Yet Another Value Podcast - The Koala ventures through the commodity space and Ivanhoe Electric (IE)

Episode Date: November 16, 2022

The "Koala", a buyside mining and commodity specialist, comes on to discuss the commodity and mining space in general and Ivanhoe Electric (IE) in particular.   The Koala's twitter account: https://twitter.com/YellowLabLife  Chapters  0:00 Intro  2:55 General mining / commodity sector overview  12:40 The "nothing can get built anymore" moat  18:40 Capital discipline imposed by low multiples  22:00 How Peabody talked their own stock down with growth plans  31:00 What is the market missing on coal?  44:00 Why is Whitehaven still the Koala's coal horse?  49:30 Discussing Ivanhoe Mines history  56:55 Ivanhoe Electrics background  1:00:45 Ivanhoe's Typhoon Technology  1:04:30 Discussing Ivanhoe's mines  1:12:00 How did Ivanhoe find these great mines in the U.S.?  1:15:00 Ivanhoe's cash runway

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That's Composer. Dot trade slash value. See important disclaimers at Composer. Trade slash disclaimer. All right. Hello and welcome to yet another value podcast. I'm your host, Andrew Walker. If you like this podcast, it mean a lot if you could follow, rate, subscribe, review it

wherever you're watching, you're listening to it. With me today, I'm happy to have on The Kuala. The Kuala is not only the first animal that we've had on the podcast, but he's a former by-side mining analyst, and he's one of the leaders of the mining and commodity finch with, and I think people are going to be impressed by the depth of knowledge in a sector that's got a lot of play recently, but there are many people who remember how to look at mining and commodity players anymore.

Anyway, Kuala, how's it going? It's going good, Andrew. Great to be here. it's a nice overcast day it's still a little warm which as a coal investor i'm bittersweet about it's uh everyone seems a little down uh it feels like uh it feels like mining before the last year or two in the city right now you know i've done a lot of work on energy recently and it's been nice it's a warm winter and everything but i'm with you i haven't thinking like damn if we had been hitting 30s in october's net net gas power price everything

would have been going parabolic and we just, we would have been celebrating. Anyway, we'll get there in a second. Let me just start the podcast the way I do every podcast. First, a disclaimer to remind everyone, nothing on this podcast is investing device. That's always true. I'll just remind everyone today, Qual and I, we're probably going to dance through a couple of names, a couple different sectors. So please keep in mind, this is an investing device. We're going to be talking commodities, mining. Those do carry extra degrees of risk. So please do your own work. Keep all of that in mind. Second, a pitch for you, my guest, you know, I only started following you over the past year because everyone started finding mining commodities all that and you've just been so spot on with a lot of

your calls obviously like anyone who follows you for more than two weeks is going to be able to sell that you've done a ton of research and you know these names and spaces really well so just really excited to have you on really excited to dance we'll talk iveno i.e electric at one point but also I really want to talk about all sorts of different things in commodities in general where do you want to start um let's lead off I think just with uh I think the general second it's been a it's been very interesting to me how the the interest levels um like obviously we can talk about coal extensively here but um i think just people are kind of waking up again to the reality of the world isn't just software and dating apps um it's or social media and

these tech things that are of zero marginal cost that sit on our phones. The world's actually made of things. We're going to be talking about the Ivanhoe companies later, but Robert Friedland loves to say, you know, you either have to grow it or mine it to make it. I think people are all now starting to wake up to this reality because things are actually noticeably more expensive now. And whether that's the EV trend or putting gas in your car today, I mean, what is there to say? You thought, and you talk more about energy, but you've had a decade where the shale revolution basically gave us cheap natural gas and cheap energy.

And the U.S. went from something to a massive amount of the energy market, partially because of the growth. and the growth metrics and the growth multiples, investors just through good money after bad and didn't really think about full cycle capital returns or the energy supply and demand. So the world got really drunk on some really cheap energy. It's a little like being back in college at a fraternity house, what we've had for the last decade. And then I would say, if we go back to mining, if you think about 2014, 2015, when China kind of caught a cold, right at the time that all of the mining industry, the big boys were all doing massive CAPEX, levering up their balance sheet because the Chinese miracle was going to continue on forever. metal demand was just one direction with no volatility in that first derivative of demand. And it turns out China prints in the second half of 15, first half of 16, they printed negative

year-on-year steel production number. And that caught iron ore completely outside. Copper was weak. We had that August 2015 shocked evaluation of the Yuan one Sunday night. And I still remember, like everything was just. down like 5, 10%, because no one realized China had to shock their FX market like that. And what happened then is you have Glencore in September 2015 go, oh, we shouldn't run it three times levered.

We each run it two times levered. And we had to do a capital raise first time since the IPO because we need to run with less leverage in these volatile commodity markets. You've had, let's just run through these Anglo-American got after. absolutely smoked at the time. Minis Rio was a massive blowout capital project. Just in general, like BHP Rio, they got, they had to, I mean, if you think about their costs of producing iron ore have gone, a C1 in Australia, went from starting with

a four to starting with a one. Like, it really was, we have to innovate. We have to take costs out. We got to maximize productivity. It's not just get these tons and get it on a boat and get it to China. it was we need margin value over volume which became a catchphrase for all the big miners it's almost like they all said that's a great line i'm going to use it and capital allocation became a huge issue because everyone said you just let a ton of money on fire you're not building anything

anymore Ivan glazenberg of glencore goes we did this to ourselves why in god's name did we are we all building we control that we have the projects we have the production if we produce too much, we don't get a price, we destroy value, why are we doing this? And so you never really saw major M&A after 2016. In fact, ironically, when everyone was distressed, the big miners like B.HP or Rio, who are more iron ore, but would love more copper, they're like, oh, you know, we have our list of eight to ten mines in the world we would love to be a part of. But they were also shell shock.

They weren't willing to say, yeah, we'll pay a price looks a little expensive today. because over the next 10 years, it'll look brilliant. No one was actually willing to do that. And so you had then massive de-leveraging. I mean, Glencore went from 20-plus billion of net debt to now they're down to, what is it, 10 billion? And here's an ironic thing about Glencore, which I've talked about immensely. But if you go back and look at the second half-15, first half-16, the trough EBITDA, if you just look at that annualized, that was like $7.5 billion.

And that's like the worst it ever got. I think all of us could agree that a $7.5 billion EBITDA business in a worst case scenario could probably run with $15 to $20 billion of net debt if you termed it out properly so you didn't have a lumpy maturity profile. But you know what? Glencore now says, nope, $10 billion, we learned our lesson. Rio Tinto, you know, they also, they're running with less than 10 billion of net debt. Like, the only one that's really actually been a little more flexible among the big boys is Valle, which had a massive tragedy with the dam break that killed 300 people back, and I believe it was January 2019, obviously has massive legacy liabilities and reclamation from that. incorporated those legal obligations in their adjusted net debt number. And now they've kind of

recognized, okay, that's a billion to $2 billion a year of cash outflow over the next five or six years. But it's kind of just part of our business. They no longer include that in the net debt profile. And they've said their adjusted net debt target is around $20 billion versus, I recall time it was 10 billion. They're the only one who's really kind of said, actually, we have more flex in the balance sheet over the last couple of years. Everyone else has actually realized that since I've had to go on this journey, the mining industry now is much more equity versus debt. And in part, that also means that if you try, you and I tried to start a mining company today with a world-class project. We would need more equity, which means our cost of capital is higher, which means it's

so much harder. You need to have a project that's even that much better. You need to go find those rare few investors that actually would entertain it. And it's like the same thing I joke, which if I could raise $100 million to do a mining cross-asset fund, I would do in a heartbeat, but I haven't for one simple reason. No one's thinking that way right now. So I actually joked about this was having a drink with a buddy at a bar. And I think I saw the come across our phones that the Shell CEO said that the energy industry should be taxed more to help deal with this energy crisis so people can afford their energy bills. And I laughed immensely. And I think I even tweeted this out that it's really fun to watch regulatory capture when you've had to go through

these hard yards, whether that's de-leveraging and putting in all these rules that, and many of them are to make for a safer work environment, a cleaner environment, but it's so much harder today versus 30 years ago, whether it was to be to start a hedge fund or to start a mine, that it's kind of funny when someone, you can see someone basically burning the ladder as they're climbing up it so no one can follow them. And Cole, great example there. No coal company is going to have, like, debt in the West, basically. White Haven's net cash, Ian Coal, I recalls, net cash. Peabody's going to be net cash even after the surety's in a couple, in a quarter or two.

And what are all the coal companies now saying? You know what? All equity is the way to go. Yep. Coal, you know, we think it's going to be longer, but we just don't want to have to explain that to the banks every five years and then have to stress. in our business financially. So you know what? We're just going to go all equity.

So if you and I found the greatest coal mine in the world that's never been developed, we would have to go find equity. And the first question would be, how am I going to look my kids or my grandkids in the eye, even as a billionaire, because I financed a coal mine.

Well, that'll be the first question, but then the second question would be, hey, I'm not 100% familiar with coal mine timing, but it's probably going to take what three to five years come online maybe more you can tell me if i'm wrong but the next question will be hey in three to five years will there be any demand for call and you and i could go say we can make all these arguments for it uh coal and the same thing would apply to a lot of energy projects everything we make a lot of argument but ultimately everybody's to be like i'm writing a billion dollar check into something that's going to go to zero terminally

like i just can't take that risk so yeah you're just not going to be able to fund it these guys have created this really interesting moat the nobody thinks anything can get built anymore moat nothing can get built anymore and then to make it even more surreal um even if we talked about things we want to build no one's really been looking because if you think about it everyone's woken up to what was robert freeland's lovely line on i have no minds he goes it was an overnight 25 year success um in terms of when he first got to the congo looked at started looking at kamoa found kamoa then they found kakula and that was just and i think it's an important thematic here kakula was discovered in late 15 early 16 kamo kakula is now in production

but that's because really that got really accelerated because when you find something so extraordinary that it's self-evident to people you find a way things that are worth the world-class projects somehow find a way and it's an interesting thing I've noticed in that the buy side and the investors will look at companies and say we're the only game in town the cost of capital so high you need more money I'm going to drive a I'm going to demand an absurd deal from you And what they haven't actually, because we really haven't had a lot of examples recently, I think Ivan host probably the best one recently is great projects don't just get financed by guys like you and me. But those are rare because what is it?

One in a thousand outcrops is a deposit and one in a thousand deposits become a mine. But so let's say you found one of these things. And you don't find a first, a 99th percentile, you find a 95th percentile. What is your prize? If the binding companies are not doing M&A, there's permitting issue, there's permitting risk, there's engineering risk. Everything costs a little more than the feasibility study says it's going to cost. Just in general, you don't have the same incentive to go look for things. So we'll talk about copper a lot here, but like LME week, everyone's talking about, yeah, the next two years, there is copper supply coming on.

QB2, Kaleveco, Oia Togeo Underground, Kamokakula, phase, whichever, that thing's going to have phases until our kids graduate from college. There's just so much copper there and high RRIC opportunities. But what's coming in 2025, 26? Um, truth is we, we don't really have much. So that's where it gets interesting. Just like these timelines and these long lead, these long capital cycles, it's, okay, no one's exploring. No one's buying anything. So like you're not going to have juniors go out looking for stuff trying to find that next great mine. The miners are going to buy back stock. They're going to focus on, look, we're good stewards of capital.

And this is a huge thing. I have a substack that's been 80% done for three weeks about how capital allocations going from a headwind to the tailwind in the mining industry because we've gone from people have just dated the sector and said, okay, China's going to be a little better than I think for the next six months. That means dividends and buyback announced me a little bit more. So I'm going to, I'm going to date the sector and then I want my money back. The industry has to regain the trust that it is a good steward of capital and that this industry needs more capital.

Because when you have low multiples and low multiples and low leverage, you're basically the market's way of saying we should decapitalize this industry. This industry has too much capital. It's X growth. It just destroys value. So what we need to do is we need to pull capital, all the free cash flow comes back to us, whether it's through buybacks or dividends, and we aren't necessarily putting it back in. So the industry needs to regain the market multiple to invest. But until that happens, and then we see M&A, only then will you see the exploration dollars come back to refill the pipeline. And then we get back to an overnight 25-year success.

When these, the, the, the river sticks for the mining industry is brutal. 2011 to even if you caught the 2016 bottom, the 2010s were not very fun. But when it's good, the party lasts for a long time because it takes a little while for the cops to show up and say, there's too many people you're all drunk you're doing stupid things it's time to go home it takes a while to get out uh get out to where the mine site is and tell us we're doing that let me jump in with a few questions here so the first would be look i think you described very rashly right like if you've got a coal company any company trading for two times free cash flow right that's an implied 50% cost of capital right even if you've got a mining project an expansion a drill

that the returns on it are 30%, right? Which in a treasuries are yielding even today, 4%. In a 4% world, like, if something will yield 30%, that's a great risk adjusted. But if your stock is yielding 50%, you can't go do that, right? So like the capital discipline's getting imposed. You saw it with BTU when they were saying,

oh, we might go buy something at four times EBITR, we might do an expansion. And the market was just melting down. But I guess I do have a question on that. Like, I hear you. And part of that is resulting in everybody likes to talk about, hey, I've done podcast on 10. I've done podcasts on uranium.

Hey, the supply is not there, right? Demand steady to going up and the supply is actually dwindling because no one's drilling. And I hear that and it all makes sense to me. And like, I am kind of believer, but just as a generalist, I can't help but think like, oh, this is what people thought in 2007, 2008 with energy when we had the oil super cycle and oil hit 150 and two years later, it's 40. This is what people thought in 2016 with energy when oil is at a hundred thousand, 100 and I knew people who were underwriting global supply curves and saying oil can never go under 75 again. Guess what? Three years later, it's negative. You know, so I'm just, I'm just as a generalist. I'm trying to like put those frames in mind because I believe the super cycle, but it's a little scary to kind of think about that. It is. And it's, I think in light of what's been happening in what I'll call fun finance of crypto this week. We've all had jokes. We've all had jokes. We've all had jokes.

about margin. There's been a lot of margin call jokes to make, rightfully so, but a line comes to mind that let's invert, which is it's not panicking if you're first. I think that's the thing the generalists have to wrap their head around. It's, yes, in 2007, everyone's talking about how much money they've made in mining, how great these companies are, great stewards of capital, where are those people in 02? Where are those people in 2016 when tech bonds traded at 60 to 70 cents a face, 20% plus yield to worst? And the stock was trading at 2, 3 U.S. And all the stock was basically saying is these things are distressed.

We're never going to need commodities ever again. It's not that bad anymore. But you have these moments where you've got to take a step back. And one of the things, just being a free agent and thinking with a little more time horizon than a pod shop, take a step back and say, okay, do I know the next $50 move in Newcastle one way or the other? No, I don't have the resources to know the exact balance of energy units on every given day, like on VTal or Glencore. What I can do is look out and say, okay, roughly speaking, what is like the average coal price going to be over the? the next few years or the next decade and i think there's enough information out there given the lead times and lags for the major pieces to move that you can say okay i see something here

is the multiple compelling for what i'm bringing coming into uh like as we joked about peabody a little bit during that call um there are things you can say when you're trading at two percent free cash flow yield. And there are things you cannot say when you're trading at two times free cash flow. Just so everyone knows what we're referring to on Peabody. Pbody reported results last week and the results were strong. Commodity prices are strong. The stock was up 20% of the results. And then as management started talking on the call and saying, we're not going to buy back stock. We might go to M&A. We might drill a new mind. There's stock. Andrew, Andrew, Andrew, Mc Cole, Seaborne, is an incredibly misunderstood market.

It has a lot of potential far more than everyone appreciates. And we view it as a strategic growth opportunity for this company. And you could just see everyone just having them in their head going, as anyone told this guy where his stock is. And the stock, it went from plus 20 to flat on the day, literally as management is reading the call. And you normally don't see that unless. management comes out and says, hey, the outlook is a disaster, inventory is rotting on the shelves.

Like, he wasn't saying any of that. He was just saying, here's my cap allocation and investors sell, sell, sell, sell, sell, sell, sell. But also, I have no problem with them going and buying a met coal mine. I think there are things that Peabody should buy that they're a logical acquirer of. And listen, but if he had just said, guys, we look at everything similar to what arch said when coronado approached them a year ago it would be rude not to take the call and hear it out doesn't mean we're going to do it but with that said guys um we hope to have a deal with the sureties uh in one queue um but until we have that deal and until we have paid down all of our debt which we've classified as current with this quarter we really want to flash that to you um it's very important to recognize that we can't do buybacks and dividends. And if I can't buy back my stock at two times free cash flow, can you blame me for thinking three times free cash flow to grow this company might be a good use of capital until I

have that option? I think if he'd heard that and everyone said, okay, he gets it. If he does something, he's going to explain to us why it's compelling. And also he's acknowledged what we all are looking at and seeing in terms of the free cash flow yield, the buyback potential, the dividends. It's kind of, you have to acknowledge if you're going to keep the free cash flow, that you're doing stuff with it, that investors feel like, not only that it's actually going to create value, but you have to message in a way that a lot of your marginal buyers and sellers, fast money hedge funds, don't be like, okay, my stock, it's going to be going to. go down 20% because you announced something. I think a good example, this was everyone hated QB2 for tech when they were going to do it, they said they were going to do it in 18, which they kind of had to do it because QB1

was run out of ore. So they kind of had to touch the sulfide, the pot, porphyry below the oxide. And this was going to be like a $5 billion project. The NPV at $3 cop or 8% was like a billion. So you kind of could quickly just go, okay, this thing blows out by 20% on the CAPX, and this is not, this is NPV, Nick, break even at $3 copper, which four years ago, $3 copper was the incentive price. Pretty marginal project. Everyone's like, why are you guys doing this? This is crazy.

And then what they do is they go out and they did, they got a Japanese trading house, I believe, was Sumitomo to come into the project at the asset level by 30%. percent at a much higher multiple kind of lending, kind of lending out the lower whack of a Japanese trading house. And they brought in a project finance facility. Now, QB2 now, even though, even with the pandemic, it's going to cost $7 billion, not $5 billion. There's been a $1.5.2 billion blowout, but it stayed on schedule. So if we look back, what do you know? There's been CAFEX issues. But QB2 actually looks kind of brilliant now because if we tried to build QB2 today, if we think about inflation, labor, everyone's thinking about what could they build if they had something. There's less mining talent, whether that's engineers, project managers. How many

people have actually built a multi-billion dollar mining operation in the high andies before who's still in the business? Because we haven't built that much in the last half decade. That project probably, I guess if we scoped it out today, would probably be not the $7 billion they're talking about. It's probably going to scope out around eight, which means let's go back and run everything. What copper price do we need to make an $8 billion project work like QB2? Start to the four. And so it kind of looks brilliant because they have the sunk capital and $3 copper is the new $2 copper and $4. is the new $3.

And at $4 copper, yeah, the torque on QB2 looks pretty damn compelling. But that's, you have to go through this journey where, like, you've got to sometimes be a contrarian, but then you have to de-risk things. Like when tech came through New York

after the Japan deal and said, yeah, the IRA was 11% in the feasibility study, but look what it looks like for us when we factor in the project finance, the asset level sell down and we're not going to have to put another dollar into this thing until year three you go oh

I see how you're going on this journey Peabody didn't do that Peabody is just like people thought they were Zuckerberg with the Metaverse I hear you but so like on the tech example you gave like one of the they did bring a partner in

that's nice and look I'm not an expert so I'm just talking about what you said but They brought in a project finance partner with a, sorry, a partner on the project with a lower cost capital in which everyone should do. That's fantastic, right? But one of the key things you said in there is the cost were supposed to be $5 billion. They blew it up to $7 billion. Guess what? I've never seen a mine or anything come in under budget or even close to budget for the most part.

So the cost blow out. And it sounds like they kind of got bailed out with copper prices running because no supply can come online. And I realize that's a little bit of a chicken or a problem where nobody wants to fund a new mine. Every mine's over budget. so prices go up for some reasons. But the same time, I hear a project that came in 30 to 40% over budget, and it seems like it got bailed out a little bit by commodity prices. And that does make me nervous.

And I guess I'll let you comment there. And then I do want to talk a little bit more coal. And then we've got to talk IE. So we've just got something to talk about. Well, I think it's interesting that you bring that up because before we, like, I have no minds, building Kamow Kokukukula, in a middle of a pandemic. They delivered that on time on budget. in the DRC.

Lord knows how many conversations I've had Reverend's like, Kowala, the DRC, like, are you crazy? But they delivered on that. And so it's, I think it's a, it is the tricky issue here.

Like, how do you explain these things? How do you justify this growth? And I think it's getting investor buy-in that this is kind of how it goes. And you'd rather be the first person, to be building a project so you can get all the talent, then be building a project when all of your competitors are building mega projects. And to get, whether it's from the engineering

consultants or Bechtel, you're getting the A team, not the D team. Let me switch over to something a little different. So we've talked Cole a couple of times. We talked Peabody. You have been pounding the drum on White Castle, Australian Coal Company. for about a year now, maybe before, a year as far as I know, and people can go look at the stock price and see that has been a nice thing to found. But I just want to ask you, when people look at coal, obviously U.S. focus investors think coal is dying. Today, people look at coal and see really high coal prices. They see most of the guys have gotten discipline on, just return all that cash to shareholders. I think a lot of people look at coal and say, oh, prices are high now,

run it back to before pandemic prices, run it back to year ago prices. They're worried about sustainability of price. So I just want to ask, when you look at coal, and I know you're so bullish Whitehaven, we have some discussion. We had a lot of questions why Whitehaven over YAL, but just overall, when you look at coal, like, what are you seeing that you think a lot of people are missing? I realize I threw a lot at you, but I know you'll ramble as long as I let you on coal. Look, I think what I'm seeing is there's really not, what is the, what is the seaborne thermal coal market? It's like a billion tons. it's it's it's it's I might be off by a few hundred here there but that's not the point um I think bulk commodities in general um and this applies to iron ore as well there are commodities that you know it when you see it copper metal in the LME is 99.9.9 copper like it's it is what it is but when we talk coal met coal iron ore

lithium, spodgamine concentrate, there are these intermediate commodities that are not in their final horn. And we think about these markets as one massive market. Well, coal, yeah, when everything is cheap, energy is abundant, coal's abundant, there's not differentials there. But the Newcastle-6,000 high-energy coal market, that's too. 200 tons of a billion-ton seaborne market. And because we all want cleaner air, we want more efficiency, most of the new coal power plants, these helies, H-E-E-L-E, that have more efficiency, they're designed with a scope.

And that scope is they need high-energy coal. You're not going to take this high moisture, low-energy, stuff that maybe it's low ash, but are you going to take some 4,000 KCal stuff out of Indonesia or somewhere else, your boiler might not be on spec for that. And so in a world of abundance and no cares about emissions and pollution, and I think there is something to be said about the fact that we have effectively exported to China and frontier markets, emissions that otherwise would have had to be incurred in the first world over the last few decades under globalization. And that's not tolerable anymore. What I look at with coal is high-energy coal is branded with the same way that terrible coal is, lit-night or,

really junky, low energy stuff. But it's needed. And it's going to be needed for 20 to 30 years. Yep. Maybe we're going to go all renewable in the U.S., but the U.S. is 300 million people. And if you go look at, say, Kenya, Tanzania, Rwanda, Uganda, Ethiopia,

if you just add up the population of those countries, you're pretty close to the U.S. in and of itself. Those guys aren't going wind and solar 24-7. So I look at the situation and I say I have a high-energy coal product that is rare. You wouldn't mind the crappy stuff

if you had abundant high-energy coal that you can't really build new supply. I mean, Vickery, White Haven's been very honest. At this, multiple, that's not being funded off of the White Haven balance sheet. Customers are going to have to come in and support that project being built. So I think that we're having a little bit of a realization in this slow education happen about high energy coal versus low energy coal. And like, yeah, if we can put on wind,

solar, use of an adium redox battery as a firming solution, and turn off a dirty coal plant, I think we all agree that would be lovely. But the role Newcastle is going to play, the high-energy Newcastle, that has a long run way. Can I just push back on one piece of that? So everything you said there, I don't really disagree with any of it. But, you know, if I go back to 2019, I'm looking at Newcastle, which is the Australian high-energy coal, we're talking about. The price is 75 to 100, right? If I'm looking today, the price is 300 to 350. And yes, we had, I didn't choose a year ago because there was a lot of COVID funkiness last year still. So I didn't choose you. Go ahead. But pull up JKM LNG. Pull up Japan

LNG. J. This is exactly, this is exactly what podcast listeners want to hear. They want to, they want to hear somebody looking at things just in real time on Bloomberg. Okay, I pulled that up. What am I looking for here? Where was it in 2019? All right, let's see. I must split up the wrong thing. Bloomberg didn't tell me.

So you can go ahead and tell me if you want. But basically, one of the things Glenn Corey's talk about in 17, 18, when they bought Rio's coal mines, was go look at the parody, the Newcastle parity price, wherein Japan LNG is like eight or ten bucks, or even six bucks. Well, it never traded. there because energy's abundant and of course you'd rather burn LNG than turn a ton of coal. Yep.

All else equal. Well, in a world of energy scarcity, where you also have rules on the emissions and how you generate energy, but the actual molecules and units are scarce, these are the things that actually start to kick it. if you can't get the if you if you need more if you need more lNG but you can't get a cargo that's why the newcastle's there i i think this is a very smart way of addressing and also my worry of addressing my worry and also part of my worry here like how much is coal right now a bank shot on hey europe lost all of their lNG because of ukraine and russia and lNG prices

everywhere are going parabolic and if for some reason russia gas is allowed again, you know, somebody drills, LNG equipment takes a long time, but if for some reason Nat gas normalizes from 200 in Europe to 20, let's call it 20, which is still, I think last year it was in the 20s, 30, whatever. If it normalizes the 30, does this whole cold story collapse? We're not at 400 Newcastle or 300 Newcastle in that world. We're probably sitting, Look, as I would say, before the Ukraine invasion, Newcastle was flirting with a two-handle. It's a function of then where are inventories? Is it hot in the summer?

Is it cold in the winter? It's a more functional market if Russia's back or the Russia equivalent is brought online. And so, yeah, you're not going to get these prices, but I'm happy. if Newcastle starts with a one in three years and continues there, I'm totally fine. And correct me, for journalists, a lot of them look at, kind of similar to what I did. They look at Newcastle 300 right now and they say, this is a scarcity driven spike and nobody is willing to underwrite, everybody's underwriting Newcastle back to 75 next year, let's call it, right?

And what you're saying is, okay, it can't sustain 300 forever. But what you're saying is similar to some of the stuff, a lot of other people have pointed out. I think this on refining, yes, this current spike can't last forever, but it's not going back to where it was previously for all sorts of reasons, for all sorts of reasons, and nobody's willing to underwrite even slight premiums to kind of the old cycle margins. If we have two or three years of 300 average Newcastle, all this talk. about why aren't the energy companies drilling? Why aren't you investing? The conversation will turn to Paul, Mr. Flynn, Vickery, yeah, let's go. Let's go. In a weird way, high prices

are the solution for high prices. It's cliche to say. And that's what generalists worry about, right like when doesn't supply gluck come but these aren't these in these companies aren't trading at eight times ebidot and people go oh you take the coal price cut it in half and there these things aren't trading on 50% free cash or they're trading on uh 15 cool um if that happens tomorrow like if that literally happens tomorrow that's a valid point but If you give me a year at 50, and just to make the math simple because buybacks are circular, you just give that back to me as a dividend. Well, that 15 by simple math, if the stock price just went from a dollar to 50 cents,

15 cents divided by 50, that's a 30% free cash flow yield. Okay. What's your alternative investment idea? I've built out models and it's so crazy because they're so cheap that literally, you know, I'll estimate, this is so stupid, I'll estimate like monthly cash flow. And literally every week or every month, I'll build out the model and be like, shit, the stock, the stocks only move 2% and they just fills up another 8% of their market cap and cash on the balance sheet.

And it's still going like every day you're getting so much. It's wild. It's just wild. Well, let's use, let's use Whitehaven as an example. It's going to be so fun when we go from free cash flow capital allocation to the total other end of the spectrum on Ivinole Electric in like five minutes, just going to be absolutely a great flip flipping the page for the viewers. But I think you look at White Haven, they put some of year 18,

they go one and a billion of free cash flow generated in the first quarter. Now, that's a pre-tax number. They're going to go to quarterly, but you sit there, you say, okay, to the point I kind of made it, if it ends tomorrow, yeah, okay, if it all ends tomorrow, I get why you're short. I totally get why you're short if it ends tomorrow. And we never have another spike ever again. We're going to be wearing shorts and golf polos in February in Manhattan.

It's going to be mild. Climate change is going to take away the heating season. I can see you. We're going to blur you up our listeners, but both you and I are wearing polos in November in Manhattan, so we're close. So who knows? Turns out climate change is going to solve the energy crisis for us. But in that world, that one and a half billion,

obviously we're halfway through the second quarter for them fiscal year end is June. They're going to generate more free cash flow, obviously, because, okay, Newcastle starts with two. Cool. Tell me what the last six weeks were. Tell me what their production and volumes were. They generated more money. So let's just assume two Q covers the tax bill. One and a half billion of free cash flow is on a $900 share, 900 shares outstanding because the milestone shares are not economic and excepting to takeout. we're talking about what a buck 50 plus like we're just trying to get to a world where the buyback is at I think I did the math at 625 or 650 that quarter of free cash flow alone covers the buyback of 240 million shares um so in that world it's what are you going to do with this cash flow like it's just funny to me that there's a point now where you almost have a put on some of these names because they're not lighting the cash on fire. that, I mean, just, I mean, literally, I heard a major fund just shorting Whitehaven now because they think the energy crisis is solved in Europe,

gas is full, winter is going to be warmer, and I kind of look and I go, and you're going to, like, these guys can buy back 10, 20 percent of average daily trade value all year, and it's on the books already. And you don't think we're going to have an energy crisis ever again? you obviously talked a lot about Whitehaven there and the most popular question I think we actually got when I said you were coming on is why White Haven over YAL which is another I believe it trades for two or three turns cheaper than White Haven which obviously when you're talking these very low like if something's trading at 20 times EBITA and a competitor's at 23 they're basically even but if something's at five and the competitors at two like that's a big difference you know so a lot of people just wondering why is White Haven still the horse that you're kind of sticking. at. So I need to go back and update all my Yann Coal work. I used to own it. Wish I still did, obviously. But I think there's a few factors there. One, most of Yan Coal's production is API 5, which is not Newcastle 6,000. It's called Newcastle 5500. It's a lower energy

coal. It is not the creme de luck crop. Yep. API 5 prices. are like 165, not this 400 or 300 we've been talking about, which, yeah, if you think the energy crisis is solved, Newcastle 6,000 is not going to trade at this massive premium to API 5. So I totally understand. If you think that this thing is solved, same way when iron ore demand is not the best, 58% iron ore and 65% iron ore don't trade at a massive spread. Yep. Because you're not trying to optimize the furnace to maximize output. You just want to keep the furnace warm.

You don't need as much. You just don't have as much tension in call on molecules where that premium product will get the premium. It merits. The abundance solves that. So API 5, which I'd rather just have the higher quality coal. You have a major Chinese shareholder who it'll be dividends. It won't be buybacks, which, sure, if you're an Australian investor or I don't know if you can do franking there because it's a, yeah, I think you can, they have fully frank dividends. So if you're an Australian investor and you have the tax and you don't have tax leakage on the dividends, fine.

You can buy it back yourself, but it's low float. I think that's right. It's low float. Like Glencore sold their 5% stake in a overnight, like, block earlier this year. So I look at a situation where I have a major. shareholder. They're going to pay dividends. But they can do what Peabody alluded to. They can grow for the sake of growth. And I don't know, there is a valuation multiple to say, look, I'm just under the existing dividend policy. I can't really lose. I'm not in position today to

answer that question if it's that cheap. But I do. know that Whitehaven has a premium product. I don't think Dickery is valued in it. And I think I have a good capital allocation strategy. And a big thing is capital allocation goes from a headwind to the tailwind in this industry. And we realize that this industry can create value through investing more capital is those who have the ability to create more value because they have good projects, they have ways to like the bottleneck existing operations. they're going to get a higher multiple, simple as that. And so, Yank, coal, I mean, how many, how many institutions,

in the limited number of institutions you actually can own coal? Low flow, capital allocation, the audience for Yankole was smaller. Now, that could completely change, and I've not done the big, deep dive there. I think, like, look, and frankly, I probably should do the same thing on New Hope. But Whitehaven, until very recently, was the only Australian name that if you were an offshore investor had liquidity that you really had to pay attention to in Australia. That's a – so there's also a familiarity there for me. I'm not saying, oh, I've done all the work deep as I have on White Haven on those two names, and I'm telling you, this is the one. There's a price for everything.

Yep, yep. It merits the work. It merits the work. that makes total sense i do want to be cognizant of a time so if it works for you i could ask about timco all these all day but let's switch over to you know when we first reached out that you said the company i want to talk about is iveno electric the ticker there is i e it ipoed over the summer i believe the market cap is a little bit over a billion dollars trades u.s and canadian but i i just want to go over there and we can run through that thesis in the next 15 or 20

minutes that works out. So I'll just talk to you. What is, what is IE and why is it so interesting to you? Well, I think it's funny because we were talking like you said, Andrew, we had a lot of questions on Ivanhoe. I'm like, and I think not to tease you as a generalist, but anyone who pulls up Ivanhoe on CNBC.com, whatever, the U.S. listed ones, Ivanhoe Electric. But there's also Ivanhoe minds. Well, we were going to talk about, I made this mistake last week when we were originally going to have the conversation. So yeah. And then if you get even more historical, Turquoisil, which Rio Tinto is trying to buy out right now, used to be called Ivanhoe when Robert Friedland ran that company. So I think it's actually, it was a good laugh because I think

it's kind of a, first of all, all the same founder, major shareholder. I think it's a fun conversation because I think to understand Ivanhoe Electric, which again, exploration, pre-revenue, everything we talked about, these things take forever to build, 25-year overnight success. Without understanding Ivanhoe Mines, you're not going to really appreciate Ivanhoe Electric. So just very briefly, Ivanhoe Mines, what is it trading at? Like, what's its Canadian ticker, right? I think the U.S. is like six, seven bucks right now. Okay. Seven, like one point four, one point five. It's basically a $10 billion company.

off the top of my head. There you have in Kamaukakula, which the Kamokua land is 50% joint venture as a gin mining. The Western Fourlands area around it is 100% Ivanhoe mines. There you have what will be in a few years, the second or third largest copper mine in the world. And because there's basically a whole basin, it's an ocean of copper effectively,

that they have found west of Coalese. In due time, that will be the largest mining operation in copper mine in the world, as they mine the various trends underground, and they build more concentrators, they get more hydropower because they upgrade more turbines on the Congo River, and they get the transmission lines, and then they get a road to Angola, they maybe get a railroad, so they don't have to truck to Durban or Daris

Salam, the concentrate. So there's a multi-decade story there. But Kekula, 50 plus percent IRA on conservative copper prices. So they found it in 16, and it's already in production. And it got commissioned during the pandemic. That's fast from guys, we found another thing here, and it's better than anything else we found, to five years later. If it's good enough, people get moving.

And but now we've talked about capital allocation, we've talked about dividends, we've talked about buybacks. Ivan O slid a comment about one day a dividend in one of their presentations earlier this year. But the reality is they can keep reinvesting in growth at 30 plus percent IRAs in copper. I think, and the markets kind of understood that. The investors are conditioned to it. They understand. Yeah, go do that. that you like no please go do that you have that bespoke opportunity like you have these properties

you found them you have the skill sets if someone else wants it they have to buy you so go do that like you have the pipeline of projects and we have confident you can execute on them so no one's harping on ivano to take free cash flow and buy back stock or this So it's the old, it's the old earning the right to invest, right? And I do think like we've talked, nobody wants people to invest in coal, but a lot of them don't have the credibility to invest because historically they've just, you know, it's the old oil wildcat or oils at 100. He says, it's going to 200. Let's go drill, drill, drill. And then he's bankrupt at 70. This is the guy, they found it. They found a great project. They successfully executed. They got run. So the shareholders who backed him, they don't want the dividends yet. They say, you've got the right to. We believe in you, go do it. Yeah. And someone can say, Oh, the multiple is in fact, it trades at a premium. Like, of course it should. It 100% should. World class projects deserve world class multiples.

And you have to earn the right to invest. The whole sector probably needs to 2X in multiple, frankly, just from on a broader level. But I look at that, the order to invest, and not to go all the way back to coal, but you heard why you haven't talked a little about, you know, Vickery, maybe we can plan a million tons here or there. We can maybe pull some stuff forward. Small capital, though. It's interesting because there's a point where you can say, guys, we're buying back 25% of our stock every year.

Like, I could go to 30, but can't I just go do this? Like, there's a point where balance is called for. And that's a key line I heard at El Mee Wee from all the big mining companies. And they're going, where are you going to get the battery metals? How are you going to grow? Well, we really want to have a balanced approach to returns to shareholders and growth. We don't want to, and it's basically like, it's the new value over volume.

No one has a project. The people who have projects, well, if they weren't built yet, are they world-class incredible projects or are they tier twos? Well, if we all build at the same time, we're all going to have CAPEX blowouts because there's a limited amount of talent. So let's just have a balanced, sensible approach. It's really a self-regulating mechanism that it's kind of like, guys, until we're at 15, 20 times EBITDA because everyone wakes up to what we've created and how long it's going to

take to solve it and how much capital it's going to take. We're not going to act like drunken sailors. When you give us permission to do that, we will do that. But that is the longer cycle. So I go back to Ivanhoe and you go, well, where's the copper growth going to come from? Well, you know, Ivanhoe mines the moment they finish phase three, they're all we're going to be talking about phase four. That's, and so that's a really unique thing because Let's now go. It's the DRC. People have gotten comfortable now to some degree with the DRC because they've seen a success story. But if we also think about you have to go where the geology is. So where are the great copper mines? Well, Ivanhoe was an incredible discovery in the DRC. Glencourt is in the DRC. But Glencore also just went through mostly in oil, not in the Congo, a massive bribery scandal that they paid a $1.5 billion fine for. You go to the these frontier jurisdictions, Western investors, for all the reasons of, you've destroyed capital, it's also like, how do you do business in some of these places? When, like, I think a lot of

people, there's a lot of people in the West who, first of all, couldn't point out Washington, D.C. on a map. But they also couldn't point out, like, they couldn't really go, okay, I have a rough idea of where countries are in Africa or the nuances of the continent. But you got to go with the geologists. And to quote a comment from a now retired CEO, it's like, we kind of know where the copper is. It's in Africa, in the copper belt, and it's in like Siberia. Well, Siberia is completely off the reservation now. To quote to quote the founder of Ivanhoe at the FD mining summit, Russia's the new ESJ. It's just, nope, we're not going there. And so you have to go find these projects, but also, we also have this reshoring and kind of resilowing of the world.

Yep. So like Senator Mansion, he wants more battery metals domestically. He wants manufacturing. Well, let's go back to the West. And what Ivanhoe Electric is, is over the course of the last few decades, I mean, a guy who loves, who's found Boise Bay, Oya Tollgoi, and Kamo Kakula, probably wanted just an absurd track record of exploration success. He had Ivan O'Meynes working in Africa, but he obviously looks at everything.

I mean, the famous thing I love about Robert is, I've been told this by multiple of his employees. He'll call you 24-7 and jump right in to what's on his mind. But the only thing you'll really get mad at you for, you won't get mad if you have a barren hole, drill a duster. But if you finish a hole still in mineralization and didn't keep going, he will lose it because why would you stop? This business is hard enough as it is.

Why would you stop when you're on site and you go, we're still finding copper here? Let's stop the hole because we hit our, depth it's like nope keep going keep going um and so he's looked around uh and he's found these things and he's just first of all he's just they joke that he uh created explained to steve job the reality distortion field way of dealing with people like general rule i've always had is you meet with robert whether it's in a group meeting or one-on-one um you kind of have to give yourself two days to like if you don't you'll yolo everything you have into the stock and yeah yeah i've uh i've known

some managers who can do that it's it's it's really hypnotizing even if you've heard the even if you've heard 80% it's like going to like a rolling stones concert you've heard all of the songs before but it's still it's still awesome incredible well so yeah but i want but here i have an electric let me funnel this down in i love to i'm not concise but it's a great story to tell. Like, here's a guy who has resources, has an incredible way with people, and understands exploration. So what he's able to do that if you were I, went around with a BHP business card, is he can spend years talking to landowners and putting together very promising packages of where they just haven't been drilled for 30 years because

no one was ever able to put the land package together, link up all the rights, get the terms right and then also bring in the exploration skills to do seismic or geophysics or electromag or whatever it requires uh which typhoon is his magical way of looking deeper into the ground uh over long areas to figure out where to drill blind um but he's able to do this and like iven electric has two main projects and for full disclosure i invested in ivan electric privately uh in 2021 at an average cost basis of 580 so i'm in this uh probably a little more egregiously sizing wise but bet the jockey and a couple things about this so there's multiple projects there's a Venetian redox uh battery business in there which if you look at the convert they did

like a few years ago, it could be worth $100,000 or $1 million. But let's just leave that to the sack. And Robert will be furious when I say, let's all set aside the optionality of Typhoon because mining investors are technology investors. I was just going to ask because their

investor deck, their S1 leads off with the two projects that we're going to discuss, but their investor deck actually leads off with Typhoon. And I was like, is this, it seems like a mining play to me, but if you're leading off with Typhoon, you're kind of making a signal, hey, this is where we think the secret saw us, the real value.

I wasn't sure if I was reading too much into that. Well, I actually think it's, it's something that we are also focused on the free cash flow, what's the project, what's it going to be worth. But the reality is we've walked every, we have basically, I think, as a human species, walked every square meter of this planet at this point probably, or we've satellite imaged it. We have a very robust science in geology. I think anything that's kind of at surface, for the most part, we've kind of looked at it. Maybe something got overlooked or there was a fault that we didn't pick up on.

But a lot of the near surface stuff where you're walking in the Andes of Peru and Chile and you go, oh, I see that. And then you drill a 300 meter hole and boom, you hit 1% copper. I like, that stuff's kind of like, the copper grades for open pits that get people excited today are like a fraction of what they were 20, 30 years ago. And so we've needed more technology, we've needed more innovation to make those projects economic and get built. QB2 is a 0.4 copper, but it's a low strip ratios. You don't have to move as much waste. whereas I have no minds it's underground but we're talking six, seven percent copper

tens of meters. So it's like, okay, I can understand multiple meters. We've got to get underground and basically dig a tunnel. And it's high enough grade. It's 10x the grade. So the thing is, what's actually left is what can we not see? Because you're not going to punch holes blindly.

Drilling is expensive. But we have technology now to kind of go look and say, Okay, well, and I'll bring it to Oyatouou as a great example of this in Mongolia. BHP saw some expression at surface, and there was a nice little open pit, not enough to build something in the Gobi Desert. But there was a nice little open pit, but when Robert got his hands on that, it was, where's the rest of the system? And they punched 90 holes into that.

And Typhoon did not find this, but they punched 90 holes into the Gobi Desert. And they had to go down. I, geez, must have been like 500 meters. It was like two to 500 meters down before they hit the Hugo DeMette deposit that's now becoming a block cave. Like, you just think, like, the idea of how crazy you have to think to go blindly look and say, we're going to drill half a kilometer before we're even going to hit something. it's it's rare um and it's the same way still then like you look at thillo in argentina you have an oxide cap which was one way of looking at but then you have this

mediocre sulfide porphyray that kind of doesn't merit itself it was very qb2-esque but then they go and they drill deep because they're trying to think through with the geology and they hit this whole 41 with massive grade and it's game on. And the Philist stock price shows that. So what I know Electric is really kind of doing is they've come back to the West with a guy who goes, loves exploration, has built his fortune off of it. And let's start with Utah, Tintech, which he took seven years for him to put this package together. Freeport has the land next door, but you have this package where you've had mining historical. like high grade precious metals here, there.

And with the geologic theories and analysis, and using Typhoon, there's a belief that there's potentially a massive porphyry at depth. Now you're going to have to drill deep. What is the potential issues here? You're below the water table. It could be very hot down there. So you'd be massive ventilation. You'd need, you want to have as few people down there as possible.

But if you found a massive high-grade porphyry system in Utah, 60 miles from Bingham Canyon, which is the biggest hole, man-made hole in the world, in a world where we want to have more mining and security of supply, that becomes a very strategic asset. Now, the question is, there's three porphyry targets they want to drill. Do they hit on the first go-around? or do they have to drill this for like a year to understand more controls

because Typhoon doesn't tell you everything. Like the drill actually informs you and it's very much kind of like I would imagine a drug trial would be like, we'll see. But I think a guy like this who spent seven years putting this land package together, I am really curious to see what he finds there. And then worst case, you have a pile of land

outside Provo, Utah, which, thanks to how the Mormons believe in having large families, it's a very fast-growing place. So worst case, it's a real estate play. No comment, well, I think if it goes to real estate play, you might be. But let me ask you. And this question is going to apply to both Santa Cruz, which we haven't talked about, that's Arizona, and Tintech, right? Like, it may be a little more Santa Cruz, but Tintik, as you said, it's 60 miles south of a big Rio mine. Santa Cruz is, in Arizona and I looked and within about 150 miles there's like 20 other copper projects within 150 miles from remember correctly and I think the person 10% 10% of copper mine in the

world I believe has come from Arizona so I believe just the first thing as a you know generalist who hasn't spent tons of time on mining I hear hey this guy's got a fantastic background I get that but he's going to places in the US like it seems like US would be pretty picked over and think and just go in and saying, hey, this one little spot of land where, you know, a hundred other minds are, I found something that's going to be revolutionary and like, not revolutionary, but it's going to be a great project. And it strikes me as, I'm just a little incredulous that he could find this kind of diamond in the rough where, you know, 30 other people are looking in the rough right around him or something.

I think, so Santa Cruz was a very pleasant surprise. It actually wasn't in the portfolio, uh, in the summer of 21 when I invested. it came in in the fall and I think it's a really interesting story because the project was discovered by David Lowell, legendary geologist probably 50 years ago but the

surface rights and the subsurface mineral rights got disconnected and I think it's a case of really just shows how this guy knows how to do deals and work through business was able to kind of sit through and say put the package together

in a way that I don't know, like, how often does, like, the head of exploration or the head of copper change at these major mining companies? It's a, it's a nuance to put it all together and say, okay, like, this is, this will probably be an underground mine. And also, what's very unique here is you look at there's Santa Cruz, there's Texaco, there's the Texaco target. And there's a few other blind targets that really haven't been drilled because this land hasn't really, it's kind of just been there for four. years. And with Typhoon, it's like, okay, well, we kind of see what the signature of the Santa Cruz deposit is. And the Texco deposit looks similar. And there's a few other on there, like Arizona Sonoras to the north. And their park sailor clearly continues on to the Santa Cruz

property. But if you go and drill out and actually there's two or three times more copper there than originally thought, well, economies of scale just show, okay, now we have something that could really just be much more interesting. But it's one of those things where you're like, I just can't believe he's the guy who put this all together. And you sit there and you go, well, also I kind of get it because it was in a private, it was in his private company. He's able to fly in and see the real estate guy who has the surface rights. He can talk to the mineral rights guys and talk about through and it's just a way that you can you can move fast make decisions and build the relationships uh to make things work and i think it's a huge endorsement frankly that

taylor melvin uh who had a really long successful career at freeport uh has chosen uh to come work with robert on this um that is a that is a really talented executive and a huge endorsement that's the new ceo yeah i was it One of the questions, but we're starting to write short and time, so I'll just lob it up. If you look at his equity package, and you can say it if you know, but I just looked this morning. So I know 500,000 base salary, fine. Maybe he hits all his bonus targets, 1.5 million. So he's getting about $2 million annually if he's hitting his bonus.

But guess what? It's all about the stock. 500,000 options struck at 1175, 750,000 RSUs. Like, this is a man who is betting on this stock working and working in a. big, big way. And it's mining. So yes, you probably want to take all the optionalities to the upside because if it doesn't go, like, yeah, you'll lose the job. But he's really equity-incented. And I thought that was just really interesting. I don't know if you want to comment on anything else there. Look, I think Freeport has the land adjacent to

the Ivanhoe Electric Tintech package. I think Santa Cruz is right in Freeport's backyard as a Phoenix headquartered company with several mines in Arizona. I think it shows that this guy understands that Santa Cruz is logically a mine and the true potential of Tintech. Yeah, you would want all the auctionally in the world. And I frankly prefer when my CEOs are incentivized. And in that context, Robert Friedlin owns, I don't know, you have it on Bloomberg. was it 15 to 19.9% of this company? Yeah, it's big. And also what you won't see on there,

but it was reported by the Financial Times. BeHP owns 4.5% of this company. That's a natural acquire, if I've ever heard one right there. Just on Friedman, so you mentioned, again, as somebody who's just generalist skeptical, he's got a great background, but, you know, generalist and just looking, oh, you found this needle in the haystack. I hear you on. This is a man. He knows how to get deals done. He's got great relations and stuff. But most of his recent stuff, not all, but most of his stuff has come internationally. And again, I just wonder as a skeptical, I like, hey, is this the guy who's great to, is this Warren Buffett going into the airlines, right? Everybody goes into one thing once and they think they found, and they get crushed.

Did he come into the U.S.? And yes, he's great internationally, but he came to the U.S. and thought, oh, I can pick these great spots, even though these giant companies have looked all around it. and kind of, you know, going to end up eating it, if that makes sense? You know, it's obviously a risk with exploration. This is not the, this is the, again, the opposite end of the spectrum of the Whitehaven trade or the Glencore trade. It is where do we fill the pipeline back up? I think my view on this is that I think Santa Cruz, I have not bothered to try to build a preliminary economic assessment of Santa Cruz, we'll get one in the first half of next year. Yep.

But I think it would give me a, it would probably give me a false sense of confidence because like what exactly is the underground mining method and how they design it. But look, I think what's going to happen there is Santa Cruz, if you use a $370 copper price, $4.00 cop price, I think you're going to see an NAB, an 8% nav on that thing that is probably north of one and a half billion dollars. Thus, if you can add in a resource at Texaco and show scale, I think that's probably where this all shakes out. But the prize really is, does he hit on Tintech?

Because, again, 25's overnight success, but if he proves out Santa Cruz is a mine that should be built, and he shows that Tintech is kind of the missing part of Bingham Canyon. Then we're just in a world where the questions are going to be, okay, a major mining company will say, I think comes along and says, okay, we'll take on Tintech and we'll pay for the privilege of doing it. Because in a world where the pipeline is barren, the cupboard is empty, great projects will get premiums. So that's, that's, and then guess what? I think because he's so incented, he owns so much. of this. I don't think these are the last two, these are the, these are not the only two projects in the portfolio. And I think there's a world where we'll probably see another project here or there. And that'll be a, that could be a very volatile thing. If Santa Cruz

doesn't work or Tintech comes up dry, that can be volatile. But this is a guy who will continue to go looking for projects. And he has the fact that he got these two projects. I think he has a very unique deal flow. Just on financing, right? So this is a company basically no revenue. They are going to develop mines, right? Guess what? Anybody's followed developing mines is expensive.

And developing mines, particularly in the U.S. is going to be really expensive. $200 plus million on the balance sheet in cash. That's a Q2 balance sheet. We'll see what Q3 looks like. I believe Q2 is at the IP in June. So that has all the IPA proceeds. If I remember correctly, yeah.

So 200 million in the balance sheet, that's not going to be enough to develop these mines, everything they're talking about. What do you think the financing path looks here? Because this does become a little bit path dependent where if they announce good results, the stock goes to 30 and they raise, it's going to be a lot different than if we're in a little bit global recession, mining comes down, the stock's at six. They haven't announced great results and they have to do. So what do you think the financing path looks like here?

So I think, look, obviously, I think if you hit on, if you hit it Tintech, it's lights out and away we go. So let's sit that one to the side. Like that's a high quality problem. I think the realities, let's say, let's say it's just we're going to develop and build Santa Cruz. Yep. I think you then have to, you get the P.E.A. out. I think we're probably having a conversation, the second half of 23, first half of 24 about the development path you let someone buy into the project at a higher valuation because they want the offtake of the copper cathode. uh themselves um do you i think you just have you then work through do you do a project finance

but the reality is i think yeah look i think you if you get the stock to 18 or 20 bucks uh you're in a world where you will see another you will see equity raise yeah but the whole thing is you do create value with every with every passing rings um and how you use the proceeds so like i I obviously I think it's a question of it would really suck if things don't go great or you have to raise money at eight bucks. But Robert has a very good approach to always thinking about not the next raise, but the raise after that when he needs money. And I'll tell a story from the I don't know minds days because in 2018 in January, the DRC tried to change their mining code, change royalties on cobalt and copper and change all. all the rules and it really kind of put a damper on the um on intimate interest in the DRC particularly for i have no minds which at the time was trying to finance building kamoa kula it was a

like great job guys i'm trying to build i'm trying to build a mine and you and you just told everyone you're going to change the the tax code that's literally just need got me yep but you then saw everyone go okay well like what's you going to do At the end of the day, like, it was like, okay, is he going to sell the company? Like, you've already done a 50% joint venture with Zijin on that part of the project. Like, what's the pathway here? And lo and behold, like, you wake up in June and he had Siddick come in and come in for, I believe, was 20% of the company at a premium. And it's like, all right.

Like, probably didn't want to do that at 368, if I remember the share price correctly. Probably don't want to do it at that price, but he got a premium. He got on with it. Here's a guy who, look, it sucks on the day to have like a 5, 10% punch from a raise. But here's a guy who's going to focus on the longer term and say, okay, we just got to get on with it. Very much if we're not moving, we're dying. Everything plays out here. Good.

Everything plays out here. Obviously, there's going to be dilution along the way. But, you know, right now, this is an investing vice, but the stock's treating in 12. We're not talking to the greatest home run case of all time, but you get kind of like a reasonably bullish upside case. What are you playing for with IE? Look, I really want to see the Tintech drill results. I see a good result out of Tintech. I think it, I mean, what's Philo's market cap today?

$2 billion. I mean, it's apples and oranges in some respects. But you kind of can see if you have something really compelling, this can be worth, I think, a couple billion to maybe even $3 billion because it's the U.S. And that's just that high. Yeah. So I look at the situation look like, I think if I got $25, 30 bucks here, I'm not in the size I am today. High quality problem, of course. But I look at this and like Santa Cruz kind of backstops me here.

That gets de-risk. We learn more about it. Copper gets a pot. Copper has a positive sentiment again versus, oh, China's not going to reopen. Short copper. We're in a recession. I think you have a couple tailwinds there, but I really want to see, I really want to see Tim Tech. And I think the, if I recall correctly, the IPO lockup, I think is like December

24. I think just though in general, the folks who that invested in this company are going to want to really want to see the end of that story in Utah. Makes sense. Cool. Well, Quill, this has been great. We've been running almost an hour and a half. And unfortunately, I have lunch plans that I need to go put on some real big boy pants for and get ready to go. But this has been fantastic. I've learned so much from you over the past couple years, especially on Cole. I wish I had followed you into the White Haven trade. but this has been great. I'm going to include a link to his Twitter handle

so anybody who wants to follow him and reach out to him on mining, Cole, any of these guys can do it, but it's been fantastic and we'll have to do it again in the near future, hopefully. Yeah, if I could just leave everyone with one last thought here.

This is a long duration trade. I know the multiples on these companies don't suggest long durations, but it's not about what the commodity price is tomorrow you are I know a few of my peers at Millennium and Citadel follow me

always nice at dinner to be addressed by your Twitter handle after a few balls of wine but the reality is for the 99% of us who are not Millennium and Citadel portfolio managers it's not about tomorrow it's about what does this look like

over the next few years the free cash flow that's generated the value that can be created, whether that's through buybacks, be capitalizing. Maybe you get a multiple rate. But it's about saying they're knowing that you have these companies and thinking about the next few years, not the next few days. It's always funny when you've got somebody who says, oh, I see this huge super cycle coming, right? And I think oil is going to 200. And oil goes from 80 to 79. And they say, oh, I need to sell all my energy stocks because the market hasn't

priced in this $1 move in energy. And you're like, dude, you think, you think oil is going to you think you found the super undervalued company like yeah if oil went from 80 to 20 maybe you need to readjust but you know one penny mines up anyway i hear you but hey i'm gonna be late for lunch and i'll give you the exact one the exact one for that is everyone knows i've been long valet because i think iron ore's 100 to 120 for this decade i had watched that thing go from 12 to 24 two times in the last two years and people go oh china koala what are you're like relax i'm not I'm willing to be patient and let the noise be the noise on that one. Like, let it all play out.

They're doing the right things. And it's one last thing. It's one less thing that I don't have to think about or stress about. I respect your diamond hands, sir, but I'm going to be late if I don't go. So we're going to wrap it up here and we'll chat soon. Thanks, buddy. We'll talk soon. A quick disclaimer, nothing on this podcast should be considered an investment advice.

Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.