Australia's Power Grid Is About to Break (Matt Fist)

Summary

Today’s episode is with the great Matthew Fist, portfolio manager at Firetrail Investments, where he focuses on Aussie small-cap …

Transcript

Nothing excites me more than when I ring up an analyst or something and I've done a couple days of work on a commodity or a company and they say to me, "No one's called me about that sock in years." [laughter] You're the only guy on the buy side who's looking at this sector or I just love that. Sort of tells you where you are in the hype cycle. >> JD, you and [music] I just got back from um from a brief trip to Melbourne and it was absolutely freezing. Undeniably, utterly freezing. But other than that, it was insightful because we got to speak with some some wonderful uh wonderful insightful individuals in our resources sector. >> We sure did. First and foremost, Matthew Fist of Fire Trail. So, this should be a great conversation. I'm sure the money miners will get a heap out of it. Fisty, as you'll hear in the conversation, is just back from the McQuary conference speaking to a whole host of different companies. So, he's got a technical background in the industry. He he covers a whole lot more than just the resources space, but we focus with what we know and what we love, the resources names, and there's no shortage of things to talk about. So, we'll cut to our conversation with Matthew Fist. We're here with the Genesis Bull Fire Trails. Matt Fist, thank you for joining us, mate. We've got um yeah, we're very excited for this hour chat. You've been on the podcast a couple a couple times in the past, and there's been no shortage of things to talk about, and today is no different. We're hot on the heels of a big deal in the gold space. So, why not kick it off with that one? What's your thoughts on the Vault Regis deal? >> Yeah, certainly certainly very topical. Uh many conversations about that over the past few days uh with with shareholders and uh investment bankers. I I don't mind the deal. Um but in mining, I prefer to see deals or any any any sector for that matter prefer to see deals with synergies because that's really where the value is created. And I think when you have to get to page 16 of the slide deck to find the word synergy. Um, and >> there's no map there. Thankfully, [laughter] >> there's no map. No, that's true. >> They're not trying to say just >> Yeah. >> Yeah. Uh, yeah. I mean, the tax synergies are well and good, but um, you know, physical synergies are better. Um, and yeah, so yeah, I can see the merits of it, but also I think there's there's probably uh better deals that could have been done. Um, we were just chatting obviously before we we started recording about some of the conversations that I've had. I've had a couple of Vault shareholders uh reach out to me over the past 48 hours and and sort of um yeah, express some of their views and I think potentially uh they were looking forward to having a bit of Genesis script uh and and it may look like that they're not going to get that anymore. So, >> because it makes more sense for Genesis to build their own mill, >> right? >> I think there's definitely >> basis. There's definitely more industrial logic for Genesis and and the King of the Hills asset to get together for sure. >> But the problem is the rest of the portfolio, >> right? >> And so >> it's not King of the Hills that's the issue like the the the reserves like 5 years out. >> Uh I don't I don't know. I haven't spoken directly to the Genesis guys about it and they probably wouldn't tell me the truth. [laughter] But, you know, there was a lot of value in in the vault share price for uh the non- king of the hill assets and they probably don't really fit in the Genesis portfolio. And so, if you were looking to structure something else, I logically think that would be um a bit of a sticking point. You know, where do you put that asset? Sort of like a a stub company. Um, yeah, >> it's um, yeah, it's a remarkable one because we we the genesis of our party was talking about the battlefield, you know, we were really holding out and hoping for an eventual marriage of Vault and uh, and Genesis, but I I'm with you. I think the likelihood that's probably on the lower side now, like, you know, I don't think I don't think Genesis is going to come. Um, and yeah, I mean, the messaging is probably that they're preoccupied because the scheme with with Magnetic is still ongoing. But yeah, >> but >> you would have thought that if that was a realistic option on the table, then it would have been pursued. >> I I'd imagine so. Yeah. But I mean, all these things come down to timing ratios at a certain point in time, personalities. So, um, yeah, we we'll wait and see what happens, but I'm not holding my breath for for an Interloper to come. >> Are you still outrageously bullish on Genesis? [laughter] >> Uh, I am. I am. Yeah, I was uh I was pretty surprised at the timing of the the Lady Julie transaction or the magnetic transaction. Uh but I think that is a good example of proper synergies in a mining deal right where you're you acquire an asset and the uh the pit is constrained on one tenement boundary um because you own the other side of the tenement and you can logically then make a bigger pit get more ounces and create more value. I mean they're the sort of deals that we love to see uh in mining and I think ra uh Matt Nixon and the team there now have a very good track record of doing those sort of deals. Um and so yeah I think that's great. um you look at where they're going and the share share price has been a bit soft lately relative to sector but we're very very confident in the outlook won't surprise you but uh they control now three of the top six undeveloped open pit WA gold projects and in this gold price environment uh you know sort of rises or boats I think and people forget about quality and when you look at the Genesis portfolio the quality of the assets that they're going to be bringing into that over the next 3 to four years we're really confident that's going to drive a lot of per share value for for shareholders and I'm pretty excited about that and and uh can't wait to stick around for it. >> So So when you think about something like Tower Hill, given that we can look back a couple years ago from when they've started to really beat the drum on it, how do you think they've fared on on the timeline? >> I think they've been pretty good. Yeah. Um I was uh having a chat to Matt Nixon at the McCory conference a couple of days ago um at dinner and yeah he um intimated to me that it's been pretty a laborious process to get that rail agreement negotiated but they've done a lot of hard work there now um got that done and um as far as I I know they're still planning for first in FY28 if not sooner >> um so you know that that's a fantastic asset um and yeah we can't wait to start to see the the impact that it has on the portfolio. I mean, the only reason it hasn't been mined cuz it's so high grade and and the strip ratio is so good is because there was the rail line there. Um, so it had to be removed and unfortunately that had to go through a bit of a process to get it done, but it's done now. It's all onwards and upwards and I'm excited to see the quality of that asset come through and then what that means for not only the production, but I think the big thing people miss is what it means for the cost profile when you can mine at 1.8 or 1.6, I think it is, um, from an open pit with a decent strip ratio right next to a mill. That's That's pretty exciting. >> Remember the AGM? He said, "Where's the effect? You're not supposed to have a favorite child, but Tower Hill is mine." [laughter] >> So, >> yeah. Well, it's definitely not Australia. >> Yeah. Yeah. Yeah. The um the the conference you're you're fresh from. The McCory uh McCquory conference, big event. All the fund managers go there in Sydney several days. Some of the Yeah. best access you get to >> to management, buy like big takeaways from your time there, Fisty. Yeah, it was it was a hectic uh 3 days. I just uh had had a 6-h hour Sydney to Melbourne flight as well. So, um fresh off that. So, I'm feeling uh feeling pretty worn out, but it it's always an amazing conference and I probably only spend about 20% of my time on mining. Um I'm a portfolio manager for the whole fund. So I spent most of my time actually seeing uh yeah a lot of other companies but I mean the key takeaway from the the the overall conference and I think the implications for resources sector are pretty profound uh was that there's just an explosion in terms of data center demand happening in Australia at the moment being driven by artificial intelligence and that's it's just got so many implications across uh commodities and the economy just I mean just in the space of two weeks and actually at the conference there was gigawatt of uh new capacity signings in Australia um for the data center sector and just to sort of wrap some numbers around that the current sector at the moment is 1.5 gawatt so there's what you know an almost doubling of demand based on what we know what we know today by 2030 um [clears throat] and and that's just the beginning um and you look at what that means for the power grid uh in terms of the commodity intensity there um what it means for I think a lot of energy commodities globally because Australia is not the only country seeing this. Um the reason we're seeing this explosion in data center demand is because they've literally run out of space and power in the US. Uh Australia is a great country um to build a data center. We've got lots of land obviously got lots of renewable resource and we're very well connected with fiber. Um and so we're just very simply seeing the overflow from the US hyperscalers looking to train these AI models coming to Australia. They're also looking at Europe, parts of Asia as well. And if we talk about that one gigawatt and there's going to be multiples of those added over the next five years in my view, um that that approximates about 5% extra electricity demand for the East Coast grid. Uh and so you just think about all the implications for that. We've had almost no growth in electricity demand in Australia for 15 years. Suddenly we've we're looking at electrification uh of cars, heating and cooling. And then on top of that, we've just had, you know, the magnitude of these contracts that I've just described. I just don't think people understand what that means. I mean, that's $20 billion of capex just in the data center uh to come into the country. And so, we're really excited about what that means um for a number of different commodities and >> the big who are the big winners that aren't priced in today. >> Well, I mean, there's the obvious players. Uh yeah, the non the non-resources players, but given this there's a mining podcast, I'll uh stick to the mining. I think the >> you can do energy. is going to do anything. Oh, sorry. [laughter] >> Um, uh, I I've been pretty bullish on thermal coal for a while now and this really solidifies that view. So, >> um, thermal coal has been in decline now for a number of years. We're seeing increased gas come into the system, renewables displace operating power plants. And what this potentially means in our view uh is that you do see the thermal coal power plant utilization increase slightly or flatline or at least the the shallowess of the decline will stop and that has some very profound implications for the thermal coal market. Um the thermal coal market's 8 billion tons. It's about a billion tons of seaborn demand. And if you get every single developed country, you increase their thermal coal fired power generation by just 1%. You create 160 million ton deficit in the in the thermal coal market. So it doesn't take much globally if there's a shortage of electrons and people start to to turn back to thermal coal which is already built in many countries there's very low utilization to have a really big impact on the thermal coal market. Uh in addition, we've seen Indonesia introduce production caps. Um you know, China is building out record amounts of coal capacity uh once again. So I think it's a market that is is much fundamentally tighter than what the market thinks and the stocks uh are not pricing in much. And I think consensus has got a fair way to catch up in terms of um pricing when we look out on a three to four year view. [clears throat] consensus is 1051 110 dollars a ton Newcastle and and I think that number probably needs to be closer to 1351 130. I >> I know you really come at it from from the bottom up and you love picking your your companies but just one more on the the kind of macro lens with a with a very Aussie focus to it like >> coal bit met coal in Queensland is is next to impossible. No one's putting capital to work there really and I think just 3 four weeks ago the New South Wales government said no green fields coal mines are going to be built in that state. So, how do you think about the goalposts shifting as you go with some of your investments? >> Yeah, I mean, I'm not investing in a uh [laughter] in a in a a thermal coal explorer in New South Wales, that's for sure. I think you need to be investing in something that's operating uh or is very close to being in operations. So, uh our preferred sector exposure is New Hope. um they've got the greatest concentration of thermal coal in their portfolio, very long life assets, uh great growth profile and have proven to be good capital allocators uh over a long period of time. So, so pretty much everything you could ask for and it's actually a blessing in disguise that uh this has happened for those that have existing assets. The cost of capital for thermal coal has been probably 20% for the past 5 years. Um I'm sure that will change going forwards. Um but that what that has meant is that there's almost no incremental supply uh coming to the system and in fact there's going to be um production declines from developed world assets um as well as some in Indonesia as well. And so that just creates a fantastic backdrop uh for investing uh from my perspective um and yeah we're pretty excited about that. I mean just when we speak to our institutional clients uh 5 years ago versus now um the conversation used to be very much on carbon emissions. we want you to lower the carbon intensity of your portfolio x% every year for the next 5 years. Now, it's much more about energy security. Um, and I think that's something that's not only happening with institutional uh managers here in Australia, it's something that's happening globally. Everyone's much more focused on energy security and uh also the cheap cost of power as well because as we move into this new world of artificial intelligence, what's the really um you know the competitive advantage that your economy can have is a cheap cost of power. And we look at the two best economies in the world, US and China. What do they both have? Very cheap uh cost of power and and they're going to continue to benefit from that. And when it comes to um sorry, I know I'm talking a lot here. when it comes to to uh emissions um you know not to get too sort of philosophical but 85% of global carbon emissions at the moment are not covered under the Paris agreement. China's building out record amounts of coal fired capacity. So unfortunately for the world it doesn't look like carbon emissions from fossil fuels are going to slow anytime soon. And a lot of countries have already shown their hand in terms of prioritizing cheap power over decarbonizing there. I mean, the China example is fantastic because they have like a all of the above approach. Every single type of energy, they're just going so hard at it. Like the amount of capacity and generation that they added in the last year alone is just eye watering. It's staggering. And even the US could be could be in trouble or being left behind in in that kind of race. >> Yeah. >> The one of the other coal names we spoke about last time was was White Haven. I know they got a bit metco portion. Yeah. >> But that's played out pretty awesome since we last spoke. I think that was 450 and now it's closer to to 9. >> Are you are you still playing around there or do you think that's approached full value? >> Uh I think they've done an amazing job there but we see better upside in in New Hope at the moment. We've got um a bit more of a preference for thermal over Met and and New Hope's the best way to express that in the Aussie market particularly now that Yanol have done the Kestrel transaction. So, um, yeah, yeah, nothing against New Hope, against White Haven. I think there's still some upside there, but a preference in our portfolio for New Hope at the moment. >> I got to do ding ding ding on all of those common names. Um [laughter] but um Fisty the Yeah, like it is fascinating that you have these these these uh thermal thermal coal miners. So there's been a real theme to get the diversification into metal and now all of a sudden maybe maybe thermal is actually one of the more attractive things to be in and people kind of >> maybe maybe forget or maybe maybe maybe threw it aside because it wasn't investable to a large portion of people before. But these these um these companies they derated their mult like their multiples compressed because they became an uninvestable asset class as that is like you know the energy security part becomes um becomes the forefront they become investable again and guess what multiple expansion at the exact same time as you get um yeah the the commodity price on your side it's it's a double whammy. Yeah, I think that's right. And nothing excites me more than when I ring up an analyst or something and I've done a couple of days of work on, you know, a commodity or a company and they say to me, I haven't, no one's called me about that stock in years or [laughter] you're the only guy on the buy side who's looking at this sector or stock. I just love that because it sort of tells you where you are in the hype cycle. >> Is gas a big focus for you as well? >> It is. Yeah. Uh I mean gas has a lot of a lot of similar characteristics and qualities. there's just limited ways to invest um in the Australian market. Uh unfortunately, we are big shareholders in Amplitude Energy and have been there for a number of years and and continue to think that that's that's great value. Um they should be generating underlying free cash flow of $170 million this year. Market caps about 550. Um they've had some tough exploration results lately. They'll be the first to admit that. Um but we still see that as a fantastic business that can grow and and we're going to need a lot more gas in Australia to supplement the renewables. Um you look at many grids over time and um they move from 5 to 25% renewable 5 to 25% gas um as renewables start to penetrate like using South Australia as an example uh and many countries overseas and and if we have the gas and appropriate price then Australia could potentially do that as well because it's a great fuel for firming. So, um, yeah, we need more supply and, uh, if there's good projects out there, we're we're very happy to to invest in them if they're going to generate an appropriate return. >> Sorry to jump in, mate. I'm not sure if you've been following all the kathuffle with the, uh, with the Australian federal budget, but things are changing in the negative gearing world for property owners, but you know what, mate, you know who's unaffected by any of that? Because some people that don't have an investment property that they negatively gear, no, they invest in commercial property through a private investment vehicle like Exceed Capitals, the collective fund. Exceed Capital the only name you need to know first and foremost because they invest personally in all the funds that they put out there to their unit holders. They are aligned. They don't just take a management fee for nothing. Their performance fees are aligned with you doing well. They target a 7 to 8% cash return perom not even taking into account the capital uplift from the underlying asset. And they pay a monthly distribution as well. >> Check out exceed capital money miners their flagship the collective fund. five commercial properties in there soon to be uh another one I believe on the west coast. Check it out. >> Go exceed. >> We started our combo talking about Genesis and um >> and I mean Genesis has become a much bigger company over the journey that you've owned it. >> Uh are you are you like yeah re like are you looking down the curve a bit more at some of the the uh the incoming gold juniors? >> Definitely. Yeah, Genesis uh was sort of a top three position in the portfolio. Now it's top 10. Um we did a body of work probably six months ago just looking at the valuation discrepancy between the larger cap producers and then some of the project developers and out of that work we identified a couple of companies to go out and do a bit more due diligence on and one of those was MI6 um and so we've been really fortunate uh that we identified that and and made the the right investment decision and um I think that's a a fantastic company uh and they've done some really interesting things over the past 6 months. So, um yeah, again at the uh at the McQuary dinner, I don't want to give Mcquary too much of a plug here, but I asked why MI6 wasn't there. Uh and one of the bankers jokingly said to me that uh they just do royalty deals and no equity, right? So, there's obviously no fees for the bankers. >> Oh, that's [laughter] that's a bit rough. >> It was a joke. It was a joke. I mean, pretty sure Luke, who runs MI6, would have um yeah, be been pretty involved when when McQuary was advising uh OS Minerals back in the day. So, they should they should they owe him an invite, I reckon. >> Yeah, I think he'll be there next year somehow. But uh I mean that that asset uh that they have um it's I think 4 and a half million ounces resource now. Um we see that growing to eight, we think it can be 10 million tons peranom, 300,000 producer for 10 years. um that's a $5 billion company in in on anyone's numbers, but there's many companies that go through the project sort of curve uh and they they raise money too early and they dilute shareholders and they impair um you know their company forever, right? Uh and so the deal that Luke and the MI6 guys did in my view is a it's just a great demonstration of how um management teams can create value in mining beyond you know operationally and and and making the correct capital allocation calls. So they effectively raised $170 million with a look through cost of capital at 3 to 4%. If they went out and tried to dilute uh at a 45 cent share price where it was at the time of that deal, that would have been permanent value destruction, they effectively managed to extract a producer multiple for those ounces that they sold. Um and so do and the share price responded accordingly. Um that deal with Franco I think is it just shows the quality of the asset um that they were willing to do it. Uh, and then it also shows what what you can do if you have a good asset like that instead of deleting everyone. You can go out there, you can do these royalty deals, and I wouldn't be surprised if they can get that resource to 8 million ounces. Um, you know, there's a real potential that they can just double down on that Franco deal and they actually won't need any equity funding at all to develop it. >> It's like the penny dropped in the market overnight and they went from, I think they went from like 12 cents to 30 plus cents in the in the space of like a few weeks and all of a sudden everyone looks at it kind of different. the the word around town is very very different. But I remember when we first spoke, you you spoke a lot about to exactly what you were mentioning just there, not liking single asset companies, thinking there's a lot of risk in that. Are you are you much more comfortable with the royalty type funding and not having to hedge or >> all that sort of stuff? >> Yeah, I don't like single asset companies at all really uh as as an investor and an investor who predominantly owns uh companies that are in production. uh you know because they've got the royalty component they'll obviously need less debt if if it comes to that but um I think I'd prefer to see quite honestly that that asset as part of a bigger portfolio um where you where you get that diversification of risk and a lower cost of funding as well. So, um I'm sure the the guys are thinking about it, you know, how they progress the project. Um they'll get to a point where it's build or sell and it'll come down to to what creates the most value for shareholders. But my personal view is that there's a lot more value to be unlocked with the drill bit. If you can take it from 4.5 million ounces to 8 million ounces and you can prove up the fact that you can operate 10 million tons peranom um produce 300,000 ounces for 15 years, that is an incredibly valuable asset. I mean, what did He get taken out for back when the gold price was a fair bit lower than it is now? Probably >> five billion. Yeah. Yep. Any guesses on who's going to take out >> MI6? >> Uh, no idea. No. >> Don't join me on that one. [laughter] >> And there were all these like like anchoring biases, right? And I it was such a big amount of capital that they raised to get hold of the asset. And I feel like every established producer got the chance to participate in that to help them raise the cap of capital and maybe they passed for whatever reason. Maybe maybe not for project reasons, but yeah, >> you know, to pass at that stage and then and then come back later, it's it's a hard psychological thing to do. Yeah, >> definitely. Yeah, I mean, we come across that with stocks all the time. Sometimes you you sell something or you make the wrong decision and you have to constantly go back and and reevaluate your thesis and uh I've learned the hard way that um you can't you can't do that if you want to make money. You have to continually question your your judgments and and go back and relook at things. Um, so yeah, I'm I'm sure uh with the benefit of hindsight um some of those companies would wish that they had have bought it. Um but you look at the amount of due diligence that Franco would have done on that deal. They've taken a one what is it a royalty for the first 4 million ounces. So they're effectively saying this company is going to produce 4 million ounces of gold from from this asset and they've paid a very very full price on that basis. So uh that gives me a huge amount of confidence that what's frank$undred billion dollar company's done the DD and uh you know and validated it >> outside of gold fist you >> where which commodities are grabbing your attention right now which companies are are really sticking out >> um so yeah gold's obviously pretty topical a lot in the energy space uh which we've already touched on continue to be really positive on the uranium market I mean it's not sexy it's not exciting no one's talking about it but I think uh it just keeps on grinding higher as we move further and further towards those inevitable deficits uh that are coming in the market. Um still have the same exposures there. Um yeah, just in a bit of a flat spot at the moment, but >> the same exposures being >> I'm happy to talk about it. Yeah, nextg and Paladin. Yeah. >> Yeah, >> Paladin's really hit us straps in uh in recent history as opposed to Yeah. like the hiccups that were there along the way. Their last like reporting was really strong. >> Yeah, definitely. No, they've they've done a good job. problem. Pretty rare to see an upgrade um in the uranium sector. We haven't seen one of those in a while. >> That must be a typo. [laughter] >> Yeah, absolutely. No, they've they've done a fantastic job. Uh Paul Paul and the guys and I think um there's a bit of renewed focus on the operations there. Um they'll have some challenges I think over the next 18 months as they transition to all fresh mining um from um rather than stockpiles. But uh you know when you look at the the opportunities available to invest in uranium globally it's um it's a pretty skinny playing field and I think those two companies stand out to me head and shoulders above the rest. Yeah. >> So when when you think back to the the conference you've just come come from >> you don't actually have to limit this to to commodities or mining but what are the other big takeaways? So the the AI capex roll out and everything going on there the the energy implications. What are the other big themes people are talking about? I mean obviously energy security is a massive one. I had some really interesting conversations with the Viva guys, uh the Aole guys. Um just talking about what's happening in Australia from a fuel security standpoint. Um if I have to go into another meeting with a mining company and hear people ask them how many days of diesel they've got on site, then [clears throat] I'll um yeah, I might try and find a window. But uh it's yeah, it's it's definitely something that's on everyone's lips. Um yeah, I think there's some fantastic opportunities for some of the contracting sector across Australia um there in in that fuel security package. I mean there's an extra 1 billion liters that needs to be stored. Um so that's going to create a fair bit of work for a lot of contracting businesses. Um everyone pretty negative, not surprisingly on on the domestic cyclicals, right? Um, it's pretty tough out there. But, you know, from a putting my mining and energy hat on, I'm super positive on the outlook. I just look at the amount of change that's happening and just how commodity intensive it is and what it means for for energy, uh, for copper, for for thermal, coal, for rare earth, lithium. Um, you know, I think it's a fantastic place to be an investor at at the moment. At the same time as we're seeing a lot of companies derate um because everyone's concerned about what artificial intelligence is going to do to their business models like software companies as an example I think mining stands out head and shoulders above the rest. You can't you know the stuff's been sitting in there for hundreds of millions of years in the ground. You can't replicate that through AI. AI can't dig it up. Um so you're going to see the multiples of those free cash flows rerate. And at the same time some of these trends are driving a lot of demand decarbonization and so on. So, I just think it's an awesome time um to be an investor in the space and uh yeah, we're pretty excited about the outlook. Um >> you said rare earth then. >> Yeah. >> What's your um latest evaluation of the investable rare [laughter] universe? >> I knew you guys had asked me about that. Yeah. Uh tough tough uh tough time to be underweight the last 6 months. I was I was really surprised uh that Lionus managed to get a 15-year deal away um with a floor price at 110. I mean, that is that is extraordinary. >> It's amazing. Amanda on the on the way out has she's had a she's been on a bit of a hot streak like >> unbelievable. >> Yeah, it's it's pretty crazy that a huge capital raising they got done mid mid last year as well. A lot of the talk was like what are they going to buy? They they were speaking about this be it >> downstream upstream looking at everything Malaysia Korea was mentioned these sorts of things. >> Yeah. >> Do you have more thoughts that kind of come to mind with how that whole space has evolved in the last little while? >> Yeah, I do. Yeah. Uh I I price uh flaws I think are fundamentally flawed concept over the long term. Um through history I've seen numerous examples of this. I think there was the Australian Woolboard, the International Teen Association. I mean they all they always end in tears but what they can do is incentivize a lot of supply. Um and hopefully that's what happens uh in the rare rare earth sector from a strategic uh perspective, right? like that's that's why the price falls are there to create more supply. They are to ultimately um create more supply and bring prices down over the long term. And so I think that that is what's going to happen. Um there's some great project in projects in Brazil um and other parts of the world hard rock projects in Australia and if you run through US 110 bucks they generate IRS of 50% plus and so they will come to market the prices will come down. Um the hard thing as an investor is uh when will that occur and to what extent will robotics and that demand um counter that on the other side of the equation when I look at how to invest? >> How's price come down when you've got a price floor? Like if you're someone that's got a price floor for all of the volumes that you can produce. Yeah. >> Then like why does it matter if price comes down if that makes sense? >> Well, yeah, you can you can go invest in Linus that's got a price floor but you're going to pay >> Yeah, of course. It's it's an infrastructure like type asset, you know, for a while because of this like certain >> downside in a sense >> until it rolls off. >> Yeah. And there's production issues and stuff. >> Yeah. But I mean, you can invest, but you'll pay for that certainty. >> Totally. Totally. The multiple wild, don't get me wrong. >> Yeah. But I mean to to your point, there's not many commodity producers out there that are have a guaranteed price. It's crazy. >> And it will last for for a time. I mean these are yeah big entities but ultimately if you just run it through to its theoretical conclusion you're going to incentivize more supply and you can't just keep on buying at 110 um because ultimately someone >> at some point how you know how does it end I don't know >> yeah it's it's wild I I never would have thought it was going to happen but here we are um but how do you invest in it from a junior perspective if I'm sitting in the line's uh seat right now or or even a Luca and you've got all that equity value because you have that 110 price floor. I'm going out and I'm using that to buy high quality early stage development assets that probably aren't going to have that same certainty. You then concentrate the supply more and you can create value for your shareholders by doing that. So I think some of the early stage projects which we're small investors in in Brazil are like a VMM or an MEI um very high-grade good projects that provide fantastic returns at those sort of multiples and uh yeah very very low market caps when you compare them to to Lionus and so I think um yeah obviously they'd be running the ruler over what they do there um because I think it's going to be pretty important to have some sort of presence in Brazil. Um overall we just saw the Sarah Verdie deal for was it $2.9 billion from US rare earths. Um so it's yeah I think there's some pretty good value there short term >> with some interesting flags attached on that one having to sell the the off tag into a what seems like a related party of the of the US government. I mean >> this has been a theme of of the last kind of year the whole the whole space it >> it was can you get close to the administration in in the states anyone >> posting on on Twitter or anything like this so >> yeah it's it's it's a fascinating kind of part of the market >> y crazy times >> copper is the other you know one of the other big ones that we haven't spoken about which is one of the most gossiped about commodities of late >> what are you what are you sort of seeing there >> uh we continue to like copper yeah from a a structural perspective and and still think there's some great opportunities in the Aussie market. Um, our preferred pick there is Firefly FFM and we still got the Aaron Collins the uh the A1M up there in Alo close to where used to work at Canington. So, >> ding ding ding. [laughter] >> Uh, so yeah, continue to be I think FFM particularly just in most recent little while it's had a bit of a pullback and that looks very attractive to me. We saw um El Dorado take out 4and mining for 2.9 billion Aussie I think it was. Um >> controversial. >> Controversial. >> Yeah. One guys weren't too weren't too happy with that one. >> The Dorado share price isn't too happy with that one either. [laughter] >> No, but I mean yeah sometimes I thought North Parks was expensive when Evolution bought it and >> that that that's uh that's a cracking asset for them now. So often I think with these assets you need to be prepared to to look forward and and you know forecast what's going to happen in the future and have a view um and the look through valuation I mean you just get crazy numbers on FFM or or that green be asset if you start to apply Elorado multiples um you know it's twice the the size it's better grade it's longer life and it's on a granted mining lease yes it's unfunded but um you know it should be at least double um the price that it is today uh in my view, albeit there's still some some funding and execution risk. >> Can I can I pitch one to you? >> Yeah. Here we go. >> Is it time to look at Hillgrove with new eyes? >> Oh. >> Uh they so their their numbers last quarter were good. They made good cash. They've they put out guidance. They've stuck with it. Their costs are uh you know there this there's great margin. They're going to produce 15,000 tons of copper this year uh at healthy healthy margin. And the capex that they've been embarking on is done. It's sunk. >> Yeah. Um, but it's got such an under demanding market cap and like not not a huge output obviously, but big enough to warrant uh probably a large market cap than it has. >> Yeah. What's the market cap? >> I think it's like I'm pretty sure it's 120 million bucks. >> Wow. Okay. Yeah. >> Yeah. And what's the is it generating cash? >> It's gen it generated last quarter pretty sure 15 million bucks of free cash. >> Yeah. >> Between capital raises it makes money. It's it's a bull market asset, but it's a bull market and >> it's better than 29 matters. >> And and um >> this is true and I think management's okay. Yeah, I think management's good. >> Yeah. >> Okay. Yeah. Is that uh that's Bob Fulker, right? The old evolution CO. Yeah. Yeah. Yeah. I haven't looked at it closely, but uh I don't ding ding ding. >> I'm pitching it just to see if I should own it really. I'm trying to iron out my own thinking, but I do think it's worth looking at with your eyes. >> Underground. >> Uh yes. Yeah. Yeah. >> Yeah. >> An hour and a half from Adelaide. Nice. Beautiful. Love Adelaide. >> It's just over the hills. It's beautiful. [laughter] >> Yeah. I mean, with uh with small scale mining companies, one obviously underground, one thing I always look for is just how real is the free cash flow? Cuz >> I've I've invested in in a few and uh >> in my years >> and they often you find that they'll underdevelop when prices are low and then suddenly all your free cash flow just goes back into the ground uh when they're high. And so, um, yeah, that that's that's something that I'll be asking Bob about if if and when I catch up with him. Yeah. >> Well, this one is a ding-ding ding ding, but Sandfire did a deal a little while ago to to come back home with with Havar. So, Oh, yeah. >> kind of at the the upper and lower end of what you look at in terms of market cap in in companies here, but did did you take a look through that deal and you have thoughts on it? Uh I didn't um not not in detail but I was actually a personal shareholder in Hava um from from many years ago because I've always loved the asset um and it was always too small to sort of make it into our fund but uh yeah I think that's that's a great asset. What was interesting was I understand the guy who did the deal at Osmond was effectively moved to Sandfire and then did the same deal again. So >> yeah, [laughter] >> we um we had Brendan on the party. Um yeah, ding ding ding. We don't have a but um >> yeah, >> yeah, it it might actually be big enough for the fund now because it Yeah, it'll get bigger over time as well as as as Sandfire, you know, puts in dollars to to advance the asset, too. >> Yeah, I I I've always thought that it needed $50 million of drilling spent on it to to really bulk it out and see what's there. And I think that's a great example of an asset that um you know hopefully Sandfire have created a lot of value for shareholders um by taking what is you know potentially pretty optimistic view on it but you know I think the geology is super interesting um in that part of the world and there's potentially a lot of copper there. So um yeah, I think those those are the sorts of assets that we should be uh investing in. >> The first time we spoke Fisty, we um >> we spoke a bit about about the lithium development assets that were attractive and now it's the kind of cycle where they become extra attractive because the producers have have run and the developers are playing catch-up. Now there's there's that relative uh relative value for producers to maybe maybe acquire some of these projects. >> Definitely. Yep. Agree with that. Oh, I think Wildcat's got to be the um >> prime target. >> Prime target for Pilat had at home still. Um yeah, Min or Pilra definitely. I'd probably say Min would be most likely on that one. I still think that's a really good project. Um >> they've still got 15%. >> Yeah, as far as I know. Yeah, I haven't looked closely in a while. Um yeah, we don't own Wildcat at the moment. Yeah, we're I mean lithium is interesting, but it's not it's uh you know, you're still trading well well above marginal cost and well above incentive pricing. So, can it keep grinding higher? Um you speak to Dale from Pilbury, he'll tell you yes. But >> funny that. >> Yeah, funny that. Yeah, all the lithium producers were all saying that a couple years ago as well pricing. [laughter] So, um look, I think it really comes down to picking like really good stock specifics in that sector at the moment. you can't rely on spot going from 2,500 to 5,000 um like you could rely on it going from 600 to,500. Um so uh for us the the best opportunity at the moment remains Alra um which is a North American asset. Um great management team still trading on about half the multiple um when you look at Pilgrim Line Town and then we've recently uh taken a position also in Lithium Argentina. Um so that's a very lowcost Brian asset. I'm not sure if that's one you guys have looked at, but >> Yeah. Yeah. And they're running a a a sell down uh minority interest in their asset with Ganfang, which which might be a bit of a catalyst for them if they Yeah. bring in an acquire of that stake, which has a really healthy C3 value on the Yeah. the the broader asset and hence their their relative market cap, too. >> Yeah, I think that's right. Yeah, I mean, I'm I'm a pretty fundamental guy in terms of cost curves and just wanting to own stuff that's low on the cost curve and could generate cash through cycles. And now in the Australian market, we don't have any really good brine assets to invest in now that all CAM um has been swallowed up by Rio. So, um I think that's a really good opportunity. I think they're second lowest cost or third lowest cost in the world u on on a look through basis. So, I think that's a um a really interesting company. Yes, it's minority interest, but you've got good Chinese partners in there that can obviously uh sell the product and provide financing and also the technical um backing as well. So, I think that's a pretty interesting one. >> When I think about some of the most crazy things that have happened in the years since we've spoke and things that are irrelevant because they're, you know, in the index of of what you play, I never would have thought we would speak about EQR, but that's a 1.8 I think last time I looked 1.8 billion company that >> I I know everyone on Twitter owns shares in this. I haven't really met anyone in person that seem to have owned stock in this, but it's it's in >> I don't even have words for the journey that that's kind of been on. And you mentioned cost curves. This would not be on any kind of part of the cost curve that attracts you, >> but I mean I think it's I think it's kind of emblematic of what we've seen in the early parts of this year. >> Yeah. H >> how do you like make sense of that? How do you play that? Because >> the benchmark and all these sorts of things are important in in how you >> manage the fund and whatnot. >> Yeah, absolutely. It can be challenging. Um I've learned the hard way that uh you know it's pretty painful to to watch stocks go up that you don't own because they're part of a hype cycle. Um but it's uh you know ultimately we're here to do the right thing for investors on a three-year view um to allocate companies to the best opportunities and we don't buy things just because we think they're going up even if the asset is worth zero. Um and there's plenty of those plenty of those and and they happen uh all the time. Um so yeah, very happy to just wear the paint on the way up because we'll know we'll make it back on the way down. Um, in terms of tungsten and EQR, I mean, I can sort of understand the the the crazy valuation. It does doesn't look like there's an easy way to solve the supply and demand equation unless China starts supplying back into the market. And it doesn't look like that's going to happen. It doesn't look despite what you think about what may happen in Iran. >> Totally. >> You know, we are moving into this bifocated world where, you know, the supply chains are all shifting and and that creates a lot of opportunities and tungsten's a great example of that. I've I've looked at EQR and I've looked at Almonte. Um, and we actually think the best asset that's undeveloped at the moment sits in Greatland with the Callahans. I'm not sure if anyone's come on and talked about that before, but >> we talked about a couple times. >> Yeah, that's I mean to me that's if you run spot prices through that, it's a $5 billion >> asset. So >> they're going to be able to monetize that for more than they paid for like for for >> Yeah. Yep. Telera and and Hav. >> Yeah, I I'll take that bet every day of the week. >> Crazy, right? >> Yeah. So, yeah, I think the interesting I mean I don't think um Sean and the guys there want to have a great tungsten division uh because it's a pretty specialized commodity from a processing standpoint as I understand it. >> And so I think >> it's quite close, isn't it, to to as well? Pretty sure. Yeah. >> Yeah, very close. Um but yeah, don't I think they might be short processing capacity soon. Not not long. >> It's quite deep, too. I think there's like 400 meters underground. Yeah. >> Yeah. >> But >> it's large and and better. It's weird saying I think it's like 6%. It's weird saying that's high grade tungsten, but that's high grade tungsten. >> Yeah. Yeah. Yeah. I don't have much of a reference point, but when you look at it on charts versus deposits, it looks >> looks awesome. So, as I understand it, they'll uh seek to we're great shareholders. Um they'll they'll seek to monetize that asset, whether that's through an IPO process because as you guys have highlighted, there's no shortage of people close to the administration in the US with deep deep pockets. um that could create a lot of value listing this thing on the NASDAQ or I'm sure every single spack in the world is uh is calling them to try and get their hands on it. Uh and then you've obviously got EQR and Alonte and a couple of those guys as well that I'm sure would be interested. So I'm sure that they'll uh do the right thing by shareholders and and we'll hopefully see some value creation from that um pretty soon. >> That's um yeah, pretty interesting. the the uh the one that's fa like maybe faded from hype cycle a little bit this year but but you know prices are still elevated um antimony it's uh you don't you don't yeah I wonder if that'll be like tungsten next year it'll just like [laughter] people pay less attention to >> yeah I don't know when I've got a bit of a rule when my high school mates or taxi drivers start asking me about things that I know it's uh yeah it's time to go so you know that's probably where we are with AI now [laughter] yeah I do think That's an enduring thematic particularly for commodities as an aside but uh yeah I I I've I don't know [laughter] >> there's not too many commodities where we can take that like the polar opposite view and it's completely hated and one of the closest to that >> would be nickel although I think it's off the off the lows now >> but it's really interesting the only reason it's >> uh like frustrating to talk about is because there's just such a der of like ways to play it these days exindo ways of of playing it but >> I'm curious if you've partaken like nickel industries would be a part of your world. >> Yeah, big part of our world. Yeah. Had a chat to Justin um yeah again this week. Uh and I think what we're seeing now is is really interesting in terms of just how important Indonesia is not only to nickel but to a lot of other commodities. I mean you look at borite market, the tin market, um obviously coal which I've already talked to where they're also putting in production restrictions. it it's fascinating and and just how quickly things can change in terms of trade balances when someone makes a policy driven decision. And so I think it's pretty clear now that we've seen the the floor price for nickel and and we're we're on the way back up. Um and it's it's carbon intensive and it's hard to produce and it's expensive to produce requires a lot of reagents and quite rightly the um the companies in Indonesia want to make an economic return on that and they control so much of the market that they can they can influence price and I don't think that changes any anytime soon. We're not invested in nickel mines. I prefer the sulfide guys personally um and had a look at CTM before Santous Metals which has a project in Brazil. I I think that looks like a really good little project actually. Yeah. >> Um yeah, if you believe what they they say very low on the cost curve and and can be developed. So, um if I was Yeah. looking to have a have a swing at nickel, that would probably be my pick. But I'm open to ideas. Yeah. >> Yeah. I think they they did a raise maybe six months ago. They had an attaching option as you do with a Yeah. >> you know, not too demanding strike price on it. And that that felt like, you know, the raise they really didn't want to have to pull the trigger on. They had to really incentivize shareholders to get on board. That would have been a great one to to be a part of. And like you say, I think they grade at about 0.9% nickel hydro power nearby. So it should have a lot of tailwinds >> close to the America or America these sorts of things if you're looking for exchina type plays. >> Yep. Yeah. Yeah. Definitely. No, that's a good one. >> Um other than nickel, it's completely in the sin bin. Perpetually in the sin. >> I always ask myself this question. I wake up every morning. a textile story and I go, "Man, what do we uh what's what's one of my friends who's who works at Solaris and what's the most hated commodity out there today?" Cuz often that's the best place to invest, right? >> Yeah. Yeah. So, the answer to that question is always graphite, but it never gets better. [laughter] >> That's a special circumstance. It probably will go up now. >> Yeah. I mean, yeah. I think I I'd almost say at the moment, honestly, I feel like energy is the most hated because everyone's sitting there saying, um, you know, is it straight open? And as it closed, everything's going to normalize and we're all going back to $75 barrel oil and and LG is going to come back and flood the market. And I I've got absolutely no yeah not afraid to stand up here and say I've got no idea about uh what's going to happen there. But what I do know is that on a 3 to 5 year view, energy is is going to be globally a very scarce commodity. And I think that people are fading this short-term sort of uh noise and and focusing too much on that and forgetting about a lot of the more structural longerterm stuff that's happening. Um and we've already talked about bifocation is I was uh having a chat to um a couple of analysts actually and about how you how we fundamentally look at supply and demand for commodities and supply is pretty easy and and often pretty technical um particularly if you from a engineering or geology background but from a demand perspective um I think one of the best ways to look at demand is per capita uh consumption versus GDP and um there's this awesome presentation by Mark Henry back uh when he was head of marketing at BHP in 2011. You can go look it up. It's still on the internet. And he plots out uh steel consumption per capita versus GDP per capita. And he does it for copper um a whole bunch of other commodities. And that's really >> like that's framed up a lot of the way that I think about uh forecasting over the long term for demand. And the only commodity that keeps on increasing in terms of intensity per capita with GDP growth or or how wealthy people get is electricity. And so um and we've seen electricity demand flat for 10 years now because of of various different things, energy efficiency, etc. That's turned on its head. We're growing at 3 to 4% in most developed countries. And I just think that's a super exciting time to be an investor in energy and any energy related commodities. So yeah, I think energy is the most hated short term, but um I think people need to look through the short-term noise and and think about what's going to happen in in 3 to four to 5 years time because that's where you can make money. >> When when I think about that chart, and I know Rio Tinto used it a lot during the the China bull market as well. Yeah, I think they always just called it the the S-curve chart and aluminium was one they always pointed out and the aluminium market has been massively disrupted with Qatar and everything going on there. Another one where there's not many ways to play it here, but Alcoa have their listing from the aluminina y deal. Do you spend much time thinking about that market? It's a fascinating market for global GDP, these sorts of things. >> Yeah, it is. Yeah, it's hard because it's um is it an energy or is it a commodity? Like is it a you know, is it a base metal? And I think it's got elements of both. We have struggle in terms of our internal risk systems. We we struggle to >> to work out where to classify it. At the moment, it's obviously trading much more like an oil stock or an LG stock than it is like a base metal producer. Um, we have previously been invested in there. Uh, we're not at the moment, just on valuation grounds, but um, yeah, I think there's a very good demand outlook and the supply outlook is pretty limited as well. Um, so yeah, I quite like the Alcoa story. I wish there was a a cleaner way to play it >> from an Australian perspective. We have previously owned MMI and some of the Bite names, but >> um they've struggled to deliver operational consistency um through that asset and yeah, >> South Yeah, South 32 might rip themselves apart sooner or later and and have a cleaner way of paying the the whole Alley supply chain or they'll just sell it to Alcoa and rid themselves of Yeah. the aluminum business alto together. But yeah, >> TBA, >> they're definitely selling Cington. >> Really? Okay. >> It's on the shopping block. Yeah. I'll have to go go spoof my ways as as a consultant somewhere. [laughter] >> Can't do that. >> And alcohol plays into like many of your themes as well like the national security one as well because they're they're the champion the the US name as well now. So yeah, >> fascinating for for a number of reasons. >> Yeah, absolutely. Who would buy Canington? That's uh >> Oh, there'd be there'd be a bunch. And I mean it's >> Yeah, there there's um they talk about the geotech issues all the time and all that sort of stuff, but it's underground like you know Yeah. You can think of like the the very proficient kind of underground people who maybe look at that asset and think >> I thought they were looking to turn it into an open pit um silver sort of zinc thing. >> Oh, I I think that they're >> that would be a massive hole. >> They've got they've got some Yeah, they've got they've got Yeah. I don't know what their m options are, but I do know that they're having more and more trouble at depth. >> Yeah. Oh, yeah. Yeah, definitely. I think I mean >> Yeah. >> Yeah. I used to work there um probably about 10 years ago now. And uh even back then there was some amazing grades down. I think it was called the R4. Taking myself back, but uh down there, but man, it was pretty hot and it was uh it was pretty rough down there as a as a graduate geologist. Um but the the grades just just awesome. Uh that I mean that's that's just been one of the >> the best assets in cash flow machines in Australian mining history, I think. And yeah, it was such a good time working there. I just hope that someone takes over it that can um maybe reinvigorate it a little bit. I know obviously Aaron's just up the road with A1M, so we'll have to give him a call after this and [laughter] see what he see what he thinks about silver and zinc. >> Yeah, I mean the last year must have been bearing a bit of fruit for them. Both those commodity prices have been >> pretty pretty friendly to them. >> If you like silver, he should there's that mariner next door to him that he's just he's kind of he's never moved on, you know. >> Yeah. >> Yeah. Yeah. I actually did some work on that as a as a geologist, but uh I I mean it's pretty skinny, right? >> It's skinny, but their study numbers are tidy. I don't know how believable they are, but they're tidy. Yeah. >> Yeah. >> Yeah. Well, >> skinny with a thought. [laughter] >> Yeah. >> Just just flex the numbers. It's all good. >> One company we haven't spoken about because they fall in a few different buckets, but um Travy mentioned technically proficient underground miners, Bill Beam. Yeah. Yeah, >> Woodlawn has made, you know, come on sort of over the last yearish and they're talking more about what they're doing in WA. So, have you have you got a take on them? >> Uh, it's not a company that I've done a huge amount of work on to be brutally honest. Yeah, we the way that we invest is we we don't sort of try and focus on everything because we find that or we know that almost 100% of the returns come from what we own, not from what we own. So we focus on really good new opportunities and then making sure that the stocks that we have in the portfolio, we just nail those and know exactly what's going on. Um so yeah, DVP's never really come across my screen. And I think or our screening process, I should say, not the computer screen, it's been there, but um uh the reason for that is is just value. I've just I've just really struggled to see value or a lot of value in in Wood Lawn, Sulfur Springs, and Bald Hill for for various different reasons, but um I think Bill's done an amazing job over a long period of time. And so I definitely wouldn't bet against him, and I know a lot of very smart fund managers who have invested there. But um yeah, to to me, the rocks just have always there's always been a bit of disconnect between the rocks and the valuation that the markets subscribe to it. And I I think a big part of that actually is that Bill is so good and he's got that that really good following. So it's probably a credit to him that it's uh you know that that it's always had in my view a bit of a premium multiple but unfortunately that's also excluded it from our investment process. But I think they did a site visit a couple of weeks ago or or a week ago and the feedback was pretty good in terms of the Woodlord ramp up. So um hopefully they can get that going. >> Last one for me. um last 12 months, the best stock call you've made and the worst stock call you've made? >> Oh, >> Justin Resources. >> Uh yeah, narrow it down for us. Yeah. >> Okay. >> Um well, obviously I'm talking about MI6 a lot because you always talk about your winners, right? So yeah, that that would probably be probably be the best. Um what have I lost money on in resources in the past 12 months? >> Jeez, I know my boss would know. [laughter] It could also be it could also be like what something you should have pulled the trigger on but you didn't you know and then it ran away from you. >> Uh oh gosh I'm struggling to think. Um what I haven't got one really wrong in resources for a while. It's been a while between drinks actually. >> The market's just gone up. >> Yeah. Oh no. No. Yeah. Uh metro morning. Yeah. Yeah. Lost a bit of money on that that over the past 12 months. Um, yeah, I'm still I mean I'm still a very very interested bystander. I think there'll be a time to to go back in there and own that. I just really want them to display some some operational consistency and there's a lot of um yeah, as you guys have followed, there's just so much happening in that aluminium market and Borksot in particular with Guinea. So, I think there's going to be a great opportunity to make some money and there's some great assets up there that need to be developed in the Northern Territory. Um, so I'm really hopeful that we can, yeah, invest back there again. But, um, yeah, that was that was a pretty painful one. Um, yeah, but I've I've had some painful ones, man. St. Barbara back during the uh the Genesis takeover days. Yeah, that was >> They're interesting again, though. >> They are. >> Like the deal they've done with the Chinese and and whatnot. >> It's >> Yeah, >> Canada is is kind of coming together. Who would who would have kind of thought? So, >> yeah. Yeah. It's amazing what a good gold price will do, [laughter] >> isn't it? Fisty, it's always awesome chatting. Appreciate you coming in after your your long journey home from from Sydney. So, looking forward to having you on next time. >> Yeah, thanks guys. Appreciate it. Good to catch up. >> How's the energy of Fisty? >> Love Fisty. >> Always great to chat with Fisty. Super insightful across a whole host of commodities and love understanding how someone that has a tough tough benchmark to beat in an evolving landscape that doesn't even involve all of the resources space has to keep adapting. So good to chat with him and share that conversation with the money miners. >> Thank you to our partners for making it possible. >> Our awesome awesome partners in links Sanvic ground support exceeded capital who we had in the show focus the platform by market tech and metals hub >> money minus. Now remember I'm an idiot. JD is an idiot. If you thought any of this was anything other than entertainment you're an idiot and you need to read our disclaimer.