The Great MinRes Debate: Bull vs Bear

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Operations at Onslow basically stopped.
It looked to me like haulage wasn't going to work and as a
consequence, there would be no trans shipping.
As a consequence, there'd be no money and as a consequence that
bondholders were going to end upowning the company.
Trav Trav kicked off my Twitter career.

(00:21):
I got like, I got like. And and gave you the most.
Name I got yeah, yeah, yeah, yeah, yeah, yeah.
I got 300 followers overnight and then it was off to the
horses. You've made it.
Trev's made it. Trev's now Forget it.
That's now properly recorded. Oh.
Mate, how funny is that clip so.You know, no matter who shares
that video, no matter where theyare, no matter where there's

(00:42):
Elon Musk, there's a great big Trevor Ricardo bubble that links
to your profile. Yeah.
So Elon Musk is sending a tweet that has Travis Ricardo and I
haven't linked your profile on it.
That's pretty funny. It's incredible.
It's kind of crazy. Yeah.
I'm. I'm.
Daily Mail writing in for a comment.
Yeah, that's pretty funny. Pretty funny mate, I'm just.
Happy that's just the that's thelowest form of journalism.

(01:03):
Just like a Twitter events unfolding quick, stick it on the
front back. So, so you know what's kind of
funny? Both both Daily Mail and
news.com, though you picked it up.
Daily Mail actually asked to which I said thenews.com dot AU
article was pretty good. Just use that.
You don't know that guy though. You just haven't.
Someone just sent you this or yes?

(01:24):
Yeah, I like mate, Jerry is clearly like that.
That snippet was was a was it worthy of being a viral clip?
Yeah, I'm happy to just milk it for the virality that it is, but
I am. I can take no credit for that at
all other than just yeah, repost.
It but did you post it intendingit to go viral?
I I had no. Idea.
Well, you're just like, this is gold.

(01:46):
I just thought it was. It was sent to me on WhatsApp
and I looked at it and I showed it to JD and you both.
He's all needed to see this. He started when he started just
cracking up in the. So you're like, it's just
cracking up. I was like, is this on Twitter
yet? I checked Twitter, wasn't there.
I'm like, I'm putting this up like.
And and 24 hours later, you've doubled your follower count.
You've got a million views or a billion views, or some insane

(02:08):
number of views. My my new followers are going to
be very disappointed. When it's when it's hyper
technical. Half, yeah, my new followers
that they've all got like Australian flags.
I noticed, I noticed very patriarchal Put it this way, if
I interviewed Pete Buttigieg, they are not the intended
listeners for that conversation.You just let me know if you want
to reach them. I'll put out some tweets for

(02:28):
you. Yeah, Moz, thank you for for
coming in. Thanks for having me.
Who are you? Who am I?
I am a A a an erstwhile lawyer turned Twitter commentator.
And the reason that we're we're bringing you in for studio mate

(02:48):
is yeah, it's kind of an interesting, a different kind of
chat we're going to have JD, butMoz has become obsessed with a
single stock. That single stock just happens
to be my my favorite stock. Mineral resources and your
obsession I find interesting. I find interesting when anyone
gets like solely obsessed people.

(03:09):
If you get so obsessed with likea single stock, I don't see the
only stock in your portfolio. So it's like you're solely
obsessed with this one stock. Then I think you have a tendency
to do do hardcore analysis. You try and check all of your
assumptions. You see where you're right or
where you're wrong. Doesn't mean you won't have
like, you know, biases along along the way, but but you've

(03:31):
been putting your analysis out there into the abyss.
It's it's gathered some attention.
You know, I've, I've, I've foundit useful and checking my own
prize. And I just think it's it's an
interesting point in time for usto really peel apart where
Minrez is at right now, like bullish thesis, bearish thesis
and the whole swarm of of other affairs going on.

(03:53):
We're recording this Monday afternoon, 28th of July.
They're reporting this coming Wednesday for, for the, for the,
for the June quarter. Stock is run from 1440 up to
what went up to like 34 and now it's back down to 30 bucks
today. I know your average entry was in

(04:14):
the 20s Twenty 2:00-ish. How did how the hell did you get
obsessed with Minarez? Well, it's an interesting story
because this conversation could be unfolding in a very different
manner. When I first started following
the company carefully, it was because I thought it was going
to 0 and I thought that this wasa dead to rights story of

(04:43):
corporate failure. This was in April this year.
I followed the company for quitea while.
I've always been interested in its CEO and his business.
It's hard not to be interested in someone like Chris Ellison, I
think, especially when you're when you live in WA and grow up
in a mining or mining adjacent sort of world.

(05:07):
But in April, I thought, as I say, this company was going to
0. So I started doing my work and
it coincided. That period of time coincided
with Trump's doomsday tariffs and whilst all of that was going
on in the background, the Onzo iron Ore project for Minrez

(05:30):
wasn't having a great time. Perhaps it's useful actually for
your audience. If we go back in time a little
bit and just set up what's happened with Minrez over the
last 18 months, you've covered it pretty well.
But 18 months ago, this company was moving from strength to
strength. It had a supportive lithium

(05:51):
price. Maybe 20-4 months ago, it had a
supportive lithium price. It had an iron ore price that
was that was maybe not irrationally high, but strong.
And then over the next six months, just about everything
went wrong in fairly catastrophic fashion.
The lithium price collapsed, SPOD fell down to at one point

(06:16):
500 on a 500US on an SC6 basis. That was a month or two ago and
that alone I think would have been enough to to cause some
panic amongst the market for Minarez or in respect of Minarez
particularly given it's highly indebted balance sheet.

(06:39):
Then things that are going wrongon the iron ore side of the
business and the iron ore price weakened a little bit.
The trucks started rolling over and earlier this year the whole
Rd. started to fall apart as a consequence of some wild weather

(07:00):
up north. I think these three factors each
individually would have caused jitters in the market.
Together they conspired to bringthe company to its knees.
And at the same time there was ahigh speed collision between

(07:21):
Chris Ellison's personal life and the affairs of the company.
And that that I think was the straw that broke the camel's
back in respect of the market's view as to the value of the
company. Now, none of that phased me a
great deal. But then in April, operations at

(07:43):
Onslow basically stopped. So I was interested in following
what was happening on the shipping side of things and I
noticed that there was no shipping for the first half of
April this year. It looked to me like this
company was was going down and looked to me like haulage wasn't
going to work and as a consequence there would be no

(08:03):
trans shipping. As a consequence, there'd be no
money and as a consequence, the bondholders were going to end up
owning the company. And that's where I fired up the,
the account maybe a little bit after that and started giving my
thoughts. Now this long monologue has
meant that I somewhat lost your question, but you asked me what

(08:25):
my interest in the company is. And and my interest now is in
looking at the fairly spectacular comeback that that I
think the Onzo Iron ore project has made over the last six
months and particularly the lastthree months following a period
in April where as I say, almost nothing was happening.

(08:45):
You, you were, you were looking to see if you should put on a
short, Yeah. And in your DD, you went to the,
you went to the transshipping volumes effectively.
At what point were you tracking the volumes?
And you thought, hang on, maybe,maybe consensus doesn't quite
match my my view. The first three weeks of April,

(09:06):
they shipped almost no iron ore and they didn't say anything.
They didn't update the market asit was occurring, but it looked
to me like they were on a pathway to be delivering 5
million, maybe 10 million tons on a per annum basis unless
things dramatically changed. So at that point I thought, I

(09:26):
mean, at that point it's a matter of simple maths.
There's there's no universe in which this company comes out of
this without a massive cap raiseor some sort of other fairly
drastic liquidity change, changein the, in the company's
liquidity. And that's where that's where a

(09:48):
decision had to be made. And that that, that was where I
think the, the short, the, the people who are short this
company seemed like they've beenvindicated.
That that roughly corresponded with some of your work.
Trevin, you were quite bearish on the company and I think
perhaps that bearishness stem from your view about the

(10:10):
feasibility and the the success of Onslow.
Is that a? Is that a fair comment?
I don't think I'll reveal if I've ever been bullish or
bearish. I feel like my sentiment, yeah,
might, might come out. I feel like I'll be scathing of,
of capital allocation decisions.I'll be scathing of, of the
level of reporting to the marketunder certain circumstances.

(10:31):
That's that that actually has improved by the way.
But and yeah, obviously scathingof like corporate, corporate
covenants issues as they've transpired and evolved.
I think there's like a lot that I have been, you know, have been
and willing to be complimentary to the business for as well.
Like the, you know, the, the degree to which been raised has
a culture of like making things happen in a, in a very, very

(10:51):
short time frame. Is, is, is generally
unparalleled, you know, amongst amongst the sector.
And I'm, I'm happy to say that the balance sheet is, is
everything and then the cash flow from Onslow is everything
to address that balance sheet. So I think you have to, the
eyeballs have to be on the delivery of Onslow because that,

(11:11):
that's the only solution for thebalance sheet.
And in April, you're 100% right.Like there was no indication
that this project was going to be what had been put out there.
Roof's still going to be in the pudding.
But but the volumes coming out of Onslow you've been tracking
the last couple months are certainly stronger than I was
expecting. Yeah, they have.
They've been they've been a lot stronger than I was expecting.

(11:34):
On that point. I should probably just clarify
before we get into some more of the detail, what the purpose of
the shipment tracking Twitter County is that I'm running and
and also more importantly, wheremy data is coming from based
upon the number of journalists in my DMSI think there's a
suspicion amongst some members of the market that I'm providing

(11:54):
non public information or information that the average
person doesn't have access to. That's not, that's not right.
Generally speaking, there's three sort of buckets of
information that I that I draw from in respect of that account.
And the first bucket is the majority of it.
And that's information that is publicly available.

(12:15):
So shipping information is publicly available.
There's AIS tracking that you can that anyone could, could get
access to tomorrow. I also share information that
comes from a more, I suppose terrestrial source, but also but
remains public information. So if somebody observes a

(12:38):
particular event that's happening up north, that's not
insider information, that's not non public information.
It's maybe a little bit harder to to find.
But I just want to make it very clear that I don't have any
special access to any company information.
I'm not an insider. I've never worked with Minrez in

(12:59):
any capacity. I don't know anybody who works
at Minrez and none of my information is is information
that the average intelligent andwell meaning individual would
struggle to find. That said, there are two other
buckets which I think is is useful to be able to draw from.

(13:19):
The second one is just speculation.
So I try to make this clear whenI do this on the Twitter
account. But some of what I say is
speculation is just a guess based upon the information that
we have. And the third bucket of
information is, is hearsay. So much the same way that you
guys every now and then will report on something you've heard
about. I do that occasionally on the

(13:40):
Twitter account. It's, it's not, it's not
reliable in the sense that I have no way to know whether or
not something I say is necessarily accurate.
But I try to, I try to take whatever steps necessary to
ensure that I'm not spreading nonsense.

(14:01):
As I say, I think it's importantto get that out there.
I wouldn't want anybody making investment decisions based upon
something I've said, assuming that I, I'm more informed than I
actually AM. The point of the account that
I'm that I'm running is just to give your average investor more,
I suppose, finely grained information about what's going

(14:21):
on at the port. Because I think at the end of
the day, despite the fact that this company trades like a
lithium miner today, down 7% or whatever, it closed out along
with PLS and IGO and the rest ofthe lithium miners.
I think Onslow is really the keyto this company's success.

(14:42):
And I think that if Onzo were togo wrong, nothing else matters.
I don't think the balance sheet can support, can support.
I don't think the balance sheet can be supported by its mining
services business, no matter howoutstanding that business may
be. And it certainly can't be
supported by the lithium business, not in, not at
prevailing prices for lithium inany event.

(15:06):
So I think our best guess as to where this company's going is
what's happening at Onslow. Do you agree with that?
Yeah. And that well, that balance
sheet at last quarter, this $5.4billion net debt, if you had,
you know, you kind of trying to you've got $500 million of of
interest payments that, that need to be serviced on the, you

(15:29):
know, on, on the debt. Yeah.
And to you effectively need operations that, that can
produce enough free cash flow toa minimum service the the
interest payments on that debt. And the only way you can get
there in my view is through the delivery of Onslatt with margin.
Yeah, yeah. I agree.
Before we before we get into what I think is happening with

(15:52):
Onso itself, perhaps we could just talk about a few themes
that that I've observed in respect of this company because
they make for fairly, fairly torturous.
They make the lives of anybody interested in following this
company as a hobby fairly torturous, to say nothing of

(16:13):
those who have invested their own money in the company.
As you mentioned, a category into which I've recently fallen
and something I thought we should spend some time talking
about is the way this company talks to the market.
Because it has been a, in my view, a consistent failing of

(16:36):
this company. And I should say that any
criticism I have of the company is not criticism of individuals
at the company, it's criticism of the company itself.
I say that because it's true, and also because I know enough
about Australian defamation lawsto know that you can't defame a
company. So you as.
Long as there's more than 1010 employees.

(16:57):
Yeah, yeah. They haven't laid off enough to
to bring them under that number.What was?
That so you, you start followingthe company in April and then
obviously your, your work kind of goes back and you start to
get a flavour of how they they report.
And yeah, well, actually April'sa great starting in April
provides a perfect example of the the phenomenon that I'm

(17:20):
about to describe. In April, as I say, not much was
going on in terms of Onslow shipping.
There was silence from the company at the end of April
right before I was thinking, allright, time to time to go short.
The company publishes its quarterly and they have an
interesting part in it where they talk about what's happening

(17:42):
at Onslow in terms of haulage and therefore shipping, and they
basically say, yeah, April was aterrible month, but don't worry,
May and June are going to be much better.
We're going to double. Yeah, we're going to double.
In fact, they, they imply that in May, which was three days
after this this quarterly reportcame out, they were going to be

(18:04):
hauling and shipping at a rate pretty much on nameplate
capacity at 35,000,000 tons per annum.
And there's an interesting part of that quarterly report where
they say that the reason April was so poor is because our
contractor trucks that we're running while the whole Rd. has
been repaired are operating at areduced cycle time.

(18:27):
And the cycle time is about 2.9,they said.
And we think it can be 4. We can, we think we can get it
up to four. And they say in May, in May and
in June, it'll be back up. It'll be up at 4:00.
And that'll give us the haulage we need to operate at 35,000,000
tons per annum. And they say in that quarterly,
these projected cycle times are now being achieved.

(18:50):
So we are presently at the end of April achieving a cycle time
of four for these contractor trucks.
Now we get into May and for the first half of May, they're not
shipping in anything like 35,000,000 tons per annum.
And I'm, I'm sounding the alarm on Twitter saying this is not,
they are not going to make this guidance.

(19:10):
They're clearly down. They're not down by 5% or 10%,
they're down by 50%. And then on the last day of May
or one of the last days of May, the company jumps in with A1
line announcement, price sensitive announcement titled
Onslow Iron Update. The day before the site visit.
The day before the site visit, Yep, it's accompanied by the

(19:32):
site visit presentation, which is a long, long document, not
marked, not marked, price sensitive.
But in addition, they jump in with a single page document in
which they say, yeah, yeah, yeah, we're way down on exports
for May. We're not going to meet our
guidance. This is because our cycle times
are at 2.7 or 2.9 or some numberin the in the twos.

(19:55):
So just just stop and observe what's just occurred.
They've said in April we're operating, we have our
contractor trucks operating at acycle time of 2.9, but they're
now at the end of April operating at a cycle time of
four. Which means in May, we're going
to be operating, we're going to be exporting at 35,000,000 tons

(20:15):
per annum. Then at the end of May, they
jump in and they say no, no, no,we're way down on guidance.
Our trucks are operating at a cycle time of 2.7.
Cool. I think it was 2.7.
That sort of carelessness in theway you report to the market is,
is destructive of the ability ofyour investors and your

(20:39):
prospective investors to take you seriously.
And it makes trying to build outa, an accurate valuation model
for this company very, very difficult.
I, I continue to be concerned that it's not possible to put
faith in some of the things thatthis company says, be it through

(21:02):
carelessness or be it through sheer happenstance.
And, and this is a problem that I think has plagued min res for
quite a while. I think this company suffers
from a discounted valuation in the market.

(21:22):
I think, I think the market builds in a discount as a result
of the complex vertically integrated structure with a fair
bit of, if not obfuscation, at least a lack of clarity
surrounding the company's operations.
And it's frustrating because this can be fixed very, very

(21:45):
easily. What do you think about that,
Trev? Are we on the same?
Page yeah, the company's got a history of minimal disclosure, I
think. Like it'd be the only company
where I still to this day don't quite know what material, like
any materiality threshold is. Like that just seems like a
subjective kind of term that could, could, could change.
But, you know, there's a very, avery kind of confidential

(22:08):
materiality threshold for a lot of disclosure.
I think there's been signs of improvement.
Like for example, the yeah, the latest quarterly did have
information relating to Onslow that was like more like
thoroughly than they had ever been in the past.
The Onslow site visit presentation included a level of
disclosure that had previously not been revealed on a lot of
different parts of the road. It also included a, a, you know,

(22:30):
a minimum guarantee in relation to the whole Rd. which was a
specific, you know, a specifically asked question in
the past, which was kind of sidestepped and had now been
revealed. Those were positive steps in
regards to the level of disclosure the market expects.
And I think why why is it important?
Because if, if, if management atMinarez has actually has a

(22:52):
positive differentiated view on the stock versus what the market
was pricing in, then then why not give the market information
exactly? I'd, I'd push back on the, the
notion that this is unique though.
I think this is super, super commonplace across the, the
resource landscape. And you're, yeah, there's plenty
of companies. Fortescue is one that comes to
mind and they're always stretched targets that they're

(23:13):
putting out there and they're, you know, look at like Iron
Bridge, for example, where you could go back 20 years and say
the same thing about Fortescue. But that's part of the the
culture of the business. Sure.
I there's documents that are said to be binding agreements
and they're just not at all the the the degree of materiality
that Onslow in particular has tothis company.
And the market's never seen a feasibility study from Minarez.

(23:35):
It's never yeah, like those those examples would be
Fortescue 20 years ago. Yeah.
And if you if you also just think like.
One of many kind of reporting gripes that I have, one of them
largely relates to, I don't think there's a single analyst
in Australia that can really tell you the value of CSI and

(23:57):
undoubtedly CSIS. The mining services businesses,
contracts that they have with the majors are incredibly
valuable and they have tremendous like earnings
resilience. They have tremendous ability to
roll over contracts repeatedly. There really isn't any other
competition in that space the contracts they have with the
majors. However, my gripe is that the
volumes attributed to those contracts with the majors are

(24:19):
grouped in with volumes. Servicing their own mines, the.
Servicing miners, you know, own JV mines and which, which are in
my view like they're cyclical operations that that that are
vulnerable to, to being turned off in a, in a, in a, in a down
market. Whereas the way that the mining
services contracts are portrayedto the market in general are
like these infrastructure assetsthat, you know, the cash flows

(24:42):
go on forever and ever. And to, to, to kind of hone in
on why I underlined that. It's like the last quarterly you
actually, you actually saw the, the way that earnings to the CSI
business can be hit when you know, when, when there's this
over reliance on 3rd party trucking and haulage at at

(25:02):
Onslow, like that's, that's at the detriment to the to the
earnings of CSI business. So all of that to say, no one
can tell can actually disaggregate the value of CSI
business if they don't know the disaggregation of of contracts
to min res's own minds and what they look like versus versus
third parties. Yeah.
And this ties back to my commentabout the discount the market

(25:25):
applies as a consequence of the complex and vertically
integrated structure that that min Res operates under.
Another point, a similar point is it's $2.00 a tonne margin
claim that seems to come up in respect of every single service
provided by CSI to every aspect of every business that IT
services. I mean that that doesn't make

(25:45):
any sense. No.
And and to the fact that you cansimplify CSI, what are they like
to everything simplifies to these units of these volumes,
these tonnage volumes. And so we just apply a dollar
per tonne to a volume of like toyour point, there's no way that,
you know, crushing volume is thesame as a haulage volume, like
the fundamentally very, very different margin types of

(26:06):
businesses. They get asked this question
every quarterly just about and they they always dodge it.
Yeah, well, that's what I'm herefor, to to push for more
transparency and respective min res disclosures.
Yeah. And there there have been like
for example, the latest reservesupdate on Onslow as well.
That was a big improvement. There was, you know, disclosure
about what future CapEx looks like, wash plans can be

(26:28):
required. Things like that, which which
you know, probably been part of the thinking for a long time
have have have finally started to come to the market in a more
more forthcoming Nana. I'd welcome, I welcome more of
more of that, like more, yeah, more of that transparency.
I think he's a positive. You know what mate, Minres have
pretty swish digs up at Onslow. I know you've seen the pictures,
right? I've seen them, mate, yes, they,

(26:50):
they talk about the great Kens board retreat, but they're not
the only ones building these flashy like, like, you know,
very, very accommodative camps for FIFO workers, mate, Grounded
construction group. They've been doing this for
years. They've, they've really brought
out some, some absolutely stunning camps for, for, for
FIFO workers across the state. You're on the money mate, and
there was a big announcement earlier this week or maybe late

(27:11):
last week, they're building a new accommodation set up in the
mighty S headland the. South Headland premium
accommodation is is coming, mate.
It's a $60 million camp, 297 rooms.
We're talking rec room, all of the perks.
This thing's going to be swish and special, and it's being
delivered, brought to everyone by Grounded.
It's true mate, and I think we need, really need to hammer this

(27:32):
point home. Why?
Why it's so important? Because you need to keep the
workers happy, right? High turnover, high costs and
that hits your productivity and that goes on and hits your
profitability. So if you wanna have.
This sounds like what Jack Tooley wrote in the AFI.
Just the. Other way tooley and it gets
research right? What do the workers want mate?
Comfortable rooms, good and quiet rooms, sounds spacious,

(27:52):
acoustics not asking for a lot. No, it's it's simple.
And you know what mate? Grounded gets workers and if
workers are happy, that helps the bottom line.
That's the message. Get in touch with Paul Natoli
and the team at Grounded. Get yourself a new accommodation
set up wherever you are in WA. Go grounded construction.
Go grounded. Yeah.
Well, actually on the theme of transparency, I don't think we

(28:14):
should move on to the actual operations until we spend a
little bit of time discussing our beloved CEO.
It might be easier if you give me your view on, on Chris
Ellison first, if you're willingto, and then perhaps I can, I
can comment on a phenomenon thatthat I'm wrestling with at the

(28:36):
moment in respect of, in respectof his effect upon this company.
Nah, you first. Well.
I, I have, I have nothing but positive words in respect of
Chris Ellison's talent as a mining executive.
And, and perhaps you and I disagree a little bit on this,
but I think he's a, he's a genuinely skilled operator.

(28:59):
And I think that he, he does getprojects done that wouldn't
otherwise get done and he gets projects done faster than other
people would be able to do them.He, he, he, he hustles harder
than any other mining executive I'm familiar with.
And I think for me, a lot of people like to spend a lot of

(29:20):
time trying to find the best asset on a piece of paper they
want the, the, the Holy Grail ofmining investing is, is, you
know, the highest grade or the largest ore body.
You've got institutional supportfrom the from JP Morgan.
You've got, you know, you've gotthe, you're going to end up

(29:41):
with, you've got the projected lowest costs on a unit basis and
then the project sits there for five years and four cap raisers
go through. And at the end of the day that
the prospect of outside shareholder returns despite the
strength of the asset minimum. On the other hand, you have a
company like or a person like Chris Ellison who he'll take A

(30:02):
and he'll take an asset that perhaps isn't on paper at the
highest quality quality asset inthe world.
And I'm thinking of something like in the lithium space,
something like Mount Marion or even Wodgina.
But he'll, he'll just start mining the bloody stuff and
he'll do it quickly and he'll cut costs where he can.

(30:23):
And for me, it is very easy to prioritize asset quality to the
detriment of to the detriment ofreturns investing in this space.
I will take a a second class asset with a first class
operator any day of the week over a first class asset with a

(30:44):
second class operator. That that's, that's the
foundation of my views about Chris Ellison's role as a
talented mining executive. But what I what I will say is
that he's put us all and by us all, I mean people who invest

(31:06):
their money in this company in a, in a fairly unfortunate
position. Because I mean, I've asked you
this Trev before, but I'll ask you again for the sake of your
listeners. If you were plopped into the CEO
seat tomorrow of Minres, what will be the first thing you do?
Well, first thing I'd do would be get the real numbers, yeah.
And then what were the second thing you do?
Second thing I do depends on what the real numbers are.

(31:28):
And if you had to have a guess of what you think the second
thing you do would be. Even what we know, well, it
depends. It totally depends like.
The answer I'm fishing for is a cap.
Raise. It would be a cap raise if if
you, if peak net debt on your numbers still has a like isn't
actually coming to call it, you know, the end of the end of this
calendar year or, or a bit later, yeah, then it would be a

(31:50):
cap raise. Yeah.
And that's what I think. That's what I think is happening
with peak net debt, although we can come back to that later.
I think any, any professional CEO in this company would do a
cap raise before the seat was worn.
And yet Chris has resisted pressure to do that for the last
18 months. His, his interests are aligned

(32:14):
with shareholders in a way that I think is unusual in this
space. But as a consequence of that, I
feel like I, and I've observed this phenomenon in my own mind.
I feel like we're all subject toa form of Stockholm syndrome.
It's, it's not normal that when I'm reading the AFR 7th

(32:38):
disclosure or seventh piece about some misconduct that
they're alleging Chris Ellison to have committed, it's not
normal that I'm, I'm reading that with one eye closed and,
and, and fighting the, the dissonance in my mind with every
second sentence trying to justify why, oh, this actually
isn't that big a deal. And come on, you know, this was
15 years ago. That's that's not a normal

(32:58):
pattern of thinking, and yet it's one that so many of us have
been forced into as a consequence of our desire to
avoid plainly destructive actions that would be taken by
anybody other than Chris. And this is the phenomenon that
gave us gave us the the truly paranormal, which was a standing

(33:19):
ovation at the AGM at which he was apologizing for historical
misconduct for what was played in the media as a tax evasion
scandal. But if you if you take the
allegations made in the AFR at face value and you assume they
are true and I have no other information, I have no
independent reason to think theyare true.

(33:39):
But assuming they are true, thiswas not just a tax evasion
scandal. This was the knowing misuse of
corporate funds for personal enrichment.
And so I, I think that I think that genuinely talented
individuals are often flawed. I think Chris Ellison is

(34:04):
evidence enough of that fact. But I do think something needs
to be done to, to try bring shareholders around to a more
comfortable position. I don't think it's sustainable
that big super funds view this company as uninvestable.
I don't think it's sustainable that there's lurking in the

(34:26):
background the constant danger of some new article in the AFR
alleging some manner of historical misconduct or some
manner of failure of disclosure.What I'm saying is if there's a
way to have the good without thebad, I think I think all of us

(34:50):
would be would be grateful for that opportunity.
I I've realized I'm I'm sort of monologuing now.
This is a no, no, no. It's a bugbear of mine, but.
It's a really interesting train of thought.
What, what, what is the, the sort of solution there or what,
what is the, the, the idea? Is it sustainable with Allison?
Well, I, I think what they should do is be is show that

(35:10):
they are committed to transparency by being far more
open about the operations of thecompany.
And you think they've had the first steps?
There, Yeah, I do. Yeah, I do.
I do. And I think the company should
be applauded for that. And and I don't, I don't think I
have as negative a view about the the intentionality of some

(35:34):
of this past conduct that that maybe you do, Trev.
I think that there's a decent chance a lot of this got caught
up. A lot of these disclosure or
mistakes of disclosure or absences of transparency in
their disclosures have been the consequence of past decisions,
not not recent deliberate decisions to mislead the market.
I don't think they've set out tomislead the market in any way,

(35:56):
but I do think that has been theeffect, if not the intention.
I I often think back like, you know, talking about Alison and
his role sort of running this company, you know, stewarding it
to the tremendous shareholder returns that we had from IPO to,
to recently and and subsequentlythe the erosion of shareholder

(36:19):
return in, in, in the recent years.
The I often think back to the question that was asked, not at
the last AGM, but the AGM beforethat.
A shareholder gets up and. I think I know where you're.
Going yeah, and and and asks, you know, how do you think about
hubris? It strikes me that a weakness of
yours or the companies might be.Do you remember his?
Response to that question because I remember the question

(36:40):
but I don't. Remember his yeah, he he hit
Chris handballed it to James requirements.
But I it was it was a funny kindof way.
It all evolved. I'm not entirely sure that Chris
knew what the definition of hubris was and that's why he
handballed it. But it was like regardless, it
seemed a a funny a funny interaction.
Like the body language was really intriguing and why, why I

(37:01):
still think about that is like IA 100% think hubris is, is the
biggest weakness of Chris is a capital allocator.
I think like that, that level of, of hubris.
It's like you, you roll in the dice, you roll in the dice, you
roll in the dice and there's a probability you'll be right.
And he's and he's, he's had a he's had a freaking hot streak.
He had a really hot streak. But if you keep kind of, you
know, rolling the lot on the next roll and at some point,

(37:24):
like, you know, you're not in charge of the macro, you can
look pretty silly on the capitalallocation front.
I do think a lot of the, the lithium investment like, yeah,
the, you know, the billion odd dollars that that went into
copper, lithium stocks and, and the like, I don't know how you
justify that from a capital allocation perspective.
And and yeah, how you kind of back solve the, the, the lithium

(37:47):
price assumptions that were so, so distinctly different from,
from the market. Like why, why did you deter from
consensus by, by such a, you know, like 2 standard deviations
in your, in your assumptions, when you're, when you're, when
you're bidding on these things, is is still a big question mark
to be had. Yeah, I, I, I tend to agree.

(38:08):
I think that I think that that success and this is not not the
sort of comment that I would usually think goes that is that
is apartment in respect of a company like Min Res.
But I do think that success can breed complacency.
And although Chris Ellison doesn't strike me as somebody
who's complacent, he does strikeme as somebody who who trusts

(38:34):
his gut more than perhaps it is prudent to do.
And I think he's been right in anumber of respects.
And and as I'm sure we'll get to, I think Onslow may well
prove him right on an enduring, on an enduring basis, but

(38:59):
there's too many unforced errorsthat are that I think by their
nature can be, can be solved. And I think it would, it would
redound to the company's benefitto do so.
And and I don't see any downside.
I don't believe that this company is hiding, hiding
information that would make the company re evaluate the entire

(39:20):
mining services business and come to the conclusion that this
is actually AC grade services business rather than the A+
grade that everybody has given it in the past.
I I don't think that's likely and and I don't agree with you,
Trev that their operations that they are servicing are marginal.
At least I don't agree that Onslow is a marginal operation.

(39:41):
So I think that the mining services business will go from
strength to strength over the next five years.
Let's take Marion and Wajna. Do you think that either of
those joint venture partners other than Minrez would like to
close those operations down? Well, I think you've reported
that they that Albemarle is desperate to to close down

(40:05):
Wajna. So I'll I'll take that at face
value. I don't think and Feng is is
keen to close down Marion. No, I think they're happy for
that to stay. Open, yeah, but I mean Minres
Minres would would keep Mount Marion running even with the

(40:25):
even with spot spot at at you know the US price for SE-6 of
women at 300 I would have thought I think that they're
banking on those mining servicesthat mining services revenue
stream. I do think they're, they're
probably telling the truth when they say that those operations
are cash flow positive from a min res point of view.

(40:47):
It's obviously not the JV is obviously not cash flow positive
at either of those lithium mines.
But I think, I think it's likelythat min res is happy to leave
them running at the at the current spot price because I
think they're either generating cash or sort of break even.

(41:08):
You, you're a bit more bearish on that side of things than I
am, I think or bearish is maybe not the right word.
You're a bit more negative on the the viability of those
operations at this price. Viability is an interesting one.
I, I think, I think I don't, yeah, I, I, I think like, OK, if
you look at the, the JVS, to thebest of my knowledge, both of

(41:29):
those JVS actually require, you know, mutual agreement or mutual
consent to actually like sees sees mining or sees operations.
I think, I think Min Res might be able to, to shut them down of
their own accord as the operators, as the operator of
each. I'm not sure about that, but I,
I certainly suspect, well, I think it's clear that the other

(41:52):
JV partner cannot unilaterally insist on care and maintenance.
Get ugly, you know, if, if, if it was like a more public kind
of display of wanting that operation to be shot, things get
ugly that could kind of like, you know, force that to happen.
I do think I don't, I like, you know, I see your analysis and
it's not like you're actually forecasting a positive free cash

(42:12):
flow from the lithium business. So I think when you when you
say, we probably set this up forthe views.
When you say you see my analysis, you're talking about
the financials that I've shared with you privately.
That's not not the financials. That's that's gonna give the
wrong impression to in cash flowforecast.
Yeah. Yeah, yeah.
My cash flow forecast I I. Think that's a fair?
Base case assumption like I don't I do think like those the

(42:33):
business current prices like allin mining services, everything.
I wouldn't be surprised if therewere you know operations from
time to time that actually like like bleeding cash.
But yeah, like TVA, there's also, you know what a well
reported agreement that Minres is looking to sell up to 49% of,

(42:53):
you know, Marion and, and and watching on whilst effectively
retaining kind of control via whatever that JV is in, in the
decision, decisions to be made in the respective minds.
But yeah, I think that would be a, a, a.
Tragic mistake. Everything's got a price.
Wow. I I think assuming.

(43:15):
Any realistic price, I think that would be a tragic mistake.
I I think what you've said is. Is is sort of bang on for for
the lithium business as we standand for the say one to two year
period, but like they're clearlynot running gangbusters.
What you know, we'll get to a point where more CapEx needs to
be kind of spent. So Marion too, like, you know,

(43:36):
like the. Float plant is a priority.
You've gone gone from like that,so that's an acceptable.
Sort of situation for the short to medium term, I think before a
real decision has to be made. Yeah, yeah.
I mean and again. This is a product of or.
This is somewhat a product of our uncertainty surrounding.
This is somewhat a product of the.

(43:57):
Absence of detail in. Some of the disclosures around
these operations, who knows whatCapEx has been deferred at what
you know, who knows whether they're high?
Grading it or not? Well, we can guess, but you

(44:17):
would think in in the current price environment they would
have to be, they would have to be high grading migrating it.
In fact, I think that that wouldbe almost prudent.
But the good news is. None of this matters.
If Onslow performs, then the lithium revenue is merely a drop

(44:37):
in the ocean compared to how much money they'll.
Make up. North.
So this is this is the point. I think of of contention and
importance to to peel out is howsuppose a, how you've come to
have a a very positive view and even medium term outlook on
Onslow's ability to generate real free cash flow and and B

(45:02):
how you consider like the the risks to that that view.
Yeah. And then we might differ yeah.
So I. Think, I'm not sure how well
your audience is likely to understand this operation, but
this project has been quite a long time in the making and I
think it's been a something of apassion project for Chris
Ellison. I think he a long time ago

(45:23):
identified these identified bid for Aquila back in 20.
I would say 1414 I think. So he identified these tenements
as capable of producing iron oreat A at a competitive price that
was. A view contrary.

(45:43):
To the views of most other market participants and I think
that was because of the distancethe tenements are from the
nearest deepwater port and the associated costs of running rail
from where these where these mines are, they're about 150
kilometers southeast of the portof Ashburton keep in.

(46:05):
Mind when? When Aquila.
Was ultimately taken over the successful bidders where you
know it was Bastille in consortium with Horizon rail
provider Horizon ultimately, youknow did after numerous studies
thought there was no potential for rail at this operation hence
why they were willing to kind offloat their their stake in

(46:26):
Aquila to Minrez for I think it was like $10 million wasn't very
much their stake in a color. Yeah, yeah, and and and Minrez.
Agreed in respect of the the feasibility of rail and so
instead the project is the the tenements are connected to the
port of Ashburton which is a which is not a a proper deep

(46:47):
water port via a Hall Rd. the highway.
To Hell has. Been the cause of so much of the
dramas running this company overthe last 12 months but then of
course even once you get there or to the port, it's.
It's it's. Loaded in an unconventional

(47:08):
manner because the port is not adeep water port, meaning that
proper Cape sized bolt carriers can't get all the way in.
Meaning that Minarez is instead loading shallow draft
transshippers, which are, in my view, a a, an incredible piece
of technology that I mean, transshippers are not new, but
Mina is. These transshippers are, from

(47:30):
everything I've heard and can see, remarkably, remarkably
efficient isn't the right word. Remarkably entrepreneurial, I
suppose. And then and then these
transshippers. Take the ore out to the waiting
bulk carriers offshore. Where are we going with this

(47:58):
discussion about Onslow? Sort of the background history.
Right from 10 years ago. Yeah, yeah, yeah, yeah, yeah.
So. And so the reason all of this is
interesting is, is interesting is because these these these
tenements were considered to contain stranded or in the sense
that it wouldn't have been economical to to transport them
by rail to a deep water port. Minres.

(48:20):
Has developed this project on the basis the most the most
recent updated disclosure assumes that.
They'll be. Mining and shipping the ore on a
free on board basis at 49 Aussieper ton.
So that number itself is lower than than you might have thought

(48:42):
it would be. Given given the situation that
this is, this is a fully. Ramped 35,000,000 ton per yeah,
yeah, yeah. Not including third party like
college, which they're heavily utilizing right now.
Yeah. And and the cost that they've
reported. So far they're not including
capitalized development costs, obviously.
So, so you know, you know, querywhere exactly this is going to

(49:03):
end up. But but that number's a little
bit deceptive, I think because that $4949 a tonne number is a
little bit deceptive because built into that is all of Min
Rez's margins on the mining services side of things.
And so that's $8 a tonne in margin for min res mining
services, but then there's also an $8 toll fee that's being paid

(49:27):
for every ton and half of that comes back to min res.
So there's $12.00 of margin in that $49.00 number for min res,
which means? If you.
If you. Strip that out and and.
This is, I suppose, a fairly crude way to look at it, But if
you strip 12 out of 49 and you end at a $37 a ton basis and you

(49:49):
can sort of you can imagine fromMinrez's point of view that
that's one way they see this project.
Suddenly this is a highly competitive bottom. 25%.
Quartile, you know, lower quartile iron ore project.
When have you ever seen? Companies like projected costs

(50:11):
from a feasibility stage or pre pre pre development stage match
your actuals in Australia mininghistory the last five years yeah
and they've been. Revised, these costs have been
revised upwards twice now, but Ido think that we'll we will have
a better understanding of what'shappening in terms of the cost

(50:33):
per tonne not in this coming quarterly, but probably in in
the next quarterly. I still don't think anyone.
Properly Understands. The cost?
Base at Onslow like there's not a good appreciation of what you
you know, costs are at Onslow and realistically what they
could get to well in terms of the.

(50:53):
Haulage so so this discussion generally relates to the haulage
the the discussion of relating to.
Cost at Onslow. Relates to the cost getting the
iron ore from the mine to the port.
I think I I don't think there's a whole lot of consternation
surrounding the actual mine operations themselves.
It seems pretty, pretty basic. It's low strip.

(51:17):
Do you have any views about the actual costs on the mining site?
I think naturally your your strip changes.
Over time, but yeah. And I, I, I obviously think that
yeah, your, your, your costs arealso going to change the
function of like where you've been like you mined the highest
grade of a deposit earlier. And, and by all accounts, you
can kind of see the deposits they bring into the mix are,

(51:38):
are, are kind of optimizing for high grade, low impurities, but
that does deplete relatively kind of quickly.
And then you then sure, but but the other side of.
Things scale allows you to to shrink your overall cost basis
because because of the nature ofscale, you have fixed costs in.
In some respects, but. You also have costs and not

(52:00):
fixed, so if they ramp this beyond 35,000,000 tons per
annum. I think it's, I think it's, I
don't think it's. Unreasonable to assume that that
cost basis will come down you. You you think the cost basis?
Long term will actually be below49.
Aussie. I'm not sure but.
There's a big question mark surrounding the haulage side of

(52:22):
things for me. But I, I don't think it's fair
to to describe this as a marginal operation.
I think that this is, I think this is competitively
positioned, yeah. I think that it's competitively
positioned. Subject to what happens with
haulage. And that's a big question mark

(52:44):
for me. Yeah.
Yeah. And the way to think about, so
you look at $49.00 a tonne, the the, the Onslow site visit
presentation, they broke it up into like 3 components, $14.00
per tonne for what they call other mining costs.
Then there's the $27.00 per tonne, which is the services
you're talking about that's crushing haulage, port handling

(53:07):
and trans and trans shipping. So there's four things people
are assuming there's $2.00 to each of those category per
tonne. Well, the company has said
there's $2.00 to. Each of those categories per
tonne and then and then there's the $8.
Our Rd. trust, yeah, the the whole Rd. like fee so, but look
at the the $27.00 per ton bit onthe services front.
Now that's kind of like a, a contractual price to deliver to

(53:31):
the to Mineco at in Rez's services effectively.
So people think that there's $8 a ton of margin there.
But what, what came out of the last quarterly was, was a, a,
there's a clear example of, well, this mining CSI has to
wear margin erosion because, because they've, they've
guaranteed the price of these services to Mineco.

(53:53):
And at the moment they're relying on 3rd party contractors
for haulage, which is basically,you know, clearly, clearly
meaning there's not $8 a tonne of, of margin there.
Yeah, I I tried to do some digging.
On on this side of things in particular, because I was
concerned that the whole the situation might make this
uneconomical or significantly reduce the economics of it on an

(54:15):
on an ongoing basis. If the the road was to to not be
up, not to be built to spec basically.
And I think that to the best of so far as I could see.
If the, if the. Min Res triples are not
autonomous. They, the Min Res thinks that

(54:38):
they will cost them about $0.06 per tonne per kilometer.
I I assumed 7 cents. I had previously assumed $0.07
per ton per ton per kilometer. The contractor trucks are double
that, so double that. That's $0.06 per ton per
kilometer. They, they cost them about $0.12
per ton per kilometer. But the company thinks that if

(54:59):
they go autonomous, that $0.06 per ton per kilometer can be
brought down to three to around $0.03 per ton per kilometer.
And that's competitive with withrail.
I think that may. Be a little bit ambitious, but
even if. Even if it's in the.

(55:20):
Ballpark, then, then that. Do you think that's 6?
Cents per. TKM is is assuming like the full
330 payload and cycle times thatare, you know, average cycles
per day, which are still kind ofin the ambitious range of
things. I'm not sure whether the.
The average cycles per day are in the ambitious range of things

(55:42):
to that's something else I've been trying to look into.
And I think that they're they'reprobably more likely to achieve
their cycle times than they are to achieve their full full load
projections. I think that what's likely to
occur is that they're going to run their triples at reduced
capacity. I think that's, I think that's
basically inevitable actually atleast for the foresee or not

(56:06):
foreseeable future, at least forthe medium term.
Now that may flow through and push that that cost up a little
bit. But I mean, again, part of this
is a function of, of a lack of disclosure around exactly how

(56:26):
they're what, what they're goingto do with these trucks going
forward. But if we assume that they're
loaded to 300 tons, which is down from 330, then I think that
that's that $0.06 per ton per kilometer is probably not
unrealistic from everything I'llbe able to find online.
Right here's. Yeah.

(56:49):
Here's probably where I have a adifferent risk outlook on on the
project's kind of capability to sustainably deliver, kind of
name plate and sustainably deliver is the the the keyword
there? The the moment you.
The moment you you get rid of your your contractor road

(57:13):
trains, well, the contractor Rd.trains are actually not
operating on the whole Rd. They're taking a different path.
They're using for for some of it, at least the access.
Road for a bit and then they're.And then they're using public,
the public highway. So it's a longer route, it's a
smaller, smaller train. So if you remove the contractor
trucks and you suddenly have a an enhanced reliance on the a

(57:34):
combination of min raises, jumbos, plus there might be
other size trucks that are also operating on the whole Rd.
I I think you're, you know, depending on what you're
actually loading these trucks atyou're you're you're coming
probably coming into a, a, a pretty dicey position in with
the extent to which your whole Rd. is kind of capable of of

(57:56):
that load in an unproven way. Yeah, you're talking about the
actual. Underlying structure of the
whole Rd. I, I I am.
Yeah, yeah. But this is an unknown.
This is there is. I have found absolutely.
No, no reliable way to work out what's going to happen with this

(58:21):
road. There are people who say that
the the the actual composition of the base course is is
necessarily stuffed as a consequence of a lack of
available material when the roadwas built.
On the other hand, the company seems to be the view that the
main problem was. Was water ingress.

(58:44):
It wasn't the actual underlying composition of the road and
therefore as folding it and playing with the with the
shoulders a little bit, extending it, being more careful
around water will deal with all these problems, both of those
things that can be related. Because yeah, of course water is
the enemy of roads. Like when it gets into the like

(59:05):
the sub base, then yeah, your chemical bonding and everything
can be pretty compromised. And yeah, when you buy.
The stock, how do you get comfortable with that then?
Or do you think that's somethingthat might play out in 18 plus
months and that's not in my timehorizon or what?
Well, yeah, it's very difficult to know.
I think that over the next six months, the company.

(59:27):
Will get a better idea. Of what's going to happen with
the road it's been it's been reported that they're they're
monitoring it quite carefully they're using GPR ground
penetrating radar to try and to try and keep an eye on any
movement subsurface but. It's.

(59:49):
What they're doing now shows that the road can take.
Say 260 tons. In on these trailers, yes, which
is a prudent. Thing and just because it can
take that much right now it doesn't mean that come January,
January, February, it'll it'll still be rosy.

(01:00:10):
Yeah, yeah, yeah, and and and. The unsatisfactory answer to all
of this may be that we just needto wait and see, but I think
that the the risks are weighted to the upside in respect of the
company's operations at Onslow. Generally, I think that I don't,
I think that the the dispute between the initial Rd.

(01:00:33):
contractor and minerals has been, has been overplayed a
little bit in the media. I think that there were some
sort of that I think, I'm not sure if it was the fin review of
the Australian who reported on this, but there was some
innuendo around the quality of the actual Rd. composition.
But I think where you to ask thepeople who built the road, I
think they would say, actually we built a, we built a road, we

(01:00:57):
built a really good Rd. The this this thing.
I don't think we've ever probably hashed out on the
podcast. Yeah.
Why the maybe? Some of the intuitive science.
Behind why the road is such an important kind of piece of
things. And in in civil construction, in

(01:01:18):
Rd. design, there's this thing called the 4th power law, 4th
power law of Rd. design. What is the 4th power law?
Well, the 4th power law. I know what it looks like.
Yeah. Yeah.
It looks like. This you can picture an
exponential curve to the power of four.
Well, that's that's the relationship between the maximum
axle weight of vehicles on a on a road.

(01:01:39):
Well, the the change in that is,is directly proportional to the
well. The road damage is directly
proportional to the 4th power ofthe maximum maximum load.
And So what what you're saying is?
Small changes in load can have outsized effects.
Tremendously outsized if. You just take a look at a
typical standard Rd. train maximum Max load is is is is 8.

(01:02:03):
Now min res ones are 20. These are public public numbers.
That's that's 2 1/2 times the Max the the axle load.
But your your your effect on on road damage is proportional to
the to the 4th power of of 2.5. So it suddenly doesn't look
like. A difference between 8 and 20?
It looks like a difference between like 40 ish.

(01:02:26):
Times the the road damage you'd expect of a of a, of a road that
is, is yeah, that's, that's the intuition behind like why this
road is matters a lot. And this the people that built
the road, I'm sure like they, they did the numbers.
They they know this stuff. They built they built roads
before and they would have builtit to the to spec, but the to to
to hope be able to manage this in the way they could.

(01:02:49):
Now it doesn't. What what I do mean though, is
like if, if the road would were designed to handle a maximum
load of of of 20, of 20, maximummaximum load of 20, but they
were overloading in the early days, for example, to 24 or 25.
Or maybe maybe the distribution of the actuals across the
vehicles wasn't probably like understood.

(01:03:11):
There was some variability that has a massive impact on kind of
what you can expect to happen onthe road.
And the other, the other workingassumption I have when thinking
about the risks of the road is the way I think about a road is
you. Will you will see Rd.
Failure in the first, you know, couple of months, if it, if, if
there were, you know, things that were where, if there were

(01:03:35):
design components were not up toscratch.
And you will know in the first couple of months, a properly
built Rd. will be durable for 50years and you'll never have to
do any maintenance on that. So my, my working assumption it
like you think, you think of a, like freeways in, in the United
States, they're loud as all hellor whatever.
But those things they're, they're basically like built
with sufficient characteristics to, to have, you know, your

(01:03:56):
certain thickness of Rd. base and all that kind of stuff, all
those materials, yada, yada, so that they can endure without
maintenance for, for the longestperiod of time to think of, you
know, your airport tarmacs, those sorts of things are the
same. But if it's not built to the
right kind of specs for what thelow ultimate load's going to be,
you'll see that very quickly. And I think we did see that very

(01:04:18):
quickly with minres. And my working assumption is
that it's not a, it's not necessarily going to be a case
that you can remediate it with some cement filling asphalt and
it's going to be durable again for, for 10 years.
In fact, like I'm, I'm very concerned about when you have
your summer months, January, February, it's going to be very

(01:04:40):
hot. That's when the road's going to
be under a lot of stress. It's also going to be very wet.
And you know, depending how muchcement has kind of been put in
to stabilize the road, your riskof different types of risks like
block failure. Now all of that to say, like.
The road remains a key risk. What it can really credibly do

(01:05:00):
remains a key risk. All that to say, but I'm I'm
amazed that they're achieving anannualized rate of 35,000,000
tons per annum right now with the reliance on contractor
tracks and using kind of 1/2 effectively half a whole Rd.
because they're they're doing repairs along it at the moment.
It's it's incredible. It's it's.
It's part of the Chris Ellison magic.
Well, the question to figure. Out is like and we know that the

(01:05:23):
repairs of the whole Rd. all of that costs is going to be worn
by Minrez. So that's 100% Minrez's, you
know, what is a realistic numberfor the annualized?
Like if you look at if you look at what they're getting for
their share of the, the whole Rd., the 50%, it's like 150
million bucks a year, right? They're spending twice that
right now just in, in repair of the whole Rd. this year.

(01:05:45):
So what's your, what's your, what should be your annualized
number of like your annualized cap expectation for Rd.
maintenance? I'm sure it's not $300 million.
I'm sure it's less than that because they're, they're doing
yeah, faulty and everything. But but that's a that that kind
of cuts into your margins pretty, pretty clearly in my
opinion. And if it also inhibits your
maximum allowable volumes, whichit obviously, you know,

(01:06:08):
obviously, what if you're havingmore, more trucks, you can't
just keep adding trucks and trucks to expand.
There's some maximum trucks and some maximum loading that this
road is going to be able to handle on a durable basis.
And that was clearly exceeded beforehand.
Yeah, it's interesting that there's been no.
Talk of long term reliance upon contractor trucks, yeah,

(01:06:28):
because. You know will.
We will. We see a point where they say
for the next 6 months we're onlywilling to run X amount of tons
along the whole Rd. We need it, we need it, we need
a year observation. So we will make up the shortfall
using the contractor accident and they've shown that they can
do that. I think that that would place

(01:06:51):
upwards pressure on, on well downwards pressure on min res's
revenue, upwards pressure on thecosts involved in getting this
stuff to port, getting this order port in the in the
presentation that accompanied the mine visit.
I think there's a line in there where they say that once the
road is repaired, there'll be essentially 0 sustaining CapEx.

(01:07:15):
That's a that's a phenomenal line.
Yeah. Yeah, that it's not.
So much that that I mean that strikes.
Me as perfectly realistic if everything goes to plan that
strikes me as. Incredibly unrealistic.
Given the the the road needed repairs.
Yeah, well, that's what I mean. That's what I mean.
So. So what what I'm saying is

(01:07:37):
what's the basis for staying forsaying there will be 0
sustaining CapEx in respect to the road unless they are very
confident that these Rd. repairshave solved this problem.
I I think like. The company does have a, a
history of disappointing on CapEx expectations from a
sustaining perspective. Like I don't, you know, and
you've spoken about, about that too, like I don't, I don't look

(01:07:59):
at that number. I think that number, the
expectation maybe is guidance tohopefully alleviate, you know,
the market that, you know, things are going to be OK for a
balance sheet perspective. But like, my thinking is that
the, the whole, the whole Rd. assuming there's going to be 0
maintenance CapEx on that whole Rd. after these repairs.
Like I think it's kind of a wacky assumption to to
realistically have given, you know, the, the, the reality of

(01:08:22):
how a bit of rain transpired. Yeah.
And if the sub base is compromised or all of that kind
of stuff, throw it out and startagain.
I'm not a civil engineer, I'm not an expert on this stuff.
But the, you know, like you, I don't think you have to be too
intuitively kind of recognize the risks with assuming A0
maintenance CapEx. We should probably.

(01:08:44):
Then mention the. The upside risks which is that
some of these problems can be alleviated or at least fudged if
you if you push the project beyond 35,000,000 tons per
annum. If you're able to suppose that
they they covered the increased cost associated with the road

(01:09:06):
with increased shipments of I know I'm I'm pretty bullish on
the capacity of this project going forward.
I think that putting the road toone side, they've demonstrated
or they are in the process of demonstrating that they can push

(01:09:26):
everything else beyond 35,000,000 tons per annum.
And my read on what's happening on the port side of things is
that the project is performing phenomenally in.
Terms of what CapEx would be? Required to push the project
beyond 35,000,000 tons per annum.
We know that they've already ordered two more transshippers

(01:09:48):
and they're arriving next year taking it up to seven.
There, there. Everything I have seen and have
heard suggests that five transshippers operating at
capacity is alone enough to get this project to name play it or
beyond. The question then comes, can
they? Can they build?

(01:10:10):
Out to 4040. 550,000,000 tons per annum.
And go from there. My view is that the.
Market is is is overestimating how much it.
Will cost to push. Beyond 35,000,000 tons per annum
or is perhaps underestimating the likelihood of that occurring

(01:10:31):
at all. And I think that I think that
they've shown were it not. For problems with the.
Road, you know, assume the road works perfectly.
I think they've shown that with 7 transshippers in operation and
some work actually at the port concerning the, the, the channel

(01:10:55):
that the transshippers used to come in to shore to be loaded.
I think they'll be able to push this well beyond 35,000,000 tons
per just on that, on that Channel point.
I think that what's, what's the only real bottleneck at the port
at the moment is that they're sharing one single quite narrow

(01:11:19):
channel with, with Shep. So Shep, Chevron has the
Wheatstone LNG project basicallyon top of where minerals is
operating at the port of Ashburn.
And they're right next to each other.
And that means that almost once a day Chevron brings in an LNG
tanker or takes an LNG taker outand, and Chevron has priority

(01:11:40):
over the shipping of the maritime operations when that's
occurring. And so it seems that miners
can't actually use can't, can't use their transshippers while
that's occurring. They can't, they can't bring
them into load or take them out from shore to the carriers.
So my understanding is it may bepossible to come up with a

(01:12:01):
workaround for this problem witha bit of bit of dredging.
I was, I was actually told that this this was not from somebody
who works at miners, but from somebody who's to understand
what's going on there. I was told that it may not be
expensive at all to dredge or towiden that Channel such that
this is no longer an issue. If that's the case, then I think

(01:12:24):
that the one impediment to shipping occurring beyond
35,000,000 tons per annum could be removed.
Does transpire then? Then we're back at the road.
We're back at the road being thethe bottleneck.
Do you have a view as to to where this project can go beyond

(01:12:44):
35,000,000 tons per minute? Let's get to let's get to 35 for
a year first. Yeah, I like, I, I, I'm
intrigued by the opportunity forexpansion.
I think like the upside's an interesting case to explore.
I think there was actually a brief window, I want to say it

(01:13:04):
was in 2024 where Chris was telling the market this is going
to be 50 million tons per annum.And then he also guided CapEx
that was kind of sharply higher than expectations and there was
a port kind of allowance that that was the the main factor for
the huge increase in expected kind of CapEx.
So I challenge the proposition that the dredging is a cheap
thing to do. I think it's quite an expensive

(01:13:26):
endeavour. I think like the discussion of
the expansion comes with it likea very uncertain like like how
they're going to fund this, right?
Like you know so well, I'm goingto talk about expansion, but the
first thing you think of is, well, that's a lot of CapEx and
like the, the balance sheet's already stressed.
So where's the free cash flow to, to, to fund this expansion?

(01:13:48):
That's got to it's got to be proven to be free cash
generative substantially before you before the market is even
told about expansion in my opinion, like because.
Expansion comes with. CapEx, well, Speaking of,
Speaking of. The need for money to fund CapEx
and the balance sheet, yeah. Do you think they should do
nothing right now, focus on operations and then earn their

(01:14:11):
way out? I don't like I, I.
If you looked at the last quarter, the that, that you
know, cash at bank was like 4400million bucks.
They had had an $800 million revolver which was undrawn,
which they, they, they could draw.
I don't have any reason to believe that they can't draw the

(01:14:31):
revolver, although I do think there's some uncertainty in the
market about that. Like I I'll believe them at face
value that they can't draw the revolver for like the purpose of
a hypothetical. Let's assume that they can't
draw the revolver. If $400 million is a completely
insufficient like level of liquidity for the nature of this
business, I think they would have, they would have had to.
Act before now if they weren't able to draw on the well, they.

(01:14:52):
They're they're absolutely running a sale process for up to
49% of the lithium business. So they are acting like and I
think like they're whether they pull the trigger on that or not
is TBA, but they are doing all things to act on adding more
liquidity to the business. I find that to be a very
curious. Very curious decision if that's
what they think is their most favoured response, their most

(01:15:16):
favoured method of of raising money.
It doesn't make sense to me. Actually, it doesn't make any
sense at all. I think that first thing first,
are they surrendering the miningservices contracts over these
49% would mean that they. Still control the JV?
Well then, who's going to pay them?
The money that these assets are worth, you run a process to find

(01:15:40):
out. I don't know.
It's insanity. I don't know.
You would have to think. They would sound.
Out the bondholders and see whatneeds to be done to you know.
Reissue. Bonds and and roll the roll the
debt right and that would dictate how a lot of cut
conversations and levers which levers are pulled yeah, it

(01:16:02):
depends in some. Respect.
What what happens with interest rates in the United States will
be important, but but why why turn to your lithium assets that
are currently being valued in a.Market or on?
On. A basis, you know, if you value
them on a on a NPV basis, they're worth nothing.

(01:16:26):
But I think quite clearly they're not.
They're not going. To sell them?
No, if they're not, it's only if.
They get a a price. Commensurate they're they're an
expensive. Option like I feel like it's my
expensive, I mean, it's like it's a valuable option on on
lithium prices. How I view their like their
their lithium business. I think they could, I think they
could get, you know, a reasonable amount of upfront
kind of cash depending like curious you see how they might
structure something curious you see what type of buyers there

(01:16:47):
could be. You know, I'd also be surprised
if the buyers didn't leaders didn't have a view on like
they'd absolutely want the marketing rights with volumes.
I'm sure the mining services contracts is a pretty
interesting part of the puzzle because I'm, I'm, I'm sure
Monrez would be unwilling to to compromise on them, but that
that that could be a pretty sticky point of contention.

(01:17:08):
But that's what I mean. And suddenly this looks.
Like a for sale, if they're compromising, of course it's a
force. Like of course.
It's why start with the lithium.What?
What else is what? Else, I mean you've got 3
interesting levers. As well in an ideal world, they
get half a billion dollars from hitting the target on the road,
200 million and another 300 fromthe energy assets over the next
year and then monetizing the theloan yeah, would be the carry

(01:17:33):
loan, yeah. The carry loan which is sort of.
790 As of last reporting, the. The carry loan's an interesting
one and the carry loan's not going to lie about the the cash
dynamics at at at Onslow, but but.
Yeah. So that's a.
Separate point. But the the antecedent point is

(01:17:57):
why don't they just sell the carry line?
They can, I think that. They've sounded that option out
historically like, and it's an expensive endeavour like, you
know you're you're forgoing a pretty substantial, you know,
risk free rate for for for enacting on that transaction.
Well, but is it a risk free right?

(01:18:18):
Well, yeah, precisely in there min res's view it is right.
So if if you had to transact on that and so yeah, bewilders mean
that they. Haven't already done this.
I would have thought that would be that would be the the obvious
option and I can't imagine that I mean and this is here.
This is where I'm I'm desperately struggling to avoid
falsifying my thesis as to the viability of oh as to the not

(01:18:42):
viability as to the as to the nature of the ONS operations.
Because the fact that they haven't sold this already is
perhaps a hint that that Onzo may not be viewed as favourably
by. Other market participants as.
As the company user and I'd flipit I'd flip it I'd.
Say, I'd try and argue that maybe the market has a more

(01:19:04):
maybe min res now has a more somber view on lithium outlook
than they historically did rightnow.
If, if, if minres has internallycome to the view that look, we
don't actually see it like too much upside on the lithium price
for a long period of Fair numberof years ahead here.
And that's kind of consensus outlook.

(01:19:24):
Well, if you can like you say ifthe MPV is 0, maybe you can
actually sell it for 49% for youknow up to a billion dollars.
And that's, that's a lot of money for something with MPV is
0. But you've kept the mining
services contract and maybe you've even kept some some
marketing volumes like and you've kept some equity upside
because you still earn a fair bit like I think I think that's
a pretty prudent like transaction to have.

(01:19:46):
I think the stock would RIP if they did it because they
alleviate a lot of liquidity concerns in the process you are
building. Into that a very bearish outlook
on lithium over the next five years.
Not even. Like not even.
Bearish. I think it's just I got it.
Who knows? Like I'm not kind of in the
business of predicting commodityprices and I'm certainly always

(01:20:09):
cautious of when a mining company predicts commodity
prices. I I yeah, I think, I think.
The value that min red. Sees in those assets is is
increasingly more towards the mining services contracts
attached to those assets rather than the equity and in the in in
the actual, you know line. The other option is to.

(01:20:32):
Sell the other half of the road.That that bit doesn't.
Makes sense to me. I certainly don't think you'd
get. Anything more than what you got
for the first half? I saw that there was some
amusing speculation in The Australian that they would get a
hefty control, that the that if they sold the other half to for
Morgan Stanley, Morgan Stanley would pay a hefty control
premium. Yeah, which makes absolutely no

(01:20:54):
sense. To me wonder where the.
Leak came from that is. Just.
A puzzling thought after what has happened since Morgan
Stanley bought the 49%. Yeah, yeah.
But. You have to remember that, that
that what they've sold is not, you know, Morgan Stanley isn't
on the hook for half of the repairs to the road, correct,

(01:21:15):
But Morgan. Stanley don't get paid if Minrez
fails. The mind doesn't work.
I mean if the entire company. Fails if if if.
Onslow doesn't work right. I mean, it still gets but
Morgan. Stanley still gets but from
what? Well, yeah, So you're saying so.
Yeah, sure. So you're saying the downside
case is not like an? Infrastructure asset, right,
like that thing's yeah, I, I, I just think that flexing the

(01:21:37):
downside case from an infrastructure perspective has
become increasingly a known thing in the market.
Yeah, I'd be amazed if it, you know, if investment committee
kind of approved a sale there ata price comparable to what it
was in the past. Yeah, I tend to agree, but.
I still would have thought that it would be possible to just

(01:21:58):
sell. I still would have preferred if
I if I'm in the position of minerals, I still would prefer
to sell the other half of that future revenue stream for the
same reason that I prefer to sell the carry loan.
However, the. The.
The. Negative view about.

(01:22:18):
Either of those two assets, if we call them assets may be the
same thing is what I'm saying, which may be why they're turning
to lithium, but. What I suspect the company would
prefer to do. Is sell nothing.
I think. I think.
The company's strong preference is to sell nothing.

(01:22:41):
Do you think that they're. You know, the businesses
liquidity needs are sufficient to warrant selling nothing like
you alluded to the fact that youthink Max net debt actually
doesn't come until yeah, end of this calendar year.
Yeah, Yeah. So it's actually.
Justified just. On that point, I think that.
Net debt when it's just got, when it's revealed Wednesday in

(01:23:04):
the quarterly, I think that there's a very real chance it
stays about where it was last quarterly.
I think there are some the dissidents in the market who
think that it's going to start coming down.
I think that there's a very realchance that stays about the
same. Although what happens with the
currency may may mean that thereis a revision downward sort of
on paper. That's not, it's not.

(01:23:26):
That doesn't tell you anything about what's happening in terms
of the cash coming in and out ofthe business, but.
Basically the reason I think. That it's unlikely to have
changed is because I think that we've had an extra 3 months of
of spending, of elevated spending required at Onslow.
I think that three months from now that number, that number

(01:23:47):
will start coming down 3 months from from Wednesday.
I think we'll be, I think it will be revealed to the market
that that number has started to come down and the.
The road is supposedly like supposed to be repaired by end
of September. I I think it the roads.
Likely to be repaired by by earlier than that, yeah, and.

(01:24:10):
Yeah, you. Think that the Max debt
therefore will coincide with thethe the CapEx kind of you know
seizing well reparation CapEx seizing well, yes, but more.
Importantly, proper earnings from Onslow, repayment of the

(01:24:31):
carry loan and and and proper free cash flow the the carry
loan makes a difference. The $200 million contingent
contingent payment is expected, of course, of course, but you
have to remember, and this is a.Mistake that a lot of people
have made with this company overthe last six months.
Despite the failures of disclosure and despite all the
drama that's been going on, we can actually get our hands

(01:24:53):
around basic. What's the word?
I'm searching for critical claims about the nature of these
operations. We can see how much iron ore is
being exported by this company. The numbers don't lie in that
respect. And there's been a dramatic step

(01:25:14):
up in exports over the last 12 weeks so that you know that that
ore has been paid for some of itin advance, but but some of it's
been paid for now, I think. I do think the market is
overlooking how much cash Onzo will be generating for this
business over the next 12 monthsWhat's the assuming that the

(01:25:39):
road holds up you know what's the what's the hole in that
thesis key risk is iron or practice yeah of.
Course, of course. But yeah, I.
I don't like. I I'd be willing to wager the
costs are substantially higher than 49 bucks when everything's
said and done. I just, yeah, like, like, kudos
to them if they can execute that.
But I just think the reality of delivering any project is is one

(01:26:03):
of us. Surprised the upside in.
A very inordinate number of waysthat are originally maybe not
expected and kind of been. Raised they have the track.
Record of delivering projects. This is completely different to
any project they've ever delivered before.
Like this is enormous. This is not.
This is not, you know. Cool, you know where they had.

(01:26:26):
To build the Carina Rd. This is a, a transformative
project. It's, it's, it's, it's, it's,
it's crazy that they built what they did in the time frame that
they did. It's incredible.
It is like, you know. Like I'm not sure.
Another team could have done that, but I think that that
comes with a lot of risks on on on costs, a lot of pressure to
meet certain cost targets and and that can come out in a

(01:26:47):
variety of ways. All of that to say, I don't
think the costs are properly understood.
I certainly don't have a firm grip of what the unit costs are
going to be. You think that 49's reasonable?
I think 49's unreasonable. Now, all I have to say is, do I
think it's an asset that is vulnerable to a downturn in the
iron ore market? I do like, is iron ore being
very resilient right now? Absolutely.

(01:27:08):
Could they absolutely just milk the cow for a year?
And this, like, the debt's not aconcern at all because iron ore
prices are elevated 100 percent,100%.
Yeah, I'll make a number of. Comments about that, I think
that mean that the indebted position of Min Res is is
confusing our understanding of the cost profile of this

(01:27:28):
project. A if.
Those costs are roughly right. Then it's a, this is a, this is
a low cost iron ore project that's you know, strip out some
of the min res margin and convert it to US on AUS dollar
cost basis and compare that to FMGS costs.
I disagree. Yeah, I mean, like for one, they

(01:27:50):
don't actually convert the carnage reduced when they show
the cost curve. It's like presented on A on a D.
Mt basis instead of a WM. T basis, it's like, you know,
there's a there's a number of you know, every cost curves
forward for a variety of reasons, but this is this is but
it's it's not a marginal. Operation.

(01:28:11):
How do you know that? Like the carry loan's still
going up. It's certainly been marginal
today. On a fully red basis like I.
Like your points received, thereshould be a line of sight to
especially like on on on prices today.
Like, you know, it'd be, I'd be amazed if they didn't didn't
make free cash, you know, but but I don't think the market
really knows what unit costs aregoing to be.

(01:28:32):
I think the impact of third party like trucks is is poorly
understood. I disagree with your numbers on
TKMS, both six cents and 12 cents for, for both cases.
And I, I, I think they have to, I think This is why the stock is
priced where it is, where you think there's an opportunity
because, you know, like people like me are skeptical and I

(01:28:52):
think they have to prove the market wrong, right?
They have to prove not just for next three months or next six
months. I think they have to, they have
to prove themselves at this timenext year.
There's been a continuity of, ofdelivery and an absence of, of,
of, of anomalies before like it's, you know, that the market
can believe this, this project in its entirety.
Yeah, I do think that there's a risk.

(01:29:13):
That the reported costs in each quarterly over the last, well,
let's just say the last quarterly, this quarterly and
the coming quarterly misunderstood due to the the the
loss of margin for the the mining services business.
I think that Minres is wearing costs that would otherwise make

(01:29:37):
that number that was last reported at, say, 58, higher.
Than higher than 50. Eight, yeah, and and in your.
Like in your experience, following the company when they
have typically suggested capitalcosts, for example, might be a
certain amount, have they had a tendency to be larger or smaller
or on, on, you know, on par withyour expectations?

(01:29:58):
It's it's it's obvious that the I just I would struggle to to
believe the 49. I also struggle to believe
there's very maintenance cutbacks on the road.
And it doesn't mean that the cost can't go up, but it's still
have a project with sufficient margin to repack their debt,
especially when I was 105 US right now, like that's a, it's a
very healthy iron ore environment for them to be

(01:30:18):
delivering this project in. But but I don't think it's a
project that is, is is definitionally resilient to your
worst case iron ore market. No, perhaps not your worst case.
Iron ore market. But it's easy to lose sight of
just what has been accomplished here, given the the this the few

(01:30:39):
but fairly calamitous problems that that have been run into.
You'd lose trust as an investor.Yeah, yeah.
Of course, of course, but but. I mean, and this is what is
truly crazy making about all this, because if they had just
been completely honest upfront about everything that was that
that had worked and hadn't worked.
If they had said in January whenthis weather happened, look, we

(01:31:00):
think we're going to have to redo the entire Rd. from from
start to finish and it's going to cost an extra 250 mil, 300
mil. If that hadn't happened and
instead. What had happened was initially
they had just said the road is going to cost 300 million more
than they did say it was going to cost.
Everyone would say, well, whatever, this is still an
incredible project of incrediblescale coming in at at remarkable

(01:31:25):
on a remarkable cost level. So it's very easy to get caught
up in the, in the, in the day-to-day errors of disclosures
and the day-to-day operational mishaps.
But, but just take a step back and look at what, what this
project looks like. That point matters.
A. Lot I've got no doubt that like

(01:31:48):
part of the culture of minres that has created the, you know,
the very value generative business that it has been for a
long period of time comes from this.
This kind of just like attitude of making shit happen on a low
budget, you know, in a in a crazy period of time with
people, you know, breaking all sorts of records, doing things.
But I thought you were going to say breaking all sorts of rules.

(01:32:09):
For it, but it's that mentality.That like may also compromise
something that is a key criticalpiece of infrastructure
underpinning it like they did they deliver the, the the road
with the same appreciation for, you know, critical delivery that
this is or, or was that same mentality of kind of, you know,
build it on a much tighter budget than maybe was was

(01:32:31):
desired by some, some people. Maybe, you know, with, with
certain parameters or standards kind of tightened here and there
with with assumptions that may may be optimistic.
If you do that, if that's the mentality and it's the the
typical mentality that also creates value, well, then maybe
you've also made yourself vulnerable.
That's the that's that's how I see the risks associated

(01:32:52):
associated with this infrastructure.
There's no doubt that there. That the the tsunami gathering,
gathering force in the background is the debt.
And that were you to take away this debt, there would be, there
would be no doubt that that thiscompany had had a lot going for
it. Has the timing being.

(01:33:15):
Unfortunate in terms of what's happened with the debt, the.
Lithium Market. The iron ore market to some
extent, yes, but but I don't think that this project has been
appreciated for what it is. And the meme, the meme out there
that Onslow is a company maker, it's going to transform this

(01:33:38):
company. Well, so far as I can tell,
that's not just a meme. It is a genuine.
A genuinely transformational project and I don't think we
should look through that on the basis that on the basis that it
has some problems, it's unconventional and involves told
iron ore tons, which, you know, hardly, hardly screams low cost

(01:34:02):
and things have gone wrong with the whole Rd.
I think that I think that the problems are not insurmountable.
There's there's no evidence thatthe problems with the road at
this stage are insurmountable. And if they're not, I think that
the the valuation that has been given to this company by the
market at the moment makes makesvery little sense.

(01:34:23):
At the end of the day, that's. That's the investment thesis for
me. It's not, it's not this is the
greatest company in the world. It's going to be the next, next
BHP or, or or Rio Tinto. It's that the risks against the
reward is not being not being calculated in a, in a reasonable

(01:34:44):
manner at the moment. I mean, go back a week before
the, the share price went from from 24 to 32 or whatever
happened back. But go back a week and, and the,
the valuation of this company isgetting pretty close to full
blown distress. And I don't, I don't think the
company's in distress. What was the either?

(01:35:08):
Time horizon or target price when you bought in that you had
in March? I'm pretty reluctant to give a.
Target price because that's going to.
Is that how you thought about going to imbue?
My words with. More with more expertise and
confidence than they're worth. But yeah, I mean, look, my basic
and this is going to really trigger Trev, my basic, some of
the parts valuation basically basically involved just looking

(01:35:30):
at the the revenue profile that the company's likely to earn on
a on a EBITDA basis and checkinga multiple of 5 or 6 on that.
You know a multiple of 5 to account for the fact.
That they got a lot of debt and you know, you look at Onslow,
the mining services outside of Onslow and then let's just say

(01:35:51):
A0 and lithium for now. Take that, that revenue, sum it
up 2 billion. Stick A5 or A6 on it, call it
A5. Given they've got a lot of debt.
That's ten billion. What's the company trading at
today? 5 billion equity, six.
Yeah, yeah, equity, but but I'm using a multiple that's that's

(01:36:11):
compressed having regard to the amount of debt they've got.
FMG doesn't trade on a multiple of five, I think.
I don't think. Yeah, yeah, there's definitely
different risk characteristics for sure.
The yeah, the the EBITDA, like the bullshit earnings.

(01:36:33):
It's it's. This Am I allowed to swear on
this? This is, yeah, this is another
gripe. With the business as well, there
is a huge focus on EBITDA. This can't be a mini specific,
right? This is mini specific this.
Is not a widely adopted financial metric of any other

(01:36:54):
mining company. I granted there's a services
company here, which of course, but but why, why use EBITDA,
right? And well, I think the answer is
they can't. They can't.
They don't know what to do with the debt.
It's very difficult to give freecash flow.
It's it's it's not just. That I think it's like.
Also like depreciation. Matters a lot to this business.

(01:37:14):
This is a capital intensive business.
So what you know, why, why are we giving, why are we talking
about EBITDA numbers and the interchange ability of EBITDA
with profitable when you know, when management talks is a is a
very like, you know, confusing component of the company.
But I do think, I do think like there's a have.

(01:37:36):
Have you? Maybe bankers have.
Convinced the company of that like, you know, if you point to
EBITDA growth, you point to strong EBITDA growth, albeit I
can't remember the last quarter that they had cash like like
honestly, I genuinely can't remember the last quarter that
in the cash. So but but EBITDA has continued
to grow in a variety of different parts of the business
or at least quarter and quarter from time to time.

(01:37:56):
Now why has that been a a, a focal point?
Well, it's obviously like debt covenants are tied to this there
like it matters to debt markets and and the, you know, the
utilization of debt markets in recent history, US bond market,
etcetera. Like that's a way their bonds
aren't tied to it. And the government, the
revolver, I believe it is, but, but I just think you have to

(01:38:20):
look at my cash flow, you have to look at free cash in this
business. And yeah, the recent history
trend has been selling assets to, to mitigate what's actually
happening to, you know, their, the, the, the ultimate liquidity
and cash balance available. I hope that trend turns now that
Onslow is kind of finding his feet.
I've been surprised at the volumes that they're doing.

(01:38:41):
I'm impressed at what they're capable and able to do with the
Reliance and 3rd party contractors.
I don't properly understand the cost basis, especially given
the, the Reliance and 3rd party contractors.
I'm nervous about, you know, the, their ability to preserve
margin in delivering the cost that the market expects there.
And I hope they can, they can alleviate my, my nerves to that

(01:39:02):
respect in in the future reporting periods.
I've despite whatever sentiment that I've had from time to time,
like I've, I've never had a position in stock like the, you
know, the entire duration we've been doing the podcast and I'll
continue not until it's too spicy for me, right.
But that doesn't match my risk. It's a matter of principle more
than it is a. Matter of the risk reward,
certainly both, yeah. The risk reward, I think it is

(01:39:22):
still too spicy for me to like Ithink you can have a a non
consensus view of operational deliverability and still get
pants by commodity price on the stock yeah, there's no.
Doubt that the price of iron ore, not the price of lithium,
but the price of iron ore matters a great deal.

(01:39:43):
Things over the next year and a half.
But the the sentiment around iron ore has been doom and gloom
for 20 years. For the last 20 years, yeah,
it's been a long time. Yeah, yeah.
What do you think end game lookslike end game?
For in. 12 months from now. I'm hoping what?
This, what this experience has convinced the management of this

(01:40:08):
company is that they need to just have a core focus and they
need to do it well. I don't think that I certainly
hope we're not going to have another crenzy, frenzied,
frenzied spree of, of genius capital allegation into
whatever's sexy three months from now.

(01:40:31):
I think I mean, in that way, thedebt may be a good thing.
It may, it may constrain the theworst impulses of of the company
and, and force them to to focus only on what matters.
But, but I think my, we're rightto guess what this company looks
like in 12 months from now. Not the share price.
I have no idea what the share price look like, but we're right

(01:40:51):
to guess what Onza looks like in12 months from now.
I would guess that it's operating at or above 35,000,000
tons per annum in terms of exports, in terms of cost, I
don't know. But I, I think there's a,
there's a more than 50% chance that certainly more than 50%

(01:41:15):
chance that haulage goes to planthe road holds up and and this
project begins to be appreciatedfor its, for its scale.
More than it is. Being appreciated by the market
at the moment. What do you think, God?

(01:41:39):
Yeah, there's like a a variety of different outcomes things can
take on the balance of probabilities.
Can I share? Can I share with your audience?
What what you said to me when I said to you, do you think the
share price of this company is more likely to be 55 or 0 within
the next 12 months? You asked 12 months is.
That what I might not have said 12 months I.
Think yeah, because if I recall.Quickly.

(01:42:01):
Your answer was I think it couldbe going to both.
Yep. But.
I do struggle to see like. Negative catalysts over the
next, I call it, call it five months like I like I don't till
summer. Yeah, yeah, I think.
I think I. Think, I think there's a lot
weighing on, on summer and there's a lot weighing on iron
oil price and you know like likethere's yeah, iron market

(01:42:24):
suddenly looks healthy again after yeah and the lithium.
Market as well, perhaps, yeah. Yeah.
I actually, I actually will struggle to give you a
prediction because I think it's so commodity focused when you've
got so much like debt in the equity so levered to commodity
prices. Yeah, yeah, yeah.
But but that's a very. Different proposition.
And that's sort of, I'm fine with that.
I'm fine with this being a play on the iron ore price because

(01:42:47):
the iron ore price is not, it's not high at the moment.
It's not, it's not, it's not really low.
I don't know how you describe the iron ore price at the
moment. You can describe it.
As sort of floundering. At a sort of at a price that
incentivizes production, but butcuts out some of the very
marginal producers. But yeah, if if this is just a

(01:43:08):
plan, the iron ore price, then then the risk reward is is
fantastic. What?
What key risks? Have you identified and like you
know you kind of watching out for other than commodity price?
Yeah, yeah. So the quantity price is the.
Is the the price of iron ore? I think is more important and
represents a A more. A more.

(01:43:34):
Influential factor in respect ofthe success of this company than
than the other than the other factors combined, but I will be.
Disappointed if. If they sell the lithium
business, if they sell half of their of the lithium business
for for anything. For any amount that they're
going to get offered. I would be disappointed if they

(01:43:54):
if they sold it for so any amount ever.
Well. They're going to be offered
realistically. Yeah, Yeah.
I mean, they're not going to be offered.
They're not going to be offered.If they were offered three
billion tomorrow for half a living business, sign me up.
But I, I think that's struggled to even get a billion in the
current market, particularly given the the mining services
situation. I think that if Chris Ellison

(01:44:16):
were to to to be fired or to leave the company, that would be
a major downside risk from my perspective.
I think that people who think heis going to voluntarily retire
at the end of this transition period are very confused indeed.
If there was any doubt that that's not happening.

(01:44:36):
I think that was put to bed whenthe chairman posted his when the
company posted the chairman's governance slideshow the other
day that that basically said Chris Ellis was not going
anywhere. And that to me is a very
positive sign, not because I think he's the the not because

(01:44:56):
he's my idol, but because I think he's the the only thing
standing in the way of this, between standing in the way of a
massive cat raise. Other than those, I think the
only real risk that that. Is worth worrying about is.
Is the road. This this uncertainty.

(01:45:22):
Place havoc with with valuationsbecause how do you how do you
build in you know, what percentage are you assigning to
the chance of the operation falling over because the road
doesn't work. I've had to assign in my sort of
model A0 percent chance of that but but query whether that's
realistic but. Otherwise, I think all the
other. Components of the Onslow export

(01:45:44):
chain are working really well. And I don't think there's any
risk associated with anything from port to carriers.
And I don't think there's any risk associated with or any real
risk associated with anything from with anything from the ore
to the road. What do you think?
I think. It's a yeah.
Like, I don't disagree. Like your point on Chris

(01:46:06):
Allison, Like, yeah. That's that's.
I agree with like, you know, themarket's not pricing in or that
the market doesn't think that he's going to be leaving.
I don't think there's any kind of query about that.
To your point on. If he were to if the board.
Were to announce tomorrow that he'd been fired.

(01:46:26):
So you think the share price would go?
I do think there's a chance of that.
Like like, and I don't think it's a zero chance only because
if there's like heightened ASIC enforcement kind of warranting
it, which like who freaking knows like where, where that's
at or anything. But I'm just kind of like, yeah,
I don't think you can assign a 0% probability to that.
I think there's there is a chance.

(01:46:47):
And do you think what, what do you think would happen?
If that would happen it it, it wouldn't be good like.
I do think like that, you know, shareholders think that A, he is
like you say, most aligned to get the company to a better
financial and operating positionand, and and B, can probably run
the company in a way that no other yeah, management person
could from getting stuff done perspective.

(01:47:10):
So yeah, I do think that's a, that'd be a pretty significant
negative catalyst for the stock.I I, I, I on my like my
intuition is that cost is substantially higher than what
you think they are. And what does that actually
mean? It means that that, you know,
depending where iron ore prices are, you're it's going to take a
fair bit longer to pay down the debt than than maybe you might

(01:47:33):
think it to take down. And what does that actually
mean? It means that you're vulnerable
to a commodity down cycle for for a longer period of time.
So that that if you're just prolonging the period, you're
kind of flirting with, with a high debt balance, you're kind
of at any point in time one negative economic shock away
from being in a a very ugly position, which would justify
doing something like selling. Half of the within business per

(01:47:54):
per a billion, yeah. Yeah.
But, yeah, it's been a pleasure to, to, to talk through the
stock. I'm, I'm glad you became
obsessed with it. I'm glad you've, you know,
you've been willing to figure out your thoughts, like, you
know, bet on them, articulate them and share them with the,
the world. You know, it's a it's a yeah,

(01:48:16):
it's an admirable thing to do. There's plenty of minarest bulls
out there, but not many of them are willing to put their face to
it. So like I do, I do commend you,
for they're not, they're not that foolish.
Yeah, well. One stock portfolio.
I don't know if I can endorse the merit of that though.
That's that's big, big kahunas, mate.
And yeah, I'd like I thank you alot for even if to bring me

(01:48:39):
back. On if it all goes to hell and
come back in one year, yeah. There we go.
Yeah, Thanks Moz. It's been a pleasure.
There we go, money minus. Let us know.
Where you sit on the line, are you long or are you short?
And a massive thank you to our fantastic partners Grounded
Sanded Ground Support and Cross Boundary.
Energy. Now remember, I'm an idiot.

(01:49:04):
JD is an idiot. If you thought any of this was
anything other than entertainment, you're an idiot
and you need to read out a disclaimer.

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