Arcadian and rio & ERA

Righto, money miners, another week and big M&A possibility. We're in that end of town. Hopefully not another bloody BHP Anglo thing, because that just eventuated to nothing. But it might not be. Hold on to your seats. And, jeez, we've got a... We've got a guest coming on to divulge a bit more about this potential Rio Arcadium merger, who is... obviously saying, need to get that bloody, get that price up, dogs. We do. This is exciting, mate. We try, yeah, we always try and wedge ourselves into deals in some way, shape or form, and this time we've managed to get the shareholder who's making the most noise at the moment to come on the potty and dial in. Easy to contact when they're making heaps of noise. It's great. Cool, isn't it? Yes. That bloody bit going on. Bit of ER, bit of. The takeovers panel, backflip ERA. WAF has plummeted today on the back of some, you know, you'd say scepticism around Burkina Faso nationalising. But is this another by the coup moment, by the dip? Who knows? That's a big question, isn't it? Oh, mate, a big question, JD. Does Mineral Mining Services still have gear available for a contract? The answer is yes. Yes, they do. Yes, same as last week, same as this week. They're still ready and rocking to go for an open pit mining contract. Mate, they can do JVs. They can just rip, tear, bust and get it all out as quick as possible, give you cash flow, give them a call. If your rocks can make money, they can do it for you ASAP. That's another website header on ThinkTrap. Well done, mate. I like it. Righty-o, let's rip in. So coming out on the weekend, not Friday, the article about the Rio Arcadium? It was GOST Friday because in after market trade, Arcadium teared up 30 plus percent. So it started. Super exciting, right? This is the big end of town. For those that don't know, Rio Tinto has confirmed that they have submitted a non-mining bid for Arcadium. And like these rumours around, the rumours around the potential deal, I think they could be traced to the back end of last week. It was actually our favourite column that penned an article on Thursday, Data Room. saying that Rio was eyeing off a big deal. She named both Arcadium and Dalbemarle in that one. I mean, there's been some rumours before that, but let's just... Good to see you hit a 180. We'll give her credit. On Saturday, though, it was Reuters who had the scoop that Rio Tinto was in talks specifically with Arcadium in a deal which was suggested to be worth between US$4 and US$6 billion. And then this morning's ASX release. Rio Tinto, they confirmed it. They said, we're in talks with Arcadium. And that's where it gets pretty interesting because they've confirmed it, right? Then to throw another spanner into the mix, one of Arcadium's shareholders, a Sydney-based kind of fund called Black Waddle, have promptly penned this letter to the board of Arcadium, which is chaired by Peter Coleman, suggesting that a deal in the vicinity of that US $4 to $6 billion would severely undervalue the business. And of course, he's... They're much lower than where share price was itself earlier this year too. So it must have just been an absolute whirlwind of a weekend for the deal teams at Rio, at Arcadium, the respective advisors and the chairs, et cetera. But there's a lot of talking points to cover in relation to this news, guys. We're going to go through why Arcadium and not Albemarle or Pilbara or any development project out there. Why now? What are Rio's plans here? What's the likelihood of a deal actually going ahead? And what about the Arcadium shareholders that will be frustrated by any offer that doesn't get the share price back to where it was recently? Well, at that point, we're going to have a certain person dial in very soon. It's obviously on one side of the fence. Probably a refresh for people who don't know Arcadium and you wouldn't bloody blame them because it's the bloody movements that's created it. It was Oricombray Galaxy made Allchem, Allchem merged with Liveit, now you've got Arcadium. now potentially Rio Tinto. Isn't it funny how both of those mergers that they did, they renamed the company to neither of the merging entities? So like Oracle Bro Galaxy became OrCam and OrCam Live Ad became Arcade. Why keep renaming? It's just so confusing. Merger of equals. Merger of equals. No name is better than the other. Right, Jadon, give us the bloody, give us the overview, give us the share price asset, all that shit, bloody overview. Who is Arcade? The thing that jumps out. Obviously is the share price reaction today up. I think last time I looked 47% just absolutely flying you can see on the spark chart there which that That's pretty wild, right? That is a pretty violent move to the kind of upside there. So that leaves the company capped at US $3.3 billion. So quick reminder, like you said, on the back of all those deals, US is now their core listing, but they've got a CDI here in Australia on the ASX. 10 operating sites, up and downstream. Again, like you said, these guys are a real mishmash of everything lithium related. So in... 2024 terms, their upstream capacity, what they produce from their brines, Oloros and Fenix, both in Argentina, is circa 75,000 tons of lithium carbonate equivalent. Now, they've got all these growth assets that they talk about. You'll remember on the investor day, they trimmed back the spending to tighten the belt a bit and give the investors confidence that they wouldn't be running short of cash while still reaching their stated 28. 28 goals. They've got downstream opportunities in Argentina, and then they've got Galaxy and Namaska Lithium both in Canada. They are hard rock growth assets that at varying stages, one of them Namaska, they're looking to turn the spot into hydroxide as well. Of course, they've got Mount Catlin, which has been recently mothballed here in Western Australia. Not yet, 25. To be mothballed. ball yet and then um yeah in terms of downstream they talk about producing hydroxide chloride butyllithium high purity metal in that investicle they sort of really pride themselves on not being pinned on just the ev sector so they talk about producing to the the farmer space the ceramics and glass making sectors and all these other things and that sort of comes at the history of of live and and everything that they had done over the sort of previous 50 odd years that they'd been in production. And they also speak a lot about building this sort of flexibility of kind of toggling between carbonate and hydroxide, depending on what gets them better value. So they're definitely building in capacity to produce both of them. They've got downstream in China, Japan, the USA. Yeah, that recent strategy day was like super interesting. I remember, you know, one slide that did the rounds there was, you know, they talk about and expect their max kind of leverage to reach sort of, you know. 2.1 times net-to-EBITDA. And then they actually point, they illustrate what their projected EBITDA will be, assuming a $1,400 per tonne sort of spot price in 2028. And that very number actually became subject to, you know, the multiples that we saw kind of talked about on Twitter and also in the letter penned by Black Waddle because, you know, that gives the shareholders a lot of credence to argue that a bid in the vicinity of $46 billion. would undervalue the company. If it's the lower end of that bound, then you're talking around like three times that 2028 projected EBITDA on those consensus numbers. Yeah, for those that hadn't caught the number, 1.3 billion EBITDA was the one that was commonly quoted. Yeah, and who better to talk about that letter than we've got Michael Turan who's a portfolio manager at Blackwater dialing into the show. So pretty keen. I mean... And full disclosure, Blackwattle, they're obviously long Arcadium. In the letter, they disclosed that they bought their stake shortly after the merger completed, which that merger completed January 4th of this year. Since then, the share price is still down about 40% even after today's 45% price spike. Oh, really? Yeah. Holy snap and duck shit. Yeah. Yeah, right. Mike. Come on, Mike. Let's do it. Thanks, mate. Thanks for having me on. This is so awesome. We'll be right back. privileged that you're making noise about a deal and you agree to come on the podcast to get loud. This is the best place to get loud when you're unhappy about terms. And who better to be unhappy about than Rio Tinto, in your view, with a lowball offer for Arcadium. How were you feeling when you were reading the leak from Reuters over the weekend that there's a US $4 to $6 billion deal that's on the table? Yeah, so, I mean, Rio has been talked about as a potential acquirer for Acadia for a little while. You know, the combination of the assets really makes sense for Rio. But, I mean, the timing for them, good on for Rio, but for Acadia shareholder, this is a very opportunistic time for Rio to get the assets. And when, you know, when we saw that $4 to $6 billion number be flooded by Reuters, you know, we thought that really undervalued the assets. And that's why we decided we'd just provide some feedback to the board and management at Arcadian about what we think, as long-term investors, what we think about the value of the assets there. So, Mike, as you laid out in the letter, for those that haven't sort of seen it, you started accumulating shares shortly after the merger earlier this year and you've, you know, been buying a little bit. Why don't you sort of lay out the picture of the value you kind of see and the sort of horizon you had on your investment when you sort of bought into the company and those sorts of things? Yeah. So, I mean, our investment style at Blackwater was that we're really focused on quality. So, you know, we're looking to sort of build a portfolio of the highest quality businesses. in every industry across the ASX. And, you know, sort of looking through the lithium space, you know, we sort of dabbled in IGEO and Pilbara. And then we sort of started looking a little bit more at Arcadium, which is a combination of two businesses. So it was the US listing Liven and then the Australian listing Orca. And they'd only combined in December last year. And you sort of look at those assets and we think they're quite unique within the industry. So this is a vertically integrated business. So unlike an IGO or a Cobra, which just sends their supply chain straight to China to get processed. But it's a vertically integrated business that has an ex-China supply chain. So there's not really any other business in the world like it. Albemarle has large Chinese processing. And so we thought this is a very unique asset, and the market's not properly valuing it, that vertical integration. allows it to have these long-term contracts with the likes of Ford and Tesla. And that gives them floor pricing and protection in their long-term contracts. And so it allows them to have profitability through the cycle. And then they have this huge growth pipeline. So they're expanding in Argentina. They're growing in Canada. And they're doubling production into 2028. And then they have another opportunity to double production beyond that. So it's a huge resource base. And so we put all that together and thought, you know, the valuation in a few years'time, I mean, you've got to be a longer-term investor. You know, going through cycles is pretty tough. But, you know, if you sort of step back and think about what the business looks like in a few years'time, it's an incredibly undervalued asset. The number you kind of pointed to, you sort of didn't even have to back out your own kind of potential value that the business could be worth because they did the work for you in the strategy day slide by pointing to, you know. FY28, you know, potential EBITDA under their kind of growth plans. You're arguing for a total kind of valuation of Arcadium that starts at $8 billion and is north of that. That's a fair way from the $3.3 billion valuation it is right now. But your math is basically saying that that's like nine times kind of the EBITDA that you're projecting out in FY28. How do you come to that kind of arithmetic? Yeah, just on those numbers. So if you sort of look at like companies like Albemarle, through the cycle they trade about 9 to 11 times, sort of a chemical business, huge demand in lithium. They sort of trade slightly higher multiples than an iron ore miner, which is maybe six or seven times a bit done. And so what we thought was, okay, Acadiums talked to this number only three weeks ago. They have some confidence in this number. If you put it on that multiple and then you discount it back, so 10% per annum discount back, so your NPV are back, and you should get towards an $8 billion number. And so if the management really believe in what they can execute and deliver those projections, then we think that the value that you talk to Rio has to be in that sort of ballpark of a discounted valuation back from that target. Mike? Like you lay it out in the note here, LTM has just been completely smashed this year in a sector of companies that have been really, really sort of beaten up. And I think the question a lot of people had is why have they been whacked so hard? You know, given as people like to say they do have, you know, relatively top tier, lower quartile, all these sorts of things, projects. Why do you have they been hit so hard by the downturn? Yeah, I mean, it's a couple of things. I mean, we've been thinking about that as well as we've sort of been watching it go all the way down. Look, I think the U.S. market in particular seems to be very focused and worried about their balance sheet. And so, you know, they've got this big growth pipeline. They're spending a lot of CapEx. And I think part of the investor day only a few weeks ago was to sort of calm everyone's fears and say, look, you know, we can actually phase this CapEx, spread it over many years and provide a lot of. had room for a balance sheet. So I think that was one of the reasons it got sold off. I think in Australia, the stock's a bit of an orphan stock. It's unlike the other lithium players, which are sort of high rock miners, which as mining investors in Oz, it's easier to get our heads around while this one's vertically integrated. And I feel like people haven't done the work to really understand what that actually means. And so I think those two things have sort of put the pressure on the share price. Does it being a CDI as well, does that sort of play into it? People think, you know what? wide plate on the secondary kind of listing is that a big factor at all yeah it's it's funny that like the when it first listed i think about 55 of the shareholders were asx listed uh and then 45 in the us um but that sort of that flow has just moved towards the us and i think it's been over 60 now in the us um and so that just makes it that much harder and uh you know you look at like the the stock indexes in in asx you know i came has fallen out of the asx 100 now into a small cap only a couple of weeks ago as well. So it doesn't help. Do you think this was always the end game for Arcadium, that Rio would take them out? Yeah, it feels like that. That'll help them all. You know, they're big assets that will require capital, you know, patience and long-term thinking. And, you know, I think the shareholder base has shown that that's not really what they're looking for, right? And so, you know, it makes sense that a larger player takes them. How amenable do you think Rio are going to be for price negotiation or do you think it's more opportunistic and it's going to be like a BHP Anglo situation? Yeah, I mean, I think this is still strategic for them. You think about like the other options they have, you know, they've got issues in Serbia. They've got a small asset in Argentina. They seem to really like Brian. There aren't really many other I don't think there's a second prize if they don't take Arcadia. Albemarle doesn't fit the bill. It's got Chinese processing. It's got some other non-Lithium parts of the business. SQM with the issues around Chile just make it too hard. So I feel like for Rio, this is all or nothing, and this is the strategic asset that they need if they actually want to chase off their Lithium dreams. So how do you think about then getting the other shareholders to sort of see your point of view? I'm sure plenty of them will be sort of pegged to a higher price given where the stocks kind of come from. But as we kind of talked through earlier, sort of breaking down the the register, you've got a large number of passive funds and then you've got a whole heap of you know non-substantial stakes below five percent a lot sort of one to two percent type stakes. How do you think about getting them on the side on to sort of see your value? Have you reached out and got a bit of a feel for how they're kind of thinking as well? Yeah we've you know since the letter sort of went out you know we've had quite a few inbounds and had a few chats with some. Look, everyone's got different views. They've got different time horizons. So some are happier to take a short-term sugar hit. Others are sort of a bit long-term like us. So, I mean, there's a variety of views. Everyone believes that the assets are undervalued. And it's just about what the premium is if the deal is to get done. You've got a good sugar hit today and a 45% kick-up. Must make you a bit happier. Yes, it helps. It does help. Chuckie inbounds to Mike in the YouTube comments while he's listening everyone a deal at 6 billion US, does that cut the muster? well we think 8 billion is close to the right number we put that number out there and today you've had a couple of the research houses come out with similar numbers so cities... said, look, our replacement value is if you were to rebuild Arcadium from scratch, it's going to cost you a bit over $8 billion to do it. Macquarie have come and said, look, if you value the full resource base, they've got $8.5 billion in the US valuation. So there's a few numbers out there. We think towards $8 billion is the right number. The challenge might be in that if Rio walked, what happens to Arcadium's share price? might come off a bit maybe it doesn't i'm not sure but there's also you look at the field of potential like interlopers here and like i don't i don't think anyone comes to play other than rio right yeah yeah you're probably right like um maybe there is a fit there for albemarle but you know they've got their own issues yeah um and otherwise you know rio is the the one you know the outsider who wants to get into the industry the deep pockets so it makes sense for them yeah um I guess, look, everyone's going to have their perspective. But our view was, look, if you're going to be closer to that $4 billion mark, you know, Sure. We think it's better valued for Acadium to walk away from the deal. Just go alone. Yeah. Look, the management team have put out these targets. They're confident in executing them, so they should back themselves to go after it. Our personal view is on the lithium cycle, we're probably closer to the bottom. Where pricing is now, you're hitting cost curve, you're hearing people are curtailing mines. You saw CATL. You know, it's tough out there, but demand is still okay. And, you know, the cure for low prices is low prices. And with patience, we probably expect another price cycle to happen in the next couple of years. Do you have any info on whether the offer was cash, script, mix, or end as a shareholder? What would you be looking for from Ray? Look, all we got to go by is that Reuters article. And, I mean, there was a mention of the Scrip as well. I think Scrip might be hard just because of the US investor base. Do they really want Rio Scrip? If you're an ASX investor, then maybe Rio Scrip is okay at the right premium, but the US investor base might be a bit too hard for them. How do you think about value across the lithium space? On the back of this news, we've seen almost every name on the watch list kick up. Are you sort of getting excited? Obviously, you mentioned you think we're sort of eaten right into the cost curve near the bottom of the kind of cycle. But like you also said, if Rio is not going to swing for some of these names, who else kind of is? So it seems a little bit premature that a lot of these names are starting to run. Are you still excited looking out there? Well, we're still excited with Arcadian, for sure. Any other names? Like I said, we've... Our preference is to look at the larger guys who are low on the cost curve, they're producing. We have looked at Pilbara, we have looked at IGO before. There is value there, but people will have to be patient. Even though we think we are towards the bottom of that cycle, it doesn't mean that prices rip tomorrow. It's going to take a little while, but demand is still solid. And you've seen all their supply and contentment. So, you know, you need lithium prices to be at an incentive price to get your production online. Otherwise, we're just going to have the same price cycle again. We're going to have a price spike at some point, and then we'll have, you know, everyone go gangbusters and spend a lot of capital, and we'll have a, you know, go find the bottom again, right? That's the way commodity markets work. Beautiful. Beautiful, mate. Oh, well, we'll look forward to engaging with you on this journey, mate. This won't be the last time we talk in this deal, I don't reckon. Early stages. So thanks, E, for coming on on short notice, mate. I appreciate it, Mike. Thank you. It was great to chat. Thanks so much, Mike. Thanks, guys. Yep. How good was that? Good stuff. The one thing we did mention, the ex-China, that's an interesting point that we probably didn't cover. It's bits and pieces, right? There is some bits, but you can sort of divide if you send your South American product to your... US facilities, then you're on side. But there are downstream facilities they have in China too. So sort of ebbs and flows. But awesome to hear it sort of firsthand from the guys themselves at Black Waddle. Very, very long-term view. Yeah. It's appearing because, you know, ex-China is a long-term thought. Yeah, that's right. You sort of carve out your view of where you think the company will be in sort of three or four years and that often tends to be much easier than where the company is going to be in six months'time. Yeah, very much so. Right, let's get into the other talking points that you alluded to at the start of the show. And I guess the big one was why has Rio Tinto picked Arcadian, which you wouldn't say is the frigging most stellar blue chip lithium company in the world by, I guess, reputation? It's complex. Very complex. Not like it doesn't have like one of the two biggest brine. Lots of operations. Large cost curve. big geographical footprint. Yeah, it's not Albemarle. No. So why haven't they gone for Albemarle? It's a really good question, Matty. Like there's a lot of, I think the rationale, there's a bunch of different reasons that I've written down here, but the one that sort of sits well the most is Arcadium just became way too cheap on a relative basis. Look at their underperformance versus Albemarle or Pilbara like, you know, Mike actually outlines in the letter pen to the board of Arcadium. It's like down 60 odd percent year to date versus like 40 odd for the other two. My intel suggests that... Rio took a good look at actually doing a deal here about a year ago, by the way. So the merger of Allchem and LiveEnt was still completing, and Rio had taken a pretty good look under the hood, but couldn't get there on value at that time. In fact, I'd heard from someone that part of putting Allchem and LiveEnt together was actually to get sufficient scale to actually warrant. being kind of acquired by Rio in the long run too. A dress up. Yep. Yeah. And when you say they were having a good look, they were going to have a good look post-merger then. Yeah. You're looking at the combined entity and look, it didn't get over the line. We've sort of, but that's changed now because it's down a truckload on a relative basis. So it probably just got a bit too cheap. I think also just to go on that point on an absolute basis as well, right, because you go back. two years and you can talk if one's relatively cheaper than the others, but they're all very expensive. But now we're talking in terms of the EBITDA number that was quoted and stuff. In absolute terms, it could be quite cheap if you're believing that's the lithium pricing environment we're going to see in a couple of years'time. Yeah. The other point is in putting a bunch of kind of like phone calls out today to kind of make sense of this. I learned that, I didn't know this before, but I learned that Rio actually has been really focused on DLE. Apparently, they've built out a pretty substantial technical team in lithium. Apparently, they've been working pretty hard on the technology side themselves. Apparently, they're much more interested in the application of the technology they've been working on in brine rather than spodumene because they think the cost optimization of the industry will make some of these brine projects even more cheaper over time, which complicates things for the larger kind of spod opportunities out there. And look... Albemarle comes with plenty of spot, don't get me wrong, but Greenbush just has a kind of complex joint venture with Tianchi and then Wojnar, you've got to accept that Minns is operator of that instead. So it's kind of a more complex kind of spot, semi-spot portfolio. But it does open them up to obviously the Atacama, like the evaporation side of things, but if they're very interested in DLE, it opens up the, what is it, the shale all fields. the what's the american ones what are they called geothermal no not the geothermal the ones in america the bloody deep deep ones in the oil field that they can't evaporate but need to be dle yeah i think i don't think dle is going to be like a one one size fits all like i think i think you'll have sort of bespoke applications i don't even really know if there's a commercial you know use yet or how far it is it's all you know let's wait and see what eventuates there but My intel suggests that Rio is pretty optimistic about the application. They might also, like keep in mind they acquired Rincon, which is in Argentina, but that project in itself might actually like need DLA in order to sort of stack up. So they've probably allocated a lot of resources to this technology side of things and as a result, they might have gotten bullish on it and they might have, they might actually see the kind of the long-term cost curve as the flat brines kind of coming lower. And you keep, like it's the spod, it's the marginal stuff there and you get, you know, if the spod's still in the market, then heck, you have even higher margins if you're part of the really low-cost stuff with the right technology. That's what I believe their view could be at the moment. Yeah, the smack over, that's what I was trying to say, the smack over at Fallfield Brines. The interesting thing will be to see what they, if like fast forward a shitload, if this did happen, what they did with the spod. Like you'd say Mount Catlin's probably. pretty immaterial to the whole of Arcadia. They've declared that non-core. Yeah. Yeah. But you look at the James Bay stuff, it's like would that be a, is this, could you assume, right, if this happens, they'd probably flog James Bay off and Spodgermine Hard Rock is not a focus and that sort of feeds into the narrative as well why they didn't go for Albemarle because Albemarle is, a good chunk of value is green bushes. And a bit of Wadjuna, which they're a non-operator at. It could be. Very Spodgermini. Yeah. Like I think there's a potential there, like for sure. And if you look at what Arcadium's announcements have been in the last few months, they've actually been substantially to, you know, minimise their marginal expenditure on any of their Spod projects. So started in August, they basically announced that they'd pause their spend on. on their galaxy mine in James Bay. And then a month later, they declared that they'd pause the cutback at Mount Catlin. And that was non-core. With the asset in James Bay, they're looking for a partner to even fund the rest of that now. So, you know, those are kind of steps that maybe dress the company up to be even more attractive for an eventual deal with Rio Tinto in that sense. So I could get on board with that logic. I also think like Arcadium's bright assets are in Argentina, not Chile, right? And, you know, the CEO of Rio Tinto, Jakob, he used to live in Argentina. when he worked for Shell. You know, it's a familiar jurisdiction that we're comfortable enough to buy a rink on. You had the regime change there, which is supportive of investment, of mining investment all of a sudden with the Malay government. At the same time, if you acquired like Albemarle, you're getting outsized exposure to the Atacama in Chile where there's some uncertainty on how the royalty regime might evolve in the post-2030s there. I can't quite remember what happens then, Jadiva. What is it? Well, the mine permit as well, which became a big point of discussion not too long ago. And you've heard a lot more in recent times about Chile wanting to build out a Codelco of lithium. We saw a deal earlier this year. They paid $300 million or $400 million to scoop up some assets there as well. So I think that people have been a bit more risk-off on Chile. operating in Chile. Would the royalty be different in Argentina than Chile? Because you say the cost curve, like the Atacama ones that SQM and Albemarle own are the lowest cost producing assets. But in terms, I think it's like the all in cost of it is the other end of the spectrum for what Albemarle actually get because of the huge royalty that goes to Chile. Yeah. Everywhere has got its own sort of... problems. The royalty regime is different, but remember for a long time, the challenges in Argentina, we're not being able to actually get the cash out of the country, those capital controls. So that's all, you know, supposedly in the works to improve. That's why BHB has invested a huge amount of money there and the Lundeen group have gotten comfortable. These things are apparently on a changing trajectory for the better, but okay. We're going to put an interview up either tomorrow or Friday, but we spoke with Hugh Mackay. And he talked about this dynamic that oftentimes countries will have where they're receptive to wanting investment. So they'll give some sweetheart deals to kind of encourage mining companies to actually invest. But then those in the long run is more investment kind of comes in because the first move is demonstrated it was okay. Then all of a sudden, those early agreements actually kind of create conflict because then it seems unfair. and it kind of creates this unrest. I think with Chile, there's something like that that's sort of happening around the 2030s. I need to get more information about it. But, yeah, he explicitly mentioned something there. It was interesting to look at the watch list today, and it sort of happened, didn't happen right at the start of trade, but, like, lithium is, they're all tearing. Like, I think, God. Everything. Liontown was up almost 20%. Yeah, like, you know, Wildcat 28%, like, you know, PMET up. It wasn't up as much, but yeah, like huge, huge moves. But the underlying Spodgermoon price has not changed. Hasn't changed. And if Rio's view is actually, you know, bullish, bullish Brian Bearish Spod, then again, that sort of puts a question mark over the Spod. And if they want to do this deal and it's all on no commodity price movement and potential, you know, M&A and everything, this looks like it'd tie them up for a bit. This would be a big deal, DD-wise, to get through, to get over the line. And we're only at the start of the potential frigging price negotiation of it. And I remember people telling us maybe a month or so ago, a bit less than a month ago, when all this news came out of cattle in China. And they said, you're not going to see the prices move straight away, but give it sort of three or four weeks and they'll move. Because we saw the futures jump up. The GFX ones jump up 8% but we're here now three or four weeks later and all the indications we've got from granted not the most transparent of pricing is that it hasn't actually moved yet and it's still around US 750 to 800, 6%. There's a comment there to at least Rio Tinto is embarking on counter-cyclical M&A for once. They had a big amended for that. Genuinely, it's kind of surprising to see Rio actually. confirm that they've bid for something in what feels like a trough and certainly on any price chart it looks that way. But I've come around to the view that there's a lot of merit in Arcadian if you believe the Rio view of the world. haven't completely come around to the view that they wouldn't subsequently look at Albemarle down the track too. I think there is a consensus view out there that there's more pain on the horizon for Albemarle. A lot of debt. A lot of debt. It'll be interesting to see how things unfold for that company over time and there might be a more opportunistic moment for Rio. If you could scoop up both Albemarle and Arcadium, that gives you a pretty commanding position in this market. I understand that the fully integrated... Like the fully integrated kind of lithium production is what is really attractive to Rio as well. You know, they're less attractive to just sort of having only upstream. They love the integration part of it. They want value across the value chain. They've done sort of similar, they had a similar strategy in aluminium historically. And it looks like they've done technical work sort of along that value chain as well. I think, and the whole brine and DLE and whether it's all fuel brines, everything that's, it's, it's. resembles iron ore in a way. High capex, long life, low cost. Whereas spodumene, besides green bushes maybe, they aren't that as long. The brines are just, they're freaking huge. Yeah, the beautiful thing about what made iron ore such a phenomenal commodity to be in is that you could have the majors produce it, you know, the teens dollars per tonne, and then the price. was always underpinned at a much higher, like price never gravitated down that way because you had higher cost production out of China, you had some high cost out of India, Brazil was high cost and also like West Australia had other high cost producers, which was sufficiently large that it kept the marginal production and hence the price floor was way, way, way high. So you could have phenomenal margins if you'd sunk the rail and you could produce at a really low cost and a decent deposit. Lithium, time will tell what that cost curve looks like. BHP is too scared because they think it'll be too flat in the long run. Rio, it looks like, actually thinks it could be a lot steeper because they think that the brines with DLE would actually come even lower, which gives you more margin if the marginal producer is spot. Yeah. Do you think there's ever a chance Albemarle to dress themselves up, would spin out their hard rock and separate that from their brine and converters? You've got a non-controlling interest in... Greenbushes and Wojnar making up over half your value. If you use IGO as a bit of a proxy of the value, it's an interesting type of proposition. I think that in itself could be something, such a deterrent for enough of a deterrent for Rio, to spend that much money and not be in control. Yeah, that's what I mean. What if they spun it out and then made the Brine and Converter vehicle? as the one that's available to Rio. I was looking at more from the lens of who would be interested in buying the hard rock. Maybe that's the bit that becomes Albemarle. At the end of the day, Greenbush is just like competitive with the lowest cost brines. It's a phenomenal kind of like, yeah, asset from every stretch of the imagination. I wouldn't be surprised to see Albemarle keep selling stuff. It looks like they're selling everything they can. They've got some real sort of balance sheet stress. Let's see what pops out of there. Kind of stress over time. Maybe some other companies can pick up interesting assets that pop out of there and maybe what's left is actually interesting to Rio if it's mostly Brian. That could be interesting. What about getting a deal done, mate? Yeah. Do you think it's possible? I do. I think the leak complicates things, but I do think a deal can get done here. If it doesn't get done, then we've got to have a conversation about how both Rio and BHP suck at getting deals done. There'd be like two leaked large mergers that they just couldn't do. I think they'd call that discipline, mate. Unless they're not getting a deal done at stupid prices. Yeah. I think both Rio and Arcadium are motivated to do this deal. The big question is just going to come down to an agreement on price. And, you know, you can hear how the shareholders think about that based on what Mike had to say. But like I said, the last few months of announcements out of Arcadium, to me, look like they are making their portfolio more attractive to what Rio likes about the company and a sort of pausing incremental spend on the things that are less interesting to them. But there's still a risk that it slips away, right? Like you said, the market cap even after the 45% uplift is $3.3 billion, yet the rumored deal value that's going around is $4 to $6. So the market's clearly pricing in a substantial risk that the deal falls off. At the same time, there's like room for an uplift there again if the deal eventuates. So the market's not sure, right? And I think it could go either way. These things are at the margin a lot harder to get over the line once they've leaked because you have shareholders sort of bloody podcast talking about it. Exactly, totally. There's no shortage of views. But I also look at the register of Arcadium and bring it up there. That's a beautiful register to get a deal done. There's no blocking stake there from like a shareholder that's got stars in their eyes. heaps and heaps of passive money there there's um and there's a lot of like you know it's just it's just a beautiful share shareholder registry of one to two percent interest here and there so in terms of actually like the execution side of things like it's gonna be hard to get a block of shareholders there to sort of vote against it i think i just think i think there's a there's motivation there's a history here i think of wanting to actually create this marriage over a longer period of time um i think that the Rio can clearly actually see value at these levels for once. It just depends, like, are they both going to get enough of an uplift that shareholders are happy at the same time? You know, Rio still sees value. That's TBA, but I think a deal is very doable. All cash you're to share? Probably from Rio, or do you reckon Rio? I think that's the most likely thing you would see, but I think script is an easier sell to shareholders because they get the rollover relief on it and they... Yeah, it would be like I actually think Rio. So that happens. That's America as well, rollover relief with Scrip, is it? I think you can get rollover relief. You have to apply for it. Yeah. It's not a given, but yeah. God, would they have anything to rollover? Yeah. Like, yeah, I mean, what do you mean by that? Isn't rollover relief for capital gains? Capital gains, yes. Would there be capital gains? Yeah. They went in the IPR. Yeah, holding it from Galaxy Days. Well, you never would have been able to hold it for a while. Yeah, yeah. It's a valid point. Yeah, I would like if I were a shareholder and I would, I think script kind of makes the deal easy, but I think it's just unlikely. You know, yeah, it's got heaps of cash. They should spend that cash on what they think is a creative way to spend it and it still looks that. This has been a winner for the investment banks as well. Year after year there's a deal with if you've. latch yourself onto Galaxy or Acobra or something like that. I mean, remember the fees involved in the last one was mind-blowing. They were the biggest fees I'd ever seen for a deal of that size. On Old Cam and Live Ant Merger, I think we pulled up a scheme, Doc. It was like north of US 150 in fees. It was something obscene for a merger. They're just putting a bit of food on the table. Got to provide. And mentioned it before, but interesting because if you collate the rumours going around, like maybe Rio or by Pilbara. Maybe Rio will buy PMET, right? Like this has changed. And whether this opens up a lot of different parties for those. And it's just so interesting that none of the other majors, obviously we mentioned BHB, but we haven't seen Glencore, Anglo, they've got enough problems of their own. But none of the other big guys have shown any interest for doing a lithium deal. That's it. No. Glencore did have interest in-It was more in trading, wasn't it? They were rumoured to want to pick up Bald Hill and IPO it for a billion dollars. If you could pick up that for pocket change, you'd do it. They're capitalists. Yeah. Their lithium trading business has been incredibly profitable and they're looking to grow that. Yeah. Yeah. I'm sure they'll get creative if there are some distressed opportunities out there and they might end up-Yeah. Loaning to own in some instances. Yeah. If there's enough value, they'd do it, but that hasn't exactly presented itself in lithium land just yet. Bloody very, very interesting. I think you're bloody, because this DD process is going to be frigging huge, mandatory CRE insurance review of all these bloody 10 assets you talk about, JD. Took the words out of my mouth, mate. Mate, you know, when you're that vertically integrated with brine and chemicals. You only need one asset to fall off. The whole tower comes tumbling down. You're not vertically integrated anymore. Go. You go, J.D. I just think Arcadium, there's so much going on. It's so complex. But CRE, they just thrive on the complexity, mate. Ten assets, not a problem. The more complex, the better, buddy. Probably the only way it's going to get over the line. Rio, cross your T's, dot your I's. bloody CRE insurance to go bloody review these assets for you. I want to see it in the dock, the takeover dock, CRE approved. That's it. They're happy to go to Japan, China, Argentina, Canada, da-do-do. Keeping every bloody global mining company safe, no matter what commodity or jurisdiction, J.D. Go CRA. Speaking of oh, jeez, yeah, anyway, more negative news, but another God, West African resources, it would have to be the most if you go through historic, massive drops in a day, it would have to be accumulated the most with all the coups and Part and parcel of operating in West Africa. Burkina Faso. And today is one of them. Traded down, you know, 25% shortly after open. Then went into a pause in trading. Then reopened. Yeah. Yeah. And I guess all around the possibility, skepticism, whatever you want to call it, of nationalizing mining in Burkina Faso. Yeah. But nothing confirmed yet. Just fear. Yeah. So that's the. That's the sort of drama we're talking about here. You remember about a month or two months ago, we spoke about potential changes to the mining code. So not nationalisation, but equally quite worrying for shareholders. And that one turned out to be a buy the dip moment. So you started by saying, Matty, more negative news, but perhaps there is a bit of a silver lining to this one. If you remember that one a couple of months ago now, within a week, the share price had completely recovered and they just sort of took it. in its stride. So it's worth looking at how this one's kind of shaping up. A lot of people still digesting the news. So I think there'll be more to come in the next couple of weeks about this one. It all comes off the back of the military junta leader, Ibrahim Traore, speaking on the national radio on Saturday. Essentially what he said about mining, this was in a broader conversation, talking about corruption, talking about... the military kind of challenges in the northeast of the country, but there was a segment on mining and potentially pulling the permits of some foreign operators. So this was then covered by Reuters and all these other sort of publications. There was a sort of quote that particularly stood out. I will just read it out now. We know how to mine our gold, and I don't understand why we are letting multinationals come in and mine it. So again, he didn't name any companies specifically, but... of size in Burkina, you've got WAF, who we're talking about today, but overseas you've got Endeavor, Nordgold, their Russian group, as well as Orzone. So it's worth mentioning these couple other operations, because I think they might come relevant in a little bit, but Bongu and Wagonyon, I'm not sure if I'm pronouncing that one right. I reckon you definitely got that right. Thank you, gents. But these assets were previously owned by Endeavor. There was a a transaction with Lilium Mining in 2023. This led to a bit of a dispute in which the government came in. They now own it. The government has scooped up these assets. They've said they'll pay Endeavor US $60 million by the end of the year. Now, we'll just put a pin in them for now, but I think they could come relevant in terms of companies acting in line with the mining code. But like we sort of said at the beginning, is this a buy the dip moment? That's the kind of big question people are trying to answer here. And for investors that are familiar with West Africa, they've invested in West African miners before, they will have seen this stuff hundreds of times before. It happens across the continent many times a year. So WOFF in that trading pause that you mentioned, Maddy, came out with an update as well, just a simple one-pager trying to alleviate the fears of shareholders. And I actually think they did a bit of a decent job at it. If you... See in the course of sales, for those listening in, shares closed at $1.66 on Friday. They opened today at $1.30 before trading downward to $1.24. Then they went into an 80-minute pause in trading in which this announcement came out. West African just took the stance that they have adhered to everything. They've got a good relationship with the government. They've won a couple awards for being the best operators in country. And there was a segment here that specifically stood out to me. talking about this being a stance against miners who have not adhered to the mining code. So that leads to people pointing fingers to those couple operators before and perhaps some actions that we're not quite aware of, but other type of operators who haven't followed the letter of the law and paid the taxes they need to pay and these sorts of things. Mate, I'm so keen to go deep on those two projects that you mentioned there, which were previously owned by. Endeavor. Endeavor. Yeah. There's some juicy word on the decline about. what happened there. There is some very juicy word on the decline. So that Lilium Group is owned by a Lilium Capital, which is also from Bikina, which is all tied to this one Bikina businessman. And there was, he accused Endeavor of not revealing all that needed to be revealed in the sales process. And then essentially Endeavor said, you haven't paid us the money. He said, we'd pay. And the Bikina government tried to step in and mediate that. Overlay that with the departure of. Endeavor's former CEO as well in an unexplained transaction. It's just a whole bunch of stuff. There's a whole story there that is not being published in the local media reports. I can guarantee that. Just to the point on how the West African response had been taken by the market, they went into that pause of trading at $1.24. They came out at $1.37. So it looked like investors. Also, there's like 80 minutes for people to sort of. mull over and see what's actually at risk here, what's going on. And they seem to like it. It's sort of trading in and around that level at the time where recording on volume, that's a good few multiples of the average daily trading multiple. So a lot still to digest as we've kind of spoken about West African, a bunch in the past, you know, by 2026, 460,000 ounces, you know, on sort of conservative numbers that could be a bit under a billion dollars in EBITDA. a bit over $600 in free cash for a $1.5 billion business today. So it's just how you kind of tie a number to the risk of operating in this country. I think they get tainted by, like Burkina Faso is decent size. There's different parts of Burkina Faso, but they get tainted as everything that happens in Burkina Faso taints the whole of Burkina Faso. Yeah, yeah. And it is not the case. It's similar with Mali as well, like geographically. kind of explaining it there, Maddy, the northeast of the country, the north of the country is, you know, a much more challenging and dangerous place to operate. So, and that was, again, that was another thing that was addressed by the military junta in their announcement on Saturday, how they're going about making the country safer and removing the terrorist groups that sort of reside in the north of the country there. So, one of the things to look out for if you're a Woff holder interested in this company. Ali JC is, by the way, ding, ding, ding for her. Ding, ding, ding, yeah. The mining code potential changes, that hasn't played out yet. So that was going from a 10% free carried interest for the government up to a 15. And what Woff said at the time was that they believe they are grandfathered in that system and that former 10% rate will apply to them. There was no confirmation from the government that that is in fact true. So we'll have to sort of wait and see. how that kind of plays out in time. That's one to keep your eyes on as a WAF holder or somebody interested there. But, you know, as for what's happened sort of today, I'm keen to see what Endeavor does when they trade overnight. Kind of Canada, if they're hit as severely, they're a bit more sheltered in that they're not just a pure play, bikini miner like West African is. But, yeah, we'll see if this ultimately ends up being a buy-the-dip situation or not. I'd say Richard Hyde's phone is permanently... plugged into power today. It would be bloody ringing off the hook. I'm sure he's handled one or two of these in his time. Making a fortune. Mate, right, next up. So we've seen a very unexpected backflip from the takeovers panel in regard to the proposed ERA entitlement offer, which this is very interesting, especially to me, because you know me. So. Brief one for people who don't know when we say ERA, that's the Jabaluka uranium deposit in Northern Territory, 300 million pounds at 0.55% uranium, decline already to the ore body. Rio owns 86% of it, just shy of compulsory acquisition, but two minority shareholders, Packer & Co, 9.3%, Centro another 3%. So 25th, so I'll go through what happened in the lead up and where we are today. So on 25th of September, the... That's when the takeovers panel declined to conduct proceedings from the application by Packer & Co and Zemtree about Rio wanting to raise $880 million via an entitlement offer at 0.002%. So essentially, if the minority shareholders didn't tip in their pro rata amount and continue riding the punt, Rio would go over 90% and proceed to compulsory acquisition. And this was then after, obviously, Prime Minister said that... they're going to incorporate it into Kakadu National Park and pretty much squash it forever. Yeah. And that price that they were going to raise the entitlement was just. It was a severe discount. It was like 90-odd plus. I think the 80 million that tipped in would be worth 14 for Packer and Co. Something like that. It was a crazy discount, but that also would have set the probable acquisition price of the remaining interest as well. Yeah, it actually said that. It says it right here. Rio intends to proceed with compulsory acquisition of all remaining ERA shares at an offer price of... 0.002. Yeah. So what then happened after the takeovers panel made that initial ruling? Well, the next day, that's when the minority shareholders, when I say minority, I refer to the two, they wrote to the takeovers panel to review the decision. And based on today's announcement, it appears, because they said they didn't even conduct the proceedings. So it appears that they've written to the president of the takeovers panel and they have decided that a fair process was not followed because they didn't even conduct the proceedings they just said no it's not happening um and based on that they've now got a independent board committee that will actually review the application made by packer and co and zentry um which was you know pretty yeah pretty it was pretty clear cut that they said we do not intend to conduct proceedings and now they said no we will review the review you essentially it's like a bit of a double review yeah so and there's no guarantee that conducting proceedings would deliver no it just means they're actually they've now got an independent committee that's going to actually because their whole thing is that you are saying like you're not going to conduct proceedings you're going to let this entitlement offer go through when there's actually a federal court case in play uh regarding this and so how can you actually do an entitlement offer when there's a an ongoing federal court case about what um you know the prime minister and madeline king of um the decision they made and the the interesting facts that came to light just at the end of last month about a week ago was that so resources minister madeline king was advised by her office that prior to making this decision to incorporate it in the to not extend the permit um A legal challenge was unlikely because Rio Tinto, the major shareholder, does not support mining at Jabaluka and they would not fund ERA's challenge because of the public backlash. So who she was advised by clearly missed the point that minority shareholders also have a say. They sort of say, oh, Rio Tinto owns the whole thing and they won't do it. And ERA pretty much immediately sued them, effectively. So it was. Now the takeovers panel typically have to operate pretty quickly. So we should see an update in the next few weeks again. Yeah. I assume they didn't put a timeline on this one. No, no, not for the review. No. So like, yeah, so there's the review, but then there's the, obviously the court thing going on as well. So it's like, well, I guess what's the, what's the possibilities if that review comes back in the favour of the minority shareholders? Obviously, they want the entitlement office squashed for the moment while the federal court case is ongoing. They want to drag that. I assume they want to drag that out as long as possible because that means they don't have to stump up the cash yet to stay in the game. And will it, I've mentioned this before, will it drag on long enough before the federal election, which is likely going to be next year? Will that then, if there was a change, see that decision to incorporate Jabaluka into Kakadu National Park overturned by a new government? A lot of balls in the air because it is a renounceable entitlement, which means that the minority shareholders can find some other parties to take up their entitlement to stay in the game. But, you know, while there's a court case going on, it's pretty fucking hard to do that. When they did the investor sounding, the only person that wanted, the only company that wanted to tip in was Rio Tinto. So it could be another fund. But don't forget old bloody. Yeah, someone like a Boss Energy as well because they were putting in a bid before all this decision happened. So who knows? Like, you know, they were proposing a free carried interest for the Mirar people. I just don't, I think this is far from over. It's a juicy, juicy story. Could drag on. Yeah, we'll see where it goes. It's very interesting. And because the whole critic of the whole process. for this rehab is just like the cost of the rehab has just been astronomical for for Ranger. I just think of the shareholder money that could have been saved for the minorities if bloody Reece and Australian Earthmoving and Horlage were doing it for them. Geez, they'd do it economically, wouldn't they? Wouldn't bloody Packard Cohen's entry be in much a better spot if the bloody Reece was up there on his D6s and D8s and his bloody trucks and trailers? Even Rio. Mate, Rio would be, mate, they'd be able to actually afford to pay a bit more for Arcadium because they would have saved this much on the rehab. You're not wrong. Like, tell you what. Anyway. They were doing a Rio Tinto version of rehab, not a nimble miner, mate. But that's the thing. Reece and AEH can actually do a Rio Tinto quality job. Yeah, quality. At like a small cap price, effectively. That is unparalleled expertise in earth moving and haulage. So lucky for all you mining companies out there, Reece and AEH are not consumed by Rio Tinto at the moment and available right now for mate. clearing for construction, drilling, building dams, rehabilitation works, post-mining, which they could have done at Jabaluka. Right now, I can just call them up. Right. That easy. Do you want to do it? You can call him right now. Quick break. JD just called him and he picked up. Easy as that. So, yeah, very, yeah, it's bloody cool. That is a very, very interesting story. I'm super keen. I mean, the history already up to today is. mind-bogglingly fascinating. So we'll see where it goes from here and what kind of happens. I think you might be right. I think there might be a little bit left in this one. We'll wait and see. I was reading a little bit over the weekend about the Beedaloo gas basin in the Northern Territory, and that's got mad, mad support behind these kind of like onshore gas projects sort of getting up off the ground in the Northern Territory. And it's kind of confusing. Why can't, yeah. Why there's sort of support for some projects and not others. I mean, we've heard about the, like the, yeah, tremendous amount of like solar projects that kind of got off the ground and got approved in very short order in Northern Territory as well. I don't know, mate. There's some forms of fucking, some forms of projects are easy to happen and others just get squashed. Maybe solar's good in Northern Territory because of the wet season and everything. So it washes the dust off the solar panels. You don't need to wash them. It just shows you how important. Efficient. Managing that. you know, social license is. Like right from the off, you've got to sort of manage it. If you like the project you just mentioned, you know, how good. Like if you've got the people on your side, you've got the people in power on your side as well, then you've got a much clearer line of sight to actually producing and returning money for your shareholders. And I think this was the first of like the, what would you say, like the flow on of traditional owner mining. news stories before, like this was obviously before the McPhillamy's thing, because the thing at the start was, it was like there was two sets of people talking to each other. You got the prime minister talking to obviously the leader, but then you got, it sounded like ERA, like you hear that the Mirar people are all for a free carried interest, but the leader's not. Like there's just so much divide in a lot of these stories. Obviously McPhillamy's was a bit different. It was just a... A rogue leader that wasn't a leader. I think it's like the McPhillips was section 10 review. I'm not sure if that was the same thing with Jabaluka. No, no, this was its lease coming up for a review. Yeah, I know, but the whole thing of like, you know, boss putting forward a proposal for a deal and then they're like, nah, Prime Minister's like, nah, it's going into the national park and we're squashing it forever. Yeah. It's been one of the more topical. Things this year is Australian native title. Sovereign risk it's been described as. Yeah. It's, yeah. It is. Very much so. I know. Yeah. Hmm. Call it a day, gentlemen. That's bloody, she's been a rip snorter to start the week. Tell you what, got some minutes out today. Action packed. Oh, surely since we've been doing this, someone's called MMS for a contract. Like, there's, yeah, they're at least probably getting one an hour. Because, um, who else would you call? to move dirt. Get him while he can. I don't know. Who else would you call to build a donger for you than Grounded Construction Group? And, mate, Timmy Taylor, geez, he can whip up a bloody hybrid power station quick as anything with cross-boundary energy. Dave, Sandvik Ground Support. Sandvik. Ah, CRE Insurance. Rio, get on to them. Greenlands Equipment, Turnkey Mine Water Management, K-Drill, The Drill and Experts, MMTS, Australian Earthworks and Haulage, And good old spark charts. Hooroo, gents. Hooroo. Hooroo. 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.

And, jeez, we've got a... We've got a guest coming on to divulge a bit more about this potential Rio Arcadium merger, who is... obviously saying, need to get that bloody, get that price up, dogs.

We do. This is exciting, mate. We try, yeah, we always try and wedge ourselves into deals in some way, shape or form, and this time we've managed to get the shareholder who's making the most noise at the moment to come on the potty and dial in. Easy to contact when they're making heaps of noise.

It's great. Cool, isn't it? Yes.

That bloody bit going on. Bit of ER, bit of. The takeovers panel, backflip ERA. WAF has plummeted today on the back of some, you know, you'd say scepticism around Burkina Faso nationalising. But is this another by the coup moment, by the dip?

Who knows? That's a big question, isn't it? Oh, mate, a big question, JD. Does Mineral Mining Services still have gear available for a contract? The answer is yes.

Yes, they do. Yes, same as last week, same as this week. They're still ready and rocking to go for an open pit mining contract. Mate, they can do JVs. They can just rip, tear, bust and get it all out as quick as possible, give you cash flow, give them a call.

If your rocks can make money, they can do it for you ASAP. That's another website header on ThinkTrap. Well done, mate. I like it. Righty-o, let's rip in.

So coming out on the weekend, not Friday, the article about the Rio Arcadium? It was GOST Friday because in after market trade, Arcadium teared up 30 plus percent. So it started. Super exciting, right? This is the big end of town.

For those that don't know, Rio Tinto has confirmed that they have submitted a non-mining bid for Arcadium. And like these rumours around, the rumours around the potential deal, I think they could be traced to the back end of last week. It was actually our favourite column that penned an article on Thursday, Data Room. saying that Rio was eyeing off a big deal. She named both Arcadium and Dalbemarle in that one.

I mean, there's been some rumours before that, but let's just... Good to see you hit a 180. We'll give her credit. On Saturday, though, it was Reuters who had the scoop that Rio Tinto was in talks specifically with Arcadium in a deal which was suggested to be worth between US$4 and US$6 billion.

And then this morning's ASX release. Rio Tinto, they confirmed it. They said, we're in talks with Arcadium.

And that's where it gets pretty interesting because they've confirmed it, right? Then to throw another spanner into the mix, one of Arcadium's shareholders, a Sydney-based kind of fund called Black Waddle, have promptly penned this letter to the board of Arcadium, which is chaired by Peter Coleman, suggesting that a deal in the vicinity of that US $4 to $6 billion would severely undervalue the business. And of course, he's...

They're much lower than where share price was itself earlier this year too. So it must have just been an absolute whirlwind of a weekend for the deal teams at Rio, at Arcadium, the respective advisors and the chairs, et cetera. But there's a lot of talking points to cover in relation to this news, guys.

We're going to go through why Arcadium and not Albemarle or Pilbara or any development project out there. Why now? What are Rio's plans here? What's the likelihood of a deal actually going ahead? And what about the Arcadium shareholders that will be frustrated by any offer that doesn't get the share price back to where it was recently?

Well, at that point, we're going to have a certain person dial in very soon. It's obviously on one side of the fence. Probably a refresh for people who don't know Arcadium and you wouldn't bloody blame them because it's the bloody movements that's created it.

It was Oricombray Galaxy made Allchem, Allchem merged with Liveit, now you've got Arcadium. now potentially Rio Tinto. Isn't it funny how both of those mergers that they did, they renamed the company to neither of the merging entities? So like Oracle Bro Galaxy became OrCam and OrCam Live Ad became Arcade.

Why keep renaming? It's just so confusing. Merger of equals.

Merger of equals. No name is better than the other. Right, Jadon, give us the bloody, give us the overview, give us the share price asset, all that shit, bloody overview.

Who is Arcade? The thing that jumps out. Obviously is the share price reaction today up.

I think last time I looked 47% just absolutely flying you can see on the spark chart there which that That's pretty wild, right? That is a pretty violent move to the kind of upside there. So that leaves the company capped at US $3.3 billion. So quick reminder, like you said, on the back of all those deals, US is now their core listing, but they've got a CDI here in Australia on the ASX.

10 operating sites, up and downstream. Again, like you said, these guys are a real mishmash of everything lithium related. So in...

2024 terms, their upstream capacity, what they produce from their brines, Oloros and Fenix, both in Argentina, is circa 75,000 tons of lithium carbonate equivalent. Now, they've got all these growth assets that they talk about. You'll remember on the investor day, they trimmed back the spending to tighten the belt a bit and give the investors confidence that they wouldn't be running short of cash while still reaching their stated 28. 28 goals. They've got downstream opportunities in Argentina, and then they've got Galaxy and Namaska Lithium both in Canada. They are hard rock growth assets that at varying stages, one of them Namaska, they're looking to turn the spot into hydroxide as well.

Of course, they've got Mount Catlin, which has been recently mothballed here in Western Australia. Not yet, 25. To be mothballed. ball yet and then um yeah in terms of downstream they talk about producing hydroxide chloride butyllithium high purity metal in that investicle they sort of really pride themselves on not being pinned on just the ev sector so they talk about producing to the the farmer space the ceramics and glass making sectors and all these other things and that sort of comes at the history of of live and and everything that they had done over the sort of previous 50 odd years that they'd been in production. And they also speak a lot about building this sort of flexibility of kind of toggling between carbonate and hydroxide, depending on what gets them better value.

So they're definitely building in capacity to produce both of them. They've got downstream in China, Japan, the USA. Yeah, that recent strategy day was like super interesting.

I remember, you know, one slide that did the rounds there was, you know, they talk about and expect their max kind of leverage to reach sort of, you know. 2.1 times net-to-EBITDA. And then they actually point, they illustrate what their projected EBITDA will be, assuming a $1,400 per tonne sort of spot price in 2028. And that very number actually became subject to, you know, the multiples that we saw kind of talked about on Twitter and also in the letter penned by Black Waddle because, you know, that gives the shareholders a lot of credence to argue that a bid in the vicinity of $46 billion.

would undervalue the company. If it's the lower end of that bound, then you're talking around like three times that 2028 projected EBITDA on those consensus numbers. Yeah, for those that hadn't caught the number, 1.3 billion EBITDA was the one that was commonly quoted. Yeah, and who better to talk about that letter than we've got Michael Turan who's a portfolio manager at Blackwater dialing into the show.

So pretty keen. I mean... And full disclosure, Blackwattle, they're obviously long Arcadium. In the letter, they disclosed that they bought their stake shortly after the merger completed, which that merger completed January 4th of this year.

Since then, the share price is still down about 40% even after today's 45% price spike. Oh, really? Yeah. Holy snap and duck shit. Yeah.

Yeah, right. Mike. Come on, Mike.

Let's do it. Thanks, mate. Thanks for having me on. This is so awesome. We'll be right back.

privileged that you're making noise about a deal and you agree to come on the podcast to get loud. This is the best place to get loud when you're unhappy about terms. And who better to be unhappy about than Rio Tinto, in your view, with a lowball offer for Arcadium. How were you feeling when you were reading the leak from Reuters over the weekend that there's a US $4 to $6 billion deal that's on the table?

Yeah, so, I mean, Rio has been talked about as a potential acquirer for Acadia for a little while. You know, the combination of the assets really makes sense for Rio. But, I mean, the timing for them, good on for Rio, but for Acadia shareholder, this is a very opportunistic time for Rio to get the assets.

And when, you know, when we saw that $4 to $6 billion number be flooded by Reuters, you know, we thought that really undervalued the assets. And that's why we decided we'd just provide some feedback to the board and management at Arcadian about what we think, as long-term investors, what we think about the value of the assets there. So, Mike, as you laid out in the letter, for those that haven't sort of seen it, you started accumulating shares shortly after the merger earlier this year and you've, you know, been buying a little bit.

Why don't you sort of lay out the picture of the value you kind of see and the sort of horizon you had on your investment when you sort of bought into the company and those sorts of things? Yeah. So, I mean, our investment style at Blackwater was that we're really focused on quality.

So, you know, we're looking to sort of build a portfolio of the highest quality businesses. in every industry across the ASX. And, you know, sort of looking through the lithium space, you know, we sort of dabbled in IGEO and Pilbara.

And then we sort of started looking a little bit more at Arcadium, which is a combination of two businesses. So it was the US listing Liven and then the Australian listing Orca. And they'd only combined in December last year.

And you sort of look at those assets and we think they're quite unique within the industry. So this is a vertically integrated business. So unlike an IGO or a Cobra, which just sends their supply chain straight to China to get processed.

But it's a vertically integrated business that has an ex-China supply chain. So there's not really any other business in the world like it. Albemarle has large Chinese processing. And so we thought this is a very unique asset, and the market's not properly valuing it, that vertical integration. allows it to have these long-term contracts with the likes of Ford and Tesla.

And that gives them floor pricing and protection in their long-term contracts. And so it allows them to have profitability through the cycle. And then they have this huge growth pipeline. So they're expanding in Argentina.

They're growing in Canada. And they're doubling production into 2028. And then they have another opportunity to double production beyond that. So it's a huge resource base.

And so we put all that together and thought, you know, the valuation in a few years'time, I mean, you've got to be a longer-term investor. You know, going through cycles is pretty tough. But, you know, if you sort of step back and think about what the business looks like in a few years'time, it's an incredibly undervalued asset. The number you kind of pointed to, you sort of didn't even have to back out your own kind of potential value that the business could be worth because they did the work for you in the strategy day slide by pointing to, you know. FY28, you know, potential EBITDA under their kind of growth plans.

You're arguing for a total kind of valuation of Arcadium that starts at $8 billion and is north of that. That's a fair way from the $3.3 billion valuation it is right now. But your math is basically saying that that's like nine times kind of the EBITDA that you're projecting out in FY28.

How do you come to that kind of arithmetic? Yeah, just on those numbers. So if you sort of look at like companies like Albemarle, through the cycle they trade about 9 to 11 times, sort of a chemical business, huge demand in lithium.

They sort of trade slightly higher multiples than an iron ore miner, which is maybe six or seven times a bit done. And so what we thought was, okay, Acadiums talked to this number only three weeks ago. They have some confidence in this number.

If you put it on that multiple and then you discount it back, so 10% per annum discount back, so your NPV are back, and you should get towards an $8 billion number. And so if the management really believe in what they can execute and deliver those projections, then we think that the value that you talk to Rio has to be in that sort of ballpark of a discounted valuation back from that target. Mike? Like you lay it out in the note here, LTM has just been completely smashed this year in a sector of companies that have been really, really sort of beaten up.

And I think the question a lot of people had is why have they been whacked so hard? You know, given as people like to say they do have, you know, relatively top tier, lower quartile, all these sorts of things, projects. Why do you have they been hit so hard by the downturn?

Yeah, I mean, it's a couple of things. I mean, we've been thinking about that as well as we've sort of been watching it go all the way down. Look, I think the U.S. market in particular seems to be very focused and worried about their balance sheet. And so, you know, they've got this big growth pipeline. They're spending a lot of CapEx.

And I think part of the investor day only a few weeks ago was to sort of calm everyone's fears and say, look, you know, we can actually phase this CapEx, spread it over many years and provide a lot of. had room for a balance sheet. So I think that was one of the reasons it got sold off.

I think in Australia, the stock's a bit of an orphan stock. It's unlike the other lithium players, which are sort of high rock miners, which as mining investors in Oz, it's easier to get our heads around while this one's vertically integrated. And I feel like people haven't done the work to really understand what that actually means.

And so I think those two things have sort of put the pressure on the share price. Does it being a CDI as well, does that sort of play into it? People think, you know what?

wide plate on the secondary kind of listing is that a big factor at all yeah it's it's funny that like the when it first listed i think about 55 of the shareholders were asx listed uh and then 45 in the us um but that sort of that flow has just moved towards the us and i think it's been over 60 now in the us um and so that just makes it that much harder and uh you know you look at like the the stock indexes in in asx you know i came has fallen out of the asx 100 now into a small cap only a couple of weeks ago as well. So it doesn't help. Do you think this was always the end game for Arcadium, that Rio would take them out?

Yeah, it feels like that. That'll help them all. You know, they're big assets that will require capital, you know, patience and long-term thinking. And, you know, I think the shareholder base has shown that that's not really what they're looking for, right? And so, you know, it makes sense that a larger player takes them.

How amenable do you think Rio are going to be for price negotiation or do you think it's more opportunistic and it's going to be like a BHP Anglo situation? Yeah, I mean, I think this is still strategic for them. You think about like the other options they have, you know, they've got issues in Serbia.

They've got a small asset in Argentina. They seem to really like Brian. There aren't really many other I don't think there's a second prize if they don't take Arcadia. Albemarle doesn't fit the bill. It's got Chinese processing.

It's got some other non-Lithium parts of the business. SQM with the issues around Chile just make it too hard. So I feel like for Rio, this is all or nothing, and this is the strategic asset that they need if they actually want to chase off their Lithium dreams.

So how do you think about then getting the other shareholders to sort of see your point of view? I'm sure plenty of them will be sort of pegged to a higher price given where the stocks kind of come from. But as we kind of talked through earlier, sort of breaking down the the register, you've got a large number of passive funds and then you've got a whole heap of you know non-substantial stakes below five percent a lot sort of one to two percent type stakes. How do you think about getting them on the side on to sort of see your value? Have you reached out and got a bit of a feel for how they're kind of thinking as well?

Yeah we've you know since the letter sort of went out you know we've had quite a few inbounds and had a few chats with some. Look, everyone's got different views. They've got different time horizons.

So some are happier to take a short-term sugar hit. Others are sort of a bit long-term like us. So, I mean, there's a variety of views.

Everyone believes that the assets are undervalued. And it's just about what the premium is if the deal is to get done. You've got a good sugar hit today and a 45% kick-up. Must make you a bit happier.

Yes, it helps. It does help. Chuckie inbounds to Mike in the YouTube comments while he's listening everyone a deal at 6 billion US, does that cut the muster?

well we think 8 billion is close to the right number we put that number out there and today you've had a couple of the research houses come out with similar numbers so cities... said, look, our replacement value is if you were to rebuild Arcadium from scratch, it's going to cost you a bit over $8 billion to do it. Macquarie have come and said, look, if you value the full resource base, they've got $8.5 billion in the US valuation.

So there's a few numbers out there. We think towards $8 billion is the right number. The challenge might be in that if Rio walked, what happens to Arcadium's share price? might come off a bit maybe it doesn't i'm not sure but there's also you look at the field of potential like interlopers here and like i don't i don't think anyone comes to play other than rio right yeah yeah you're probably right like um maybe there is a fit there for albemarle but you know they've got their own issues yeah um and otherwise you know rio is the the one you know the outsider who wants to get into the industry the deep pockets so it makes sense for them yeah um I guess, look, everyone's going to have their perspective. But our view was, look, if you're going to be closer to that $4 billion mark, you know, Sure.

We think it's better valued for Acadium to walk away from the deal. Just go alone. Yeah. Look, the management team have put out these targets.

They're confident in executing them, so they should back themselves to go after it. Our personal view is on the lithium cycle, we're probably closer to the bottom. Where pricing is now, you're hitting cost curve, you're hearing people are curtailing mines.

You saw CATL. You know, it's tough out there, but demand is still okay. And, you know, the cure for low prices is low prices.

And with patience, we probably expect another price cycle to happen in the next couple of years. Do you have any info on whether the offer was cash, script, mix, or end as a shareholder? What would you be looking for from Ray? Look, all we got to go by is that Reuters article. And, I mean, there was a mention of the Scrip as well.

I think Scrip might be hard just because of the US investor base. Do they really want Rio Scrip? If you're an ASX investor, then maybe Rio Scrip is okay at the right premium, but the US investor base might be a bit too hard for them.

How do you think about value across the lithium space? On the back of this news, we've seen almost every name on the watch list kick up. Are you sort of getting excited?

Obviously, you mentioned you think we're sort of eaten right into the cost curve near the bottom of the kind of cycle. But like you also said, if Rio is not going to swing for some of these names, who else kind of is? So it seems a little bit premature that a lot of these names are starting to run.

Are you still excited looking out there? Well, we're still excited with Arcadian, for sure. Any other names?

Like I said, we've... Our preference is to look at the larger guys who are low on the cost curve, they're producing. We have looked at Pilbara, we have looked at IGO before.

There is value there, but people will have to be patient. Even though we think we are towards the bottom of that cycle, it doesn't mean that prices rip tomorrow. It's going to take a little while, but demand is still solid.

And you've seen all their supply and contentment. So, you know, you need lithium prices to be at an incentive price to get your production online. Otherwise, we're just going to have the same price cycle again. We're going to have a price spike at some point, and then we'll have, you know, everyone go gangbusters and spend a lot of capital, and we'll have a, you know, go find the bottom again, right?

That's the way commodity markets work. Beautiful. Beautiful, mate.

Oh, well, we'll look forward to engaging with you on this journey, mate. This won't be the last time we talk in this deal, I don't reckon. Early stages. So thanks, E, for coming on on short notice, mate.

I appreciate it, Mike. Thank you. It was great to chat.

Thanks so much, Mike. Thanks, guys. Yep.

How good was that? Good stuff. The one thing we did mention, the ex-China, that's an interesting point that we probably didn't cover.

It's bits and pieces, right? There is some bits, but you can sort of divide if you send your South American product to your... US facilities, then you're on side. But there are downstream facilities they have in China too.

So sort of ebbs and flows. But awesome to hear it sort of firsthand from the guys themselves at Black Waddle. Very, very long-term view.

Yeah. It's appearing because, you know, ex-China is a long-term thought. Yeah, that's right.

You sort of carve out your view of where you think the company will be in sort of three or four years and that often tends to be much easier than where the company is going to be in six months'time. Yeah, very much so. Right, let's get into the other talking points that you alluded to at the start of the show.

And I guess the big one was why has Rio Tinto picked Arcadian, which you wouldn't say is the frigging most stellar blue chip lithium company in the world by, I guess, reputation? It's complex. Very complex. Not like it doesn't have like one of the two biggest brine. Lots of operations.

Large cost curve. big geographical footprint. Yeah, it's not Albemarle. No. So why haven't they gone for Albemarle?

It's a really good question, Matty. Like there's a lot of, I think the rationale, there's a bunch of different reasons that I've written down here, but the one that sort of sits well the most is Arcadium just became way too cheap on a relative basis. Look at their underperformance versus Albemarle or Pilbara like, you know, Mike actually outlines in the letter pen to the board of Arcadium. It's like down 60 odd percent year to date versus like 40 odd for the other two.

My intel suggests that... Rio took a good look at actually doing a deal here about a year ago, by the way. So the merger of Allchem and LiveEnt was still completing, and Rio had taken a pretty good look under the hood, but couldn't get there on value at that time.

In fact, I'd heard from someone that part of putting Allchem and LiveEnt together was actually to get sufficient scale to actually warrant. being kind of acquired by Rio in the long run too. A dress up. Yep.

Yeah. And when you say they were having a good look, they were going to have a good look post-merger then. Yeah. You're looking at the combined entity and look, it didn't get over the line.

We've sort of, but that's changed now because it's down a truckload on a relative basis. So it probably just got a bit too cheap. I think also just to go on that point on an absolute basis as well, right, because you go back.

two years and you can talk if one's relatively cheaper than the others, but they're all very expensive. But now we're talking in terms of the EBITDA number that was quoted and stuff. In absolute terms, it could be quite cheap if you're believing that's the lithium pricing environment we're going to see in a couple of years'time.

Yeah. The other point is in putting a bunch of kind of like phone calls out today to kind of make sense of this. I learned that, I didn't know this before, but I learned that Rio actually has been really focused on DLE.

Apparently, they've built out a pretty substantial technical team in lithium. Apparently, they've been working pretty hard on the technology side themselves. Apparently, they're much more interested in the application of the technology they've been working on in brine rather than spodumene because they think the cost optimization of the industry will make some of these brine projects even more cheaper over time, which complicates things for the larger kind of spod opportunities out there. And look...

Albemarle comes with plenty of spot, don't get me wrong, but Greenbush just has a kind of complex joint venture with Tianchi and then Wojnar, you've got to accept that Minns is operator of that instead. So it's kind of a more complex kind of spot, semi-spot portfolio. But it does open them up to obviously the Atacama, like the evaporation side of things, but if they're very interested in DLE, it opens up the, what is it, the shale all fields.

the what's the american ones what are they called geothermal no not the geothermal the ones in america the bloody deep deep ones in the oil field that they can't evaporate but need to be dle yeah i think i don't think dle is going to be like a one one size fits all like i think i think you'll have sort of bespoke applications i don't even really know if there's a commercial you know use yet or how far it is it's all you know let's wait and see what eventuates there but My intel suggests that Rio is pretty optimistic about the application. They might also, like keep in mind they acquired Rincon, which is in Argentina, but that project in itself might actually like need DLA in order to sort of stack up. So they've probably allocated a lot of resources to this technology side of things and as a result, they might have gotten bullish on it and they might have, they might actually see the kind of the long-term cost curve as the flat brines kind of coming lower. And you keep, like it's the spod, it's the marginal stuff there and you get, you know, if the spod's still in the market, then heck, you have even higher margins if you're part of the really low-cost stuff with the right technology. That's what I believe their view could be at the moment.

Yeah, the smack over, that's what I was trying to say, the smack over at Fallfield Brines. The interesting thing will be to see what they, if like fast forward a shitload, if this did happen, what they did with the spod. Like you'd say Mount Catlin's probably. pretty immaterial to the whole of Arcadia. They've declared that non-core.

Yeah. Yeah. But you look at the James Bay stuff, it's like would that be a, is this, could you assume, right, if this happens, they'd probably flog James Bay off and Spodgermine Hard Rock is not a focus and that sort of feeds into the narrative as well why they didn't go for Albemarle because Albemarle is, a good chunk of value is green bushes.

And a bit of Wadjuna, which they're a non-operator at. It could be. Very Spodgermini.

Yeah. Like I think there's a potential there, like for sure. And if you look at what Arcadium's announcements have been in the last few months, they've actually been substantially to, you know, minimise their marginal expenditure on any of their Spod projects.

So started in August, they basically announced that they'd pause their spend on. on their galaxy mine in James Bay. And then a month later, they declared that they'd pause the cutback at Mount Catlin. And that was non-core. With the asset in James Bay, they're looking for a partner to even fund the rest of that now.

So, you know, those are kind of steps that maybe dress the company up to be even more attractive for an eventual deal with Rio Tinto in that sense. So I could get on board with that logic. I also think like Arcadium's bright assets are in Argentina, not Chile, right?

And, you know, the CEO of Rio Tinto, Jakob, he used to live in Argentina. when he worked for Shell. You know, it's a familiar jurisdiction that we're comfortable enough to buy a rink on.

You had the regime change there, which is supportive of investment, of mining investment all of a sudden with the Malay government. At the same time, if you acquired like Albemarle, you're getting outsized exposure to the Atacama in Chile where there's some uncertainty on how the royalty regime might evolve in the post-2030s there. I can't quite remember what happens then, Jadiva.

What is it? Well, the mine permit as well, which became a big point of discussion not too long ago. And you've heard a lot more in recent times about Chile wanting to build out a Codelco of lithium. We saw a deal earlier this year.

They paid $300 million or $400 million to scoop up some assets there as well. So I think that people have been a bit more risk-off on Chile. operating in Chile. Would the royalty be different in Argentina than Chile?

Because you say the cost curve, like the Atacama ones that SQM and Albemarle own are the lowest cost producing assets. But in terms, I think it's like the all in cost of it is the other end of the spectrum for what Albemarle actually get because of the huge royalty that goes to Chile. Yeah.

Everywhere has got its own sort of... problems. The royalty regime is different, but remember for a long time, the challenges in Argentina, we're not being able to actually get the cash out of the country, those capital controls. So that's all, you know, supposedly in the works to improve.

That's why BHB has invested a huge amount of money there and the Lundeen group have gotten comfortable. These things are apparently on a changing trajectory for the better, but okay. We're going to put an interview up either tomorrow or Friday, but we spoke with Hugh Mackay. And he talked about this dynamic that oftentimes countries will have where they're receptive to wanting investment.

So they'll give some sweetheart deals to kind of encourage mining companies to actually invest. But then those in the long run is more investment kind of comes in because the first move is demonstrated it was okay. Then all of a sudden, those early agreements actually kind of create conflict because then it seems unfair. and it kind of creates this unrest. I think with Chile, there's something like that that's sort of happening around the 2030s.

I need to get more information about it. But, yeah, he explicitly mentioned something there. It was interesting to look at the watch list today, and it sort of happened, didn't happen right at the start of trade, but, like, lithium is, they're all tearing.

Like, I think, God. Everything. Liontown was up almost 20%.

Yeah, like, you know, Wildcat 28%, like, you know, PMET up. It wasn't up as much, but yeah, like huge, huge moves. But the underlying Spodgermoon price has not changed. Hasn't changed.

And if Rio's view is actually, you know, bullish, bullish Brian Bearish Spod, then again, that sort of puts a question mark over the Spod. And if they want to do this deal and it's all on no commodity price movement and potential, you know, M&A and everything, this looks like it'd tie them up for a bit. This would be a big deal, DD-wise, to get through, to get over the line.

And we're only at the start of the potential frigging price negotiation of it. And I remember people telling us maybe a month or so ago, a bit less than a month ago, when all this news came out of cattle in China. And they said, you're not going to see the prices move straight away, but give it sort of three or four weeks and they'll move.

Because we saw the futures jump up. The GFX ones jump up 8% but we're here now three or four weeks later and all the indications we've got from granted not the most transparent of pricing is that it hasn't actually moved yet and it's still around US 750 to 800, 6%. There's a comment there to at least Rio Tinto is embarking on counter-cyclical M&A for once. They had a big amended for that.

Genuinely, it's kind of surprising to see Rio actually. confirm that they've bid for something in what feels like a trough and certainly on any price chart it looks that way. But I've come around to the view that there's a lot of merit in Arcadian if you believe the Rio view of the world. haven't completely come around to the view that they wouldn't subsequently look at Albemarle down the track too.

I think there is a consensus view out there that there's more pain on the horizon for Albemarle. A lot of debt. A lot of debt. It'll be interesting to see how things unfold for that company over time and there might be a more opportunistic moment for Rio. If you could scoop up both Albemarle and Arcadium, that gives you a pretty commanding position in this market.

I understand that the fully integrated... Like the fully integrated kind of lithium production is what is really attractive to Rio as well. You know, they're less attractive to just sort of having only upstream. They love the integration part of it.

They want value across the value chain. They've done sort of similar, they had a similar strategy in aluminium historically. And it looks like they've done technical work sort of along that value chain as well.

I think, and the whole brine and DLE and whether it's all fuel brines, everything that's, it's, it's. resembles iron ore in a way. High capex, long life, low cost. Whereas spodumene, besides green bushes maybe, they aren't that as long. The brines are just, they're freaking huge.

Yeah, the beautiful thing about what made iron ore such a phenomenal commodity to be in is that you could have the majors produce it, you know, the teens dollars per tonne, and then the price. was always underpinned at a much higher, like price never gravitated down that way because you had higher cost production out of China, you had some high cost out of India, Brazil was high cost and also like West Australia had other high cost producers, which was sufficiently large that it kept the marginal production and hence the price floor was way, way, way high. So you could have phenomenal margins if you'd sunk the rail and you could produce at a really low cost and a decent deposit. Lithium, time will tell what that cost curve looks like.

BHP is too scared because they think it'll be too flat in the long run. Rio, it looks like, actually thinks it could be a lot steeper because they think that the brines with DLE would actually come even lower, which gives you more margin if the marginal producer is spot. Yeah. Do you think there's ever a chance Albemarle to dress themselves up, would spin out their hard rock and separate that from their brine and converters?

You've got a non-controlling interest in... Greenbushes and Wojnar making up over half your value. If you use IGO as a bit of a proxy of the value, it's an interesting type of proposition.

I think that in itself could be something, such a deterrent for enough of a deterrent for Rio, to spend that much money and not be in control. Yeah, that's what I mean. What if they spun it out and then made the Brine and Converter vehicle? as the one that's available to Rio.

I was looking at more from the lens of who would be interested in buying the hard rock. Maybe that's the bit that becomes Albemarle. At the end of the day, Greenbush is just like competitive with the lowest cost brines.

It's a phenomenal kind of like, yeah, asset from every stretch of the imagination. I wouldn't be surprised to see Albemarle keep selling stuff. It looks like they're selling everything they can.

They've got some real sort of balance sheet stress. Let's see what pops out of there. Kind of stress over time. Maybe some other companies can pick up interesting assets that pop out of there and maybe what's left is actually interesting to Rio if it's mostly Brian.

That could be interesting. What about getting a deal done, mate? Yeah. Do you think it's possible?

I do. I think the leak complicates things, but I do think a deal can get done here. If it doesn't get done, then we've got to have a conversation about how both Rio and BHP suck at getting deals done.

There'd be like two leaked large mergers that they just couldn't do. I think they'd call that discipline, mate. Unless they're not getting a deal done at stupid prices. Yeah.

I think both Rio and Arcadium are motivated to do this deal. The big question is just going to come down to an agreement on price. And, you know, you can hear how the shareholders think about that based on what Mike had to say.

But like I said, the last few months of announcements out of Arcadium, to me, look like they are making their portfolio more attractive to what Rio likes about the company and a sort of pausing incremental spend on the things that are less interesting to them. But there's still a risk that it slips away, right? Like you said, the market cap even after the 45% uplift is $3.3 billion, yet the rumored deal value that's going around is $4 to $6.

So the market's clearly pricing in a substantial risk that the deal falls off. At the same time, there's like room for an uplift there again if the deal eventuates. So the market's not sure, right?

And I think it could go either way. These things are at the margin a lot harder to get over the line once they've leaked because you have shareholders sort of bloody podcast talking about it. Exactly, totally.

There's no shortage of views. But I also look at the register of Arcadium and bring it up there. That's a beautiful register to get a deal done. There's no blocking stake there from like a shareholder that's got stars in their eyes. heaps and heaps of passive money there there's um and there's a lot of like you know it's just it's just a beautiful share shareholder registry of one to two percent interest here and there so in terms of actually like the execution side of things like it's gonna be hard to get a block of shareholders there to sort of vote against it i think i just think i think there's a there's motivation there's a history here i think of wanting to actually create this marriage over a longer period of time um i think that the Rio can clearly actually see value at these levels for once.

It just depends, like, are they both going to get enough of an uplift that shareholders are happy at the same time? You know, Rio still sees value. That's TBA, but I think a deal is very doable.

All cash you're to share? Probably from Rio, or do you reckon Rio? I think that's the most likely thing you would see, but I think script is an easier sell to shareholders because they get the rollover relief on it and they...

Yeah, it would be like I actually think Rio. So that happens. That's America as well, rollover relief with Scrip, is it? I think you can get rollover relief. You have to apply for it.

Yeah. It's not a given, but yeah. God, would they have anything to rollover?

Yeah. Like, yeah, I mean, what do you mean by that? Isn't rollover relief for capital gains? Capital gains, yes. Would there be capital gains?

Yeah. They went in the IPR. Yeah, holding it from Galaxy Days. Well, you never would have been able to hold it for a while.

Yeah, yeah. It's a valid point. Yeah, I would like if I were a shareholder and I would, I think script kind of makes the deal easy, but I think it's just unlikely. You know, yeah, it's got heaps of cash. They should spend that cash on what they think is a creative way to spend it and it still looks that.

This has been a winner for the investment banks as well. Year after year there's a deal with if you've. latch yourself onto Galaxy or Acobra or something like that.

I mean, remember the fees involved in the last one was mind-blowing. They were the biggest fees I'd ever seen for a deal of that size. On Old Cam and Live Ant Merger, I think we pulled up a scheme, Doc.

It was like north of US 150 in fees. It was something obscene for a merger. They're just putting a bit of food on the table. Got to provide.

And mentioned it before, but interesting because if you collate the rumours going around, like maybe Rio or by Pilbara. Maybe Rio will buy PMET, right? Like this has changed. And whether this opens up a lot of different parties for those.

And it's just so interesting that none of the other majors, obviously we mentioned BHB, but we haven't seen Glencore, Anglo, they've got enough problems of their own. But none of the other big guys have shown any interest for doing a lithium deal. That's it. No. Glencore did have interest in-It was more in trading, wasn't it?

They were rumoured to want to pick up Bald Hill and IPO it for a billion dollars. If you could pick up that for pocket change, you'd do it. They're capitalists.

Yeah. Their lithium trading business has been incredibly profitable and they're looking to grow that. Yeah. Yeah. I'm sure they'll get creative if there are some distressed opportunities out there and they might end up-Yeah.

Loaning to own in some instances. Yeah. If there's enough value, they'd do it, but that hasn't exactly presented itself in lithium land just yet.

Bloody very, very interesting. I think you're bloody, because this DD process is going to be frigging huge, mandatory CRE insurance review of all these bloody 10 assets you talk about, JD. Took the words out of my mouth, mate. Mate, you know, when you're that vertically integrated with brine and chemicals.

You only need one asset to fall off. The whole tower comes tumbling down. You're not vertically integrated anymore. Go. You go, J.D.

I just think Arcadium, there's so much going on. It's so complex. But CRE, they just thrive on the complexity, mate. Ten assets, not a problem.

The more complex, the better, buddy. Probably the only way it's going to get over the line. Rio, cross your T's, dot your I's. bloody CRE insurance to go bloody review these assets for you.

I want to see it in the dock, the takeover dock, CRE approved. That's it. They're happy to go to Japan, China, Argentina, Canada, da-do-do.

Keeping every bloody global mining company safe, no matter what commodity or jurisdiction, J.D. Go CRA. Speaking of oh, jeez, yeah, anyway, more negative news, but another God, West African resources, it would have to be the most if you go through historic, massive drops in a day, it would have to be accumulated the most with all the coups and Part and parcel of operating in West Africa.

Burkina Faso. And today is one of them. Traded down, you know, 25% shortly after open. Then went into a pause in trading.

Then reopened. Yeah. Yeah.

And I guess all around the possibility, skepticism, whatever you want to call it, of nationalizing mining in Burkina Faso. Yeah. But nothing confirmed yet.

Just fear. Yeah. So that's the. That's the sort of drama we're talking about here. You remember about a month or two months ago, we spoke about potential changes to the mining code.

So not nationalisation, but equally quite worrying for shareholders. And that one turned out to be a buy the dip moment. So you started by saying, Matty, more negative news, but perhaps there is a bit of a silver lining to this one. If you remember that one a couple of months ago now, within a week, the share price had completely recovered and they just sort of took it. in its stride.

So it's worth looking at how this one's kind of shaping up. A lot of people still digesting the news. So I think there'll be more to come in the next couple of weeks about this one. It all comes off the back of the military junta leader, Ibrahim Traore, speaking on the national radio on Saturday. Essentially what he said about mining, this was in a broader conversation, talking about corruption, talking about...

the military kind of challenges in the northeast of the country, but there was a segment on mining and potentially pulling the permits of some foreign operators. So this was then covered by Reuters and all these other sort of publications. There was a sort of quote that particularly stood out.

I will just read it out now. We know how to mine our gold, and I don't understand why we are letting multinationals come in and mine it. So again, he didn't name any companies specifically, but... of size in Burkina, you've got WAF, who we're talking about today, but overseas you've got Endeavor, Nordgold, their Russian group, as well as Orzone. So it's worth mentioning these couple other operations, because I think they might come relevant in a little bit, but Bongu and Wagonyon, I'm not sure if I'm pronouncing that one right.

I reckon you definitely got that right. Thank you, gents. But these assets were previously owned by Endeavor. There was a a transaction with Lilium Mining in 2023. This led to a bit of a dispute in which the government came in.

They now own it. The government has scooped up these assets. They've said they'll pay Endeavor US $60 million by the end of the year.

Now, we'll just put a pin in them for now, but I think they could come relevant in terms of companies acting in line with the mining code. But like we sort of said at the beginning, is this a buy the dip moment? That's the kind of big question people are trying to answer here. And for investors that are familiar with West Africa, they've invested in West African miners before, they will have seen this stuff hundreds of times before. It happens across the continent many times a year.

So WOFF in that trading pause that you mentioned, Maddy, came out with an update as well, just a simple one-pager trying to alleviate the fears of shareholders. And I actually think they did a bit of a decent job at it. If you... See in the course of sales, for those listening in, shares closed at $1.66 on Friday.

They opened today at $1.30 before trading downward to $1.24. Then they went into an 80-minute pause in trading in which this announcement came out. West African just took the stance that they have adhered to everything.

They've got a good relationship with the government. They've won a couple awards for being the best operators in country. And there was a segment here that specifically stood out to me. talking about this being a stance against miners who have not adhered to the mining code.

So that leads to people pointing fingers to those couple operators before and perhaps some actions that we're not quite aware of, but other type of operators who haven't followed the letter of the law and paid the taxes they need to pay and these sorts of things. Mate, I'm so keen to go deep on those two projects that you mentioned there, which were previously owned by. Endeavor.

Endeavor. Yeah. There's some juicy word on the decline about. what happened there.

There is some very juicy word on the decline. So that Lilium Group is owned by a Lilium Capital, which is also from Bikina, which is all tied to this one Bikina businessman. And there was, he accused Endeavor of not revealing all that needed to be revealed in the sales process.

And then essentially Endeavor said, you haven't paid us the money. He said, we'd pay. And the Bikina government tried to step in and mediate that. Overlay that with the departure of. Endeavor's former CEO as well in an unexplained transaction.

It's just a whole bunch of stuff. There's a whole story there that is not being published in the local media reports. I can guarantee that.

Just to the point on how the West African response had been taken by the market, they went into that pause of trading at $1.24. They came out at $1.37. So it looked like investors. Also, there's like 80 minutes for people to sort of. mull over and see what's actually at risk here, what's going on.

And they seem to like it. It's sort of trading in and around that level at the time where recording on volume, that's a good few multiples of the average daily trading multiple. So a lot still to digest as we've kind of spoken about West African, a bunch in the past, you know, by 2026, 460,000 ounces, you know, on sort of conservative numbers that could be a bit under a billion dollars in EBITDA. a bit over $600 in free cash for a $1.5 billion business today. So it's just how you kind of tie a number to the risk of operating in this country.

I think they get tainted by, like Burkina Faso is decent size. There's different parts of Burkina Faso, but they get tainted as everything that happens in Burkina Faso taints the whole of Burkina Faso. Yeah, yeah.

And it is not the case. It's similar with Mali as well, like geographically. kind of explaining it there, Maddy, the northeast of the country, the north of the country is, you know, a much more challenging and dangerous place to operate.

So, and that was, again, that was another thing that was addressed by the military junta in their announcement on Saturday, how they're going about making the country safer and removing the terrorist groups that sort of reside in the north of the country there. So, one of the things to look out for if you're a Woff holder interested in this company. Ali JC is, by the way, ding, ding, ding for her.

Ding, ding, ding, yeah. The mining code potential changes, that hasn't played out yet. So that was going from a 10% free carried interest for the government up to a 15. And what Woff said at the time was that they believe they are grandfathered in that system and that former 10% rate will apply to them.

There was no confirmation from the government that that is in fact true. So we'll have to sort of wait and see. how that kind of plays out in time.

That's one to keep your eyes on as a WAF holder or somebody interested there. But, you know, as for what's happened sort of today, I'm keen to see what Endeavor does when they trade overnight. Kind of Canada, if they're hit as severely, they're a bit more sheltered in that they're not just a pure play, bikini miner like West African is.

But, yeah, we'll see if this ultimately ends up being a buy-the-dip situation or not. I'd say Richard Hyde's phone is permanently... plugged into power today.

It would be bloody ringing off the hook. I'm sure he's handled one or two of these in his time. Making a fortune.

Mate, right, next up. So we've seen a very unexpected backflip from the takeovers panel in regard to the proposed ERA entitlement offer, which this is very interesting, especially to me, because you know me. So. Brief one for people who don't know when we say ERA, that's the Jabaluka uranium deposit in Northern Territory, 300 million pounds at 0.55% uranium, decline already to the ore body. Rio owns 86% of it, just shy of compulsory acquisition, but two minority shareholders, Packer & Co, 9.3%, Centro another 3%.

So 25th, so I'll go through what happened in the lead up and where we are today. So on 25th of September, the... That's when the takeovers panel declined to conduct proceedings from the application by Packer & Co and Zemtree about Rio wanting to raise $880 million via an entitlement offer at 0.002%.

So essentially, if the minority shareholders didn't tip in their pro rata amount and continue riding the punt, Rio would go over 90% and proceed to compulsory acquisition. And this was then after, obviously, Prime Minister said that... they're going to incorporate it into Kakadu National Park and pretty much squash it forever.

Yeah. And that price that they were going to raise the entitlement was just. It was a severe discount.

It was like 90-odd plus. I think the 80 million that tipped in would be worth 14 for Packer and Co. Something like that. It was a crazy discount, but that also would have set the probable acquisition price of the remaining interest as well.

Yeah, it actually said that. It says it right here. Rio intends to proceed with compulsory acquisition of all remaining ERA shares at an offer price of...

0.002. Yeah. So what then happened after the takeovers panel made that initial ruling?

Well, the next day, that's when the minority shareholders, when I say minority, I refer to the two, they wrote to the takeovers panel to review the decision. And based on today's announcement, it appears, because they said they didn't even conduct the proceedings. So it appears that they've written to the president of the takeovers panel and they have decided that a fair process was not followed because they didn't even conduct the proceedings they just said no it's not happening um and based on that they've now got a independent board committee that will actually review the application made by packer and co and zentry um which was you know pretty yeah pretty it was pretty clear cut that they said we do not intend to conduct proceedings and now they said no we will review the review you essentially it's like a bit of a double review yeah so and there's no guarantee that conducting proceedings would deliver no it just means they're actually they've now got an independent committee that's going to actually because their whole thing is that you are saying like you're not going to conduct proceedings you're going to let this entitlement offer go through when there's actually a federal court case in play uh regarding this and so how can you actually do an entitlement offer when there's a an ongoing federal court case about what um you know the prime minister and madeline king of um the decision they made and the the interesting facts that came to light just at the end of last month about a week ago was that so resources minister madeline king was advised by her office that prior to making this decision to incorporate it in the to not extend the permit um A legal challenge was unlikely because Rio Tinto, the major shareholder, does not support mining at Jabaluka and they would not fund ERA's challenge because of the public backlash.

So who she was advised by clearly missed the point that minority shareholders also have a say. They sort of say, oh, Rio Tinto owns the whole thing and they won't do it. And ERA pretty much immediately sued them, effectively.

So it was. Now the takeovers panel typically have to operate pretty quickly. So we should see an update in the next few weeks again. Yeah.

I assume they didn't put a timeline on this one. No, no, not for the review. No. So like, yeah, so there's the review, but then there's the, obviously the court thing going on as well. So it's like, well, I guess what's the, what's the possibilities if that review comes back in the favour of the minority shareholders?

Obviously, they want the entitlement office squashed for the moment while the federal court case is ongoing. They want to drag that. I assume they want to drag that out as long as possible because that means they don't have to stump up the cash yet to stay in the game. And will it, I've mentioned this before, will it drag on long enough before the federal election, which is likely going to be next year?

Will that then, if there was a change, see that decision to incorporate Jabaluka into Kakadu National Park overturned by a new government? A lot of balls in the air because it is a renounceable entitlement, which means that the minority shareholders can find some other parties to take up their entitlement to stay in the game. But, you know, while there's a court case going on, it's pretty fucking hard to do that. When they did the investor sounding, the only person that wanted, the only company that wanted to tip in was Rio Tinto. So it could be another fund.

But don't forget old bloody. Yeah, someone like a Boss Energy as well because they were putting in a bid before all this decision happened. So who knows? Like, you know, they were proposing a free carried interest for the Mirar people. I just don't, I think this is far from over.

It's a juicy, juicy story. Could drag on. Yeah, we'll see where it goes. It's very interesting. And because the whole critic of the whole process.

for this rehab is just like the cost of the rehab has just been astronomical for for Ranger. I just think of the shareholder money that could have been saved for the minorities if bloody Reece and Australian Earthmoving and Horlage were doing it for them. Geez, they'd do it economically, wouldn't they?

Wouldn't bloody Packard Cohen's entry be in much a better spot if the bloody Reece was up there on his D6s and D8s and his bloody trucks and trailers? Even Rio. Mate, Rio would be, mate, they'd be able to actually afford to pay a bit more for Arcadium because they would have saved this much on the rehab. You're not wrong. Like, tell you what.

Anyway. They were doing a Rio Tinto version of rehab, not a nimble miner, mate. But that's the thing. Reece and AEH can actually do a Rio Tinto quality job.

Yeah, quality. At like a small cap price, effectively. That is unparalleled expertise in earth moving and haulage. So lucky for all you mining companies out there, Reece and AEH are not consumed by Rio Tinto at the moment and available right now for mate.

clearing for construction, drilling, building dams, rehabilitation works, post-mining, which they could have done at Jabaluka. Right now, I can just call them up. Right. That easy.

Do you want to do it? You can call him right now. Quick break. JD just called him and he picked up.

Easy as that. So, yeah, very, yeah, it's bloody cool. That is a very, very interesting story. I'm super keen.

I mean, the history already up to today is. mind-bogglingly fascinating. So we'll see where it goes from here and what kind of happens. I think you might be right.

I think there might be a little bit left in this one. We'll wait and see. I was reading a little bit over the weekend about the Beedaloo gas basin in the Northern Territory, and that's got mad, mad support behind these kind of like onshore gas projects sort of getting up off the ground in the Northern Territory. And it's kind of confusing. Why can't, yeah.

Why there's sort of support for some projects and not others. I mean, we've heard about the, like the, yeah, tremendous amount of like solar projects that kind of got off the ground and got approved in very short order in Northern Territory as well. I don't know, mate.

There's some forms of fucking, some forms of projects are easy to happen and others just get squashed. Maybe solar's good in Northern Territory because of the wet season and everything. So it washes the dust off the solar panels.

You don't need to wash them. It just shows you how important. Efficient. Managing that. you know, social license is.

Like right from the off, you've got to sort of manage it. If you like the project you just mentioned, you know, how good. Like if you've got the people on your side, you've got the people in power on your side as well, then you've got a much clearer line of sight to actually producing and returning money for your shareholders. And I think this was the first of like the, what would you say, like the flow on of traditional owner mining.

news stories before, like this was obviously before the McPhillamy's thing, because the thing at the start was, it was like there was two sets of people talking to each other. You got the prime minister talking to obviously the leader, but then you got, it sounded like ERA, like you hear that the Mirar people are all for a free carried interest, but the leader's not. Like there's just so much divide in a lot of these stories.

Obviously McPhillamy's was a bit different. It was just a... A rogue leader that wasn't a leader.

I think it's like the McPhillips was section 10 review. I'm not sure if that was the same thing with Jabaluka. No, no, this was its lease coming up for a review.

Yeah, I know, but the whole thing of like, you know, boss putting forward a proposal for a deal and then they're like, nah, Prime Minister's like, nah, it's going into the national park and we're squashing it forever. Yeah. It's been one of the more topical. Things this year is Australian native title.

Sovereign risk it's been described as. Yeah. It's, yeah. It is.

Very much so. I know. Yeah. Hmm. Call it a day, gentlemen.

That's bloody, she's been a rip snorter to start the week. Tell you what, got some minutes out today. Action packed. Oh, surely since we've been doing this, someone's called MMS for a contract.

Like, there's, yeah, they're at least probably getting one an hour. Because, um, who else would you call? to move dirt. Get him while he can. I don't know.

Who else would you call to build a donger for you than Grounded Construction Group? And, mate, Timmy Taylor, geez, he can whip up a bloody hybrid power station quick as anything with cross-boundary energy. Dave, Sandvik Ground Support. Sandvik.

Ah, CRE Insurance. Rio, get on to them. Greenlands Equipment, Turnkey Mine Water Management, K-Drill, The Drill and Experts, MMTS, Australian Earthworks and Haulage, And good old spark charts. Hooroo, gents.

Hooroo. Hooroo. The information contained in this episode of Money of Mine is of general nature only and does not take into account the objectives, financial situation, or needs of any particular person. Before making any investment decision, you should consult with your financial advisor and consider how appropriate the advice is to your objectives, financial situation, and needs.

Transcript for:Arcadian and rio & ERA

Transcript for:
Arcadian and rio & ERA