CRUX sat down with Cobalt 27 (TSX: KBLT) Chairman and CEO, Anthony Milewski. Is ethically sourced Cobalt & Nickel important? Does China care? Do they also focus on Lithium? The battery market and stainless steel is driving recent growth in Nickel so how can Cobalt 27 take advantage of that? And will copying Franco Nevada and Wheatons business model work for them? More deals than anyone else in the space over the last two years, now it’s time to give something back to the shareholders by focusing on cashflows. Hear Anthony’s insight on all of this and more.
Click here to watch the interview.
Matthew Gordon: How are you Anthony?
Anthony Milewski: Hey Thanks Matthew for having me…I’m great thanks.
Matthew Gordon: Thanks for joining us. Why don’t we kick off and kind of set the scene for everyone and give us a two minute overview of Cobalt27.
Anthony Milewski: Yeah. So you know when I think about Cobalt27, I want to step back and really start to think about the world. And know what we’re seeing today is a structural change in two of the most important industries in the world. Namely the energy business and the automobile industry. So you know if you if you think about crude oil today, something like 60% is used in transportation, maybe even more than 60. If you think about the automobile industry and what’s happening there. You’re seeing almost every automaker in the world transitioning into electric vehicles and hybrids. You’re seeing autonomous vehicles, and the rise of the autonomous vehicle sort of any day now coming out. I don’t know if you would have noticed in the last kind of week Tesla announced a million of these vehicles in the next year. I don’t know if they’ll hit that target. But you’re seeing massive disruption. And you know when we set out to create Cobalt 27, we’re thinking about how do you capture that disruption as an investment? What is the best way? And what we realised was it’s tremendously challenging, because while we can all agree that these changes are coming and you can’t really stop them, what we weren’t able to kind of nail down was how do you play it. Do you buy Tesla stock? I don’t know maybe actually Ford is going to be the winner. Potentially Beijing Auto. I don’t know. Maybe you should buy ENvida the chip maker. Maybe you buy one of the sensor makers. And then we realise something, which is so long as you believe that there’s going to be a winner. So long as you believe that there are going to be electric vehicles sold, the winner is actually basic materials. And the reason is is because every single electric vehicle, every single hybrid is going have a battery and that battery is a Lithium ion battery that has Lithium Nickel, Cobalt, Manganese. You know these basic materials and so we set out to create a proxy for the adoption of the electric vehicle. That disruption of the energy industry and that proxy is really Cobalt27.
Matthew Gordon: Okay. So I think there’s a general acceptance that people are moving towards electric vehicles, batteries whatever they do… Storage for homes is all coming coming down online and there’s a lot of information in the marketplace about that. So tell me a little bit about your strategy because a lot of companies come to us without a business plan. They’ve no written business plan which surprises me, having worked outside of this space. So tell me a bit about your strategy and why you think that’s going to give you the edge.
Anthony Milewski: That
that’s very simple. We have copied in a way, Franco Nevada or Wheaton Precious
business model which is streams and royalties. We are not miners. We go out and
we seek to do streams and royalties with world class partners. So if you look
at the first Cobalt stream ever done, we did with Vale. So Vale is a world
class mining operation right. So they’re the operator of the mine. If you look
at a transaction that we’re in the process of closing, it’s a Nickel Cobalt
mine once again in operation, MCC is the operator. So the business model is
very similar to the Franco’s in the regions of the world who focus on precious
metals. But what we’ve said is we’re going to replicate that business model but
focus on the battery metals, particular Nickel and Cobalt that are absolutely
critical to the Lithium ion battery.
Matthew Gordon: But you also have some physical product that I notice and some interest and other battery metals as well so it’s not as a pure royalty play is it?
Anthony Milewski: No
I mean you know you have to kind of play the hand you’ve been dealt as a where
and because of this speciality nature of of Cobalt and Nickel we had to be a
bit creative. And when we launched the company we actually launched with 2,000,
approximately, 2,000 metric tons of Cobalt. And then we bought another 900 tons
subsequently you know a few months after the launch.
Matthew Gordon: Why do that? What are you doing, hedging?
Anthony Milewski: Well
no so that was that was the foundation of the balance sheet. So you know when
you have a physical commodity like that you can actually take leverage. And in
the early days we wanted to build the balance sheet so that we could do the
subsequent transactions, like the acquisition of the royalty Voisey’s Bay or
the Dumont royalty. So that was really a strategy around building a balance
sheet.
Matthew Gordon: So I mean so how does it work? You’re you’re leveraging that? Why wouldn’t you just sell it into the market?
Anthony Milewski: So
we we have it is leverage to this point. However we have a credit facility
available to actually leverage it.
Matthew Gordon: A couple hundred million.
Anthony Milewski: Exactly.
So why why don’t we sell it? I think one of the things so I’ve talked to
briefly about the fact that we’ve replicated the Franco Nevada model, I think
one differentiated aspect of our business is we’re creating an ethically
sourced supply chain. So everything we do is outside of the Congo and we can
talk about it later. But there are a lot of issues around conflict minerals
with Cobalt in the Congo. And so, one of the things in having this physical
Cobalt position, having the Voisey’s Bay stream, you have flow of material, as
it were, which is all outside of the Congo. So at some future date if a battery
maker an automobile maker wants to step in and actually take that material,
it’s another available source. So we sort of see ourselves in addition to
copying the streaming and royalty model, we’re actually creating a conflict
free supply chain outside of the Congo.
Matthew Gordon: I was going to ask you about this later actually. So explain to people what’s going on in the DRC which makes that problematic for you as an ethical sourcer.
Anthony Milewski: Yes
so. So to be very clear we have zero investments in the Congo and we’ve told
everyone categorically that we’re not going to invest. That a very important
point. But what’s going on there is very straightforward. Some of the
highest-grade Copper, some of the highest-grade ores actually sit inside of the
Congo. And what happened and has happened for Cassiterite which is Tantulum and
a bunch of other materials over the course of last 20 years, is that when a
given basic materials price gets sufficiently high, it’s actually economic for
literally an individual to go out there with a shovel. Dig up the ore and put
it in a sack and sell it right and sell it. You know wha.. what happened and
has been happening for a long time with with Cobalt in particular, but a bunch
of other metals have suffered the same fate, including Copper and Consitterite
and Tantalum is that you know in these situations where they’re very poor, you
know people bring their kids along and so you have people who are missing
school, or you have a family member or friend who’s kind of having this child,
who might be 10, 12. I think there’s some great wall street journal reporting
on this and Global Witness is reported on this. They’re having these children
out there digging this this ore, that’s ultimately getting put into the supply
chain. Where we come in and are saying look we can’t fix that problem. I
believe people can fix, but we’re not unable to fix that problem. So what we’re
offering is a product where none of our material touches any of that supply
chain. And what we think is, you know
the early adopters of electric vehicles in particular in the US, Canada and Europe. I think their green
individuals. They care about the environment. And so I think that they care
about the supply chain of the materials that comprise a lot of electric
vehicle. And they want to know that their new, name the name of the car, is
actually not having conflict Cobalt inside of it.
Matthew Gordon: Is this a marketing thing? I mean are we saying that these companies will find it easier to market a green product? I know it’s ethical but you know that there’s a kind of bond between is that. Is it a gimmick for marketers or is it a genuine concern for these countries?
Anthony Milewski: I
think the companies. I think it’s also a legal concern. I mean you know if
there are law like in the US I’m familiar with. You can’t be like, you can be
selling a product with known conflict materials. I mean you know so you run
into legal issues. I think it’s twofold. I think there’s just an ethical issue,
but I think there’s also a legal issue. And look I do believe that with time,
you know companies are thinking about ways with block-chain and different
technology to bag and tag, which is what they did with Tin. Meaning you know
you go all the way back to the source. You put it into a bag that you can verify,
then they put a barcode on it. None of these systems are perfect but none of
them properly exist for Cobalt yet.
Matthew Gordon: So. Well yeah. You say they’re not perfect. So who measures monitors what is and is not ethical?
Anthony Milewski: it
doesn’t exist. I mean I think if you’re a cathode maker, a battery maker, an
automobile maker, at the moment what you do is you buy directly from large
mechanized miners. So you buy from them Glencore or a Vale. I do believe that
those companies are able to look through the supply-chain. But I think there’s
only so much Cobalt that’s produced by those companies. And so as soon as you
step in to like an aggregator, I think you start to enter a pretty murky space.
Which we’re completely avoiding. And you know people are making efforts to
clean it up. It just will take time.
Matthew Gordon: In the Congo?
Anthony Milewski: Well
what they’re what they’re doing, is they’re they’re trying to create tracking
systems. There’s a couple of companies trying with block-chain technology, to
really be able to demonstrate that, we’re talking about Cobalt, but this could
be true of any of them. Just like Look here’s your car, by the way here’s the
manifest. The Cobalt from here and it’s sort of ethically source but you know
it’s a very complex issue. I’ll give you an example. If you’re a refiner or
processor and you have 15 sources of Cobalt, 14 of them may be legitimate but
if the 15th one isn’t, it all gets mixed up and then it taints the whole….the
LME by the way, the London Metals Exchange, they’ve announced that they’re
taking steps to try to look back into the supply chain. And so I think people
are aware of the issue. It’s just very complex and it’s not going to be
something that’s just sorted out. You know like that it’s going to take years.
Matthew Gordon: Yeah. Well I guess in the meantime there’s always going to be a market for…you are determining, well and others, are determining as unethical or not green.
Anthony Milewski: Well
I mean there’s always there’s always gonna be a bet there will be that market.
But I can tell you we spend a lot of time in China. I was in Beijing last week
and there’s this kind of idea that the Chinese don’t care. And I think that’s
completely false. I can tell you we were with a lot of major automakers,
battery makers, they’re acutely aware of this problem as well. And they care
also. I mean you know they, in China and we can talk about this. China is
really setting environmental policy globally around the adoption of electric
vehicle. You know the intention there is ultimately not to sell you a battery,
but to sell you a car. So you’re driving your Beijing auto car in London. Like
that’s going to be the future. But setting that aside. So they’re acutely aware
of this problem and I can tell you that the Chinese consumers who are making
these electric vehicles they don’t want to buy this stuff either. And so the
problem isn’t… it’s a global problem I guess is what I’m getting at.
Matthew Gordon: Yeah I think that’s going to become come onto China later. They seem to be leading from the front on ..certainly in the battery space at the moment. Tell me a little bit about you? You come from a financial background. I think you position this as a financial play, what you’ve constructed here. So tell us a bit about you. How that’s informed your thinking and the strategy of the business.
Anthony Milewski: Yes
so look I’ve spent my career primarily as a Resource investor. Investing
primarily in metals and mining, but also oil and gas to a lesser extent. And
you know in Europe and New York. And it has highly informed the business
because we really are taking a risk adjusted return portfolio approach. You
know we tried to dilute concentration risk. We have multiple royalties, across
a number of jurisdictions.
Matthew Gordon: But all battery metals related?
Anthony Milewski: All
really at the moment Nickel and Cobalt related.
Matthew Gordon: Just those two? Would you be looking at the other battery metals as well?
Anthony Milewski: You
know look I think our investors are primarily interested in that class one
Nickel that goes directly into the chemical industry and Cobalt. So that’s the
focus. I mean there are Lithium miners so you can actually go buy a Lithium
company. And by the way there are actually a lot of Copper miners as well but
Cobalt, as a byproduct, is very hard to invest in, in fact, I don’t think
there’s any real legitimate way. And then you know the kind of Nickel that goes
into batteries, once again it’s a harder play. And so we have that focus. And
then within that focus, we have this portfolio approach of multiple royalties
and streams, across multiple jurisdictions and so in a lot of ways it’s kind of
trying to kind of diversify risk, such that if one asset something happened you
sort of don’t cause a cataclysmic problem for the business.
Matthew Gordon: Tell me. Royalties is an interesting space. There’s not that many players in it. How do you, as an investor in this space, this is a financial product for you. Do you have any say in what the company’s doing or are you just looking at balance sheets. And going that where we are now.
Anthony Milewski: So
there are like I mean each… one of the great things about the product is very
bespoke. So each royalty or stream is addressing a specific concern a specific
situation for that company. But one of the reasons I think why the company is
like it is, you’re not running their business. This is their business.
Matthew Gordon: Do you have a say in it?
Anthony Milewski: You
definitely don’t have a say but. But the structure is such that you do have
protections. I mean you have minimum throughput right. You know you’re covering
the entire mine because like if you just as by way of example, if you just
focused on a little area you could create an incentive to mine a different part
of the mine. So you structure the contract. And remember the industry has been
around for over a decade now and so people have kind of learned from some of
the early mistakes. But what I would say is you’re definitely not operating
that business, and through the structuring of the contract you have
protections. But it’s a very hands off
light touch approach.
Matthew Gordon: Say the hard work for you is determining which companies to invest in and structuring the agreement.
Anthony Milewski: And also getting them interested. You know because when you’re when you’re dealing with a counter-party that is a large, a large miner there has to be a reason why they want to do it as well.
Matthew Gordon: Yes. Yes. They are producing, they got options and then it’s a question of what’s the cost.
Anthony Milewski: Cost
of capital….
Matthew Gordon: So what you spend your time doing then? If you’re sitting back looking at numbers I mean what was your time spent doing? Are you looking at M&A constantly.
Anthony Milewski: Yes
so we have a list of probably almost every single Nickel Cobalt project in the
world. I mean it’s an Excel document. And you know we track very closely the
lifecycle where the companies are at. And then we have kind of a short list of
situations. Companies that you may not even realize and I won’t say it in
public. You may not even realize produce Nickel Cobalt and maybe there’s a
capital expansion and they’re there fixing the refineries. Well hold on a second.
They don’t even show that there’s Nickel there. But we know there is. So
they’re getting no credit for that Nickel. So if we come to them and say here’s
$100M ust by way of example. Then there would be other companies that would be
moving along the development timeline and then there’d be a divestitures and
maybe a companies buying into the company and they need asset finance and so
they’re really buying a Nickel project. So these are all these different
situations and we monitor them.
Matthew Gordon: But this isn’t about their needs. It’s about your needs. So talking about the structure is like what are you actually looking for? You’re looking for a quick monetisation event or you kind of building something bigger than that which when all the parts put together when.
Anthony Milewski: You mean Cobalt 27 specifically or?
Matthew Gordon: Yeah.
Anthony Milewski: So
you know these contracts are usually life of mine. So you’re talking about
getting product potentially to 30 or 40 years. So this is this is a business…
Matthew Gordon: It’s at your discretion you can opt out or cash in out or sell …
Anthony Milewski: The
way the agreement works like take Voisey’s Bay. That’s the wife of mine. Or the
royalty at Turnagain. That’s for what’s potentially 60 year of mine life. So
these are very long duration contracts. And that also makes it attractive
because ultimately if you’re an end consumer of the product. You can have this
visibility than on the life in this particular mine.
Matthew Gordon: So give me a sense that. A life of mine this can be up to 60 years?
Anthony Milewski: But
I could say…that’s one particular mine.
Matthew Gordon: What
are you averaging?
Anthony Milewski: It’s very different. I would say by the time people put billions of dollars of CapEx into something. I think you’re talking 20 to 40 years on a lot of these.
Matthew Gordon: That’s right. And that must make the cost capital for you a lot cheaper?
Anthony Milewski: Yeah
of course. I mean when you take an asset which is in production, or almost a
production, you know the funny thing about finance is you know it’s like if you
use a 10% discount rate after 10 years everything is a zero. But I can tell you
that we can all agree that’s a nonsense right. So say it’s sort of the funny
thing about the cost of capital and and how you look at these investments. So
you actually have massive upside just because of the nature of the discount
rate which is kind of this esoteric thing which people don’t care about in the
short term. But as you compound these royalties and streams and you keep adding
to the portfolio. You actually ultimately are creating a huge free cash flow
scenario in years to come right.
Matthew Gordon: Well absolutely. And so what we… actually tell this how long you’ve been with the business?
Anthony Milewski: So
my partner and I Justin Cochran and I took it public about two years ago.
Matthew Gordon: Right. Okay. And what mostly kind of major moment? Did you did you get the strategy right from day one or was there a moment where you thought actually…
Anthony Milewski: That
it was always the strategy to begin with. Go back and read the prospectus. I
think even in the prospectus although we were focused on that physical at that
initial physical holding when we went public. Even in that initial prospectus
when you read it you can see that this was always the business plan. I mean we
really even from the earliest days when we were putting the team together. You
know Justin he spent, prior to joining us he was at Sandstorm which is one of
the other companies in Canada. And then prior to that he was a banker at MBF.
Doing the streams and royalties and so rock even like the formation of the team
was two fold. One was getting the technical industry knowledge and then the other
of course was the actual financial knowledge. And so this was always kind of
the plan.
Matthew Gordon: So what’s it look like going forward? I mean you’re starting to build up a body of work as it were, a portfolio which gives you the credibility in this market. I mean is there a limit to this? How much think you can manage? You could quite a big board in a lot of advisors on there.
Anthony Milewski: So
remember that there’s a board and there’s advisory board. There’s the advisory
board is unpaid advisors who kind of help on the way. But the actual board as
it is is kind of just I would say standard. So I think we’re kind of at a
moment now where Voisey’s Bay was closed earlier last year and you know
Highlands Pacific acquisition closes in May this month. And it’s time now to
let the cash flow start coming in and let the share pressure appreciate. You
know we we did a lot of capital raising in the first couple of years. We had a
lot of price volatility around the commodity. I think it’s time now to let investors
kind of reap the benefit of that. And so I don’t I don’t foresee anything
immediate just because we need to kind of let the stock age here a bit.
Matthew Gordon: Because I guess you’re trying to bond or weigh up the options in the marketplace, because the price of commodity prices, certainly battery metals, even Gold, uranium. There’s a few commodity prices which are suffering which often says opportunity, especially for companies struggling with cash. So you’ve got cash. People need cash and your big spreadsheet must be telling you there’s a few key people out there at the same time you’ve got these shareholders you’re saying it’s important to declare.
Anthony Milewski: Including
Myself.
Matthew Gordon: I mean when you say we got to look after shareholders…?
Anthony Milewski: Ultimately
the businesses.. the endeavors are not worth doing if the people who invest in
the business are making money. I mean that’s fundamentally and I can have
support. Yeah. And it doesn’t make sense. So we’ve been exceptionally active. I
mean we raised hundreds and hundreds of millions of dollars in the last few
years. We’ve done… I’m not I’m unaware of anyone who’s and more I’m in terms
of deal numbers. And so I think there’s just a certain fatigue. And now you
have to kind of let these assets settle into the business.
Matthew Gordon: Breathe a bit.
Anthony Milewski: Yeah
I mean think about it. You have Voisey’s Bay. You have Highland Pacific to
premiere world cost and assets on the developments on you have Turnagain in the
largest Nickel sulphide, undeveloped Nickel sulphide. You have Dumont. I mean
you started going through that. This has happened in two years. You know we
had… we raised 300 and then we raised two hundred, we raised one hundred. A
lot has happened in a very short period. And you know it’s time now to kind of
digest it.
Matthew Gordon: I get it.
Anthony Milewski: Yes.
This is what it is.
Matthew Gordon: So we talked about the board . Tell me about the active members of the board and the management team, people who are actually involved in the day to day basis?
Anthony Milewski: So
I think on the management side besides myself we have Justin Cochran who as I
described he’s really one of the one of the top streaming guys in the world.
And he really joined because he has learned from the good and the bad and the
ugly of the streaming industry over the last decade. Because it has evolved.
Matthew Gordon: In what way?
Anthony Milewski: Like
just as a basic example like in the early days of a streaming royalty they had
terms which might have been so oppressive that if anything went wrong with the
mine, it could send it into bankruptcy. So there’s a little kind of things like
that.
Matthew Gordon: Death spiral type structure.
Anthony Milewski: Exactly
and so it’s completely evolved away from that or like a basic example can be
you know if this is a piece of paper you know if this is your mine and you’re
only streaming this little portion over here, you create an incentive for them
to mine it over here. So that when you create that diagram you take the whole.
Matthew Gordon: So that your effective strategy on a company which you shouldn’t be running.
Anthony Milewski: Exactly.
So the point is, I think the whole industry has learned from these from these
evolutions as it were. And Justin was there through that process so he kind of
brings that really critical knowledge of the underlying document.
Matthew Gordon: This is tough. Been there.
Anthony Milewski: The
next guys called Martin Vedra. Right. And Martin is a very interesting case. So
he was 30 years at Sherritt. And he worked in you know he was at MOAA which is
the Nickel Cobalt mine. He was in the Technology Group. So he brings a real
depth of technical knowledge about Nickel Cobalt operations globally.
Matthew Gordon: Right. So he’s part of the assessing process.
Anthony Milewski: Yeah I mean he’s just generally critical. I mean if if he’s going to look at a mine or talk about processing I mean really you’re talking to Martin, sort of 30 years of experience there. And interestingly prior to that his father was at Sherritt for 20 years so. So these guys have Nickel Cobalt in their blood. And that’s really the core the core of of the team. We also have a Director of Communications here who does that. But you know the model allows for very lean operation.
Matthew Gordon: Know I suspect I mean your G&A must be next to negligible.
Anthony Milewski: I
mean I can tell you the biggest aspect of G&A was it was actually like
legal fees and banking fees from all the transaction. So actually that goes
down quite a bit when you’re not transacting.
Matthew Gordon: For sure. for sure. So you got a bunch of advisors which are I guess you go to specific matters.
Anthony Milewski: Yeah
exactly. You reach into those advisors in specific moments based on whatever
their expertise is. But then you have a traditional board of directors. And
there’s a range of skill sets that I’d like you know take Frank Ostergaard you
know Chairman of the audit committee and he was a partner KPMG. So an
exceptional person to have on there. He is an NED. You know with the financial
statements like someone like that is really helpful. You know take Nick French
he was probably one of the main Cobalt traders in the world for 30 years. So
once again a non-executive director. But you have a question and you call Nick
and next got an answer for you. So you kind of go to that board. Phil Williams
was a banker in Toronto. And so there’s a certain advice there on financings.
Candice. She’s an executive at a Gold mining company. So you kind of put
together this team of experience that you know everyone has an opinion and
they’re all different. But everyone has a perspective which I think is
beneficial to the broader board.
Matthew Gordon: Yeah I guess it says you know what you don’t know.
Anthony Milewski: The
known unknowns, and the unknown unknowns.
Matthew Gordon: I can never remember remember how to say that so let alone understand it. So tell me about the finances? I want to get into the share price because you talked about letting giving something back to the shareholders that the stock has seen a fall. You know from this time last year to where it is today. It is running about a third so you need to give something back. So tell me about the economics?
Anthony Milewski: So
I think what happened is in the early days of the stock. You know know a lot of
retailers what retail investors would have Bloomberg. But I think there’s other
free sites. If you actually took our share price and the Cobalt price and
overlaid it, like you’d see a pretty tight correlation going up. And by the way
Cobalt peaks at $44lbs and you know it goes all the way down to $13 it’s going
to back at $18 now. By the way our share price would follow it down the
downtrend right. And so I think what happened was and probably rightfully so.
The business was exceptionally correlated to Cobalt price and sentiment around
Cobalt. And I think and hope what is going to happen now is, we’ll transition
away slightly from being just a proxy for Cobalt, into actually being a proxy
for cash flow. As you know Highland Pacific now closes on I think a middle of
May. All the sudden there’s cash flow there. You know Voisey’s Bay, where they
start producing you know the kind of about two years out, like there’s cash
flow and so I think you transition away from this binary correlation to Cobalt,
move although there is and always will be a correlation. It’s not like you’re
getting the seesaw effect.
Matthew Gordon: It comes back to your strategy here. What kind of what kind of multiples do you get for cash in this business versus you know mitigating it by buying into actual mining equities, rather than royalties. Where there’s some upside or blue sky potential. I mean how does it work?
Anthony Milewski: So
the large cap names like Franco And Wheaton you know they’re trading on at
certain points over two times right. Two times like a Pnav ratio. Now mind you
they’re highly liquid names. And you know the market has changed for for
smaller cap companies, with a premium value obviously on more liquid names.
That’s just the nature of the capital markets today. So I don’t know that we
would achieve that per say but certainly in a trading in the mid one and a half
this is achievable. If you look at it in Altius, which is a base metals trading
company and it’s a completely different model. But you have to pick kind of
comes out you know that’s potentially something you could look at. So we think
that what will happen is, we’ve initially traded as a complete proxy for Cobalt
price. But now as you bring in we bring in what’s really a Nickel asset
Highlands. I think what will hopefully happen is a transition away from a
binary correlation to Cobalt, to a more streaming like multiple. And that will
also be an addition to implying a higher share price. I think that’s more
stable right. Like that that that becomes a more stable valuation as opposed to
like a whipsaw with the Cobalt price.
Matthew Gordon: You got to stick you gonna stick with that? You’re not going to … to get some investors could be listening to this on the podcast or watching a video you know, they have a blended portfolio approach. Are you going to resist that? Are you going to just stick with what you know.
Anthony Milewski: I
think there’s no there’s no intention to move past Nickel and Cobalt. So we’ve
looked at a Lithium royalty last year. And the pricing was wrong. We thought it
was interesting the pricing was just not right. And then we also kind of
thought of through and realised there are a lot of options for investors in
Lithium. Yes and Alomar I mean any number of public companies. And so like why
buy us over them. I don’t know why you would do that. And so I think I think
we’ve kind of moved away from the Lithium royalty. I think we realized that the
people are buying us and owning us for that for that Cobalt exposure and that
cost one Nickel exposure.
Matthew Gordon: It that’s a good question. So why should they buy you for the Cobalt Nickel exposure?
Anthony Milewski: Yeah
yeah exactly.
Matthew Gordon: So you know what was different about you guys?
Anthony Milewski: There
is no primary. The only primary Cobalt producer is Managem which is owned by
the Prince and the family in Morocco. There are some Exploration companies out
there but that’s just totally different, every 10 minutes people raising
capital and there’s dilution, and by the way in the right market that’s a great
game. We’re not playing that game at all. So if you think about it like that
there’s no exposure as it were to specifically the part of the battery that
we’re offering and that’s the differentiator. If you want real Cobalt exposure
like here we are. If you want that class one Nickel exposure that goes into the
battery industry like MCC. That Ramuu
production that’s going into batteries everywhere. So that’s really that
leverage that you’re getting which I don’t think you can find anywhere else.
For instance if you buy Glencore stock. You like Glencore is the world’s
largest producer of Cobalt but by the way that’s probably an irrelevance as
compared to their Copper business and their coal business. So you’re not really
buying Cobalt exposure are you?
Matthew Gordon: No.
Anthony Milewski: And
that’s and that’s where even with Nickel, it’s kind of the same analysis I look
Norilisk. Well actually are there Palladium company now? I mean you know based
on Palladium run and so when you kind of go through the options out there. Where there’s a great Nickel company in
Australia I think. What is it called Nickel Mines maybe. Well that’s Nickel pig
iron. That’s going into steel. So you start kind of going through the options,
you know like take Giga Metals. One of the largest undeveloped Nickel sulphide
deposits on earth. Fantastic optionality once again. That’s a development play.
And these are all different and we’re offering something very specific. You
know you’re not going to have that exploration upside with what we’re doing.
This is a very conservative model.
Matthew Gordon: Yeah. So what do you think. I mean just to finish off from a shareholder component. What do you think that’s going to do for your share price? You know we talked about. ‘A time to breathe a little bit time to give back to the shareholders’. If people come in now, new people looking at you. Is there going to be reasonable appreciation there. How would you describe the opportunity for them?
Anthony Milewski: Forward
looking statements popping up? I think the point is what what we’re striving to
do is transition from this binary Cobalt proxy, to a streaming and royalty
multiple. If that happens which.. that’s what we’re trying to do, if that
happens, then that will imply a lot better share price. And so I’d want to give
guidance about what…
Matthew Gordon: Sure.
Anthony Milewski: But
like that transition implies a better share price.
Matthew Gordon: So let let’s talk about a couple of things more about the company but I want to kind of your view in the market in a moment if I may. So you had a busy year. A lot of M&A last year, probably a bit exhausted, but what’s your report card for 2018 look like? What would you’ve done differently?
Anthony Milewski: 2018.
I mean you know it’s it’s hard in the business. You can’t hedge these illiquid
commodities. So if you had this crystal ball and you looked at what was really
a collapse in the Cobalt price from $44 down to $17 you would go back and say
oh we would hedge this or do that. But you actually really can’t. And so it’s
hard to look back. I mean we raised capital at a high Cobalt price and did not
anticipate frankly that it was going to roll over as hard and as fast as it
did. You wouldn’t raise the money at that price, in the same way because
obviously you know, there’s implications there. But I mean there’s no way to hedge
that. So that was the business model. We told everyone what we were going to do
and we did exactly what we told the market we were going to do. So I don’t know
how you can… other than just not doing the deals. I’m not sure how you can do
it because unlike say Copper where you could actually hedge it out, with with
Cobalt it’s just not really really possible.
Matthew Gordon: Right. Okay. And so like you started two years ago. Share price of?
Anthony Milewski: $9
with the IPO. Goes all the way up to..
Matthew Gordon: $12
Anthony Milewski: It
goes above $13 $14 And now it’s kind of $4 – $4.50…
Matthew Gordon: Back down.
Anthony Milewski: And
a very important point. Is pull up the Cobalt chart to pull up our share price.
And it’s like…
Matthew Gordon: These things go in cycles. But you’ve got a model which, Okay I think some people have been doing it for a while, but as you say the royalty business has changed. You think this is cyclical. It’s caused by commodity price. Things will get better. And you’re actively saying we need to give something back to the shareholders. That’s the message I’m hearing.
Anthony Milewski: Well
it is this is just because… I mean obviously have a dividend policy and a
buyback policy, which allows us to either give a dividend or buyback shares or
do both. Give back and place that which is which is obviously part of the
corporate policy right. But I think it’s also you know allowing the transition
from binary Cobalt proxy to streaming royalty multiple takes time. When I say
give something like what I really mean is to try and allow that transition to
happen.
Matthew Gordon: Right. But that’s a message you need to share and I guess you are sharing all around the world that we’re going through this. We know what we’re doing. We’re in control. We understand the process. Just need to give it that time to get back to where we think he could be. OK so can we talk about the market? Because I want you to help our viewers and listeners understand a little bit more about what’s going on the battery storage space and battery space generally OK so commodity prices are down. Why do you think that is.
Anthony Milewski: So
as you say and as I said earlier, this is a complete change in these
industries. And I’m unaware of a single automobile maker who doesn’t have an EV
planned or an already underway. Right. And although this is true in China,
Korea, Japan it’s not just like Rover. So all these batteries are powered by
Lithium ion batteries.
Matthew Gordon: Explain was in a battery for people just very quickly. So they are they’re getting tons of batteries. But generally what was it look like?
Anthony Milewski: So
the main component of a Lithium ion battery is the chemistry and you know the
main chemistry is a Nickel Manganese Cobalt chemistry. Tesla uses a secondary
chemistry called Nickel Cobalt Alumina chemistry and it’s a higher Nickel
chemistry.
Matthew Gordon: So what is the percentage breaks down of that? What are the main constituent parts?
Anthony Milewski: So
it’s such a Tesla today is kind of an 8 1 1 meaning Eight parts Nickel, one
part magnesium, one part Cobalt. The prevailing chemistry for the balance of
the world is a 5 3 2. Over time evolving towards 8 1 1, 6 2 2, 8 1 1. The
problem is as you reduce Cobalt, you increase the Nickel. And the batteries
become unstable and can overheating catch fire, like a lot of these fires, are
in part based on the fact that the transition from a high Cobalt battery to a
Nickel rich battery, is complex and challenging. So I actually think the
industry has to get there. You need that transition to happen, because frankly
there’s only so much Cobalt out there. And while there’s plenty for the coming
years, I just think mathematically if you assume that 70% of vehicles will be
electric, well actually you’re going to need a lot more Nickel, a lot more
Cobalt. You know you’re talking about doubling tripling the global production
of Cobalt to meet the demand in 2025, 2030. And so you actually need this
transition to take place. But I think what cathode makers, battery makers are
finding is getting to that 8 1 1 chemistry safely and with the durable battery
has proven more challenging and taking longer than people think.
Matthew Gordon: So you said 70% is a big number….
Anthony Milewski: So
I’m thinking like we use like 15% in 2025.
70%. I’m just telling you ultimately, the world will be primarily
electric. But you know you’re gonna have other…. So one of the misnomers here
is that like there’s only one technology and the answer is there’s gonna be
different technologies for different segments. So for instance I think fuel
cell… I think automobile buses will very likely be on fuel cells. Because
because a fuel cell is not interesting for cars but on a fixed route like you
at a mine site would be an example. An auto bus where everyone gets sent to the
same station. Potentially a long haul trucking for everyone is going the same
round this same station. Yeah like there are going to be uses for fuel cells.
Right? Moving to battery storage. Lithium ion batteries fantastic for things
like your power wall at your house where it’s light and small. But you know if
you’re gonna have a massive grid storage installation around a wind farm, you
know frankly maybe Vanadium Redox is gonna be more interesting over time. Now
that technology’s not quite there yet. But you know they’re not going to be one
brush to paint everything. This is a complete transformation. And there is
going to be multiple battery including Lead acid by the way including the Zinc.
There’s gonna be a bunch of different batteries, for different applications.
And this actually has implications I think, we’re talking about Cobalt a Nickel
today, but this has implications for investors who are looking at the space
more broadly through the cycle, and this cycle is going to be in like a decade
long cycle, there are going to be moments where potentially Lead is
interesting, Vanadium is interesting. You know the recent Vanadium run which
had nothing to do with batteries. It was about steel policy in China. But these
people were promoting it as batteries, unrelated, uncorrelated right. So a
bigger takeaway for your investors is you know there are a bunch of basic
materials that are going to benefit as this thing kind of rolls out. Like
Copper 15% of Copper demand you know 2025 2030 could be related to
electrification more broadly. So there’s a big macro kind of trend, that’s
going to impact and touch a wide range of commodities.
Matthew Gordon: So general acceptance in the market, that’s where it’s going. Is it moving at the pace that people thought it would?
Anthony Milewski: Fallows
are WAY faster right. I mean it’s actually stunning how much people don’t
understand that point. So the Chinese numbers came out. Q1 this year EV sales
up a 100% year on year. I mean there’s I’m unaware of any data point which
isn’t showing tremendous growth. And I think it’s this funny thing …have you
ridden in the new Tesla.
Matthew Gordon: Yeah.
Anthony Milewski: Okay.
So most people say no. I always find it funny I say you know I’ll sit there
with someone who says this is never going to happen. I’ve not heard a single
person who has actually ridden in one not only necessarily ridden in one of
these cars who doesn’t instantly see this is the future. By the way, I’ll tell
you something which I know you probably haven’t done. Have you run in an
autonomous vehicle yet?
Matthew Gordon: Yeah yeah.
Anthony Milewski: Yeah
you have. Yeah I guess so. Like when you when you. It’s rare because most
people haven’t. Cause you have to sign up for a demo. Yeah. So a fully
autonomous one. I mean it is crazy it is amazing and what you realize kind of
five minutes into, depending on who’s giving you the tour, five minutes and
you’re like why am I even driving a car? And so it’s hard to appreciate that
pace of change. If as the average person you haven’t either ridden in or
experienced it. But it’s sort of like the iPhone, take the effort you say like
oh I’ve got this new iPhone, Why do I need this new iPhone in the old iPhone. And
then 20 minutes after you use the new iPhone. Actually this one is kind of
clunky and old. And you can’t quite articulate why. I think that’s kind of the
same experience although I could articulate why you know when you ride in the
view when you ride in an autonomous vehicle you really then you understand why
this is happening so quickly. And that doesn’t even get into the effects on the
environment. That’s just like a practical thing.
Matthew Gordon: What do you think’s driving it? I mean like with things like the Paris Accord coming in here and you got government signing up to changing the way that their energy strictures are comprised so you know we put a lot of wind farms here now. So what’s driving this?
Anthony Milewski: Yeah
I think it’s very simple like, we’re destroying the earth. Like I don’t care.
You know global warming. What however you want to spin it, the most political
narrative right. The bottom line is like we’re dumping enormous amounts of
plastic into the ocean. We’re burning down the forests. Like all these things are happening factually
right. And I just think that there’s a growing awareness of the damage that’s
being caused to the earth. I think that’s part of it. And so I think people are
becoming more socially aware. That so that’s kind of in the West. I think that
China’s very practical. I think in China in particular, the Chinese government
has said look our people in these big cities are getting asthma, lung cancer
and we need to clean up the air and there’s a bunch of ways to do it. But a
very simple way is if you live in Beijing to say you know if you buy…
internal combustion engine vehicle it’s gonna take you five years to get a
license plate or we’ll give you one if you buy an EV. And even though subsidies
cost the government nothing. And so I think you know in China it’s very
practical. You know in London it’s very practical. It’d be interesting to look
at on my phone on me. You’d be shocked to know that that the London air quality
is actually on certain days some of the worst in the world.
Matthew Gordon: On The Strand here.
Anthony Milewski: Yeah.
Exactly so so. So I think governments are acknowledging and realizing the need
to clean up air in major cities. And so I think that’s another driver so I
think there are multiple drivers here. But what’s clear is if we don’t act
around our environment, then there’s gonna be a irreparable damage for future
generations.
Matthew Gordon: There’s a lot more awareness about it. There’s you know everywhere you look there’s a lot of. And I’d encourage people to read your PowerPoint actually, some lovely little snippets of information in there. But there’s some discrepancy between this generation who are more aware, or greener, than compared to the price of some of these commodities. People aren’t investing into mining as much as they did.
Anthony Milewski: Let’s
because they haven’t made money. Let’s be clear. Let’s call a spade a spade.
Matthew Gordon: There’s a discrepancy there.
Anthony Milewski: But
people didn’t make money.
Matthew Gordon: So whose fault is that? Where does the fault lie?
Anthony Milewski: That’s
a very complex discussion and there’s all these changes in global capital
markets, with money moving towards liquidity. But mining means a relative…
like the total market cap of mining is probably less than a couple of the
largest single companies. So that all these complex things. But if you wanted
distill it down to a very important point, by and large equity investors in the
big global markets are judged on an annual basis performance right. What
happens to me this year? And that’s what they get paid. That’s how they’re
reviewed by peers. If you find… if you dig a shovel and you hit your Gold or
your Copper you take whatever you have right now, if it’s ever mine, if it’s
ever mine. On average it’s not going to be a mine for 12 to 15 years. You know
it’s like, you’re asking some some gal or guy who gets paid based on next by
the end of December to like take a view of what happens 15 years from now, it’s
like good luck. And so it’s you how there’s a mismatch. You have this situation
where it’s literally 15 years, if ever, to a mine. And capital duration today
has gone increasingly short, like it’s literally in fact I would argue that a
lot of the big funds in New York are platforms where like there’s not daily
liquidity. Forget forget this year, their risk departments are looking at
things and they’re trading today. Their trading by lunchtime and so it’s this
interesting dynamic and then you have a move towards passive, which means that
primary equity raises are harder to do because a passive investor doesn’t
participate in a primary equity issuance. So you have kind of all these forces
coming together. And ultimately what it means, I will tell you and I don’t know
if that’s tomorrow or seven years from now. Forget the day. It just means it’s
creating this bull market. Under-investment, under investment, inefficient
investment in the sector will ultimately mean a massive bull market. And it
won’t even be about by the way, forget electric vehicles like. We consume every
single day like look there a look around this room. Everything is either mined
or grown just about. And so consumers continue to consume every day and they
don’t recycle everything that they consume. And so because of this inefficiency
in the capital market, in the longer term you set the stage for bull markets
and bubbles, in this asset class over time.
Matthew Gordon: Now I agree with that. Hence my question. There’s a discrepancy between what people want and their understanding of where it comes from. And you know the same can be said you know in… some of the kids at my children’s school their not actually sure where the meat on the table comes from because it comes in plastic bags, wrapped. That’s not a cow that’s just a piece of meat or chicken or whatever. So you know I’m trying to understand you know what’s changed or if you’ve got a sense of what’s changed, in say the last 10 years, 20 years, 30 years for investors. Mining used to be the go to investment class.
Anthony Milewski: That’s
because it was a proxy. I mean if you look if you look at when where when the
market was hot, people were really investing in mining as a proxy for GDP
growth in China,right. Basic material, that was driving their interests. But
also I think a lot of hedge funds had a lot of different constraints around
liquidity. So in other words they could invest in a liquid it liquid assets and
I think what happened in the global financial crisis was, a lot of hedge funds
a lot of asset allocators were really illiquid things, not everything but a big
part of the portfolio was in illiquid things. And you know when you have a cash
call, when you have a redemption or redemptions, and you have to start selling
stuff, like what you find is like a part of your portfolio goes no bid. And I
just think that that that completely changed the way that funds were. This is
very high level to show. It changed the way that funds were structured. And so
now a fund who maybe in 2005 could have 15% of his or her percent portfolio in
liquid assets maybe today they run 1%
just made up the number right. And so that’s. And so by the very nature
of of mining companies, you know you’re in a
billion market cap one point five billion on market cap in mining like,
actually that’s a big company. By the way, that is completely irrelevant, in
that and the spectrum of daily liquidity, like these funds now, they want to
have $100M of our position and they want to be able to sell out of that in two
trading periods. And that doesn’t exist in mining. And so it creates that
inefficiency whereas a decade ago or maybe longer, now those constraints
weren’t there.
Matthew Gordon: Yeah. Well well it’s definitely been a move away from exploration from some institutions.
Anthony Milewski: I
agree with that that’s gone because that’s too binary. But that’s different
than liquidity. I’m talking about.
Matthew Gordon: No I understand liquidity but that you know the knock on effect is you know and for a lot of people certainly they invest in the junior mining space here in the UK, there wasn’t the liquidity for them wanting to get out of a million dollar positions forget a hundred million bucks. Okay. Because things weren’t moving there no volume there. So that’s had a big knock on effect in the way that juniors in the UK and then we see a lot of Canadian companies coming over here hoping to find some money and there’s more of a reliance on this retail high net worth family office type money for the smaller your pretty big company now, but I know you’re still are classified as a junior.
Anthony Milewski: There
is a place for retail because historically way the way it’s been is like
retail. Friends and family retail was the early money. You know the stock would
run then hedge funds would step and the stock would run again. Institutions.
And that was the plan. Look it still happens from time to time but that that
system has been slightly disrupted by a change at the bigger end of the street.
I still think with with retail that you can make money. Remember you know by
and large even in what we’re calling illiquid names, you know $5,000 which is a
real amount of money. My dad’s a high school. So my dad’s a high school teacher
like I can tell you for him that would be a huge position. There’s sufficient
liquidity even in… our stock trades you know 1 to 3 million dollars a day. So
$5,000 on a position you can kind of come in and out. But you know if you’re in
a name where you’re going to build a mine, with a you know a $1Bn capex is making
a number up. Ultimately the big guys are going to have to write a cheque and I
think when you’re a retail investor you have to think about that question. Like
unless you’re just taking a punt which is fun and everyone does it for time to
time but if you’re ever saying there’s a longer term investment like you have
to think that the stock is going to rerate. So at the next capital perhaps it’s
higher than when you came in.
Matthew Gordon: That’s the name of the game. We’re buying shares, not the company.
Anthony Milewski: Exactly.
And so you have to think that ultimately there’s a path towards that big
capital raise and becoming a mine. And that has been completely disrupted. And
and that is I think going to result in at some point the next decade in big
bubble asset class bubbles in our assets and in big, big bull markets because
you know the pipeline is not getting built. Like look at Nickel. OK. If you
need, if we all agree and I don’t know anyone who disagrees with the statement,
that we’re going to get a heck of a lot more Nickel in five years. I’ve got to
literally don’t know a single sophisticated person who disagrees with that
statement. Not one. OK so what’s getting built right now globally. Like the
answer is not much.
Matthew Gordon: And that’s just that’s the same for a lot of commodities at the moment because.
Anthony Milewski: Copper
is the same way. But then this comes back it’s all circular comes back to my
point. So let’s assume we agree. Well you’re an investor you get paid by year
end December. I’m talking at the big end of the market now. Like you can’t be
bothered to think about five or six years, now because you’re really worried
about having your job this year. And so it’s creating this weird moment where
these projects aren’t getting pushed along. And so we’re going to wake up and
it’s going to go kaboom on on some of these commodities.
Matthew Gordon: That’s really interesting … example here.. you know UK politics. You know we vote every four years and decisions by politicians are made on a short term basis. But look at the Japanese government, they’re making decisions 25 50 years out. There’s there’s a very strong difference between the way that the politics work seems you know for the greater good or for yourself.
Anthony Milewski: Look
look. Last week China just put a few hundred million more to Ivanhoe which has
this huge Copper deposit the DRC. Why? Because they know they need Copper.
Matthew Gordon: But what happened to the ethical component we talked about earlier?
Anthony Milewski: I
think that’s different. Because that’s it that’s a development project. But
you’re developing your own project you can control those parameters. So that’s
not so that’s not it. There’s no artisanal mining there. That’s that’s developing
probably one of the largest Copper mines on Earth. So that’s a different that’s
different. My point is. So what’s interesting is China has so I don’t begrudge
the investor whose job is what their job description is like, they can’t
control that by a large right. Because by the way they have their own set of
investors who are demanding that liquidity.
Matthew Gordon: Everyone gives up a business model.
Anthony Milewski: And
so China, where China has a unique position and stage… kind of seat at the
table as it were, is that they’re able to say whatever. We think Copper is going to happen. So we’re
buying the Copper mine and that’s going to have big implications on the Fourth
Industrial Revolution, which is underway. Because if if we all agree EV’s are
going to happen but not just a bunch of things like renewables and all these
other things. Those are all powered by somewhat esoteric commodities and
China’s going to control all the major deposits. And so you know like
government. It’s really smart.
Matthew Gordon: I think that’s fantastic. I think they’re fantastic. In a way they kind of control price in that way because they are price insensitive to a degree.
Anthony Milewski: I
would say yes /no I mean like I can tell you were there a lot of these people
as a misnomer. They’re not just spraying money. They have a very sophisticated
process. They they still think about NPV. They do think about the greater good
as well right. But like I can tell you there’s no free ride. Right. Like that’s
not true.
Matthew Gordon: That’s why I said to a degree because I think they know their tolerance levels are more than most.
Anthony Milewski: They
can look through cycles is what I would say. So one of the big differences is
that a Chinese investor on a world class project can look through the cycle,
whereas an investor sitting in New York very much is concerned about the cycle,
and trading around the cycle. And that’s a fundamental difference.
Matthew Gordon: That’s the difference between a daily trader, a day trader versus forward for planning.
Anthony Milewski: I’m
not calling you as investors day traders, I’m just saying it’s a different
model.
Matthew Gordon: I understand. So can we just quickly touch Gold and it’s not your thing but you’re a finance guy. You’ve got experience in this thing. And it comes back to the discussion we’re sort of having now about sort of sentiment and marketplace. Gold has traditionally been a safe haven to use that well-worn phrase, for investors in troubling times, when you know the world’s at war or the trade wars in this case. That’s not happening right now? It’s not moving
Anthony Milewski: I’m
of two minds on Gold of two minds on Gold. First of all I challenge you to find
a Gold bug who is under 40 years old. There is not one that I’m aware of. And
so I think you actually at this age problem with Gold wherein there’s not a new
kind of group of investors who are enamored by Gold who were under 40. By the
way. those happen to be like a lot of the PMs out there. And so I think there’s
just this element of crypto and some other asset classes have supplanted Gold
now. But mind you on the drop of a hat it can all kind of come back but I think
that’s part of it. I do I do actually think though that Gold is interesting from
a different perspective. We know what the weaponization of the U.S. dollar and
with these big Gold purchases by the Russian and Chinese government. You can
see and also China’s trying to redenominate crude in some different commodities
in the RNB. So this is all a big strategy to say like why should the U.S.
government have visibility on every swift transaction in the world. But this is
like a 20 year thing. And so like it’s very hard to read in. I think on that
basis when Gold actually is going to become interesting. I’m not negative or
positive. I’m just saying that that’s a big macro change which is roll out over
20 years. I also think at some moment you know we’ve had unprecedented in
modern history printing. At some moment the US will slide into a recession. No
I’m not saying end of world, just a typical business all recession. You know
they’re going to try to print at some point inflation, I’m not I’m not a Gold
bug, I’m not a hyper inflation guy, but inflation comes in and Gold becomes
interesting. But I find that that cycle is so hard to call that that I can see
it you can see it kind of from a hundred miles away. But you don’t quite know
how fast the car is going to get there right.
Matthew Gordon: But there’s the point. You just used a great phrase is no one can see when it’s coming. You can apply that to Uranium, Gold Copper.
Anthony Milewski: Commodities.
Matthew Gordon: And that’s I guess the…
Anthony Milewski: Gold
is slightly different because I like Cobalt is highly driven by Supply Demand
model, like highly correlated. Gold like I don’t know like our Indian rice
farmers buying, Indian farmers buying
Gold and like what you’re like… I don’t know a search engine but so I would I
would argue that base metals and Gold are differentiated on the basis that that
a supply demand model really impact your Copper view.
Matthew Gordon: I understand but I’m trying to wonder if the sentiment applies across commodities as a whole, irrespective of whether it’s an emotional purchase like know some of the precious metals, because people as you said earlier, people are viewing it differently, people under 40 are viewing it differently now. This stuff which we’re going to need, to build the stuff we want to use every day. And you know at some point people come to wake up the fact that, as you say, there’s going to be a bull market, there’s going to have to be a bull market because there’s not enough mines and production producing the stuff which people need to be able to produce the things that we use every day. So people will wake up to it. But I just I’m not sure why we.
Anthony Milewski: They’re
not asleep. Let me be clear like on the base metals, like when you go through
New York. The Fund Managers. They’re really smart intelligent shredded women right
so they can see the same thing I see. It’s just the structure of capital
dictates their investment horizon. So it’s not like they, ‘oh one day magically
Copper is going to run and they didn’t see it coming’ it’s going to be that you
know, they think it’s coming in 24 months and so let’s get it in 22 months. I
just made that up right. So that’s different. Where as Gold. Gold. I don’t
think you can have that view as much because. Probably it is coming. But who
what when where why is much harder to predict when you don’t have a supply
demand model informing you. In my opinion.
Matthew Gordon: The point at this point I’m trying to make about institutions, they’re a bout making money. Right. So they set up structures and we are saying they’re not nimble or flexible enough to change that up take advantage of a situation.
Anthony Milewski: Why
would you invest in Gold? What’s the S&P return right now 20%^ this year.
Matthew Gordon: Not necessary, I’m talking about the other commodities which are lagging.
Anthony Milewski: I’m
plying devil’s advocate. Why would you invest in commodities this year or the
last year. I mean what is this new show to someone right up to the lady in New
York who’s running… You know they want like, funny joke here for the retail
investor… When you’re in New York there if they don’t tell you how much money
they’re running it means it’s less than $10Bn. Because when you show up
“we’re running $100Bn. Like why why does that individual who can invest
maybe in anything care about kind of a sector that’s underperforming. Apple and
Amazon! Like why do they care. You know like that, I mean you’re trying to get
them as a company. You’re trying to get them to care. Look we had a moment of
caring because of the adoption electric vehicle. But you talked about the
sector more broadly where they can invest in anything they want and frankly a
lot of this stuff has massively outperformed basic materials, which by the way
in addition to having underperformed. It’s also kind of a liquid and kind of hokey,
and not all the management teams are that great. So you know if you think about
it that perspective. You know it’s not it’s not time and you know there’s an
argument that it becomes time when that market’s fully invested maybe some of
the money flows down. But I often suffer from this, and I think a lot of
investors who focus on mining, suffer from
missing the forest for a tree season.
Matthew Gordon: Are you saying people are institutional and retail just got smart the game played in the mining sector?
Anthony Milewski: I’m
not calling anything a game. I’m just saying that there’s been a lot of other
opportunities which have materially outperformed. You know like look at YETI, I
just said because I have I bought some Yeti stock I think it’s doubled this
year. You know I mean so. And by the way it’s liquid. You know like start
naming these stocks and so I think you know if you’re an investor…
Matthew Gordon: You’ve got choices.
Anthony Milewski: You
have choices and that’s just a reality and we shouldn’t we should not pretend
like.
Matthew Gordon: I say all the time.
Anthony Milewski: So
you know and I think one of the things that we’re trying to give people the
choice is around and EV proxy adoption, but talk about the industry more
general. If I’m Antony and I can buy anything like tell me why should I buy
your Gold company over Apple stock right now. And the answer is maybe I
shouldn’t. And I don’t maybe I should I don’t know.
Matthew Gordon: Yeah you can have a long term view about the commodity sector and all of that.
Anthony Milewski: I’m
going to give you a longer view so OK I’ll play devil’s advocate. Great. So
your time at Gold’s going to run in two years. Great. I’m going to own Apple
for two years collect my dividend and then and then. I’ll buy Gold and that may
be kind of what you but that’s what you’re facing because I talked to these
investors all the time. Yeah that’s this. Anthony So is this happening. When’s
this happens. I don’t know. That’s great. Yeah I’m up 20% of the S&P this
year. Like let’s talk when it’s going to happen.
Matthew Gordon: I mean maybe discussion for another time but then that leads to issues for again some of these companies who are struggling for cash. You know it’s a self-fulfilling prophecy. But it’s great for companies like you that likes a conversation for another time like let’s some let’s finish up here because I want to ask you about, well without forward looking statements, I want to ask about this year. You’ve sort of explained that earlier on but when you talk about deliverables or focus this year or the next year.
Anthony Milewski: I
think the balance of the year. It’s about closing the Highlands acquisition and
getting it all everything kind of in place and really making sure that everything
is buttoned down. Having done a bunch of acquisitions and then hopefully having
the Cobalt and Nickel price come our way a little bit so that you know we get a
bit of a rerating, not only from the underlying commodities but also from this
transition from being what was initially a stockpile, to now being really a
streaming & royalty company.
Matthew Gordon: Fantastic fantastic. I’m going to finish you off give me five reasons why people should consider investing in Cobalt 27.
Anthony Milewski: It’s
simple. We’re a proxy for the adoption of electric vehicle and I think there’s
no one else out there doing what we’re doing.
Matthew Gordon: Going for one big one!
Anthony Milewski: That’s
the big one.
Matthew Gordon: Okay fine. Hey thanks very much. Good to meet you.
Company page: https://www.cobalt27.com/
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