Friday money miners. Thursdays, Friday in our world
it is. Why not bloody?
What have we got today? We've got 'cause Adam Prom full
year financial results where years are going into a bit of a
hedging spectacular. Absolutely.
Why? Why not?
Where it? Becomes becomes super topical
when people close out their hedges and when the commodity
price runs hard. Doesn't it matter?
It does, and when they close it out with shares, Shawn Russo is
going to be so proud that he's like LED us to the water and we
can do hedging episodes without him.
He's gonna, he's like. Proud, proud dad moment.
What else we got mate? We've got mate all.
Rounder grounds we've got. Gossip.
There is gossip flying everywhere about bloody M and A
and mostly gold stuff. At the moment I'm just gonna
unleash all my gossip. Why not?
It might be true, so let's do it mate.
I'm approaching a freaking awesome week in Adelaide.
Oh bloody you are next, next next week right?
Underground operators buddy. 100 bucks off your tickets.
Make sure you grab them before the conference.
'Cause it's not having. It after it links in the show
notes and I've officially extended my Adelaide Bender.
Have you? I'm doing, I'm doing underground
operators and then I'm hanging around for Thursday, the
resource rise and stars gather round.
Oh. Gather round.
Quite a pertinent name 'cause it is the AFL gather round.
So mate, that's on the Thursday at the convention centre and
mate, just look at this fundies footy and fine wine.
It's. Probably not horrible, doesn't
it? But the make.
The fundies and fine wine. I'm gonna absolutely love that.
So bloody. Yeah, mate, Grab.
You're really taking one for the team, Maddie.
Oh mate. Happy to help.
Koshy's gonna be there. Koshy.
Me, me and Koshy bloody. I don't know, I don't think I'm
speaking, but I might. I might just go up and start
hijacking Koshy segments. So I love it, right?
Get your bloody, get your tickets to that layer was in the
director's special. I'll hopefully remember to Chuck
that in the show notes. But bloody mate, it's all
happening. I can't wait.
I'm going to be busted. Up.
Go away. Jesus Christ, right?
All righty, Maddie, we've done prom.
We've taken it away. There's a bit more bloody, Yeah,
there's a bit of a bit of the the uranium spot price has gone
up a dollar and it's all green on screen.
For the uranium. I think someone there was
probably, well there's 11 carry trade, put it up a dollar, so
there you go. There's some optimism everywhere
we're. Foolish again, and a couple of
interesting comments out of Casadam Prom's full year
results. So yeah, the old what do we got?
I'll bring up the old watch list on screen boss up 10% bloody.
Where's Paladin? They're up a couple next Gen.
back up four or five. So there's a bit of yeah,
they've Oh no, change their changes everyday spot price back
up to 6450 a pound US. So now for 'cause Adam Prom's
results, what do we got? So I hate financials, are there?
So I just don't speak the language, but I'll do me best
revenue revenue. So they've the the some of the
whole thing that I will say that the all the talk a year and a
bit ago was around the risk of the sulfuric acid thing for
because Adam prom and like these downward guidance revisions and
like the risk that they're just not going to be able to hit
their targets and it's going to send whirlwinds.
But like to their credit, they it had they've delivered like
they did revise the guidance down, but then revised it back
up and they hit that guidance. So it actually like what the
whole thesis that was coming about didn't didn't really
happen looking looking back on it.
So now, so if you look at their revenue and they remember like
uranium prices going up a bit last year, it's come back down,
but from the previous year it's going up.
So it's like group revenue was up 26%, EBIT attributable
EBITDAR up 23% and cash flow up 19%.
So and they're obviously siding the higher production cost for
the uranium produced like for inflationary pressure, higher
cost for purchased uranium which is which saw their cost of sales
up 39%, so. Explain that quickly, Maddie,
given they're the the the producer.
They're, well, they've got to my understand they produce it, then
sell the pounds to the JVS. So you're selling it to them at
A at a higher price. So that's gotcha.
Yeah, that little shimmy works. Think.
Yeah. So that they, they sold at an
average realized processor at 6950.
Yeah, right. And I think the average uranium
price last year was in it's down there average weekly spot price
last year was 8628. There's obviously still some a
lot of you know, contracts with Russia, China and the like.
What, you know, booting off scores first two years has gone
to Russia. So yeah, now they exceeded their
revised guidance. So if you remember there in so
January 2024, there was sort of two revisions.
They reduced their 24 guidance to it was 25.3000 tonnes.
So I tell you tonnes of uranium time that times that by 2.6 to
get the actual U3O8. They dropped that from 25300
down to 21750 and that was all around the challenges of
sulphuric acid availability and construction delays at the newly
developed projects. Then in August last year they
then increased it back up to 22 1/2 to 23 1/2 thousand tonne AU.
So and they, you know attribute that better expected operational
performance which which led to that.
So and they actually hit 23, 270.
So sorry they didn't exceed it. They just got pretty much at the
at the top end. So as I said, they're actually
like, you know, delivered on it across all their operations on a
on 100% basis. And just a refresher for those
who aren't aware, why is sulfuric acid and availability
of it important for producing uranium?
So, so because they're all in situ recovery operations, like
the sulfuric acid is one of the main components needed to, you
know, flush, flush the paleo channel to leach the uranium.
OK. As part of that process.
Yeah. And and the biggest, the bigger
industry that gets preference for sulphuric acid in Kazakhstan
is the agricultural industry. So I think uranium then comes
second side and there's they're in the process of building
sulphuric acid plant or a couple there at the moment.
But I don't think they're scheduled for a lot.
There's been delays. I don't think the schedule's
sort of 2728. So that's it's that.
Period. Competing sort of uses for it,
yeah. Sort of, yeah.
And then obviously around the whole Russia, Ukraine thing,
supply chain logistic issues like you couple all that
together. But it seems like they're it's
getting like they're producing, they're hitting the target.
So it must be subsiding bit the interesting bit is the group
inventory that fell a further 13%.
So they're I guess they've got I think their group inventory is
6334 thousand tonne of you. So I'll be out.
I think it's the one that the one that references the cap
inventory of finished goods, which is 5400, which is about
14,000,000 lbs. So they're, you know, they're
guiding to produce 65,000,000 lbs and they've only got
14,000,000 lbs of inventory and that's at a decade low.
So, and they did come in at the end here that they will consider
purchasing from the spot market to begin lifting inventories
again. So it's that that's sort of gone
towards the the bulls thesis that if the inventories are that
low, there's them coupled with all the utilities will at some
point have to really enter the market to give that give that
catalyst they're all talking about.
So that yeah, that that is historical decade lies there.
So their, their costs have obviously gone up all in
sustaining costs has gone up nearly 30% up to 2765 US pound
and their CapEx also rose to rose 58%.
And then their guidance that they've put out.
So they it already CapEx already rose 58% to 317,000.
I think that's what is it. K What's the currency called?
Kazak. Kazak. 10 guy, 10 guy, 10 guy
isn't. It so that comes out at a bit
over 600 million US, yeah. So and then that's that's risen
again in their garden. So they've reiterated their
production volume guidance of 25 to 26, half thousand tonne of
you, so about £65 million. But their CapEx has gone up to
about 400 midpoint of 400,010 K400 billion, 10K10 guy or 10K
with AJ10 guy. There we go bloody currency
experts here. So and a lot of that you can see
a lot. So there's a lot of CapEx going
towards booting off score that's there.
That's the big humdinger that's in the JV with Russia thing.
It's about what is it going to about £16 million or something
6000 tonne a year. So a lot of CapEx going towards
that. They also mentioned the other
one, the Catco JV, that's the one with the Rano and the
Altaric JV. So, but the, I guess the
inference that some of the commentators are saying that
with a lot of CapEx going to burden off score, they're trying
to and and reiterating guidance, they're trying to really maybe
put everything into that to pull that forward.
That's pull as much of that forward as possible and get to
the 6000 tonne output as quick as I can.
So what's that that sorry, it's £14.4 million.
So yeah, that's I think that's where a lot of the attentions
go. And they said they're going to
drop the guidance for JV in car because they did have the pause.
That's the one with Kamiko. They did have the pause for that
earlier in the year, but it has already started.
So yeah, it's all all booting off score, which is expected,
but the the news also coming out yesterday and this was it's not
like flashing everywhere, but I looked at it from a couple of
sources. Quakes quakes on blue sky said
it quakes has got a parody account back on Twitter now that
some blows some like just post quake shit on Twitter that he's
posting on blue sky. So, but it's saying that because
Adam prom there's some potential government legislation,
potential legislation coming in where for any expansion of these
uranium JVS or future projects that cassatomprom will take 90%
share in that joint venture. So oh wow, a lot of these are,
you know, like for instance, the one with like Catco, I think
it's 51% Urano for Urano, 49% cassatomprom.
So pretty much if they there, I think, I think that CATCO one
goes to their sub soil use agreement goes to 2038.
I think Kamiko Zinko JV expires in 2045.
So it's not it's they're ages away.
So they're safe to them. But if they wanted to expand
that or. Beyond that?
Point new JV for another area because Adam probably will take
90% of that JV. So that that's some pretty,
yeah, could be some, it's pretty early news, but I think that's
going to be pretty influential news for, you know, because Adam
Prom's control of the Kazakhstan stuff, I don't know how that'll
work with Russia and everything. It's probably a bit different
relationships than us old folk in the West.
But yeah, so that's going to definitely keep me eye on that.
So that's that's about it. They're producing uranium.
Go uranium. Well, have you got any queries,
JD? Not so much queries mate, but I,
I had also seen to sort of go in addition with what you said at
the end there about how the, the Kazaks are viewing investment
in, in their country. And they'd sort of teed up this
big $2.6 billion package last night broader.
We're not just talking about uranium here, but minerals
investment. And the slant of it was to to
align it with products that the US want, which is a bit odd to
the grand. I haven't, I haven't gone kind
of deep in it, but it was interesting to see them aligning
with a a potentially more western side.
And but that potentially that was just the the journal who
wrote the articles kind of take of it.
But that's one to to dive a bit deeper on I reckon.
Very much so. Do you?
Who's the bloody Gerard James equivalent in Kazakhstan that
drills out these paleo channels? Kazakhs.
Who's Kazakhstan? Water boars.
I don't think he can be. I don't think he can be matched
anywhere in the world. No, no, but WA water boars, the
mud Rotary experts, the best bloody drillers in Australia,
like like they're, you know, they've conquered water boars,
uranium, paleo channels is the next thing and I'll keep hopping
on and about it, but it will happen mate.
What are they mate? 6 high capacity water well rigs,
2 road trains. Cart cart around all their own
shit. Self-sufficient camps.
Merger opportunity. Sufficient grounded camps for WA
water ball size. Love it, right?
How good's that they? Can drill for water or they can
drill for uranium, whatever needs mud Rotary.
The experts give them a buzz. Love it.
Good energy, awesome. Capricorn closing out the, I
wouldn't say the infamous hedge book, but it was being kicked
down the road a bit. It was coming, coming up to
close another year and a bit, wasn't it?
Well, after they kicked a couple more kicked down the road.
But anyway, it's closed out. It's all good.
Requiring a block. Traded the shares already and
she's good to go. Take us through.
Yeah, spin the yarn. Yeah, so, So what they closed
out was 55 odd 1000 oz Maddie. And the the reason it's super,
super interesting is that they they did it with stock.
So I think that extra detail makes it really worth chatting
about. And we've, we've noticed, I
think we've chucked in the director special here and there,
they've done the odd sort of deal to wrap up tenements that
are contiguous with Karla Winder and, and Matt Gibson here and
there, paid a million or two in, in stock here and there.
But obviously this is of a much, much larger magnitude.
And I thought it was kind of worthy of a discussion.
So to, to start with, it's not new for, for miners, for gold
miners to, to close out hedge books with a equity raise will
flash up on the screen here you can see Barrick, they, they did
a kind of well known famous, so maybe infamous is the right word
for this one raise in 2009, they raised $3 billion and 1.9 of
that went toward close net hedges.
So it's a, it's a bit of an old trick, but to relate it to
Capricorn and to talk about what they've done, we'll go back to
August 2019 to start. And this is when they were
financing Kalawinda. I'll show a, a screenshot here
from December 2019. The hedges had already been in
place from from August, December is when they kind of got the,
the debt over the line with Macquarie.
And as is customary, you've got to have those hedges in place.
So standard 200,000 oz for those listening on audio is what they
put in place at the time at 2250 bucks.
Now obviously at the time that was a, that was a kind of decent
price. So The thing is they didn't
deliver into these hedges as was originally planned.
The operation got up and running super smoothly as you'd expect
with the management team there. There was barely a a hiccup as
they coasted through to that sort of plus 100,000 oz per
annum run rate. I'll just just a quick Google
the price. Aussie Price Gold on 18th of
December 2019 was 18110 per oz. Yeah.
So they had locked those hedges in in kind of mid 2019.
So already they were looking quite good.
But as we kind of say and as you noted in the in the opening
Matty, they didn't deliver into them.
So just a random example here from June 2022, you can see that
they rolled forward 30,000 ounces of hedges from the
second-half of 2022 calendar year to the first half of 2026.
Now those ones had that same delivery price 22150 Aussie.
So again, you can see on the same announcement kind of
interestingly that they they've done sort of small deals with
with stock, but they here and there kept rolling out those
hedges, kept pushing them back and selling gold into the spot
market. Now in June 2023, they did the
first of these blocks where they closed out hedges.
So all up they've closed out a bit over 150,000 ounces in kind
of three blocks of roughly 50,000.
The first one was in June 23, then in June 24 and then you've
got this one from the other day. So in 2023, they did, it cost
them on the day $37 million. In 2024, they did it again.
That was closing out the hedges for the next roughly 18 sort of
months. That cost them $70 million on
the day. That was also we've buying a few
puts to sort of manage that downside risk.
So the 70 million accounts for both, but the majority of that
is just closing out your hedges. Both occasions are paid for that
with cash, which is obviously not what they've done today.
So to to run everyone through the announcement from the most
recent one from just the other day, they've agreed with
Macquarie to close out the the remaining hedge book 55,000 oz
at Aussie 2300 so. Which is a bit less than half
the current Spot gold price. It's amazing, isn't it?
Yeah, it it sure is. Interestingly, they've purchased
puts to only account for half of the previously hedged oz.
So if you look back at the other two times the purchase puts to
account for the total amount of the hedges they closed out.
So that's a kind of interesting little detail.
And those those puts are sort of in 5000 oz blocks over the next
few quarters running out until kind of end of 26.
And they're for four and a half, 1000 bucks an ounce.
They are so a bit below where we are today on that one.
Again, that's just the the right to sell.
You don't have the obligation for those that are not so much
into the finance side of things, that just manages your downside.
If the gold price does fall below it, you can just sell at
that price. If it doesn't, you've paid a
small premium for the right to sell there.
And that's just that's money you've lost.
But you've got the upside of enjoying the gold price.
Why it's kind of higher. The transaction the other day
that cost him 147,000,000 bucks. So that's the hedges, that's
buying the puts and the transaction costs.
And the vast majority of that is for the hedges.
So 132 million is the back of the envelope number I calculated
for that. And to fund this $140 million
capital raise essentially is 7 bucks 90 and the remainder paid
in cash. And exactly like you said,
Maddie, just look at the chart here, you can see the volume.
They normally trade 1 to 2 million shares a day and on the
19th of March 22 million shares go through.
So Macquarie's slaughtered them already, you'd imagine.
Yeah, yeah, that is definite. Yes, it, it, God, it looks, it
just looks like it's, it's been like just all planned out.
It's like they've obviously avoided rising capital at low,
low prices. Yes, the hedge book was there.
They've had to use cash, but they've just continually had
that. That that multiple on them like
the what would you say the good earnings per share and now their
share price is that bloody high. They just close it out with
minimal dilution. It's.
Yeah, they, they talk about this, they talk about this
strategy of closing out the hedges and they say that's led
to 36,000,000 bucks in revenue enhancements.
So that's, that's only from the point where you decide to close
them out and then you look forward and you see what you
would have had to sell it at versus what what you've actually
kind of got. You're analysing where the gold
price went from there. It's not comparing it with what
would have happened had you just delivered into those hedges
originally. And you know, you can, I mean
hindsight's 2020, but you can you make you can make an
argument that's $100 million plus decision that they kept
pushing the hedges down the road, but.
But did they? $5,000,000 a 100 million not in,
not in cash. So yeah.
But did they did not delivering into them mean that they made
more cash, they had a better, a better multiple and their share
price got higher? And like, it's sort of might
have been, you know, part of the journey to get to today.
There's 2 two sides really. Yeah, I mean, after the fact,
you, you can't, you can't say they've been in, they've been in
great financial health. The markets traded them at A at
a significant premium to most of the other names.
So it, it, it's super interesting.
And you, you kind of think about the two decisions like closing
out the hedges and paying with script.
But they're two sides of the same coin, aren't they?
You can't think of them separately because they wouldn't
choose to close out the hedges today if they weren't paying
with script. I mean, maybe they would.
I don't think they would. And you can, you can dice it any
way you like, right? You can say on the one hand,
you're going to be able to participate in the rising gold
price, you're going to do better.
That has been the case the last two times they did it.
Or on the other side, you could say they're paying with script,
they're using their stock. They must think it's kind of
richly valued. And like here, here's where I've
kind of come to it, come to it. So management teams like this,
they will use their paper when they are trading in the market
at the high end, you know, relative to the intrinsic value.
And in the opposite scenario you try and do a buy back or
something along that kind of wavelength and to tie in the
commodity price with it. We've all seen gold just go on
an absolute tear. It's gone nearly vertical in the
in the past year or so. And commodities don't tend to do
that for too long. And it's not to say the gold
price won't be higher in two or three years time, but CMM, they
have far outpaced what the gold price has done.
They've nearly doubled since mid last year.
And this is a sort of big company and aside from the the
margin expansion they're going to get from that, there's no big
changes at Karla window yet. They're going to do an
expansion. Obviously Mount Gibson, if
anything's been held up a little bit in November, they already
did a capital raise $200 million so that they would fund Mount
Gibson with new issued shares rather than with debt.
They could have debt funded it, but now they've got 350 million
plus bucks in cash and bullying, they can do it that way.
And if you just look back to like June last year, they've got
a a price to cash flow multiple of about 10 times, that's closer
to 20 times today. And APAP NAV that's gone from
about .7 times to about one time in that same period.
So their decision today just tells me a huge amount about
what the company thinks about their value.
And you know, that could be the the value of the the industry
more broadly and just how quickly it's come on in the past
few months and. What's it?
So? What's their market cap now, JD?
God, I want to say 3.3. Wow.
Yeah. So it's this.
Is a bloody let me, let's just bloody check.
We'll check this live. Three 3.4 yeah, Aussie.
So, yeah, I mean we're talking about 4% dilution.
Yeah, yeah, and it's and and look at it, everyone's like
great decision now your full upside.
It's just that overhang gone and you've done it bloody.
You're the best valued stock on the market.
So yeah, it'll as you said, they might the gold keeps.
Could it could it be interpreted another way?
Like if they're like, well, I suppose they could have used
cash or debt to do it. If they if they're bullish on
gold price and they they want the full value of it, you would
think you'd more be more inclined to use cash or to do
this transaction, wouldn't you think?
I think in simple terms, yeah. Because if the gold price just
runs and runs and runs, then your margin goes up.
If you tried at the same multiple, your stock is even
higher than where it is today. So I think that's the kind of
simple way to look at it. And it's like, look, it's one of
those the there's not many of them.
Like I think rail had the same thing at Saracen, like Buddy
Bill was probably the same at Northern Star on the rise like,
and Capricorn's the same example.
Like it's you can you can point to OK, right.
Are they doing this because Carla Winder's going to get
deeper. There's going to be more strip
ratio, higher strip ratio. There's potential risk for, you
know, Mount Gibson delays if on permitting and if like you can
point to all them, but you're just these people.
They've become self fulfilling prophecies, these premium
management teams and these stocks.
So you can you can go, oh, is this the high?
And you start going against them, but people just keep
buying them and it just keeps fulfilling itself.
So that's why it is just near impossible to bet against these
companies once they've got that reputation.
Yeah, it's it's fascinating, right.
Like at at some point it's got to be hard to to live up to
right. They've they've done such a good
job. You go back to to what when we
started the the chat 2019 and hardly, hardly put a foot wrong
really. Like you can everyone can make
their own view up on on the hedge book and delivering into
it, but it it really hasn't affected them in in a massive
way. Like it's they just, they've
just kept on delivering and in, in an environment where gold is
up, like you said, Maddie from late 2019, what is it like 2 1/2
times? It's it's pretty incredible.
Yeah, I like, I feel, I feel the same pressure trying to be like,
funny every day. Like it's just like the weight
of the audience on me. Like I know you feel.
Like. I know you feel Clarky.
You're going through the same. Swear on you mate.
Oh nice, just you can't have a down day.
And all this talk about hedging, Maddie, does it remind?
You I'm not saying it. I'm not saying it.
No, I'm not linking it again, no.
Are you linking like this like gold like gold producers to CRE
insurance because they insure heaps of gold?
Maybe maybe that's it that of the of the IT was a layup for
the the Sean Rousseau hedging CRE insurance.
But I'm not saying it. I'm not saying it, but like.
We can talk about CRE regardless, hey?
Well, like just to think all the freaking bloody world class gold
mining operations around the world that they are the broker
for to ensure they are protected and whether that's from bloody
anything we might you could have hedge impact protection mate.
They are the absolute insurance broking experts for the global
mining industry. Gold's one of them, Carl Bloody
any other metal, like any energy they've.
Got that new orange office as well in western NSW too.
It would have wonder if it's painted orange as well.
Just it's just like to welcome ourselves to the town.
We're going to paint our orange office orange.
Go say our insurance. Love your bloody.
Love your bloody, get yourself insured.
Love. It right, Jay, So you've gone a
bit deeper into, have you? Yeah.
Oh, a little bit, yeah. Yeah, no.
So all the all. The you're looking at me like
wrong part, Matthew. No, no, absolutely right part
no. So all the the chat with the the
Capricorns news out the other day sort of got me a bit
inspired guys just to look at, well, what is the status of all
the other sort of Aussie gold producers, you know, hedge
books. So I went had a look through all
the quarterlies out from last quarter 31st December from
pretty much any Aussie gold producer that you know, 100,000
oz plus production profile. So 13 companies all up and to my
surprise not as many of them as a thought are hedged at the
moment or if they are, it's a pretty, it's pretty small
relative to their production profile over the next few years.
And by the way, when I was, when I'm talking about hedging here,
I mean companies with gold forwards sort of hedges, not
necessarily those with options hedging, which oh.
Not 0 cost collars and stuff, no right.
Yeah, so I'll get my Ding Dings out the way as well.
There's Vault, Genesis, and Remilius.
I'll just go. Do you want me to?
Do you want me to go get lunch while you do that?
Go get yourself a barn mate. So who's who's hedged at the
minute? So there's I'll go for some sort
of biggest hedge book to to smallest.
We've got Northern Star about 1.7 million oz at an average
price of 3242. There's all Aussie dollar gold
prices as well. This is out till the middle of
2028, so on average the the hedging's about 1/4 of their
annual production over the next few years.
As as Stewie said in the OR studio, Simon said in the
quarterly call when they asked about hedging, they're like,
look, hedging never works in a rising gold price environment.
It's pretty obvious it's. Fair comment.
And then Next up you've got vaults.
So they've got about 209,000 oz at an average price of 2841 out
till the end of next year. So they've got the second lowest
average price of of the lot. It's worth around 30% of their
FY20 six production, but then it drops off quite a lot, yeah.
And that'll come in, come in, that'll come in from the Red 5
debt. Yeah.
I think that's a yeah sort of legacy from that.
Then you've got Bellevue, they've got about 196,000 oz at
2756 out till the end of 27. So that's sort of the most
onerous of the lot as far as the lowest average price out of this
group, but also sort of as a percentage of their production
or sort of annual production. So on average, the hedging
represents, you know, roughly 1/4 of annual production over
the next few years. Then you've got Remilius just
shy of 100,000 oz at 3183 out to the end of next year, it's about
30% of next year's production. FY20 6 then drops right off.
Yeah. And I think they said in the
Spartan deal, they haven't secured any more.
Sorry, part of the mount magnet expansion plan.
They haven't secured any more Ford contracts, so it looks like
they're trying to unhedge themselves.
Unwind that and then you've lastly you've got Evolution and
and Genesis who have both got pretty, pretty small amounts
relative to their production profiles, 75,000 oz at 3230 for
Evolution and 13 1/2 thousand oz at 3684 for Genesis.
OK, so who isn't hedged JC, Who's Oh no one WAFF because
they say the first line of everything unhedged gold
producer. They didn't form part of my
deal, but they did come to mind because they always make like to
make it very clear that they're unhedged.
West Gold isn't hedged. Regis Gold Rd. as of recently.
Capricorn Catalyst Orabanda and Pantoro.
MMM. I think well, one year probably
that has a bit smaller. I think Perseus, they're a bit
they've. Got yeah.
So they I looked at just the Aussies, but yes, they do have,
they do have some hedging as well.
Yep. OK, what's the what's the
thoughts on it all Jay say? So I, I had a look at also the
average realised gold price that all these 13 producers took away
last quarter sort of averaged about 3900 bucks an ounce for
the December quarter. Now mind you the, the at the
start of the December quarter, gold was at 3800 bucks an ounce,
finished at 4240. But between then and you know,
we haven't even quite finished the March quarter just yet.
And we're, you know, I did say we ticked over 4800 bucks.
An ounce well that and and it's so but it's funny looking at how
the percentages are working now like you know, rose, you know,
in that 10 percent 3800 and 4240, but you know ten 1010% on
4240 you're up near 4700. So like the the increases by
percentage now having such a bloody material impact on
absolutely profit like it's huge.
It is huge. And then, you know, in any
event, you know, we should certainly expect to say a a
decent jump in that average realised gold price for
producers this quarter, you know, even the ones that are
hedged. So you know, obviously the ones
that are unhedged get, you know, the full full whack of that, you
know that full exposure to the gold price increasing.
But even the hedged ones sort of get a bit of a double whammy
obviously to a lesser extent compared to the ones who are
unhedged. So I just had a look at like a
couple of the hedge books for example of some of these guys.
So you typically say that, you know, as they deliver into these
hedge books, the gold price on the hedged answers is typically
like a little bit better, a little bit higher each quarter
or each half. Or you know, perhaps the number
of answers they've got to that a hedge that they've got to
deliver into sort of coming down progressively or perhaps a
combination of both. So you know, you're seeing them
get either a better price for those hedged answers and or you
know, more answers that are exposed to the spot price rather
than the hedge price or you know, perhaps both.
So you know, look at even at Northern Stars when we'll flash
up an example, sort of the amount of hedged answers sort
of, you know, per annum or per that half sort of increases a
little bit and then it starts to fall right off.
But you can see the gold price is sort of you know from around
3:30 increasing to 313233 etcetera over that period of
time. Similarly for Volt, you know,
sort of you can say that the percentage number there on on
the screen sort of represents what their exposure is to, to
Spot gold. You can see that sort of comes
right down. But also like the the price of
those hedges sort of gets a little bit better each period as
well. But separately, going back to
what we we sort of mentioned at the start is this sort of seems
to be a trend to companies and these are those that are sort of
with traditional hedges in place or unhedged entering into option
hedging. So like these collars and put
options as a sort of form of you know, like protection or
insurance as opposed to traditional hedging.
So like JD mentioned earlier, you know, you sort of can
maintain full exposure to higher gold prices, but you're
minimising your downside on those sort of number of answers
that are subject to those options.
So, you know, a few companies that do have option hedging in
place include Bellevue, Capricorn, Genesis, Orbanda,
Pantora. So how do these actually work?
You know, you basically have the and JD touched it all early.
You know you have the option or the right rather than the
obligation to exercise those options depending on the gold
price at the time and then you deliver those answers at that
price. So rather than locking yourself
in hedging this many answers at this price which you have to
deliver into irrespective of the gold price at the time,
obviously it costs money to put those options in place, but
you've got that sort of flexibility and and downside
protection. I think it's like, it's like
health insurance. Yeah, they're paying a premium,
but they choose to go to the doctor whenever they want.
That is a very good analogy. Yeah, yeah.
Much simpler than I could have thought of, yeah.
But yeah, it is in, in, you know, that's a really, you know,
simple and easy way to think about it.
Yeah. Don't worry if you don't worry
about BJ. So yeah.
If you want to be a bit cynical, do you think some of these
companies are just saying, on the one hand they're unhedged,
but they're managing that downside on the other hand?
Yeah, I do. I do think about that because it
is I guess it is sort of still a form of hedging, but it's
because it's, it's more that right, not the obligation that
sort and not that sort of traditional sort of hedging
people typically have in their minds that sort of run around
with these, you know, UN unhedged sort of.
Yeah. And I, I, I'm, I'm, yeah, the
dollar fan of the, the dollar. Yeah, the dollar value, but that
you pay for this premium compared to what you could be
out of the money on on your hedge book is well multi
magnitudes different, yeah. It's capped.
Yeah, Yeah. Yeah, no, that's right.
So I mean like the classic example, even when if if we use
today's 1. So with, with Capricorn, you
know, they've had these put options at four and a half,
$1000 an ounce. So that means, you know, if I'm,
you know, today's gold price is 4800 bucks an ounce roughly.
I'm not going to use the put option because of the the Spot
gold price is great. I'll make you know, let's roll
with that. But if suddenly gold was $4000
an ounce, well, I'd like the the right to sell some of my gold at
4 1/2 thousand oz four and a half, $1000 an ounce via my put
option and and exercising that option.
So just as as a as a worked example from from yesterday's
one. So you, you dug into Bellevue as
well and they're at that kind of phase where they had to Chuck it
in while they got got the debt to finance the project build.
What did you kind of come away thinking from from Bellevue?
Oh, well, they like they're getting talk.
It's, it's the, the hot topic at the moment is, is Bellevue
coming up to this half? And like as you said, the, the
amount of, you know, 35% of their production guidance if
they hit it is, is hedged AT28O2.
So like the, yeah, there's just a lot of a lot of chat about
going into this quarter and this half and what's going to go on
beyond that. And you know, a lot of it is
probably a function of this, not all of it.
But like the if they didn't have this hedge book, for instance,
like they would just be in such a being different cash position,
they'll be able to get out of the whole all a bit easier.
But that's the position they're in.
Like you look at their their back weighted guidance that they
said for revise their guidance. They said it's, you know, going
to be a strong second-half. They've but it's even supposed
to be a strong back end quarter. Like if they I think they're I
think their breakevens about low 30,000 oz this quarter and lot.
So if it's going to be another soft quarter, 30 odd, that means
I'll bring up a rough chart here.
They need, you know, high, high 50 odd 1000 ounces in that
quarter four to meet their revised guidance.
So it's and then on the back of that lot, what what happens from
there is like right, are they if they only just get it or they
miss it, like what is the market going to be confident that they
can then get towards this 250,000 oz growth profile at 1.6
million tonne per annum or like, you know, is that going to be
possibly wound back too because it was a bit too ambitious.
It's there's a lot going on, but they're.
You you don't know which way they're going to go in terms of
are they going to look to acquire something to potentially
help with tons of answers and take the pressure off that
single asset or people looking at them at the moment?
Like there's there's narratives and support for other argument.
As I've always said, like they I'll, I'll bring up the map of
where they are. Like this is sort of limited,
probably geographical options for them that will probably make
sense. Like if they're going to have a
swing at something to maybe feed their mill or like there's not
really apes in the area unless there's bloody gold rot on a
frigging cosmos or something like that.
But nothing, nothing near term like like Vivian's down the road
like that's in gorilla now, but they got to drill that out and
like that's that's not something that they could easily pick up
like if they had a big swing to trans like, you know, further
transform the company. Lot lot Thunder box is an
interesting one, which is 70 odd K's way, 7080 K's way down the
road. Like that's northern stars
highest cost producing asset. It's got a six million ton mill
and it's like, you know, imagine if but that that'll be a pretty
big bloody transaction for Bellevue to try and get that
into their portfolio, turn their mill off and send all their dirt
down to a six million ton Miller Thunder box.
But it's right it could be the other way like but off I
wouldn't have met like you God, you never say never but you
wouldn't imagine Northern star would be looking for another
transaction in the midst of a transaction now with the Gray
but it like it look it could make sense if they come under
pressure and they picked him up and send all that dirt Thunder
box like Agnew Agnew's closer gold fields operation.
But we've seen how inactive they've been in any Australian M
and I. So I wouldn't imagine that
unless they want to divest it and Bellevue picked that up, but
it could go either way, who knows?
I yeah, I don't. It's going to be a fascinating
couple of quarters. Yeah, and I guess there's. 1.
The the next sort of couple of the sort of the important ones
to watch and and hopefully they can hit those revised targets.
Yeah, God, if they, they, they, they, they need, they need
someone else's dirt or another operation or something just to
take the focus off this single asset operation that's taken a
bit of effort to get up to the required runway that they run,
right, That they anticipated for numerous.
I assume there's numerous factors all coinciding to to
that. So oh, it's just well, we'll,
we'll wait and see. Bloody around the grounds.
What's going on? Oh, I mean race yesterday, the
whole ride she's been she's paused for we don't know how
long. We don't know how long.
No, I I would imagine it, it can't be too long.
I mean, you know, you've got you've got work safe WA there.
This is the 6th truck that is that is flipped, which is
obviously pretty concerning and they would have looked at every
single one, but they spoke about hauling on on the sort of side
Rd. there. They like you're not getting any
serious tons on that at all. So.
Yeah, I think that it was just the back trailers that flipped.
I I think I saw not the actual cabin it was the trailers that
went. Yeah, that's right.
Yeah. Yeah, but it just like it
obviously looks because the whole thing with the the volume
is, you know, trucks that need to be gone both ways flat out.
And there's the whether the the ultimate goal.
I think we were talking about it before JD about like getting to
that autonomous stage where you can.
Everything's a lot more precise, but that's still far away and
like these. Yeah, it's like the and you and
you can't like put like passing bays in and have them just go on
one way to keep give a bit more room because I think you were
saying it takes so long to bloody speed and back up because
of the payload on it. Yeah, that just it, it just does
not work when you need to have trucks running, you know
crossing every less than 5 minutes.
And these are big, big trucks. They don't they don't slow down
and speed up quickly by any stretch of the imagination.
Like you said, Maddie's super tight Rd. as well.
So autonomous could be easier for that.
But I mean, Ellison said that's late 26.
That's if things go well. They need, they need every
single dollar they can get in the door now.
And I think this what's happened yesterday just highlights how
how kind of binary the outcome is here.
This whole Rd. needs to work. Otherwise the, the company's in
in serious trouble as we've sort of touched on in the past.
And I don't think things like autonomous vehicles are going to
bridge that gap in the in the meantime, you know, the, the
road needs to work first and then maybe they can do
autonomous vehicles down the road, you know, in 27.
But whether the road works or not is something we're going to
find out much before that. No, it's, it's getting so much.
I think you got the the big funds.
Yeah, there's a lot of articles about the, you know, the long
opportunity. I think it was Angus Aiken was
in there. So like in the papers and
everything. So they're like there's coming
from both sides as it's a leverage play at the moment, to
be honest. Like it's actually rebounded to
where it was before, before this news.
But there's obviously a lot of big wigs that aren't betting
against them either during these these times, the depressed times
of the share price. So it's up.
So that's maybe one to follow. The If the road works and iron
ore ticks up, this thing will fly.
And yeah, I don't think we need to outline what the downside
case is again. Yeah, very much still.
A Ding Ding on that one this way.
Oh God, you Josie tight buddy. Catalysts.
They've getting rid of Henty. Yeah.
It looks like. Kaiser, Kaiser Rook.
Yeah, they got they got the what is it the I-1 mine?
Yeah, I one mine in Victoria one of.
The I was in Melbourne, yeah. Yeah, all, all old school deep
as anything air leg and show. So that's that's a big, big
change for Kaiser, obviously. But I like first first thing
rating it. I think it's, I think what is
it? 15 Miller shares, 15 Miller Cash
roundabouts. Yeah, 30 bucks for for Catalyst
and I think Kaiser were doing a 15.
No, sorry, a $25 million raise. Yeah.
And I've commented on it before like whether just like Henty
wasn't like Platonics there, that's their flagship, that's
where all the focus is. But having that smaller
operation, yes, it probably producing some bit of cash flow.
But just having the the management and time required to
go run that operation in a separate state and put focus on
that when you can potentially now not have to worry about it
at all. All the focus is on Platonic.
You would think like you got less, less boots on ground that
you're paying for, like you probably optimise the cost of
the business a bit better. You're not flying over there to
bloody look at it and where you could be spending time to figure
out how do we get the most answers and lower the cost at
Platonic so. Great decision.
Hey, yeah, great. Decision, I think that's that's
the whole management time and focus thing is, is it's not
something that you can sort of easily quantify, but I think
it's so underrated in, you know, deals like this, right?
MMM. I don't think.
I think it's probably probably had the decision a while ago.
It's just finding who was gonna buy it.
Yeah, yeah, 30 bucks is a good result, I thought.
Yeah mate gold price, how good is it?
What else? Oh Jesus, there's bloody gossip
going around like mate, what have you got after BMO?
They reckon BMO lot the talk of like the bullishness about
potential M and I was very hot and over there.
I thought around all the bomos invite only waiting for mine.
Gold M and A yeah, Gold M&A, to be clear.
Gold and copper, yeah, bloody more in there.
So. And there was Agnica Eagle
people spotted in Kalgoorlie last week.
And there's a, there's a bloody word on the decline that, you
know, potentially there's a big bank on behalf of Agnico looking
at Northern Star like things like that.
Well, I'm sure they've had a bloody look before.
So I like Agnic. Yeah, be there was, we've always
talked about Agnico. Are they going to do a big deal
over here and get a, get a foothold in Australia outside of
what they've got at Fosterville, which has had a tie die already.
So right. I reckon with the whole the grey
Northern Star and Gold Rd. the sort of the passenger on that,
it just makes Gold Rd. look interesting in terms of if
someone could interrupt that deal by taking Gold Road and if
they wanted exposure to Northern Star, that gives them a 4% on
the end of it after that merger goes through.
So and then but then you hear bloody potentially Gold Road and
Regis might be timing up to put a bid in for Ravenswood as AJV.
That was another one bloody going around.
Oh mate, go Perth so. Well, just just on the Agnico
one mate, really interesting to look at the performance of
Agnico versus the other massive, massive gold miners.
So Newmont and Barrick Agnico have way outperformed because
they've delivered the cash flow. So they've they've more than
doubled since beginning 24 and you know Barrick and Newmont are
nowhere near that kind of level. So that's puts them in a very
strong position as in terms of market cap, second biggest going
now. God, Can you imagine if that if
that happened, the shit the the bankers would be licking their
lips this the assets that were coming out the arse end of that
in Australia, Because I'm not sure what Agni goes.
If they just look at like, you know, the big 2027 million tonne
operation at the Super pit and then you know, I pretend I don't
know how they look at Hemi like the big large scale long life
operations and the other stuff that's a bit fickly and needs a
bit bit more capital put into it to keep it going.
Like whether all that'll come out the arse end, If yeah, who
knows, who knows, I don't. You put it best mate.
The bankers will be licking aliens.
Ah God yes, how do I don't? Know what the American version
of 6011 is, but I'm sure they're having a great time.
What would it be? Yeah.
What is the Cotteslaw equivalent in America?
Probably the Hamptons. The Hamptons?
About about 9210. The Hamptons.
Oh, very good. You heard any Goths?
Oh, not, not to your level mate. And I think Agnico is Canadian
by the way. So if that changes that, I'm not
sure where the the 6011 is in Toronto, but I'm sure the team
is from there. Oh no, no, the 60 bankers 6011
like where the the deal with the deal makers.
Geez, if you're a Canadian banker, you'd be you'd be trying
to get your sharp overs in before the the New York bankers
do, wouldn't? You Oh, come on, RBC, pull your
finger out. Yeah.
Shout out Benny Nelson. Bloody right.
OK, thanks. All the bloody partners.
God, we've got bloody deals flying everywhere.
Underground operators 100 bucks off blinking the shanags, the G
RX conference bloody 190 bucks off that.
Like get your tickets to gather round in Adelaide Just going
just going do business development and you probably see
some of these mobs, some of those as well.
Mineral mining services, ground at CMB ground sport CR
insurance, Cadrel WA water balls, sweet Quattro project
engineer and they're definitely at underground operators.
So sweet cross boundary energy. What are you who to?
Wrote Peter. Wrote Guys.
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