[Music] hi I'm Christian East today I'm the CEO and managing director of hot chili limited uh we're a large copper developer on the Chilean Coastline north of Santiago developing the Costa fuo copper gold uh Hub uh one of the largest undeveloped projects in the world that we are positioning for production uh towards the end of this decade Christian casier here in uh not so Sunny Toronto this week week week two of Road shows for you how was bimo yeah look it was busy it was busy I believe they had a record number of attendees this year yeah um obviously you know one of the world's preeminent private conferences for the for the mining sector and yeah it was great to interact with some of the other uh other CEOs and and corporates and was coming with certain science getting brighted that one right where people think that that's right yeah it's it's pretty it's pretty hard to get a ticket to pmo um and even the companies that get invited you know they have one representative generally the CEO that goes so yeah it's um it's certainly uh a lot of value for Hot Chili to to be invited firstly with the market cap of where we are um so it really speaks a lot about I guess where the crowd see the company going yeah and obious say now we're here at pet there different of conference a bit more industry lad when what are you hoping to get out of this one yeah look we're we're we're continuing with our engagement with the North American Market we're coming over to Canada North America regularly now um so it's it's it's part of our our PR uh campaign that we we we regularly do now uh and this year we're being invited to speak uh at pdac on Tuesday which is fantastic that'll be our first for the company uh and also at some of the the the local events around pdac U with the Chilean uh events and uh and seeing a lot of a lot of Brokers and investors over here yeah I yes it's a good place to kind of see all the companies you want to at the same time and then next week off to Asia yeah um at least it's on the way home that's good news correct yeah through through through New York and and then into into Japan seeing seeing counterparties over there um on the Japanese side which is fantastic where we're really sort of continuing to to develop our relationships um as as as you know Matt you know we have a significant amount of concentrate that uh that is available for offtake and there's a significant amount of Interest being shown in that uh and also um for the first time uh uh we'll be we'll be uh undertaking meetings on the infrastructure side of some of those groups right okay well that's the you're you're out there marketing people like what you've got and want to understand more and next base for you is trying to I guess piece this thing together moving forward so you recently upsizing of um resources better tell us about that yeah yeah no there was a a great job by the team we were able to put together a couple of years of really infield drilling geotechnical metallurgical Hydro geological some extensional work around corded era and product Tor and really just putting the in touches on the resource base which is now 85% measured and indicated so very high categorization a huge amount of investment obviously and that has us really sitting well for the delivery of our pref feasibility later this year right and what does that put you all categories terms of scale uh 800 million tons in the me in the measuring indicated basket now a further 200 in indicated so combined we've we've ticked over that magic billion ton number um but this is a huge Bank of metal you know this is some 3.6 million tons of contained copper over well over 3 million ounces of gold now uh 100% of it will convert straight into our U First reserves for the first combined reserve of cost of fuo later this year so you know it has us uh I guess really ready now to take that final step towards that last phase moving towards financing investment decisions that's the commencement of our bank andall feasibility next year right okay and I and I want to so I'm I can't want to do the numbers cuz it's going to enable us to have a better conversation around like how does how does this thing move forward and why is it relevant in the space right so um bankable bankable is coming up um you've you've got a plan as to how you best mind this thing you got a sense of where where do you start what are you aiming for can you tell us the tell us a little bit about that and and why sure well as you know last last year mid year we delivered our paa on the project that gave a shape to this thing and it established us as one of six large scale projects in the pipeline outside of the majors that has 100,000 ton perom or production capacity or above so it's a very exclusive club that has this much exposure to Copper so we're one of those projects now it's a combined open pit underground project that we took forward we well recognized that quarter era our largest resource could also be extracted by a large open pit without the requirement for an underground but that is at a higher implied um price we optimize all of our um all of our economics on our mind designs around $330 and assess the projects at $385 in line with consensus forecast so there's some optionality there going into the pre-re ability um but this is a very um large scale project um it's extremely cheap on Capital it's half price to develop and those advantages around a low operating cost at $133 per pound because of the low strip ratios on our open pit and the low elevation and no necessity to use desalinated water using raw seawater you know we enjoy really um competitive operational costs and capital cost down on the coastline and we can see that in other developments such as Capstone to the north of us with then Mano ver brownfields developments and even going into Peru to projects such as Min houa um which have been really really star performers so you know it's a low-risk project that we're taking into pre-feasibility it may be expandable that is really a lot to do with the outcome of our of our growth drilling at the project over the last 12 months and going forward and more importantly also the completion of our consolidation strategy for the region because you've got another 10,000 meters coming up plans we've got we've got a 30,000 M program that we're a little over halfway through um we're we're we're pausing and continuing and pausing that project navigating the markets and you know we've got good cash at the moment um the equity markets are still depressed and so you know we like to have a longer window um where we are funded and so that means we we we're progressing that drilling um we may even be doing some some very interesting things on the geophysical front right shortly that we're contemplating and we'll we'll announce um if we decide to go that way um but no that activity on growth is still continuing and that's what our funding was put in place for with the investment from a Cisco last year okay so the growth is still important I mean you reach the like you say it's it's a good size right you're you're you know got over that that um hurdle as it were um people I I think Matt it's it's more about us being able to eye up another Horizon of growth and it's preparing for the environmental impact assessment which you know clearly is the last thing we need to do on permitting we've cleared all of the rest to the deck on Maritime concession land accesses on the coast easement Corridor surface rights Etc um electrical connections and that's the last thing that we need to do so if we know that this project is going to be scaled up in the future then we need to contemplate that within our eia submission and so if we submit that at the beginning of next year as this currently uh scaled project at Circa 100,000 tons perom of fine copper um but if we know that's going to be scaled up we'll put that into the design on things such as Tails facilities Etc that's the rationale okay makes sense okay can you also just coming back a bit you make the the um the difference between you know Majors major Majors for projects and you're saying well we're one of the six larest outside of those Majors what what's the difference I mean Copper's copper where we get it from is this because you're trying to say well potentially we're good Target now or what's the point of making that differ I guess you know the the majors have balance sheets so they're able to develop these projects I think Gary Nagel just recently said again at a few days ago that you know we'll develop our projects when the when the copper Market is screaming when the price is incentivizing us obviously um and and and there's a there's a there's a large amount of discussion on that at the moment inertia from CEOs of major companies putting in capital at this kind of copper price so clearly there's an incentivization price you know ahead of us if we want to see the pipeline outside of the majors and the pipeline within the majors developed it's not either or we're all in this together and so large Capital deployment to solve this Supply issue and this inelasticity which looks like it's absolutely baked in um we don't see you know in the last movement on copper where we moved to $5 per pound not one ton of additional new copper Supply came on so it tells me that the incentivization price is actually a lot higher than what people people would imagine and so inside the majors we're talking about 50 of the largest undeveloped copper projects on the planet um 38 of those are controlled by the Mages there's about 12 that are not controlled by the Mages and all those 12 the's six that that look like they have the ingredients to go forward in the nearer term in the next 10 to 12 Years be put into development what I guess what I'm trying to work out is what I'm kind of investing in because there's a bunch of variables there which may affect valuation on on paper and which is not necessarily the same as what someone's actually going to pay you um and and and if I'm going to invest into a company do I want to invest into some at a point where they're just about to go and have to raise a ton of money go through that slump period of building the goddamn thing out because it's hard right things go wrong um what all the while competing with the majors who will also be incentivized with a High copper price and therefore you know that will have a KnockOn effect they've got the balance sheets they can crack on you've got to raise the money and that that kind of affects your Val value for a short period of time Jim you're having to do that dance sure we're going to W in a second because I think that could be the the thing which which helps one locks um well gives you options say so do you know mean so so in terms of what what are you trying to do 100 what are you market cap 130 at the moment 3050 P day the day of the week right and not with not a big balance sheet with not getting the value that you want and you just position said right the so what here is we're big we're attractive someone might want to bolt us onto the reserve program right you've got to say pick pick a pick a route and say we're trying to make ourselves look real pretty for these people over here right or we genuinely want to get this thing built out because we think we've got this this kind of water uh solution for ourselves and the district and the money is going to be flowing like the water I think the ladder Matt I think the ladder and and I think that the but have you got to say that because you don't want to you got to get attention I think that the the management group that has taken this forward for 15 years a long a long journey um these things as you know take a long time to put into production because of things like permitting and now you know ironically that is one of our our greatest advantages and and you you talked about the water so you know we we looked at this and this is well known junior is trying to build projects that are got Capital profiles of a billion dollars or more um large projects is is is very ambitious um I think that some people refer to those um those events where they occur um where Equinox transitions into a producer or or whatever example you want that the Unicorn moments and they only generally occur where the the company has the ability to do it and so if you look at our track record of the last two and a half years we haven't issued a single new piece of paper onto our shareholders so zero dilution from a from a share issurance perspective and that's largely about our strategy moving through this final period which is often the component that will trip up 99% of companies and whether you call it the valley of death or the orphan period of the sun curve M which you know well um how do you navigate that and you know when someone says well how do you put together $500 million of equity side that's five times where you are now there's the dilution formula it doesn't look attractive and so you've got to look inward at the project as we have on optionality um we put a very very small royalty on the project last year which has allowed our stock to be performing very well over the last 24 months um on an upward sort of trajectory and that's largely been about how we've navigated um funding and so going forward in towards this Final Phase and how we think about the actual financing package we've embargoed and left alone all of our precious metal credits so they're sitting there on streaming capability we have 40% of our offes ready for the spot market and for other offers um and so we have a significant amount of um concentrates 160,000 tons per atom in a very very concentrate hungry Market with a premium product that has virtually no arsenic in it and so that's a very attractive option for our financing and then moving forward even looking at what we're talking about putting to work our water licenses and our water easements and our electricity connection and and all of these things that are the makings of really a large multi-user explain the problem business on water yeah so right but the new folks look looking in at this one maybe even some people who perhaps didn't take it on board when we spoken in September and Denver it's explain the problem that companies Junior miners are going to face with regard regard to uer around warer yeah look you know to to to round out what we were just saying so so when we when we look at funding a billion dollars we look at chopping down all of that Equity side so actually what's left is very small in relation to the company's size and that that that that sort of solves your strategy as you move towards that but right now one of those options water which we we just spoke about you know firstly let's just Prov by the context where we are is the southern atakama the atakama region of Chile and Argentina and desert I think people would so there's the clue correct correct um there has been changing regulations towards no extraction of Continental water anymore um in the atakama and that if you look at you know the the four reasons for why copper Supply is going to be difficult to respond to to new demand you know about fourth down the list is is water scarcity and the atakama and so it means that all of the new undeveloped projects are requiring salt water desalination projects to supply fresh water which is far most of them in the high Andes most of them at 3 and 1 half 4,000 M altitude and how far to the coast 150 km but that's as the bird flies you see the problem is is the Andes yeah and so one of the key reasons we've got a half price project is we don't have that high altitude pipeline to build we don't have a desalination plant but if we look at our licenses we have everything that everyone else needs and we have six major undeveloped projects nearly 24% of new Supply over the next 10 years sitting in one spot in the world in the Wasco Valley and we look look and investigate that and we have the only active Maritime concession to extract sea water and the last time I I looked you need to be able to extract the sea water first before you could desalinate it and so 10e Head Start 10 years it took us to put those licenses in place means that we have the ability to unlock all of those project projects 10 years earlier right and and that's the key here it's not it's not just the cost of selling the pipeline from whatever 3 4,000 M up in the Andes down the coastline at whatever I don't know million bucks a kilometer I I I'm not quite sure what the cost is the money is one thing that's one thing which is which is brutal I'm sure people can find a way around that it's that 10year period before they can actually start doing what are they going to do truck it up there you know it's it's a difficult solution to solve and it's not one that they can buy their way out or spend their way out of necessarily so for you tell me give me again give me that so what so what can that mean for you you've kind of got most of the perits and licenses that you need yes to get to it to where you want it to be and if they want to kind of plumb down to you one that's cheaper for them but to um it solves their time time problem right is that it that's right time firstly is the is is the number one thing that you've got to think here because the the the amount of value that that creates onto a project being able to bring forward cash flow over that period if we find ourselves in a coppera price en environment where it's saying develop and accelerate and that's a huge option value to each of those projects but on the Capital Saving one pipeline one desalination plant versus five desalination plants five pipelines is something that the government is fully behind this is their new big thing that they've been talking about in the press for the last 6 months multi-user water networks to solve this issue in the atakama and and so we just happen to find ourselves at that perfect time with the assets available that are scalable and transferable we have a second application going in for a desalination upgrade now and we're now actively engaging yeah with each of those six major off-takers and major infrastructure Partners on a long life potential business that could be set up of 3700 lers a second and it's you know it's kind of mindboggling when you look at that because we're talking about developing and focusing on building a big copper project here and that's what hot chili is doing this is no by no means something that is is turning our attention or or defocusing us from that task but as long as we have water to our project salt water not desalinated water salt water to our project by 28 29 when this thing will require that water then as far as we're concerned if those licenses can be put to good work for chile for the communities of the Wasco region that we can supply water to for 3700 l a second of new mining Supply um that brings forward all of those developments and more importantly creates that that perfect marriage of economic Synergy with Community Synergy with environmental Synergy with that power connection this could be 100% renewable yeah powered project and so you know when you've got that together it of course it looks like a significant monetization OPP opportunity for us and our shareholders potentially bigger than the core project um potentially right so how how does how again how do we view that is that something that youve got to take to a certain point and then spin out is that something that you use to you flip because you want to fund the copper project do you prefer the annuity stream of that cash flow from the the water project for as long as the communities and and the other couple projects need it how do you play it yeah look I think I think firstly is is about churing up our interaction with the off-takers with capable infrastructure partners that have you know obviously you know tier one infrastructure partners that have the balance sheet that have the capability and knowhow um to build and operate these projects um mostly in Chile and throughout the the world there's a privately funded projects by a major industrial slice um on utilities and so you know I think that that that those two are the steps are the next key steps for us as we undertake the business case study now now that we've completed the scoping uh and I guess concept study and so what is also you know that we're aware of is that these projects are able to be Advanced really rapidly not in the time frames that mining projects um have have we will be in a very strong position at the end of this year and into early next year probably with pref feasibility numbers on this and so then it's really about what are those monetization options that you discussed you know is it a spin out for the company and our shareholders is it uh is it all these assets put into an SPV and shareholders brought in investors or infrastructure Partners taking this on as a as a as a side by-side uh Equity partner in this um there are a number of ways that we can go um but really pleasingly you know those discussions are underway do you have again I know all the arbl on the table and you going you've got ways to go anyway but do how how do you view the water in the context of the copper because if if I look at some Minds in Australia they do like to report to me say oh we we're a gold company but we've got we've got a nickel content in there and which reduces our Asic by 100 bucks sure we've got a bit of copper it reduces it by 25 bucks on the you know they they they use the the other byproducts as a means of reducing the cost cost and why why I think it's important right now so many CEOs are saying to me there's a new economic reality out there right the cost base has not gone back down to pre-co levels it won't go back down to pre-co levels and in in in a gold context Asic going from like 1,000 to 1250 right that's sort of General consensus is give give or take um yes gold price is doing its thing so ultimately margins are about the same so good news there folks cost cost inflation being hit with price inflation sure yeah so you know when you were reporting when you reporting saying look we got we've got a whole bunch of copper um equivalent numbers in there and yes we've got the higher gr portion we're going to go for first and uh so it's all good news um the economics in a copper context yeah you're saying you said in the beginning clearly the incentive price for copper is going to move the major thing that we think that everyone thinks like General consensus is that but the cost environment has has changed it has yeah so that's got to affect the way that you view potentially treating the water to allow you to report your copper project or you say sry i' love to be able to report a a water credit that would be that would be that would be a first Mt you know that it would be a first would be but so is a copper company owning a water company yeah right you've got this classic sort ofari coin situation where we've created two assets by punching out the center of the first coin so you know but if you need the inter but if if you need the help economically in terms of reporting your copper project in the early days why not water is a commodity sort of thing do you know I just think you got to think creatively in envir like this and you can create uh you can think creatively chairman uh Nikki adad Bell and in in several conversations it was suggested that you know these are perfect opportunities for royalty revenue streams back to Hot Chile um so you know there are a few things that we're thinking about and the board probably hasn't finalized on on where those decisions will be there's a few more inputs into our thinking um on the financial modeling that's going on at the moment uh once that's through we'll probably start to circle around what those what those monetization options are that we'll pursue well the revenue from the commodity which is water might might be a way I don't know keeping in check the cost so it it's the money we're focus on not the water but um you get my point um because you know what I no is that like like in the presentation you don't talk abouts yet because you recognize that copper is you know perhaps not where it needs to be but by the time you get into bank feasibility you are going to have to talk about that because the people giving you the money exactly will be very interested in that exactly you know the the the post tax Iris that are are in the presentation and the pre-tax Iris um when you when you look closely at the the work that we've done on because everything's about context in this world M um you can you can be disappointed with the grade of uh of Costa fuo or any of our peer projects for that matter at this scale because we're all in the large space we're representatives of 80% of copper Supply in the world um and so these things are done on scale and when you've got large scale large capex long life projects irrs at $385 as as we show you know produce a spread of irss on all of these projects at anywhere she's on the low end at 177% and towards the high end at 27% so that's that's where these projects live at the moment in that copper price environment you know and then we look at post tax npv to to Capital ratios uh for project with profitability indexes above one you know you you spend a billion you get your billion back and you make a billion at least the starting point for investment in large scale and there's only four so it it does show that that that why would Capital be attracted to building projects with those kind of irrs profitability indexes you put a $5 price on that now you're starting to see IRS approaching the 40s well that that that that's good news and the reason I said because we we spoke with um Arizona Sor recently and they they put out a study yeah 15% and and the CEO's approached George was basically well get used to it guys that's the new world okay get used clearly we'll do some optimization clearly we'll do some more tring but that is a new economic reality for you know couple projects so that's why it'sing so so cost of ir post tax at 21 and pre-tax at what 23 24 I mean we're we're we're we're sitting in the upper um portion of those peer groups on IRS you know which is good and we're one of the few projects sporting a profitability next above one and and that's all capital related that's all because we've got a half price project because the capital intensity we're the lowest out of the large developers now and so you know that advantage of low elevation and see what proing processing has really given us a huge lift up it it has and and you know that that transforms into three and half year payback that's the third fastest out of this peer group and when I say peer group everything above 40,000 tons perom of of production potential on copper outside of the majes so that's the that's the sort of landscape that we sweep and so costao is certainly one of the one of the better performers in that group important point you make I think W that L with MCO on their transaction they didn't quite get that right uh well look good to see you yeah enjoy I don't know how you do it I me three weeks on the road ridiculous um enjoy the meetings I guess it helps when this positive meeting right yeah hopefully you have a great time in Sunny Toronto while we're running around in the pdac masses I'll see you over there I'll see you over there for sure thanks thanks for time thanks p