Picking Nickel Names: Thinking About A Framework For Investors

Anthony Milewski talks us through what he considers before investing in Nickel companies. A lot of the thought process is the same as regular investing, but as you will note from our Nickel Insight series, you need to know the backdrop to the nickel market, its cycles, the technology and how it gets priced.

He tells us why the follows components are important and why:

  • Exchange: ASX, TSX, LSE, JSE
  • Project Stage: concept, pre-discovery, discovery, feasibility, development, start up, production
  • Project Jurisdiction: North America, Africa, Australia, South East Asia
  • Project Type (what technology will be used to develop it): sulphide v laterite
  • Intended Product (who will buy it?): chemical industry (batteries) v nickel pig iron (steel)
  • Management: Has management been successful exploring/developing/building/operating?  
  • Capital Structure: Is there debt?  A convertible note?  What are the terms of the joint venture?  Are there any streams and royalties?  Is there an off take agreement in place?
  • Share Register (also liquidity): Who owns the stock?
  • ESG: Environmental and social licenses are becoming increasingly important.

So if you are interested in the battery thematic and want to understand the nickel space, Milewski gives you a heads up to the things you need to be be considering in this article (*Note* – To access the article, you will be asked to enter a valid email address – this is not a subscription to CRUXInvestor.com, CRUX-Club.com or affiliates, and your email address will not be used in any marketing activities or shared with any 3rd parties).

In addition it is worth looking at the Nickel Series of interviews with Mark Selby and Anthony Milewski, where they talk in greater detail about some of the Red Flags and Green Lights when picking companies.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Anthony Milewski – Every good gold digger’s gonna wind up there (Transcript)

A photo of Conic Metals Chairman, Anthony Milewski

Interview with Anthony Milewski, Chairman of Nickel & Cobalt Royalty & Streaming company, Conic Metals (TSX-V: NKL)

CLICK HERE to watch.

Milewski gives us his insight into investing in the nickel market and builds on Mark Selby’s recent nickel interviews with us. What are the red flags and what are the positive signals when thinking of investing in nickel projects? What stage projects have what what types of risk profile? What are the signals? Can you build a Hpal project for less than $1Bn? Horizonte Minerals (AIM: HZM) says yes. What do Mark Selby and Anthony Milewski say?

Interview Highlights:

1:23 – Fall of Indonesian Nickel Production and Price: The Reasons
5:45 – High Capital Intensity: Is an HPAL Project Possible Under $1B?
10:45 – Types of Investors to Invest in Nickel: Should They Invest Now and in What? 13:51 – Key Parts to Look at When Investing; (13:55) Exchange, (16:03) Jurisdiction, (20:13) Project Type
21:45 – Chinese to Fund Nickel Projects: Where Does the Price Need to be to Interest Western Financing?
26:32 – Management Teams: What Questions Should You be Asking Them?
31:20 – Types of Projects for High and Low Risk Tolerance
33:17 – A Minute on Conic: Are They Looking at Dividends?
34:18 – Capital Structure Pet Peeves: What Should Cause You Concern?
39:30 – Share Register: Importance of Management’s Involvement


Matthew Gordon: Hello, welcome to Crux Investor. We’re here today with Anthony Milewski, he’s the CEO of Conic Metals, but we’re not going to talk about Conic Metals today. You’re going to tell us about the world of Nickel.

Anthony Milewski: I will, but by the way, I’m the chairman.

Matthew Gordon: You’re the chairman!

Anthony Milewski: I’m the chairman.

Matthew Gordon: You got promoted? 😉

Anthony Milewski: Non-executive chairman.

Matthew Gordon: Really? They didn’t want you doing too much? 😉

Anthony Milewski: I don’t want to cause any trouble.

Matthew Gordon: Okay. First question, and please don’t blame the Coronavirus for this one.

Anthony Milewski: It’s definitely the Coronavirus’ fault.

Matthew Gordon: That’s literally all I heard last week for everything that went wrong in a company was the Coronavirus even though it’s been going only a month and their share prices have been dropping for months. But you’re not going to do that. Indonesian Nickel ore production fell significantly last year. Why?

Anthony Milewski: Yeah, I think there’s probably a couple reasons. I think one reason is Nickel prices are just off. I mean, I think that’s part of it. But there are other reasons. There was a ban instituted in Indonesia where you had to ship a refined product. So, depending on what smelters are paying, depending on the logistics of those smelters, certain producers could sort of be shut out of that market because they can’t ship direct anymore. So, I think it’s a combination of Nickel price and just the factors around the Nickel export.

Matthew Gordon: Right. And you said the Nickel prices dropped and I think we talked about this previously in other interviews. But what’s your rationale for that? Why do you think that’s happened?

Anthony Milewski: Well, I think first of all, even as much as we want to talk about future demand for electric vehicles, it’s driven by stainless-steel. That’s really the driver of the market. Now, last year, we saw a big draw down in LME inventories. And we think that that was probably hedging and forward buying. But, notwithstanding that, if you look at the last month, LME inventories are kind of right back up there. And with the Corona virus and a decrease in the stainless-steel demand, with Nickel having tapered off a little bit, it makes sense that production for a marginal producer would be down.

Matthew Gordon: Conic is a royalty and streaming company. We can talk a little bit about it.  You’ve made some big bets on Nickel. You still believe that the EV thematic is holding true. You did say last time we spoke, it’s probably a couple of years out in reality, which I think was a nice reality check for the market to make people stop and think, because everyone gets very excited about these things. So, your view on the numbers hasn’t changed?

Anthony Milewski: No. I mean, look, if you look at Cobalt, if you look at Lithium, these false dawns where everyone gets excited about adoption of electric vehicles, which is real, and I’m a huge proponent of. But I think in certain cases that market can really move. You have a sell off, then you have reality set in, and then you can actually have that real move. And what we see with Nickel, we didn’t see that extreme move that we saw in both cobalt and lithium. We did see a move. And I think the reason, by the way, for that is that, stainless steel drives the Nickel market, whereas in cobalt and lithium, small incremental demand can really change the dynamics of the market. So, it’s stainless steel in a way is a more robust market. And so, it’s harder to really jam it up on the idea of some future demand. And so, we did see a bump. But I think now what you’re really going to have to see is a higher price to bring back in more speculators and interest.

Matthew Gordon: Timing for that?

Anthony Milewski: It’s impossible to say. And I do think what’s happened in Rhodium and Palladium recently is kind of interesting and potentially telling. And that is to say, both those markets had people out there for five, six, seven, eight years talking about the pending doom and gloom scenario. And actually, as it turns out, they’re right. I just read this article that this morning about people stealing catalytic converters in London. So, they turned out to be right. And where I’m going with that is what’s interesting with Nickel and some of these other metals, if we don’t get investment into projects, bringing more supply on in the future, that chart ultimately will start to look like a palladium or rhodium chart. And I think that’s not healthy for a commodity but it’s a reality when it takes years to bring additional supply on line.

Matthew Gordon: This probably was the Coronavirus but you promised to write me an article some weeks ago.

Anthony Milewski: It’s coming!

Matthew Gordon: I’ve got half of it here. So, we’re going to talk about that half of it.

Anthony Milewski: The good half!

Matthew Gordon: And just for everyone at home, this article is really to talk about being able to pick winners and losers in the space because in all commodities there are companies which are going to make it. Other companies perhaps will struggle a bit. And we don’t want to waste anyone’s time talking about companies which perhaps are going to struggle for whatever reason. So, we’re going to talk about some of those headlines for Nickel. They kind of apply to all commodities in a way some of them.

Anthony Milewski:  Well Nickel is unique. The one I found really interesting. And I’ll tell you why. Because Nickel, unlike Gold, you could get a Gold CEO in here who would potentially have a project that would need under $100MIL of CapEx for production. That’s possible. Nickel is very, very capital intensive. In fact, I would argue that Nickel is possibly the biggest destroyer of value over 20 years with the HPAL projects, projects like Goro ended up costing $8Bn. And to name a couple, Ambatovy, you have Ravensthorpe…

Matthew Gordon: Here’s one. I’ve got one. So, we’ve had a bit of a debate online because we got a quote from someone you know, Mark Selby, saying you can’t build a HPAL project under $1Bn. We’ve got an AIM-listed company, the management team, CEO, saying that’s not true. He has got some new Chinese technology coming through and HPAL will be able to be delivered for much less than that. Are you a buyer of that? What is this new technology?

Anthony Milewski: Yes. So, here’s what I would say. I think you’re talking about two separate things. If you’re talking about a brand-new stand-alone project, I’m unaware of a single instance where someone’s done that for under $1Bn. When they’re not relying on infrastructure, when it’s a new project sitting in the middle of the jungle, wherever it is, I think that’s not happening anytime soon. However, if you’re talking about specifically about some of the stuff that the Chinese are doing with HPAL in Indonesia, that’s totally different, because what they’re doing is, they’re tacking on $1Bn onto $7Bn dollars of infrastructure.

Matthew Gordon: So, there’s the infrastructure component and with the processing plant component. So, can you build a plant on top of a resource for a billion bucks?

Anthony Milewski: Can you build a plant on top of an existing producing mine in Indonesia where the Chinese have already spent $7Bn? Yes. So, can you go from $7BIL to $8BIL? Yes.

Matthew Gordon: Greenfield site?

Anthony Milewski: I would be hard pressed to give a single example of the world where you could do that. This is import about investing. So, I think when you’re looking at Nickel names, I think you have to ask yourself, what is really fundamentally the process? Not are we sugar-coating it. Is it HPAL? And if it’s HPAL? The answer is this is an HPAL project I think you have to think it’s going to be in the billions of dollars. And so, if you’re thinking about a speculative play, it’s a big ore body, will it go up when Nickel moves? Answer might be yes. But if you’re thinking will this be a mine? I think the answer is going to be most likely not.

Matthew Gordon: So, how would a company get a Feasibility Study done by an independent contractor to tell you it’s going to cost less than that for HPAL project?

Anthony Milewski: Well, I can’t speak to any specific situation, but I think we just generally look at Namascar. Now they’re in receivership now and they had, I think, no less than four of the top contracting firms working on that project or consultants at contracting firms. They missed it by, what, $500M. So, I think it happens, I think is the answer, it happens. And, I can’t speak to why one person will miss it, or another person will miss it. But HPAL, one of the things to remember about HPAL is the tailings really should be in an environment, especially like if it’s tailings sitting behind a tailings dam, need to be in an environment where you evaporate more water than rains in a year. So, if you’re in a place or a situation where you like have torrential downpours and you’re not going to evaporate like you just have a real problem with tailings. And in a post valley world, I think globally regulators are thinking about tailings. So, to take a step back from all that and talk about just investing in Nickel, I think you need to think about is this a sulphide or is this a laterite. Because at least, like in (RNC) Dumont was an example in Canada, potentially (Giga) Turnagain someday, those projects, the processing is very simple and straightforward, like everyone knows how to do that. You can come up with a number that’s real. It might be $1.5Bn for Dumont. I don’t know what that number is going to be, but that’s the number. Whereas if you go into some of the Australian HPAL processes or elsewhere in the world, frankly, you don’t know how long a piece of string is. That doesn’t mean you shouldn’t necessarily own those names because when the Nickel tape happens any big research will go up because it’s just the case that that will be true. So, you can own a basket, but specifically, you need to trade those names, because if you look through the cycle, it’s hard to see after Ambatovy, after Ravensthorpe, after Goro, it’s hard to see that anyone is going to build a greenfield HPAL project. Different than brownfield expansion, tagging onto an existing project, but a greenfield project is pretty unlikely in my view.

Matthew Gordon: Ok, so let’s veer away from that, HPAL at the moment, and come back to investing because you gave some clues about the sorts of things people should look for. First of all, we should probably identify the type of investors who would invest a Nickel because this is not an overnight day trading scenario or even get out in the next six months or so. If you’re coming in now and I guess you would advocate getting in now, or would you?

Anthony Milewski: Well, I would say, what do you think the average amount of money your investor has to invest, $5,000, $10,000?

Matthew Gordon: I don’t know. There’s so many, the average is difficult.

Anthony Milewski: Well, let’s just say you have $1 to invest in Nickel, I don’t think I would just go by a dollar worth a Nickel equity today. I think you want to cost average in over time. But certainly, what we saw in Rhodium and Palladium and a lot of other commodities is they can move really quickly. And if you actually do subscribe to this notion that EV adoption is generating new demand, it’s going to impact the price of Nickel. If you subscribe to that notion, that investment thesis, I think you over time want to average in to these Nickel names. I wouldn’t go spend all my Nickel allocation today. Especially as we’re faced by a lot of uncertainty around coronavirus. But I would think that over time you would want to leg into it.

Matthew Gordon: I think that’s fair, and again, reasonable. Like you say there’s a lot of people who come and talk to us and tell us how much of their commodity they’re going to put into a battery and the EV revolution is going to change their company literally overnight. You need to buy now. And I just think sometimes for a lot of companies that’s not true. They’re so far away, so far removed from the EV chain.

Anthony Milewski: Well timing is tough. I look at lithium right now. Some of these names, they move overnight. Lithium Americas, I mean just on a rocket ship lately. They announced this deal, which effectively takes away the operatorship. They get money and now it’s going to be built. So, this thing goes on a rocket ship, but I would just say as an investor, it’s hard to predict. So one of the things I would consider, I guess, when I look at some of these names is making sure to own some names that don’t require capital raises because if between now and that move, it’s two years, let’s just say, if you look into that balance sheet and you can see that they’re going to need two capital raises, well just wait and go in when the capital’s raised. I think in particular for the juniors, this is relevant because from my perspective, if you could invest in Nickel like let’s own a basket of names. So own Independence Group, this is an adult company. It’s producing Nickel and it’s hard to foresee that they can raise capital. You’re not going to get as much torque as you would in like a Giga and with Turnagain. But at the same time, it’s a much safer, safer bet. So, I think you have to have like a range of these names.

Matthew Gordon: Right. Okay. And that’s just Nickel we’re talking about. Obviously, people have got lots of options, not just mining, not just Nickel the commodity, but lots of options within mining and outside of mining and portfolio approach which most sensible people would advocate. Let’s come back to some specific things that you’ve started writing about in terms of things that you look for. The first thing we talk about is the exchange. You’ve got to work out which exchanges you’re comfortable being on. Why?

Anthony Milewski: Well, if you look at different commodities, do better on different exchanges.

Matthew Gordon: Is that true for Nickel?

Anthony Milewski: Yes, it’s actually Nickel that’s does better on the ASX. If we’re being honest, the ASX and the reason is, is that retail investors in Australia understand Nickel, there is a larger number of Nickel publicly traded companies for Nickel. And so, I would say, depending on where the asset is, that makes more sense. Now, for Gold Canadian and North American producers do better generally speaking, on the TSX. Australian producers do better, there’s always exceptions, on the ASX. So, I think understanding comps for that exchange is important because if you have peers, which look sort of similar, that means you’re going to have research coverage. It also means you’ll have like a general body of knowledge among retail and institutional investors. So, it’ll be easier for them to get up the curve and potentially invest in the name that you’re looking at. So, it is always important to think about the peer groups. Now in a bull market, of course, probably it doesn’t matter as much. But in a market like this I think you can actually have a quite a bit of upward support in these names when you’re on the right exchange.

Matthew Gordon: OK. That’s interesting to me.

Anthony Milewski: I can do a data-point, not just to plug.

Matthew Gordon: Please.

Anthony Milewski: Conic Metals. The primary asset of Conic Metals is the Ramu Nickel joint venture we discussed. That joint venture assets looking almost exactly as Conic does today. Not quite as good because there’s more in Conic trading on the ASX, was trading at kind of $100/$110M market cap. Today on the TSX, it trades at $3M. So, there’s a bunch of other factors in there, but it’s just one single example. I think you can find that across different commodities.

Matthew Gordon: Ok. So, what we’re going to do, we’re going to piece together lots of moving parts here and you’ve got to consider all of these. So, you’ve sort of talked about project stage. So, if there’s anything more you want to say, we can sprinkle it in later, but I want to talk about jurisdiction. And that kind of comes the point we made earlier with regards to where your next Nickel project is. Some countries are better than others. You’re dealing with Southeast Asia, Indonesia. You’ve got the Canadian plays. You’ve got Russians. There’s a lot of big players out there. Why is jurisdiction specifically important to Nickel?

Anthony Milewski: Well, let’s look at Cuba. So, Sherritt, which is an important producer of Nickel fundamentally has a problem where a lot of investors are not allowed to invest in that company because they’re US, because the fund has U.S. investors. So, then you have a problem with Cuba, even though great mine, great asset, right? Russia, maybe you don’t have restrictions, but at the same time, people perceptions about Russia. And so when you kind of go around, clearly the best Nickel assets to invest in would either be in Australia or Canada from perspective of the market. But there are interesting things in Africa as well like this project, I think it’s Sama Resources. It is potentially a large discovery in West Africa. But I think it doesn’t get as much credit as it would in Canada or Australia because of its location. So, investors over the years have had bad experiences in Africa and certain countries. It just makes sense, like in Gold, if that asset is sitting in Canada, it’s going to have a higher multiple than if it’s sitting in somewhere in Africa generally.

Matthew Gordon: So, that’s in West Africa, Sama Resources?

Anthony Milewski: Yes. I think Robert Friedland invested a bunch of money in it. His technology is on it. It’s an interesting story because it’s potentially huge, right? It’s just one example of a name where if that same asset was sitting in a different jurisdiction, it would have probably materially higher market cap.

Matthew Gordon: Absolutely. Talking of things that affect, different jurisdictional plays. We had a contributor send in a piece about what’s happening in West Africa at the moment and I wish more companies would respond to this, to these sorts of articles where there’s a bunch of terrorist activity happening in places like Burkina Faso, Southern Mali and then Liberia and so forth. And the companies are choosing to ignore these things. And we’ve had a few phone calls for allowing someone to publish on our sites talking about these negative things. But I think it’s a great moment for the companies to come on and talk to us and say, well, actually, it’s fine. This is going on, which is not good, but it’s business as usual for us. It’s not going to affect our operations. But rather than bury their heads in the sand and try and get their PR people to tell us we shouldn’t be having these conversations. So, jurisdiction is important, I think, because we’ve definitely been caught out. We’ve definitely lost money investing in the wrong jurisdiction and these kind of safer plays, or more relevant plays for Nickel hopefully they will work out for your company. You talk about Indonesia.

Anthony Milewski: PNG.

Matthew Gordon: Papua New Guinea? Apologies. How’s it doing business there? That’s something you must know a lot about by now.

Anthony Milewski:  We’re very fortunate in that because MCC, which is a very large company, is operating the mine. So, I think we’re fortunate just because we don’t have to deal with a lot of the day to day. We don’t deal with any of the day to day. In fact, we’re not the operators. So, it’s a joint venture interest holder. And because they’re such a big company, I think that, they’re able to navigate but it’s not without its headaches. I think that’s true of anywhere though. You can experience that in the US and Canada as well.

Matthew Gordon: So, it comes back to your investment in royalty. It’s investing in mining without the mining risk.  So, your job is a lot easier, is it?

Anthony Milewski: Well, it’s definitely easier than building a mine. I can tell you that. That would be tough.

Matthew Gordon:  Right. You talk about project types. You kind of get into a lot of detail about this. What do you mean by project type?

Anthony Milewski: I mean, if some geologist comes on here, they can criticize and say, well, there’s really 20-types, but basically there are two-types, Nickel sulphide and laterite. Those are the two primary ore bodies that we talk about. The laterite ore bodies have the HPAL process, which is very hard to get right and certainly has a history of massive cost overruns. Sulphide has always been preferred until the HPAL technology came along. But what you’re facing today is that no Nickel sulphide ore bodies tend to be lower grade. And so it just means you have to process more ore and the Capex, I can’t think of a project with under $1Bn Capex. I’m sure there’s some small projects somewhere, but by and large, ones you’re talking about $1Bn to $5Bn and the market’s just not ready to fund that. There’s just no actual money to fund a project like that, which is kind of what makes Nickel interesting because there are no projects out there. Dumont being one of the fully permitted ones for instance.

Matthew Gordon: It’s got the scale.

Anthony Milewski: It’s probably $1.5-$2M and no one’s sticking their hand up. And if you stick your hand up right now, today, it’s probably, 4-5 years from commercial production.

Matthew Gordon: 3-years if you’re listening to them.

Anthony Milewski: Whatever. In practice, right?

Matthew Gordon: It’s a long time, it’s a lot of money. I get it. Those are very difficult conversations with the price as it is today, most certainly. What do you think the price needs to get back up to before or how long does that need to sustain for before you get funders or consortium funders are thinking I have $500M, now’s the time to move?

Anthony Milewski: So, my experience right now is that it’s really Chinese money. I mean, even when that move starts to happen, what I see is interest coming out of China and that’s bad. I think that shows a commitment to electric vehicles and a realization about what’s happening with EV adoption. So even as we move past Indonesia, which is kind of where a lot of that investment that you referred to earlier is going, I actually think inside of Africa and elsewhere you’re going to see Chinese investment is lost. So, it’s not going to be just isolated into Indonesia. It’s going to be kind of globally.

Matthew Gordon: You’re up for building these large giga factories for this E.V. revolution. They want to be in control of as many of the moving process possible. And you’ve got a lot of the European automotive manufacturers funding these bills. And we look at their budgets, their forecast budgets and they’re in the tens of billions of dollars. But you’re saying that at a basic level, the Chinese, the ones that are going to be funding these mines into production in this E.V. revolution, because we hear the same story in copper, we hear the same story in lithium.

Anthony Milewski: It’s the real story. It’s a real story.

Matthew Gordon: I get it. It’s the same story.” We’re going to do this, we’re going to do this”. But the money isn’t seemingly available from the West and everyone’s looking to China like they used to, to be able to get these things done. Do you think that Chinese are going to take a grip on the speed at which this EV revolution is allowed to move and will it be to their drumbeat?

Anthony Milewski: Well, certainly I think what they’ve done is they’ve set environmental policy, which is actually pretty spectacular, like they’re leading the world in environmental policy as it pertains to adoption of electric vehicle. And if you think about the automobile industry, China really failed at creating an automobile industry in China. They might create parts, they might create certain brands. But really, the US, Korea, Japan, Europe, Germany, they kind of held the grip. And I think they’re saying, guys, the gig’s up and what they’re doing is they’re not going to sell you a battery. They’re going to sell you a car. I actually think if we fast forward 10-years, let’s say, and you look out in London, you’re going to be buying a Chinese car. Now, it might not be called the Chinese car. It still might be called Ford.

Matthew Gordon: Well, that’s my point. That’s where I was going. I thought you were going somewhere else. But they own these brands now.

Anthony Milewski: They’re going to own these brands. And so, they’re going to be vertically integrated. And so, you’re going to have a loss of Detroit in the traditional sense, like the automobile industry is going to be lost. And the reason is because if you’re a Western investor, you know, what was the S&P last year? 30% or something crazy, right? What’s Tesla up? I mean, the market’s on fire. All-time highs a couple of days ago, right? So, why would invest in this tiny little sector. In fact, two days ago, last week, you had all-time highs in every single sector of the S&P except for mining and energy. So, if you’re an investor, you’re not going to allocate to the sector. So, you get no money from the west because your kind of year to year, 12-month compensation or you’re passive and you can’t choose. And then in China, you’ve got this low cost of capital and you’re trying to build an industry. It’s kind of inevitable that it’s happening.

Matthew Gordon: Are you not worried about quantitative easing in the US and it’s a lot of borrowing going on to generate this growth. We had a lot of commentary for Christmas about this, that there will be a moment where the market just implodes.

Anthony Milewski: I’m not a Gold company where I’m wearing my tin hat. Like I think you should interview someone in a tin foil hat. But I do think for that maybe this is one of the most interesting moments for Gold in a long time because you do have all these random checks. But when you’re talking about governments, the one thing I will say is their ability to carry the trade, to kick the can down the road is probably longer than we think. I mean, there are these scary facts like by and large, the Russians have sold US treasuries. The Chinese aren’t buying treasuries, they’re lending them all off. But it’s hard to say like some doomsday scenarios happening next week. I think that the world can’t have the reserve currency, namely, you can export inflation. But you can’t have the reserve currency fail because you failed too. So, we can have this conversation in 10 or 15-years where there’s maybe more than one reserve currency but, you know, should there be a recession? Could there be a recession after a 10-year-old Gold market? Are we going to have a mass panic civil war? No, that’s not happening.

Matthew Gordon: Let me ask you about management. You’re a royalty company. People must approach you all the time asking for money, your money, and you have to do diligence on them. So, you get to meet a lot of management teams, specifically Nickel, if we can stay on Nickel. What are you seeing out there? Are there lots of good teams? Nickel’s an easy thing to min, get into production, get into market, or do you see only a handful of people capable of actually bringing anything to market?

Anthony Milewski: Well, it’s kind of extremes. On the one hand, you have independence in PETA, PETA are this great company. They don’t really need anything, they just kind of keep ticking on. And there aren’t that many small Nickel projects left that are potentially fundable. Dumont would be an example, but it stuck with Waterton. And I think R&C may have the operatorship. But the reality is, they don’t have much control. So, the question for Waterton is, are they going to do anything this cycle or maybe it’s so irrelevant to their portfolio that they’re focused on Gold. I don’t know the answer to that but it’s a great asset that could be moved forward.

Matthew Gordon: Talk to me about the management team. I want to know, what are you looking for when you talk to these guys? Is it all about the asset? Given that you said a second ago, we sit back, the management teams run these things. So, what are you looking for?

Anthony Milewski: I actually find that there’s this weird Darwinian thing, which is generally good management teams end up with good assets or it ends up that way eventually, right? I can’t tell you what a world class asset is being run by buffoons. I’m sure there’s examples.

Matthew Gordon: I don’t want you to name names, but I’m saying what would do they need to know, what gives you comfort?

Anthony Milewski: A team, in particular for Nickel, that understands the technology around that deposit. Especially, is it a sulphide? What’s that going to look like? What’s the process? What’s the flow sheet going to look like? In the face of not only all the HPAL things we talked about, but in the face now of Namaskar, where they raise a billion dollars. They got the flow sheet wrong. Or at least the Capex were unrelated to refinery. It’s a mess. So, I think if you’re going to do a royalty, you have to believe it can be built. And so that means you got to have sufficient technical knowledge in-house to believe that that group can build it. But I would tell you, I don’t really think at least off the top of my head, I can’t think of a project out there that’s actually going to get built by a junior company. It’s a $1.5Bn Capex. What happens is they’re going to bring it up to feasibility, they’re going to get it ready with partners and then in one form or another, they’re going to hand over that operatorship to someone who is actually able to build it, right?

Matthew Gordon: What are the red flags? Are you saying right OK if a junior company is saying “I’m going to get this thing into production” you’re going to call bullsh*t on that?

Anthony Milewski: You can just look at the product and know.

Matthew Gordon: Well, we don’t know. You’re the expert here.

Anthony Milewski: Some of the microcap, massive disseminated laterite low grade ore body as you look at that. Now, that doesn’t mean you shouldn’t have asked us to be clear if it has a $6M market cap today, and uranium is a great example of this, and Nickel triples. Well, that’s $6M market cap company trades as an option. So, it may well trade at $150M market cap through the cycle. So, that doesn’t mean you shouldn’t own it but that’s different than as a royalty company thinking about whether or not you want to give them money to invest.

Matthew Gordon: Right. Good point by that. So, I want to talk about, and for people watching this and for me, how do I identify having spoken to the management team, what should I be asking a management team to give me the clues to allow me to make an investor decision?

Anthony Milewski: So, I would ask myself, firstly, what is my risk tolerance? Am I delving into the speculative? Because if you’re going really speculative, you know Mark Selby for instance, so Mark, I understand in the next two weeks or sometime very soon, Mark is going to have a publicly traded company with Nickel Asset. And that’s an exploration play. Now, look, if he makes that discovery, that’s going to go up. Now, if he doesn’t, by the way, it’s going to crash. So that’s one type of investment. Buying independence is really just going to be a function of cash flow and earnings relative to the price of Nickel. Now, Nickel has a whole bunch of projects in between like, I can’t think, there’s a handful of them in Australia, just blanked a couple of their names and they’re going to fit somewhere in between on the spectrum. And what you have to ask yourself is when I look at that ore body type, do I think that there is a shot of that getting built in the cycle?

Matthew Gordon: Another scenario for you here, okay? You’re going to say buy Nickel all day long. Lots of different options in Nickel, as you should. But if I’m a high risk tolerant, I’ve got some throw away money here, don’t mind if I lose it. What is the type, don’t need to name names, what are the types of Nickel companies I should be looking at? And I’m going to ask you the same in a second if you’ve got a low risk tolerance.

Anthony Milewski: So, if you’re high risk, I would look at really large ore bodies that will trade as options and they will happen.

Matthew Gordon: At some point they will happen. Buy them, put them in your drawer. Done.

Anthony Milewski: However, you should think about it in terms of an option value like theta in other words time decay. You should actually think about that as an option. So, you buy $50,000 today, by the way, if the time horizon is five years, it’s probably going to zero because they’re going to raise money three times. By the way, just like an option, if it happens in the next 24 months, you might do X times your money. So, I’d think about that as an option.

Matthew Gordon: That’s nice. I like that.

Anthony Milewski: For better or worse, like death or glory, I like to have a little bit of money invested in exploration play like when Mark’s thing comes out just for fun, but that’s very binary. You know, you can only twin a director’s hole so many times.

Matthew Gordon: Yeah, we’re not betting the house. But it’s worth putting something on that.

Anthony Milewski: Exactly. Those are the high-risk ones. But personally, my biggest Nickel positions, besides the company I’m the chairman of, are these large option plays where I look at them as time decay theta because I think it’s going to happen sooner than that, then that thing gets diluted down because of capital raises. So, that’s what I would look at. It’s very risky and I think you leg in unless the thing has no market cap as it is.

Matthew Gordon: We were talking about a Gold company in the same position before we kicked off the interview. Yeah, I understand. So, that’s your low risk scenario, or indeed invest in a company like yours which out dishes out dividends.

Anthony Milewski: So, the way that Conic works is we have a loan sitting at the joint venture level that’s getting paid off with cash flow every month. Ramu has been producing for seven years. The first tranche of that is paid off in kind of 14-18-months, depending on Nickel cobalt price. And then once that’s paid down, we’ll start with free cash flow.

Matthew Gordon: Dividends galore.

Anthony Milewski: Dividends galore. There will be no dividends between now and free cash flow I can promise you. That’s not happening.

Matthew Gordon: You’ve got to ask. This is one of which I love, not a lot of retail guys discuss or really understand, and I get a lot of questions through on DM and e-mail and through social media, which is around capital structure. So, that’s kind of my background. I kind of enjoy the structuring of deals. It’s literally the first thing we look at before we walk into an investment diligence process, which is how has this company structured itself from the beginning and what has happened to it, its structure, to this point and why? Again, it’s one of the headings that you put on here because I know that you like this.

Anthony Milewski: A personal pet peeve I have, no debt before production unless it’s part of that financing package. So, like sometimes I see these junior companies that are 5 or 10 years away from production with a convertible note. This makes no sense to me. It’s one thing if this is part of the package of money, it puts you into production, that makes complete.

Matthew Gordon: We talk about near-term revenue, for us. So, if it’s 12-months we could…

Anthony Milewski:  If you have a feasibility done and you’re going into production, that should be part of your capital structure along probably with the stream of royalty like that’s kind of the new capital structure. But if this junior mining company is pre-fee, whatever the case is but years away and it has that a convertible note, you’re going to get blown out. Show me a time you don’t get blown out. I’m sure there’s one. So, I think that’s I think that’s important. I also think one of the desperate moves that a lot of juniors make just in general is they give away the offtake way too early and they give it years away. And the problem is, if you give the off take away five-years before production, then actually really materially hinders and a lot of cases your ability to raise financing for production because the person who might fund you no longer can have the offtake. So, I think that’s why should leave the offtake unencumbered as long as you can.

Matthew Gordon: Great point.

Anthony Milewski: And if you’re years away and it’s encumbered to me, that’s a big red flag.

Matthew Gordon: But a lot of juniors and we spoke to quite a few recently talking about announcements of offtakes imminent and we don’t say anything but we’re looking at them and going, what terms could you possibly be empowered enough to negotiate now? Compared to down the line?

Anthony Milewski: It just reflects the capital market. There’s no equity. There’s very little equity there.

Matthew Gordon: But they’re looking for a catalyst. They’re looking for a moment to say something to the market that we’ve done this off take agreement and the terms of which are usually very vague and if they are in a bit more detail, then they are fairly one sided. So again, I’m like you. I’m not I’m not a fan of it. And I’m even less profound when the CEO touts that as that being a moment for significant change in the company’s fortunes.

Anthony Milewski: Certainly, like for graphite, it’s a very unique market. But for copper and Nickel, I think it’s a bit odd and it doesn’t make any sense because especially for a specialty market, like a mixed hydroxide or even like a lithium, it’s such a specific product you’re making that some offtake contract is going to basically be referred to a specialized product, which you may or may not be able to make years down the road. So, I think it’s a false catalyst and it’s probably driven by the fact that in order to get financing, certain types of debt, you ultimately will need for bulk commodities in particular, but for a lot of places, you need to take or pay contract that people can see that you can sell the material. I think what’s happened is management teams have seen that be successful. They started to draw that out was way too early. So, I think it’s a nonsense.

Matthew Gordon: What are your other pet peeves? I mean, for me, when people start talking about MIU’s or non-binding contracts or those sorts of things, which are meant to signify moments.

Anthony Milewski: I don’t want to criticize. Part of the problem is, put yourself in the shoes of the management team, you’re doing the right thing, you’re generally playing by the rules. And literally no one cares. Out of all of your listener base, one-person cares. And so, you’re struggling to generate interest because you have a view on name a commodity. I think there’s this pressure that gets put on the management team to manufacture a story.

Matthew Gordon: That’s the moment that worries me most, when we’re having discussions, when they are manufacturing…

Anthony Milewski:  That’s mining right now. Everybody except for Gold is having a moment. It’s manufacturing a story.

Matthew Gordon: But it puts retail investors, who perhaps haven’t seen cycles, or haven’t seen these moments where these stories played out before, puts their money at risk. That’s the truth, right?

Anthony Milewski: You could trick someone into buying in.

Matthew Gordon: So, I think that’s unacceptable. Truly unacceptable. And when we see that, we will call it out because it’s tantamount to lying effectively, or theft, as far as I’m concerned. It’s a bit extreme, but that’s our view. And we’ve seen too many of these juniors put in difficult positions and make difficult decisions, make the wrong decisions with other people’s money whilst they’re being paid a salary.

Anthony Milewski:  Otherwise they have no meaning actually, they’re not binding another party. It’s just a nonsense. Your point is that while sometimes it gets people to buy the stock, they shouldn’t otherwise do it.

Matthew Gordon: Yeah. Share register. That’s another point you make here. This is kind of interesting, because there’s a train of investment thought, which is if you just basic invest in anything Eric Sprott invests in.

Anthony Milewski: Well, that’s kind of the Canadian model right now.

Matthew Gordon: And it kind of works right now. You get in a bit late, you get out a bit late, but you’ve made a bit of money probably because that name, there’s a few others obviously, there are more options in the market than Eric, those names going in signify to retail that this is going to work because Eric’s money has gone in. Now, it’s also worth noting that for Eric some of this money is option money, people like Eric, they’ve got hundreds of millions available to them and this is option money. So, it works out great, but doesn’t matter so much. He spreads the love. Do you think that’s actually a good investment strategy? Would you recommend?

Anthony Milewski: Well, it certainly would have been successful over the last year, I think with Gold and the other stuff, I don’t think you should ever rely on someone else, you should always decide based on your situation and your views. So just blindly investing where Eric invests is probably not the best strategy because eventually it won’t work out, I don’t think. I’m just not criticizing him, but just saying you should pick your own names. So historically, you’d say is this a big company, is this a big fund? Is that being funded? But what I’ve noticed is actually the stickiest money, interestingly, is retail money. Most of the money now in mining is pretty short term. I mean, setting aside its own private equity money, which is expensive. It’s pretty short term. And so historically, whereas you’d always BlackRock in, as you know, whoever in, I’m not sure that’s as much cachet to becoming an institutional stock. I don’t know that carries as much weight as it once did.

Matthew Gordon: It has different effects for different companies, clearly.

Anthony Milewski: The meaning is, at one point, the institutional investor brought the big equity in and so you went from $100M to $1Bn and you could raise the money to build that big mine. And now that’s just not the case.

Matthew Gordon: I’ve seen too many variances. I’ve seen companies which have got big retail and it’s helped with liquidity and it’s all great. And then I’ve seen other companies where the retailer goes, pardon phrase, batsh*t crazy and it’s stalling the company again, because there’s all sorts of rumours, unfounded or misinformation or whatever, so different horses for different courses.

Anthony Milewski: People are pretty worked up.

Matthew Gordon: Yes, they are, because it’s their money. And I kind of like the fact that people get impassioned because this is their money. This is their hard-earned money that they’ve earned or been given or inherited or made in some way, so well done them. And part of this is entertainment value. I say to the guys, it’s kind of WWE, except without the fancy dresses here. It’s entertainment. There’s money to be made. And I like that. And we have a lot of very passionate followers and subscribers, so I like that. But I’m coming back to the share register component here. So, you’re saying that the mix for you, you like the retail being involved more than the institutional or how does it work for Conic?

Anthony Milewski: Do you know what else I actually like? I actually like does the CEO or does management actually own any of the stock? I guess it’s like the classic Canadian thing, if someone jams a deal together, whoever that person is sitting in the shadows, the thing goes, they sell their stock and have a good life. So, I think it’s nice to see that the management has stock in a company.

Matthew Gordon: Always. Got to.

Anthony Milewski: It’s not realistic in these big Capex projects for them to own 10% of it or something. But at least if they have enough to make it meaningful for them. I like to look at what are their options looking like. Does it matter if it succeeds or fails? If it doesn’t matter, then why should it matter to you?

Matthew Gordon: This is a whole other discussion here because we get people coming in with lots of views, where you’ve got to pay for the best or they’ve got to pay themselves to make their family comfortable, allow them to concentrate on work or that you’ve got to buy success by paying these guys the best to incentivize them to work harder. Hundreds of scenarios. I mean, personally, we don’t like to see a big salary paid. We like know options and success fees and all of those things that you would hope so if it works out, shareholders make money. They make money. It’s all great. One of our guys is doing an article at the moment “Top 10 best excuses as to why they need to be paid so much”. And we’ve heard them all from divorces to actually things didn’t quite work out at the last company, I’m still paying down what I owe there etc. There’s lots of reasons. But don’t make it the shareholders problem is my view.

Anthony Milewski: It should be set up such that they’re incentivized to make it work. Because if they’re not, if it’s just a wicket, then what do they care if it doesn’t work? Let’s go find a new wicket. So, I think however that is set up and there’s different ways DSU’s, RSU’s, options that can be said up a lot of ways, but you should be able just to look at it and ask them what happens if this sells for 100% premium? Are you making any money? Or whatever the numbers are in that particular situation.

Matthew Gordon: Yeah. Okay. And I think that’s probably one close to your heart which people should read the paperwork. I always say to people, why get angry now? You should have read the paperwork before you put your money down. You know what you’re getting into. If you don’t know what you’re getting into. Don’t invest. It’s really simple. Don’t put yourself in a position where you might get pissed.

Anthony Milewski: On that point, I think a lot of times, especially in Canada, lets speak about Canada, that’s a market I know really well. There’s a huge amount of information available for retail shareholders. What I would say is if the amount of money that you’re putting into this name is going to impact your mental health, it’s going to cause you stress if it goes to zero. So, it’s one thing if you’re this rich guy, you buy $10,000 of it and like, who cares? If that’s you, then don’t worry about it. Whatever that number is, when you get to that number, go on Sedi, download the AIF, download those documents or just read it, because I think what you find is most companies are actually fully disclosed. It’s just the people that read it. So, I would say if the amount of money that you’ve put into stock matters to you, that could be $1 could be $1M, if it matters to you, take the time to go on. It’s all free. All disclosures free. Download it and read about the management profiles because you know, what you’ll find is whatever is on the website is the best foot forward. But when you get into the disclosure documents, you might see there was a cease trade order in their last company, or you might see nothing. But the point is, if it matters enough to you that you’re going to be stressed if it goes wrong, then you should definitely read the paperwork.

Matthew Gordon: Now, we found ourselves in a scenario recently where we interviewed a CEO who got awfully upset that we dared to ask him about his remuneration package and how that was structured.

Anthony Milewski: Is this the guy that’s going to sue you?

Matthew Gordon: He’s going to sue my ass.                               

Anthony Milewski: For reading the disclosure?

Matthew Gordon: That’s not happening. We ask them some tough questions, but it’s all public information and there’s nothing wrong with that. And I think the last time we spoke, we asked you some pretty tough questions about your remuneration after Cobalt 27. You answered them. It was fine. But that backs up the point. It’s all publicly available. So have a look. If it’s going to irritate you, don’t invest. There’s lots of companies that will probably meet your criteria but do the homework, I guess that’s what I’m saying. OK, we’ve got to go. Thanks for coming to London specially to see us and to hand in the first draft, I appreciate that. I literally can’t wait for you to finish it on the plane on the way home. And we’ll look forward to publishing it.

Anthony Milewski: Thank you very much for having me as always.

Company page: https://www.conicmetals.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A photo of Conic Metals Chairman, Anthony Milewski

Anthony Milewski Talks Nickel

The Conic Metals company logo.

Crux Investor recently sat down with nickel market expert, Anthony Milewski, the Chairman of Conic Metals Corp.

Investors might want to check out another nickel investment article. They may also want to watch our recent interview with fellow nickel expert, Mark Selby.

Milewski gave us a fascinating insight into all the moving cogs within the much-confabulated EV revolution, including some nickel investment advice that nickel investors will likely find of great use.

We discuss:

  1. The Technical Side Of Nickel: Educating Investors On The Intricacies
  2. Nickel Investment Strategy
  3. Nickel Investment Red Flags
  4. The Best Nickel Tips

Company Website: https://www.conicmetals.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Conic Metals company logo.

Cobalt 27 (TSX-V: KBLT) – The Nickel Market Explained (Transcript)

In our second interview with Anthony Milewski, CEO of Cobalt 27 (TSX-V: KBLT), soon to be Nickel 28 due to a recent acquisition from Pala Investments. It’s been a bad year for Cobalt and we ask Anthony what he has learnt over the last 2 years. He tells us that demand outstripped their forecasts from the IPO but that the supply-side was unpredictable.

We also discuss artisanal miners, small metal market and pricing mechanisms, the need to educate analysts better so that buyers can make more intelligent investment decisions and the importance of liquidity.

The highlights:

  • Update and recent news – Pala Investments and Nickel 28.
  • The Cobalt market drop.
  • Big issue in the space and what needs to be fixed.
  • What would have been done differently? Lessons learned.
  • Difference between Cobalt and Lithium.
  • Nickel 28 and how the strategy reflects Cobalt 27.
  • Batteries and the evolving market of Green Energy and Nuclear Power.

Click here to watch the interview.


Matthew Gordon: It’s good to have you. We had a good chat last time. Now a few things have happened since.

Anthony Milewski: Yeah, one or two.

Matthew Gordon: One or two, so why don’t you tell everyone what’s happened?

Anthony Milewski: Yeah, since we were last in here, Pala Investments has made a bid for the company. And with that bid there’s a spin co, that will spin out some of the Nickel assets into a public company, Nickel 28. It’s really unexpected…

Matthew Gordon: 28th on the periodic table…

Anthony Milewski: Yes exactly, Cobalt 27. Nickel 28

Matthew Gordon: That is really clever, really clever. 

Anthony Milewski: What does that mean for Copper in the future? It’s an interesting time, a lot going on corporately. As you know, the circular is prepared in the coming weeks. Ultimately the circular prints, I think in probably, call it three weeks. And then the shareholders vote, probably mid to late August.

Matthew Gordon: Okay, well, we should get together around that time to get into the detail. That’d be fantastic. So why don’t we keep it broad? Last time we spoke you educated us about the marketplace. So why don’t we start with Cobalt? Obviously, it’s had a bit of pressure on it recently. What’s been going on?

Anthony Milewski: Yeah, Cobalt a year ago was $44, today, it’s probably $13.50 to $14. I think the outlook for Cobalt and my view of the outlook for Cobalt hasn’t changed. I mean, incredibly bullish.  Timing, of course, can change, right? And so, I think there’s a couple of key factors that have impacted the Cobalt price. One of those is simply the DRC in Congo.

Matthew Gordon: What’s happening there?

Anthony Milewski: Well what we saw was artisanal miners, which is literally someone showing up with a shovel, very hard to control. Last week, tragically 36 illegal miners died. So artisanal miners effectively are just digging up the material for their own kind of account and then they sell.

Matthew Gordon: Remind us why you think that’s not necessarily a good thing. So obviously they’re looking after their livelihood, but what are the impacts, just remind us?

Anthony Milewski: Well, there’s a few kind of aspects of that. One is simply health and safety. If you go dig a hole, and it’s not engineered, it can collapse.  So that’s part of it. Another part is just environmental damage. When you don’t have a Feasibility Study, when you haven’t properly engineered it, you can cause significant environmental harm. Then I think the third, and the one which has gotten the most attention is, of course, child labour. And we need to be clear, not all artisanal mining is child labour. Those are two separate issues. But all three of those are key issues. And what we saw was, when Cobalt ramped up into the $40’s, a wave, kind of tsunami of Cobalt came on. Now what we’ve seen on the way back down is, that Cobalt, that incremental artisanal producer, really dies out of the market, probably in the high $20’s. Around $29. So right now, artisanal mining has really slowed down compared to the peak at $44. But you have a pretty significant amount of material from that period that’s not able to be consumed yet, just because of one origin, but two, the market is not there for it. And then I think you had de-leveraging in China. What that means is consumers of materials, for your listeners, consumers will carry a stockpile and then they’ll borrow against that for working capital. And if for whatever reason, interest rates hike, or something like that happens, they’ll reduce their stockpile to help manage their working capital. So, you had de-leveraging in China and the artisanal material and what you’ve really done is created a situation where there’s a surplus in the market, temporarily.

Matthew Gordon: By de-leveraging – just to help everyone with the terminology here – you mean the Chinese running down their stock. What do they see, that we should know about?

Anthony Milewski: The read through was just the cost of capital. This is very much, “you are a business and you’re borrowing against your stockpile”, and there’s a cost of that borrow whether it’s 2% or 7%, or whatever it is. That’s just part of your working capital. And so, de-leveraging in this context means they’re reducing the amount that they’ve borrowed. And then a corollary to that is a margin cost. At $44 the amount you can borrow against this is one thing, at $14, it’s another. It’s really, we’re talking about managing capital structures, so that put a whack of material into the market. And then I think really, and most importantly, Congo, put a whack of material and then of course, the final factor would be new a mine ramp up and increased output.

Matthew Gordon: Quite a few moving parts there, but in terms of the total size of the market, how much does China, DRC represent?

Anthony Milewski: The official market today is around 110,000 metric tonnes.

Matthew Gordon: Is there an unofficial market?

Anthony Milewski: Well, I would say that the Congolese material that’s artisanally produced is definitely unofficial. I would say that consumed unofficial market – and no one knows for sure. You can look at export data, but it’s probably not that accurate. It’s at least another 20,000 to 30,000 metric tonnes. However, the amount produced in that run up period could have been, and most likely was, materially higher than that. It’s interesting because actually if I had sat here with you and projected EV demand today at the time of the IPO, what I would tell you is we were wildly wrong, we were too conservative. So the demand has actually outpaced any analyst’s expectations. It’s just that on the supply side, there’s been some bumps that probably mean that Cobalt is less interesting for the next three years, although ultimately the demand side is intact and more bullish than we’ve ever seen.

Matthew Gordon: That’s going to be quite scary. You’re saying we were wrong, but in a good way.

Anthony Milewski: Yeah the demand side. Yeah, we over-estimated demand.  That’s true.

Matthew Gordon: Let’s go back a couple of years. You’re saying, “Right, we’re doing our projections. Cobalt is…” and I remember these conversations from brokers. They were like, “Have you got anything in Cobalt in Africa?” as I’ve done a lot of work there. And that was the big thing two, three years ago, and you must have been having the same sorts of conversations then. And you think, Cobalt, battery market, Nickel, huge correlation, this has got to be a good thing. But obviously, the market has come down. It’s gone from $40 down and you’re saying it’s entirely due to Chinese, DRC actions, things you couldn’t predict?

Anthony Milewski: Well, I mean, there’s also an element of legality. The particular material like the child labour, conflict material in Congo, it’s a very complex issue. For instance, your refinery in China, even if 9 out of 10 of your sources are legitimate, if the 10th one isn’t and you are just combing all the material…Atoms are atoms, and it’s all mixed now. I think that what I thought on the front-side was that ultimately automakers, but also really consumers and battery makers would demand a higher level of transparency in that supply chain and it’s definitely started to happen. But I think the lack of supply chain transparency allowed for a huge amount of artisanal production to come into the market. Now, there’s been a great Wall Street journal article six months ago, and the FT has done some work on it. And I think they’ve brought this issue to light and there are a bunch of different groups working on ways, maybe using Blockchain or like a Kimberley style process, but that hasn’t happened. I think the lack of that process allowed for a huge amount of artisanal to come into the market that was not anticipated because I don’t think most people really believed that the Cobalt in their phone may have been dug up by a nine year old boy. 

Matthew Gordon: But those things are driven by a number of factors. Someone’s got to pay for the building of an AI or a Blockchain solution to be able to do this tracking. Is it necessarily in each of the relevant company’s interest or the industry’s interest to do that, because that’s another overhead at a time when it was quite tough. It’s also, and I think we touched upon this the last time we spoke here, is these things are driven in other sectors – whether it be environmental or otherwise – issues are driven by marketing initiatives and go “Well, this is a point of differentiation for us.” So the automotive industry would need to push this harder. The Chinese would need to push this harder.

Anthony Milewski: And diamonds is the example, right?

Matthew Gordon: Absolutely.

Anthony Milewski: Diamonds and also Tin is another example of that.

Matthew Gordon: Yeah. So, what’s got to happen? What’s going to give in this space because it’s a big issue? It’s one of the first things you look at.

Anthony Milewski: I think one of the issues was the automakers said, “Oh, this isn’t our problem, this is really the battery maker’s problem.” I think that was initially the case. And so ultimately, the consumer with all the reports in media, are saying, “Guys, this needs to be…Custody needs to be…Will it be shown all the way back to the mine?” So, I think the consumer is now driving that and the automakers are unable to just throw their hands up and say, “Well, it’s not us.” And you are starting to see some of that accountability flow all the way through, but I think it’s such an esoteric thing, including Lithium, but different issues. These are industrial materials that the automakers, by and large, had not used historically, at least not in large quantities. Unlike say Copper or Aluminium. I think they didn’t know what they didn’t know. That was that was part of the learning curve and all these factors which were hard to foresee created a scenario now where the market’s probably quiet for a few years.

Matthew Gordon: If I look in another space, plastics, recycling of plastics.  Huge push from the public. Lots of PR around it. We saw David Attenborough talking about it at the Economic Forum recently. I was listening to an article the other day about the UK – we ship a lot of plastic over to Turkey to be recycled. So forget the carbon footprint issue there. It gets to Turkey, only 30% of it gets recycled, the rest of it is landfill. We’ve just moved the problem, because of what you’re saying, there’s no tracking and no accountability. But the public feels there is. They’re filling up their recycling bins with great pride, but there’s no accountability in terms of, or visibility of where that goes or what happens, and therefore no one cares.

Anthony Milewski: That’s a great observation and I would just say the whole green revolution is intensely complex. 

Matthew Gordon: It is.

Anthony Milewski: And displacing Coal is great and we’re doing that. But you also have to think, “Okay, what are the implications of whatever the other things are that we’re mining? And what are the products we’re making?  And can you recycle them?” It’s intensely complex in a world with regulatory environments in every single country. Hopefully the WTO (World Trade Organisation), and some of these global organisations are working on initiatives that can actually be implemented. That’s why the consumer hopefully puts up the demand, because if the consumer buys the car, they’re voting with their pocketbook and that would be the most effective way. I think the way that the consumer does that is through, like I said, there’s a guy at the Wall Street Journal who has covered this really well – by making that information available to consumers, I think that they’re ultimately voting with their pocketbook. And if they’re not prepared to buy a car because the basic materials custody isn’t shown, then that’s a plus. On a practical level, that’s why I think it can manifest itself.

Matthew Gordon: Yeah. Okay. But I would argue with the plastic example, they’re voting with their pockets to a point and then it gets grey, very grey. Conversation for another day.

Anthony Milewski: Yeah, it’s a good observation. It’s not perfect and we have 100 years now of carbonisation, of intense carbonisation around the world. And hopefully it doesn’t take a 100 years to decarbonise, otherwise you might find that our great grandchildren don’t have a place to live. But I do think that these are intensely complex issues. But, the technological advancements are happening at an accelerated pace and the battery revolution that’s happening in stationary storage as well is changing the economics of renewable energy. I think it’s all positive, but there are definitely going to be speed bumps, and we shouldn’t forget that some of these industrial minerals are coming from tough places and we should examine how they’re being mined. In the case, to be clear, in the case of Glencore or these more mechanised mines, I think it’s pretty transparent how that’s happening. And it’s okay. I think where it’s more complex is in a poor country like the Congo. Artisanal mining is not universally illegal. There are artisanal mining claims and so it’s breaking down that issue into the sub issues around child labour and environmental and permitting, that’s complex and maybe beyond the reach of someone who’s casually thinking about buying a car.

Matthew Gordon: You’re one of the smartest guys I’ve interviewed. You’re a bright guy. If we look at you, look back to two years ago. What would you have done differently then? What would you have demanded of the companies that you invested in, back then, which may have changed the…because we’ve all got a role to play in this. The public has got a role to play in it, but you’re one of the guys at the front of this. You’re in the mining space.

Anthony Milewski: We definitively did not invest a single penny and haven’t invested a single penny in the Congo.

Matthew Gordon: So that’s one thing.

Anthony Milewski: And I think that’s the key. That was the big thing because if you look at the trouble that Glencore’s had, and that’s a big-cap, major company, the feeling was always like, ”How are we going to do it if they can’t do it?” So that’s avoidance…

Matthew Gordon: …Of my question?

Anthony Milewski: No it’s the sin of omission versus the sin of commission. What wouldn’t you do differently without being able to predict the price? Maybe one of the ways would have been to get involved at the very beginning and bring to the forefront that artisanal issue.Be a voice in that because I think then maybe the demand for that material wouldn’t have been there and so you wouldn’t have had as much of it come into the market. To think you would have stopped it, is impossible. But at least if you had the battery makers, the Umicores, the Panasonics saying from the outset, “We don’t want that material. We don’t care how it comes to us.” If you had that from the beginning, maybe what would have happened was less material would have come out of the Congo. But it’s really hard to say because the flip side of this is you’re an individual, you don’t have a livelihood, and someone presents you with the way to make – whatever the number, I don’t know if it’s $20- whatever that number is a month, and that’s your only livelihood, it’s pretty darn hard to turn that down.That’s why these are intensely complex  

Matthew Gordon: I get it and I don’t think one person fixes it all, but it’s a case of we all have a role to play, people like you more than most.  You can’t predict the future, but you can learn from the past. You are obviously getting into a new venture. We’ll talk about that in a few weeks time in terms of what that structure is and what it looks like. Are there things that you’ve learnt? I said you’re smart, but are the things you’ve learnt in the last two years which make you think, “Well, I’m going to look at the market differently, I’m going to look at my company differently?”

Anthony Milewski: I think there are interesting things to take away from that, which is in a commodity like Nickel or Copper, where it’s a much bigger commodity, I think you have more efficient pricing mechanisms with more liquidity. I think the market is more efficient. And in Cobalt, but not just a Cobalt, in a lot of smaller, more thinly traded metals it’s more complex that pricing dynamic.

Matthew Gordon: Well, I’ve been interviewing a few Uranium people who would definitely agree with you on that one.  But there are many.

Anthony Milewski: And so I think one of the interesting things that I observed is even the difference between Cobalt and Lithium. If you look at it globally, there are how many Lithium projects out there that are interesting? There are plenty. And consequently, there’s enough market cap spread among a variety of players to allow for proper analyst education. And for a sell side community to really fully understand Lithium or to really understand at least at a pretty high level, they get the pricing and it’s industrial and it’s a chemical and hard rock. So they sort of have that. When you look at Cobalt, there’s no one else out there because actually, there’s no such thing as a primary Cobalt mine, with the exception of Manajem in Morocco. And so, what you’re really talking about with Cobalt is Nickel mining globally, or Copper mining. And what that means is even though we have a lot of analyst’s coverage, it’s very challenging for an analyst to be fully abreast of the changes because they’re not covering seven Copper companies. And with that comes challenges around misinformation. It comes with challenges around ultimately where the equity price is because buyers don’t necessarily have the best information because it’s not like… let’s just take Copper or even Lithium where I think you have a lot of different data points and that makes it a little bit easier to come to a more educated view. Whereas with Cobalt, for instance, to get one of the main pricing sources, you have to pay. If you just own $10,000 of the stock, you’re not going to buy the service. There’s that kind of dynamic which is interesting.

Matthew Gordon: That’s interesting, but what about you? That’s the market.  The question was, what do you think you’ve taken away from the market?

Anthony Milewski: Well the point is I think that there is value in liquidity. That’s really the message. And Nickel, I think one of the interesting aspects of Nickel 28 will be that, as chemistry shifts towards a more Nickel rich battery.

Matthew Gordon: Tell us about that because you did mention it last time in terms of the construct and the different inputs there.

Anthony Milewski: What’s happening is the original chemistry is at 111, save it for Tesla, which is kind of a different story. And today it’s a 532 moving into a 622 and an 811.

Matthew Gordon: What are people looking for? Why is this migrating…efficiency I guess?

Anthony Milewski: Yeah, the driver of the change is simple. It’s consumers, because consumers are demanding two things; range and recharge-ability. And so those chemistries are attempting to maximise energy density for range and recharging efficiency. And ultimately as you shift into these Nickel rich batteries, what they’re trying to do is have a car that can go as far, or further than current cars, and that’s really down to the size of the battery. Size of the battery also equates to cost, more basic materials you have. And then right now what they’re trying to do is get rechargeability down to be something more akin to a gas station stop. It’s getting that into that sub 15-minute level would be big.

Matthew Gordon: Yeah. Supercharge.

Anthony Milewski: Or maybe that’s not possible. I mean, they’re looking at other solutions in Israel right now. There’s a stretch of highway where they’re actually charging as you go. So there’s different ideas and different solutions. But back to Nickel 28, what is interesting about the liquidity aspect is, Nickel and Cobalt are intertwined, globally. What you see in Nickel 28 is exposure to a producing mine and you also still retain some Cobalt exposure, but you have the potential I think for a much bigger story in Nickel when the Nickel moment comes. And that comes as you see not only the ramp up in purchase of electric vehicles, but also that Nickel rich cathode…   

Matthew Gordon: Well, that’s what I’m asking. Because if we look two years back, you had a view on the Cobalt market, which was true at the time…

Anthony Milewski: Which is still true. Everything is true…

Matthew Gordon: Yeah. It’s outperformed in somethings, but things have affected the price. You think that from the investor’s point of view, the price was $40. It’s now a third of that and you can’t predict these things because like you say, the demand has outstripped even your expectations, but the market got hit. What’s the learning? You are going into the Nickel market now, you’re making your call today based on the data that’s available and this changing battery environment.

Anthony Milewski: Nickel’s at the bottom by the way. This is the moment for Nickel.

Matthew Gordon: Okay, this is the moment for Nickel.  Tell us about some of the hypothesis or thesis behind that.

Anthony Milewski: So Nickel is a 2.2M tonne market with, I would say over 70% today going into Steel. It’s a Steel market. But that market is really two markets. You can cut that market in half, with half of it really being like an NPI, a Nickel Pig Iron product and the other half being a class one Nickel that goes into things like batteries. And what the really critical thing for listeners is that the crossover price to create class one Nickel from NPI is probably double Nickel’s price today. There’s lots of Nickel sitting in Indonesia, but in order to take that and put it…

Matthew Gordon: That’s the pig iron version?

Anthony Milewski: Yeah exactly. In order to take that and put it into a battery, you’re talking about a huge CapEx, and you’re talking about the need for a double from here most likely. That’s the delta. It’s really interesting what happened in the last Nickel bull market was China came in, building like crazy, industrial Revolution. Nickel gets bid up, and then this new technology came out, which dramatically lowered the cost. And I think investors still feel the concern around that and so what that’s done, combined with the fact that HPAL – High Pressure Acid Leach – has been one of the truly great ways to destroy value in mining. Whether it’s Gora who I think might be six or seven billion, two billion intended, Ambatovy probably almost single handedly put Sherritt almost out of business. These HPAL cost overruns have been in the $2Bn to $5Bn range, so those overruns and then the experience of creating a process to dramatically reduce costs in the last cycle has meant that almost no inflows have come into Nickel in terms of building new production. It’s once again a constraint story and then you have to subdivide that market and you say there’s almost no production of any note that I can point to right now that’s going to be class one Nickel, adding that million tons. It’s all going to come online in the next three to five years.

Matthew Gordon: We’ve seen a couple of reports. What are the sources that people can go to just to understand the Nickel market a little bit better.

Anthony Milewski: I mean you can Google. You know, Benchmark has some great, Benchmark Minerals has some great articles that are free. Obviously CRU is great, but I think that’s paid. There’s been some great…  Annals Reports, McQuarrie…

Matthew Gordon: Worth looking at.

Anthony Milewski: Yeah, you can Google it. There’s a bunch of stuff out there.

Matthew Gordon: They all seem to be, give or take, predicting quite a significant growth, and a ways out. Not just short-term, but the long-term for Nickel does look very strong.

Anthony Milewski: Especially as the chemistry has become more Nickel rich and by all accounts, that’s how we’re going. And the other part which is interesting for investors – and this is not a criticism of Cobalt – but a realisation, is that there’s a wide range of things you can buy. You can buy Norilsk or Western Areas, larger cap companies. You could go buy Turnagain, which is at Giga Metals which is a Nickel Sulfide, huge undeveloped. $10M to $15M market cap, can easily be $400M to $500M in the next cycle. Or you can buy something in between, like a Nickel 28. And so, I think the ecosystem will be sufficiently large, that it will be able to attract much more liquidity across the full spectrum of opportunity.

Matthew Gordon: Let’s talk a little bit about Nickel 28. We’ve had Cobalt 27. We’ll discuss the deal in a few weeks time when the circular’s out. I’ve made my opinions public on it already. What’s the thought around what you’re trying to build there with Nickel 28? I’m going to assume Pala is going to be involved in some level?

Anthony Milewski: I think they’ll still be a shareholder for sure. But I think the key assets in that company and they are really three. The first and most important asset, of course, is the Ramu joint venture. This is probably the single best producing HPAL facility ever created. It’s operating above capacity. It’s almost guaranteed that your watch right there might have Cobalt in it from this facility. It’s going into all the batteries and automobiles, major automobile makers end up with this material. So this is a great asset, this is a world class asset and it’s run by a world class operator. It’s going to be our job to really tell that story to the market, Justin and I. Then you have a royalty over Turnagain. Turnagain it is one of the largest undeveloped Nickel sulfide deposits. It’s a personal favourite. I’ve bought in the market. I think I probably own around 4% or 5% of it now, personally, which is fully disclosed. And then there’s Dumont. Dumont is shovel ready. However it’s owned by a private equity firm by and large, and their intentions have not been made public as to what they’re planning to do with it. So you kind of have these three assets, which give you…

Matthew Gordon: We know it through RNC Minerals, obviously. We know a little bit about it. It’s a world class asset in terms of scale.

Anthony Milewski: It’s a big CapEx as well.

Matthew Gordon: It’s a big CapEx. They’ve got a few things to work at. I think they upgraded their DFS recently, made an announcement on that, but now people are looking for guidance as what they’re going to do next.

Anthony Milewski: Yeah, that’s why Turnagain is great. Turnagain’s CapEx is more like a $500M to $600M CapEx. So you kind of have the spectrum. You’ve got earlier stage in Turnagain. You’ve got Dumont, which really needs to work out its CapEx. I agree with you. And then you’ve got production. And the important thing here is Nickel is the primary on all of those, but every single one of them also has the potential, or is a significant Cobalt producer.

Matthew Gordon: See that comes back to your strategy with Cobalt 27.  Certainly when we spoke last, you were trying to cover a bunch of bases, kind of blend that risk profile. And it sounds like you’re doing the same thing here again, right?

Anthony Milewski: Yeah, exactly, and also world class assets. I mean, if you look at that asset base, I can really arguably only think about one or two other assets, which by the way aren’t even available, that are out there for that portfolio. And so once again, when people buy it, it’s going to be an expression of not just the adoption of electric vehicle, but also the transition in chemistries. You see CATL and some of the others really pushing this 811, and Valet has been a big proponent of this, what’s going to happen in the Nickel market, and so I think as you see that shift, Nickel will come into favour in a big way in the coming, I even think by later this year in terms of people’s interests will come into favour, but certainly in the coming years.

Matthew Gordon: People need to believe in the Nickel story. They need to believe your model.

Anthony Milewski: They need to believe in the EV story because this is really still driven by batteries.

Matthew Gordon: Okay, so let’s talk about batteries for a second, because again, you’re great at educating people on these things. The battery story is evolving, Nickel is becoming a bigger proportion of that story. You’ve got things like Vanadium coming in for these longer storage batteries, where they can take renewable energy and keep it for a little bit longer. There’s a whole evolving universe around batteries. There’s a lot going on. And there’s going to be new technologies as well. There always is. Things come on right.

Anthony Milewski: Yes. I’ll tell you how it looks today. On the EV side, definitively unaware of any major push outside of the Lithium-Ion battery. So that’s electric vehicles. On the industrial side of electric vehicles, like auto buses, and…

Matthew Gordon: Boats, planes…

Anthony Milewski: I would say with buses and potentially like trucks at mine sites, fuel cells are interesting, because you’re on a fixed route. Okay, so infrastructure, so there’s that. And then if you shift over to home use, Lithium-Ion batteries are interesting for home use. But then you have all these other applications, like if you want to talk about renewable energy, then Vanadium Redox Battery is intensely interesting because of its size, its recyclability.  

Matthew Gordon: Absolutely.

Anthony Milewski: And also the cycle length.  Right?   

Matthew Gordon: It’s fantastic.

Anthony Milewski: Yeah, so what you’re going to see inside of the storage market is a multi segmented market. Let’s pretend that you’re in a remote place in the Congo. Well, flying in Lithium-Ion batteries probably makes sense.  Let’s pretend you’re a massive solar wind farm where you can drive a truck up to it, Vanadium Redox is probably going to make sense. And by the way through the cycle, as this is really a transformation as it occurs, you’re going to see things like the Lead acid battery is going to have its place and there’s going to be a Zinc battery. And so there’s going to be multiple, well, the technology exists, there are multiple technologies that will have multiple applications across that grid storage. You know, for instance, if you go to a neighbourhood where everyone’s house is already built, you’d probably put a solar roof on and a Lithium-Ion battery. If you’re building a new subdivision, you’d probably put a solar roof on, have a transformer and then you’ll have a Vanadium Redox battery. And so what you’re going to see is, unlike the electric vehicle which is very well set for the next decade in terms of technology, with these applications you’re going to have multiple technologies. And I actually believe – and I wish I knew how to monetise it – but I actually believe that in America, every single person is going to be an energy trader. And what I mean by that is I think over the next 20 years everyone’s going to have solar roofs. And you’re going to be able to buy and sell energy credits, because you’re going to have battery technology. People in Arizona are going to be selling people in the North east energy.

Matthew Gordon: There is a little bit of that going on. We’ve had conversations with traders here in Europe about trying to build up an ecosystem around that where they can they can trade across borders…   

Anthony Milewski: Well, right now in the States, you can actually, depending on the utility, you actually can sell — it’s a two-way meter and you sell in and you draw out. But I actually envision something very different where this technology is advancing so quickly that, and maybe it will come in the form of a token. I don’t know what it will look like, but we’re all going to be, If you own property, you’re going to be buying and selling energy, like a personal trader thing. I think that these are the evolutions that are going to go. But a key point on the Vanadium Redox Battery and batteries more generally is, and I don’t know how close you’re following this, but it’s dramatically reducing the cost of green energy. And the reason is because if you couldn’t store the energy, there were times when you couldn’t put it into the grid. So now with batteries, you’re able to balance that out more and push it into the night or draw off from the night or put into the day. You’re able to do different things.

Matthew Gordon: Yeah, more constant stream. Yeah, that’s very exciting. A completely opposite view of that yesterday was put to me by someone, was that a lot of this renewable energy is actually prolonging the life of fossil fuels in a way because there’s so many different solutions out there which have their own issues. I think this guy was referencing wind for instance, or solar…

Anthony Milewski: Was this the Uranium guy?

Matthew Gordon: He may have been the Uranium guy. I said you were clever.

Anthony Milewski: I tell you, the Uranium thing is interesting, but unfortunately for folks, the problem nuclear is, and it’s totally irrational because if you look at the number of deaths in coal mines versus nuclear, it’s not even close. But people are emotional. And when something goes wrong in a nuclear power plant, it’s scary and it’s a huge media event. But I agree with the premise that nuclear would be the cleanest form of energy and maybe they’re able to kind of figure out how to make it safer. Although they would argue it already is extremely safe and factually, they would be correct.

Matthew Gordon: Yeah, I agree. It was an interesting conversation because everyone talks about what’s happened in the Cold War and weapons and the fact that the difference between nuclear for power versus nuclear for weapons is such a significant difference in terms of the enrichment process, but, it is a clean energy, zero carbon. But the thing that people really can’t answer the question on, including the Uranium guys, is where do you store this safely? What do you do with the waste? Some people say you can prolong it a bit and create more energy out of the waste now with new technologies. There’s much longer life reactors. But what do you do with the waste? I think that is the bottom line that needs to be answered before we get comfortable again, right?

Anthony Milewski: Don’t they turn it to glass? I grew up in the west near the Hanford Nuclear Reservation and they had a facility there.

Matthew Gordon: There’s a bit of that but people still, there’s an education process that needs to go on, but that’s for the Uranium guys to deal with not, not us.

Anthony Milewski: But I would say that I kind of reject this idea that somehow this is positive for Coal. I think it’s a false narrative.

Matthew Gordon: Yeah, I’d agree. Not with the numbers I’ve seen, that’s declining.

Anthony Milewski: Even for a different reason. Look at the mandates of endowments and different investment proposals in America.

Matthew Gordon: It’s problematic, for sure.

Anthony Milewski: Yeah. They’re saying you cannot invest in companies that invest in Coal or you can’t be more than a certain percentage. And on the one hand that will create some opportunity for some hedge funds to get a little bit of money, but the reality is that will hasten the decline of Coal companies, or the use of Coal, because it just won’t be bankable. Coal’s not going away tomorrow. But, you know, we’re in China all the time and what I see in China is a real demand to clean up the air, specifically the air quality. And this requires burning less carbon next to major cities.

Matthew Gordon: Well, they’ve also just created the world’s largest, it’s like a vacuum cleaner, which is a large sort of tower which sucks in and filtrates the air. It’s fascinating. I mean, they are are dealing with it, but one for another. Just very quickly before we wrap up, you said there, Vanadium, fascinating, really interesting. How interesting? Interesting enough for Nickel 28 or just a Nickel company?

Anthony Milewski: It’s just Nickel and Cobalt but I would say that Vanadium, there’s two things about Vanadium. I think the technology is interesting. It’s not been rolled out and commercialised on a broad scale yet. And I think what will be interesting is to see what happens with the Vanadium price. By the way, Vanadium is similar to Cobalt, there’s Steel and there’s two types of Vanadium.

Matthew Gordon: 90% and 10%.

Anthony Milewski: Yeah. And so I think before it gets commercialised on a large scale, I think people have to figure out if they feel comfortable around the pricing, and if they’re able to get that material in large scale. Now with Cobalt, for instance, I will tell you, that because Cobalt is sitting at high $13’s, now low $14’s, there’s almost no discussion about substituting it out. I mean, that conversation has died. Now the transition in cathodes is still happening, but that’s not being driven by Cobalt price. And so with any of these new technologies, Lead, Zinc, one of the big factors will just be the luck of the draw on what is the commodity price when it gets rolled out. Because now that Lithium-Ion is dialled in to that Nickel Manganese Cobalt chemistry style, you are kind of hostage. But you’re not hostage in those early days and I harken back to VHS and Betamax. So Betamax by all accounts, may well have been a better technology, and VHS won.

Matthew Gordon: Not as good at marketing.

Anthony Milewski: And by the way, the same thing happened with CD players. I can’t even think what was the other? 

Matthew Gordon: CDs and DVDs.

Anthony Milewski: No there was another competitor at the time.

Matthew Gordon: Blu Ray.

Anthony Milewski: It was something. So just because technology is better doesn’t necessarily mean it’s the one that’s adopted. I think in terms of some of these other applications, in particular for the broader grid and the storage, I think there will be an element of luck about which commodity.

Matthew Gordon: Well it’s what you said at the the beginning. It’s timing.

Anthony Milewski: Yeah and you can’t control it.

Matthew Gordon: Like this whole industry. Some of it won’t work. Timing.

Anthony Milewski: You can be really cynical about the mining business and say as long as you’re long in anything, when the commodity price moves like a high tide floats all boats.

Matthew Gordon: Every single expert quotes me that.

Anthony Milewski: And by the way, you can be long in the best in class of whatever it is and when that thing halves, the stocks going down.

Matthew Gordon: Again, the uranium guys.

Anthony Milewski: So I don’t know that you can get away from that. But what I would say is, obviously that’s for people in the equities because when hypothetically when Gold goes up 5%, the equities go up.  

Matthew Gordon: Silver’s looking for a pop.

Anthony Milewski: Yeah.

Matthew Gordon: It’s all correlated, but it’s all timing as well. Anthony…

Anthony Milewski: Thank you very much for having me.

Matthew Gordon: I really enjoyed that.  And now you promise you’re going to come back and see us or we’re going to speak to you when the circular goes out.

Anthony Milewski: Yeah, when the circular is out.  We can’t talk about the details.

Matthew Gordon: It’s an exciting story.  I think it’s an exciting story.  I’ve told people what I think, I think it should be something people are looking at. Maybe between now and then we can help them with some pricing information too.

Anthony Milewski: Okay. Cool. Thanks a lot for having me.  

Matthew Gordon: Thank you.


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Cobalt 27 (TSX: KBLT) – Cobalt & Nickel Royalties and Streaming (Transcript)

CRUX sat down with Cobalt 27 (TSX: KBLT) Chairman and CEO, Anthony Milewski. Is ethically sourced Cobalt & Nickel important? Does China care? Do they also focus on Lithium? The battery market and stainless steel is driving recent growth in Nickel so how can Cobalt 27 take advantage of that? And will copying Franco Nevada and Wheatons business model work for them? More deals than anyone else in the space over the last two years, now it’s time to give something back to the shareholders by focusing on cashflows. Hear Anthony’s insight on all of this and more.

Click here to watch the interview.


Matthew Gordon: How are you Anthony?

Anthony Milewski: Hey Thanks Matthew for having me…I’m great thanks.

Matthew Gordon: Thanks for joining us. Why don’t we kick off and kind of set the scene for everyone and give us a two minute overview of Cobalt27.

Anthony Milewski: Yeah. So you know when I think about Cobalt27, I want to step back and really start to think about the world. And know what we’re seeing today is a structural change in two of the most important industries in the world. Namely the energy business and the automobile industry. So you know if you if you think about crude oil today, something like 60% is used in transportation, maybe even more than 60. If you think about the automobile industry and what’s happening there. You’re seeing almost every automaker in the world transitioning into electric vehicles and hybrids. You’re seeing autonomous vehicles, and the rise of the autonomous vehicle sort of any day now coming out. I don’t know if you would have noticed in the last kind of week Tesla announced a million of these vehicles in the next year. I don’t know if they’ll hit that target. But you’re seeing massive disruption. And you know when we set out to create Cobalt 27, we’re thinking about how do you capture that disruption as an investment? What is the best way? And what we realised was it’s tremendously challenging, because while we can all agree that these changes are coming and you can’t really stop them, what we weren’t able to kind of nail down was how do you play it. Do you buy Tesla stock? I don’t know maybe actually Ford is going to be the winner. Potentially Beijing Auto. I don’t know. Maybe you should buy ENvida the chip maker. Maybe you buy one of the sensor makers. And then we realise something, which is so long as you believe that there’s going to be a winner. So long as you believe that there are going to be electric vehicles sold, the winner is actually basic materials. And the reason is is because every single electric vehicle, every single hybrid is going have a battery and that battery is a Lithium ion battery that has Lithium Nickel, Cobalt, Manganese. You know these basic materials and so we set out to create a proxy for the adoption of the electric vehicle. That disruption of the energy industry and that proxy is really Cobalt27.

Matthew Gordon: Okay. So I think there’s a general acceptance that people are moving towards electric vehicles, batteries whatever they do… Storage for homes is all coming coming down online and there’s a lot of information in the marketplace about that. So tell me a little bit about your strategy because a lot of companies come to us without a business plan. They’ve no written business plan which surprises me, having worked outside of this space. So tell me a bit about your strategy and why you think that’s going to give you the edge.

Anthony Milewski: That that’s very simple. We have copied in a way, Franco Nevada or Wheaton Precious business model which is streams and royalties. We are not miners. We go out and we seek to do streams and royalties with world class partners. So if you look at the first Cobalt stream ever done, we did with Vale. So Vale is a world class mining operation right. So they’re the operator of the mine. If you look at a transaction that we’re in the process of closing, it’s a Nickel Cobalt mine once again in operation, MCC is the operator. So the business model is very similar to the Franco’s in the regions of the world who focus on precious metals. But what we’ve said is we’re going to replicate that business model but focus on the battery metals, particular Nickel and Cobalt that are absolutely critical to the Lithium ion battery.

Matthew Gordon: But you also have some physical product that I notice and some interest and other battery metals as well so it’s not as a pure royalty play is it?

Anthony Milewski: No I mean you know you have to kind of play the hand you’ve been dealt as a where and because of this speciality nature of of Cobalt and Nickel we had to be a bit creative. And when we launched the company we actually launched with 2,000, approximately, 2,000 metric tons of Cobalt. And then we bought another 900 tons subsequently you know a few months after the launch.

Matthew Gordon: Why do that? What are you doing, hedging?

Anthony Milewski: Well no so that was that was the foundation of the balance sheet. So you know when you have a physical commodity like that you can actually take leverage. And in the early days we wanted to build the balance sheet so that we could do the subsequent transactions, like the acquisition of the royalty Voisey’s Bay or the Dumont royalty. So that was really a strategy around building a balance sheet.

Matthew Gordon: So I mean so how does it work? You’re you’re leveraging that? Why wouldn’t you just sell it into the market?

Anthony Milewski: So we we have it is leverage to this point. However we have a credit facility available to actually leverage it.

Matthew Gordon: A couple hundred million.

Anthony Milewski: Exactly. So why why don’t we sell it? I think one of the things so I’ve talked to briefly about the fact that we’ve replicated the Franco Nevada model, I think one differentiated aspect of our business is we’re creating an ethically sourced supply chain. So everything we do is outside of the Congo and we can talk about it later. But there are a lot of issues around conflict minerals with Cobalt in the Congo. And so, one of the things in having this physical Cobalt position, having the Voisey’s Bay stream, you have flow of material, as it were, which is all outside of the Congo. So at some future date if a battery maker an automobile maker wants to step in and actually take that material, it’s another available source. So we sort of see ourselves in addition to copying the streaming and royalty model, we’re actually creating a conflict free supply chain outside of the Congo.

Matthew Gordon: I was going to ask you about this later actually. So explain to people what’s going on in the DRC which makes that problematic for you as an ethical sourcer.

Anthony Milewski: Yes so. So to be very clear we have zero investments in the Congo and we’ve told everyone categorically that we’re not going to invest. That a very important point. But what’s going on there is very straightforward. Some of the highest-grade Copper, some of the highest-grade ores actually sit inside of the Congo. And what happened and has happened for Cassiterite which is Tantulum and a bunch of other materials over the course of last 20 years, is that when a given basic materials price gets sufficiently high, it’s actually economic for literally an individual to go out there with a shovel. Dig up the ore and put it in a sack and sell it right and sell it. You know wha.. what happened and has been happening for a long time with with Cobalt in particular, but a bunch of other metals have suffered the same fate, including Copper and Consitterite and Tantalum is that you know in these situations where they’re very poor, you know people bring their kids along and so you have people who are missing school, or you have a family member or friend who’s kind of having this child, who might be 10, 12. I think there’s some great wall street journal reporting on this and Global Witness is reported on this. They’re having these children out there digging this this ore, that’s ultimately getting put into the supply chain. Where we come in and are saying look we can’t fix that problem. I believe people can fix, but we’re not unable to fix that problem. So what we’re offering is a product where none of our material touches any of that supply chain. And  what we think is, you know the early adopters of electric vehicles in particular in the US,  Canada and Europe. I think their green individuals. They care about the environment. And so I think that they care about the supply chain of the materials that comprise a lot of electric vehicle. And they want to know that their new, name the name of the car, is actually not having conflict Cobalt inside of it.

Matthew Gordon: Is this a marketing thing? I mean are we saying that these companies will find it easier to market a green product? I know it’s ethical but you know that there’s a kind of bond between is that. Is it a gimmick for marketers or is it a genuine concern for these countries?

Anthony Milewski: I think the companies. I think it’s also a legal concern. I mean you know if there are law like in the US I’m familiar with. You can’t be like, you can be selling a product with known conflict materials. I mean you know so you run into legal issues. I think it’s twofold. I think there’s just an ethical issue, but I think there’s also a legal issue. And look I do believe that with time, you know companies are thinking about ways with block-chain and different technology to bag and tag, which is what they did with Tin. Meaning you know you go all the way back to the source. You put it into a bag that you can verify, then they put a barcode on it. None of these systems are perfect but none of them properly exist for Cobalt yet.

Matthew Gordon: So. Well yeah. You say they’re not perfect. So who measures monitors what is and is not ethical?

Anthony Milewski: it doesn’t exist. I mean I think if you’re a cathode maker, a battery maker, an automobile maker, at the moment what you do is you buy directly from large mechanized miners. So you buy from them Glencore or a Vale. I do believe that those companies are able to look through the supply-chain. But I think there’s only so much Cobalt that’s produced by those companies. And so as soon as you step in to like an aggregator, I think you start to enter a pretty murky space. Which we’re completely avoiding. And you know people are making efforts to clean it up. It just will take time.

Matthew Gordon: In the Congo?

Anthony Milewski: Well what they’re what they’re doing, is they’re they’re trying to create tracking systems. There’s a couple of companies trying with block-chain technology, to really be able to demonstrate that, we’re talking about Cobalt, but this could be true of any of them. Just like Look here’s your car, by the way here’s the manifest. The Cobalt from here and it’s sort of ethically source but you know it’s a very complex issue. I’ll give you an example. If you’re a refiner or processor and you have 15 sources of Cobalt, 14 of them may be legitimate but if the 15th one isn’t, it all gets mixed up and then it taints the whole….the LME by the way, the London Metals Exchange, they’ve announced that they’re taking steps to try to look back into the supply chain. And so I think people are aware of the issue. It’s just very complex and it’s not going to be something that’s just sorted out. You know like that it’s going to take years.

Matthew Gordon: Yeah. Well I guess in the meantime there’s always going to be a market for…you are determining, well and others, are determining as unethical or not green.

Anthony Milewski: Well I mean there’s always there’s always gonna be a bet there will be that market. But I can tell you we spend a lot of time in China. I was in Beijing last week and there’s this kind of idea that the Chinese don’t care. And I think that’s completely false. I can tell you we were with a lot of major automakers, battery makers, they’re acutely aware of this problem as well. And they care also. I mean you know they, in China and we can talk about this. China is really setting environmental policy globally around the adoption of electric vehicle. You know the intention there is ultimately not to sell you a battery, but to sell you a car. So you’re driving your Beijing auto car in London. Like that’s going to be the future. But setting that aside. So they’re acutely aware of this problem and I can tell you that the Chinese consumers who are making these electric vehicles they don’t want to buy this stuff either. And so the problem isn’t… it’s a global problem I guess is what I’m getting at.

Matthew Gordon: Yeah  I think that’s going to become come onto China later. They seem to be leading from the front on ..certainly in the battery space at the moment. Tell me a little bit about you? You come from a financial background. I think you position this as a financial play, what you’ve constructed here. So tell us a bit about you. How that’s informed your thinking and the strategy of the business.

Anthony Milewski: Yes so look I’ve spent my career primarily as a Resource investor. Investing primarily in metals and mining, but also oil and gas to a lesser extent. And you know in Europe and New York. And it has highly informed the business because we really are taking a risk adjusted return portfolio approach. You know we tried to dilute concentration risk. We have multiple royalties, across a number of jurisdictions.

Matthew Gordon: But all battery metals related?

Anthony Milewski: All really at the moment Nickel and Cobalt related.

Matthew Gordon: Just those two? Would you be looking at the other battery metals as well?

Anthony Milewski: You know look I think our investors are primarily interested in that class one Nickel that goes directly into the chemical industry and Cobalt. So that’s the focus. I mean there are Lithium miners so you can actually go buy a Lithium company. And by the way there are actually a lot of Copper miners as well but Cobalt, as a byproduct, is very hard to invest in, in fact, I don’t think there’s any real legitimate way. And then you know the kind of Nickel that goes into batteries, once again it’s a harder play. And so we have that focus. And then within that focus, we have this portfolio approach of multiple royalties and streams, across multiple jurisdictions and so in a lot of ways it’s kind of trying to kind of diversify risk, such that if one asset something happened you sort of don’t cause a cataclysmic problem for the business.

Matthew Gordon: Tell me. Royalties is an interesting space. There’s not that many players in it. How do you, as an investor in this space, this is a financial product for you. Do you have any say in what the company’s doing or are you just looking at balance sheets. And going that where we are now.

Anthony Milewski: So there are like I mean each… one of the great things about the product is very bespoke. So each royalty or stream is addressing a specific concern a specific situation for that company. But one of the reasons I think why the company is like it is, you’re not running their business. This is their business.

Matthew Gordon: Do you have a say in it?

Anthony Milewski: You definitely don’t have a say but. But the structure is such that you do have protections. I mean you have minimum throughput right. You know you’re covering the entire mine because like if you just as by way of example, if you just focused on a little area you could create an incentive to mine a different part of the mine. So you structure the contract. And remember the industry has been around for over a decade now and so people have kind of learned from some of the early mistakes. But what I would say is you’re definitely not operating that business, and through the structuring of the contract you have protections.  But it’s a very hands off light touch approach.

Matthew Gordon: Say the hard work for you is determining which companies to invest in and structuring the agreement.

Anthony Milewski: And also getting them interested. You know because when you’re when you’re dealing with a counter-party that is a large, a large miner there has to be a reason why they want to do it as well.

Matthew Gordon: Yes. Yes. They are producing, they got options and then it’s a question of what’s the cost.

Anthony Milewski: Cost of capital….

Matthew Gordon: So what you spend your time doing then? If you’re sitting back looking at numbers I mean what was your time spent doing? Are you looking at M&A constantly.

Anthony Milewski: Yes so we have a list of probably almost every single Nickel Cobalt project in the world. I mean it’s an Excel document. And you know we track very closely the lifecycle where the companies are at. And then we have kind of a short list of situations. Companies that you may not even realize and I won’t say it in public. You may not even realize produce Nickel Cobalt and maybe there’s a capital expansion and they’re there fixing the refineries. Well hold on a second. They don’t even show that there’s Nickel there. But we know there is. So they’re getting no credit for that Nickel. So if we come to them and say here’s $100M ust by way of example. Then there would be other companies that would be moving along the development timeline and then there’d be a divestitures and maybe a companies buying into the company and they need asset finance and so they’re really buying a Nickel project. So these are all these different situations and we monitor them.

Matthew Gordon: But this isn’t about their needs. It’s about your needs. So talking about the structure is like what are you actually looking for? You’re looking for a quick monetisation event or you kind of building something bigger than that which when all the parts put together when.

Anthony Milewski: You mean Cobalt 27 specifically or?

Matthew Gordon: Yeah.

Anthony Milewski: So you know these contracts are usually life of mine. So you’re talking about getting product potentially to 30 or 40 years. So this is this is a business…

Matthew Gordon: It’s at your discretion you can opt out or cash in out or sell …

Anthony Milewski: The way the agreement works like take Voisey’s Bay. That’s the wife of mine. Or the royalty at Turnagain. That’s for what’s potentially 60 year of mine life. So these are very long duration contracts. And that also makes it attractive because ultimately if you’re an end consumer of the product. You can have this visibility than on the life in this particular mine.

Matthew Gordon: So give me a sense that. A life of mine this can be up to 60 years?

Anthony Milewski: But I could say…that’s one particular mine.

Matthew Gordon: What are you averaging?

Anthony Milewski: It’s very different. I would say by the time people put billions of dollars of CapEx into something. I think you’re talking 20 to 40 years on a lot of these.

Matthew Gordon: That’s right. And that must make the cost capital for you a lot cheaper?

Anthony Milewski: Yeah of course. I mean when you take an asset which is in production, or almost a production, you know the funny thing about finance is you know it’s like if you use a 10% discount rate after 10 years everything is a zero. But I can tell you that we can all agree that’s a nonsense right. So say it’s sort of the funny thing about the cost of capital and and how you look at these investments. So you actually have massive upside just because of the nature of the discount rate which is kind of this esoteric thing which people don’t care about in the short term. But as you compound these royalties and streams and you keep adding to the portfolio. You actually ultimately are creating a huge free cash flow scenario in years to come right.

Matthew Gordon: Well absolutely. And so what we… actually tell this how long you’ve been with the business?

Anthony Milewski: So my partner and I Justin Cochran and I took it public about two years ago.

Matthew Gordon: Right. Okay. And what mostly kind of major moment? Did you did you get the strategy right from day one or was there a moment where you thought actually…

Anthony Milewski: That it was always the strategy to begin with. Go back and read the prospectus. I think even in the prospectus although we were focused on that physical at that initial physical holding when we went public. Even in that initial prospectus when you read it you can see that this was always the business plan. I mean we really even from the earliest days when we were putting the team together. You know Justin he spent, prior to joining us he was at Sandstorm which is one of the other companies in Canada. And then prior to that he was a banker at MBF. Doing the streams and royalties and so rock even like the formation of the team was two fold. One was getting the technical industry knowledge and then the other of course was the actual financial knowledge. And so this was always kind of the plan.

Matthew Gordon: So what’s it look like going forward? I mean you’re starting to build up a body of work as it were, a portfolio which gives you the credibility in this market. I mean is there a limit to this? How much think you can manage? You could quite a big board in a lot of advisors on there.

Anthony Milewski: So remember that there’s a board and there’s advisory board. There’s the advisory board is unpaid advisors who kind of help on the way. But the actual board as it is is kind of just I would say standard. So I think we’re kind of at a moment now where Voisey’s Bay was closed earlier last year and you know Highlands Pacific acquisition closes in May this month. And it’s time now to let the cash flow start coming in and let the share pressure appreciate. You know we we did a lot of capital raising in the first couple of years. We had a lot of price volatility around the commodity. I think it’s time now to let investors kind of reap the benefit of that. And so I don’t I don’t foresee anything immediate just because we need to kind of let the stock age here a bit.

Matthew Gordon: Because I guess you’re trying to bond or weigh up the options in the marketplace, because the price of commodity prices, certainly battery metals, even Gold, uranium. There’s a few  commodity prices which are suffering which often says opportunity, especially for companies struggling with cash. So you’ve got cash. People need cash and your big spreadsheet must be telling you there’s a few key people out there at the same time you’ve got these shareholders you’re saying it’s important to declare.

Anthony Milewski: Including Myself.

Matthew Gordon: I mean when you say we got to look after shareholders…?

Anthony Milewski: Ultimately the businesses.. the endeavors are not worth doing if the people who invest in the business are making money. I mean that’s fundamentally and I can have support. Yeah. And it doesn’t make sense. So we’ve been exceptionally active. I mean we raised hundreds and hundreds of millions of dollars in the last few years. We’ve done… I’m not I’m unaware of anyone who’s and more I’m in terms of deal numbers. And so I think there’s just a certain fatigue. And now you have to kind of let these assets settle into the business.

Matthew Gordon: Breathe a bit.

Anthony Milewski: Yeah I mean think about it. You have Voisey’s Bay. You have Highland Pacific to premiere world cost and assets on the developments on you have Turnagain in the largest Nickel sulphide, undeveloped Nickel sulphide. You have Dumont. I mean you started going through that. This has happened in two years. You know we had… we raised 300 and then we raised two hundred, we raised one hundred. A lot has happened in a very short period. And you know it’s time now to kind of digest it.

Matthew Gordon: I get it.

Anthony Milewski: Yes. This is what it is.

Matthew Gordon: So we talked about the board . Tell me about the active members of the board and the management team, people who are actually involved in the day to day basis?

Anthony Milewski: So I think on the management side besides myself we have Justin Cochran who as I described he’s really one of the one of the top streaming guys in the world. And he really joined because he has learned from the good and the bad and the ugly of the streaming industry over the last decade. Because it has evolved.

Matthew Gordon: In what way?

Anthony Milewski: Like just as a basic example like in the early days of a streaming royalty they had terms which might have been so oppressive that if anything went wrong with the mine, it could send it into bankruptcy. So there’s a little kind of things like that.

Matthew Gordon: Death spiral type structure.

Anthony Milewski: Exactly and so it’s completely evolved away from that or like a basic example can be you know if this is a piece of paper you know if this is your mine and you’re only streaming this little portion over here, you create an incentive for them to mine it over here. So that when you create that diagram you take the whole.

Matthew Gordon: So that your effective strategy on a company which you shouldn’t be running.

Anthony Milewski: Exactly. So the point is, I think the whole industry has learned from these from these evolutions as it were. And Justin was there through that process so he kind of brings that really critical knowledge of the underlying document.

Matthew Gordon: This is tough. Been there.

Anthony Milewski: The next guys called Martin Vedra. Right. And Martin is a very interesting case. So he was 30 years at Sherritt. And he worked in you know he was at MOAA which is the Nickel Cobalt mine. He was in the Technology Group. So he brings a real depth of technical knowledge about Nickel Cobalt operations globally.

Matthew Gordon: Right. So he’s part of the assessing process.

Anthony Milewski: Yeah I mean he’s just generally critical. I mean if if he’s going to look at a mine or talk about processing I mean really you’re talking to Martin, sort of 30 years of experience there. And interestingly prior to that his father was at Sherritt for 20 years so. So these guys have Nickel Cobalt in their blood. And that’s really the core the core of of the team. We also have a Director of Communications here who does that. But you know the model allows for very lean operation.

Matthew Gordon: Know I suspect I mean your G&A must be next to negligible.

Anthony Milewski: I mean I can tell you the biggest aspect of G&A was it was actually like legal fees and banking fees from all the transaction. So actually that goes down quite a bit when you’re not transacting.

Matthew Gordon: For sure. for sure. So you got a bunch of advisors which are I guess you go to specific matters.

Anthony Milewski: Yeah exactly. You reach into those advisors in specific moments based on whatever their expertise is. But then you have a traditional board of directors. And there’s a range of skill sets that I’d like you know take Frank Ostergaard you know Chairman of the audit committee and he was a partner KPMG. So an exceptional person to have on there. He is an NED. You know with the financial statements like someone like that is really helpful. You know take Nick French he was probably one of the main Cobalt traders in the world for 30 years. So once again a non-executive director. But you have a question and you call Nick and next got an answer for you. So you kind of go to that board. Phil Williams was a banker in Toronto. And so there’s a certain advice there on financings. Candice. She’s an executive at a Gold mining company. So you kind of put together this team of experience that you know everyone has an opinion and they’re all different. But everyone has a perspective which I think is beneficial to the broader board.

Matthew Gordon: Yeah I guess it says you know what you don’t know.

Anthony Milewski: The known unknowns, and the unknown unknowns.  

Matthew Gordon: I can never remember remember how to say that so let alone understand it. So tell me about the finances? I want to get into the share price because you talked about letting giving something back to the shareholders that the stock has seen a fall. You know from this time last year to where it is today. It is running about a third so you need to give something back. So tell me about the economics?

Anthony Milewski: So I think what happened is in the early days of the stock. You know know a lot of retailers what retail investors would have Bloomberg. But I think there’s other free sites. If you actually took our share price and the Cobalt price and overlaid it, like you’d see a pretty tight correlation going up. And by the way Cobalt peaks at $44lbs and you know it goes all the way down to $13 it’s going to back at $18 now. By the way our share price would follow it down the downtrend right. And so I think what happened was and probably rightfully so. The business was exceptionally correlated to Cobalt price and sentiment around Cobalt. And I think and hope what is going to happen now is, we’ll transition away slightly from being just a proxy for Cobalt, into actually being a proxy for cash flow. As you know Highland Pacific now closes on I think a middle of May. All the sudden there’s cash flow there. You know Voisey’s Bay, where they start producing you know the kind of about two years out, like there’s cash flow and so I think you transition away from this binary correlation to Cobalt, move although there is and always will be a correlation. It’s not like you’re getting the seesaw effect.

Matthew Gordon: It comes back to your strategy here. What kind of what kind of multiples do you get for cash in this business versus you know mitigating it by buying into actual mining equities, rather than royalties. Where there’s some upside or blue sky potential. I mean how does it work?

Anthony Milewski: So the large cap names like Franco And Wheaton you know they’re trading on at certain points over two times right. Two times like a Pnav ratio. Now mind you they’re highly liquid names. And you know the market has changed for for smaller cap companies, with a premium value obviously on more liquid names. That’s just the nature of the capital markets today. So I don’t know that we would achieve that per say but certainly in a trading in the mid one and a half this is achievable. If you look at it in Altius, which is a base metals trading company and it’s a completely different model. But you have to pick kind of comes out you know that’s potentially something you could look at. So we think that what will happen is, we’ve initially traded as a complete proxy for Cobalt price. But now as you bring in we bring in what’s really a Nickel asset Highlands. I think what will hopefully happen is a transition away from a binary correlation to Cobalt, to a more streaming like multiple. And that will also be an addition to implying a higher share price. I think that’s more stable right. Like that that that becomes a more stable valuation as opposed to like a whipsaw with the Cobalt price.

Matthew Gordon: You got to stick you gonna stick with that? You’re not going to … to get some investors could be listening to this on the podcast or watching a video you know, they have a blended portfolio approach. Are you going to resist that? Are you going to just stick with what you know.

Anthony Milewski: I think there’s no there’s no intention to move past Nickel and Cobalt. So we’ve looked at a Lithium royalty last year. And the pricing was wrong. We thought it was interesting the pricing was just not right. And then we also kind of thought of through and realised there are a lot of options for investors in Lithium. Yes and Alomar I mean any number of public companies. And so like why buy us over them. I don’t know why you would do that. And so I think I think we’ve kind of moved away from the Lithium royalty. I think we realized that the people are buying us and owning us for that for that Cobalt exposure and that cost one Nickel exposure.

Matthew Gordon: It that’s a good question. So why should they buy you for the Cobalt Nickel exposure?

Anthony Milewski: Yeah yeah exactly.

Matthew Gordon: So you know what was different about you guys?

Anthony Milewski: There is no primary. The only primary Cobalt producer is Managem which is owned by the Prince and the family in Morocco. There are some Exploration companies out there but that’s just totally different, every 10 minutes people raising capital and there’s dilution, and by the way in the right market that’s a great game. We’re not playing that game at all. So if you think about it like that there’s no exposure as it were to specifically the part of the battery that we’re offering and that’s the differentiator. If you want real Cobalt exposure like here we are. If you want that class one Nickel exposure that goes into the battery industry like  MCC. That Ramuu production that’s going into batteries everywhere. So that’s really that leverage that you’re getting which I don’t think you can find anywhere else. For instance if you buy Glencore stock. You like Glencore is the world’s largest producer of Cobalt but by the way that’s probably an irrelevance as compared to their Copper business and their coal business. So you’re not really buying Cobalt exposure are you?

Matthew Gordon: No.

Anthony Milewski: And that’s and that’s where even with Nickel, it’s kind of the same analysis I look Norilisk. Well actually are there Palladium company now? I mean you know based on Palladium run and so when you kind of go through the options out there.  Where there’s a great Nickel company in Australia I think. What is it called Nickel Mines maybe. Well that’s Nickel pig iron. That’s going into steel. So you start kind of going through the options, you know like take Giga Metals. One of the largest undeveloped Nickel sulphide deposits on earth. Fantastic optionality once again. That’s a development play. And these are all different and we’re offering something very specific. You know you’re not going to have that exploration upside with what we’re doing. This is a very conservative model.

Matthew Gordon: Yeah. So what do you think. I mean just to finish off from a shareholder component. What do you think that’s going to do for your share price? You know we talked about. ‘A time to breathe a little bit time to give back to the shareholders’. If people come in now, new people looking at you. Is there going to be reasonable appreciation there. How would you describe the opportunity for them?

Anthony Milewski: Forward looking statements popping up? I think the point is what what we’re striving to do is transition from this binary Cobalt proxy, to a streaming and royalty multiple. If that happens which.. that’s what we’re trying to do, if that happens, then that will imply a lot better share price. And so I’d want to give guidance about what…

Matthew Gordon: Sure.

Anthony Milewski: But like that transition implies a better share price.

Matthew Gordon: So let let’s talk about a couple of things more about the company but I want to kind of your view in the market in a moment if I may. So you had a busy year. A lot of M&A last year, probably a bit exhausted, but what’s your report card for 2018 look like? What would you’ve done differently?

Anthony Milewski: 2018. I mean you know it’s it’s hard in the business. You can’t hedge these illiquid commodities. So if you had this crystal ball and you looked at what was really a collapse in the Cobalt price from $44 down to $17 you would go back and say oh we would hedge this or do that. But you actually really can’t. And so it’s hard to look back. I mean we raised capital at a high Cobalt price and did not anticipate frankly that it was going to roll over as hard and as fast as it did. You wouldn’t raise the money at that price, in the same way because obviously you know, there’s implications there. But I mean there’s no way to hedge that. So that was the business model. We told everyone what we were going to do and we did exactly what we told the market we were going to do. So I don’t know how you can… other than just not doing the deals. I’m not sure how you can do it because unlike say Copper where you could actually hedge it out, with with Cobalt it’s just not really really possible.

Matthew Gordon: Right. Okay. And so like you started two years ago. Share price of?

Anthony Milewski: $9 with the IPO. Goes all the way up to..

Matthew Gordon: $12

Anthony Milewski: It goes above $13 $14 And now it’s kind of $4 – $4.50…

Matthew Gordon: Back down.

Anthony Milewski: And a very important point. Is pull up the Cobalt chart to pull up our share price. And it’s like…

Matthew Gordon: These things go in cycles. But you’ve got a model which, Okay I think some people have been doing it for a while, but as you say the royalty business has changed. You think this is cyclical. It’s caused by commodity price. Things will get better. And you’re actively saying we need to give something back to the shareholders. That’s the message I’m hearing.

Anthony Milewski: Well it is this is just because… I mean obviously have a dividend policy and a buyback policy, which allows us to either give a dividend or buyback shares or do both. Give back and place that which is which is obviously part of the corporate policy right. But I think it’s also you know allowing the transition from binary Cobalt proxy to streaming royalty multiple takes time. When I say give something like what I really mean is to try and allow that transition to happen.

Matthew Gordon: Right. But that’s a message you need to share and I guess you are sharing all around the world that we’re going through this. We know what we’re doing. We’re in control. We understand the process. Just need to give it that time to get back to where we think he could be. OK so can we talk about the market? Because I want you to help our viewers and listeners understand a little bit more about what’s going on the battery storage space and battery space generally OK so commodity prices are down. Why do you think that is.

Anthony Milewski: So as you say and as I said earlier, this is a complete change in these industries. And I’m unaware of a single automobile maker who doesn’t have an EV planned or an already underway. Right. And although this is true in China, Korea, Japan it’s not just like Rover. So all these batteries are powered by Lithium ion batteries.

Matthew Gordon: Explain was in a battery for people just very quickly. So they are they’re getting tons of batteries. But generally what was it look like?

Anthony Milewski: So the main component of a Lithium ion battery is the chemistry and you know the main chemistry is a Nickel Manganese Cobalt chemistry. Tesla uses a secondary chemistry called Nickel Cobalt Alumina chemistry and it’s a higher Nickel chemistry.

Matthew Gordon: So what is the percentage breaks down of that? What are the main constituent parts?

Anthony Milewski: So it’s such a Tesla today is kind of an 8 1 1 meaning Eight parts Nickel, one part magnesium, one part Cobalt. The prevailing chemistry for the balance of the world is a 5 3 2. Over time evolving towards 8 1 1, 6 2 2, 8 1 1. The problem is as you reduce Cobalt, you increase the Nickel. And the batteries become unstable and can overheating catch fire, like a lot of these fires, are in part based on the fact that the transition from a high Cobalt battery to a Nickel rich battery, is complex and challenging. So I actually think the industry has to get there. You need that transition to happen, because frankly there’s only so much Cobalt out there. And while there’s plenty for the coming years, I just think mathematically if you assume that 70% of vehicles will be electric, well actually you’re going to need a lot more Nickel, a lot more Cobalt. You know you’re talking about doubling tripling the global production of Cobalt to meet the demand in 2025, 2030. And so you actually need this transition to take place. But I think what cathode makers, battery makers are finding is getting to that 8 1 1 chemistry safely and with the durable battery has proven more challenging and taking longer than people think.

Matthew Gordon: So you said 70% is a big number….

Anthony Milewski: So I’m thinking like we use like 15% in 2025.  70%. I’m just telling you ultimately, the world will be primarily electric. But you know you’re gonna have other…. So one of the misnomers here is that like there’s only one technology and the answer is there’s gonna be different technologies for different segments. So for instance I think fuel cell… I think automobile buses will very likely be on fuel cells. Because because a fuel cell is not interesting for cars but on a fixed route like you at a mine site would be an example. An auto bus where everyone gets sent to the same station. Potentially a long haul trucking for everyone is going the same round this same station. Yeah like there are going to be uses for fuel cells. Right? Moving to battery storage. Lithium ion batteries fantastic for things like your power wall at your house where it’s light and small. But you know if you’re gonna have a massive grid storage installation around a wind farm, you know frankly maybe Vanadium Redox is gonna be more interesting over time. Now that technology’s not quite there yet. But you know they’re not going to be one brush to paint everything. This is a complete transformation. And there is going to be multiple battery including Lead acid by the way including the Zinc. There’s gonna be a bunch of different batteries, for different applications. And this actually has implications I think, we’re talking about Cobalt a Nickel today, but this has implications for investors who are looking at the space more broadly through the cycle, and this cycle is going to be in like a decade long cycle, there are going to be moments where potentially Lead is interesting, Vanadium is interesting. You know the recent Vanadium run which had nothing to do with batteries. It was about steel policy in China. But these people were promoting it as batteries, unrelated, uncorrelated right. So a bigger takeaway for your investors is you know there are a bunch of basic materials that are going to benefit as this thing kind of rolls out. Like Copper 15% of Copper demand you know 2025 2030 could be related to electrification more broadly. So there’s a big macro kind of trend, that’s going to impact and touch a wide range of commodities.

Matthew Gordon: So general acceptance in the market, that’s where it’s going. Is it moving at the pace that people thought it would?

Anthony Milewski: Fallows are WAY faster right. I mean it’s actually stunning how much people don’t understand that point. So the Chinese numbers came out. Q1 this year EV sales up a 100% year on year. I mean there’s I’m unaware of any data point which isn’t showing tremendous growth. And I think it’s this funny thing …have you ridden in the new Tesla.

Matthew Gordon: Yeah.

Anthony Milewski: Okay. So most people say no. I always find it funny I say you know I’ll sit there with someone who says this is never going to happen. I’ve not heard a single person who has actually ridden in one not only necessarily ridden in one of these cars who doesn’t instantly see this is the future. By the way, I’ll tell you something which I know you probably haven’t done. Have you run in an autonomous vehicle yet?

Matthew Gordon: Yeah yeah.

Anthony Milewski: Yeah you have. Yeah I guess so. Like when you when you. It’s rare because most people haven’t. Cause you have to sign up for a demo. Yeah. So a fully autonomous one. I mean it is crazy it is amazing and what you realize kind of five minutes into, depending on who’s giving you the tour, five minutes and you’re like why am I even driving a car? And so it’s hard to appreciate that pace of change. If as the average person you haven’t either ridden in or experienced it. But it’s sort of like the iPhone, take the effort you say like oh I’ve got this new iPhone, Why do I need this new iPhone in the old iPhone. And then 20 minutes after you use the new iPhone. Actually this one is kind of clunky and old. And you can’t quite articulate why. I think that’s kind of the same experience although I could articulate why you know when you ride in the view when you ride in an autonomous vehicle you really then you understand why this is happening so quickly. And that doesn’t even get into the effects on the environment. That’s just like a practical thing.

Matthew Gordon: What do you think’s driving it? I mean like with things like the Paris Accord coming in here and you got government signing up to changing the way that their energy strictures are comprised so you know we put a lot of wind farms here now. So what’s driving this?

Anthony Milewski: Yeah I think it’s very simple like, we’re destroying the earth. Like I don’t care. You know global warming. What however you want to spin it, the most political narrative right. The bottom line is like we’re dumping enormous amounts of plastic into the ocean. We’re burning down the forests.  Like all these things are happening factually right. And I just think that there’s a growing awareness of the damage that’s being caused to the earth. I think that’s part of it. And so I think people are becoming more socially aware. That so that’s kind of in the West. I think that China’s very practical. I think in China in particular, the Chinese government has said look our people in these big cities are getting asthma, lung cancer and we need to clean up the air and there’s a bunch of ways to do it. But a very simple way is if you live in Beijing to say you know if you buy… internal combustion engine vehicle it’s gonna take you five years to get a license plate or we’ll give you one if you buy an EV. And even though subsidies cost the government nothing. And so I think you know in China it’s very practical. You know in London it’s very practical. It’d be interesting to look at on my phone on me. You’d be shocked to know that that the London air quality is actually on certain days some of the worst in the world.

Matthew Gordon: On The Strand here.

Anthony Milewski: Yeah. Exactly so so. So I think governments are acknowledging and realizing the need to clean up air in major cities. And so I think that’s another driver so I think there are multiple drivers here. But what’s clear is if we don’t act around our environment, then there’s gonna be a irreparable damage for future generations.

Matthew Gordon: There’s a lot more awareness about it. There’s you know everywhere you look there’s a lot of. And I’d encourage people to read your PowerPoint actually, some lovely little snippets of information in there. But there’s some discrepancy between this generation who are more aware, or greener, than compared to the price of some of these commodities. People aren’t investing into mining as much as they did.

Anthony Milewski: Let’s because they haven’t made money. Let’s be clear. Let’s call a spade a spade.

Matthew Gordon: There’s a discrepancy there.

Anthony Milewski: But people didn’t make money.

Matthew Gordon: So whose fault is that? Where does the fault lie?

Anthony Milewski: That’s a very complex discussion and there’s all these changes in global capital markets, with money moving towards liquidity. But mining means a relative… like the total market cap of mining is probably less than a couple of the largest single companies. So that all these complex things. But if you wanted distill it down to a very important point, by and large equity investors in the big global markets are judged on an annual basis performance right. What happens to me this year? And that’s what they get paid. That’s how they’re reviewed by peers. If you find… if you dig a shovel and you hit your Gold or your Copper you take whatever you have right now, if it’s ever mine, if it’s ever mine. On average it’s not going to be a mine for 12 to 15 years. You know it’s like, you’re asking some some gal or guy who gets paid based on next by the end of December to like take a view of what happens 15 years from now, it’s like good luck. And so it’s you how there’s a mismatch. You have this situation where it’s literally 15 years, if ever, to a mine. And capital duration today has gone increasingly short, like it’s literally in fact I would argue that a lot of the big funds in New York are platforms where like there’s not daily liquidity. Forget forget this year, their risk departments are looking at things and they’re trading today. Their trading by lunchtime and so it’s this interesting dynamic and then you have a move towards passive, which means that primary equity raises are harder to do because a passive investor doesn’t participate in a primary equity issuance. So you have kind of all these forces coming together. And ultimately what it means, I will tell you and I don’t know if that’s tomorrow or seven years from now. Forget the day. It just means it’s creating this bull market. Under-investment, under investment, inefficient investment in the sector will ultimately mean a massive bull market. And it won’t even be about by the way, forget electric vehicles like. We consume every single day like look there a look around this room. Everything is either mined or grown just about. And so consumers continue to consume every day and they don’t recycle everything that they consume. And so because of this inefficiency in the capital market, in the longer term you set the stage for bull markets and bubbles, in this asset class over time.

Matthew Gordon: Now I agree with that. Hence my question. There’s a discrepancy between what people want and their understanding of where it comes from. And you know the same can be said you know in… some of the kids at my children’s school their not actually sure where the meat on the table comes from because it comes in plastic bags, wrapped. That’s not a cow that’s just a piece of meat or chicken or whatever. So you know I’m trying to understand you know what’s changed or if you’ve got a sense of what’s changed, in say the last 10 years, 20 years, 30 years for investors. Mining used to be the go to investment class.

Anthony Milewski: That’s because it was a proxy. I mean if you look if you look at when where when the market was hot, people were really investing in mining as a proxy for GDP growth in China,right. Basic material, that was driving their interests. But also I think a lot of hedge funds had a lot of different constraints around liquidity. So in other words they could invest in a liquid it liquid assets and I think what happened in the global financial crisis was, a lot of hedge funds a lot of asset allocators were really illiquid things, not everything but a big part of the portfolio was in illiquid things. And you know when you have a cash call, when you have a redemption or redemptions, and you have to start selling stuff, like what you find is like a part of your portfolio goes no bid. And I just think that that that completely changed the way that funds were. This is very high level to show. It changed the way that funds were structured. And so now a fund who maybe in 2005 could have 15% of his or her percent portfolio in liquid assets maybe today they run 1%  just made up the number right. And so that’s. And so by the very nature of of mining companies, you know you’re in a  billion market cap one point five billion on market cap in mining like, actually that’s a big company. By the way, that is completely irrelevant, in that and the spectrum of daily liquidity, like these funds now, they want to have $100M of our position and they want to be able to sell out of that in two trading periods. And that doesn’t exist in mining. And so it creates that inefficiency whereas a decade ago or maybe longer, now those constraints weren’t there.

Matthew Gordon: Yeah. Well well it’s definitely been a move away from exploration from some institutions.

Anthony Milewski: I agree with that that’s gone because that’s too binary. But that’s different than liquidity. I’m talking about.

Matthew Gordon: No I understand liquidity but that you know the knock on effect is you know and for a lot of people certainly they invest in the junior mining space here in the UK, there wasn’t the liquidity for them wanting to get out of a million dollar positions forget a hundred million bucks. Okay. Because things weren’t moving there no volume there. So that’s had a big knock on effect in the way that juniors in the UK and then we see a lot of Canadian companies coming over here hoping to find some money and there’s more of a reliance on this retail high net worth family office type money for the smaller your pretty big company now, but I know you’re still are classified as a junior.

Anthony Milewski: There is a place for retail because historically way the way it’s been is like retail. Friends and family retail was the early money. You know the stock would run then hedge funds would step and the stock would run again. Institutions. And that was the plan. Look it still happens from time to time but that that system has been slightly disrupted by a change at the bigger end of the street. I still think with with retail that you can make money. Remember you know by and large even in what we’re calling illiquid names, you know $5,000 which is a real amount of money. My dad’s a high school. So my dad’s a high school teacher like I can tell you for him that would be a huge position. There’s sufficient liquidity even in… our stock trades you know 1 to 3 million dollars a day. So $5,000 on a position you can kind of come in and out. But you know if you’re in a name where you’re going to build a mine, with a you know a $1Bn capex is making a number up. Ultimately the big guys are going to have to write a cheque and I think when you’re a retail investor you have to think about that question. Like unless you’re just taking a punt which is fun and everyone does it for time to time but if you’re ever saying there’s a longer term investment like you have to think that the stock is going to rerate. So at the next capital perhaps it’s higher than when you came in.

Matthew Gordon: That’s the name of the game. We’re buying shares, not the company.

Anthony Milewski: Exactly. And so you have to think that ultimately there’s a path towards that big capital raise and becoming a mine. And that has been completely disrupted. And and that is I think going to result in at some point the next decade in big bubble asset class bubbles in our assets and in big, big bull markets because you know the pipeline is not getting built. Like look at Nickel. OK. If you need, if we all agree and I don’t know anyone who disagrees with the statement, that we’re going to get a heck of a lot more Nickel in five years. I’ve got to literally don’t know a single sophisticated person who disagrees with that statement. Not one. OK so what’s getting built right now globally. Like the answer is not much.

Matthew Gordon: And that’s just that’s the same for a lot of commodities at the moment because.

Anthony Milewski: Copper is the same way. But then this comes back it’s all circular comes back to my point. So let’s assume we agree. Well you’re an investor you get paid by year end December. I’m talking at the big end of the market now. Like you can’t be bothered to think about five or six years, now because you’re really worried about having your job this year. And so it’s creating this weird moment where these projects aren’t getting pushed along. And so we’re going to wake up and it’s going to go kaboom on on some of these commodities.

Matthew Gordon: That’s really interesting … example here.. you know UK politics. You know we vote every four years and decisions by politicians are made on a short term basis. But look at the Japanese government, they’re making decisions 25 50 years out. There’s there’s a very strong difference between the way that the politics work seems you know for the greater good or for yourself.

Anthony Milewski: Look look. Last week China just put a few hundred million more to Ivanhoe which has this huge Copper deposit the DRC. Why? Because they know they need Copper.

Matthew Gordon: But what happened to the ethical component we talked about earlier?

Anthony Milewski: I think that’s different. Because that’s it that’s a development project. But you’re developing your own project you can control those parameters. So that’s not so that’s not it. There’s no artisanal mining there. That’s that’s developing probably one of the largest Copper mines on Earth. So that’s a different that’s different. My point is. So what’s interesting is China has so I don’t begrudge the investor whose job is what their job description is like, they can’t control that by a large right. Because by the way they have their own set of investors who are demanding that liquidity.

Matthew Gordon: Everyone gives up a business model.

Anthony Milewski: And so China, where China has a unique position and stage… kind of seat at the table as it were, is that they’re able to say whatever.  We think Copper is going to happen. So we’re buying the Copper mine and that’s going to have big implications on the Fourth Industrial Revolution, which is underway. Because if if we all agree EV’s are going to happen but not just a bunch of things like renewables and all these other things. Those are all powered by somewhat esoteric commodities and China’s going to control all the major deposits. And so you know like government. It’s really smart.

Matthew Gordon: I think that’s fantastic. I think they’re fantastic. In a way they kind of control price in that way because they are price insensitive to a degree.

Anthony Milewski: I would say yes /no I mean like I can tell you were there a lot of these people as a misnomer. They’re not just spraying money. They have a very sophisticated process. They they still think about NPV. They do think about the greater good as well right. But like I can tell you there’s no free ride. Right. Like that’s not true.

Matthew Gordon: That’s why I said to a degree because I think they know their tolerance levels are more than most.

Anthony Milewski: They can look through cycles is what I would say. So one of the big differences is that a Chinese investor on a world class project can look through the cycle, whereas an investor sitting in New York very much is concerned about the cycle, and trading around the cycle. And that’s a fundamental difference.

Matthew Gordon: That’s the difference between a daily trader, a day trader versus forward for planning.

Anthony Milewski: I’m not calling you as investors day traders, I’m just saying it’s a different model.

Matthew Gordon: I understand. So can we just quickly touch Gold and it’s not your thing but you’re a finance guy. You’ve got experience in this thing. And it comes back to the discussion we’re sort of having now about sort of sentiment and marketplace. Gold has traditionally been a safe haven to use that well-worn phrase, for investors in troubling times, when you know the world’s at war or the trade wars in this case. That’s not happening right now? It’s not moving

Anthony Milewski: I’m of two minds on Gold of two minds on Gold. First of all I challenge you to find a Gold bug who is under 40 years old. There is not one that I’m aware of. And so I think you actually at this age problem with Gold wherein there’s not a new kind of group of investors who are enamored by Gold who were under 40. By the way. those happen to be like a lot of the PMs out there. And so I think there’s just this element of crypto and some other asset classes have supplanted Gold now. But mind you on the drop of a hat it can all kind of come back but I think that’s part of it. I do I do actually think though that Gold is interesting from a different perspective. We know what the weaponization of the U.S. dollar and with these big Gold purchases by the Russian and Chinese government. You can see and also China’s trying to redenominate crude in some different commodities in the RNB. So this is all a big strategy to say like why should the U.S. government have visibility on every swift transaction in the world. But this is like a 20 year thing. And so like it’s very hard to read in. I think on that basis when Gold actually is going to become interesting. I’m not negative or positive. I’m just saying that that’s a big macro change which is roll out over 20 years. I also think at some moment you know we’ve had unprecedented in modern history printing. At some moment the US will slide into a recession. No I’m not saying end of world, just a typical business all recession. You know they’re going to try to print at some point inflation, I’m not I’m not a Gold bug, I’m not a hyper inflation guy, but inflation comes in and Gold becomes interesting. But I find that that cycle is so hard to call that that I can see it you can see it kind of from a hundred miles away. But you don’t quite know how fast the car is going to get there right.

Matthew Gordon: But there’s the point. You just used a great phrase is no one can see when it’s coming. You can apply that to Uranium, Gold Copper.

Anthony Milewski: Commodities.

Matthew Gordon: And that’s I guess the…

Anthony Milewski: Gold is slightly different because I like Cobalt is highly driven by Supply Demand model, like highly correlated. Gold like I don’t know like our Indian rice farmers buying,  Indian farmers buying Gold and like what you’re like… I don’t know a search engine but so I would I would argue that base metals and Gold are differentiated on the basis that that a supply demand model really impact your Copper view.

Matthew Gordon: I understand but I’m trying to wonder if the sentiment applies across commodities as a whole, irrespective of whether it’s an emotional purchase like know some of the precious metals, because people as you said earlier, people are viewing it differently, people under 40 are viewing it differently now. This stuff which we’re going to need, to build the stuff we want to use every day. And you know at some point people come to wake up the fact that, as you say, there’s going to be a bull market, there’s going to have to be a bull market because there’s not enough mines and production producing the stuff which people need to be able to produce the things that we use every day. So people will wake up to it. But I just I’m not sure why we.

Anthony Milewski: They’re not asleep. Let me be clear like on the base metals, like when you go through New York. The Fund Managers. They’re really smart intelligent shredded women right so they can see the same thing I see. It’s just the structure of capital dictates their investment horizon. So it’s not like they, ‘oh one day magically Copper is going to run and they didn’t see it coming’ it’s going to be that you know, they think it’s coming in 24 months and so let’s get it in 22 months. I just made that up right. So that’s different. Where as Gold. Gold. I don’t think you can have that view as much because. Probably it is coming. But who what when where why is much harder to predict when you don’t have a supply demand model informing you. In my opinion.

Matthew Gordon: The point at this point I’m trying to make about institutions, they’re a bout making money. Right. So they set up structures and we are saying they’re not nimble or flexible enough to change that up take advantage of a situation.

Anthony Milewski: Why would you invest in Gold? What’s the S&P return right now 20%^ this year.

Matthew Gordon: Not necessary, I’m talking about the other commodities which are lagging.

Anthony Milewski: I’m plying devil’s advocate. Why would you invest in commodities this year or the last year. I mean what is this new show to someone right up to the lady in New York who’s running… You know they want like, funny joke here for the retail investor… When you’re in New York there if they don’t tell you how much money they’re running it means it’s less than $10Bn. Because when you show up “we’re running $100Bn. Like why why does that individual who can invest maybe in anything care about kind of a sector that’s underperforming. Apple and Amazon! Like why do they care. You know like that, I mean you’re trying to get them as a company. You’re trying to get them to care. Look we had a moment of caring because of the adoption electric vehicle. But you talked about the sector more broadly where they can invest in anything they want and frankly a lot of this stuff has massively outperformed basic materials, which by the way in addition to having underperformed. It’s also kind of a liquid and kind of hokey, and not all the management teams are that great. So you know if you think about it that perspective. You know it’s not it’s not time and you know there’s an argument that it becomes time when that market’s fully invested maybe some of the money flows down. But I often suffer from this, and I think a lot of investors who focus on mining, suffer from  missing the forest for a tree season.

Matthew Gordon: Are you saying people are institutional and retail just got smart the game played in the mining sector?

Anthony Milewski: I’m not calling anything a game. I’m just saying that there’s been a lot of other opportunities which have materially outperformed. You know like look at YETI, I just said because I have I bought some Yeti stock I think it’s doubled this year. You know I mean so. And by the way it’s liquid. You know like start naming these stocks and so I think you know if you’re an investor…

Matthew Gordon: You’ve got choices.

Anthony Milewski: You have choices and that’s just a reality and we shouldn’t we should not pretend like.

Matthew Gordon: I say all the time.

Anthony Milewski: So you know and I think one of the things that we’re trying to give people the choice is around and EV proxy adoption, but talk about the industry more general. If I’m Antony and I can buy anything like tell me why should I buy your Gold company over Apple stock right now. And the answer is maybe I shouldn’t. And I don’t maybe I should I don’t know.

Matthew Gordon: Yeah you can have a long term view about the commodity sector and all of that.

Anthony Milewski: I’m going to give you a longer view so OK I’ll play devil’s advocate. Great. So your time at Gold’s going to run in two years. Great. I’m going to own Apple for two years collect my dividend and then and then. I’ll buy Gold and that may be kind of what you but that’s what you’re facing because I talked to these investors all the time. Yeah that’s this. Anthony So is this happening. When’s this happens. I don’t know. That’s great. Yeah I’m up 20% of the S&P this year. Like let’s talk when it’s going to happen.

Matthew Gordon: I mean maybe discussion for another time but then that leads to issues for again some of these companies who are struggling for cash. You know it’s a self-fulfilling prophecy. But it’s great for companies like you that likes a conversation for another time like let’s some let’s finish up here because I want to ask you about, well without forward looking statements, I want to ask about this year. You’ve sort of explained that earlier on but when you talk about deliverables or focus this year or the next year.

Anthony Milewski: I think the balance of the year. It’s about closing the Highlands acquisition and getting it all everything kind of in place and really making sure that everything is buttoned down. Having done a bunch of acquisitions and then hopefully having the Cobalt and Nickel price come our way a little bit so that you know we get a bit of a rerating, not only from the underlying commodities but also from this transition from being what was initially a stockpile, to now being really a streaming &  royalty company.

Matthew Gordon: Fantastic fantastic. I’m going to finish you off give me five reasons why people should consider investing in Cobalt 27.

Anthony Milewski: It’s simple. We’re a proxy for the adoption of electric vehicle and I think there’s no one else out there doing what we’re doing.

Matthew Gordon: Going for one big one!

Anthony Milewski: That’s the big one.

Matthew Gordon: Okay fine. Hey thanks very much. Good to meet you.


Company page: https://www.cobalt27.com/

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