I don't think it makes sense to drill another hole in Western Australia to look for lithium for the next 2 to three years in light of what's happened in the last 3 months all our money more is another episode on the tens with an americ love it another one who's uh famous in the in the world of Twitter as wellet the world of Travis rii Travis Rick alternative existence what to El on musk mate Twitter it's now X right so we got the koala on he's got a big koala in front of his mug which tell you what which I thought it was going to be an easy task on Premier Pro but it fucking did me in anyway I thought there'd be some AI software that could have just had it bobbling but anyway I feel like I've watched you like bend a bunch of bulks today just going mad just melting on the inside anyway we got it so to parter cuz he can bloody talk and part one what do we say we go into a bit of historical potential upcoming m&a around the world talk about glenor uh with BHB and stuff BHB a lot of the tier one assets we touch on bit of theory about the hype cycle of these uh m&a majes and how they're just going to get fomo then we go to Australian Lithium we do why not talk so and part two was jeez I haven't even got to part two on the edit yet and there was a lot we'll tell you what part two is about when part two comes out that's it we talk about why lithium is what ior was 20 years ago how would you describe koala after um after after our chat with him MD JD well I think it's it's right to give a bit of background on him this is a guy who's obviously Anonymous but he's got a background in the sell side and buy side of natural resource Finance so he comes across he's got strong opinions you know some that he holds quite tight he uh loves to specialize and Dabble in around m&a at the at the big end of town I think it's fair to say we don't agree with every single point but that always makes for a juicy interview and a juicy conversation the more beers I had the more I disagree with him on the more Punchy you got but I'm Keen to see what the what the money minders take away and what they what they think of this sort of style getting the old Anonymous you know or pseudonymous Twitter personalities on the show it'll be it'll be better when I can get the koala head talking with it that'll make you happy that'll make me happy kudos to him for dropping in on his one day that he had in Perth absolutely right part one coming up part two coming up after part one at another day Trav you've got a video that you've found which is will play for the money MERS I do indeed I saw this and I just thought mate this is prime material for us to talk about there we go right here it is you see all these Cofe court cases with my children have really taken a toll I don't have much left that's mine except for my mind well that may be as such but I can't move on a $150 $125 cash done oh except I don't carry that sort of money can you break some iron or I'll just get my chisel hit the change good work Jana good work Jana God you that God they would have to get legal to run over that video all those videos why is this relevant because we have I have seen a rock handed to me at a at the barn me shop saying can we get rhyo Sullivan in here to break this so I think in the honor of our love for cadal we need to approach this organization and see if we can possibly redo that video with Ryan behind the counter can you can you break some iron for fucking o i can says rhyo Sullivan and just snaps the fucking thing in half right in front of her that would be a better video I reckon it would agreed mate 100% mate Ryan be Gina love to see that now while kadr aren't breaking Rock with with their bare hands they I don't know if they've engaged yet for those two new Diamond Drill rigs they got for the surface o but I'm just going to leave the people in suspense I may or may know not if they have or not I'd suggest getting quick getting quick man getting quick for a surface Diamond Drill and contractor for someone that can also do RC Drilling and can and can break iron or from their bear with their bare hands that is given to them by Australia's richest woman that can happen too have you got any of those needs just yeah junah if you want to actually break a bit of on or get Ros solivan from cadr to do it call out call out to Hancock on that one yeah you'd be mad not to Ryan doesn't need a chisel right boys I learned another word I'm learning words every day what's the new word well was the other one you called astr turfin oh yeah oh yeah that was a good one that was a good one another word for the money miners greenwashing o have you heard a greening years have always heard of the words and I haven't think you read a lot more so apparently this is like I need that thing to come up with the definition dictionary bloody thing happen post greenwashing is when an organization spends more time and money on marketing itself as environmentally friendly than actually minimizing its environmental impact yeah greenwashing and apparently you can get in shit for it now yeah as ASC don't like it really no no they put out uh there was an article here which I'll I'll bring up so they're deeply committed to protecting Australians from Financial harm acting on acting on and deterring misconduct and upholding the Integrity of Australia's Financial system which pretty much means any company that is uh greenwashing will get in a lot of trouble I'm sure they have their work cut out then and it would be easy to look like you're greenwashing when maybe you're not maybe you put your words wrong in your ESG statements don't don't leave it to chance no Benny Swan is an expert in keeping your out of the shit for greenwashing future proof don't greenwash cuz that's don't do it but you might accidentally do it and you don't even know you've done it we know about that sort of stuff um get get get Ben Swan and future proof to give a bit of a proof read that's why they call it future proof it's a future proof read you are grain washing Ben will give you a big smack he'll give you a smack on the bottom and then he will fix all of your crap yeah or if you've accidentally done it he'll change the wording to make it make you look accordingly whether do you're doing it or not doing it get Benny Swan to run his eye over it from future proof and anything other esgc e SG I me to it's a word now mate you change you forever change keep it that's I meant to say anything ESG related get the industries esgc to sort you out love your work it's just on me mind all the time Benny swamp future proof ESG absolute gurus right as much fun as I'm having here we better get into the koalas yarn let's rip it part one right money miners here we go something something about every time we interview Americans we get on the T it's bloody great mate thanks for giving us the opportunity now you might see a little funny thing flopping around in front of this F's head this is yellow lab life the koala off Twitter and he will remain the koala exactly but why you've picked the most unamerican animal to go by please explain why not why not well why not where's this industry actually uh come from uh I won't say Brazil cuz I know there's a little bit of an inferiority complex here in wa about how good the iron ore is in uh Brazil or in the labrador trough or Simmon do but uh you know this is kind of a place where when you think about first world jurisdictions where we get the building blocks of our society back to the matter is this third of the country as long until China decides to get a Blue Water Navy and take it over um this is the desert that is going to have built the cities of China the cities of India and uh the modernization of Africa and all the emerging markets and it's something that yeah all of it's done in US dollars but these are the people and these are the lands that are delivering and so a little hat tip to uh you Wes and kangaroos that I I'm lazy I'm lazy I I sit in a tree and I just watch you guys do all the work that's that's what the finance guys do I've heard you and I know that's the closest we're ever going to get to a compliment from you so we'll take it what's now what's the go with this buy this is this is a point of conjecture for me and J D sometimes the the anonymity in Twitter pseudonyms like mate I say if you're that Bloody good put your mug behind it but what's the theory behind the whole thing the koala so I started this when I was on Garden leave serving out a non-compete and I was just getting incredibly bored in early 2020 and then then dri would come along you would have got even more bored yeah but then we all realized that uh what we were used to doing 12 to 14 hours a day with our colleagues co-workers competitors and peers and clients and service providers um which I wasn't doing and I for i' gone crazy so I I think I was about three months ahead of the curve here we all realized our family and friends didn't want to talk about this and but we all wanted to keep talking about cuz we like doing it so social media kind of became a way for people to kind of rebuild their office Dynamics their professional Dynamics um because let's be honest we all got tired of uh looking each other over Zoom trying to stare at a screen staying focus when having just a casual chat on social media uh it's built new networks and as we were talking about before this I think one of the most interesting things three and a half years into this I mean it's almost an undergrad degree from uni at this point is coming from the New York hedge fund world uh I had the sense I knew everyone in New York on the hedge fund side um but did I know the private Equity guys not really I knew some industry guys but now I feel one of the more unique dividends here is because I've been a little more out there the last couple years is when I go travel and I come to mining Finance centers which I dream of the day New York is one of those it is the financial center of the world but it's not a mining Finance Center office exchange boys what do you reckon bring itot office I think that now it's not oh a couple guys I met at a conference in February in Florida once a year and just got on well with it's folks from the industry from private Equity um not just hedge fund guys it's it's really broaden my network in a way that I feel like I have uh gotten access to clicks that we would just be ships passing in the night in this industry and this is a small industry after the last decade I mean we're all 28 to 38 I would say here how manyer than that how I mean how many people do we know who stuck out and spent our 20s focused on an industry after the China pop the deleveraging of the whole business because people almost went bankrupt in 1516 everyone still doesn't believe iron or is sustainable you just described most of Perth by the way uh maybe this is my this maybe this will become my new home but you never know well buddy Trav you're so Trav rickardo if you've just met is actually just been voted as the biggest upand cominging Twitter talent in Western Australia just to let where is that a vot what award is this that is the award I've got a funny story about and Twitter oh right there was one morning um oh jeez it must have been like three or four months ago and um I I wake up and and bro this is when we still doing the show out of our house I wake up and um Brads cuz he came to bed bloody late last night what were you doing up so late and I had to look at her dead in the face straight and say I was up till 2: a.m. arguing with a koala on Twitter spaces she's like what the fuck if we can repeat that today right you've got the now this is the koal is your type of guy being the Twitter man what what's your take on the whole the koala I think I think like the Twitter thing is interesting right cuz like you like you and JD don't Embrace Twitter that much and I think what I like about Twitter especially in our world is um like the fact that most people on Twitter have a pseudonym it almost kind of eliminates the importance of all of the institutions you worked out it kind it takes meritocracy it's the closest thing you get to to meritocracy in the digital world it's you know like it doesn't matter where you went to school it doesn't matter what company you worked for it doesn't matter what your previous occupation was no it doesn't matter if you had a silver bom with a silver spoon up your ass no it kind of It kind of rewards you for you know the strength of your ideas for the most part and I think that's um that's a pretty cool thing to just have an even like an even Level Playing Field kind of means like anyone who no matter what they're doing wherever they are can kind of you know um put some interesting thoughts into the abyss and sometimes when you do that you can pick up some interesting Alpha I think mate I'm coming around I just don't have my Twitter involvement is a Time dependent thing I just don't have time at the moment even though um yeah your experience doesn't really matter on on Twitter I think we can produce a couple of things about about yours KOA you know one is you know you can figure out that you you had an early career as an investment banking analyst and the second one is you had a few stins on the buy side um you mentioned hedge fund so I think like that's you know trying to trying to build um build a bit of a story around your Insight and you've clearly been around the mining um industry for a long time in those capacities and I was think I was trying to think of like reflecting on the content you put out into the ab and and try to think of like the sort of opportunities you appear to be interested in if I were to kind of like group them into three buckets this this is my take and I'm ke to get your um feedback one is you seem be pretty interested in the genuine tier one m&a targets that um major miners would be interested in the second one is you appear to be interested in value trades where you take a non-consensus but High conviction view on the commodity Outlook or development pipeline Etc and the third one is that you seem to be somewhat interested in call option type opportunities by virtue of stage or pricing Dynamics is that a fair conceptual categorization of the the groups of opportunities you're attracted to if I ever launch a fund I'll how are you as the marketing guy because that's the slide I guess better than I can say it we'll write that down before you leave mate take take it with you give us a plug like why then right like there's so many opportunities in this world like like he trying to screen what signal and noise like what what why why you drain to those tier one assets what is uh Rio Rio's pilra operations name the iron or Price what's the otet margin been somewhere between 50 and 70% rain or shine that's yeah there's cyclicality to it but if you actually look at the history that's a bloody good business these first cortile long life assets first of all they're by definition special we'll get into many things but you know if Corvette's not special lithium a terrible industry to be in if a Cula is not special why be involved in Copper you you what actually generates the great profits and sustainability of some of these industries is the fact that the cost curve steepens and that there are these really special assets that if you find one of them and you can develop it without blowing the capital budget epically you have incredible expansion optionality I mean I think I said this on a different podcast but it's more another way we all know this great comment about oh the head grade of Escondida and the head grade of copper mines has been declining precipitously over the last 20 years so you need to move more rock to get the same tons of copper I take this the other way which is the real interesting thing is Escondida processes today 130,000 130 million tons a year through the mill instead of 70 10 years ago and it produces the same amount and you sit there and say okay they have to run they have to run in they have to invest capital in multiple concentrators to run in place I take this the other angle which is if you had unlimited access to Talent equipment and capital Escondida would have been so much bigger day one than it was but they also are able to do these Brownfield expansions that sure it runs in place but the returns make sense on what they're adding to it so these long life assets with these abundant resource endowments they have incredible optionality which because we went through 14 15 16 truth be told we're not valuing optionality in these things because as we'll get to the buy side you can't in the public markets you can't survive more than two bad years and you only get a third year if you've made someone a pile of money beforehand otherwise three strikes you're out and this is a business with very long Cycles where you have to have the ability you take a perspective um so there a little just a mismatch but I feel comfortable personally and if I have the right investors alongside me who understand that this is a 10-year possibility or five-year possibility you're going to work out all right yeah you could buy something completely wrong that's always the risk this is a cyal industry by definition but yeah if you told a private Equity guy they're going to make a 50 to 70% eepa margin every year now based on price that fluctu is here and there but these are really good businesses find something in the first quartile there's a reason glenor used to have like small little Silver Mines in Bolivia that had some zinc and was like the talk seven years ago is oh this is really nice for the marketing business it's a nice little compliment but I think post brumadinho which after samarco in 2015 um I think there's been a very clear attitude in the majors which is is this a riotinto asset is this a glenor asset is this a free Port asset is this a BHP asset unless something's actually material to the bottom line 5% of EPA 10% of EPA are you really going to have the are you really going to have the A Team on it the B team on it I mean let's use um Cobar which we all think mck mcmullan's Bloody genius what he's done at Still Water what he's done at detour and there's all the stuff he's done privately which has done been absolutely phenomenal but what that guy's going to do with a focused team at Cobar when if you're the guy at glenor who's given Cobar you're a young mine manager great this is proven ground to get one of the big mines if you've been there 20 years you're never getting kolasi you're not getting anti pakai and if you're not getting those that's kind of the retirement job you're you're not you're not going to get access to the capital so I think in these Majors now there's an attitude of if is it an asset that belongs in our portfolio if not it needs to have a more focused team and a more focused set a shareholder so that's why I love the tier one stuff it's until we solve the eucalyptus Paradox and Mining is beloved and we have like 20-year High mining Engineers uh coming out a university these things aren't going to be valued properly but th those big companies can't have anything less than a absolute tier one asset because they got that much that many people walking around because they're that system driven and that over the top with absolutely everything that they need these worldclass or bodies to actually make money you throw them in uh a mid-grade gold deposit or something for example they wouldn't make any money 25,000 safety people walking around on the surface telling everyone to stop work like that's yeah they need those or bodies it just wouldn't work otherwise look big mines big mines you have a bigger margin for error but they have the capital to create those big mins I sort of think of those cost curve Dynamics as like you know cost curves are the Holy Grail of investing in mining completely um yes and I think you know we we read a lot of these you know could your research reports and all that sort of stuff and not much time is actually spent on evaluating um where the project sits on the Costco and just how important that is in the context of the rest of the equity research report but it's like the most important factor in a lot of ways because it let it protects you throughout the cycle um and it attracts a kind of a corporate outcome in the case of you know special kind of deposits I think we'll get to that throughout some of our our conversation the bit like you know when you think of your the way you look at your opportunities and everything like that I me I listened to one of your podcasts and you said that humility is not one of your strong points right and you did mention getting stuff wrong in your um in your piece there so like how does that how does that impact the way that you reflect on the times that you get wrong you think your the fact that humility is not one of your strengths limits your ability to kind of you know reflect on the times when you make a bad call and improve and learn from that well one of the things that was said about me when I was growing up was there's something incredible about you koala you're aware of all of your flaws and yet you make no effort to change I I think self-awareness and knowing that there's a confidence and a subtle arrogance which you guys might just call being American uh is part of an American prick you gota you got to believe you can do it to actually try it and if you don't try it you're never going to win that's the spirit we have there's no tall poppy syndrome in the USA I look I think though it's uh you have to kind of have the ability to go okay we got that right we got that wrong okay all right is there any lessons to take or is this one of those shit happens or to quote uh The Usual Suspects bad day fuck it move on those are the uh you have to have I mean this whole business to go look for a to go look for a deposit to build a deposit to run a deposit to invest your own money when index funds are there by the simple by simply actively managing you have to believe in yourself you're better than others if you don't have that belief even if you say oh I got something to prove I just want to learn no if you're if you're committing real time to this stuff deep down you have that belief and you can deny it you can say you can wrap yourself in you know it's a great team know if you got into this whatever you do in life whatever you got into you do it because you believe you're good at it I think that's just a simple fact to it like I've had a few people say who have met me from this that uh some people are different online than they are in person and a few folks said my online Persona is a much more constrained version of who I am in real life that's a real Rarity oh that's good glad we got you in person then C one of the um one of the points Trev touched on in those categories was m&a at the big end of town so why don't we start by diving into that you've you've got a bit more experience than most of us here in the investment part of the the mining world and you've already touched on you know 14 15 16 and those days just to start with I'm ke to hear how different things look now from 10 years ago can't believe 14's like 10 years ago fucking I'm feeling old how old are you KOA 33 that's the oldest go anyway I continue look someone at one of the big companies said we're like a super tanker turning us as a nightmare but once we get pointed in the direction we want to go and we start moving momentum is incredible in fact it's so incredible that if we want to stop we can't um so I think in the big mining companies we talked about all the systems the processes um these things it's not like there's four with the exception of Glen core which I think from everything I can observe outside looking in still has a partnership mindset and a desire to be flexible and be able to move fast and make decisions and own them I mean look first Quantum announced earlier this year that they're going to um they bought 55% of laranja from rioo for 105 million in a commitment to spend first 546 million of Inc expenditures that deal was first talked about I think on mining.com in 2020 lron has been sitting in the Rio portfolio for over a decade how does that deal take three years I think that you just have to say that these things these things take time they take alignment uh I mean I think we all kind of see the logic of bhp's minerals but how do you get all the internal systems of a major minor and then get Management on board get the board on board agree the price makes sense and then actually have the target look at you and go yeah this makes sense for us too I mean when you have so many things after I mean m&a is hard like it's just it's one of the reasons you don't see that many deals I mean this this Tech glenor Saga then that ended up with glenor buying the coal business from Tech I mean we learned about through that that Ivan and Don Lindsay had talked about this a few years ago but how do you get that alignment and then I as I said very publicly multiple places I thought Glen tech would have been a fabulous deal but the chairman ettus who has the class A shares didn't feel the same way but how much of this is you know repercussions from the terrible m&a that was done 10 or 15 years ago like you you talk about m& taking so long but is that a sort of mindset change from the amount of capital that was burnt through the you know atrocious deals that were done what you got Rivers Al big one there was some big humdingers wasn't there there's plenty I mean everyone's said everyone's had disasters um and I think a good example of this is uh the amount of optionality that is sitting on the major balance sheets right now that is not understood by the market cuz everyone who made money in the China super cycle is retired you nailed the 1516 collapse you either walked away or if you kept saying this is the end of China you've been carried out on a stretcher by now but if you look at second half 15 first half 16 remember September 2015 glenor even the partners capitulate and said we're over levered we're going to do a rights issue and we're going to take our prata um and they did that at memory serves me correct it was 125 Pence um I look at that and if you look at second half 15 one half AG 16 come to tropy Buton mean that was a nightmare if we ever go back there we're going to be drinking something far stronger than beer doing this podcast um 8 billion of e what is Glen and Glen cor's bought some coal mines out of um Rio since then fine tuned here and there but let's I think it's fair to say it's probably a 910 billion trophy du if we go back to that nightmare what's Glen cor's net debt policy today before we can factoring elk Valley and everything else it's 10 billion they have a base distribution policy they'll look at all their obligations and then they'll say okay we may do an incremental Capital return but it's kind of like a sweep up to 10 billion and for strategic value of creative m&a they'll go to 16 billion and then delever themselves for a business that has try $10 billion or even if we forget that say it's 8 billion two times TR is the max if they do m&a you're seriously telling me that second half 15 first half 16 was not sustainable like if that had gone on for one more year multiple companies would have gone into restructuring multiple mines would have closed you would have to say it's the end of growing Metals demand globally I personally think that these businesses could run at Three Times try dah let's go take the 15 16 that nightmare 12 months adjust for m&a and all that you could run a three times trough provide you don't have a wall of maturity hitting in one given year so just have a responsible Treasury Department a thoughtful CFO but no one's running at that level no one dares goes beyond one two times so there's a lot of optionality and it's very difficult to get m&a done and that's why I think from an exploration perspective of tier ones are what's so impressive cuz what's actually going to get some someone to get through all the Committees and get focuses to say this asset belongs with us you know it takes an asset to be developed independently it can't catch the eyes of a Rio or a BHP why did Robert friand have to have to deliver kamoa kakula remember he sold he did Zin 9.9% at a premium in late 15 he sold 50% of kamoka coola which is the 80% cuz the Congo got 20% so if you think about it half of K kak and they discovered kakula announcement in for early 16 so half of K Kaka goes to the Chinese set the asset level and then to actually Finance the build of that thing he had to give he had to do 20% to cic at a premium 10% cic at a premium long story short 40% of Ivano mines today is owned by Zin and cidic half the asset plat reef is interesting kushi's interesting Western forlands has a lot of optionality but who are we kidding the value of that business overwhelmingly is kok caula so for an asset that will be the second biggest copper mine in the world come five six years from now and has multiple expansion opportunities if you include the Western forlands he had to basically sell 75% of the economics to the Chinese bigest based on copper output I assume you mean yeah yeah and also phenomenal profitability bloody but also bloody bloody incredible profitability the smelter is one of the most ES favorable Investments you're not going to you're going to produce acid that is then going to be a great byproduct in the African copper belt where you have oxides that need acid instead of sending out 50% concentrate you're sending out 100% copper layering the rail it's just it it solves Logistics it reduced cost it's what everything ESG should be but I say this because that was the Congo no one was ready to go to the Congo even for an asset that good and so I look at all this L and I say when you go look at exploration one in a, discoveries become a mine or one in a th000 outcrops becomes a discovery or a deposit when you go looking you want to go find something that is so self-evidently incredible that you just go yeah we all know where that asset ends up one day but what about like barck for instance they've been operating well that was sorry that was ran gold originally now it's barri for the cabali m in DRC does it sound like the incumbents in places like the DRC and there's other obviously other mines there as well they're a lot safer than anyone new that wants to go there in terms of ease of operation we've obviously seen the avz thing but they've obviously been operating for a long time there without too much drama I know look they're up there they're up there in the Northeast Congo which is arguably I mean the Congo's a massive country the copper is all in the south I mean that's a I've been I've been to that part of the Congo um but look I the Northeast Congo is a much more complicated part of it uh cabali is an incredible mind and I don't spend much time on the golds but I'll pivot your question to everyone knows I'm a shareholder and big believer in alphaman which has a beautiful tin asset up there in North Kevo um you sit there and go there's not a Logistics in there there's not the logistics in there building these mines are difficult uh but they want the jobs you have to be good with the community you have to have the right talented people to deliver it but you got to go where the geology is simple as that I mean bringing it back to the Yem Pace um what was what was the point in talking about ivanho in the context of you know the m&a Dynamics of of the Mages you are you implying that it's you know that freedland had to develop that because the Mages didn't didn't take an interest or what like what what's the what's the broader commentary on on the m& strategy I think everyone knew even in 17 that kok kakula was an exceptional asset with kakula being phase one of it with that said does Robert expect a full price when he finds something truly incredible he expects to be compensated for it you don't be as successful as he has been without having that attitude um but I think coming out of the trauma of the 2011 to6 period when you're the CEO of a major Mining Company you're going to ask yourself why do I have this job and there weren't a lot of retirements around that time it's I'm in this job because they decided they needed a fresh set of a fresh think on things and what was the biggest mistake you made in the first half of the 2010s you bought something so what do you do if you're given a job because the person above wasn't performing to the standards of their boss the board and the shareholders what was their their mistake okay first rule don't do that and so who's going to go chase where you're going to have to pay full price for and tier one assets you have to pay full because if it's self-evident the shareholders know it's a T1 PR as well yeah well that's why the that's why the value is in the discovery of something incredible and then there's value in delivering it running it but also the optionality and exercising the optionality of expansions and all that in these great orbis I mean Freeport had a great slide in the 2010s looking at Morenci Sarah Verde grasberg with a simple message the big mines get bigger this is before they and they still had 10K 10K funar roomi at the time like that's how these things everyone goes well what what where's all the copper come from why is this uh deficit kept getting pushed out it's cuz BP is going to do brownfields in Southern Australia they're going to figure out what to do at esanda to maintain production it's it's all those things so I bring up ivanho because you look can say that's the deal that that should be in a major today but just because of the timing of the cycles and confusion about and and trying to understand the Congo and think about getting companies Western companies to go into the Congo that asset had been in Chile that asset had been in Peru that asset had been in Canada or wa that asset is not going into production as an independent asset that's why I bring it up because that's the one thing when you say koala what do you mean tier ones that's a tier one that went independent it went independent because it was in katanga it's not if that was in any other place effectively that that's taken over and you you mentioned Freeport there it's interesting with 10K around that time I think in 16 they sold it Y what what do you think they're thinking with all the majors and selling some of these assets that are tier one that keep going [Laughter] on ah I'm excited about this now if you anticipation that's been 10 years I can tell the story um third month of investment banking got called into a managing director's office and said um we've been asked to pitch for the the fairness opinion for a mining company that's going to diversify into oil and gas and make two simultaneous Acquisitions free P we did not win that mandate and probably for the best because given how well that was received and all the litigation that went on after that I think maybe the bank that actually won that some of the bankers had to testify in Delaware Chancery Court I didn't win well so what's the story I don't know but the reason teni had to get sold so let's just think about a few things Freeport had to do uh deciding to go into oil and gas in late 2012 early 2013 uh which we remember the nightmare of iron or going to 40 now oil went negative in covid but uh it started with a two at one point in early 16 as well so thank you Shale um Freeport had to delever Carl icon became an activist but they had levered up which again everyone's terrified to use leverage now um they had in at the money Equity offering going on I mean this is a New York Stock Exchange multi-billion dollar company that traded below $10 at one point and look everyone was convinced they were they weren't make money the grassbur contract was gonna going to be up for renegotiation in 5 years in the next 5 years the debt was onerous they weren't generating free cash flow they sold 13% of Morenci to the Japanese who were already 12% Partners there for a billion dollars I mean morenzi for crying out loud that's an amazing that's one of the best assets in Arizona um and they sold tanky fi for2 and half billion dollars right before Cobalt ripped uh to China mly because if you're trying to stay alive you have to make decisions in triage that maybe longterm are going to look very foolish but you end up in a car crash and you're losing a lot of blood I find it interesting right you're going to put a uh bandage oh God what do you call those things that uh t t yeah you're going to put a tourniquet on an arm to stop the bleeding thought you were having a bloody SP fucking G to have to give you Ma to no it's the but no you'll put tourniquets on things and just to save the life even if you might impair things down the road and that's what happens when you make critical mistakes I have two follow-ups firstly those sorts of bits of m&a you know BHB tried in in oil and gas I think a few years before that as well that's the m&a I'm I'm talking about where I think the whole investment Community is scared of what the uh the miners will do once they start getting and they have had over the past few years great cash flows you know they're scared they'll do stupid m&a like that again do you think that's still front and center of investors minds I think I think everyone is now starting to get comfortable with the idea that these big established mining companies um have a license to grow um look Rio 15% owned by the Chinese there's an understanding directly between CRA and Beijing that that can't go anymore Rio can't buy stock unless something sorted out there they can't buy back stock BHP is not buying back stock right now I think one of the reasons BHP is buying not buying back back stock is because first of all redomicile collapsing the Dual listing you guys have these wonderful Franken credits here so there's a great preference for that super fans love divies but BHP and Rio have had a little bit of a reating I mean the only major that hasn't had a reating and I think that's because of Cole is glenor to some extent so you could sit there and say the BuyBacks aren't as value a creative as they would have been I would turn that around and say that for about seven years the market has looked at this industry and said capitalize it give me my money back we don't trust you we don't need as much this in the future so give me dividends buy back stock decapitalize the industry we're not going to need you anymore you're it's it's it was ESG to an extreme through the multiples we're now starting to understand how much we're going to need this stuff so if you've already sunk the capital you have all this optionality the multiples are growing and I wouldn't say you could say cynically BuyBacks aren't a creative anymore I would say there's a license to grow a license to invest responsibly but everyone's going to get one shot and if you screw it up you're going to go in the Penalty Box C can I can I bring it back to your free Port point just briefly listening to that story it always sounds like a key message or a key takeaway I have from that story is that leverage can bite you in the ass but simultaneously is as you tell that story with that lesson you also advocate for miners today to have three times tropy evitar instead of one that was my second question I read your mind how do you reconcile those two views well I reconcile it with the fact that you look at if you have a responsible maturity ladder you got and say okay if we go into a three-year depression um and let's say you had 10% of the debt amortising every year starting in year five and you were responsible about refinancing things when times are good and maintain optionality you're always going to have some Runway um and again the trough happens for 12 months so I think you can have a responsible perspective I'm not saying let's take midcycle lever it up four times and act like we're Apollo or Blackstone buying a packaging company I'm saying recognized that there's potential here but everyone's still traumatized by it um and so there's opportunities to do stuff there but so far away and this is why Cycles exist imagine this is just four of us talking around the table imagine trying to get everyone in a mining company a big hundred billion $50 billion dollar Mining Company to get around we're going to be the first to do this we're going to be the first to go you know what let's do something creative but also quite frankly what's the harm in using shares for m&a the glenore proposal for Tech was all stock I think look if you have a major Discovery and look exploration the way it works is you hit a great hole does the followup validate and all of a sudden you realize you have something self-evident it's incredible wealth creation very quickly why would you want to take cash and pay capital gains if you're being acquired by a responsible Diversified who's going to be a great custodian of the asset and you're not going to have to pay Capital Gains because it's a share swap might be or off fir as you say if they haven't been rried yet yeah but even still good for we're not we're not in a world where these guys are trading at premium multiples or it's like go buy everything we want you to go buy we don't want the money back we're not in a go on a shopping sprs okay go find the next what what's the next escanda for BHP it's going to be vuna Argentina simple as that like what what what else is out there that's going to give them the same scale option ity in a place where they go okay I can see how it's going to work I can see all the capital's going to go in but we're going have to SN a lot of capital we're going to have to think long term but that will still be a mind running when all of our grandkids are going into retirement that's the optionality but we're only now talking about optionality instead of you trade a 15% free cash flow yield at spot give me my money back I just want to I'm renting these stocks because I'm terrified if I lose money in mining I'll get fired Great Line in New York no long only analyst or PM has gotten fired for missing a mining cycle what um so we've seen a lot lately and it's becoming just the new thing we even saw it today with percus Spa into orop where there's no there's no real takeovers or scheme of Arrangements anymore it's just let's just buy 15 to 20% of the company and we'll block any future m&a and we'll just now have in a way control of the company we've seen on our on our side part of the world what have we got we've got Delta Wildcat aour line Town we've got and as I said oror today what do you think of the whole strategy all right so um that's the invitation to talk about lithium wa should we talk about it we can yeah let's talk about the the uncompetitive nature of the m&a but all right um but let's yeah Will FAL meme time uncompetitive CU there they're not allowing it to be competitive oh that's so by the rules I don't think it makes sense to drill another hole in Western Australia to look for lithium for the next two to three years in light of what's happened in the last three months oh we've got the inro ordered put the drill down done it's pointless because the wealthy people good people of Perth because I'd like to leave tomorrow um shout out Christina hold him up immigration I mean you give it time yeah well might sure you're in the air first the uh look album Marl simple deal with Lion town you get the higher bid and then you have a blocking bid come in sqm looks that and says okay well we're strategic we're totally fine with this uh 352 and if a couple billionaires out of Earth in Western Australia decide they want to play the same games put option to everyone at 350 we we'll and I think the mind is a great we'll end up with 51% 52% Gina ends up with 19.9 Chris ends up with somewhere between 10 and 19.9 anyone wants to be uh the minority uh tetherball between all of us that's fine C's in there too and you got the carried and they've just all kind of gone I mean you've sterilized the whole wa Market because if it's deemed it it's not even that Gina bought at 250 when the initial bid came in it was when the final number was decided and it's like the Yankees have deemed this worthy I must defend the honor of the pilura and my homeland my father found the pilra and some damn Brits have mined it and I will not let that happen again but do you think of the line toown case if she started buying let's talk lown if she started buying it a150 or something before I think she had a minority stake that was yeah but if she like become became substantial and then started buying it wouldn't have ever got back down to a$ dollar 50 I don't think like she did pay obviously a significant premium for that 20% up near three bucks but now it's what trading at $137 today I know the lithium price fell about 50% in between that but all all that price movement from a $150 to three bucks was purely a function of Alba M's numerous bids if if she played a hand too early I don't think it yeah there there's not really any interest at the moment in it but it might have been it might it just went different you think of strategies like minimizing consideration for 100% right assume assume that's the the plan she 80 80 for absolutely fuck all you can back solve the strategy today as rational look when she made her move you do not get the impression that this was a fundamental position for her if it was a fundamental position she would have been in already on the first bid she would have been there there buying alongside Alamar when Alamar would buy below 250 in the market and it would have been made very clear this isn't happening I want this to go the distance it it you wouldn't have wasted the legal resources the banking resources the corporate resources on this drama what was it it was like a six Monon game but she is any position in Australia fundamental to her because she's got so much money anyway most billionaires don't have 18 billion in cash yeah she literally has 18 billion in cash just a piss thean like even the hole of L town is not much to her it's exciting though from a macro lithium perspective cuz can you imagine line toown was already is already being built but can you imagine a Zur Delta wild cat it's um sorry it's wild cat just let pegmatite 4 pegmatite five H pegmatite 6 is going to need a float plant has some mic whatever anything's good right now the whole thing is these things are not all going to come on first of all you're not going to have the equipment the labor and the capital all running on three big projects at once Chris and Gan have sat down and said you will go in the order that we tell you to when we decide which is great you've just smoothed out the supply growth um but I think everyone in Australia should really go look back on The Saga of turquoise Hill uh when Rio figured out that they didn't actually have a standstill to stay at 49% and they went to 50.1 freedland left the board and we're going back and one of the things I nerd out about is understanding the history of these cycles and really digging into this because these things repeat they don't they don't repeat but they rhyme to be cliche so understanding these things and Rio got to 50.1 and because of the original agreement Rio and Ivano turo had basically Rio controlled everything and then Rio builds OT now was it bad Chinese Steel in shaft 2 that had just not really been maintained or had gone bad while uh the underground was stalled was it they actually got underground and the ground conditions were poor but all of a sudden o o tooy underground took an extra two years and an extra like3 billion dollar nothing to Rio Tinto but if you're the 49% turquise hill minorities I mean Rio doesn't put you out of your misery until like the things about ready to ramp so having gone through the turquoise Hill Saga myself and having been to OT twice amazing asset but the drama the VA the headaches and wasn't worth it isn't there another there's a part of the all body between a certain RL that is owned by another party that there was a court case going on about that not a big deal yeah but it was like as you said just drama I can I can see why I'm I'm surprised about the what happened with line town but that might be just an alale thing but you can you can see why aou and Wildcat are attracting so much attention without not much oh if there's shitloads of underground mins come online to get skilled labor and to get the people to do it is so much harder than getting big open pits going big open pits are so much simpler just blow the living fuck out of it dig it up there is a lot of intricacies to it but to get skillful people to run and underground mine and get everything set up is always the question hasn't it been the question about lown the whole time is show me a underground Hard Rock lithium mine ah but doesn't matter what the Rock is it's it's all it's all the same methods I don't it's and there's look prominent Hill and caratina and that like they're they're of a similar scale like prominent Hill was three to four million tunnel think out from an underground it's they they exist how thick are the seams though I mean I'm I'm not I'm not underground Miner but I'm just saying you haven't really seen that before in the Hard Rock lithium space is it a is it is it thick enough like these are all the Dy lown is it's fucking huge like it's like it's big I believe that too album album was ready to do it I assume they've done their work would be a different case like that's actually a lot looks like a lot thinner um so you know in the iron contamination and things like that they'll need yeah that's a bit different but overall just the skill levels and the amount of people available required to just drive heer trucks and bl do these Mass blasts and open pits it's just a different Arena and that's why I believe aour and Wildcat have got so much attention because they're just e it's so much easier yeah so that's where the that's where the focus will be you know any more that's going to pop up yeah you let us know afterward why would I but why would I but why would you want to be Chris and Gina's bitch well but does that mean like okay minr minres must be a bloody if if these companies are getting buggered over by their shareholdings and losing control and everything obviously the value is going back towards the value has to go somewhere if they're losing value obviously the value must go to Chris and junina yeah but I think to the point about getting optionality fully under pre in the majors and in these big assets I mean are Chris and Gina really going to come out and say to the world all right well we're not coordinating want to be very clear we are not coordinating but you know just I think we're aligned with the other shareholders here and you know I think we'll do this then we'll do that and it's it's one of those things where um I had a I had a mining company recently explained to me that they're going to drill out a Target and they will probably but they have to negotiate with the local community for exploitation rights they have the rights to drill but then they're going have to pay something to actually mine it and this is a satellite deposit and it's like okay well here's the question do you drill it fully out such that if you drill it fully out you're paying you're GNA you're going to pay full Freight do you drill it out just so you improve it justifies developing and then negotiate with the community and then you real and then but then the market doesn't appreciate the full potential of the of the whole thing it's it's just tricky to understand all these iterations because we we're so used to now thinking about nav and nav is a snapshot if I sync this capital and deliver this mine plan and deliver these cash flows what is it worth you then think about okay well what if we double the thing in year three what if we do a little you can build that into nav you can you can risk your nav well you then have to add on to the okay we're going to deploy $2 billion in year three and we're going to 2x cash flow but there's all these decision trees looking forward you can check on some stupid exploration value and say in there there's always a nav can capture that Excel Excel can do anything but imagine like you talk you look at what the lithium price has done how much it's fallen off imagine if bloody like avz and Leo lithium actually their minds were actually being developed right now now like all this a lot of and we talked about it the other week all the chat we've been having about lithium has been about change of rock ownership like there's line towns coming online that's exciting a lot of a lot of the new lithium supply in Australia has been from organic expansion um there isn't like yeah we're waiting for the actual rock to come it's going to be exciting when it does imagine if avz injected themselves like back before yeah it' be yeah be a different story I'm interested to get your your thoughts you know around that how do you see the supply growth of lithium over the next 10 years you you've written a substack over a year ago now saying lithium is to the effect of the next inor I or 20 years ago ion or 20 years ago how does I mean since you've written that a year ago had has your thinking changed at all no I think we were all wait if if you if you want to believe that there's going to be a wall of cheap lithium coming you need to believe in direct lithium extraction which I personally think is H pal 30 years ago so um the risk of not getting out of the city alive tomorrow I'd like to bring up Anaconda nickel H pal is a tricky little thing and it's taking a long time to sort out but I think you saying that about dle puts you in the good books of a lot of people in wa as well so they sort of white they they're rock rock rock man everything else is not going to work me and the folks at wa have a complicated and volatile Beautiful Romance but I mean yeah my cup SE I think to the point it's uh it's very good for Hard Rock lithium if dle isn't a you know in wa if dle isn't a imminent threat it's a bold position to say that you know um lithium is I or 2.0 because like it's not like there's a bunch of latent iron or that could just Supply that could come online as technology advances um but there is with lithium unless you belied in recycling you know all of a sudden um so like how can you sort of confidently have the view that lithium is Ion or 2.0 when like the abundance of it is more prevalent there's um you don't have such of a steep cost curve the and there's a bunch of latent like lithium that can come online if technology permitted if technology permitted correct if technology permitted we would have eafs all over the place not just as a dominant steel production in the US but then you actually need to have the scrap and you actually need to have scrap in the right spec not the steel that was acceptable 30 years ago that is not going into a skyscraper built today in fact you go look at the iron uh unit mix that goes into a USAF and Vol did an amazing slide deck on this that I've referenced multiple times from like four or five years ago I mean the site visit and the analyst day presentations are incredible because the research departments in these companies for as slow as they move on things the research they do is phenomenal on an academic thinking really longer term the eafs in the US 20 to 25% of the iron mix is not just scrap because they need the components of Virgin iron or drri to actually deliver the steel on spec so I think even Robert Freeland would say 10 years ago we were on a big floating ball of iron and he wasn't excited about iron or today he has nimba uh in Guinea or it's Liberia it's one side of the Border uh which is very near simu so I think you actually have to think about this in the let's look at iron War everyone's convinced this price is not sustainable uh there plenty of iron ore here and there like BEP could go to 330 like Ironbridge simmo's coming Val wants to get their Dam sorted they could go back to 400 if they wanted to uh I've said I think Mary River up in Baffin Island in Northern Canada is probably the asset that could build the next great major um it's all there but there's also little magnetite hematite projects all over the place I mean there's small things in wa y but the whole thing is why is all these iron or guys making so much money it's because there's only like four or five places in the world and they've built the Great mining companies where there's big scale lowcost it's these small little mines which are really hard to work on and it's why no one tries to do it anymore quite frankly so you get this very steep cost curve and to bring it back to lithium uh pedite whether it's coming out of Africa and it's being processed in China that's kind of set the top of the cost curve there is a very steep Phantom fourth quartile now you can have restocking and destocking that creates all this volatility I would just remind everyone the long-term price is the average price you got to overshoot it and undershoot it as I see spge me hit 1400 today so if you want to have the S if you want to enjoy the 5,000 6,000 you got to be happy with the, 1400 which is why I also wrote that substack over a year ago that said volatility is quality's best friend that's how you get the chance to buy these things cheap when people panic and you go all right it's going to be fine and I think price is higher longer term than it is today but I look at this and I say okay the James Bay Alem asset the resources in 63 dikes contamination dilution how do you run all that cleanly how Nal has failed twice there are folks that I spoke to who are very experienced people that I said hey I've been investing in some lithium exploration stuff it looks very interesting I really think you should take a look at it and they said koala I was involved in Nal one of the times it screwed up you say hard rocks Bine lithium in Canada or even Australia you've just triggered PTSD for me I I think just like to find these quality scale things now let's see how aor comes together and if you really want to get into the and I want to turn this into a wa versus everything else but most of these things in wa are going to require flotation so you got to get water you got to get water on spec these things will eventually work it's just the ramp ups are going to take longer than I think people think well that's OD pill gangor is the classic example they got a lot of internal docks in the or body and you know it's all it's not a it's not an exact science they just say oh start digging here stop digging there based on where these blast balls have ended up now you know 18 months of sort of tweaking the flotation side of things every every side's obviously as someone who uh who Once Upon a Time had a a junior go see new century as their first mindsight visit and doing of some Pro and doing the model and everything and the model looked beautiful just uh you know whilea the recoveries weren't good this month this quarter because you know we're going to have to put another Jameson cell in it's like it's just one of those things where some point you actually have you run out of capital patience and Runway it's just these things are going to take a lot more time and I think as people see that I mean yeah 3,000 4,000 for two years everyone's going to be like I don't care just go we'll figure it out we have time to figure out the prize is big enough we hang out at500 to 2,000 all right well is it going to take us another 6 to 12 months to get this sorted all right what do the returns look like it's just a I think it's one things where everyone wants to believe we're going to have cheap lithium they want to believe Elon that refining is the bottleneck and these refineries are really hard to build but I stand by this is going to look like wa iron ore going to steel mills in China there no matter how great the technology is if you don't control your rock and you don't control your feed stock that's where the profits going to be because there's just not going to be that many special ore bodies that can deliver a consistent blend of feed to a very what is really a very sensitive steel mill with phds running it to deliver the spec that's going to go into these EVS simple as that you look at P pilra the reason the pilra is pilra is just from what a Year's worth of massive prices that gave him three billion bucks worth of cash well they' just they just capitalized they were just there at the perfect time had it ready and just absolutely spiked it and that year or two years of tinkering and getting it all right was done before the prices went perfect time had the the IP or whatever to to understand how to maximize the value of the the processing and everything right yeah all righty there was part one of our chat with koala it was JD it was plenty more to come we went for a couple of hours so what happens in part two I don't know yet of put the boxing gloves on I haven't edited it yet got some we've got some juicy stuff coming like to to be fair like tra literally he had three be is in 2 hours which I think is pretty acceptable but it's enough to get him going put it that way just needed to loosen up a little bit just drop the shackles yeah all righty we've got we've got one of our favorite topics incentives coming up we're going to talk shareholder activism and a whole heap more I re we'll just leave it at that just leave it at a whole heap more you know those TV shows when they get to the final the final ad of like a broadcast and they're like plenty more to come like they're literally going to come back and sign off try and keep you hooked right let's thanks all the partners the esgc at the top of the show future proof Consulting and kadril who are going to be breaking on all vgina very soon we're also got DSi underground teror Capital Mand mining Title Services anytime exploration KCA Site Services JP search and Brooks Airway the information contained in this side of money of mine is of General nature only and does not take into account the objectives financial situation or needs of any particular person before making any investment decision you should consult with your financial adviser and consider how appropriate the advice is to your objectives financial situation and needs