American Manganese (TSX-V: AMY) – Is This Battery Recycler Really Better Than The Rest?

The American Manganese company logo.
American Manganese
  • TSX-V: AMY
  • Shares Outstanding: 181M
  • Share price C$0.13 (27.03.2020)
  • Market Cap: C$23M

Crux Investor recently interviewed Larry Reaugh. He is the President & CEO of Lithium-ion battery recycling technology company, American Manganese (TSX-V:AMY). The interview was very interesting, and perhaps a little controversial.

Our most recent interview with a manganese company was our interview with the Managing Director of manganese developer, Element 25 (ASX: E25), Justin Brown. We’ve interviewed other manganese companies in the past; it may well be worth watching. There are also some manganese-related articles on our platform.

It might also be worth watching our interview with project developer, Neometals, a battery recyling company we think is very promising, but Reaugh thinks isn’t transparent with the market.

American Manganese Inc. is a critical metals company focussed on extracting cathode materials from lithium-ion batteries via recycling using its RecycLiCo™ Patented Process. Just what does American Manganese have going for itself that its battery recycling competition doesn’t?

We Discuss:

  1. Company Overview
  2. The American Manganese Backstory
  3. Cash Position, Pilot Test Results, and Plan of Actions to Attract Funders
  4. The Business Plan
  5. Conversations Driving American Manganese Forward
  6. Imminent Raises:
  7. Management Share Position: Are They Buying More?

Company Website:

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 American Manganese company logo.

Neometals (ASX: NMT) – Transforming Battery Recycling Recovery Rates for the Electric Vehicle Revolution

Neometals portfolio of projects are progressing on schedule, so we thought this would be a good time to catch up with them. Chris Reed, CEO, talks to CRUX Investor. Click here to watch the interview in full. Neometals has converted from miners to project developers following the Electric Vehicle thematic. It’s clear that they are rather good at taking complex problems that are challenging, and work out how to commercialise it efficiently. Reed is a sharp and driven individual, who has built an eco-system of smart people around him to deliver financially sustainable solutions.

Neometals made its money with a Lithium mining project, Mt Marion in Australia, and timed their exit beautifully. They pocketed c.AUD$130M, and has returned c. AUD$45M to shareholders in the shape of dividends. And they have retained an option on the Lithium spodumene component which will be a revenue stream for them at the point the market comes back. A smart piece of negotiations. And that typifies their approach to business.

Reed views Neometals as a “project development business.” Neometals has a variety of assets with differing commodities, but the battery thematic is the key driver. There are 3 core projects with Neometals’ focus: the Barrambie Titanium Vanadium Iron Project in Western Australia, a Lithium Refinery Project and of course it most advanced project, the battery recycling business. Reed updates us on their battery recycling portion of the business. They are at an advanced stage of proving up their MOU terms with the billion dollar German industrialists, SMS Group. Reed talks us through the deliverables for this year and how they will become a significant global player in an accelerated time frame.

Neometals is valued at cash in the bank. Some investors are struggling to understand why. Perhaps Neometals need to start telling their story and investors need to pay attention. Barring a global meltdown, the battery recycling industry looks set to grow at a phenomenal rate. Having identified the growing demand to recycle Lithium batteries as a focal point, the company is working towards commercialisation of its proprietary process for recovering Cobalt, Nickel, Lithium and other valuable materials from spent Lithium batteries. Neometals’ pilot process has generated a high purity (+99%) Cobalt sulphate product at a high recovery rate (+98%).

Neometals’ management has created an eco-system of experts in their field with the ability to solve complex problems currently related to Lithium, Titanium and Vanadium. Neometals hydro-metallurgical recycling method is unique. And with strategic partnerships, supply lines and MOU’s already in the bag, the eco-system seems to be close to delivering on its ability to move the pilot in to commercial reality at scale in Europe.

What did you make of Chris Reed? Is Neometals the answer to our waste-related problems? Are they a better bet than a conventional junior mining company? Comment below and we may just ask your questions in the near future.

Company page:

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.

European Lithium (ASX: EUR) – A Giga Factory JV with a Junior Lithium Developer? (Transcript)

Interview with Tony Sage, Non-Executive Chairman of European Lithium (ASX: EUR, FRA: PF8, VSE: ELI)

Can European Lithium plug in to the European EV and battery revolution? They talk about how they think they can attract EU debt funding and a strategic equity partner. Will that partner be prepared to pay more for buying local / greener? Tony talks to us about the realities of how junior miners attempt to get funding and why he believes European Lithium is in a unique position in Central Europe. We are interested in understanding the terms and conditions to their recent €10M convertible note funding facility. If you are a shareholder, do you like terms?

We get his take on the Lithium pricing cycle and timing for recovery. Their Feasibility numbers need the price of Lithium to rise significantly to be economic. Do you agree with him?

We are also fascinated by the fact that European Lithium sits on the ASX (ASX:EUR), Frankfurt Exchange (PF8), Vienna Stock Exchange (ELI) and NEX UK (EUR). Find out which exchanges work for them and why.

Interview Highlights:

  • Overview of the Company
  • The Background Story of European Lithium
  • New Shareholders: Who Are They Targeting?
  • Lithium Market and Geopolitics
  • Standing Out: Can They Get Financing in Today’s Market?
  • Cash Position
  • What Are The Board Preparing For? What Are The Main Concerns Going Forward?

Click here to watch the interview.

Matthew Gordon: Why don’t you kick off with a 1 minute history of the business.

Tony Sage: mine was developed by the Austrian government back in the 1980s. They were looking for uranium but they found Lithium. Unlike any Western company, they actually went out and built the mine straight away without doing all of the work that is required before you start building a mine. What they did is they followed the Lithium from the ceiling of the opening and just followed it all the way down. It’s a beautiful structure inside the mine. But unfortunately, when we took over in 2012, there wasn’t data to prove how they found it. So what we’ve done in the 6 years that we’ve owned it, is mine it So we mined 1,500t. And we also drilled. So that proved, as all Western companies need, is a JORC compliant resource. So we know we’ve got 11Mt of ore there. That that will last 22 years as a mine life. And we completed in that time frame a PFS. So a Pre-Feasibility Study has been completed. It was completed by one of the leading engineering groups in the world, DRA. So that’s basically the premise of our story.

Matthew Gordon: How this has come about? You’re involved with Cape Lambert. Cape Lambert is a shareholder in this project.

Tony Sage: It’s a very interesting background. It started off with a cocktail party. One of my colleagues met The Count of that district in Austria, near Wolfsburg. And they got talking and he’s introduced himself. He was in mining. And The Count said, ‘I’ve got a mine on my property’. That’s where it started. So in 2012, we had a look at it, and invested in his property. We paid him a lot of money for access. And then over time, he enjoyed what we were doing, and he became a shareholder of the company. I didn’t have the funds myself personally. So I used my investment vehicle, Cape Lambert Resources, and we invested some money in. And since then, we’ve got other investors in. In 2012, Lithium wasn’t flavour of the month but in 2016, it became flavour of the month. We kept it private for 4 years. And then we listed it on the Australian Stock Exchange back in 2016-17. At the time Lithium was exploding around the world. But in Australia, there were 41 separate ASX listed Lithium companies at the time. And a lot of those were in Australia, some of those were in Africa, and obviously some in South America. So we were being drowned out by all of the Australian ones. So if you’re an Australian investor, and you say I want to operate a mine in Austria, I would just say you’re crazy. Mining doesn’t happen in Europe. So listing in Australia was an error of judgment. But we got the money when we listed, and we were able to progress the project. But then in 2017, we listed it in Frankfurt, Hamburg, Munich, Stuttgart and Berlin. And from that moment on, it exploded. The investor base moved from 100% Australian shareholders to now 55% shareholding base in Europe. And most of those European shareholders are German or Austrian. There’s a splattering in UK, France, Switzerland. So we realised we hit on something extremely good. If you look at a lot of the social media, our company is clicked a lot more than some of the bigger companies in Europe because of 1. EV, 2. it’s a unique story that a mine is going to be actually reopened 20 years later in a little country called Austria.

Matthew Gordon: I do want to say over the management since experience and so forth, but you talk about shareholders and the split between Europe and ASX. Obviously, it’s a European asset. So you’d hope that people would be interested in Europe, but just looking at your share price. Lithium companies across the world have been absolutely hammered. In fact, what is the Lithium price at the moment?

Tony Sage: We’re going to produce is Lithium hydroxide, at its peak was $22,500 per tonne. And you’re looking probably at $15,000 – $16,000 a tonne now. So it’s dropped a lot in the last 12 months. The actual raw Lithium price, got to just over a $1,000 a tonne. It’s probably trading at $450 to $500 a tonne now. Hydroxide has gone down about 35% over the last 4 months.

Matthew Gordon: Most of the numbers I’ve seen from you is using $16,000 a tonne. So obviously that’s taking a bit of a hit. I’ve read various things from JP Morgan that suggest that it’s going to go lower. What do you think?

Tony Sage: We look at benchmark. We look at Roskill, but we also look at the broader world. China has just announced, it wants to build 1M electric buses. Now you just think about the amount of Lithium required for 1M electric buses. The slide started when one of the biggest producers out of Chile said that they were going to double production, because they had an agreement with the Chilean government to increase their production. It didn’t happen. But that was the initial scare. From that date that was announced the Lithium price actually fell about 15% on the day. Lithium stocks all around the world just went down 10%, 15%, 20% because they thought all this production was coming off. However, 1. that production is not coming on. 2. you’ve got countries like China, who are now announcing that they’re going to be a 1M electric buses. Now, there’s not enough Lithium around today to produce those 1M buses in the timeframe they want. The price will go up.

Matthew Gordon: You’re projecting that. I think like most supply demand stories, there’s two sides to it. We accept that the demand is probably going up because of the whole EV story.  But likewise, as soon as the demand goes up, new entrants come into market or production, which is sitting idle at the moment or on a very low level, goes up. JP Morgan would suggest that there’s going to be double the amount of production out of South America alone into the marketplace. So that is going to affect pricing. It’s a question of where it settles. Production is not going to stay as is. It would be insane to think that. I think people will be attracted to come into the Lithium market again. It’s a question of can they do it economically. And we’ve spoken to a lot of Lithium businesses. You’re right, in the ASX lithium is a dirty word at the moment because people’s shares are underwater. It’s a question of when does the price start to move again? You’re going to get through this cycle into the next cycle. Can you get financed at current levels?

Tony Sage: I think we can. I wouldn’t be pushing ahead, spending already $12M-$13M on the Pre-Feasibility Study (PFS). Spending another $10M on the definitive or bankable, unless I was very confident. We’ve been in discussions with project financiers, quite large ones, European-based. What you’ve got to understand is the broader geopolitical situation. You’ve seen it now with Rare Earths. China has said to the world, we’re not going to export any more Rare Earths. At the moment China produce over 80% of the Cobalt required for EVs and 85% of the Lithium for EVs. Now, if they’re going to build 1M electric buses. And of course, with cars and obviously battery storage… how many batteries do you think they’ll be exporting in 10 years time? So the EU has made Lithium and Cobalt critical minerals. There’s only a few players in Europe that can produce in Europe. 25% of the world’s Lithium ends up in Europe. They produce none at the moment for electric batteries.

Matthew Gordon: Let me understand the terminology. You say critical minerals need to be produced from within Europe. Or have they got the ability to buy out in the wider market?

Tony Sage: Well, OK, let’s go into Hydroxide and Carbonate production. All comes from China. They’ve built one plant here in Western Australia. Who owns it? The Chinese. At some point like they have done with Rare Earths, they could say for their own critical needs, that they can’t export any more Lithium Hydroxide or Cobalt Hydroxide, or Cobalt Carbonate or Lithium Carbonate. At some point, it might not happen, but the security countries like America and Europe as a whole need to have is some production in their own backyard. Ours isn’t going to anywhere near create the supply that is needed by BMW, Volkswagen.

Matthew Gordon: So again just so I understand. Are you talking about production or are you’re talking about processing?

Tony Sage: I’m talking about production of Lithium Hydroxide or Carbonate in Europe.

Matthew Gordon: Right. Because it’s a fairly abundant resource, isn’t it? That’s the problem.

Tony Sage: It is. But mining it economically is the key point. So it is abundant everywhere. So, for example, we just take Pilbara Minerals, for example, 4 weeks ago, they were in big trouble. They got rescued by the Chinese because the price has fallen down, because they’re in a remote location. We’re in Wolfsburg, right near the railway line, 40km from Graz, where Samsung have a battery factory. We’re in an industrial area in Europe where we can export to any country in Europe by train for very little compared to having it from Australia or South America, shipping it to China to get produced in China. All China does buy it for $450- $900 a tonne, and sell it as Hydroxide at $16,000 a tonne to battery makers in Europe. The EU have recognized that. They’ve recognized that with Rare Earths. They were scared by the Rare Earths announcement by China on 2020 no more export. So they’re madly, as with the Americans now, trying to find Rare Earths. But it’s the same problem that will be with Lithium Hydroxide and Carbonate. Forget the raw stuff. I mean, there isn’t a plant in Chile that produces Hydroxide or Carbonate. They ship the raw product to China to get the Hydroxide.

Matthew Gordon: Are you’re saying that Europe is coming up these protectionist policies to be able to produce and process their own Lithium in their own backyard?

Tony Sage: Encouraging policies, encouragement for European mines to be able to produce Hydroxide, Carbonate for the European market.

Matthew Gordon: An encouragement! We’ll talk about the funding program launched by the German ministry, which you mention, in a minute. But if I’m Gigafactory producing batteries, I’m going to go to the cheapest supplier, aren’t I? I’m going to go to the South Americans. So how do you stack up against that?

Tony Sage: Well, 1. the freight cost. We’re not paying $22 – $25 a ton to ship it from there to Europe. 2. if you look at and read our Pre-Feasibility Study (PFS), our cost structure is very good. The number is $6,500 -$7,000 a tonne, whereas 12 months ago we could have got $22,000 for it. Now we can get $15,000. It’s still a very big margin of profit, excluding financing costs, for our shareholders. So we believe we can produce for the European market a safe green, very green supply of Lithium Hydroxide to the European market without any problem with geopolitics. If the suppliers, for example, as we saw 7 months ago, the Argentinian government slapped a tax of 10%-12% on every export, including Lithium. So if you’re a Lithium producer in Argentina, you’ve just dropped 12% of your profit.

Matthew Gordon: Yes, but they’re also producing at $3,000, so they got some margin. Lowest quartile producers.

Tony Sage: Well, in Chile they are, Argentina not so. But in Chile. Yes. Chile is very un-environmentally friendly.

Matthew Gordon: Meaning what?

Tony Sage: Well, they’re producing this from brines, which takes up a lot of water. And which is causing all the grief with the local population. And they don’t want any of those mines to be increased, because if you’ve seen a brines production facility, it’s pretty ugly to the environment. So environmental, ours is all underground. So we can get a big green tick and we’re producing Hydroxide for EVs or other environmentally friendly industries. So I think we get 1. a big green tick 2. the German car manufacturers for example, I think one got into a bit of trouble investing in a Cobalt mine in DRC.

Matthew Gordon: That’s a well-trodden path with regards to Cobalt and DRC and child labour and so forth. Let’s stay away from that. Let get into this. So what I want to understand is how does your project get financed today? I know you did a raise earlier in the year. What are the terms of that. $10M was mentioned. But it was a bit more complicated than that, wasn’t it?

Tony Sage: So it’s a financing facility that we can draw down on. It’s complicated because it depends on the share price at the time. They get a 10% discount to the market. Say we are trading at $0.10. They get it at $0.09. And they don’t do it all at once. So we’ve got the facility there. They can do it when they feel like. So, we’ve only drawn down on that facility $2M and so we got $8 million left.

Matthew Gordon: And you can drawdown in $1M tranches upon conversion of all the notes from previous rounds. That’s the way it works?

Tony Sage: So when they finished when they finished selling those to recoup their money, we can then draw down the next one.

Matthew Gordon: Got it. So it’s a real stagger. It’s not $10M per se. It’s a facility, as you said.

Tony Sage: It’s a facility and it can last 3 years.

Matthew Gordon: So let’s come back to financing, because that’s where the fascinates me. At $15,000-$16,000, you’ve shown your what the economics are here for you. But if I’m a banker, I’m discounting today’s price by up to 40%. So it becomes a question of, can you persuade people that your thesis about price going up is true? And if you can, that’s great. If you can’t, then what are your options in terms of getting this thing finance? Once your DFS is complete?

Tony Sage: Well, 1. the DFS will say whether we’re robust enough. So if the DFS comes out saying this is a very marginal project, I wouldn’t go to any bank with this. That’s one scenario. We’re expecting the opposite because the Pre-Feasibility Study (PFS) was very robust. So I’ll have a very robust DFS. So I go to the bank and I will say, ‘this DFS proves there’s a 40% margin in this. How much can you project finance this?’. They will say, ‘this much’. We will seek some EU funding, whether it’s a soft loan, whether it’s a…

Matthew Gordon: Tell us about that? You talk about the German ministry putting a battery production funding program together of €1Bn. That’s quite a lot of money. But how much of that would be applicable to you? How much of that €1Bn would be set aside for mining?

Tony Sage: Unknown. If we, for example, link up with a battery manufacturer, as a joint application for use of these funds, it might be a larger number. As a miner, by ourselves, I don’t think we would be able to do it. We’d have to link up with maybe an end user. I’m just throwing out names. An automotive maker in Germany or a battery maker in Germany. We can partner up and then apply for that. But separate to that there’s EU funding. It’s called Horizon 2020, and under that, there is a direct application for us as a critical mineral for Europe. We may be able to get a soft loan. So that soft loan might be €50M at a very attractive interest rate, which is probably almost zero repayable over X amount of years. So at the same time, say the number is $400M that we’re looking for. We would do $70M of that in direct equity, and the rest in project finance and or funding from a source like Horizon 2020, or from the €1Bn fund from the German government.

Matthew Gordon: How does someone like Horizon 2020 assess your project and the economics of a project like this.

Tony Sage: The credibility of being the… the PFS is done and the DFS is coming. We would have to present a case to them that 1. it’s very good for Europe. 2. it will create jobs in Europe. 3. it is green. We’re not going to hurt the environment by doing what we’re doing. The three key criteria in Horizon 2020. We take every one of those boxes.

Matthew Gordon: It’s interesting that none of those criteria are about the economics.

Tony Sage: No. Again, it’s about creating jobs. If you look at virtually any government around the world, it’s not really about economics. It’s about creating jobs. This is a fiscal investment by the EU into something that’s going to create jobs and solve the problem, albeit in a small way of producing a critical product for the European industry, rather than being reliant on China.

Matthew Gordon: So potentially that type of money is quite important, because it’s… I’m not saying dumb money but it’s money which is a different set of values or needs from institutional money, who does care about the economics, because they’re buying shares in your business, presumably on the equity side, and want some guarantees that you’re going to be able to mine economically and pay back the debt. So have those conversations been had? How do you know that Horizon 2020 is interest in investing in something like you?

Tony Sage: Well, because we’ve applied, and we’ve talked to the right people at the right agency. And we will await the outcome of the DFS. They’ve got a stringent programme as well. We’ve got to have a document that shows that we will be economic. We will create jobs in a low job area, especially for youth near Wolfsburg in Austria, where we are. So that would create long-term 300-400 jobs, short-term 1,500 during the construction phase. So we are going to create jobs in that. And if you go to the local government in that area, we’ve got two sets of competing mayors who want us to build the plant on their side of the fence. So we’ve got so much support from the local government. We’ve got so much support from the Austrian government. So now it’s one step higher, which is the EU in total. And they’ve got so many other factors to look at geopolitics, which we’ve talked we’ve touched on environment, which we’ve touched on. And most important jobs.

Matthew Gordon: Most important for them. But I’m talking about shareholders wanting to come in and invest.

Tony Sage: But if we get that money. That’s a big chunk of shareholders who will go, ‘wow, that’s great’. That’s $50M, $70M. How are you going to get the other… $300M. $70M of that is going to come directly as direct equity. So that’s roughly 25% of it. We’ve done the numbers with banks. What they’re looking at for the project finance side, and they can project finance probably 60% of the project.

Matthew Gordon: So let me get this straight. I want to get the numbers right. You say $400M required. You’re getting potentially, let’s just say for a second argument, $50M of debt from Horizon 2020 on a 70/30 debt / equity split.

Tony Sage: Half of that.

Matthew Gordon: So I’m just trying to think as a retail /high net worth /family office investor looking at your company going, ‘I think this is a great story. I’m going to invest. How do I feel about Horizon 2020 coming in?’. I guess if they’re putting $50 million towards the debt. Great. But it’s still costing the company, whatever nominal rates that these people are charging…near zero. You’re suggesting. That’s great news. Do I look at that as some kind of endorsement of the project? I guess not. It’s about job creation, and is it green etc. So I’d need to some see who else would be involved with this, is what I’d be thinking. You talk about advanced stage discussions with some of the off-take agreements as a means of… would that be pre-funding in terms of the off-take? Who are some of the names involved with this who would give me some comfort around the validity of the project?

Tony Sage: We’ve signed NDA’s with these companies. But rest assured that a large German automakers and builders of batteries themselves is another company. And let’s go for one other one, which was in the industry of producing electronic tools. Now, the reason I don’t pre-sell the off-take now is, once this DFS is done and people see how robust the project is, you’ve got other suppliers around the world that will say here’s a foothold into Europe. So if we’ve already sold our off-take pre the DFS, we won’t be a takeover target.

Matthew Gordon: Ok.

Tony Sage: If I don’t and the DFS comes out, here we are. There’s a small player in Europe is only going to produce 11,000t of Hydroxide per annum. They are in Europe. They’ve got all these contacts. Wouldn’t it be great to have in our portfolio? So if we’d already sold the off-take is very much more difficult to have that story. I’d like to be in a position where we’re completely transparent. We’ve got no-offtake partner now. We don’t want one now. And we will wait until the DFS is done and we can sign 4 agreements today, if I wanted to. And a couple of those are outside of Europe, but I don’t want to sign one now for that reason.

Matthew Gordon: And I appreciate the insight into the strategy and the thinking. That’s well-noted. So, if I look at the project now, $16,000, which is what you’ve done the numbers on, and let’s say it’s roughly give or take that on any given day at the moment, you’ve got a 25% IRR, which is reasonable. But you’re right on the margin in terms of price in the market at the moment. So you’re looking for this price appreciation to drive not only the IRR, but the NPV of this project up. Are there institutions that you’re talking to or begun conversations with, in anticipation of what the DFS is going to tell you?

Tony Sage: Yes, we’ve got a couple of institutions already in the stock. They bought through the last equity raising we did. So they’re sitting back. I’m going to be completely honest now. Virtually everyone, the two major banks, European banks, and two off-takers want to wait for the DFS. The Chinese obviously don’t care about the DFS. They’ve seen the PFS. But we don’t want to send concentrate from Austria to China for $400-$600 a tonne, and it comes back in to Europe at $16,000-$17,000 a tonne. So we can take easy money now and breeze through the next 6 months, or we can hold tough like we have. Be true to what we want to be able to do, which is finish the DFS. And then go to the two major banks that we’ve talked to and say, ‘right, this is it now. You’ve asked us to be our clients. Can you raise X amount of dollars on the IRR based on this final report from DRA’.

Matthew Gordon: Those are an investment banks as opposed to debt providers. And the current investors are going to be very different from the types investors you’re looking for going forward, aren’t they?

Tony Sage: Absolutely. Yes. Completely different. At the moment, we’ve got, in Australia, we call them mums and dads; in Europe they are called family houses. So we’ve got a lot of family house investors in Europe based in Austria and Germany. We’ve got a little bit of investment, now that we’re listed in London on the NEX. And a few are coming through that. The reason we did that is to broaden our investments spread of investors from Europe, and a lot of family houses in London, and a lot of municipalities can’t invest unless you’ve got some sort of listing in London. So we chose the NEX because it was the quickest to get on. And since we were on, it doesn’t trade very well, because most of the family houses buy on the Frankfurt Exchange where we trade millions and millions a day.

Matthew Gordon: It’s cheap and quick on NEX, but doesn’t necessarily trade or give you the volume of liquidity you need. So how much cash are you sitting on?

Tony Sage: $1.7M in the bank right now. Our next drawdown is $1M, which should come through by the end of October, halfway through November. And that will continue. So in another 3 or 4 weeks, we can draw down another $1M or so on.

Matthew Gordon: So they let you know how they’re doing with regards to selling down the shares.

Tony Sage: Well, we see it because they have to come through us to convert their shares. We’ve obviously got the share register, so we know when they are selling it. So we’re okay for now. Would we want a different funding, partner? Maybe. So, there’s lots of different options on the table. We’re not going to say we’re stuck with this one, but this one will suit us for the time being until we finish the DFS.

Matthew Gordon: You mentioned part of your strategy is, you don’t necessarily want to take off-take partners on board yet, until you get clarity on the DFS, because then you’ll understand what your options are. You’re a small Lithium player. You’re in Europe. That’s a USP for you or your positioning it as such anyway. What are you doing? Some companies choose to hunker down until there is price discovery. The price gets back up. Or some people like charge on at 100 miles an hour. Some people JV. What’s going on with the board’s thinking. What are the things keeping you awake at night Tony?

Tony Sage: Well, the biggest one right now, believe it or not, is geopolitical. Because everything affects everything in this world. Trump’s fight with Xi Jinping, everyone should be worried about, the whole world should be worried about.

Matthew Gordon: We are. That’s why Gold has gone up.

Tony Sage: Yeah, $1,500. I’ve been reading reports over $3,000 an ounce by mid-next year. But if I’m thinking purely of business, that is my number one concern. China already has proven with this Rare Earth announcement that it will try and hold the rest of the world to ransom if it doesn’t get its way. Trump is belligerent on the other hand, and he wants his way. So, that negotiation is very important for a lot of things in commodity prices around the world. So that’s one thing that keeps me awake at night. I think part of the reason that the US now says, ‘I want to buy Greenland’, because I know there’s a whole lot of Rare Earths in Greenland. So that one maybe a parody or a joke from him. But he’s quite serious about getting investment in Greenland. And I think now with the Prime Minister going to visit Trump. He’s come out and said, ‘we want to really be involved in Lithium, Cobalt, Rare earths’, anywhere in the world with any Australian company. So geopolitically I think there will be a resolution coming up, whether it’s in Trump’s favour, China’s favour. Who knows? But that will settle a lot of the nervousness. You’ll see Gold maybe come down a little bit. But I think everyone then will think, right China’s ready to go again. We just saw the spurt in iron ore prices, for example. It went from $60 a tonne back to $125. Because they’ve got rid of their stockpiles and they needed it very quickly. If there is some sort of resolution, China will need to fiscally spend money again and that will increase the Iron Ore price. But that goes on to other things. If they’re building 1M buses, they still need Iron Ore. But they still need Lithium. I look at the whole of the world and think about things that can happen, cannot happen. For the board, we’ve got a very good project in a very good country. The government of Austria wanted to go ahead. The local government there wants to go ahead. We’ve had no environmental issues come forth for us. Being in Europe, you see every time there’s a new mine set up, there’s greenies everywhere trying to stop it. Ours is not like that. It’s all underground. I think we’re in a unique position to go ahead, finalize the DFS, have a document that we can present to project financers, institutions that will take chunks in an equity raising and obviously go to the $1Bn fund people out of Germany and also the Horizon 2020 out of the EU. I’m looking forward very positively and I believe that the Lithium price will start to move upwards from January next year.

Matthew Gordon: We shall see. I think lots of people want to see some movement there. And then it’s a case of what happens next. Do we get a slew of Lithium miners coming into market or not? And how do you take advantage of your unique position in Europe and capitalize on that? Tony that’s a great first introduction to the company. I would love to stay in touch and see how you get on.

Tony Sage: Thank you very much.

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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.

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