sometimes the tail starts wagging the dog if I had to figure it out that gold mining companies in the next decade would have used shareholders money to buy that gold back we wouldn't be having this conversation I'd be in the South Front you would never have convinced me in 2001 that Eucharist would go to the market and raise two billion dollars by 5 billion dollars worth of gold in a week and a half to crystallize a two billion loss and use shareholders money to pay that lot the minute that you say please sir can I roll that hedging forward when it's out of the money you've got to treat it like debt it's like a gold denominator debt regis's strategy was very simple and every time they had a higher priced spot they would sell spot and they would roll their Hedges forward and they were very open about that but the problem with doing that was as the that loss got bigger the unrealized loss although it was unrealized it wasn't uncharged [Music] I will be absolutely happy to say to you that sons of gwalia their strategy in their last day is like trying to acquire out for some of the deals they did I have absolutely no doubt they did that to increase their production profile to try and diminish their their hedge obligation remind me modest welcome to the show Thursday 21st September boys today's episode a special interview in store don't we talk about someone that knows a fuck load about something [Music] without giving too much away that is Howard would describe this fella this there's some real Niche parts of this mining Finance well Maddie and when someone spends their entire career on a very very Niche part of it they just they kind of can you can feel the passion when they talk about it and um and I can explain it in ways that often are pretty relatable this guy fits that bill he kind of is across a very Niche part of the money Finance World more than anyone I've ever met and I learned a fair few things in the conversation we had with him and they oh they probably enjoy you know when you know something Niche and then you find someone that's willing to listen to you that's it that's what I thought that's when you get them going even more than that mate we weren't just willing to listen we're willing to share the story um so this is Sean Russo Sean Russo runs Noah's rule I don't want to tell the money miners what Noah's rule does just yet because you probably actually had a sneak peek in the preview we played before but this guy's fascinating it's a super specific part of the market but like where all the wiser for really getting in the weeds of this specific part of the market and he is the expert in it what did you think of the chat yeah I mean like let like many of the people we speak to Trav is another guy is just a wealth of knowledge you know there's heaps and you can learn so much you know he's been in the industry since since the 80s he's in gauging had plenty of great stories you know about some you know fallen giants of the mining industry so I learned plenty from him and I reckon you know without getting into what it is mate yeah we can sort of he's trying to suck viewers in to get the average listener duration up or something is this a strategy Thing by you too it's a strategy because it's like if you say the word that the Topic's about I reckon people would be disinterested I'm trying to hook as much as possible because it's worth listening to oh yes that's it before we get into it there's always a strategy right partners for today JP search the absolute JC's of the recruitment industry specifically that and we talk about niches talk about niches these guys the finance World integrated within Mining and finance yeah CFOs and all that Travis I got any fucking jobs going at the moment like look if the podcast shits itself and I'm looking to hedge my bets you'd say yeah uh so they're not not it's not really CFOs that's not quite then then she's sort of like the guys like JD and I that work at places for you know see corporate development teams investment Banks I actually because they're not impartial to a CFA because they are effing yes so yeah yeah that's I said so far because I going in a CFO you want to clip another ticket well last time I spoke about them I I was alluding to the fact that they got these like Wicked mandates with firms and they actually sent me uh a page with some of the places that they do work with frequently and they include places like tatarang line Town Baron Joey um ffi Azure Rio Tinto South 32 CFC mindaroo like there's a bunch of Hesperia so the family officers these are ones who are you know public but they've also got always just got a bunch of mandates that are you never really know about until you pick up the phone and talk with them because a lot of the really really cool stuff is private very good if you're in the uh Finance world looking well you might not be looking give jpsearch a call or maybe they'll call you okay is that there is that their business logo I don't know maybe we'll call you I like it right let's get into the uh Noah's rule chat about the unidentified topic let's rip it g'day money miners today we're uh we're going to talk about a really important feature of a lot of companies that we discuss on our podcast it's a feature that keeps companies alive uh when times are tough and makes them look absolutely stupid when times are good it's also a feature of mining companies that has a lot of misconceptions out there about it JD and if I told you what this feature was right now I think some of our listeners might actually switch off and I just think it's boring so I'm not going to mention the word or what it's about just yet but safe to say I think there are some really important things to understand about this topic and will collectively be all the wiser and hopefully better investors after learning about it so the guest that we have with us to discuss this topic is Sean Russo welcome to the show Sean thanks very much Travis good to be here enjoy I really enjoy I'm a big fan of the show so I'm delighted to be on Sean you've uh you've got a pretty fascinating background you did 20 odd years at Rothschild and when we when we met you face to face you came in the office last week and you'd read you know a large number of the books on on the bookshelf that we've got you even mentioned that yeah you're called out in the Trevor Sykes book it's a favorite of all of ours so for the last 20 or so years you've been running Noah's Rule and you know I think we've we've done what we can to hook the money miners on why they really should listen to this but I want to hear it from yourself now why is the topic that we're going to talk about you know sexy and something that the money miners need to know about um well I'm going to start by giving you a list of people who've been very successful in the industry and I think any Junior minor says I want to be the next bill I want to be the next Jake I want to be the next you know Mark Clark I want to be the next rally Finland sir every single one of those guys hedging has been part of their success in in the early days of their businesses to avoid dilution to keep their their Capital structures tied to use debt hedgings being some part of that so I always find it interesting when we we have this discussion with our mate not hedging you know where they do that you know showers went upside some of the greatest success stories in the industry you look at the people that have done it you look at the people people want to emulate they all did it so what what are the biggest misconceptions that you see out there with with regard to hedging and Sean for both the punters and the gold miners yeah sure well one of them is that you know by hedging you give up the upside and the idea that you give away revenue is one thing but what about earnings per share so you know again I mean hedging if you go to the end of a project or you look at them we'll talk some of them today I'm sure and with the Glorious hindsight you can see whether the people did a good job or a bad job the cost of hedging if you start to talk about how much money they might have made if they didn't hedge has to be measured against the value of dilution avoided you know you look at the the value of the increase in the company over that time by keeping the register tight when they're a 20 cent company makes a very big difference and helps them much more easily get to be a five dollar company or a six dollar company now dilution is a far far more um toxic thing Equity dilution is far more toxic than derivatives and yet it's far more common but no one talks about no one ever goes oh you shouldn't have done that raising back in whenever right so so I think that's one big one another big one is having a lot of mining companies say oh the bank's just make you do hedging so they make more money um so I'm not going to do that uh you know I was involved in a couple of mining transactions mining Finance transactions on the Rothschild in the late 90s we lent companies order of 30 or 40 million dollars and when they went broke they owed us 60 or 70 million dollars because the hedging was out of the money the mine had failed so you know Banks don't always make money out of hedging it's certainly part of their revenue stream but it's not um you know that's that's not the reason they do it they do hedging to keep the minds in business during The Debt Service period that's really uh the big thing so I think I think those are the two core ones and then people like to throw at things like sons of gwalia and pasmico and go well look they went broke and they did hedging so um you know that's that's the reason you can't do it and I think particularly I'll say Neds and people my age so 60 and older um late 50s who are around in the late 90s it's really easy they've now developed in their into their career and they're now needs like oh yes well you know of course fun to go out there and pass me go two very good examples but they're not we could talk about that later as we discussed but you know those guys were using hedging products but they weren't hedging they were speculating with derivatives very very big difference yeah let's get into that right now because it's such a fascinating story there was the the hedging the the derivatives the you know short-term trading everything going on at sons of gwalia as you've touched on and I think it's just an intriguing one and we're going to try and do it through this conversation it's just weave in these real world examples of you know incidents where edging you know it's what comes to mind when the punters think about it so yeah absolutely in the case of Sons of gwalia if you just spoke to the you know typical bloke off the street who's been around markets for long enough and you ask them what what went wrong at sons of gwalia they'll probably have a story that goes something like uh sons of gualia blew up because they had a hedge book that was out of the money and then there was a pit wall failure at Tamila now known as king of the hills and that tipped him over the edge is that right uh if I didn't um didn't help the the thing that triggered it I only have I spent 20 years at Rothschild I only have applied for one job in all that time and I applied to be the managing director of funza grahlia really um yeah so is this and is this when it was in it got put into Administration and you no Mark Mark kudafani had just left yeah and uh I called up um I called up Peter Layla who I knew yeah because we're both on the um on the board of refining company uh our refining company had merged with the Perth Mint he was on the board there and uh thankfully perhaps the uh the Headhunter rejected me because I didn't have any public company experience I've spent about 60 years working for a private company but the reason I joined is I thought they know about mining but they've got some real derivative problems maybe I can help them solve it so even then I think it was a well-known secret in the mining industry that Sansa gwali had some issues with their hedging um but you know the pit bull failure besides I mean the new managing director the guy that got the job I applied for he actually um they did a reserve downgrade and it was when they did the reserve downgrade that the banks fall went holy duly like that level of Reserves I've got more derivative exposure than that I mean there was a lot of different banks that had um the product and that was one of the that was one of the covenants that they turned out to be breaching for a long time right there was a a ratio of hedging to to reserve ounces I believe yeah they by virtue of the size and remember too that sounds a greatly I think there's I want to say their share price for something like 2.20 when they went into Administration that's extraordinary and you know normally the share price declines the market knows that the company's in trouble there was very little in that and also at the time which is funny giving today I mean they they were pantalum was their big thing right they were talking about they were a high-tech company as well that was the you know the whole thing lithium was waste back then green bushes yeah yeah so they were talking about mobile phones and a lot of stuff and distracting from the gold but but coming back to the gold I mean at the very simple core of it sometime in the mid 90s gold prices were very low and they wanted to have higher prices and somebody inside the company talked to an investment banker a bulge bracket investment banker and said I need a high price tomorrow this is what I'd like to how do you do that and the the product at the core of their failure was a thing called an index put option and we did some work we did substantially when I worked for years in fact the earliest job we had at Noah's rule was helping the estate through the receiver manager of Sons of gwalia do all the forensic work on this hedge book so I'm I'm I knew most of what was going on before we did that job and the rest we learned after but there was a product called the index put option and um the interesting thing was we googled index put option and this early days of Google admittedly um around 2004 2005. but we googled index put option the only references we could find in Google was to Sons of gwalia's accounts and an oil company and an oil company in Texas that had index index options for their their employee options were indexed for the oil price so there was no other reference so the Auditors clearly um you know they can't have known what they were what they were in short was for every ounce of cover that you got in the nearby you you're committed to losing money on six ounces in the future so you you bought one put option and you sold six calls but they weren't called call options it was an indexing to the price and it allowed the company in their view to say we hold put options we don't have committed hedging and John McDonald who'd be one of the best analysts going around in my um career both of JD now all right there you go well great go you know what he's like I mean I I he was the person asking the questions going how come the negative Mark to Market which Sunset while they did report to the market how come it's going up um you know if they only own put options like if they don't put options the value of the put options should be falling if the price goes up but they shouldn't have a negative Mark to Market and their negative Mark to Market was going up because the banks were sending the mark to Market statements which did have these embedded derivatives in I mean it's a it's a little bit complicated but in short you know it was like give me a higher price tomorrow and it solves my nearby problem and five years out I'll give you five times the gold price increase above that level now I should say I don't think when the company entered into those contracts that they understood what they did I don't think they understood it because the formula had lots of moving Parts in this product and uh it was quite complicated in the way it was presented it was very simple in its Essence once you understood what it was but um it sold to short-term problem and I guess back then people used to say things like oh the gold price goes up that's fine because we'll produce a lot more gold and we'll be able to deal with it but um they weren't the only people that did it but they were the only people that really got caught out in the end solved a short-term problem for them but created a long-term problem for you having to uh rebut the uh the critique that comes up about sons of agualia's head book no absolutely and there was lots more in there besides there was a lot of Foreign Exchange teaching there was a lot of other stuff um you know and and that's been one of the big things I mean when we started Noah's rule of 2004 and we wanted to help people kind of manage risk better and coming on the environment of failure of pesmenkins pasmica and Sons aguali we started by saying look we don't know what the future is Future's totally uncertain but what we do we can do is we can look back over the last 20 years we've involved in this market and say if people who did these things generally got caught out right and you do the foreign exchange you don't do the metal or you do the metal and you don't do the foreign exchange or you do complicated derivatives those people generally got caught out so let's not do that so that's been one of our big things with our clients for the last 19 years that don't hedge the foreign exchange if you're not hedging the metal or vice versa or if you do only use options and um that stood our clients in woodstead so there's heaps of different directions to to take it from there I want to first ask you to give the money miners a bit of scope on what the size of the the global hedged market in gold looks like and sort of compare that with when Noah's rule started 20 odd years ago yeah sure I mean just around the time or 2000 in the year 2000 roughly around the time the gold price made it's all it's low for that 20-year bear Market there was the equivalent of one year's annual producer gold production forward sold so well over 100 million ounces um today there's about six or seven million ounces and about half of that's done by Australian mining companies so the market was very very substantial but you have to remember the price had been falling for 20 years and the Hedge book had been growing and you had a situation where the lower it got the more mining companies came under pressure the more they they went to derivative salvation to keep mines open that should have been shut I mean there are a lot of boards that just didn't make tough decisions they wanted the um I think what did Rusty call it the you know the soft issues softness um you know if you closed all your minds you don't get paid anymore so if you can hedge them and keep them going you know until things get better and then that's sort of a bit of a slippery slope but that hedge book essentially grew every quarter from 1984 I was in I was around in the gold market in my first year I think the first hedge I saw get done was in 1985 Southern Cross gold Southern gold fields in Southern Cross first one done in Australia um within two years there was a couple of million ounces in Australia that were hedged by sort of Christmas 87 and then it just grew spread worldwide and yeah it was over 100 million by 2000 2001. sounds like yeah you described the classic human behavioral bias we're so Pro cyclical in the way that you know we invest instead of being kind of cyclical investors in cyclical Industries yeah well it gets even it gets even worse because it peaked in 2000 2001 110 million ounces and I used to say to people if I go away come back in a year and the gold price is higher I'm going to ask when did the Central Bank Stop lending because you know all that gold that was forward sold by those miners had affected the price was all being borrowed from central banks if I had to figured out that gold mining companies in the next decade would have used shareholders money to buy that gold back we wouldn't be having this conversation I'd be in the south of France with a feeding buckets of champagne as they say I mean you you couldn't have you would never have convinced me in 2001 that in 2007 or whatever it was that um newcrest would go to the market and raise two billion dollars by that by five billion dollars worth of gold you know in a week and a half to crystallize a two billion dollar loss and use shareholders money could pay that loss I mean you could never have convinced me in 2000 2001 that happened but that happened and in fact it happened about 12 times between 2001 and 2012 as all the Mages closed out their hedge books so the the Hedge book was at its smallest in Q3 2012 when we made the highest quarterly close ever until the last couple of years totally counter-cyclical to spell that out for the listener what you're talking about is these gold Majors who have deeply out of the money hedge books closing out those hedge books by doing a giant Equity raise however they're buying the gold on Market they're a gold miner they're producing gold but they're literally just buying gold on market and they announced the equity raise use of funds exactly to what you started the show with Sean on on the point of dilution and that's what you really need to compare it with because to to counteract it there they've just massively diluted their their shareholders well well absolutely and if you think about it I mean if you give two billion dollars to newcrest to buy gold bars all right I mean there's no there's there's no prospectivity down Dipper a long strike on the goal bar like that's a gold bar they still come some time ago right that's a loss and and so they just crystallize a loss and you know if anyone who raises money to to repay debt anyway it's a massive discount and Equity to begin with because the people putting the money in don't like it but they probably feel they have to do it and yeah so what happened is a lot of people in the world around that time around 2005 2008 said if the best thing that companies like new Crest and all of its peers can do with the cash I give them is buy gold bars they sold some time back in the you know the um latter part of the last century um trying to keep mines up and well I'm just going to go and buy gold bars as well and of course the gold ETF you can see the volume of the gold tdf increasing through that entire decade as well the punters went hang on how many more gold producers now are going to be forced to do the same thing because the one thing you guys know from watching this is nobody wants to go too far out on the branch right the minute that a few guys buy the Hedge book back everybody else had the strategy I have to buy my hedge book back too but they needed to have it have a share price sufficient to do it and I I had imagined in 2000 that they just a period of time where people would have to deliver in and would have Painful years I didn't imagine they'd still be buying them back when the gold price had gone up fivefold but that's that's what happened and so yes totally counter cyclical um yeah Central Bank similarly right central banks are actively selling in the late 90s early 2000s now the savior of the gold market is the fact that central banks are back in buying it with your ears Pinback I mean just people like you and I I mean I try to buy low and sell lower um you know these guys are just uh you know that's that's generally quite good in the junior sector at the moment but you know these guys were selling low and buying high so Sean I have to hear you you know run a business that helps these companies organize their hedge books and so on how do the conversations that you have with the the board of directors at these you know mining companies or companies that want to become a minor you know maybe then they're in that construction phase how do those conversations normally go down granted you just describe scenarios where management looks silly for engaging and hedging so I mean there must be some Merit to doing it as well and and maybe it's just worth very quickly just for the so everyone's on the same page with this when you do a gold forward sale all that happens is the bank that does the forward sale borrowed somebody else's gold sells it today at today's spot price and puts the proceeds of that sale on deposit so a forward fail for any company is just a it's just like a fixed term deposit right so you've made a promise to them to the bank that that you're going to produce gold in the future you've given them all your paperwork you've given them your models they've convinced themselves you're going to produce gold and that you're the management team that can deliver so they go and borrow gold from a central bank or from their clients and they sell it and so all they're concerned about is you actually being around long enough to produce the goal to give back to them because if in the future gold costs more than the money they have on deposit that money that's waiting to be given to you then then they have to go on the market and Buy and they they lose money so so gold hedging people think derivatives and all this stuff it's it's it's incredibly simple right so to come then to the question JD you sitting down with a mining company you go well you want to build your mind and and invariably in the junior sector and we've had lots of conversations could help us a really good example when they were westonia okay that's the end of May mine but you know restonia had an offer from a bank to do hedging gold price is about 800 at the time the bank can let them hedge at 1100 the price had never been to 1100. and we're having the conversation with the company and I said Okay cool so how much you need to borrow oh okay it's gonna be 70 million dollars to build the plant and it's a few years ago now yeah cool that's great but I think the market cap you've got is about 12 or 13. um that's a bit of a problem right like yeah and today you can see the same thing there are companies out there and today that would need 120 million 150 200 million to build a mine and they've got a 30 million dollar market cap the in-ground value of the gold is there how do you capture that well you're not going to raise Equity to do that so you need debt so when you're having the conversation with the board and that conversation with Estonia we said well the amount of hedging that you have to do in order to make this financing work the financing is as good as you'll get you won't get a better financing if we were you we we just wouldn't do it and they said what do you mean I said well it's just too much go like the equity Market's going to lose interest because you've sold so much gold in those early years to make it work our assessment is that the um the equity Market well this is why would the bank lend us money if why would the bank lend us money if if it's not a good deal we go well it's a good deal for the bank and the bank will get its money back for its shareholders and around that time we came up with a phrase we used to say to mining companies you're in the vicinity of being bankable and that's the most dangerous place to be right because the Project's not quite as robust as it might but between hedging and whatever you can get it done and then the Brokers are happy because you raise some more money so our conversations are generally about what are you trying to achieve what risk profiles you want and in that case the board of westernia quite rightly he said yeah okay well we were kind of thinking it and you're like let's go back to exploring for a while that's and that's a really tough decision right because the guy that was the MD had been brought in to build the mind so he did himself out of a job uh yeah it did it he did the right thing by shareholders right he left and they went back and then all of a sudden of course the gold price went up and then we had that we're in the middle of the just before the GFC and Company renamed itself catelpa and all of a sudden they could lock in 1700 on the forward Market instead of 1100. cost hadn't gone up all of a sudden that that just looked easy and that was a very easy decision and we sat down with the board and we said right same facility you can lock it in they went in and locked in I think it was 1700 odd dollars it was the largest Hedges that have been done for years um and that that project worked so that was about timing and that was about just the a very good example where the company says say well this is a good idea but it's it's too early and you know that's something Equity I say in equity investing you know early and right you know you're still wrong uh you know in terms of you know there's that they're kind of just I and I think quite frankly um you know if they've done it previously and sold at 1100 it never would have made it through right so uh but that's but those the way you're talking to the boards around this is absolutely about trying to balance stakeholder all the stakeholder needs and I mentioned those names of those guys before that have been very successful where they've got significant you know equity in those companies um and not have necessarily had the kind of Dynamics Catalpa had if you're trying to avoid Equity dilution you've got to take on debt um and I think in fact most companies if you look that have been you were talking about Tito yeah recently and you know they they went that's very rare for a company to go completely Equity funded totally but they probably but they probably got to a point where as they were going that debt wasn't available to them and they had two choices you know do you raise the equity and keep going or do you go back to drilling but I think most people will agree that it doesn't make sense from a capital markets or from a balance sheet perspective to build a mine purely with shareholders equity um so then if you want to get dead the debt that you can get the easiest debt you get from the banks the banks essentially require hedging because the banks have no upside and if the gold price goes down and you don't have hedging you won't be able to repay them we talked about a an interesting Dynamic I think it was in our conversation with Alan trench and you know the whole Holy Grail of um investing in resources companies is it's all all about cost curves right if um and it just so it turns out that the companies that can endure the volatility of a mining cycle the the lows are the ones that are of course going to be in the lowest cost curve however you've so so they're more able to to withstand higher gearing however if you look at the data it's actually the highest cost quartile that has the highest gearing potentially as a function of you know you gotta you gotta just load it with as much debt as possible to build the mine in the first place because you know the equity only gets you so far um yeah I just I keep coming back to that sort of thought as well that quite often you see the most fragile miners from an operating perspective also with the most financial leverage as well which makes them even more fragile yeah yeah look I mean a lot of Old-Timers will talk about that you know our look we're in the bottom quartile we don't need to Hitch you know and and that's true but you know I think too often mining companies think that a cash balance is a hedge you know that they because they've got a large amount of cash they they don't need to be too um you know careful about how they manage cash quarter to quarter because you know that they can lose money for several quarters and they'll still have a positive cash balance I mean I my own view is that's lazy whatever wherever you are in the cost curve but you but you're right I mean the higher you go up in the cost curve the more you're probably going to have to gear to get it and there's never been more money available um to mining companies in my observation in 40 years than there is today you know when the funds started to arrive is it 10 years ago I can't remember now you know like where I mean Taurus first popped up and then Orion and red Cuts actually it's more than that it would be closer to 15 years ago you know that was a the idea they turned up and said we'll lend you money and you don't have to Hitch I mean the whole selling pitch to some extent was I mean they can't actually provide hedging because they're not a bank they wouldn't have the balance sheet to be able to do it but their sales pitch was largely oh you know we're we're sort of Covenant light we don't need as much things as that and most importantly we don't need to hedge and looking at all the train wrecks and all the BuyBacks going on in 2000 so you can understand why a lot of CEOs in that period of time said oh hedging hedging's clearly bad I don't want to hedge if you've been drinking the sons of gwalia you know pasminko Kool-Aid but the reality was within that you know new mining houses were built um and built off the back of doing sensible financing with hedging in one of the earliest was Perseus fantastic success story you know significant amount of hedging on their first transaction we assisted them um negotiate that hedge and and and and that debt and you know they've gone on to great things from this they're still a client and I'm a big fan of of what they do uh again it's that created they've created um you know certainty and the capacity to do I think in 2013 the year the gold price collapse is um delivered to the hedging and they were in an article in the mining press in Canada reported they had the highest realized gold sales price of any Mining Company in the world that year I mean that yes it's a long time ago but that one year a lot of mining companies didn't didn't make it across the void from 2012 to today Sean there's one other aspect on on hedging I want to I want to get into that you touched on earlier and that's as it relates to Foreign Exchange how does that sort of play a role well I mean uh I think the way that we started out on this in 2004 when we started the business was we looked back in the previous period of time and we had seen people try to decouple their hedging at various times and hedge in you know just in US Dollars and not to the Australian dollars or do a lot of Australian um dollar hedging and not the gold but there's a broad correlation I think everyone agrees ninja Aussie dollars are commodity currency now the last two years have kind of been really you know stretching the boundaries of that friendship but we started I think the first Public Presentation I gave at a paid at Gold conference 2005 was gold bulls need to be Aussie balls because I was going around Perth at that time and everyone was bullish gold and bearish the Aussie because I think the Westpac economists were saying oh the Aussie is going to go down China's about finished 2005. and uh we were saying well you can't cherry pick bullish gold forecasts and bearish Aussie forecast because that guy who's bearish the Aussie forecast probably doesn't I believe the gold is going higher but our key thing to our clients was your costs are in eight dollars you're an eight dollar reporting entity the 80 gold price is the price that you need to pay attention to and people who get two US dollar Centric who run Eight dollar Centric businesses tend to get into trouble because people go gold prices going up in the early 2000s the U.S dollar gold price went up 70 and the Eight dollar gold price was unchanged over that period because the Aussie dollar was going up as fast as the gold price so you know you you it's a very dangerous thing I think and to not pay attention to we've worked with companies now in Brazil in Canada um in South Africa and Australia and in all those cases you have to look at the local currency you have to look at your cost structure you have to look at the Canadian dollar gold price or the Brazilian uh real nickel price if if that's where you're producing and understand to the extent that you've got cost how you how you manage that now if you Fund in US dollars in some of those places that makes more sense than funding the local currency then you take that into account um but overall you've got to get that right so an Australian company it's easier generally to borrow Australian dollars and most of our clients when they do a goal mining Finance they hedge in Australian dollars and they borrow Australian dollars but we have advised certainly back in the early 2000s mid-2000s iron ore company looking to get started in Australia the banks wanted to lend them eight dollars and they said that's crazy you know you can't hitch the iron ore price all your own or you're selling US Dollars why would you increase the a dollar operating costs in your business by Having Eight dollar Debt Service as well borrowing US Dollars and they reverse that round with the bank and they did that so they were trying to balance revenue and cost revenue and obligations to be as close as possible I mean I think it's really you know otherwise you're a bit like those Farmers back in the in the 90s and high interest rates in Australia The Borrowed Swiss Francs to finance their farming equipment because the Swiss franc interest rate was a lot lower worked for a few years and then they all got carted out I'm I'm really um yeah intrigued to understand that Dynamic of project Finance for the developer it's usually a single asset developer yep um I can think in recent history for gold companies you know what are the gold developers that were able to finance their mind with a project Finance facility which Incorporated mandatory hedging Capricorn calories Red five the most recent ones that come to mind wa gold producers now the three of them and I think um I'm I'm I reckon you know there are there are some ways I used to think about um how risk is allocated throughout the process that have changed since you know we first spoke Sean I reckon it'd be handy to kind of unpack what that whole um that whole financing process looks like so just to kind of like you know have it reinforced when this uh gold company sort of needs to get into production they'll look at what they're they're capable of of loading um how much debt they're able to take on what they think is reasonable and the bank normally tells them you need some hedging to go along with that sometimes you're on the advisory side and like what actually like what in that process of you know development the company's got to ramp up it's a pretty damn fragile state for a company we've spoken about the song curve plenty of times it can go horribly wrong um so like like what is what does good hedging look like given that the bank says you need hedging you know it Excel spreadsheet everyone's put everything in and you know so you've got all your moving Parts in there you've got a thousand different assumptions and contributions from engineers and you know you name it the different Specialties right and it's all educated guesses right about the future the one thing that's absolutely there's no educated guess on at the end of the day is the price it's totally uncertain we don't know what the price is going to be tomorrow but someone's got to put a line in there so the bank puts a conservative price in that model and for before there's any hedging in you know that that price is going to be a lot lower than the prevailing spot price right um and and that's makes sense because if I'm lending you the money and I'm the bank and I don't get any upside if it goes up and I've got all the risk that goes down because you give me the keys and walk away I'm going to put a conservative pricing so you put a conservative price in there and there's one line in the model that's the most important line cash available for Debt Service the cads line right so that's what that's also call it cfads right okay so yeah so yeah so that you know so that's it so all the young guys that bang are doing all the modeling that's there and so they go okay um in theory if I was to lend you money without any hedging here's the amount of money that I could lend you from zero to something right and we do that when we do independent debt carrying analysis for potential clients or potential borrowers like one of their big things is you don't ask a bank how much they're willing to lend you you should know how much you can borrow before you ever go inside the bank and with that's what we try and do for our clients we get the independent analysis so we'll give them a table and we'll say with no hedging this is the amount of debt we think you could borrow now you might be able to get that from Taurus or Orion but there's going to be other strings attached to royalties and you know and whatever but at the bank to stick to that that's it now if you added 10 hedging 20 hedging 30 hedging this is how the the gearing changes and it's very real because if you could lock in 3200 Aussie dollar gold price a couple of years out including the contango after fees in if you're doing a project financing and the bank would otherwise put 2000 or 2100 in the model for that period you can imagine that there's a very big difference in the cfads line between the ounces of 3200 and the ounce is at 2100 so you know the cynic says oh well the bank uses a very low price deck to make it easy to justify hedging but the middle ground is it's fair now I'll say to you in 2004 and I was a bit gun shy when I when I started Noah's rule I'd come through a peer where Rothschild had some really dark days in the late late 90s you know miners had owed us more than we'd lent them from my colleagues at Finance mines it should never have been financed and they'd help the company use derivatives to build a mine that should never have been built right and we paid the price I looked at it I familiarized myself with it we started revised clients and my view then and is still today that in most cases the right amount of hedging is half what the bank asks you to do right that's that my personal view is about it should be about half now why do I say that because the risk that you take on to your point of committing I think Capricorn sold the equivalent of two years production right two years production I think was what they announced when they did their initial hedge so eight year Reserve or whatever so it's modest but it was two years so the idea that you would commit two years of gold 18 months or two years from first being able to deliver into that hedge with all of those moving Parts in that model that's a that's quite a substantial risk right and and the risk to the bank that when you get there and it's not producing like it would be and it's it's public knowledge that that's the case for caledus and red five of your of your three um you know that that's an issue because if you'd assumed it was 50 of production and now it's 70 that's a lot less free board for the company and it's a lot more time to digest so you know I've always had the view now I can have that view but you can sit across the table from the guys at the bank and they go yeah lovely view Sean but um this is how my model works and if they want my money that's the amount of hedging and you know you negotiate very hard I mean the interesting thing in that three is that Capricorn hedged far more per dollar of debt than the other two certainly I think Capricorn hedge more than twice as much um ounces per million dollars of debt than red five did um to get those finance things but very robust business and it's and you know it it hasn't affected its share price in any way I mean it's very good example of they how they're able to keep the capital structure very tight and hedging um you know worked very well for them but I in my view when I saw it done it looked like much more hedging than was needed to support that level of debt but it hasn't held the company back in any way because they've performed so well mustn't be a client of yours uh I'm joking joke um no no they're not the uh I'm I'm also I'm a bit intrigued in a lot of ways like wrapping your head around as an investor you don't always think about the Hedge book as a liability um and what that sort of means in the context of the fragility of the company so you know you've got ramp up you have ramp up issues um or maybe things are delayed a bit longer you've already locked in the quantity the price of the gold that needs to be delivered at that date and time um and the way that that kind of materializes in the company is um nothing you know if if they can't meet it or or um or or a greater proportion of their production is now has to be delivered into the Hedge book than than total you know sometimes you need Equity to top it up and then you get yeah your dilution no absolutely because look I mean the problem that you have is you know you you have the best will in the world of what you're going to do and then two years later you're in production and you you just go to the bank and you say well the model's not working quite like I thought and you know grade or you know whatever it is that hasn't gone right combination of all those things can add up to a lot fuel prices are higher costs whatever and the bank reruns the model and says well yeah actually now if I with the hedging in there and with there and with the price I now knowing what's going on here you probably don't have enough cash in the bank this I need a I need a bigger I need a bigger buffer I mean you guys talked about 29 Metals the other day now they they they don't have any hedging but you know that most recent Equity rate is I mean it wasn't used to repay debt but that that money is certainly there to I in my view looking from the outside to give their Bankers comfort you know I mean and it's now part of the bankers um uh uh overall risking and in fact I think gascoigne and that's the only time I've ever seen it happen in Australia I seem to call gascoigne did a raise and no sooner they do the race and the bankers then closed on them because they they sort of saw the cash is solving the problem which was didn't reflect well on those particular lenders in my view but you know that that that was certainly the case so if things don't go well he's going to add to it but if the mind doesn't perform the finance team you can't necessarily go to the finance them and say all right you screwed this up yeah I know I've we've done this hedging we've raised this Equity all in good faith that we thought we were going to produce 100 000 hours a year for five years or whatever and now we're not doing that but that's again my my thing that trying to do as little hedging as you can pre-production because it things probably won't go to plan you know people are generally all optimistic because everyone's got a you know show me the incentives and I'll show you the thing whatever that you know expression is of Charlie mongers I mean everyone's got an incentive to do the deal the broker to raise the money the bank to lend the money and it's not their money it's somebody else's as well they're just getting a fee so you know everyone's got an incentive to get it done so when you're in the vicinity of being bankable you know all those things come in and it's just about always trying to have a decent level of conservatism the other thing of course is that we've had a period of time with gold prices and commodity prices generally have just been rising so it's very easy to be very casual about hedging or to look at companies and say you know look at all the money that you've lost but you know my 20 years at Rothschild I think God probably 15 of them the gold price went down of the 20 years I worked there um and Mining houses were still built over that time Robert the correctly built a magnificent mining company over that time you know you were still able to make money in a falling price environment but hedging was far more important to it now um you know I think that's different but I mean I think I said to you guys the other day I saw a list of two quarters ago when the gold price was very high I saw a broker put our announcement of all the money that had been lost by hedging companies you know how much cash they didn't make in the quarter that as I looked across the list of companies it was very interesting because I thought those companies have all survived and grown since 2010 2012 so there's almost like this reverse survivorship bias that you were criticizing these companies that had survived a decade and gone on and thrived whereas their peers that borrowed money and didn't hitch had mostly gone broke somewhere in that period and certainly most of their North American peers that was the case because they're atrocious over there in the way they approached their financing in my observation generally Sean you touched on a broker report there you know announcing all the the Lost potential Revenue I'm Keen to hear from you if you think there is a bit of a lack of disclosure like we notice it all the time we notice that today researching for the show it can be pretty hard to find out what the actual hedge book is when you know at certain quarters how many ounces have to be delivered do you think there is a lack of Disclosure by mining companies on the exact nature of their hedge book yeah definitely um I think it's changed over the years I know it's different from company to company um my recollection is you know back back in the day you know people laid out full tables of of where where they were and that you know each individual year and what then some still do that so you've got an idea of how many you know how many ounces they're obliged in those those different years I mean I think some companies that want to try and maintain a bit more flexibility some of the companies in the past that might have done that might have been less so but um you know at the end of the day I think the most important thing to really understand is the the total number of ounces um and the prices which it's committed and and certainly getting a handle and they're able to track for for analysts the negative Mark to Market is a good check back to that point about John McDonald and Sons ago Ali I mean the mark to Market was actually the thing that gave the smart people early on the understanding that what Sons agualia said it had and what it had were different right so um but yeah I think generally um you'd be I mean I think it's interesting Perseus I mean the most recent quarterly they talk about their profitability talk about the hedging you have to look quite hard to actually see how many ounces that they they produced because they're all about making money you know they're in the business of making money mining's how they do it and that's the way they present it so um you know it is different for different companies I got a bit of a a bit of a gripe um we spoke about companies using hedging to get project finance and they often have a bit of an announcement uh project Finance facility secured looks like this sometimes the hedging comes later sometimes it comes at the same time yep um and the broker reports which we just spoke about quite often you read them and people just look at the coupon rate of the debt and assume that's the cost of debt for the company but clever people might realize that's not actually the cost of debt um you got to factor in some other things too so from the purview of um of a hedge guy uh how do you figure out the real cost of debt for a company well you I mean if there's if there's hedging involved I mean you're not going to know what the real cost of debt is until you get to the end and it's fully repaid and you can look at all those other numbers and how much edging and if it didn't cost you right in the same way in the same way if you look at the coupon on a tourist deal or um an Orion deal and then you you have to go you have to wait till you see what the royalty that you gave we're costing all the rest right so so there's a much broader impact I I think the more important thing in in many cases is you know again I come back to that how much dilution did you need to get it done because if the financing goes well then the most important thing is going to be how tight you kept your capital structure but then coming more directly to your question there's no doubt that some CEOs really love to tell the market they got a low margin over because that implies how you know how credit worthy their company is and that's a bit like The Magician's dancing girl right you know that that's the obstruction while over here you know you've got the other thing and there's you know I have met mining companies that had no idea what margin was on their hedging they didn't even know what discount to the wholesale price the bank was charging them so they didn't know what the upfront cost of their hedging was they didn't know if the hedging was twice as much as was actually needed to justify the financing or not those costs can be you know very substantial and if if the hedging margin let's say the hedging margin is is um one-third the margin charge for hedging is one third of the margin charge for debt but the face value of the hedging is is multiples of the debt you know that's that's a very substantial additional cost to the company now if the price goes down there's no cost to the Hedge I mean the hedging is a positive contributor right but but in terms of the cost and the margin on the hedging I don't think that the margin they charge on the hedging is the most um significant part I think it's the the extra year of hedging that the bank does in order to make the model really robust that wasn't needed because if you think about in the 2000s the really tragic um stories like taranga I'm trying to think in a few others that you know you do your financing you you do the hedger you lock in the hedging the bank also gets to sweep all the surplus funds right so you've got a you've got an amortized schedule you have to repay and then anything over a certain level you have to give them as well the gold price went up dramatically lots of those companies repaid their debt within 18 months of being in production they had hedging that was still going out three and four years and four years later the gold price had doubled and trebled again and though that last year of the hedging that's probably never should have been done in the first place that's where the enormous cost um to these Finance engines I um there's a few things I'd love to have the opportunity to relate to some some real world experiences on companies that we come across pretty pretty often I'm Keen to Keen to talk about Regis right because Regis has got this real reputation for having the worst hedge book it's had that reputation for as long as I've had a professional career in finance um how long how long ago did you get into Finance I started 2020 at your neighbor like yeah Regis is reputation like it was just I think gold ripped and all of a sudden you know everyone's just like clued onto how bad Regis the Hedge book is um some of us some of us include on a little bit before then yeah I'm sure you were I wasn't working before then but I can read these history uh I mean it's not it's not as bad now like so it's currently like 120 000 ounces but it's Aussie 1571 dollars per ounce and it's the pro I mean they've reduced it oversized by delivering into it but it's the price that really catches your eye you're like how can you possibly have a hedge price that's almost half of spot price right now like like uh I just it's it's baffling to think of how that possibly could have come about but I'd love you to walk us through the mechanics of how you end up with a hedge at that price well it's very it's actually incredibly simple and if you think back to the example I gave of that fixed term deposit right that that's all it is that the idea that you know you've got um the bank's got your money your sales proceeds and you don't get it till you give them the goal so when you turn up and let's say in the the gold price is 1400 that you had just 1400 and the gold price is 1600. if you go to the bank oh look I'd really rather sell the gold at 1600 than delivering the Hedge at 1400. do you think that's possible they go yeah no worries that's possible how far did you want to roll the obligation out yeah let's roll it out a year so they just take your money that's on deposit and they roll it out for a year but before they roll it out like it's a fixed term Deposit they say yeah but you owe me 200 now because the gold price today is 1600 and your contract's only worth 1400 so I'm going to lend you that 200 an ounce and this is the interest rate I'm going to charge sometimes they tell them sometimes they don't they calculate the interest rate they're going to charge in that 200 embedded loss they then go and look at the forward price they impact all that in and they go oh okay you're 1400 Hedges now 1430 one year out and you get to sell at 1600. everyone's happy right that that's fine but we have said to our clients from day one that the minute you do a hedge to a date to meet an obligation to underwrite data particularly if it's mandatory hedging but you sell at a price you're comfortable to deliver into to meet your objectives and to avoid that early dilution the minute that you say please sir or ma'am can I roll that hedging forward when it's out of the money you've got to treat it like debt at least partially it's like a gold denominated debt so Regis the strategy was very simple and it's a strategy you know in the those guys grew up in the market in the night in the 90s right and Samantha and whatever the companies were in their earliest days with Nick Georgetta in the falling price environment with high contango everybody did that and that made perfect sense we turned up in 2004 we said to all of our clients everything that you learned in the 80s and 90s is is no good anymore because we're now in a low contango environment and we're in a rising gold price environment until that stops you should never roll out of the money Hedges further forward it's bad I think so what we call our clients we say hexagonal hygiene you should always deliver into your Hedges on time and you should try and accelerate Regis was the ante of that right they they still were dealing with their 90s so they would every time they had a higher price spot they would sell spot and they would roll their Hedges forward and they were very open about that in fact I've you know I've heard them talk about that I mean and they never underperformed the gold price for a decade as I always sold spot and if the price was lower they delivered into Hedges but the problem with doing that was as the that loss got bigger the unrealized loss although it was unrealized it wasn't uncharged they were essentially earning no contango so I just happened to anticipate that you might ask me this question Travis so I dug back into the archives and back in 2012 Regis had a hedge book of 188 000 ounces and the present value of that hedge um was 1480 okay um in December 16 they had a 404 000 out page and the present value was about 15 46 right so and today they've got 120 000 ounces and we'd estimate the present value is about 15.42. so in seven years the price hasn't changed in seven years of contango Now by comparison Northern Star in 2014 their Hedges were at 14 29 and today they're at 2645 that's the PV price and remelius back in March 215 like 1582 slightly better than Regis has today today the Hedge books at 2670 let's say that might be the prices they're declaring to the future but that's our estimate of the the present value right if you closed out today what's the spot equivalent right so those two companies have gone from 1400 1500 like Regis had back then the 2600 2700. because they've always delivered into the hedges when they matured and sometimes they put new Hedges on so they deferred the benefit of those new Hedges Regis kept on rolling the old Hedges and taking the cash during that period so their cash performance then and their dividend payouts and everything was fantastic but you might like you know if you're familiar with the Oscar Wilde the Portrait of Dorian Gray you know like they they paid the price they were the the handsome young man you know on the surface but meanwhile the you know the the disc got this bigger and bigger gold denominated debt that's growing in the background and you know the Brokers were very kind to them for a very long period of time no one really ever mentioned it and I you know I I've been approached to diggers in places like that because people say what do you think about you know 10 years ago people would ask what do you think about regis's hedge book and I go well it's going to work really well if the gold price goes down and it's going to work out really badly if the price goes up and you guys all think the price is going up so the strategy doesn't make sense to me but it made sense for a very long time from a cash perspective in a capacity to pay dividends and all those things to maintain a wonderful price to cash flow multiple yeah but you kicked the can down the road yeah and and and that's I think to your point about reporting like people have to pay more emphasis to the negative Mark to Market of the Hedge because essentially companies I've seen companies they were debt free and so well you're debt free but you've got this Hedges out of the money that's a and that's a gold denominated debt because it's getting bigger the the potential cost is getting greater and the further and first you go you know the costs are going to go up the one thing you can be certain about is the cost of producing gold is going to increase over time so why would you want in 10 years to deliver into today's price I mean at least you want the benefit it can I mean we never recommend our clients hedge more than about 18 months to three years forward and on a tapering basis right and that's I mean the longest hedge books in Australia I think now are probably like three years right the idea you would carry the same Hedges on your book for a decade it never made sense to me it's it's an interesting phenomenon because if you keep yeah rolling your head just forward then in the future you've still got this you know pretty substantial production commitment and um I think about Regis um you know in the context of their acquisition of Tropicana which also happened in 2020 by the way I remember when that uh transaction was announced they acquired Tropicana consensus was they paid too much for it but it gave them access to uh you know a larger production profile which in our last conversation you pointed out to me actually would have assisted in delivering their hedge book would have made their Bankers a lot more comfortable about about the percentage of um the debt let's talk about just go back and just you talked about Santa Gali before and the the pit Warfare I mean I will I will be absolutely happy to say to you that sons of gwalia their strategy in their last day is like trying to acquire out for some of the deals they did I have absolutely no doubt they did that to it to increase their production profile to try and diminish their their hedge obligation you know I think that that that that that was very obvious and you know that's sort of easy one to talk about because they're they're not around anymore we shouldn't talk ill of the dead but um you know that that's um yeah yes anyone who's got a large hedge book and as it becomes an increasing percentage of your reserve resource position you're going to become concerned about that and sometimes the tale starts wagging the dog you know in Rising price environments it's amazing how often clients want you to update what's our negative Mark to Market position they don't keep revaluing the in-ground inventory that's that that's not hedged that people start to be concerned about it because it's an obligation um and it's you said a sentence there that the bankers definitely would have been more comfortable with it and I think this is a point that gets lost with a lot of people myself included to be honest and that's that like we often think of the banks um downside in the context of you know the the project Finance facility that exists and think that the bank's downside is sort of capped to the Quantum of that facility we could talk about caledus you know if we wanted to they you mentioned that it's public knowledge that they've had some ramp up challenges the model's probably not matching right um and you look at you know what's outstanding there it's like 81 million bucks to Macquarie and you know my simplistic mind I used to look at that and think well the downside to Macquarie if calabas you know worst case scenario sits up it's capped to 81 million bucks downside to Macquarie but it's not because of the Hedge book can you tease out that Dynamic if why the bank sort of exposed worse than just the Quantum of the uh facility yeah absolutely and I sort of touched on it earlier in my experience when I was in the banking I mean one of those um common misconceptions is that Banks take the other side of the trade right people think oh all the upside the banks made all that um no as I said they've borrowed I mean when when you do a project financing you borrow money and you get the money and you borrow gold and you don't get the money the money gets put on deposit and that's the forward sale so if you think about it like that you have two obligations the bank has two liabilities from the company they've got the cash liability and they've got the gold liability and that gold liability is only limited by the gold price going up now you know in a log normally distributed world where there's a 50 50 chance for the gold price going up or the gold price going down when they run their risk profile they go oh that's really good if the gold price goes down under any circumstance they can still repay the debt that that's why they're comfortable to let the company hedge right if the gold price goes up and the mind fails yeah you you have to go back in the market and buy that gold like we talked about with all those companies that they didn't fail but the Hedge book got so big they just raised Equity you know companies like new Crest and all the others back in Barrack back in the mid 2000s so yeah the bank um one's on balance sheet once off balance sheet but that exposure's there so the negative Mark to Market in in and and I have the very unfortunate position having turned up to quite a few creditors meetings in the late 90s um yeah yeah as the lender right as the secured lender and yeah and when a company dies I mean it's you know companies in a death spiral you know they do some terrible things in terms of just the green grocer and the News agent no one gets paid right and the mines still producing gold so everyone in the mind says oh mate we poured heaps of gold it's good we're good for it you know and all these poor little people turn up and we rode they said but you lent them 40 million dollars why are you claiming 80. well because we had to go and buy the gold back in the market and that cost us another 40. now yeah we're stupid I'd like to shoot the lending officer that ever did the deal in the first place but our shareholder the Rothschild family lost twice as much as they lent because that gold denominated liability had increased the gold price had gone up and the mine failed so that's that's the dynamic that's there and the equity Market's aware of that in terms of what happens to the share prices of these companies that have it because people clearly understand you know the sophisticated people understand what the liquidation um value is right so but you know nobody borrows and does hedging that doesn't expect to be able to produce and the bank has scrutinized the model so when when it doesn't go to plan um you know it it's it's the Rarity but it I mean it it happens right I mean it it happens but I think the good thing in Australia is the banks work very hard with the mining companies to try and restructure and roll those Hedges out and do whatever they can to let them get through and that's an important part when we are helping someone borrow from the bank the caliber of that bank and their capacity to deal with problems is one of the most important criteria there are some banks we just say to our clients well I just wouldn't borrow from them because the minute things get tight there'll be some new guy comes from the workout team and you know that's it flights out right that that's um you know that's you don't want that you want them to say how do we work through this to get out of this together you know how do we if we can let's let's mine our way out of the problem I think that's you know an important takeaway that I I have is um these calories is another example right but the Hedge book is also with Macquarie and you know the the debts with Macquarie and I imagine in my you know simplistic brain that if if you haven't issues um that the fact that the two are with the same counterparty there's going to be greater flexibility to negotiate you know a change in your repayment structure for example because the you know macquarie's aligned on the downside from from the Hedge very much interest to work out yeah so so Kelly this is is a client of ours we've been helping them on the hedging side we weren't involved with helping to negotiate the debt somebody else did debt but we certainly were involved in overseeing the execution making sure they got the right pricing on the day and all that type of thing which is part of our service but so just to be very open but you know they um your your uh perspective is absolutely clear there is nobody that has more of incentive to ensure that caledus can mine can keep on mining and meet its obligations than the bank because you don't want to have to go in the market and and and buy gold um if the Gold's in the ground you figure out and work with the company to find a way to get through and there are several examples where I've seen companies in a similar position to calendar Square they've gone on um they've dealt with that situation and you know and and survived and continued to prosper and you know it's just about it's a it's a it just becomes a bit of a digestive issue you know when your model is not what you expected right I mean nobody planned to be in the position that they're in that's just the position that they they find themselves in and that's that's Mining and again that comes back to my point about I always just work on the basis whatever the whatever you think in the model Works try and do it for half as much because then you'll have a little bit more free board if you do get into that situation and price is different you you're not you're not quite um so so tight it's been a wicked conversation yeah fascinating really appreciate it Sean yeah but before we round off I've just gotta ask about the Optics of um someone who spent 20 years working at Rothschild having an Occupy Wall Street poster behind you and I've realized the entire time that I've had a Black Swan sticking out the top of my head too yeah um yes it's fun we've we've had quite a lot of uh query about that recently I look we had a big office there was lots of blank and I just and I wanted lots of art on the wall and we that's literally like my brother took that out of a like a magazine and we blew it up and painted on canvas but I just like the Monopoly man the kind of Monopoly man image of the Saddam Hussein thing it was just that resonated me as a very clever uh piece of art and and I am a um I am kind of a contrarian uh but by Nature I run you know I have my own business because after 20 years of working for a private company I I considered I was unemployable in a in a normal kind of institutional type framework so um yeah anyway but it's sort of you know a bit like our name Noah's rule it's a bit of that picture is a bit of a conversation starter so yes but um the Black Swan there under underneath that um if you can see there's a cartoon which was in the AFR and it's a Black Swan typing on the keyboard and he's typing gear editor um please you know cease and assistant using my name inappropriately and we just love that because you know so many people talk about being destroyed by Black Swan events that are something that the same thing that happened three years ago right that's hilarious has become a very very convenient thing for people like oh you know who who knew Black Swan anyways love it and really appreciate your time Sean I'm sure the money miners have taken plenty and learned heaps about hedging just like I have really along the way today you and I are both unemployable Sean I swear too much publicly these days well can I I just say look I I really as I said the other day I I love listening to your podcast it's very fresh um I like the fact that people are being held to account people are going to be a bit more cautious about how they present things in their presentations if they know that somebody's actually reading all the detail and is going to call them out on things and um you know it's great to have a bit of an independent voice I mean too many people are kind of sponsored by the same very people they're chatting to so uh keep it up love it very good cheers here on thank you cheers guys thanks bye-bye there he goes guys what do you reckon Maddie oh mate well I wasn't there so I don't have too much opinion but I do look very forward to listening to the whole thing yeah it was great a lot of value to be sort of historical lessons and like some very contemporary like case studies there which just help help to understand the present a bit better by learning about the past and he sort of tied that in wonderfully love a bit of Sons of gwalia talk as well I'm gonna say hedge I can talk about hedging now I can't win the episode's finished it's not it's not a mystery anymore it's not a mystery man we're not holding on to everyone any longer yes that is um I'd like to maybe we could do us we're talking about doing series mining Niche series like like if you're going to look at really Niche industries that people are absolute experts on hedging would be one of them I'd be um interested to see what other ones we can come up with and find experts in that field absolutely mate and this one you know it's niche but it is almost everywhere in Australia you know it's it's pretty common and like he said you know not just in Gold anymore you do see it in in other commercial it is and I think we'll see sort of you know I wonder if we'll see more of it in emerging Commodities as well well over even after speaking to him in the office before um before he's did the episode just the probably the misunderstanding of what hedging is throughout the market from the uh probably more people a lot myself that aren't entrenched in the finance world but did you did you guys from the finance world even think wow shitloads I didn't even know about hedgie exactly no definitely yeah well that's all that's always good to hear awesome guys a couple sponsors to think oh we've got a couple all right JP search at the top of the show we've also got any time exploration K drill smack power and technology and territory Capital how can we have a good way to get our great friends at Terran Capital love it cheers guys thanks bunny morning had your bets 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