malays out out of government, things could change.
You know, I hope they don't and they probably won't, but
there's, there's always that, that risk.
We seen changes across the world in almost in almost every
country. You know, it's that is part of
the risk of investing in mining, unfortunately.
Do you think nickel sulfide developers and X producers would
look at this as a positive? Yeah, For them, yeah.
They'd be thinking this is the sort of potential Indonesian
catalyst that could change the landscape.
These are the the cracks that start to emerge.
Commodities are cyclical, you know, and for, for the varying
factors in like this case, the government wanting a bigger
piece of the pie. That's nothing new.
Nothing new under the sun there, right?
Yeah. And it's a, it's a incrementally
huge piece of the pie that they're wanting.
I mean. It is the pie.
Yeah. It's.
Fascinating. Really, really interesting.
That's a good, that was a good one.
We'll see. We'll see where it goes and
whether that does in in due course, become legislation.
Yeah, well, well, very good lads.
Get your tickets to Aussie Man. Yeah.
And it's 100 bucks. That's not gonna go up by 15%
unexpectedly. It's just 100 bucks off some
other contractors that will buy Chuck a random royalty on you
MMS grounded see if it ground sports CR insurance kadrill a
transparent invoice. No chance of a bloody royalty WA
water balls sweet quattro project engineer across boundary
energy Urdu money. More information contained in
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not take into account the objectives, financial situation
or needs of any particular person.
Before making any investment decision, you should consult
with your financial advisor and consider how appropriate the
advice is to your objectives, financial situation and needs.