Decoding Kazatomprom’s results & the uranium reaction

Friday money miners. Thursdays, Friday in our world it is. Why not bloody? What have we got today? We've got 'cause Adam Prom full year financial results where years are going into a bit of a hedging spectacular. Absolutely. Why? Why not? Where it? Becomes becomes super topical when people close out their hedges and when the commodity price runs hard. Doesn't it matter?

It does, and when they close it out with shares, Shawn Russo is going to be so proud that he's like LED us to the water and we can do hedging episodes without him. He's gonna, he's like. Proud, proud dad moment. What else we got mate? We've got mate all. Rounder grounds we've got. Gossip. There is gossip flying everywhere about bloody M and A and mostly gold stuff. At the moment I'm just gonna unleash all my gossip. Why not? It might be true, so let's do it mate.

I'm approaching a freaking awesome week in Adelaide. Oh bloody you are next, next next week right? Underground operators buddy. 100 bucks off your tickets. Make sure you grab them before the conference. 'Cause it's not having. It after it links in the show notes and I've officially extended my Adelaide Bender. Have you? I'm doing, I'm doing underground operators and then I'm hanging around for Thursday, the resource rise and stars gather round. Oh. Gather round.

Quite a pertinent name 'cause it is the AFL gather round. So mate, that's on the Thursday at the convention centre and mate, just look at this fundies footy and fine wine. It's. Probably not horrible, doesn't it? But the make. The fundies and fine wine. I'm gonna absolutely love that. So bloody. Yeah, mate, Grab. You're really taking one for the team, Maddie. Oh mate. Happy to help. Koshy's gonna be there. Koshy. Me, me and Koshy bloody. I don't know, I don't think I'm

speaking, but I might. I might just go up and start hijacking Koshy segments. So I love it, right? Get your bloody, get your tickets to that layer was in the director's special. I'll hopefully remember to Chuck that in the show notes. But bloody mate, it's all happening. I can't wait. I'm going to be busted. Up. Go away. Jesus Christ, right?

All righty, Maddie, we've done prom. We've taken it away. There's a bit more bloody, Yeah, there's a bit of a bit of the the uranium spot price has gone up a dollar and it's all green on screen. For the uranium. I think someone there was probably, well there's 11 carry trade, put it up a dollar, so there you go. There's some optimism everywhere we're. Foolish again, and a couple of interesting comments out of Casadam Prom's full year results. So yeah, the old what do we got?

I'll bring up the old watch list on screen boss up 10% bloody. Where's Paladin? They're up a couple next Gen. back up four or five. So there's a bit of yeah, they've Oh no, change their changes everyday spot price back up to 6450 a pound US. So now for 'cause Adam Prom's results, what do we got? So I hate financials, are there? So I just don't speak the language, but I'll do me best

revenue revenue. So they've the the some of the whole thing that I will say that the all the talk a year and a bit ago was around the risk of the sulfuric acid thing for because Adam prom and like these downward guidance revisions and like the risk that they're just not going to be able to hit their targets and it's going to send whirlwinds. But like to their credit, they it had they've delivered like they did revise the guidance down, but then revised it back

up and they hit that guidance. So it actually like what the whole thesis that was coming about didn't didn't really happen looking looking back on it. So now, so if you look at their revenue and they remember like uranium prices going up a bit last year, it's come back down, but from the previous year it's going up. So it's like group revenue was up 26%, EBIT attributable EBITDAR up 23% and cash flow up 19%.

So and they're obviously siding the higher production cost for the uranium produced like for inflationary pressure, higher cost for purchased uranium which is which saw their cost of sales up 39%, so. Explain that quickly, Maddie, given they're the the the producer. They're, well, they've got to my understand they produce it, then sell the pounds to the JVS. So you're selling it to them at A at a higher price. So that's gotcha. Yeah, that little shimmy works. Think.

Yeah. So that they, they sold at an average realized processor at 6950. Yeah, right. And I think the average uranium price last year was in it's down there average weekly spot price last year was 8628. There's obviously still some a lot of you know, contracts with Russia, China and the like. What, you know, booting off scores first two years has gone to Russia. So yeah, now they exceeded their

revised guidance. So if you remember there in so January 2024, there was sort of two revisions. They reduced their 24 guidance to it was 25.3000 tonnes. So I tell you tonnes of uranium time that times that by 2.6 to get the actual U3O8. They dropped that from 25300 down to 21750 and that was all around the challenges of sulphuric acid availability and construction delays at the newly

developed projects. Then in August last year they then increased it back up to 22 1/2 to 23 1/2 thousand tonne AU. So and they, you know attribute that better expected operational performance which which led to that. So and they actually hit 23, 270. So sorry they didn't exceed it. They just got pretty much at the at the top end. So as I said, they're actually like, you know, delivered on it across all their operations on a

on 100% basis. And just a refresher for those who aren't aware, why is sulfuric acid and availability of it important for producing uranium? So, so because they're all in situ recovery operations, like the sulfuric acid is one of the main components needed to, you know, flush, flush the paleo channel to leach the uranium. OK. As part of that process. Yeah. And and the biggest, the bigger industry that gets preference for sulphuric acid in Kazakhstan

is the agricultural industry. So I think uranium then comes second side and there's they're in the process of building sulphuric acid plant or a couple there at the moment. But I don't think they're scheduled for a lot. There's been delays. I don't think the schedule's sort of 2728. So that's it's that. Period. Competing sort of uses for it, yeah. Sort of, yeah. And then obviously around the whole Russia, Ukraine thing, supply chain logistic issues like you couple all that

together. But it seems like they're it's getting like they're producing, they're hitting the target. So it must be subsiding bit the interesting bit is the group inventory that fell a further 13%. So they're I guess they've got I think their group inventory is 6334 thousand tonne of you. So I'll be out. I think it's the one that the one that references the cap inventory of finished goods, which is 5400, which is about

14,000,000 lbs. So they're, you know, they're guiding to produce 65,000,000 lbs and they've only got 14,000,000 lbs of inventory and that's at a decade low. So, and they did come in at the end here that they will consider purchasing from the spot market to begin lifting inventories

again. So it's that that's sort of gone towards the the bulls thesis that if the inventories are that low, there's them coupled with all the utilities will at some point have to really enter the market to give that give that catalyst they're all talking about. So that yeah, that that is historical decade lies there. So their, their costs have obviously gone up all in sustaining costs has gone up nearly 30% up to 2765 US pound and their CapEx also rose to rose 58%.

And then their guidance that they've put out. So they it already CapEx already rose 58% to 317,000. I think that's what is it. K What's the currency called? Kazak. Kazak. 10 guy, 10 guy, 10 guy isn't. It so that comes out at a bit over 600 million US, yeah. So and then that's that's risen again in their garden. So they've reiterated their production volume guidance of 25 to 26, half thousand tonne of

you, so about £65 million. But their CapEx has gone up to about 400 midpoint of 400,010 K400 billion, 10K10 guy or 10K with AJ10 guy. There we go bloody currency experts here. So and a lot of that you can see a lot. So there's a lot of CapEx going towards booting off score that's there. That's the big humdinger that's in the JV with Russia thing. It's about what is it going to about £16 million or something 6000 tonne a year. So a lot of CapEx going towards

that. They also mentioned the other one, the Catco JV, that's the one with the Rano and the Altaric JV. So, but the, I guess the inference that some of the commentators are saying that with a lot of CapEx going to burden off score, they're trying to and and reiterating guidance, they're trying to really maybe put everything into that to pull that forward. That's pull as much of that forward as possible and get to the 6000 tonne output as quick as I can.

So what's that that sorry, it's £14.4 million. So yeah, that's I think that's where a lot of the attentions go. And they said they're going to drop the guidance for JV in car because they did have the pause. That's the one with Kamiko. They did have the pause for that earlier in the year, but it has already started.

So yeah, it's all all booting off score, which is expected, but the the news also coming out yesterday and this was it's not like flashing everywhere, but I looked at it from a couple of sources. Quakes quakes on blue sky said it quakes has got a parody account back on Twitter now that some blows some like just post quake shit on Twitter that he's

posting on blue sky. So, but it's saying that because Adam prom there's some potential government legislation, potential legislation coming in where for any expansion of these uranium JVS or future projects that cassatomprom will take 90% share in that joint venture. So oh wow, a lot of these are, you know, like for instance, the one with like Catco, I think it's 51% Urano for Urano, 49% cassatomprom.

So pretty much if they there, I think, I think that CATCO one goes to their sub soil use agreement goes to 2038. I think Kamiko Zinko JV expires in 2045. So it's not it's they're ages away. So they're safe to them. But if they wanted to expand that or. Beyond that?

Point new JV for another area because Adam probably will take 90% of that JV. So that that's some pretty, yeah, could be some, it's pretty early news, but I think that's going to be pretty influential news for, you know, because Adam Prom's control of the Kazakhstan stuff, I don't know how that'll work with Russia and everything. It's probably a bit different relationships than us old folk in the West. But yeah, so that's going to definitely keep me eye on that.

So that's that's about it. They're producing uranium. Go uranium. Well, have you got any queries, JD? Not so much queries mate, but I, I had also seen to sort of go in addition with what you said at the end there about how the, the Kazaks are viewing investment in, in their country. And they'd sort of teed up this big $2.6 billion package last night broader. We're not just talking about uranium here, but minerals

investment. And the slant of it was to to align it with products that the US want, which is a bit odd to the grand. I haven't, I haven't gone kind of deep in it, but it was interesting to see them aligning with a a potentially more western side. And but that potentially that was just the the journal who wrote the articles kind of take of it. But that's one to to dive a bit deeper on I reckon. Very much so. Do you? Who's the bloody Gerard James equivalent in Kazakhstan that

drills out these paleo channels? Kazakhs. Who's Kazakhstan? Water boars. I don't think he can be. I don't think he can be matched anywhere in the world. No, no, but WA water boars, the mud Rotary experts, the best bloody drillers in Australia, like like they're, you know, they've conquered water boars, uranium, paleo channels is the next thing and I'll keep hopping on and about it, but it will happen mate. What are they mate? 6 high capacity water well rigs,

2 road trains. Cart cart around all their own shit. Self-sufficient camps. Merger opportunity. Sufficient grounded camps for WA water ball size. Love it, right? How good's that they? Can drill for water or they can drill for uranium, whatever needs mud Rotary. The experts give them a buzz. Love it. Good energy, awesome. Capricorn closing out the, I

wouldn't say the infamous hedge book, but it was being kicked down the road a bit. It was coming, coming up to close another year and a bit, wasn't it? Well, after they kicked a couple more kicked down the road. But anyway, it's closed out. It's all good. Requiring a block. Traded the shares already and she's good to go. Take us through.

Yeah, spin the yarn. Yeah, so, So what they closed out was 55 odd 1000 oz Maddie. And the the reason it's super, super interesting is that they they did it with stock. So I think that extra detail makes it really worth chatting

about. And we've, we've noticed, I think we've chucked in the director special here and there, they've done the odd sort of deal to wrap up tenements that are contiguous with Karla Winder and, and Matt Gibson here and there, paid a million or two in, in stock here and there. But obviously this is of a much, much larger magnitude. And I thought it was kind of worthy of a discussion.

So to, to start with, it's not new for, for miners, for gold miners to, to close out hedge books with a equity raise will flash up on the screen here you can see Barrick, they, they did a kind of well known famous, so maybe infamous is the right word for this one raise in 2009, they raised $3 billion and 1.9 of that went toward close net hedges. So it's a, it's a bit of an old trick, but to relate it to Capricorn and to talk about what they've done, we'll go back to

August 2019 to start. And this is when they were financing Kalawinda. I'll show a, a screenshot here from December 2019. The hedges had already been in place from from August, December is when they kind of got the, the debt over the line with Macquarie. And as is customary, you've got to have those hedges in place. So standard 200,000 oz for those listening on audio is what they put in place at the time at 2250 bucks. Now obviously at the time that was a, that was a kind of decent

price. So The thing is they didn't deliver into these hedges as was originally planned. The operation got up and running super smoothly as you'd expect with the management team there. There was barely a a hiccup as they coasted through to that sort of plus 100,000 oz per annum run rate. I'll just just a quick Google the price. Aussie Price Gold on 18th of December 2019 was 18110 per oz. Yeah. So they had locked those hedges in in kind of mid 2019. So already they were looking quite good.

But as we kind of say and as you noted in the in the opening Matty, they didn't deliver into them. So just a random example here from June 2022, you can see that they rolled forward 30,000 ounces of hedges from the second-half of 2022 calendar year to the first half of 2026. Now those ones had that same delivery price 22150 Aussie.

So again, you can see on the same announcement kind of interestingly that they they've done sort of small deals with with stock, but they here and there kept rolling out those hedges, kept pushing them back and selling gold into the spot market. Now in June 2023, they did the first of these blocks where they closed out hedges. So all up they've closed out a bit over 150,000 ounces in kind of three blocks of roughly 50,000. The first one was in June 23, then in June 24 and then you've

got this one from the other day. So in 2023, they did, it cost them on the day $37 million. In 2024, they did it again. That was closing out the hedges for the next roughly 18 sort of months. That cost them $70 million on the day. That was also we've buying a few puts to sort of manage that downside risk. So the 70 million accounts for both, but the majority of that is just closing out your hedges. Both occasions are paid for that with cash, which is obviously not what they've done today.

So to to run everyone through the announcement from the most recent one from just the other day, they've agreed with Macquarie to close out the the remaining hedge book 55,000 oz at Aussie 2300 so. Which is a bit less than half the current Spot gold price. It's amazing, isn't it? Yeah, it it sure is. Interestingly, they've purchased puts to only account for half of the previously hedged oz.

So if you look back at the other two times the purchase puts to account for the total amount of the hedges they closed out. So that's a kind of interesting little detail. And those those puts are sort of in 5000 oz blocks over the next few quarters running out until kind of end of 26. And they're for four and a half, 1000 bucks an ounce. They are so a bit below where we are today on that one. Again, that's just the the right to sell.

You don't have the obligation for those that are not so much into the finance side of things, that just manages your downside. If the gold price does fall below it, you can just sell at that price. If it doesn't, you've paid a small premium for the right to sell there. And that's just that's money you've lost. But you've got the upside of enjoying the gold price. Why it's kind of higher. The transaction the other day

that cost him 147,000,000 bucks. So that's the hedges, that's buying the puts and the transaction costs. And the vast majority of that is for the hedges. So 132 million is the back of the envelope number I calculated for that. And to fund this $140 million capital raise essentially is 7 bucks 90 and the remainder paid in cash. And exactly like you said, Maddie, just look at the chart here, you can see the volume.

They normally trade 1 to 2 million shares a day and on the 19th of March 22 million shares go through. So Macquarie's slaughtered them already, you'd imagine. Yeah, yeah, that is definite. Yes, it, it, God, it looks, it just looks like it's, it's been like just all planned out. It's like they've obviously avoided rising capital at low, low prices. Yes, the hedge book was there. They've had to use cash, but they've just continually had

that. That that multiple on them like the what would you say the good earnings per share and now their share price is that bloody high. They just close it out with minimal dilution. It's. Yeah, they, they talk about this, they talk about this strategy of closing out the hedges and they say that's led to 36,000,000 bucks in revenue enhancements.

So that's, that's only from the point where you decide to close them out and then you look forward and you see what you would have had to sell it at versus what what you've actually kind of got. You're analysing where the gold price went from there. It's not comparing it with what would have happened had you just delivered into those hedges

originally. And you know, you can, I mean hindsight's 2020, but you can you make you can make an argument that's $100 million plus decision that they kept pushing the hedges down the road, but. But did they? $5,000,000 a 100 million not in, not in cash. So yeah. But did they did not delivering into them mean that they made more cash, they had a better, a better multiple and their share

price got higher? And like, it's sort of might have been, you know, part of the journey to get to today. There's 2 two sides really. Yeah, I mean, after the fact, you, you can't, you can't say they've been in, they've been in great financial health. The markets traded them at A at a significant premium to most of the other names. So it, it, it's super interesting. And you, you kind of think about the two decisions like closing out the hedges and paying with script.

But they're two sides of the same coin, aren't they? You can't think of them separately because they wouldn't choose to close out the hedges today if they weren't paying with script. I mean, maybe they would. I don't think they would. And you can, you can dice it any way you like, right? You can say on the one hand, you're going to be able to participate in the rising gold price, you're going to do better. That has been the case the last two times they did it.

Or on the other side, you could say they're paying with script, they're using their stock. They must think it's kind of richly valued. And like here, here's where I've kind of come to it, come to it. So management teams like this, they will use their paper when they are trading in the market at the high end, you know, relative to the intrinsic value.

And in the opposite scenario you try and do a buy back or something along that kind of wavelength and to tie in the commodity price with it. We've all seen gold just go on an absolute tear. It's gone nearly vertical in the in the past year or so. And commodities don't tend to do that for too long. And it's not to say the gold price won't be higher in two or three years time, but CMM, they have far outpaced what the gold price has done. They've nearly doubled since mid last year.

And this is a sort of big company and aside from the the margin expansion they're going to get from that, there's no big changes at Karla window yet. They're going to do an expansion. Obviously Mount Gibson, if anything's been held up a little bit in November, they already did a capital raise $200 million so that they would fund Mount Gibson with new issued shares rather than with debt.

They could have debt funded it, but now they've got 350 million plus bucks in cash and bullying, they can do it that way. And if you just look back to like June last year, they've got a a price to cash flow multiple of about 10 times, that's closer to 20 times today. And APAP NAV that's gone from about .7 times to about one time in that same period. So their decision today just tells me a huge amount about what the company thinks about their value.

And you know, that could be the the value of the the industry more broadly and just how quickly it's come on in the past few months and. What's it? So? What's their market cap now, JD? God, I want to say 3.3. Wow. Yeah. So it's this. Is a bloody let me, let's just bloody check. We'll check this live. Three 3.4 yeah, Aussie. So, yeah, I mean we're talking about 4% dilution. Yeah, yeah, and it's and and look at it, everyone's like great decision now your full upside.

It's just that overhang gone and you've done it bloody. You're the best valued stock on the market. So yeah, it'll as you said, they might the gold keeps. Could it could it be interpreted another way? Like if they're like, well, I suppose they could have used cash or debt to do it. If they if they're bullish on gold price and they they want the full value of it, you would think you'd more be more inclined to use cash or to do this transaction, wouldn't you think?

I think in simple terms, yeah. Because if the gold price just runs and runs and runs, then your margin goes up. If you tried at the same multiple, your stock is even higher than where it is today. So I think that's the kind of simple way to look at it. And it's like, look, it's one of those the there's not many of them. Like I think rail had the same thing at Saracen, like Buddy Bill was probably the same at Northern Star on the rise like, and Capricorn's the same example.

Like it's you can you can point to OK, right. Are they doing this because Carla Winder's going to get deeper. There's going to be more strip ratio, higher strip ratio. There's potential risk for, you know, Mount Gibson delays if on permitting and if like you can point to all them, but you're just these people. They've become self fulfilling prophecies, these premium management teams and these stocks. So you can you can go, oh, is this the high?

And you start going against them, but people just keep buying them and it just keeps fulfilling itself. So that's why it is just near impossible to bet against these companies once they've got that reputation. Yeah, it's it's fascinating, right. Like at at some point it's got to be hard to to live up to right. They've they've done such a good job. You go back to to what when we started the the chat 2019 and hardly, hardly put a foot wrong

really. Like you can everyone can make their own view up on on the hedge book and delivering into it, but it it really hasn't affected them in in a massive way. Like it's they just, they've just kept on delivering and in, in an environment where gold is up, like you said, Maddie from late 2019, what is it like 2 1/2 times? It's it's pretty incredible. Yeah, I like, I feel, I feel the same pressure trying to be like,

funny every day. Like it's just like the weight of the audience on me. Like I know you feel. Like. I know you feel Clarky. You're going through the same. Swear on you mate. Oh nice, just you can't have a down day. And all this talk about hedging, Maddie, does it remind? You I'm not saying it. I'm not saying it. No, I'm not linking it again, no. Are you linking like this like gold like gold producers to CRE insurance because they insure heaps of gold?

Maybe maybe that's it that of the of the IT was a layup for the the Sean Rousseau hedging CRE insurance. But I'm not saying it. I'm not saying it, but like. We can talk about CRE regardless, hey? Well, like just to think all the freaking bloody world class gold mining operations around the world that they are the broker for to ensure they are protected and whether that's from bloody anything we might you could have hedge impact protection mate.

They are the absolute insurance broking experts for the global mining industry. Gold's one of them, Carl Bloody any other metal, like any energy they've. Got that new orange office as well in western NSW too. It would have wonder if it's painted orange as well. Just it's just like to welcome ourselves to the town. We're going to paint our orange office orange. Go say our insurance. Love your bloody. Love your bloody, get yourself insured. Love. It right, Jay, So you've gone a

bit deeper into, have you? Yeah. Oh, a little bit, yeah. Yeah, no. So all the all. The you're looking at me like wrong part, Matthew. No, no, absolutely right part no. So all the the chat with the the Capricorns news out the other day sort of got me a bit inspired guys just to look at, well, what is the status of all the other sort of Aussie gold producers, you know, hedge

books. So I went had a look through all the quarterlies out from last quarter 31st December from pretty much any Aussie gold producer that you know, 100,000 oz plus production profile. So 13 companies all up and to my surprise not as many of them as a thought are hedged at the moment or if they are, it's a pretty, it's pretty small relative to their production profile over the next few years.

And by the way, when I was, when I'm talking about hedging here, I mean companies with gold forwards sort of hedges, not necessarily those with options hedging, which oh. Not 0 cost collars and stuff, no right. Yeah, so I'll get my Ding Dings out the way as well. There's Vault, Genesis, and Remilius. I'll just go. Do you want me to? Do you want me to go get lunch while you do that? Go get yourself a barn mate. So who's who's hedged at the

minute? So there's I'll go for some sort of biggest hedge book to to smallest. We've got Northern Star about 1.7 million oz at an average price of 3242. There's all Aussie dollar gold prices as well. This is out till the middle of 2028, so on average the the hedging's about 1/4 of their annual production over the next few years.

As as Stewie said in the OR studio, Simon said in the quarterly call when they asked about hedging, they're like, look, hedging never works in a rising gold price environment. It's pretty obvious it's. Fair comment. And then Next up you've got vaults. So they've got about 209,000 oz at an average price of 2841 out till the end of next year. So they've got the second lowest

average price of of the lot. It's worth around 30% of their FY20 six production, but then it drops off quite a lot, yeah. And that'll come in, come in, that'll come in from the Red 5 debt. Yeah. I think that's a yeah sort of legacy from that. Then you've got Bellevue, they've got about 196,000 oz at 2756 out till the end of 27. So that's sort of the most onerous of the lot as far as the lowest average price out of this group, but also sort of as a percentage of their production

or sort of annual production. So on average, the hedging represents, you know, roughly 1/4 of annual production over the next few years. Then you've got Remilius just shy of 100,000 oz at 3183 out to the end of next year, it's about 30% of next year's production. FY20 6 then drops right off. Yeah. And I think they said in the Spartan deal, they haven't secured any more. Sorry, part of the mount magnet expansion plan.

They haven't secured any more Ford contracts, so it looks like they're trying to unhedge themselves. Unwind that and then you've lastly you've got Evolution and and Genesis who have both got pretty, pretty small amounts relative to their production profiles, 75,000 oz at 3230 for Evolution and 13 1/2 thousand oz at 3684 for Genesis. OK, so who isn't hedged JC, Who's Oh no one WAFF because they say the first line of everything unhedged gold

producer. They didn't form part of my deal, but they did come to mind because they always make like to make it very clear that they're unhedged. West Gold isn't hedged. Regis Gold Rd. as of recently. Capricorn Catalyst Orabanda and Pantoro. MMM. I think well, one year probably that has a bit smaller. I think Perseus, they're a bit they've. Got yeah. So they I looked at just the Aussies, but yes, they do have, they do have some hedging as well. Yep. OK, what's the what's the

thoughts on it all Jay say? So I, I had a look at also the average realised gold price that all these 13 producers took away last quarter sort of averaged about 3900 bucks an ounce for the December quarter. Now mind you the, the at the start of the December quarter, gold was at 3800 bucks an ounce, finished at 4240. But between then and you know, we haven't even quite finished the March quarter just yet. And we're, you know, I did say we ticked over 4800 bucks.

An ounce well that and and it's so but it's funny looking at how the percentages are working now like you know, rose, you know, in that 10 percent 3800 and 4240, but you know ten 1010% on 4240 you're up near 4700. So like the the increases by percentage now having such a bloody material impact on absolutely profit like it's huge.

It is huge. And then, you know, in any event, you know, we should certainly expect to say a a decent jump in that average realised gold price for producers this quarter, you know, even the ones that are hedged. So you know, obviously the ones that are unhedged get, you know, the full full whack of that, you know that full exposure to the gold price increasing. But even the hedged ones sort of get a bit of a double whammy obviously to a lesser extent compared to the ones who are

unhedged. So I just had a look at like a couple of the hedge books for example of some of these guys. So you typically say that, you know, as they deliver into these hedge books, the gold price on the hedged answers is typically like a little bit better, a little bit higher each quarter or each half. Or you know, perhaps the number of answers they've got to that a hedge that they've got to deliver into sort of coming down progressively or perhaps a

combination of both. So you know, you're seeing them get either a better price for those hedged answers and or you know, more answers that are exposed to the spot price rather than the hedge price or you know, perhaps both. So you know, look at even at Northern Stars when we'll flash up an example, sort of the amount of hedged answers sort of, you know, per annum or per that half sort of increases a little bit and then it starts to fall right off.

But you can see the gold price is sort of you know from around 3:30 increasing to 313233 etcetera over that period of time. Similarly for Volt, you know, sort of you can say that the percentage number there on on the screen sort of represents what their exposure is to, to Spot gold. You can see that sort of comes right down. But also like the the price of those hedges sort of gets a little bit better each period as

well. But separately, going back to what we we sort of mentioned at the start is this sort of seems to be a trend to companies and these are those that are sort of with traditional hedges in place or unhedged entering into option hedging. So like these collars and put options as a sort of form of you know, like protection or insurance as opposed to traditional hedging.

So like JD mentioned earlier, you know, you sort of can maintain full exposure to higher gold prices, but you're minimising your downside on those sort of number of answers that are subject to those options. So, you know, a few companies that do have option hedging in place include Bellevue, Capricorn, Genesis, Orbanda, Pantora. So how do these actually work? You know, you basically have the and JD touched it all early.

You know you have the option or the right rather than the obligation to exercise those options depending on the gold price at the time and then you deliver those answers at that price. So rather than locking yourself in hedging this many answers at this price which you have to deliver into irrespective of the gold price at the time, obviously it costs money to put those options in place, but you've got that sort of flexibility and and downside protection. I think it's like, it's like

health insurance. Yeah, they're paying a premium, but they choose to go to the doctor whenever they want. That is a very good analogy. Yeah, yeah. Much simpler than I could have thought of, yeah. But yeah, it is in, in, you know, that's a really, you know, simple and easy way to think about it. Yeah. Don't worry if you don't worry about BJ. So yeah.

If you want to be a bit cynical, do you think some of these companies are just saying, on the one hand they're unhedged, but they're managing that downside on the other hand?

Yeah, I do. I do think about that because it is I guess it is sort of still a form of hedging, but it's because it's, it's more that right, not the obligation that sort and not that sort of traditional sort of hedging people typically have in their minds that sort of run around with these, you know, UN unhedged sort of. Yeah. And I, I, I'm, I'm, yeah, the

dollar fan of the, the dollar. Yeah, the dollar value, but that you pay for this premium compared to what you could be out of the money on on your hedge book is well multi magnitudes different, yeah. It's capped. Yeah, Yeah. Yeah, no, that's right. So I mean like the classic example, even when if if we use today's 1. So with, with Capricorn, you know, they've had these put options at four and a half,

$1000 an ounce. So that means, you know, if I'm, you know, today's gold price is 4800 bucks an ounce roughly. I'm not going to use the put option because of the the Spot gold price is great. I'll make you know, let's roll with that. But if suddenly gold was $4000 an ounce, well, I'd like the the right to sell some of my gold at 4 1/2 thousand oz four and a half, $1000 an ounce via my put option and and exercising that option. So just as as a as a worked example from from yesterday's

one. So you, you dug into Bellevue as well and they're at that kind of phase where they had to Chuck it in while they got got the debt to finance the project build. What did you kind of come away thinking from from Bellevue? Oh, well, they like they're getting talk. It's, it's the, the hot topic at the moment is, is Bellevue coming up to this half? And like as you said, the, the amount of, you know, 35% of their production guidance if they hit it is, is hedged AT28O2.

So like the, yeah, there's just a lot of a lot of chat about going into this quarter and this half and what's going to go on beyond that. And you know, a lot of it is probably a function of this, not all of it. But like the if they didn't have this hedge book, for instance, like they would just be in such a being different cash position, they'll be able to get out of the whole all a bit easier. But that's the position they're in.

Like you look at their their back weighted guidance that they said for revise their guidance. They said it's, you know, going to be a strong second-half. They've but it's even supposed to be a strong back end quarter. Like if they I think they're I think their breakevens about low 30,000 oz this quarter and lot. So if it's going to be another soft quarter, 30 odd, that means I'll bring up a rough chart here.

They need, you know, high, high 50 odd 1000 ounces in that quarter four to meet their revised guidance. So it's and then on the back of that lot, what what happens from there is like right, are they if they only just get it or they miss it, like what is the market going to be confident that they can then get towards this 250,000 oz growth profile at 1.6 million tonne per annum or like, you know, is that going to be possibly wound back too because it was a bit too ambitious.

It's there's a lot going on, but they're. You you don't know which way they're going to go in terms of are they going to look to acquire something to potentially help with tons of answers and take the pressure off that single asset or people looking at them at the moment? Like there's there's narratives and support for other argument. As I've always said, like they I'll, I'll bring up the map of

where they are. Like this is sort of limited, probably geographical options for them that will probably make sense. Like if they're going to have a swing at something to maybe feed their mill or like there's not really apes in the area unless there's bloody gold rot on a frigging cosmos or something like that.

But nothing, nothing near term like like Vivian's down the road like that's in gorilla now, but they got to drill that out and like that's that's not something that they could easily pick up like if they had a big swing to trans like, you know, further transform the company. Lot lot Thunder box is an interesting one, which is 70 odd K's way, 7080 K's way down the road. Like that's northern stars

highest cost producing asset. It's got a six million ton mill and it's like, you know, imagine if but that that'll be a pretty big bloody transaction for Bellevue to try and get that into their portfolio, turn their mill off and send all their dirt down to a six million ton Miller Thunder box.

But it's right it could be the other way like but off I wouldn't have met like you God, you never say never but you wouldn't imagine Northern star would be looking for another transaction in the midst of a transaction now with the Gray but it like it look it could make sense if they come under pressure and they picked him up and send all that dirt Thunder box like Agnew Agnew's closer gold fields operation.

But we've seen how inactive they've been in any Australian M and I. So I wouldn't imagine that unless they want to divest it and Bellevue picked that up, but it could go either way, who knows? I yeah, I don't. It's going to be a fascinating couple of quarters. Yeah, and I guess there's. 1. The the next sort of couple of the sort of the important ones to watch and and hopefully they can hit those revised targets.

Yeah, God, if they, they, they, they, they need, they need someone else's dirt or another operation or something just to take the focus off this single asset operation that's taken a bit of effort to get up to the required runway that they run, right, That they anticipated for numerous. I assume there's numerous factors all coinciding to to that. So oh, it's just well, we'll,

we'll wait and see. Bloody around the grounds. What's going on? Oh, I mean race yesterday, the whole ride she's been she's paused for we don't know how long. We don't know how long. No, I I would imagine it, it can't be too long. I mean, you know, you've got you've got work safe WA there. This is the 6th truck that is that is flipped, which is obviously pretty concerning and they would have looked at every single one, but they spoke about hauling on on the sort of side

Rd. there. They like you're not getting any serious tons on that at all. So. Yeah, I think that it was just the back trailers that flipped. I I think I saw not the actual cabin it was the trailers that went. Yeah, that's right. Yeah. Yeah, but it just like it obviously looks because the whole thing with the the volume is, you know, trucks that need to be gone both ways flat out. And there's the whether the the ultimate goal.

I think we were talking about it before JD about like getting to that autonomous stage where you can. Everything's a lot more precise, but that's still far away and

like these. Yeah, it's like the and you and you can't like put like passing bays in and have them just go on one way to keep give a bit more room because I think you were saying it takes so long to bloody speed and back up because of the payload on it. Yeah, that just it, it just does not work when you need to have trucks running, you know crossing every less than 5 minutes.

And these are big, big trucks. They don't they don't slow down and speed up quickly by any stretch of the imagination. Like you said, Maddie's super tight Rd. as well. So autonomous could be easier for that. But I mean, Ellison said that's late 26. That's if things go well. They need, they need every single dollar they can get in the door now. And I think this what's happened yesterday just highlights how how kind of binary the outcome is here.

This whole Rd. needs to work. Otherwise the, the company's in in serious trouble as we've sort of touched on in the past. And I don't think things like autonomous vehicles are going to bridge that gap in the in the meantime, you know, the, the road needs to work first and then maybe they can do autonomous vehicles down the road, you know, in 27. But whether the road works or not is something we're going to find out much before that. No, it's, it's getting so much.

I think you got the the big funds. Yeah, there's a lot of articles about the, you know, the long opportunity. I think it was Angus Aiken was in there. So like in the papers and everything. So they're like there's coming from both sides as it's a leverage play at the moment, to be honest. Like it's actually rebounded to where it was before, before this news. But there's obviously a lot of big wigs that aren't betting against them either during these these times, the depressed times

of the share price. So it's up. So that's maybe one to follow. The If the road works and iron ore ticks up, this thing will fly. And yeah, I don't think we need to outline what the downside case is again. Yeah, very much still. A Ding Ding on that one this way. Oh God, you Josie tight buddy. Catalysts.

They've getting rid of Henty. Yeah. It looks like. Kaiser, Kaiser Rook. Yeah, they got they got the what is it the I-1 mine? Yeah, I one mine in Victoria one of. The I was in Melbourne, yeah. Yeah, all, all old school deep as anything air leg and show. So that's that's a big, big change for Kaiser, obviously. But I like first first thing rating it. I think it's, I think what is it? 15 Miller shares, 15 Miller Cash

roundabouts. Yeah, 30 bucks for for Catalyst and I think Kaiser were doing a 15. No, sorry, a $25 million raise. Yeah. And I've commented on it before like whether just like Henty wasn't like Platonics there, that's their flagship, that's where all the focus is. But having that smaller operation, yes, it probably producing some bit of cash flow.

But just having the the management and time required to go run that operation in a separate state and put focus on that when you can potentially now not have to worry about it at all. All the focus is on Platonic. You would think like you got less, less boots on ground that you're paying for, like you probably optimise the cost of

the business a bit better. You're not flying over there to bloody look at it and where you could be spending time to figure out how do we get the most answers and lower the cost at Platonic so. Great decision. Hey, yeah, great. Decision, I think that's that's the whole management time and focus thing is, is it's not something that you can sort of easily quantify, but I think it's so underrated in, you know, deals like this, right?

MMM. I don't think. I think it's probably probably had the decision a while ago. It's just finding who was gonna buy it. Yeah, yeah, 30 bucks is a good result, I thought.

Yeah mate gold price, how good is it? What else? Oh Jesus, there's bloody gossip going around like mate, what have you got after BMO? They reckon BMO lot the talk of like the bullishness about potential M and I was very hot and over there. I thought around all the bomos invite only waiting for mine. Gold M and A yeah, Gold M&A, to be clear. Gold and copper, yeah, bloody more in there. So. And there was Agnica Eagle people spotted in Kalgoorlie last week.

And there's a, there's a bloody word on the decline that, you know, potentially there's a big bank on behalf of Agnico looking at Northern Star like things like that. Well, I'm sure they've had a bloody look before. So I like Agnic. Yeah, be there was, we've always talked about Agnico. Are they going to do a big deal over here and get a, get a foothold in Australia outside of what they've got at Fosterville, which has had a tie die already. So right. I reckon with the whole the grey

Northern Star and Gold Rd. the sort of the passenger on that, it just makes Gold Rd. look interesting in terms of if someone could interrupt that deal by taking Gold Road and if they wanted exposure to Northern Star, that gives them a 4% on the end of it after that merger goes through. So and then but then you hear bloody potentially Gold Road and Regis might be timing up to put a bid in for Ravenswood as AJV. That was another one bloody going around.

Oh mate, go Perth so. Well, just just on the Agnico one mate, really interesting to look at the performance of Agnico versus the other massive, massive gold miners. So Newmont and Barrick Agnico have way outperformed because they've delivered the cash flow. So they've they've more than doubled since beginning 24 and you know Barrick and Newmont are nowhere near that kind of level. So that's puts them in a very strong position as in terms of market cap, second biggest going

now. God, Can you imagine if that if that happened, the shit the the bankers would be licking their lips this the assets that were coming out the arse end of that in Australia, Because I'm not sure what Agni goes.

If they just look at like, you know, the big 2027 million tonne operation at the Super pit and then you know, I pretend I don't know how they look at Hemi like the big large scale long life operations and the other stuff that's a bit fickly and needs a bit bit more capital put into it to keep it going. Like whether all that'll come out the arse end, If yeah, who knows, who knows, I don't. You put it best mate. The bankers will be licking aliens.

Ah God yes, how do I don't? Know what the American version of 6011 is, but I'm sure they're having a great time. What would it be? Yeah. What is the Cotteslaw equivalent in America? Probably the Hamptons. The Hamptons? About about 9210. The Hamptons. Oh, very good. You heard any Goths? Oh, not, not to your level mate. And I think Agnico is Canadian by the way. So if that changes that, I'm not sure where the the 6011 is in Toronto, but I'm sure the team

is from there. Oh no, no, the 60 bankers 6011 like where the the deal with the deal makers. Geez, if you're a Canadian banker, you'd be you'd be trying to get your sharp overs in before the the New York bankers do, wouldn't? You Oh, come on, RBC, pull your finger out. Yeah. Shout out Benny Nelson. Bloody right. OK, thanks. All the bloody partners. God, we've got bloody deals flying everywhere.

Underground operators 100 bucks off blinking the shanags, the G RX conference bloody 190 bucks off that. Like get your tickets to gather round in Adelaide Just going just going do business development and you probably see some of these mobs, some of those as well. Mineral mining services, ground at CMB ground sport CR insurance, Cadrel WA water balls, sweet Quattro project engineer and they're definitely at underground operators. So sweet cross boundary energy. What are you who to?

Wrote Peter. Wrote Guys. Information contained in this episode of Money of Mine is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Before making any investment decision, you should consult with your financial advisor and consider how appropriate the advice is to your objectives, financial situation and needs.