Why Mega Deal "GlenTinto" is On (with Koala)

Episode Transcript
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(00:00):
Massive week in mining, JDA. Massive week in mining, don't
you think? Huge mate.
Rio Tinto board stashes. We got potential mega mega mega
mergers with Glencore and Rio Tinto, name a few.
That is kind of crazy. What is this could be the deal
of our generation if it eventuates and it's kind of
bizarre that it's resulted in the MD being pushed out, pushed

(00:22):
out of the company by the board,it appears.
Well, that's. What drama drama's like.
Clearly, Glen Glen Tinto in someshape or form is on the cards,
and we've called our friend the Koala to help us talk through
all of the what that means, plusother important news.
And Speaking of important, JD, you know what's important to me?
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Get it done. All right mate, but first.
I'm keen to share this conversation, mate, because I

(01:04):
think it is a Ripper beyond whatyou touched on there.
We're going to talk about the Adriatic and Dundee potential
deal. We're going to talk about
whether we'll see an interloper with Harmony and Mac, which is a
super interesting one. One for the tin barons as well,
mate. Alpha Min versus Meadows XA bit
of a comp on who is the better allocator of capital in that

(01:24):
interesting neck of the woods and the the uranium fans out
there. They can a bit of a special
mention in why Koala has sort ofperked up his ears to Next Gen.
in recent times. Let's get to it.
Here we go, Koala. Why is Glencore's latest
restructuring maybe indicative of of of something a bit bigger?

(01:47):
1 + 1 makes the big fella of your homelands, gentlemen, the
small fella. Alas, in the passage of time,
perhaps the shareholders of GlenTinto sell seek the Freeport
multiple, while others shall seek the franking dividends and

(02:10):
capital returns that come from Bolt Co.
That for franking dividends and tax treatment should probably be
ASX Australia incorporated and ASX listed with a USADR.
With such lovely assets including Tobra Iron ore, Evra
thermal coal portfolio of Australia, South Africa and

(02:33):
Colombia, maybe we put IOCC in there, maybe we don't.
We'll put damn pure salt in there because that creates
traffic at Port Hedland, which none of Rio's iron ore goes
through, but it keeps the competitors honest.
We'll put Ferrell, always Glencore in there because why
not? Kind of fits into that steel

(02:54):
additive model, that manganese Chrome joint venture, which to
be honest, I think I know Glencore better than most on the
buy side and I can't name it offthe top of my head.
Marafi, I think maybe So you throw that in there, maybe throw
a winnow in there because it's Aussie Copper Project.

(03:14):
But yeah, you would create a bulk machine.
We're jumping 4 steps ahead here.
So what you're saying is that the Glencore Rio Tinto merger is
on. You're inferring that from all
of the press that's come out this wake, including Jacob's
exit and the the flurry of of speculation around maybe his
resistance to a deal with Glencore and now that he's

(03:36):
departed, you think that's on and you're already hypothesizing
about a future separation of a box business from the copper
lithium business? I mean, this could be the mother
of all mining deals for this generation and cycle and the
Koala's accepted he's not going to be getting a fee for it.

(03:56):
What's going on here? What like, OK, so, so Jakob's
departure, it was very vanilla to begin with.
And then it quickly, you know, everyone's suspicious, but it
seemed vanilla in the press to begin with.
And then quickly it kind of comes out that that he'd been
pushed out of the board. And the reporting seems to
suggest there were differences on two things, one being M&A

(04:18):
strategy, which kind of seems tobe the big thing, right?
And the other one was maybe a lack of focus on, on cost
reduction and you know, this increased bloat in the in the in
the structure there. Rio, do you think it's valid?
Yeah. I mean, I think we we didn't
talk about on money of mine, butI think there is been this

(04:40):
ongoing discussion since those original talks or initial
approaches leaked last year in 2024 that you know, Gary clearly
has ambitions for one of the bigcall it 300 + 1,000,000 ton iron

(05:00):
ore portfolios with a long believed Glencore hypothesis
that if that went through our marketing business, there's one
to $2.00 a ton of EBITDA of incremental margin just because
we're the ones with the marketing strategy.
And I think it's a really tough thing for a board to reflect on

(05:23):
because if you gave Gary and theGlencore iron ore team BH PS
iron ore book, Rio's iron ore book or Volley's iron ore book,
and they actually delivered 1 to$2.00 a ton of EBITDA
improvement in a measurable way.That would be so damning to so

(05:46):
many generations. Or frankly, the last 2530 years
of management and leadership of these businesses.
And what kind of further drive the point across that these big
companies, Rio, BHP, Volley, I mean, they would have probably
been so much better off if they had just gotten fat, drunk and
lazy, digging holes in the Pilbara, running trains and

(06:10):
loading up ships and never leaving WA because that's really
where all the wealth comes from.Up in the Pilbara, just like any
mining region, productivity is paramount.
But lately we've been seeing numbers showing a pretty
concerning trend. JD productivity's declined for
four consecutive years. The latest numbers showed a 2%

(06:32):
plus decline a year, which doesn't sound like much, but
that was the worst print since the GFC.
Yeah, they're, they're pretty astounding numbers, right.
And compounding that issue is employee turnover, right.
So FIFO OPS across WA, not just the Pilgrim now, they've had
turnover rates of over 20% in the recent years and at some

(06:54):
operations they hit 31% mate. That is, that's kind of wild.
High turnover disrupts operations.
It increases your cost. It hampers productivity.
But what's driving workers away often, mate, it's the quality of
life on site. Mate, that's where I think
you've got to think of Grounded construction.
Grounded specializes in super high quality, comfortable camps.

(07:17):
They make remote work more liveable for the teams doing the
hard yards up at site. These aren't just camps, mate.
This is this is pristine accommodation.
It's it's it's super liveable. Why would you ever want to
leave? And when you don't have to
leave, guess what? That's lower cost because
Grounded have a track record of building these over seventy 170
projects. 170 mate, that that ishuge.

(07:37):
And to spell it out more, by improving camps, companies can
reduce turnover. They can boost the overall
experience for all their workersout at sight, enhance
productivity, and help the bottom line.
Investing in better accommodation isn't just about
comfort, it's a move to improve your bottom line.
Go grounded construction. Go grounded.
And ventures abroad have not been profitable anywhere to the

(08:00):
scope that the Pilbara has been.So it's always been this little
conundrum to me that would, whatwould any board have the courage
to be like? OK, let's actually all right,
because Glencore is not going todo any deal unless they run the
show like it'll be a top down Glencore management culture.

(08:20):
What board says, you know what, let's actually test this
hypothesis out and different CE OS have different cultures
around this. I think it's fair to say, I
think we would all agree unanimously BHP where it sits in
Australia, there's just no way with national pride and culture.
It would be well received if there was a merger with Glencore

(08:44):
and Gary and the Glencore guys were now in charge.
Your thoughts would would that be taken well?
I think you're on the money there.
Yeah, there's a reason an American has never run BHP last
night checked, let alone a SouthAfrican.
That's that's not true. Marius.
An American Anderson in 1998 came in and and then Good

(09:09):
Goodyear came in in 2004. So I stand corrected.
Bravo. Yeah.
Yeah, that that is when BHB wentfrom an Australian company that
had awesome cash flow and, you know, drank in the at the
Melbourne club and was the, you know, a very Australian centric
business to being Americanized and with corporate management.

(09:32):
And yeah, Chip came in as CFO and then in 2004 later became
the boss before the the South Africans came into to run the
show, which was a kind of bitterpill to take.
And even the the government camein and was like, headquarters
has to stay in Melbourne. You know, you can't, you can't
move this company out of our country.
And perhaps there's sort of similar type discussions, even

(09:55):
though, you know, Rio's a Londonkind of company in a sense.
But there's there's such analogies right to the Billiton
BHP merge. I mean, Glencore's got pretty
shit assets. I mean, Evr's, yeah, phenomenal
in the long run. But but like you think of the,
the assets that Glencore has, they're not, they're not like
they're not of the same quality of there's, there's no, there's

(10:15):
no Pilbury in Ore. There and the Billiton assets is
S 32, right? Exactly so, so there, there,
there's there are parallels to what a potential merger.
Well, let's think, let's think about this guy's the copper
business, Colossi. That's something Rio and BHP
would last for. Sure.
Yep. Antamina 34% It's run as an
independent joint venture. Ant Pakai.

(10:37):
It's not sexy, but it it makes money and you're not ready, you
have to worry through the cycle.OK, Congo with cobalt in the
ditch. Not as great as we all hoped it
would be, but Marin El Pichan are probably more interesting
gross projects than what we knew.
And LaGrange, which they farmed off to 1st Quantum if you're

(11:00):
real. So there is a decent copper
portfolio which what does Rio have OTA share of Escondida,
which has an incredible CapEx profile out of it and Kennecott.
So there is, I would argue a superior copper Business Today.
Nickel, I mean, Mirren, Mirren'sawash where if we're talking

(11:22):
about Tilbra and like Colossi assets, Sudbury's may be past
its prime, but it is a good asset in Canada.
I mean zinc sawash, but then youhave the pole hunter value.
I mean we all know Glencore at the end of the day now is really
a copper and a coal company. Nothing else just really moves

(11:43):
the deal. And the marketing business,
which I imagine in any negotiation, how do you value
that marketing business is a huge factor here.
But I mean, look right now at call it 2.8 lbs a share, that's
about 378 US 12.1 million sharesoutstanding, 46 million £46

(12:06):
billion market cap, 60 US 1.65 billion shares and 98 billion
for Rio. So the current split 6832, let's
be sporting and put a 22% premium on Glencore, the same
premium Glencore offered tech. You'd end up with a 6436 split.

(12:27):
Gary, Gary, CEO, Dominic Chair. You put the company together,
you run it for a year or two, you see how it works, but you
have it all structured in a way that you have the option to very
efficiently split into base metals Co and bulk capital
return Co two to three years down the track once the

(12:48):
shareholder registers settled out.
I think one of the the obvious questions, sorry about in Koala
is just that the coal aspect andthe the ESG part with with
proxies and institutions. You think that's an actual point
of contention or that just washes through?
What did Aussie Super just become substantial shareholder
in? What haven't that?
That'll make the argument that they were 4.9 for a long time.

(13:13):
Well, now they're not ashamed tobe seen in public.
Yeah, absolutely. Absolutely.
Like Glencore made an approach last year, seems pretty certain
at this point, like wanting to do this deal or wanting to do a
deal in some way shape or form. Is there any rate here with
Glencore like is desperate or are they just thinking bigger
picture here about the iron ore?I think they see a huge
opportunity in the margin accretion of marketing and iron

(13:38):
ore book and you can go back andlook at the Glen Tech slide
deck. I think one of the more cheeky
observations, I think they said I don't have in front of me like
they thought they could be 300 million of incremental EBITDA
for marketing if they had tax volumes put through their
marketing portfolio. So there's clearly in the eyes

(14:01):
of the 800,000 tons of real copper, even though we have to
acknowledge that the OT tons arekind of spoken for.
China, I'm not sure you really add much to that.
The 3.3 million tons of aluminumand remember Lincorp bought into
MRN and a few things in Australia and I believe it was

(14:21):
in Jamaica, some alumina bauxiteand has a stake in Century
aluminum. The Gulf War is very bullish
aluminum, if you just look at some of the deals they've done
in the last couple years, small dollars in the scope of like
what they've done in coal, but it's complementary.
And then you have the titanium and iron, you have the IOCC

(14:44):
volumes, lithium. Glencore is a trader already and
Brio just bought arcadium and done a few other deals.
Yeah, you just kind of look and go, there's clearly more
marketing synergies beyond just iron ore and then just you'd be
creating 100. And before you factor in the
premium, and let's even assume some of the premium to Glencore

(15:07):
falls off of Real, it's just called the unaffected 143
billion market cap. That's a much bigger company if
it got primarily listed in the US in some way could gain some
indices, get into more passive flows.
What happens if you get an extraturn of EBITDA on this thing?
I don't have consensus EBITDA for both of these, but I assume

(15:27):
the combined EBITDA is north of $40 billion, an extra 40
billion. I mean, 40 / 140 is an extra 20%
uplift. I mean, that's a lot of value.
We're just arguing about how we split the pie here and who runs
it in a world where the tech companies are trillion dollar

(15:51):
companies. What, what's Exxon's market cap
right now? I mean, that that's probably a
like, we just don't really have mining companies at the scale
that they're in the current of the passive flows in the same
way that gets the lower cost of capital.
And then everyone asks, why won't the mining companies
invest in growth? Why won't you do El Pechon?

(16:11):
Why won't you do Mara? Why won't you do LaGrange Winnu?
Why did the Chinese have to dragRio kicking and screaming over
Simindu? Cost of capital matters.
If not cost of capital, you needhigher commodity prices.
And yeah, Exxon's a $443 billionmarket cap company.
You got to get something bigger in the most liquid capital

(16:33):
markets. I mean, there are US investors
who don't know what Glencore is because it's just not in their
benchmarks. So it just doesn't matter.
It's not relevant. And there's no point taking the
career risk to study this company and put it in your
portfolio. And the US capital markets are
the most liquid there are. The the the other opportunity

(16:57):
that that peers or sounds like is kind of on the table for for
Rio Tinto, or at least it could have been or should have been.
And maybe is the reason why, youknow, Jacob's go on is is the
reluctance to do anything more in copper.
And I'm speaking specifically the opportunity to to buy tech.
Why should why should why shouldRio be more aggressive about

(17:17):
Glencoe than tech right now? I.
Think the question is where would the synergies be in a tech
deal you send to QB 2? I mean do you really want to get
into red dog? I mean RT is an RTZ anymore.
In fact frankly the only owner of red dog besides tech that
makes sense is probably Glencorebut we don't need to revisit

(17:39):
2023. I look at.
And then also you still have to deal with the fact that Keevil
still his suit, his super votingrights and probably wants some
insane premium like and and to we are going to bring it up
later, But I mean, you kind of look at a harmony bidding for
Mac. What was Mac's original name

(18:01):
Metals Acquisition Corp. I mean, I think it's an open
secret. They were one of the silver
bronze medalist on Nevis Corvo. And I look at the whole this
whole equation, you say if you want to consolidate in decent
jurisdictions producing base metal, especially copper assets,
you're not buying these at accretive valuations anymore.

(18:25):
You're buying them at like non accretive or mildly dilutive
with the premise that 1 + 1 = 2 1/2 three because bigger gets
you an incremental generalist tobe able to look at your stock
because there's more creating liquidity and therefore you have
potential to be in more indices.And you see that in some of the

(18:46):
proper royalty deals that are done like when gold royalty
GROYI might have butchered the name, but that's the ticker.
I think when they did a copper stream on Adriatics of Rs
project, from memory, it was like almost like 4425 copper was
like 8 times EBITDA on an 18 year mine life.
And you're like really got really.

(19:08):
But hey, they did a bought deal in 24 hours and they had all the
money in the door. So in these base metals and
certain they're in the safe, if you will, jurisdictions, people
are just like, yeah, just getting bigger is more value
add. So, but that's a tough pitch for
some boards to take at least I think was something like

(19:29):
Glencore. You have this marketing
business, you have this potential.
You could split these companies up one day, eventually create a
capital return machine and then create a call it US folk AUS
domiciled base metals company that could chase the Freeport
multiple, which also by the way,wouldn't have a problematic

(19:50):
asset like grasper. Phenomenal asset, but the
Norwegian sovereign wealth fund won't touch it.
I mean you put a base metals pier of the size and quantum
that produces 3.3 million tons of aluminum and right now more
copper than Freeport on a consolidated basis.
That gets a crazy multiple rewrite.

(20:12):
And as we talked about with Anglo BHP last year and before,
everyone's kind of secretly chasing that Freeport multiple.
So I think there's just so much more optionality in this
Glencore deal. And if you own iron ore, do you
really care about on coal? It's it's mostly steelmaking.
The thermal comes along with that fine.

(20:32):
It is what it is. Koala to to go to your earlier
point about how you split up thepie, the the relative
performance of Glencore versus Rio take it since discussions
were rumored to have started maybe 8 odd months ago has been
much more to the detriment of totally understand your case for
just bigger is better, more flows all these types of things.

(20:56):
But do you think on, on the margins that still kind of in
does it deal with with Gary and Co getting a smaller stake in
the ultimate merged Co? Glencore certainly wasn't in the
twos last year. They've they've with coal prices
and everything peeling back, they've been here.
I'm sure there is. I think it's a question of just,

(21:17):
and we have this debate when Glencore Tech came around and
it's like, if you're doing an all share deal, I don't think
you quibble about premiums per SE.
You say there's a pie and what'sthe right attribution.
I I really like, I don't think any day at Supremes is like,
should this be a 7030 deal, a 6040 deal?

(21:39):
I don't think actually the, the premium will matter if you're
deal speculating in the market because you want to see that big
juicy premium. But I imagine any conversation
here is like, OK, like we're doing a deal that's going to
define everyone's career here. What do we think the right the
right split of the pie is? I don't think look that if it's

(22:01):
moved, I don't know what the internal calculations are, but
if it's moved, I mean that's whythese deals so rarely happen.
The stars have to align perfectly, do.
Do you think that it's a certainty that, you know, the
Glencoe's coal business actuallyfolds into red Like is, is there
not another theory that's like Glencoe want to take the coal

(22:21):
business private themselves and,you know, return to the good
times of of the privacy that comes and then then you can have
like probably even better trading margins on that.
There's a lot of a lot of like cold blood in that company from
a trading perspective. There's a lot of cold blood, but
I think the people who would be most inclined to take that

(22:42):
company, say, private work for Glencore.
So that's a bit of a conflict ofinterest.
Management buyout mate. But I mean, in that sense, then
who would run the? Who would run Rio Tinto?
Well, I don't, I, I, I honestly don't, don't know, but I, I

(23:06):
would have thought that that'd be a compelling proposition to,
to sell, you know, the, the, yeah, all of the, all of the
base metal stuff all over the like, get rid of it all.
Keep, keep the coal, keep, you know, the wonderful Elk Valley
like business, the thermal coal business trying business on top
of that. It's I think the take away from
this week is it's very clear if you think about October,

(23:27):
November, the idea was Gary's horny for this idea, but the
British Rio board would, would never.
They they they, they told Sam Walsh told Ivan to go to hell in
2014, and Jacob and Dominic are telling Gary to go to hell in
2024. You don't think Ivan's been a

(23:48):
part of this conversation too? Surely Ivan's been calling
Dominic. I don't think so at all.
I think Ivan's very happy in retirement.
Wow. Just picked up some more
Glencore stuff. There's a lot of stock.
I think it's quite clear now that Dominic Barton and the Rio
board have a much more open viewto this new generation of

(24:10):
Glencore leadership, led by Gary, in a way that their
predecessors maybe looked at Ivan more guardedly.
Dominic clearly is more open to,well, what would Glen Tinto Glen
Tinto be? I'd love to read their Signal

(24:32):
group chat. I think that's a super valid
view. Well, also don't forget Dominic
was the chair of tech before he was given the ambassadorship in
China. I think it's very telling that
when he left the ambassadorship,he went to be the chair of Rio.

(24:54):
He didn't go back to Vancouver. Should we try and squeeze a bit
more in Koala, you, you recentlysort of shared some thoughts on
uranium as well, next Gen. specifically, I think.
Yeah, your thoughts were on the,the wavelength of good
exploration results and perhaps they're not totally factored in,
but it's been pretty eventful this week in in the world of

(25:16):
uranium in your neck, neck of the woods as well.
What are you making of the sort of set up there?
OK. No view on the executive orders.
I mean we seem to get one and every other day of the week.
Until I see the actual green lighting and FID of western
Greenfield reactors, I don't really have a reason to get

(25:39):
excited about the uranium balances.
It's really just a next Gen. specific point, which is during
that April meltdown. I did just take a look at next
Gen. at one point privately witha few friends and just say, OK,
like this thing's completely like at levels we haven't seen
in a few years. Like what's it imply?

(26:00):
I don't believe the feasibility study that shows £25 million for
like 5, whatever, 5 to 10, whatever years then falls off.
I don't think anyone's putting £25,000,000 into a £200 million
market with the audacity to say,oh, we want spot pricing for
everything. You add 10 plus percent in one

(26:20):
go to a spot market, we all knowwhere spots going, especially
when you can see we're not goingto 10% growth in reactor builds
all of a sudden. So we all know that that
feasibility study sort of front loads the NAV.
That's one of the reasons I always find the NAV of the thing
a little silly. There's also the question that I

(26:43):
offered, I asked publicly and I don't have an answer to it, but
I really wish someone would answer.
It is in light of the fact that foreign mining realized that in
Saskatchewan sales tax is not refundable.
What did Next Gen. assume for their CapEx at Arrow?
Is the sales tax assumed it's refundable or recoverable or is
it assumed not recoverable? And the other thing though is

(27:07):
this, if the Patterson Corridor extension, this PCE continues to
look this impressive, it's clearthat this the A2 formation which
has like 200,000,000 lbs of like4% at arrow and then the other a
three formation is like under 2%uranium.

(27:29):
If there's another A2 like superhigh grade formation, whatever
the life of mine average is going to be going through that
mill, it might not be call it 1011.
It might be closer to 15 to 20 once it's fully fleshed out and
expanded. My hypothesis has always been

(27:52):
that you would do a phase one, let arrow enter the market, get
settled in and then you would doa meal expansion.
Some you will point between years 5 and 10 and that way you
wouldn't disrupt the uranium market.
But look, it's, it's great exploration, it's western 4
lands esque in a way, in the sense of, you know, there's so

(28:15):
much more optionality in this, in this project.
The, the management I'm not impressed with.
I mean, pretty sure the reason the CEO wasn't at Canaccord is
probably because he was at the Monaco Grand Prix.
Lord knows if I was a junior CEOof a junior and I sponsored
Aston Martin, I'd be in Monaco. But I think there's just a lot

(28:38):
of optionality, flexibility. And it's a great project.
So much so that it really allowsfor so much annoyances, which
we've all talked about before, whether it's the M cap, physical
uranium and convert and a few other things.
But look, I think it's very fascinating.
I think there's a lot of optionality.

(28:59):
I mean, but really, and I haven't really been lazy and
there's another better way to play that news release, but I'm
not going to tell you about thatquite yet.
But it look, it's a good project.
And I think as you look forward and if uranium doesn't continue
to collapse, I think it's just agood project.

(29:23):
And yeah, it's a trade for me. I'll be very blunt.
This is by my standards of trade.
Now I've heard someone say my trades or other people's
investments, but those are greatat those are great assays and it
shows that there's a lot more flexibility in what this
potentially can be. So let's see, I don't see a
nuclear renaissance in the West without that thing coming

(29:44):
online, whether that comes online at the end of Cigar Lake
or if it comes online in 20-30. I mean, I didn't really care if
you feel sulfide should have been 35 or 40, so.
It's what it is. It's still the only deposit that
really matters. Have you got a view on on one of
the majors coming in looking at an asset like that or no

(30:07):
interest in uranium for those guys?
I, I think it's too small of a market for Rio, who's
liquidated. I don't think it's big enough
for BHP to enter the market. I don't think Glencore wants to
start trading it. I don't think Anglo can be
bothered. I mean, I think tech would face
incredible scrutiny from their shareholders for doing that

(30:29):
deal. And then so who's left?
It's Camico and we all know the story there.
But I think there's actually a sidewinder opportunity here,
which is I think Franklin, Nevada Wheat and Precious would
write a royalty or a stream on the Arrow PCE asset in an
absolute heartbeat. So I think there's incredible,

(30:53):
there's probably a billion dollar royalty or stream deal to
do there. And also, I mean, why wouldn't,
because Adam Prom start looking abroad at M&A opportunities?
Is anyone going to bat an eyelash because Adam Prom took a
19.9% stake in Next Gen. to helpfund the build of Arrow where

(31:17):
they're still hands off. It's just a financial
investment, but they've now stood up a company that they
still would have incredible influence then and Camco could
then basically never get their hands on Arrow.
I don't know. It's just some creative
thinking. I've been pondering as you see
this play out, there will be AI.Don't know when the gun goes off

(31:39):
on this, but it'll be fun when it's actually time for Arrow to
be in play. But I could be out of that thing
in a week. It's one of those things you're
constantly looking at and you just.
But those are great at those aregreat assets I'd.
Be curious what the Canadian government said about a Casada
prom 20% stake if they would raise any issues.

(32:02):
It's a couple more things I'd love to get your thoughts on
Koala 22 recent deals look well,one of them's one of them's
announced in Harmony Gold is acquiring Metals Acquisition
Corp. We touched on another one,
Dundee Precious Metals rumored to be in advanced discussions to
look bid on Adriatic as the UK takeover laws.

(32:23):
They're putting a timeline for afirm, firm offer to happen.
It's kind of trading above term,sort of implying that that's
almost a certainty or at least you know, a competitive outcome
is going to is going to eventuate there, which is is
pretty intriguing. How do you read both of those?
And also by the way, Max trade was trading above terms when I
last looked too, which, oh, it seemed crazy because it's like a

(32:45):
2% break free. I don't think anyone else is
coming in there. But yeah, anyway.
What's, as I said before, it used to be called Mells
acquisition, but it's a producing pretty decent copper
mine in a first world jurisdiction.

(33:06):
Those don't trade cheap. Is Harmony the logical owner of
that asset? I don't know.
Sure there's a few other folks who are probably got to be
pondering that puzzle right now.I mean.
I don't know. I'll take the other side.
Yeah. I don't think harm like yeah,

(33:27):
synergies are really hard in that region and there's yeah, I
get, I get the I. Get the People don't, people
don't, people don't. People don't necessarily buy
copper for synergies. Oh yeah, of course.
It's a special commodity in thatway.
Yeah, Yeah. I mean, if we called, if we if
we change the name of Khobar to De Grusso 2 point O, would we
all have a little bit of a chuckle?

(33:51):
Maybe I mean. S 32 between Sierra Gorda
trilogy, I mean Formosa, I mean there there's just in your guy's
neck of the woods. There's got to be a few people
sitting there going it's right there.
It's a plane ride across Australia, but it's still right

(34:13):
there. So we'll see.
We'll see what happens yeah, butbigger is better when it comes
to these things. So I think every mid cap small
cap copper producer asked to be at least asking the question, if
Nick's not going to be a consolidator, he's actually a
seller. All right.

(34:36):
Well, if you had M&A ambitions, what's it going to be?
As for Adriatic, we don't have terms.
There's nothing been officially announced other than they're
talking. I think they're though too.
I mean, you have a Eastern European producer, it's in the

(34:58):
it's in the same region. The cash flow of virus ramped up
would be phenomenal. Dundee has a pretty a balance
sheet with a lot of flexibility and a lot of cash.
Adriatic on a standalone basis, we're going to have to we're
going to have to spend this yearpaying back Orion and traffic
era. I mean, love the Adriatic team,

(35:20):
but I mean, how many equity raises to ramp up and extend the
runway can you do? But they actually have to
deliver. And I know that's an interesting
idea where you put those two together, put some nice cash
flow into Dundee and Dundee has a really interesting discovery
within their portfolio. And does this combined operating

(35:41):
platform give them the cash flowto really approach that
discovery aggressively? I think there's a lot of
synergies in that opportunity. I mean, the Dundee stock has
done well from all I can tell since this is this has been
released, this has been leaked, which is interesting.
And that seems like a good, thatseems like a good management.

(36:02):
I mean, well, that's the market saying, hey, this actually makes
sense. Please proceed.
We want to understand more. Yeah.
Do you think there's risk that that deal falls away though?
How so? Well, there's a, there's a
deadline on it. It hasn't been a firm thing yet.
And if Dundee, well, that's if Dundee doesn't come to the party
with a firm offer, then does anyone else come for Adriatic?

(36:26):
And then does Adriatic have to wear, you know the the
potential, you know, inflexible period of of cash flow during
ramp up still themselves? Oh, the mine has to still run
while this. And if we've kind of learned
from Anglo Peabody, just becauseyou announced a deal doesn't
mean you can take your eye off of operational excellence.

(36:46):
So the ramp up has to continue. Certainly.
Certainly, yeah. I but I mean, look, we saw this
with Anglo BHP. Remember there was like a one or
two week extension to continue the conversation.
Yeah, it's just the way the UK, the UK does these things.
I mean, it clearly, just it clearly puts an urgency on.

(37:06):
OK, let's get on with that. Yeah, yeah, Alfman, Middlesex, I
know you've been buyers and sellers of well, certainly
Middlesex, but Ding, Ding, Ding,Ding on that front.
Elf min a long term position foryou.
I'm not sure if you trimmed anyone and then when the news
came out or you just left it. I own more, I own more, I own

(37:28):
more than I did at the beginningof the year.
It's been a fun year so far. Yeah, all.
I'll say on that is it's truly acase of what doesn't kill you
makes you stronger. There's an implicitly AUS flag
at BC now. And what does it tell you?
If if in the years that I've known you guys, if I told you

(37:51):
doing the very rough mental models in my head.
If I told you that Alfaman, ADRCpin producer in North Kivu that
had to shut off for a month due to rebel war activity, trades at
a higher EV EBITDA multiple thanMetal Zacks, which owns 50% of a

(38:12):
tin mine in Tasmania, Australia,I think you all would have
thought I'd lost my God damn minds.
But it tells you that the market's kind of starting to
understand the alphabet story a little bit better.
But also it's a condemnation of metals X, which.
You're buying the equity, not the AV unfortunately with with

(38:32):
Middlesex. Yeah, except the problem is they
seem to have very interesting ideas of what to do with the
cash and that's a problem. I mean, and then life's just
life's just too short to deal with that.
And if you think about it, if you can get the commodity price
right and you is can they execute on the operating plan?

(38:53):
A mining company generates a certain amount of cash.
So can we get the commodity price right?
Can you execute on the operatingplan generates cash slash
capital. Third question, most important
question in this multiplication,are they going to create value
with the capital or are they going to light it on fire and
not do value creative things? Now whether that's we give
dividends, we do buybacks, we doM&A, we do growth, we pay off

(39:17):
debt to delever and de risk the company.
But capital allocation is a hugemultiplier in our business.
And yeah, I just, I just don't think chasing every little tin
project around the world, I mean, do something bold if
you're going to do that. But yeah, it's just kind of

(39:39):
wild. It's just wild to me.
It's just wild to me. You have a like you, you you're
a shareholder, Travis. I mean, it should bother you to
no extent that Alpha given a warzone, a war happened, the mine
got evacuated, turned back on and you're going.
We don't get the same valuation that they do.

(40:00):
Yeah, I don't, I don't think you'll find a, a massive catalog
of me appraising the capital allocation of Middlesex just by
being a shareholder, but I thinkit's less bad now.
But it's yeah, I, I, I do find the, the investments in the
yeah, the, the junior tin development story is kind of
interesting. I don't, I like, I think there
are better ways to maybe use thecapital in the short, medium

(40:20):
term, but I, I just wonder if they're kind of land banking,
like are they actually going to finance those things?
Not sure. I kind of just feel like there
might be land banking, but that's smart.
Yeah. But then why?
But then if you're going to do that, I mean, I don't have the
precise valuation on it, but I mean solid core, the gold
producer in Kazakhstan bought 55% of tin when holding which is
the serum bet tin deposit in Kazakhstan.

(40:44):
And that was, if I get this right, I mean that was a, that
was maybe $100 million of cash. It was a bit to that deal, it
was a bit to that deal. There's there's anything with
solid core, there's a bit that doesn't meet the eye. 82 and a
half million 82 and a half million bucks I mean that could

(41:06):
have been metals X doing trying to do that deal I.
Don't think Metals X could have bought it from $82 million.
What? Do you think about the the
capital allocation with your alpha men hat back on, they're
going to start generating good cash and hopefully that
continues. You just want that.
I think there's a back. Dividends.
I think you they've been quite clear they're going to take the

(41:28):
debt down to 25,000,000 on the local facility.
I think it was the right thing to let's print, let's see them
print a clean 2 Q and three Q the next dividend if it comes
and it should come with being declared in October, paid in
November. I have a few ideas for some

(41:52):
creative things they could do but I'll keep those to myself
for now. But I think you got to get back,
you want to get back to those that 6 cent Canadian semi annual
dividends and maybe even a little higher.
Anything else you want to leave us with before we part ways with
you? No.

(42:12):
No, I'm I, I. I thought you mentioned US
Steel. Glad.
You brought it up. 17 months. I'm one stubborn son of a bitch,
aren't I? Look, I think that the right

(42:36):
thing was done there. That's probably something I'm
going to reflect on a lot more over the next three months, that
experience, that whole investment in its entirety.
But it's kind of wild to think that 14 billion of investments
coming from Nippon, I mean, for a sector that we complain about

(42:56):
being capital starving, capital constrained, the US steel
industry will not be capital constrained.
And it's all thanks to 1 new participant.
And I think it's kind of amazingto think that Lorenzo kicked us
all off with a hostile after US Steel politicized the union to

(43:16):
say I'm the only person who can buy this and in doing so sparks
a bidding war. And now his peer, his peer
competitor is someone who's, I mean, the guy from Nippon who
did this deal basically flew between Pittsburgh and
Washington, DC for the last yearand a half.
Now he has to spend $14 billion improving the US Steel assets

(43:41):
and creating new capacity while Cliffs is levered and has not
made the same investments. I just got an idea.
He's going to enjoy watching Lorenzo just stress out just
watching Nippon just basically bear hug the blast furnace steel
industry in in the US because I don't know what Cliffs does from

(44:04):
here. I just don't know.
Well, that's a wicked, wicked place to leave out our chat.
Well, it's been a pleasure speaking with you.
As as always, there's always a lot to reflect on and lots of
different like parts of the market that you've got your your
eyes on. Love your insight as always, so
thank you very much. Cheers Koala.
Cheers. Fantastic mate, that was an

(44:24):
awesome conversation. A massive thank you to all our
partners that make this all possible.
Mineral mining services, Grounded Sandy ground support,
CRA insurance, K drill, KCA sideservices, black diamond drilling
services, Cross Boundary energy go.
To root, go to root.

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