China's Economic Stimulus and Market Reactions

Right-o, money miners, welcome back to another week. The flu's finished, but caught up with the uni, mate. You know I did Mustang Bar Friday and Saturday night? What a business development in English from uni. That is one sponsor I want to get. That is the greatest place on earth. It's a good venue. Oh, so good. A good live venue. Mate, our goods are frigging high on all price. Bloody what, up 13%? 13% on open of the Shanghai Exchange. Yeah, mate, it's just... Well, that's pretty much... Look at the majors rip higher. All of them. Large cap watch list. Oh, my energy is up a minimum 13.5% every day just before I rip an Axis mining technology ad. Jesus Christ, nothing better than my favourite pastime, telling everyone about the trusted advisor in drill oil survey instrumentation. Life has never been better. It just makes you feel good. Oh, makes you... Go Axis. You want to feel good, give them a call. You'll feel great. Your energy will be up 20%. Right, China stimulus, big, big news. This could be, as you said, trap. Is this the start of a commodity super cycle? He said it just like that. No mayo at all. It's a big U-turn in policy, right? Like this is like we're seeing it in the stocks, we're seeing it in the futures markets. It's like this is kind of the only story that really matters right now in the markets that we all care about is the policy. environment in Beijing, which is maybe that's always been the case, to be honest. But, you know, certainly right now it feels like an elevated time of importance on this. I just can't believe how quick things have changed. Like we were talking about Minres at $30 the other day and they're bloody $52 again. Like it's just. Minres is definitely getting a mention. But, yeah, I think you're dead right, Trav. This is the thing we've got to talk about. Obviously a lot of the news started dribbling out late Tuesday, Wednesday, and it's just sort of shaken. commodities, as well as heaps of other markets. You can see the ramifications in European markets. You can look at the luxury stocks. They get a pickup when Chinese buyers want to buy more. I reckon we should run through it in the best way we can. Then in the background, we're going to keep working on getting some China experts on the show. If you've got any recommendations for people, just flick us an email, put a comment, or just let us know. And we will try and get them on the show. But if you live in Singapore, get in touch. All the gurus are in Singapore, it appears. Good time zone as well. So to start with, let's run through like what's kind of gone on. Oh, yeah. We've got Liontown and Kingston as well. But China. We do. China. Don't forget about them. All right. So everyone sort of knows that the property market in China has been under a bit of a drag for four years, I want to say. We started. hearing about Evergrande and some of these other companies in China really starting to slow down in 2020 through 2021. So it's been going on a while. And China's policy has been pretty different, pretty needless to say. The way they operate is very different to the West, not these massive rounds of stimulus. And on the rates side of things, they've been actually cutting for a while. So they're in a bit of a different sort of sync to what we are in Australia, to what they're in in the US. and all these sorts of things. They've also kind of steered clear of this individual stimulus, just kind of handing out money to individuals for kind of ideological type reasons as well. But like you said, Trav, a lot of this kind of changed last week. They announced big measures, which we'll kind of run through the kind of key points on, but the pretty clear results of all of this can be seen in the stocks. So the Shanghai index had its best week. in 16 years. And if you look at the Hong Kong index, the Hang Seng, that had its best week since 1998. So absolutely flying. You have to caveat this with the point that the Chinese real economy is very firmly different from the stock market that they have. So there is not the same correlation between the real economy as there is perhaps between the S&P and the broader US economy. So that's something you really need to note because the... The Chinese, first and foremost, they want to stimulate the real economy. They want people to feel richer, spend more, all these sorts of things, as opposed to just see the stock market go up today. Well, this is a big policy difference between largely the West and China, is a lot of the policy settings that we see in the West are actually more accommodative of just higher asset prices, rather than being more in touch with the real economy. 100%. That's been a feature since the global financial crisis in particular. Since 2008, a lot of the policy that we've seen has just seen a... inflation in asset prices across the Western world. So to get into what the Chinese have done in the past week or so, the highlights are that they have cut some interest rates. These, like I mentioned before, have been cut in the past, but they did a bit more of a substantial cut. They lowered the bank reserve requirement ratios, essentially meaning that banks need to hold a bit less capital to, again, stimulate liquidity throughout the economy. Then to boost the stock market, this is a bit of a different one. Again, they've done things like this, but not to this degree in the past. They're going to help firms buy back their own shares by refinancing bank loans that they've got. Essentially, this kind of helps leveraged investment. I think the kind of takeaway is that they don't like the sentiment that is present in China. When people see the stock market, they see it continuously going down. They feel less inclined to invest. in assets like the stock market because they just feel like they're losing wealth. So they kind of want to put a hold to that. They've never been outwardly massively supportive of just seeing the stock market rip higher, but they kind of want to put a bit of a pause on it just trending downward and downward over time. The signaling is super vital. And we see that in the West as well, the signaling around the central bank discussions, the Fed, the RBA. here in Australia, what they kind of signal is super, super important. And some of the messaging they were giving is that they would be comfortable and it's a possibility that they would double or even triple the limits on some of these packages of stimulus. For example, the stock stimulus there. Isn't that the whole stock? I mean, it's like there is a big difference between stimulating the real economy and then letting companies effectively borrow more. and have more fragility in your financial system in order to just buy back stock. That's not, buying back stock is, well, capital allocation that doesn't go to the real economy. It just goes to sort of the wealth effect to the extent that that exists. Yeah, and it seems from the outside much more sort of short term in nature, just to put a bit of a halt on the decline. But you can see because they had a Politburo meeting at the end of last week. This was sort of seen to be pulled forward a month from when it otherwise would have happened. And some of the wording, stopping the decline and stabilizing the property market, that was mentioned as a goal for the first time. That sort of explicit wording hasn't kind of been used before. And there's still questions about how they're going to kind of execute that and put it into implementation. But the fact that that is like the first ticket on the menu there is pretty telling. They're also talking about issuing bonds to the equivalent of 1.5% of its GDP to kind of raise capital. Again, that's interesting. That's a pretty big number. It's nowhere near the biggest that China has done in the past, but it is a very, very big number. But this whole stimulus package, it's not necessarily massive, but the wording that they will do more of it and that they're open to doing more of it I think has just got everyone super excited out there. Isn't it funny how this is all about China stimulating China, but how it actually just stimulates the world? Yeah. Because the fact that they are just a buyer of so much stuff, which you're going to go into. Totally, yeah. I'm no macro expert. I'll be the first to admit that. I steer clear of it as much as I possibly can. But I do love following the views of some of the large money managers that have a firm view on China. I don't know if you caught the commentary from David Tepper just a couple of days ago, JD. David Tepper is a billionaire. hedge fund manager. He runs Appaloosa Management, which I think over the last few years has been kind of returning its external funds and it basically manages mostly Tepper's own capital these days, which is just a casual $14 billion or thereabouts. He went on CNBC at the end of last week and I cut out a little bit and I'm keen to just sort of play it so you guys get a bit of a, and the listeners get. Get an indication of what these like large head-fung managers are making this like you turn in policy from China Cause the undervaluation as you you know, listen You can look at your chart and look at a chart of Bob on you on your screen right there Whatever stock you like in China They are even with the recent moves are like on a flat line low Compared to where they have been in the past and you're sitting there with single multiple Pee's with double digit growth rates for the big stocks that trade over here That's kind of versus what you know the value of your 20 plus on the S&P. Right. Okay, and then you have, so the question was, was China going to do the things that you want them to do? Okay, are they going to do the easing measures that you want them to do? So yeah, they came the other day and what's his name, Pan Gongxian, and I apologize because I can't even speak English well. You know, he came out and he was like jovial. It's like, whoa, jovial saying we're going to cut? And we're going to and we'll give you more. And he said, we'll do more and more if needed. Now, the Chinese to say we'll do more and more if needed. They don't say that because it's not been healthy to say those sort of things in China. But they said that the other night and I've listened very carefully what government officials say. So I took it that they did a lot. They exceeded expectations and he promised to do more and more and more. OK, and that's very strange language, especially for any central banker. but especially over there. So that was the first thing that happened. And last night, we heard that they were gonna have some kind of meeting, but they kind of blew away expectations on the physical stimulus that they were gonna do. Now, physical stimulus, if you look at your charts, if you like charts, because you used to be a broker and that was a good way to do things fast, what can happen around the world when they do that? That's what you have to ask yourself now. So now you have the Fed, so just a backdrop, again, the Fed's easing, you know you have a few more easings coming. The Japanese, they don't know what they want to do right now, but it doesn't matter what people think, they're going to be forced into things, and I can talk about that in a second. The Europeans are lowering rates, and now the Chinese are lowering rates, okay, and they're going to be aggressive in how they're going to do it, and they're also, believe this or not, swap facilities to buy stocks, encouraging buyback. of stocks, encouraging buybacks of stocks. Okay, this is China, all right? This is stock buybacks, not only encouraging it, lending you money to do it. And they're giving money like health money where you can put money out and you have no losses if you want to do it. You know how that thing works? You have only the money you put up and you don't lose money. That's a great deal for me. I want to be over there and borrow from some of this stuff. The other thing I thought you were going to ask is about tariffs and stuff like that. I do not care. Yeah. This is internal stimulus. In the physical stimulus they did last night, they're going to encourage consumption, directly saying it. So they're really doing all the things that people have asked them to do over these years. Good to see JD.com was up 9%. What did you guys make of that? Well, it sounds like a bit of a perfect storm, eh? Like if you've got, like, interest rates going down in the US and everything, and then you've got China stimulus, it's a bit of a double whammy, isn't it? It's such a, yeah, the entire government regime globally now is aligned to focus on these stimulatory kind of like market stimulus activities, which by their very nature kind of create more fragility in the financial system. Like you heard, China's banking sector is now going to have lower reserve ratios. Well, that definitely makes your banking sector more fragile. But it's kind of crazy as well. Like you see, you know, you hear it in Teppas. voice who's been a China watcher for so long and this is just like a really kind of unexpected and serious kind of U-turn in what the policy regime has been there in relation to the downturn they've experienced over the last sort of 18 months. I think historically, stimuluses are, you think of GFC, that was like a stimulus, trying to stimulate the economy to bloody everyone to own their own house and that obviously went to shit. Yeah, it does seem in the short term it's very encouraging for asset prices, exactly like as he outlined there, all the measures kind of put forward are positive in the short term for whether that be, you know, stocks, houses, any of these kind of things. But you kind of got to bear in mind that the reason it's done is because things haven't been looking so healthy. So that's one to keep in the back of our mind. Yeah, I think in like a... the way I internalize these activities is you encourage your banking sector to make riskier and riskier loans or have like low reserve ratios or whatever. a greater proportion of those new loans result in, you know, kind of can't be paid back. And that's when you have kind of the, you grow your credit, you grow your debt, and then it kind of compresses because at some point the marginal kind of like, you know, the person you lent money to can't pay it back. Yeah. It's just the debt cycles, yeah. A hundred percent. I was going to mention something further down, but it's appropriate to kind of pull it up here. A lot of the liquidity measures, the lowering of the interest rates, throughout China, you know, that that has been done to stimulate the economy in China, kind of needless to say. But there hasn't actually been the appetite to borrow. These rates have been coming down since 2023. And just, you know, reading people who watch this stuff religiously, they're saying that there hasn't been that sort of appetite for businesses, for households, whoever, to kind of borrow despite the cost of capital declining over that period. So. Whether we see it again after this sort of bigger drop down in interest rates kind of remains to be seen, but there is super weak sentiment both in the corporates and the households there. And in simple terms, if you don't want to borrow at a cheaper rate, doesn't really matter. So it's just something to kind of bear in mind. And it kind of stood out very interestingly that another reason why they're trying to do this is turn the sentiment around. in China to encourage people to invest and do these sorts of things that lead to growth over the longer term. Yeah. To focus on what like Tep is, you know, he highlighted, this is just a long-term chart of Alibaba, a little spike at the back end there. It's up 30% less than a week, but you can still see it's like, it's pretty subdued relative to the highs it reached sort of, you know, leading up to 2021 there. I don't have the numbers on me, but, you know, I think it's still. trades at a single digit multiple of earnings. Like it trades Alibaba, this phenomenal kind of Amazon equivalent, can actually trade on some instances a lower multiple of earnings than some of the mining companies we talk about. And Tepper is-I don't think Jack Ma talking ill of the CCP helped his crazy idea. And Tepper's not the only one that thinks this way. This is from Shanghai Macro on Twitter. In short, I'm aligned with David Tepper, buy China, buy everything, since the- July. Politburo meeting of 2023, I've been unequivocally bearish China. On Tuesday, I abandoned that bearish view and shifted to a tactically bullish stance due to significant shifts in Beijing's communication strategy, evidenced by the financial regulators press conference. Then after Thursday's Politburo meeting, I immediately sent out a note titled by China, where I turned outright bullish over a cyclical time horizon. Fresh off the press today, here's a tweet I thought was worth sharing. Beijing stock exchange 50 index soars over 14.5%. So New record for the largest single-day gain. So there's a couple of stocks mentioned here. China X rose more than 10%. Cattle. Cattle rose more than 5.5% despite the HQ's production site catching big fire on Sunday. The picture of the fire. So it's kind of crazy, isn't it? Yeah. Wow. Yeah. I mean, the common feature there of all the commentary I've seen is people saying short-term. They are not out-and-out, long-term, bullish Chinese equities. or any other sort of such Chinese assets. It's kind of one to very much keep front and center. They're sort of betting on a shorter term reflation, if you like. So where's this stimulus going to come through? What's the biggest sector? We're talking China. The housing sector is one that I want to talk about, Matty, for a number of reasons, mainly because it is the key asset for household wealth in China. So roughly like 70% of a household's wealth is tied up. in their house in China. So in simple terms, the negative wealth effect that we've spoken around is that when your house price declines and your overall net worth declines because most of your wealth is tied up in it, you're less inclined to go and spend throughout the economy. So it's not kind of great. But you need to bear in mind in China, this was very much intentional. They started this four or three years ago. And they wanted to do it because they didn't want the property sector to make up such a large portion of the economy. They let Evergrande kind of collapse, essentially. Country Garden is not completely bankrupt, but it's a shell of what it kind of used to be. The leverage in China sits within these developers, not the same as it does, say, in the US before the financial crisis, where it's all the individuals who have all the leverage. It sits much more in these developers there. And the Chinese Communist Party was happy. to see that kind of deleverage to become a much more kind of normalized, if you like, size relative to the other sectors within the economy. Now that the messaging they're putting out is very much around stabilizing this, because if everyone thinks... that the house prices are just going to decline massively, then they're going to run and sell, and it's not going to be good for anyone. So they're going out there, they're trying to stabilize this, and they're doing these by releasing all these measures, letting people buy more, letting people invest in property, all these kinds of things to counteract that negative wealth effect that we're seeing. Right. So if you're going to make it money of mine per to turn. pertinent with the mining. Right. Talk metals and miners for me, J.D. I know, mate. First and foremost, that's the one we've got to talk about. So they had a huge week last week. And as we just said before, today has been a massive day. So US, roughly $110 a ton again. We'll flash up a chart here that shows FMG, BHB, Rio and Mins year-to-date performance. So still sort of down, not been a great year, but... You can see that kick up in the last week. It's pretty enormous. If you look wider across the other metals, copper, met coal, even lithium, they're all sort of moving in the right direction. And as a bit of a side note, Jim Thomas, the treasurer, was in China just last week. And interesting to note, there was a lot of question marks about whether there'd be sort of tariffs put on the EVs that we're importing here that you're seeing more and more on the streets here in Australia, the BYDs and those sorts of ones. And kind of good to see from my perspective that he didn't put any tariffs on them. We don't have a car sector to protect or anything like that. So sort of starting a trade war with China again over, you know, slapping tariffs on their EVs would have been kind of shooting ourselves in the foot. Pointless, really. You mentioned those big four iron ore miners. Look at how they opened this morning on the Spark chart. At one point today, Minrez was literally 10% up, sort of, you know, peeled back down to... 4% intraday, and the others all similar, just huge volume on open in response to the commodity moves that are kind of unfolding in real time thanks to the stimulus. Yeah. I mean, MINS is a really interesting example. Obviously, we've spoken about them a bunch lately, guys, but you can see it. We'll flash up the short man chart here, and you can see just the kick up in short interest from sort of mid-September, sort of 10th of September through to like the 20th. And it's jumping from 7.5% of the shares outstanding to 12.5% in the same time that the stock's gone from about $30 to $51. So that's a pretty short and sharp, nasty burn for a lot of those people just sort of piling on as they kind of, I guess, anticipated the writing being on the wall for Mins a bit. Hey. Yeah, it's so interesting, right? Like the policy setting was a bit of a U-turn and then, yeah. those people kind of double down on their existing shorts when you had the share price come off. And then because it's so levered as well, it's a hypersensitive stock to the commodity price deviations, which flipped on the stimulus. So it's, oh. Was there any inkling or goss that this was going to happen or come out very abruptly, the China stimulus? I didn't hear anything. There had been sort of rumours or I guess more hopes that this would happen for years. Like. I remember listening to sort of podcasts back in 2022, people sort of thinking, yeah, you know, it's sort of time China's going to light a big stimulus. If you remember, they sort of suffered from COVID a bit longer with these stronger lockdowns that they kind of implemented. And people have been anticipating this sort of stimulus for a long, long time. But, you know, the timing always kind of takes people by surprise, as well as the sort of intensity of it. You know, they've really locked this one in their gaze now. I remember. like less than a month ago, obviously, but the iron ore was, I think it was just above a hundred. It was like a one Oh five. And the Chinese media is calling that irrational like that, you know, the spike above 100 is irrational. And then iron ore kind of obviously fell pretty rapidly and now it's bounced back again. Yeah. I mean, you got to give a shout out to the shrub. I reckon he was mentioning a potential sort of catalyst at the, you know, the. back end of his mind of China stimulus. He had been long energy, long commodities more broadly because they were just so beaten up. And I think the best way to kind of visualize this in Australia is just think about the relative sort of value of the big four banks versus the big miners here. The performance in the banks had been so much sort of stronger. So if you just kind of put on a relative kind of bet that they would normalize that kind of ratio between them would normalize a bit more. I mean. The big four banks were just powering higher and higher and higher over the past year. And the last week or so has been a pretty nasty one. They've sort of corrected a little bit and it's been the complete opposite. So that's. pulled way more into a kind of normalized relative valuations for the two of them. The last point I think is worth noting on this kind of China stimulus is that a lot of it has been financial kind of related. It's not necessarily stimulating demand for commodities themselves. It's not as if China announced a massive infrastructure plan that is going to soak up a whole lot more. commodities. So it'd be sort of interesting to see if it gets to the point where they do something like that. Like they're addressing homes that have already been built that are kind of there, these kinds of things. They're not talking about building a heap more houses. So it'd be interesting if that takes on another sort of form or is expanded if they really need to address this in a bigger way down the track. And kind of lastly, China has announced packages like this in the past and just not implemented it. So kind of... worth keeping an eye out on whether they actually put this into practice in the future. So what's the sum up? Real assets, you think they're in a kind of good spot despite all the bad stuff out there for the remainder of the year. At least in the short term, oil prices are low. That helps a lot of people out there. The US is into a cutting cycle. China is kind of stimulating all these things around the world. Despite all the challenges out there, they're just... given a good tailwind. So that's the sort of way the funds have been flowing in the past couple weeks. And you'd kind of imagine like the US smashing through records on the S&P, the NASDAQ, all these kinds of things. But this one's a bit out of my pay grade, Matty. So we'll get on some good guests to run through what they're kind of thinking, I reckon. Yeah. Well, as you said, Trav, like, buddy, you iron ore a Metco, you think China stimulus, they're the first two things you think of that start flying. Steel mills. Yeah, steel mills. As long as I'll... President Z knows, like, I guess the pecking order of where that steel has to go. Like, you know, the housing market, it's a big market. That's second preference. But as long as he knows the first preference, it goes to the Sandvik ground support division. For the, like, that's up here. I hope he's all onto it. I think it appears that Sandvik have possibly noticed, like, this meteoric rise of the DSI brand. on the back of us vouching for them for the whole past year. 100%. And thought we'd better get it on the back of this. And great thinking, Sandvik. This DSI Underground is now branded as the Sandvik Ground Support Division. It's all been swallowed up. I actually feel it quite an honour, one of the most honourable things since this podcast has started to display the Sandvik logo on Money of Mine. I never thought it would happen, but just, oh. You used to have a great relationship with the Sandvik Jumbo. Well, I had a great relationship with both. I'd use like, you jam a DSI split set into the ground with a Sandvik Jumbo, but now operators can use a Sandvik Jumbo to jam in a Sandvik bowl. I think it's just great for the industry. But look, don't fear, ladies and gents, Derek Heard is still running the show. APAC CEO for the Sandvik Ground Support Division. Go, Derek Hurd. Go, Sandvik. Go, ground support. Love it. Oh, beautiful. Right, speaking of probably a medium amount of ground support going in. Yeah. Good ground, apparently. Line tear. There's news out. First shipment of SpodCon has been sent. God, isn't it bloody? Bloody, oh, it's different to gold, isn't it? I remember them holding the Spod in the photos, but like. God, the amount of time it takes to frigging get it on the ship and everything. A bit different to sending it to the mint. The joys of bulk commodities. So let's go through it. So 11,855 wet metric tonne of 5.2% spodumene concentrate was on the water going to an existing off-take customer. So they're saying at the moment. Kathleen Valley, they've produced 28,000 wet metric tons of concentrate 2 date from first production. That was announced 31st of July. Yep. And they've also commenced selling into the spot market for-Uncontracted. Uncontracted products. So they said there was a spot sale of 10,000 tons sold to a Singapore-based trader at a premium to spot, actually, US $802 per dry metric ton at SC6 equivalent. Now, we're going to talk about this SC6 in a bit. So that's considering the spot prices currently sitting, the two numbers I saw this morning, 750 to 786. So look for around 5.2%. It's about equates to about $10 million Aussie bucks outside of their off-takes. So scheduled to be shipped early next quarter, that bit. So might be a bit of an informative week on the Liontown front, I think, because I think we might see something from them out soon around this sort of mine review. We're all waiting for, you know, costs. Costs are one thing. Some guidance. And guidance and timing of the guidance. Hopefully recoveries maybe, but probably clear sight also of whether this 4 million tonne expansion in 2027 is still in the pipeline on ice or if they're going to commit to that or not. I think that's another thing. Remind me again because I've lost track. At one point it was going to be 6 million tonne. No, no, no. It was only ever going to be it was going to be 4. 4. They dialed it back. When they did the Yeah. the funding and everything they sort of and with the lowering the prices they sort of put the four on ice just said we're going to go for three three the fours and the fours still an optional thing they just weren't firmly committing to it like they were previously yeah yeah um and probably another one about what the the product product spec is going to be so and i'll get into that a bit later so because to my knowledge like we don't really definitively know yet when lion town are going to sort of get to this three million ton per hour run rate and look how many tons of spodcon that will entail so i think there was some comments around it being about oh six to eight months or something after first production which would be sort of q1 next year because i haven't started stoping yet i don't believe they're still doing all the development and getting it all ready so i think it's looking to be the back end of the year uh when they start stoping or like maybe yeah like a q4 thing so that'll obviously see the Bloody tons really lift towards that 3 million ton run rate. So I've heard they might be able to get there earlier than Q1 next year. That'd be impressive. Yeah, and I think it helps with the because it's big and bulky. As long as they've got the frigging there's that many headings there, I think, because you go in, there's just fucking spodumene everywhere. And once you get it bloody get enough developed, you'll be able to rip a bit out pretty quickly. So And look, since their DFS, there's, you know, I think it was 2021. I think so much has changed when we talk spodumene concentrate, like for the status quo. So because, you know, back then it was everything was like, right, SC6 equivalent. Most companies other than Greenbushes were sort of aiming for that 5.5, SC5.5. But now you see sort of SC5.2 becoming what you consider normal. Like that's what. what Pilbara Minerals is selling, and this is what Linetown have sold in this. So I think Linetown will be weighing up the trade-off of producing an SC 5.2 product, which I assume has a lot more processing flexibility, probably less margin for error, versus having to fuck around to try and get an SC 5.5 or better and depend if people wanting to buy the 5.2 and you can push more through and it's easier and, and you might, you might get a better recovery. Yeah. So it'd be interesting to see if we get a bit of commentary around that. So I heard Maddie that the benchmark, the fast markets benchmark is, is going to be changed to SC5. Yeah. It makes sense, doesn't it? Yeah. Cause like why have a benchmark that only one mine or sometimes zero mines is producing. Yeah. easier on the math so so yeah so that would be interesting to see how that all works because you know it does that does throw out all the you know from their dfs figures the amount of concentrate produced on their old numbers because if you look at i'll bring up the charts here if you look at the dfs figures like two and a half million ton per annum gave around 540 000 ton of dry metric ton sc6 equivalents i remember i think it was in a footnote today so The wet metric tonne contains about, I think it's like 9.3% moisture. So that's when you convert it back to dry metric tonne, that's how it works. So look, 3 million tonnes should give around 650,000 tonne per annum of SC6 equivalent. But if they're selling 5.2% instead of 650,000 tonne, you'd need 750,000 tonne to be sort of in line with those DFS numbers. So I'm sure there's a bit of a balance in act. I'll be interested to see if once they start punching through all the... the underground feed, like from the honeypot areas, which is probably higher grade, what effect that has on the whole, you know, recoveries and the spodumene concentrate grade, if that's a thing or not. So because if you go off what they've produced so far, 28,000 wet metric tonnes since 31st of July, so that's 25,000 dry metric tonnes in two months, about 12,500 tonnes a month so far. They're in ramp up, obviously in ramp up with the open pit feed because the run rate they'll be chasing, they'll need to be around above 50,000 tonnes per month, so about four times what they're currently doing. But I feel like if they're already committing spod... into the spot market, you would think they'd be confident enough that they're going to be able to fulfil their offtake requirements if they're already selling into the spot market as well. Because if you look at the amount they have contracted to LG, Tesla and Ford, it looks like their minimal contractual commitment for year one is about 265,000 tonnes of SpodCon. There was another offtaker that came in late as well. I think it was a Chinese entity that took a little bit of extra during ramp-up. Yeah. So it looks like pretty much double what they're pumping out now for this first two months is what's actually contracted. Right. So they obviously must be pretty confident they're going to be able to fulfil all that because I think there's a 10% variance on the LG one and the Ford one. So they can go 10% under those numbers if they need to. So it'll be. Once this all comes out, it'll be interesting to see all the sell-side models being updated with the costs, the guidance at these prices, because always plenty of rumours were circulating in the past month or so, and probably before the cattle announcement of the Lapidolite mine shutting down, but thinking, God, are we going to see any further curtailments? So I think on the back of that cattle announcement, probably this updated mine plan. probably should hose away those rumours for them hitting the pause button, I would imagine. Because in terms of the finance side of things, when that LG convertible note was announced, so it said they had like $381 million of liquidity after another $120 million of remaining capital costs. And they've got, obviously they've got the $550 million of debt with Ford and LG convertibles. So you'd think, I think they can call on another $100 million. debt from LG if needed. So, but you, yeah, obviously got a bit of cash to see them through. They're not in bloody, it's not like they've got 50 million bucks left or anything. Just a real shit time to start a lithium mine. Yeah. It's like, you know, they're going to have, like while the market is where it's at, they're going to have a period. It's just like how long is the period going to be where the costs are going to be greater than what they're able to sell their product for, right? And it's like that's the whole equation for Linetown is like, you know, how long is that period going to be? Yeah, I suppose you want yeah, it's a tough one. You want high prices when it's low, but if you're going to pick a time to have low prices, you probably want them when you've got the least amount of product coming being produced if you've got enough money to see you through. Yeah, the best thing is having Those early cash flows outweigh a lot. Pay back your debt and all that sort of stuff. Riskier. It'll be better later on. Yeah, so no, it'll be good. I'll be interested to see if that I don't know if it's coming out next week, but I don't think it's this week. I don't think it's too far away, and especially on the back of sort of YJ's comments in the last week, which is probably the first sort of semi-bullish episode we've done around lithium in recent times. Yeah. It'd be good to see a bit of a turnaround. It'd be great. I think like, yeah, calling lithium market has bottomed versus calling like, you know, it's gone. parabolic again a very different sort of calls just because the lithium market's bottom doesn't mean that lithium prices go to the moon again it just sort of things can stay bottomed out for a while and just sort of grind sideways slightly higher over over an extended period of time too oh mate they'd just take they'd take 1200 yeah all they want they just want lithium to go up 50 effectively not asking for a lot not asking for much we just want it up 50 but But isn't that an amazing thing to say? Yeah. It doesn't sound like much that it has to get back to $1,200, but that is 50% higher than what it is now. It's kind of crazy. How do you ask a commodity price to do that? Yeah. It's like saying Rare Earths needs to go back to $60 or $70. Yeah, it would be like saying Iron Ore should go to plus $200. Yeah. But as you said, it's just that historic anchoring to the mania prices. So... Yeah. But I'm in terms of, I guess, doubts and sort of like the confidence in what they're doing there. Grainlands are on site there. They've done some work there. Are they? Greenlands Equipment. Yeah. So, mate, you've got water specialists there like Greenlands Equipment. Like, Jesus Christ, it's like having a comfortable blanket put over you, proverbially. So, mate, everything's safe now. What did they do? I think they were doing some bit of poly work. Yeah, right. So, yeah. Mate, bloody. I don't have any doubts about the poly work. Oh, mate, not at all. The amount of MDs I'm speaking to lately after listening to, when they listen to the Greenlands ads, they're like, Jesus Christ, they sound like a perfect fit for our operation. Like they were the exact words. That's because they are. So turnkey mine water management specialist. When I say turnkey mine water management, I don't have to go through the website, each individual thing. It just means everything. Yeah. Everything water. Like name a random water thing that you would require on your mine site. A Mount Franklin vending machine. Yeah, they do that. Yeah, guaranteed. It's turnkey. So, look, look at the clients. Genesis, Minre, it's Pantoro, Northern Star. And speaking of Northern Star, mate, they've done three separate sites there, Karasu, DM, Moonpit and Thunderbox. So, obviously, they've done one job and Northern Star were like, shit, how good were they? Let's get them back for another one. They've done the second one. They're like, holy snapping duck shit, they did the second one better than the first one. We'll get them in for a third one. What a customer review. Beautiful. Got any green ones? Mate, the Cobar comeback kid. Kingston resources. Go the Cobar. I was keen to have a chinwag, brief chinwag. Cobar's the family. Kingston's a child, you'd say? Yeah. Yeah, I suppose you could say that. Yeah, right. So this morning, Kingston, they came out with an updated kind of mind plan. I'm getting curious about Kingston for a couple of reasons. Number one, Cobar. We just love talking about the Cobar. Number two was... I remember our chat with Dan Porter last year and his Pure Resource Fund, they've kind of lent this company $15 million now. So Kingston's going to have to repay that back. Kind of lent it or literally lent it? No. They've lent it. They've lent it, yeah. They don't get con notes though. So what they do is they lend them money, which needs to be repaid, but they get a truckload of out-of-the-money options too. Yeah, yeah. I'll let you that. And the third reason is our good friends at the show at Delphi. Deutsche Bellet and you might know them as, they've kind of etched up their shareholding from 12.5% to 15% on the register too. So today, this funky announcement that they put out together with a bit of a Schmiko presentation, it's essentially a reserves update, but the gist of it is spun like a mine life update for their Mineral Hill project. Kingston, they acquired Mineral Hill in 2022. They processed the tailings through the plant as they were sort of wrapping together a mine plan for the... for the rest of the resource. Two months ago, they started running open pit material through the mill and they reckon the mill kind of hit full capacity there two weeks ago. It's a small mill. But under the updated mine plan drop today, they suggest open pit material will run through the mill until the back end of FY26. That's when underground will take over. So there you go, Matty. There's an underground contract that's going to be up for grabs, development work. Development work is going to kick off. on the underground next year there. But I know there's not too many of them coming up, so everyone's watch out for them. It's only a 400,000 tonne per annum meal, so it's kind of interesting how the reserves update today. It included this production target based on only 51% of the reserves, as I've highlighted here, 51% of reserves, 11% M&I, and then 38% inferred. I think a lot of companies, they get pulled up by ASX for... They put a mine scenario up that has too much inferred in the mine plan and then ASX says, you can't do this. So I imagine when I see this sort of thing, I imagine that's why this announcement doesn't include any NPV for this six-year mine plan. If you look at the fine print, they do say that they ran a version of their financial model which included only the reserves, so none of the resources, just the reserves case, in which they say... was NPV positive demonstrating economic viability. So if that fills you with confidence on just the reserves, NPV positive, they don't put a number there. I think everyone's just trying to find where the ASX line is. Let's just chuck a heap of different shit in and see what It depends who your advisor is that you have there. You can't argue with ASX, but there's a lot of different ways that the companies are trying to convey what they want to convey. on the work they've done at these like projects within the confines of what the ASX kind of permits. Need to get all the MDs in a WhatsApp chat just to bloody so they can share what they got pulled up on. Tron, the WhatsApp ASX line. They probably exist. Yeah. Anyway, this is where kind of Kingston, I think where Kingston fits into the regional things in the co-bar is the more interesting sort of story for me. You see like Talisman is next door. They've had it. expiration success this year. AGC, another expiration story this year. I see Alchemy on this map. Today they announced an earning agreement with Jogmec for their kind of lithium gold tenure near Manor in Western Australia, mostly focused on the lithium for Jogmec. But does like with that sort of in their pipeline now, does that mean that, you know, Kingston could potentially do a deal with Alchemy's overflow tenure, which has a 342,000 ounce gold equivalent resource? I don't know. So are the 20% owner of that? is develop mining, which is interesting. There's a bit happening in the region. Kingston's Mill is pretty small. And like with $15 million in drawn debt, I'm following it closely just to see how their cash position trends because their CapEx isn't, you know, it's not completely finished with the CapEx when you've still got, you know, underground development that needs to be done in due course and all that sort of stuff. But hopefully they're making money. on the open cut material going through the mill at the moment. They're also looking to get some coin in the door for the sale of MISMA, which is the gold project in PNG. But I remember them running a sale process on that in 2022, which seemingly didn't amount to a deal. I think like the best case for Kingston is that they're kind of cash flow positive already based on the open pit material they're putting through the mill. And that'd be great for them because they could use that money to do the underground development plus pay back the debt and all that sort of stuff. But. But until kind of their quarterly comes out, which should be out in about a month's time, it's pretty hard to get a read on what the economics of their sort of the mining scenario is at the moment. It seems like you look at that map, like especially Mac have renamed to Mac Copper. Yeah. You'd think, you know, they're obviously looking, I think the Peel mining is probably the logical one there. Like this is obviously gold, predominantly gold. Gold copper. A little bit of copper. It looks like more of a gold mine, you'd say. Like is that an Aurelia thing on the back of like once Darks is finished now? Are they going to be looking to get a bit of a rebirth or something? Well, keen to see how Aurelia get Federation going now that that's all, you know, in motion. Yeah. There's heaps in this region and not a lot of M&A, sadly. I'd love to see a bit more M&A in this region. It's long, the region's long infrastructure. Yeah, a lot of-Kind of short quality projects though, isn't it? Yeah, and the projects are all kind of sort of subscale-ish. So, you know, it's the whole kind of hub and spoke thing, which is a bit of a maligned, you know, model as a mining company in the first place. But there's, you know, there's opportunity for the lean kind of operators who sort of think differently and can kind of just get, you know, get value additive deals done with neighbours who have resources and all that sort of stuff too. Yeah, you have to sort of be convincing and charismatic to get a few of those deals over the line, I'd imagine. Yeah, yeah. Mate, plenty of balls in the air at the moment. Yeah, there are. It's a really interesting time, I reckon. Like everything going on the last few weeks in particular, I think hopefully a bit more of a tailwind through our kind of neck of the woods until the end of 2024, we'll kind of see. It's all the stuff that you forget about that you don't expect. You never know. We might just see a massive gold M&A deal come out in the next month. Who knows? I mean, gold just in the background just keeps going from strength to strength, hey? Yeah, let's not forget that. Hey, J.D. That's it. Right, hey. Let's not forget that, mate. Having forgotten Axis Mining Technology. Love your bloody work, Ender. Great friends of the rest of the bloody partners. Mineral Mining Services. Verify. 80. Get your tickets for Drill 24, everyone. Don't forget. Previously DSI Underground. Now the Sandvik Ground Support Division. Silverstone. CRE Insurance. Greenlands Equipment. K-Drill. And our goods are bloody spark chart. Hooroo, fellas. Hooroo, money miners. The information contained in this episode 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 advisor and consider how appropriate the advice is to your objectives, financial situation and needs.

That is one sponsor I want to get. That is the greatest place on earth. It's a good venue.

Oh, so good. A good live venue. Mate, our goods are frigging high on all price.

Bloody what, up 13%? 13% on open of the Shanghai Exchange. Yeah, mate, it's just...

Well, that's pretty much... Look at the majors rip higher. All of them. Large cap watch list. Oh, my energy is up a minimum 13.5% every day just before I rip an Axis mining technology ad.

Jesus Christ, nothing better than my favourite pastime, telling everyone about the trusted advisor in drill oil survey instrumentation. Life has never been better. It just makes you feel good. Oh, makes you...

Go Axis. You want to feel good, give them a call. You'll feel great. Your energy will be up 20%. Right, China stimulus, big, big news.

This could be, as you said, trap. Is this the start of a commodity super cycle? He said it just like that.

No mayo at all. It's a big U-turn in policy, right? Like this is like we're seeing it in the stocks, we're seeing it in the futures markets.

It's like this is kind of the only story that really matters right now in the markets that we all care about is the policy. environment in Beijing, which is maybe that's always been the case, to be honest. But, you know, certainly right now it feels like an elevated time of importance on this.

I just can't believe how quick things have changed. Like we were talking about Minres at $30 the other day and they're bloody $52 again. Like it's just.

Minres is definitely getting a mention. But, yeah, I think you're dead right, Trav. This is the thing we've got to talk about.

Obviously a lot of the news started dribbling out late Tuesday, Wednesday, and it's just sort of shaken. commodities, as well as heaps of other markets. You can see the ramifications in European markets.

You can look at the luxury stocks. They get a pickup when Chinese buyers want to buy more. I reckon we should run through it in the best way we can.

Then in the background, we're going to keep working on getting some China experts on the show. If you've got any recommendations for people, just flick us an email, put a comment, or just let us know. And we will try and get them on the show.

But if you live in Singapore, get in touch. All the gurus are in Singapore, it appears. Good time zone as well. So to start with, let's run through like what's kind of gone on.

Oh, yeah. We've got Liontown and Kingston as well. But China.

We do. China. Don't forget about them. All right. So everyone sort of knows that the property market in China has been under a bit of a drag for four years, I want to say.

We started. hearing about Evergrande and some of these other companies in China really starting to slow down in 2020 through 2021. So it's been going on a while. And China's policy has been pretty different, pretty needless to say.

The way they operate is very different to the West, not these massive rounds of stimulus. And on the rates side of things, they've been actually cutting for a while. So they're in a bit of a different sort of sync to what we are in Australia, to what they're in in the US.

and all these sorts of things. They've also kind of steered clear of this individual stimulus, just kind of handing out money to individuals for kind of ideological type reasons as well. But like you said, Trav, a lot of this kind of changed last week. They announced big measures, which we'll kind of run through the kind of key points on, but the pretty clear results of all of this can be seen in the stocks.

So the Shanghai index had its best week. in 16 years. And if you look at the Hong Kong index, the Hang Seng, that had its best week since 1998. So absolutely flying. You have to caveat this with the point that the Chinese real economy is very firmly different from the stock market that they have. So there is not the same correlation between the real economy as there is perhaps between the S&P and the broader US economy.

So that's something you really need to note because the... The Chinese, first and foremost, they want to stimulate the real economy. They want people to feel richer, spend more, all these sorts of things, as opposed to just see the stock market go up today. Well, this is a big policy difference between largely the West and China, is a lot of the policy settings that we see in the West are actually more accommodative of just higher asset prices, rather than being more in touch with the real economy.

100%. That's been a feature since the global financial crisis in particular. Since 2008, a lot of the policy that we've seen has just seen a... inflation in asset prices across the Western world. So to get into what the Chinese have done in the past week or so, the highlights are that they have cut some interest rates.

These, like I mentioned before, have been cut in the past, but they did a bit more of a substantial cut. They lowered the bank reserve requirement ratios, essentially meaning that banks need to hold a bit less capital to, again, stimulate liquidity throughout the economy. Then to boost the stock market, this is a bit of a different one. Again, they've done things like this, but not to this degree in the past.

They're going to help firms buy back their own shares by refinancing bank loans that they've got. Essentially, this kind of helps leveraged investment. I think the kind of takeaway is that they don't like the sentiment that is present in China. When people see the stock market, they see it continuously going down.

They feel less inclined to invest. in assets like the stock market because they just feel like they're losing wealth. So they kind of want to put a hold to that. They've never been outwardly massively supportive of just seeing the stock market rip higher, but they kind of want to put a bit of a pause on it just trending downward and downward over time.

The signaling is super vital. And we see that in the West as well, the signaling around the central bank discussions, the Fed, the RBA. here in Australia, what they kind of signal is super, super important.

And some of the messaging they were giving is that they would be comfortable and it's a possibility that they would double or even triple the limits on some of these packages of stimulus. For example, the stock stimulus there. Isn't that the whole stock?

I mean, it's like there is a big difference between stimulating the real economy and then letting companies effectively borrow more. and have more fragility in your financial system in order to just buy back stock. That's not, buying back stock is, well, capital allocation that doesn't go to the real economy. It just goes to sort of the wealth effect to the extent that that exists. Yeah, and it seems from the outside much more sort of short term in nature, just to put a bit of a halt on the decline.

But you can see because they had a Politburo meeting at the end of last week. This was sort of seen to be pulled forward a month from when it otherwise would have happened. And some of the wording, stopping the decline and stabilizing the property market, that was mentioned as a goal for the first time. That sort of explicit wording hasn't kind of been used before.

And there's still questions about how they're going to kind of execute that and put it into implementation. But the fact that that is like the first ticket on the menu there is pretty telling. They're also talking about issuing bonds to the equivalent of 1.5% of its GDP to kind of raise capital.

Again, that's interesting. That's a pretty big number. It's nowhere near the biggest that China has done in the past, but it is a very, very big number. But this whole stimulus package, it's not necessarily massive, but the wording that they will do more of it and that they're open to doing more of it I think has just got everyone super excited out there.

Isn't it funny how this is all about China stimulating China, but how it actually just stimulates the world? Yeah. Because the fact that they are just a buyer of so much stuff, which you're going to go into.

Totally, yeah. I'm no macro expert. I'll be the first to admit that. I steer clear of it as much as I possibly can.

But I do love following the views of some of the large money managers that have a firm view on China. I don't know if you caught the commentary from David Tepper just a couple of days ago, JD. David Tepper is a billionaire.

hedge fund manager. He runs Appaloosa Management, which I think over the last few years has been kind of returning its external funds and it basically manages mostly Tepper's own capital these days, which is just a casual $14 billion or thereabouts. He went on CNBC at the end of last week and I cut out a little bit and I'm keen to just sort of play it so you guys get a bit of a, and the listeners get. Get an indication of what these like large head-fung managers are making this like you turn in policy from China Cause the undervaluation as you you know, listen You can look at your chart and look at a chart of Bob on you on your screen right there Whatever stock you like in China They are even with the recent moves are like on a flat line low Compared to where they have been in the past and you're sitting there with single multiple Pee's with double digit growth rates for the big stocks that trade over here That's kind of versus what you know the value of your 20 plus on the S&P.

Right. Okay, and then you have, so the question was, was China going to do the things that you want them to do? Okay, are they going to do the easing measures that you want them to do? So yeah, they came the other day and what's his name, Pan Gongxian, and I apologize because I can't even speak English well. You know, he came out and he was like jovial.

It's like, whoa, jovial saying we're going to cut? And we're going to and we'll give you more. And he said, we'll do more and more if needed. Now, the Chinese to say we'll do more and more if needed. They don't say that because it's not been healthy to say those sort of things in China.

But they said that the other night and I've listened very carefully what government officials say. So I took it that they did a lot. They exceeded expectations and he promised to do more and more and more. OK, and that's very strange language, especially for any central banker.

but especially over there. So that was the first thing that happened. And last night, we heard that they were gonna have some kind of meeting, but they kind of blew away expectations on the physical stimulus that they were gonna do. Now, physical stimulus, if you look at your charts, if you like charts, because you used to be a broker and that was a good way to do things fast, what can happen around the world when they do that?

That's what you have to ask yourself now. So now you have the Fed, so just a backdrop, again, the Fed's easing, you know you have a few more easings coming. The Japanese, they don't know what they want to do right now, but it doesn't matter what people think, they're going to be forced into things, and I can talk about that in a second. The Europeans are lowering rates, and now the Chinese are lowering rates, okay, and they're going to be aggressive in how they're going to do it, and they're also, believe this or not, swap facilities to buy stocks, encouraging buyback. of stocks, encouraging buybacks of stocks.

Okay, this is China, all right? This is stock buybacks, not only encouraging it, lending you money to do it. And they're giving money like health money where you can put money out and you have no losses if you want to do it. You know how that thing works? You have only the money you put up and you don't lose money.

That's a great deal for me. I want to be over there and borrow from some of this stuff. The other thing I thought you were going to ask is about tariffs and stuff like that. I do not care. Yeah.

This is internal stimulus. In the physical stimulus they did last night, they're going to encourage consumption, directly saying it. So they're really doing all the things that people have asked them to do over these years.

Good to see JD.com was up 9%. What did you guys make of that? Well, it sounds like a bit of a perfect storm, eh? Like if you've got, like, interest rates going down in the US and everything, and then you've got China stimulus, it's a bit of a double whammy, isn't it? It's such a, yeah, the entire government regime globally now is aligned to focus on these stimulatory kind of like market stimulus activities, which by their very nature kind of create more fragility in the financial system.

Like you heard, China's banking sector is now going to have lower reserve ratios. Well, that definitely makes your banking sector more fragile. But it's kind of crazy as well.

Like you see, you know, you hear it in Teppas. voice who's been a China watcher for so long and this is just like a really kind of unexpected and serious kind of U-turn in what the policy regime has been there in relation to the downturn they've experienced over the last sort of 18 months. I think historically, stimuluses are, you think of GFC, that was like a stimulus, trying to stimulate the economy to bloody everyone to own their own house and that obviously went to shit.

Yeah, it does seem in the short term it's very encouraging for asset prices, exactly like as he outlined there, all the measures kind of put forward are positive in the short term for whether that be, you know, stocks, houses, any of these kind of things. But you kind of got to bear in mind that the reason it's done is because things haven't been looking so healthy. So that's one to keep in the back of our mind. Yeah, I think in like a...

the way I internalize these activities is you encourage your banking sector to make riskier and riskier loans or have like low reserve ratios or whatever. a greater proportion of those new loans result in, you know, kind of can't be paid back. And that's when you have kind of the, you grow your credit, you grow your debt, and then it kind of compresses because at some point the marginal kind of like, you know, the person you lent money to can't pay it back.

Yeah. It's just the debt cycles, yeah. A hundred percent. I was going to mention something further down, but it's appropriate to kind of pull it up here.

A lot of the liquidity measures, the lowering of the interest rates, throughout China, you know, that that has been done to stimulate the economy in China, kind of needless to say. But there hasn't actually been the appetite to borrow. These rates have been coming down since 2023. And just, you know, reading people who watch this stuff religiously, they're saying that there hasn't been that sort of appetite for businesses, for households, whoever, to kind of borrow despite the cost of capital declining over that period.

So. Whether we see it again after this sort of bigger drop down in interest rates kind of remains to be seen, but there is super weak sentiment both in the corporates and the households there. And in simple terms, if you don't want to borrow at a cheaper rate, doesn't really matter.

So it's just something to kind of bear in mind. And it kind of stood out very interestingly that another reason why they're trying to do this is turn the sentiment around. in China to encourage people to invest and do these sorts of things that lead to growth over the longer term. Yeah. To focus on what like Tep is, you know, he highlighted, this is just a long-term chart of Alibaba, a little spike at the back end there.

It's up 30% less than a week, but you can still see it's like, it's pretty subdued relative to the highs it reached sort of, you know, leading up to 2021 there. I don't have the numbers on me, but, you know, I think it's still. trades at a single digit multiple of earnings.

Like it trades Alibaba, this phenomenal kind of Amazon equivalent, can actually trade on some instances a lower multiple of earnings than some of the mining companies we talk about. And Tepper is-I don't think Jack Ma talking ill of the CCP helped his crazy idea. And Tepper's not the only one that thinks this way.

This is from Shanghai Macro on Twitter. In short, I'm aligned with David Tepper, buy China, buy everything, since the- July. Politburo meeting of 2023, I've been unequivocally bearish China. On Tuesday, I abandoned that bearish view and shifted to a tactically bullish stance due to significant shifts in Beijing's communication strategy, evidenced by the financial regulators press conference.

Then after Thursday's Politburo meeting, I immediately sent out a note titled by China, where I turned outright bullish over a cyclical time horizon. Fresh off the press today, here's a tweet I thought was worth sharing. Beijing stock exchange 50 index soars over 14.5%.

So New record for the largest single-day gain. So there's a couple of stocks mentioned here. China X rose more than 10%. Cattle.

Cattle rose more than 5.5% despite the HQ's production site catching big fire on Sunday. The picture of the fire. So it's kind of crazy, isn't it? Yeah.

Wow. Yeah. I mean, the common feature there of all the commentary I've seen is people saying short-term.

They are not out-and-out, long-term, bullish Chinese equities. or any other sort of such Chinese assets. It's kind of one to very much keep front and center. They're sort of betting on a shorter term reflation, if you like. So where's this stimulus going to come through?

What's the biggest sector? We're talking China. The housing sector is one that I want to talk about, Matty, for a number of reasons, mainly because it is the key asset for household wealth in China.

So roughly like 70% of a household's wealth is tied up. in their house in China. So in simple terms, the negative wealth effect that we've spoken around is that when your house price declines and your overall net worth declines because most of your wealth is tied up in it, you're less inclined to go and spend throughout the economy. So it's not kind of great.

But you need to bear in mind in China, this was very much intentional. They started this four or three years ago. And they wanted to do it because they didn't want the property sector to make up such a large portion of the economy. They let Evergrande kind of collapse, essentially. Country Garden is not completely bankrupt, but it's a shell of what it kind of used to be.

The leverage in China sits within these developers, not the same as it does, say, in the US before the financial crisis, where it's all the individuals who have all the leverage. It sits much more in these developers there. And the Chinese Communist Party was happy. to see that kind of deleverage to become a much more kind of normalized, if you like, size relative to the other sectors within the economy.

Now that the messaging they're putting out is very much around stabilizing this, because if everyone thinks... that the house prices are just going to decline massively, then they're going to run and sell, and it's not going to be good for anyone. So they're going out there, they're trying to stabilize this, and they're doing these by releasing all these measures, letting people buy more, letting people invest in property, all these kinds of things to counteract that negative wealth effect that we're seeing.

Right. So if you're going to make it money of mine per to turn. pertinent with the mining.

Right. Talk metals and miners for me, J.D. I know, mate.

First and foremost, that's the one we've got to talk about. So they had a huge week last week. And as we just said before, today has been a massive day.

So US, roughly $110 a ton again. We'll flash up a chart here that shows FMG, BHB, Rio and Mins year-to-date performance. So still sort of down, not been a great year, but...

You can see that kick up in the last week. It's pretty enormous. If you look wider across the other metals, copper, met coal, even lithium, they're all sort of moving in the right direction. And as a bit of a side note, Jim Thomas, the treasurer, was in China just last week.

And interesting to note, there was a lot of question marks about whether there'd be sort of tariffs put on the EVs that we're importing here that you're seeing more and more on the streets here in Australia, the BYDs and those sorts of ones. And kind of good to see from my perspective that he didn't put any tariffs on them. We don't have a car sector to protect or anything like that.

So sort of starting a trade war with China again over, you know, slapping tariffs on their EVs would have been kind of shooting ourselves in the foot. Pointless, really. You mentioned those big four iron ore miners. Look at how they opened this morning on the Spark chart. At one point today, Minrez was literally 10% up, sort of, you know, peeled back down to...

4% intraday, and the others all similar, just huge volume on open in response to the commodity moves that are kind of unfolding in real time thanks to the stimulus. Yeah. I mean, MINS is a really interesting example.

Obviously, we've spoken about them a bunch lately, guys, but you can see it. We'll flash up the short man chart here, and you can see just the kick up in short interest from sort of mid-September, sort of 10th of September through to like the 20th. And it's jumping from 7.5% of the shares outstanding to 12.5% in the same time that the stock's gone from about $30 to $51.

So that's a pretty short and sharp, nasty burn for a lot of those people just sort of piling on as they kind of, I guess, anticipated the writing being on the wall for Mins a bit. Hey. Yeah, it's so interesting, right? Like the policy setting was a bit of a U-turn and then, yeah.

those people kind of double down on their existing shorts when you had the share price come off. And then because it's so levered as well, it's a hypersensitive stock to the commodity price deviations, which flipped on the stimulus. So it's, oh. Was there any inkling or goss that this was going to happen or come out very abruptly, the China stimulus?

I didn't hear anything. There had been sort of rumours or I guess more hopes that this would happen for years. Like.

I remember listening to sort of podcasts back in 2022, people sort of thinking, yeah, you know, it's sort of time China's going to light a big stimulus. If you remember, they sort of suffered from COVID a bit longer with these stronger lockdowns that they kind of implemented. And people have been anticipating this sort of stimulus for a long, long time.

But, you know, the timing always kind of takes people by surprise, as well as the sort of intensity of it. You know, they've really locked this one in their gaze now. I remember. like less than a month ago, obviously, but the iron ore was, I think it was just above a hundred.

It was like a one Oh five. And the Chinese media is calling that irrational like that, you know, the spike above 100 is irrational. And then iron ore kind of obviously fell pretty rapidly and now it's bounced back again.

Yeah. I mean, you got to give a shout out to the shrub. I reckon he was mentioning a potential sort of catalyst at the, you know, the. back end of his mind of China stimulus. He had been long energy, long commodities more broadly because they were just so beaten up.

And I think the best way to kind of visualize this in Australia is just think about the relative sort of value of the big four banks versus the big miners here. The performance in the banks had been so much sort of stronger. So if you just kind of put on a relative kind of bet that they would normalize that kind of ratio between them would normalize a bit more.

I mean. The big four banks were just powering higher and higher and higher over the past year. And the last week or so has been a pretty nasty one. They've sort of corrected a little bit and it's been the complete opposite. So that's.

pulled way more into a kind of normalized relative valuations for the two of them. The last point I think is worth noting on this kind of China stimulus is that a lot of it has been financial kind of related. It's not necessarily stimulating demand for commodities themselves. It's not as if China announced a massive infrastructure plan that is going to soak up a whole lot more.

commodities. So it'd be sort of interesting to see if it gets to the point where they do something like that. Like they're addressing homes that have already been built that are kind of there, these kinds of things.

They're not talking about building a heap more houses. So it'd be interesting if that takes on another sort of form or is expanded if they really need to address this in a bigger way down the track. And kind of lastly, China has announced packages like this in the past and just not implemented it. So kind of... worth keeping an eye out on whether they actually put this into practice in the future.

So what's the sum up? Real assets, you think they're in a kind of good spot despite all the bad stuff out there for the remainder of the year. At least in the short term, oil prices are low. That helps a lot of people out there. The US is into a cutting cycle.

China is kind of stimulating all these things around the world. Despite all the challenges out there, they're just... given a good tailwind.

So that's the sort of way the funds have been flowing in the past couple weeks. And you'd kind of imagine like the US smashing through records on the S&P, the NASDAQ, all these kinds of things. But this one's a bit out of my pay grade, Matty. So we'll get on some good guests to run through what they're kind of thinking, I reckon. Yeah.

Well, as you said, Trav, like, buddy, you iron ore a Metco, you think China stimulus, they're the first two things you think of that start flying. Steel mills. Yeah, steel mills. As long as I'll... President Z knows, like, I guess the pecking order of where that steel has to go.

Like, you know, the housing market, it's a big market. That's second preference. But as long as he knows the first preference, it goes to the Sandvik ground support division.

For the, like, that's up here. I hope he's all onto it. I think it appears that Sandvik have possibly noticed, like, this meteoric rise of the DSI brand.

on the back of us vouching for them for the whole past year. 100%. And thought we'd better get it on the back of this. And great thinking, Sandvik. This DSI Underground is now branded as the Sandvik Ground Support Division.

It's all been swallowed up. I actually feel it quite an honour, one of the most honourable things since this podcast has started to display the Sandvik logo on Money of Mine. I never thought it would happen, but just, oh.

You used to have a great relationship with the Sandvik Jumbo. Well, I had a great relationship with both. I'd use like, you jam a DSI split set into the ground with a Sandvik Jumbo, but now operators can use a Sandvik Jumbo to jam in a Sandvik bowl.

I think it's just great for the industry. But look, don't fear, ladies and gents, Derek Heard is still running the show. APAC CEO for the Sandvik Ground Support Division.

Go, Derek Hurd. Go, Sandvik. Go, ground support. Love it.

Oh, beautiful. Right, speaking of probably a medium amount of ground support going in. Yeah.

Good ground, apparently. Line tear. There's news out.

First shipment of SpodCon has been sent. God, isn't it bloody? Bloody, oh, it's different to gold, isn't it? I remember them holding the Spod in the photos, but like. God, the amount of time it takes to frigging get it on the ship and everything.

A bit different to sending it to the mint. The joys of bulk commodities. So let's go through it.

So 11,855 wet metric tonne of 5.2% spodumene concentrate was on the water going to an existing off-take customer. So they're saying at the moment. Kathleen Valley, they've produced 28,000 wet metric tons of concentrate 2 date from first production.

That was announced 31st of July. Yep. And they've also commenced selling into the spot market for-Uncontracted.

Uncontracted products. So they said there was a spot sale of 10,000 tons sold to a Singapore-based trader at a premium to spot, actually, US $802 per dry metric ton at SC6 equivalent. Now, we're going to talk about this SC6 in a bit. So that's considering the spot prices currently sitting, the two numbers I saw this morning, 750 to 786. So look for around 5.2%.

It's about equates to about $10 million Aussie bucks outside of their off-takes. So scheduled to be shipped early next quarter, that bit. So might be a bit of an informative week on the Liontown front, I think, because I think we might see something from them out soon around this sort of mine review.

We're all waiting for, you know, costs. Costs are one thing. Some guidance.

And guidance and timing of the guidance. Hopefully recoveries maybe, but probably clear sight also of whether this 4 million tonne expansion in 2027 is still in the pipeline on ice or if they're going to commit to that or not. I think that's another thing. Remind me again because I've lost track. At one point it was going to be 6 million tonne.

No, no, no. It was only ever going to be it was going to be 4. 4. They dialed it back. When they did the Yeah.

the funding and everything they sort of and with the lowering the prices they sort of put the four on ice just said we're going to go for three three the fours and the fours still an optional thing they just weren't firmly committing to it like they were previously yeah yeah um and probably another one about what the the product product spec is going to be so and i'll get into that a bit later so because to my knowledge like we don't really definitively know yet when lion town are going to sort of get to this three million ton per hour run rate and look how many tons of spodcon that will entail so i think there was some comments around it being about oh six to eight months or something after first production which would be sort of q1 next year because i haven't started stoping yet i don't believe they're still doing all the development and getting it all ready so i think it's looking to be the back end of the year uh when they start stoping or like maybe yeah like a q4 thing so that'll obviously see the Bloody tons really lift towards that 3 million ton run rate. So I've heard they might be able to get there earlier than Q1 next year. That'd be impressive.

Yeah, and I think it helps with the because it's big and bulky. As long as they've got the frigging there's that many headings there, I think, because you go in, there's just fucking spodumene everywhere. And once you get it bloody get enough developed, you'll be able to rip a bit out pretty quickly.

So And look, since their DFS, there's, you know, I think it was 2021. I think so much has changed when we talk spodumene concentrate, like for the status quo. So because, you know, back then it was everything was like, right, SC6 equivalent. Most companies other than Greenbushes were sort of aiming for that 5.5, SC5.5. But now you see sort of SC5.2 becoming what you consider normal.

Like that's what. what Pilbara Minerals is selling, and this is what Linetown have sold in this. So I think Linetown will be weighing up the trade-off of producing an SC 5.2 product, which I assume has a lot more processing flexibility, probably less margin for error, versus having to fuck around to try and get an SC 5.5 or better and depend if people wanting to buy the 5.2 and you can push more through and it's easier and, and you might, you might get a better recovery.

Yeah. So it'd be interesting to see if we get a bit of commentary around that. So I heard Maddie that the benchmark, the fast markets benchmark is, is going to be changed to SC5.

Yeah. It makes sense, doesn't it? Yeah. Cause like why have a benchmark that only one mine or sometimes zero mines is producing. Yeah.

easier on the math so so yeah so that would be interesting to see how that all works because you know it does that does throw out all the you know from their dfs figures the amount of concentrate produced on their old numbers because if you look at i'll bring up the charts here if you look at the dfs figures like two and a half million ton per annum gave around 540 000 ton of dry metric ton sc6 equivalents i remember i think it was in a footnote today so The wet metric tonne contains about, I think it's like 9.3% moisture. So that's when you convert it back to dry metric tonne, that's how it works. So look, 3 million tonnes should give around 650,000 tonne per annum of SC6 equivalent. But if they're selling 5.2% instead of 650,000 tonne, you'd need 750,000 tonne to be sort of in line with those DFS numbers.

So I'm sure there's a bit of a balance in act. I'll be interested to see if once they start punching through all the... the underground feed, like from the honeypot areas, which is probably higher grade, what effect that has on the whole, you know, recoveries and the spodumene concentrate grade, if that's a thing or not. So because if you go off what they've produced so far, 28,000 wet metric tonnes since 31st of July, so that's 25,000 dry metric tonnes in two months, about 12,500 tonnes a month so far.

They're in ramp up, obviously in ramp up with the open pit feed because the run rate they'll be chasing, they'll need to be around above 50,000 tonnes per month, so about four times what they're currently doing. But I feel like if they're already committing spod... into the spot market, you would think they'd be confident enough that they're going to be able to fulfil their offtake requirements if they're already selling into the spot market as well.

Because if you look at the amount they have contracted to LG, Tesla and Ford, it looks like their minimal contractual commitment for year one is about 265,000 tonnes of SpodCon. There was another offtaker that came in late as well. I think it was a Chinese entity that took a little bit of extra during ramp-up.

Yeah. So it looks like pretty much double what they're pumping out now for this first two months is what's actually contracted. Right. So they obviously must be pretty confident they're going to be able to fulfil all that because I think there's a 10% variance on the LG one and the Ford one. So they can go 10% under those numbers if they need to.

So it'll be. Once this all comes out, it'll be interesting to see all the sell-side models being updated with the costs, the guidance at these prices, because always plenty of rumours were circulating in the past month or so, and probably before the cattle announcement of the Lapidolite mine shutting down, but thinking, God, are we going to see any further curtailments? So I think on the back of that cattle announcement, probably this updated mine plan.

probably should hose away those rumours for them hitting the pause button, I would imagine. Because in terms of the finance side of things, when that LG convertible note was announced, so it said they had like $381 million of liquidity after another $120 million of remaining capital costs. And they've got, obviously they've got the $550 million of debt with Ford and LG convertibles. So you'd think, I think they can call on another $100 million.

debt from LG if needed. So, but you, yeah, obviously got a bit of cash to see them through. They're not in bloody, it's not like they've got 50 million bucks left or anything.

Just a real shit time to start a lithium mine. Yeah. It's like, you know, they're going to have, like while the market is where it's at, they're going to have a period. It's just like how long is the period going to be where the costs are going to be greater than what they're able to sell their product for, right? And it's like that's the whole equation for Linetown is like, you know, how long is that period going to be?

Yeah, I suppose you want yeah, it's a tough one. You want high prices when it's low, but if you're going to pick a time to have low prices, you probably want them when you've got the least amount of product coming being produced if you've got enough money to see you through. Yeah, the best thing is having Those early cash flows outweigh a lot.

Pay back your debt and all that sort of stuff. Riskier. It'll be better later on.

Yeah, so no, it'll be good. I'll be interested to see if that I don't know if it's coming out next week, but I don't think it's this week. I don't think it's too far away, and especially on the back of sort of YJ's comments in the last week, which is probably the first sort of semi-bullish episode we've done around lithium in recent times. Yeah.

It'd be good to see a bit of a turnaround. It'd be great. I think like, yeah, calling lithium market has bottomed versus calling like, you know, it's gone. parabolic again a very different sort of calls just because the lithium market's bottom doesn't mean that lithium prices go to the moon again it just sort of things can stay bottomed out for a while and just sort of grind sideways slightly higher over over an extended period of time too oh mate they'd just take they'd take 1200 yeah all they want they just want lithium to go up 50 effectively not asking for a lot not asking for much we just want it up 50 but But isn't that an amazing thing to say?

Yeah. It doesn't sound like much that it has to get back to $1,200, but that is 50% higher than what it is now. It's kind of crazy. How do you ask a commodity price to do that?

Yeah. It's like saying Rare Earths needs to go back to $60 or $70. Yeah, it would be like saying Iron Ore should go to plus $200.

Yeah. But as you said, it's just that historic anchoring to the mania prices. So...

Yeah. But I'm in terms of, I guess, doubts and sort of like the confidence in what they're doing there. Grainlands are on site there. They've done some work there. Are they?

Greenlands Equipment. Yeah. So, mate, you've got water specialists there like Greenlands Equipment.

Like, Jesus Christ, it's like having a comfortable blanket put over you, proverbially. So, mate, everything's safe now. What did they do?

I think they were doing some bit of poly work. Yeah, right. So, yeah.

Mate, bloody. I don't have any doubts about the poly work. Oh, mate, not at all. The amount of MDs I'm speaking to lately after listening to, when they listen to the Greenlands ads, they're like, Jesus Christ, they sound like a perfect fit for our operation.

Like they were the exact words. That's because they are. So turnkey mine water management specialist. When I say turnkey mine water management, I don't have to go through the website, each individual thing. It just means everything.

Yeah. Everything water. Like name a random water thing that you would require on your mine site.

A Mount Franklin vending machine. Yeah, they do that. Yeah, guaranteed. It's turnkey. So, look, look at the clients.

Genesis, Minre, it's Pantoro, Northern Star. And speaking of Northern Star, mate, they've done three separate sites there, Karasu, DM, Moonpit and Thunderbox. So, obviously, they've done one job and Northern Star were like, shit, how good were they? Let's get them back for another one.

They've done the second one. They're like, holy snapping duck shit, they did the second one better than the first one. We'll get them in for a third one.

What a customer review. Beautiful. Got any green ones? Mate, the Cobar comeback kid.

Kingston resources. Go the Cobar. I was keen to have a chinwag, brief chinwag. Cobar's the family.

Kingston's a child, you'd say? Yeah. Yeah, I suppose you could say that. Yeah, right.

So this morning, Kingston, they came out with an updated kind of mind plan. I'm getting curious about Kingston for a couple of reasons. Number one, Cobar. We just love talking about the Cobar.

Number two was... I remember our chat with Dan Porter last year and his Pure Resource Fund, they've kind of lent this company $15 million now. So Kingston's going to have to repay that back. Kind of lent it or literally lent it?

No. They've lent it. They've lent it, yeah.

They don't get con notes though. So what they do is they lend them money, which needs to be repaid, but they get a truckload of out-of-the-money options too. Yeah, yeah.

I'll let you that. And the third reason is our good friends at the show at Delphi. Deutsche Bellet and you might know them as, they've kind of etched up their shareholding from 12.5% to 15% on the register too.

So today, this funky announcement that they put out together with a bit of a Schmiko presentation, it's essentially a reserves update, but the gist of it is spun like a mine life update for their Mineral Hill project. Kingston, they acquired Mineral Hill in 2022. They processed the tailings through the plant as they were sort of wrapping together a mine plan for the... for the rest of the resource.

Two months ago, they started running open pit material through the mill and they reckon the mill kind of hit full capacity there two weeks ago. It's a small mill. But under the updated mine plan drop today, they suggest open pit material will run through the mill until the back end of FY26. That's when underground will take over.

So there you go, Matty. There's an underground contract that's going to be up for grabs, development work. Development work is going to kick off.

on the underground next year there. But I know there's not too many of them coming up, so everyone's watch out for them. It's only a 400,000 tonne per annum meal, so it's kind of interesting how the reserves update today.

It included this production target based on only 51% of the reserves, as I've highlighted here, 51% of reserves, 11% M&I, and then 38% inferred. I think a lot of companies, they get pulled up by ASX for... They put a mine scenario up that has too much inferred in the mine plan and then ASX says, you can't do this. So I imagine when I see this sort of thing, I imagine that's why this announcement doesn't include any NPV for this six-year mine plan.

If you look at the fine print, they do say that they ran a version of their financial model which included only the reserves, so none of the resources, just the reserves case, in which they say... was NPV positive demonstrating economic viability. So if that fills you with confidence on just the reserves, NPV positive, they don't put a number there.

I think everyone's just trying to find where the ASX line is. Let's just chuck a heap of different shit in and see what It depends who your advisor is that you have there. You can't argue with ASX, but there's a lot of different ways that the companies are trying to convey what they want to convey.

on the work they've done at these like projects within the confines of what the ASX kind of permits. Need to get all the MDs in a WhatsApp chat just to bloody so they can share what they got pulled up on. Tron, the WhatsApp ASX line.

They probably exist. Yeah. Anyway, this is where kind of Kingston, I think where Kingston fits into the regional things in the co-bar is the more interesting sort of story for me.

You see like Talisman is next door. They've had it. expiration success this year.

AGC, another expiration story this year. I see Alchemy on this map. Today they announced an earning agreement with Jogmec for their kind of lithium gold tenure near Manor in Western Australia, mostly focused on the lithium for Jogmec. But does like with that sort of in their pipeline now, does that mean that, you know, Kingston could potentially do a deal with Alchemy's overflow tenure, which has a 342,000 ounce gold equivalent resource?

I don't know. So are the 20% owner of that? is develop mining, which is interesting.

There's a bit happening in the region. Kingston's Mill is pretty small. And like with $15 million in drawn debt, I'm following it closely just to see how their cash position trends because their CapEx isn't, you know, it's not completely finished with the CapEx when you've still got, you know, underground development that needs to be done in due course and all that sort of stuff.

But hopefully they're making money. on the open cut material going through the mill at the moment. They're also looking to get some coin in the door for the sale of MISMA, which is the gold project in PNG. But I remember them running a sale process on that in 2022, which seemingly didn't amount to a deal. I think like the best case for Kingston is that they're kind of cash flow positive already based on the open pit material they're putting through the mill.

And that'd be great for them because they could use that money to do the underground development plus pay back the debt and all that sort of stuff. But. But until kind of their quarterly comes out, which should be out in about a month's time, it's pretty hard to get a read on what the economics of their sort of the mining scenario is at the moment. It seems like you look at that map, like especially Mac have renamed to Mac Copper.

Yeah. You'd think, you know, they're obviously looking, I think the Peel mining is probably the logical one there. Like this is obviously gold, predominantly gold. Gold copper. A little bit of copper.

It looks like more of a gold mine, you'd say. Like is that an Aurelia thing on the back of like once Darks is finished now? Are they going to be looking to get a bit of a rebirth or something? Well, keen to see how Aurelia get Federation going now that that's all, you know, in motion. Yeah.

There's heaps in this region and not a lot of M&A, sadly. I'd love to see a bit more M&A in this region. It's long, the region's long infrastructure. Yeah, a lot of-Kind of short quality projects though, isn't it? Yeah, and the projects are all kind of sort of subscale-ish.

So, you know, it's the whole kind of hub and spoke thing, which is a bit of a maligned, you know, model as a mining company in the first place. But there's, you know, there's opportunity for the lean kind of operators who sort of think differently and can kind of just get, you know, get value additive deals done with neighbours who have resources and all that sort of stuff too. Yeah, you have to sort of be convincing and charismatic to get a few of those deals over the line, I'd imagine. Yeah, yeah. Mate, plenty of balls in the air at the moment.

Yeah, there are. It's a really interesting time, I reckon. Like everything going on the last few weeks in particular, I think hopefully a bit more of a tailwind through our kind of neck of the woods until the end of 2024, we'll kind of see.

It's all the stuff that you forget about that you don't expect. You never know. We might just see a massive gold M&A deal come out in the next month. Who knows?

I mean, gold just in the background just keeps going from strength to strength, hey? Yeah, let's not forget that. Hey, J.D. That's it. Right, hey.

Let's not forget that, mate. Having forgotten Axis Mining Technology. Love your bloody work, Ender. Great friends of the rest of the bloody partners.

Mineral Mining Services. Verify. 80. Get your tickets for Drill 24, everyone. Don't forget.

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The information contained in this episode 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 advisor and consider how appropriate the advice is to your objectives, financial situation and needs.

Transcript for:China's Economic Stimulus and Market Reactions

Transcript for:
China's Economic Stimulus and Market Reactions