Finding Alpha Where Others Fold with Muddy Waters’ Darren McLean

And then they went and killed this pole and they just hit this extraordinary grade. I, I remember just sitting there looking at in the morning again, like, Oh my God, I think I just watched $5 billion get created in a company that's trading for hundreds of 1,000,000 and. I think we've got to keep this intro very short because the conversation is worthy of every minute that the money miners listen to here. But we're speaking Darren McLean of Buddy Waters.

People might think of Muddy Waters as this activist kind of short seller. Got a reputation? Got a reputation, Darren. He runs a long fund these days. He came from K2 Asset Management, a hedge fund, where he had tremendous success. Yeah, spent nine years there, right, cutting his teeth, ran the sort of mining sleeve.

And I think for anyone that is interested, which I'm sure there's a lot of people out there in just investing in the mining sector, in particular, those companies at the early stage all the way through to seeing these projects get built, they're going to love this conversation. There are so many Nuggets of of wisdom. There's so much sort of experience that he's built up

over his career. I'm thrilled to share this conversation with Darren. Darren McLean from Muddy Waters, we're hoping that the the waters clear up and we can have a pretty enlightening conversation about investing in the mining sector today with you. Thank you so much for joining us. Thanks for having me guys, appreciate it. Dan, I'm, I'm super excited to, to have this conversation. We, Trevor and I both listened to a conversation of yours a few months back and yeah, it was, it

was pretty gripping. We were messaging each other afterwards saying got to get this guy on the show. It was just sort of fascinating the way you spoke about the sector, the way you found yourself investing in, in the natural resources world. So I, I want to start the

conversation there. You're not from a technical background, but you spoke in that conversation we heard and and when we spoke on the phone a little while ago with real sort of technical capability and and thrusting yourself into that junior end of the market. So how did it all kind of come about? How'd it all come about? I worked, I got the chance to work for some extraordinary

people. I would say not really from a direct teaching perspective, like an elements of that, but but honestly, just the people that let me just kind of chart my own path and do and follow my my nose and kind of like, Hey, I think you're onto something. Go go chase that down. And I just happened to work and I've only ever, prior to Muddy Waters, worked for two different groups ever.

And both my previous bosses were, I think, pretty special people who gave me a lot of re reign and latitude and let me chase down and kind of bury myself and things that I thought were compelling. And even if I couldn't really explain them, Yeah, I work for some great people who just kind of enabled me to work in an unstructured environment and emphasize that. So I mean, that was fantastic. They're also both contrarians, which helped. And I think I'm worried that way by nature.

And in doing so, you know, you never know where to begin when you start working in any sector. And I'm a big believer that the vast majority of, of what you do is, is learned on the job. Like if you want to be an engineer or doctor, sure, your, your education is, is pretty important. But in finance and business and anything like that, I mean, learned experience ends up dominating. And, and certainly mining it I think is no exception to that.

There's like, I think when people think about technical aspects of mining, they think, well, you need to have a technical background to reach technical conclusions. But the reality is, I mean, any given technical background in mining only covers a small area of the components that make a project work, and certainly they have almost nothing to do with

capital markets. So at the end of the day, you need to pull together a range of skill sets and you need to just have a general good set of instincts of what is and isn't relevant, what needs to be dug into, what you can take as a given, what you can't, where the, you know, mines. So many things need to come together for a mind to succeed and work. It only takes one thing to fail for a whole project to fall apart.

And there's so many risk factors and they're not necessarily readily obvious when you first look at a project and you say, oh, it looks it's got millions of Oz. I saw this other thing. They look the same. It's great that one's trading in here. This one's cheaper. I should buy this is cheap. And then you find out there's a weird species of something or you have to divert a, some a certain number of cubic meters

of water flow a year. And that that's just screws you for permitting timelines and pushes you into, into acts. And I think knowing where the risk factors lie, having a good

nose for the instincts of that. And, and yeah, just the ability to dig into that and bring together a bunch of disciplines from understanding how to get confidence in metallurgy, how to get confidence and a resource how to get confidence in, in the engineering aspects, how to get confidence in the the earthworks and whether you can take that as a given and just having a good nose for risk and joint probability.

These are kind of, I don't feel like I'm doing a great job of answering the question, but I would say that I don't think there's any one technical skill set that really necessarily endows you with the foundation to go and do it.

Yeah, I think there's probably like 10 things you need to pull together and you can only really get an academic education in one of them, so. Yeah, it it sounds like curiosity is the the thing you just sort of follow and it was something that sort of gripped you and interested you from pretty early on. Curiosity is the word. Yeah, curiosity is the word. And tinkering. You know, you got to love to tinker, but it's a contrarians industry too. You have to be a creature of

your own convictions. Can you? Can you peel into that bit? I mean, I'm just kind of keen to hear you like your synopsis or your, your opinion of how, how do you make money investing in the sector? How do I make money? How do you make like? How do you make money in a general sense? Like how should you make money If Like how do I specifically make money? Like how you as as maybe like a non-technical outsider who's become a a very like a skilled

investor with success. Like what's your synopsis of now you like you'll learn method if you were like writing a book? How do you make money in the sector?

Well, when I started out, I worked for this fellow Glenn Brown, who had this shop called Boswell Capital. And he's, Glenn's a genius. He's brilliant and he's into deposits and discoveries and exploration and he's a geologist and loves having complex theories of how a project will come together or how expiration will come together or so on and so forth. And I, I, I sat in his basement of his office and just plotted drill holes.

I read every single drill hole news release that came out in the market every single day and tried to figure out if they're interesting or not. And that I did that, you know, I spent the first hour or two of my morning every single day doing that. I did that for years. And in doing so, you plot things out and a lot of it leads to nothing. And then every so often something will come by and it will just knock you off your chair and you'll be like, Oh my God, this is different.

So just doing that over and over and over. And how to take a drill hole and make sense of what it's worth isn't, there's no book on that. It's something you have to just kind of do and immerse yourself in. And, and I did that and, and I thought there were probably people all over who just did that. And then I kind of quickly realized that that wasn't the case. I, I had a hard time finding

anybody who, who did that. And, you know, we talked about exploration projects and people would ask me about them and I'd go and tell this minutia in detail because I was obsessed with this stuff. And then I realized everyone's eyes were glazing back in their head.

And I was like, oh, you know, they don't really, this isn't what they do. But at the same time, in doing so, I found like incredible pieces of value and you know, Alpha, where you start spotting some things and uncovering some things that you think are worth extraordinary amounts of money. And the thing about drilling is drilling is the ultimate catalyst. Like a drill hole comes in and walks into a company that might be 10s of millions of dollars and hundreds of millions of dollars.

And sometimes it changes the value proposition by hundreds of millions of billions of dollars in a moment. And, and when you watch that happen and sometimes the stock barely responds and you're like, no, that has to be worth half a billion dollars or something like that. And, and it doesn't respond. And then you, you then you see it play out and you're right from beginning and you say, Oh my God, that was just sitting there hanging out.

Like that was an extremely compelling thing for me is watching those pieces of information come in, realizing not everyone was very few people were doing that, and then watching them come to fruition to the positive, to the negative and realizing, Oh my God, there was an incredible opportunity to

make money there. So I watched the number of those instances go by early in my career way understood the the scenarios intimately and I understood the value propositions early and I realized, no, there's a real edge here and there's a real transaction opportunity.

And I, I always say to people, you know, when we're starting out that I've worked with, like the the first time you see something you extraordinary, you probably won't believe it and you won't trust yourself and you won't have the confidence to make enough money on it. And if you do, you're probably, you know, maybe you got a case of Dunning Kruger where you're emboldened by your own naivety, but you're kind of you're timid at first. You're like, no, we can't, it

can't be this obvious. And you watch it play out in the second time. You need to swing. If you see it, you need to move. And so I had a lot of reps of first times and that kind of job. And then I got the opportunity when I went to K2 to transact on a number of those. And yeah. Do do you think the the opportunity out there has gotten

bigger over the sort of 15 ish years of of your career? As in less funds doing and competing in that arena. Well that's a. I'd say that's it's a simple question. It's a very multi faceted answer. Has it gotten easier from a competition standpoint? Yes, I think mutual funds have been, but they they were a very traditional source of capital and walked in. They were big players.

You had these big funds with very large capital sleeves and the people directing them had a lot more rain and flexibility and how they could pursue things. And then I think they've been regulated and restricted more and more. They've been forced up calf, they've been forced to minimum minimum liquidity requirements, minimum deployment requirements. They're kind of forced into pro cyclical vehicles. It it'd be a tough place to to operate, at least for how I like to invest.

I think it'd be extremely difficult from where the managers of those funds sit and what their restrictions are. So that's really removed a lot of that capital out of the sector and and the word exists has been largely pooled up cap into, you know, quasi index funds and then active capital.

Yeah, honestly, I, I remember reading something not that long ago outlining that mining was one of the least allocated sectors in finance for active capital and sitting there and just being like, Oh my God, it's one of the most attractive as far as I can tell in terms of value creation and and catalysts and ability to get an edge. So, yeah, yeah, your, your

competition. I I think it's certainly reduced a lot of the brilliant activity and driving deposits forward, which is what I focus on was has always been driven by special characters, ultra high net worth people, you know, these dogged, talented individuals who take extreme risk with their own Personal Capital. Those individuals are aging and they haven't been, there's been some rising new stars to kind of take their their place or who are showing nascent see could

turn into them. But there's, there hasn't been a proper replacement mechanism like they're aging far faster than they're getting replaced. So their capital is is inherently on its way out from the previous generation. Yeah, which leaves a big vacuum in terms of that. But at the same time, the industry has attracted less capital. It's drilled a lot less. It's been the driest decade, I think no in in for discoveries. And so the opportunity set has inherently been smaller.

So it's been a smaller opportunity set. It's been, but there's been less competition. When there's less competition, the opportunity for yourself, yeah, it's great. It's more, it's, it's more compelling. At the same time, when there's less capital getting allocated, the difficulty of driving that opportunity to fruition can be higher, like it can take longer. Maybe the money doesn't come in, you know, you, you can be right about something and it might, you may not show up a week, it

might be years. You're driving it forward before it crosses a threshold of the market wakes up to with the value that's there through some forcing mechanism. So I think the forcing mechanism would have came faster if there was more active capital, which is a long way of saying, yeah, the opportunities I think are greater. You have more time or is more intestinal fortitude.

Tell me about follower Capital in. What sense? It's it's a phrase you mentioned in your last interview, but I was just keen to tease what it means to you. Like your observation of follower capital sector. Yeah. I can't remember the context which I would have said it in.

I can only guess. I mean, the reality is I think most of the money in this sector right now, I don't think there's a huge market and there never really has been of people independently going out and qualifying assets and trying to RIP them down to the nuts and bolts and figuring out which ones work, which ones won't work. Assets that have failed, really understanding and a detailed post mortem as to why they failed, what really happened versus what the narrative was in the market.

And I've generally found if you do that, there's some very, very powerful relationships in terms of things that have worked, things that haven't worked, outcomes for assets and certain tiers versus other tiers. And I just don't think there's a big breath of, of capital out there approaching the market that way. I think predominantly what they do is they look for, they look for plays, they look for a stock plays, they look for capital marketplace, they look for

things that are working. It's like, you know, you get a hot deal, market deals are working, people start playing deals, you'll start going forex oversubscribed. They start padding their orders because they tend to, you know, they're everyone's structuring deals is free trade. They're free trading in seven days and every, you know, for the last eight that have gone off, Oh my God, they've all, they've all had liquidity 10 percent, 20% higher like you. And so money says deals are working.

They plow into deals. I think a lot of it's market activity is just oriented around that. I don't think people are going in funding companies on who's deserving of capital. I think they're just, it's a lot of FOMO and event driven. And but and then on, on companies, what I've kind of witnessed in my time, and this is just my perception is that people have become a lot more gun shy in financing small companies, venture companies, exploration companies, and rightfully so.

I mean, it's extremely risky, but there used to be a sense that there was money coming behind you. And I think people generally when they invest in the sector, they want to feel like money's coming behind them. And when they feel that, that's when they feel the most emboldened to invest. And honestly, that's prominent. That's predominantly the most important factors why people invest. But when the check slowed down in the market, activity slowed down, that feeling went away.

I think that enough there'd been enough kind of false starts and pulses of excitement that then washed out that left people kind of gun shy and worried about getting into these things, getting trapped in moments of the liquidity and not being able to get out. I think people are inherently terrified when they write a check to a company. They don't want to be one of the bigger checks. Usually they want to be in the book in a mid medium size.

You know, it's not on them. Like they don't want to end up in a situation where they get a phone call and they say, hey, listen, we got 3,000,000 until we need to keep drilling. Yeah, this year wasn't a success really. We had some good prospects, but like, we need to raise 10 and we need you to be the lead, by the way, if you're not the lead, it's going to be tough. And that could really be bad for

your investment. So, you know, that's the situation they're scared of or it could fall on them and they're in too deep to get out. And so I think we generally what you've seen in what I've seen over the last like three to five years is money wants to tuck in between individuals they perceive is very strong. They want individuals they view as strong to anoint assets for them.

Deep pocketed individuals like you've seen enormous amount of capital pile in behind like the Lundin family and Pierre Lassand, individuals like that. I mean, Eric Sprott is. Just. You know, he, I'd say he's the ultimate gunslinger in the sector still. He still writes big checks, but a lot of retail money and institutional money wants to slot him behind him because they know all those individuals have deep pockets of deep convictions

and they follow their money. And so there's no question that the companies will run out of gas before they can reach the next gas station. And, and so I, I just think that honestly drives most market activity. And those are the companies that had been able to attract capital. No, things have picked up a bit recently. Money's been flowing again.

But I think I found that generally speaking, you want guys and they want to say, well, they're behind it, they believe in it. So the project must be good. They're going to push it forward. They're going to keep financing it. They're not keen on down rounds and they've got the money to try to, you know, keep financing these companies, these projects higher. We feel safe somewhere we can park, we can slot in, it's not going to fall on us.

And I'm pretty confident that this big strong, you know, leader is going to carry me to the promised land. And I think that's driven most of the market activity and capital allocation in the sector, so.

Yeah, it's expected. Like the whole concept of funding certainty is being like a massive de risking like thing for just earning, earning the equity because the junior mining companies definitely fighting dilution their entire wayfunding certainty, you know, reduces that that race to a degree. If you've got a big backer who who you know well, we'll kind of underwrite a check when things get tough. Yeah, Yeah, you got, I mean cost of capital is kind of

everything. Certainty of cost of capital is kind of everything. Well, it's not kind of everything, but it's it's, it sure is important. And I don't think a lot of people feel like they have the strength and the wherewithal to drive these things for themselves. And so they're looking to to talk in behind people who do feel that way.

Dan, I want to really sort of hone in on on the part of the Lausanne curve that that you find that the sweet spot if you like. So I think one of the the things that really stuck out from that conversation was that the the rewrite potential. From execution is underrated in a sense. And I think you might have said that you know you can you can see a decent sort of a 3X there.

And it's kind of interesting because we speak with a lot of people here and that is really the part where they might run away from the stock that construction hell where things can only go wrong. But am I right in thinking about the the area of the market you like to play as the project under appreciated whatever stage it might be you you come in there and then you like to see it all the way through until the project is built or how else would you sort of describe that

that phase you love to play in? Yeah. In a general sense, I like single asset companies, usually. I like because there's more exposure to the, the area of alpha that I, that I see. I like things that are under appreciated. I like things that people view as a bit of maybe a, a haunted house, Like there's something wrong with the company and people have been burned once there and they don't want to go back to something's changed. And that's the, that's the perfect scenario.

And you're like, well, I know why people don't want to look at this. And I didn't even want to look at this, but now that I've looked at it, Oh my God. And this isn't the same thing as before. And, and I know why people are writing it off. It makes complete sense. But like, like something's changed here. And it's also, hey, in a perfect world too. It's of the size and nature that I, me, I can walk in the door and I can change it.

I can change the situation so I can, I can materially improve some of the things that are that are holding the company back. That's the ultimate situation. It's not always like that. Sometimes there's not a single thing I can do about it. But my God is, is it just, you know, something special is going on here? And, and I think when I look back actually at all my, it's funny, I worked at my previous firm for 9 years. I spent probably six of those just driving the mining side of things.

But now maybe 7 years. But when I think back to it, like, and then in my time at Muddy Waters now in these years, like it's really been dominated by like maybe 5 to 8 files. I've just hazard a guess. And pretty much every single one of those was something that met that criteria. It was kind of a haunted house to people.

Like, I remember, I remember Michael O'Keefe, one of the most brilliant individuals I ever met, He's an Australian, came into my office at K2 and I took a meeting with him. I didn't want to take the meeting. I didn't care. He had this Bloom Lake Asset Company champion iron ore and I didn't know who this guy was. I remember him and David Cattifer walking in my office with this fellow John Rothwell at TD, taking them around 3.

Just absolute wonderful individuals who I think the world of now didn't know any of them at the time. And I just took the meeting because I wanted information on what was going on in the Labrador trial. It's a globally significant export region in Canada. There's almost no capital markets opportunities. So there's not a lot of competing people trying to figure it out. So hey, should probably keep a close eye. Maybe something will come out of

that. And he starts talking to me about the project and I'm like ask a few questions. I'm thinking this is a, this is a $90.00 project and a $65, you know, $90.00 cost project in a 60 to $65 price environment. Who cares? And I'm just like, yeah, what about, yeah, the rail contract though, what you're paying there? And he's like, oh, renegotiated that got a 10 bucks lower. I'm like, OK, well, if you said so, he probably did do that. OK, fine.

It's not a $90.00 assets, It's an $80 asset now. Cool, great. You know, good luck for paying your capital and that and then, you know, the port, the ports undersize that you can't take supermax vessels together, bury the material back and forth to fill the ship. Like it's a big problem that kills you. It's like, Oh no, fix that. Like how do you fix that? Well, I built a Newport got a Newport built. How did you buy? How did you build a Newport like this? Hundreds of millions of dollars.

So I got the government to build it or it was something to that effect. I'm like, what are you? Who else is using it? Just me. What are you paying to use it? The answer is basically nothing. And I was like, I'm like, well, what's your relationship with the government here? Well, they're one of the big shareholders. And we structured it and he starts going up and how we structured it. And I'm like, well, that probably knocks off 10 to 15 bucks a ton. Oh, OK, now we're getting close.

And then you're like, yeah, the recoveries though, they couldn't get that. I'll fix that. How'd you fix that? Like, oh, they're using the wrong, they're using mineral sand spirals. We just use the right ones. They actually had them sitting in the mill. We just moved them over. And I'm like, OK, and that really works. How do I know that? And he's like, cuz I'm getting those recoveries right now. And I'm like, and then he

started to talk more. I just kind of I shut my mouth because I couldn't believe what I was hearing. And I I was just thinking there. I'm like, Oh my God, what have you pulled off here? Like this is a very complicated like, like this would have taken. You must be this guy must I realized I was sitting across from a very impressive individual and a very determined like guy who you just kind of you can't keep down. He just gets back up. No matter when he hits, he takes

kind of guy. And I was like, and I just didn't say like much of A word for the rest of the meeting. We're just sitting there absolutely floored. And I walked out of that meeting. And then Michael told me after that he, he mentioned to John, it's like, like, I didn't care about anything I had to say. And I walked out of that meeting. I went to my, my business part partner at the time.

And I'm like, that was either the greatest lawyer that ever walked into my office or that was the best meeting I ever had got on a plane, flew right up the site, went there and I get there and there's a like one other person in the site visit. No one cares. And I'm standing there on the on the port watching this vessel get loaded. I'm just sitting there. I'm like, I think this guy's making like thirty, $40 million a quarter right now.

Like, Oh my God. And but no one wanted to look at it for the same reason I didn't want to look at it. Who cares about Bloom? Like, you know, the thing had blown up consolidated Thompson and like wrecked Cleveland cliffs. Like this thing was a, everyone knew that asset couldn't work in this price environment. And yeah, I just, I couldn't believe what I was seeing. So I mean, that's one example. It was very obvious when no one

wanted to look. I I feels like a bit of a fluke that I actually ended up taking that meeting because I didn't want it really or any interest in the company. And it was one of the greatest feats I ever saw anyone pull off in the sector, to be honest. So. That's incredible, Yeah. I mean, I O'Keefe had had run Glencore Australia and then sold Riversdale to to to Rio.

But credit to you as well because that would have been like 16 or 2017 in the, in the depths of the iron ore bear market where everyone was scared to to go. So even even taking the meeting and thinking about investing in iron ore was a bit of a contrarian sort of play on your part there as well, I'm assuming?

A bit, I think I just, it was more of a thing that the Labrador through is something you should watch if you can, if you can have relationships with people and garner information on what's going on in the Labrador, which is largely held inside companies that it's not primary assets. It's not a lot of reporting on. You should know it because something special could come out of there and it made sense. There could be a lot of value at some point.

There's so much infrastructure, so many projects and deposits. You should watch it and and try to gather as much as you can because you never know if something did happen, it could be special. And that was really it. I just didn't think for a minute this meeting would be that, but it was. So it was just I I think I'd probably credit myself for the instinct that I should continue

to care and watch that. And I've also just been of the mindset that iron ore is was always one of the most fascinating medals to me because I, I walked into my career and I think it was like, it just been in like the hundreds and then it collapsed down to 35 for a moment, being like 50. And I'm, you know, reading all these reports coming out from like, I think it was Goldman's and other groups talking about iron ores never coming back and never see like 50 above 50 bucks

a ton again. It was dead. And I've just as long as I've been in mining iron ores, been pricing backwardation, like the forward curve goes down always. And here's, listen, I'm not like the Super macro guy, but I'm like, I don't know, man. It feels like in a growing world, like the whole economy is predicated on the world growing and expanding really. I mean, if it starts shrinking and you got big problems, hope you got some really fancy

insurance policies. But steel seems like something that probably shouldn't go down forever. I don't know, seems like a good thing to buy when others are pessimistic and you're kind of up against the cost curve. But you know, people thought that Bo and HP were just going to print the metal into oblivion and forever. Now it's funny because that predictions being dead wrong. Iron ore has just continued to rise pretty much my whole career. And yet the backwardation had

always persisted. The pessimism had always been like maintained. And for some reason, all these banks had maintained their confidence that you should be pessimistic on iron ore and you should price it cynically. It didn't seem to matter how many times in a row they were wrong. And I'm like, well, that's easy Alpha. I'll have to. All I have to believe is that like, they don't know what the heck they're talking about. That's it.

And the world's more complicated and and they're probably a bit emboldened. I never listen. I never, I never care for what anyone has to say on macro in their convicted beliefs on the world. If they can't prove to me they can solve individual companies to a great degree of alpha man, if you can't find alpha and individual companies to an exceptional degree, good luck solving the world. Like the number of pairwise combinations there is are insane.

So whatever, you know, I always think that's an opportunity in in commodities and I always think iron ore is fascinating for that. So that's why I wanted to watch it and that's why I wanted to watch the through. So I'm glad to. Something thankfully, I'm guessing Champion Iron was one of the five files that has mattered a lot in in your history.

I I can't let you go without telling me about another one. Yeah, I think it is absolutely. It is one of them. It was one of the most impactful. I thought it was brilliant. I think it's one of the most brilliant things I saw pulled off. In terms of an individual achievement. Not to put it all in, Michael. I mean, I think David Catterford's an exceptional individual there as well. I think the two of them are a great team.

But I think the world of both those guys and yeah, that had a big impact on me. And it's also just turned into important relationships. So, but there's been lots. There's been, yeah, that's one of the five to 10, let's call it. And and and another one would be. GT Gold was a was a big one.

Philo was a very big one. Actually, those two are those two kind of like were went end to end in this kind of fortuitous fashion because I sold GT Gold, signed the voting support agreement and sailed to Newmont. I think the transaction closed and then we were sitting flush with a lot of money and I was probably in close to a 50% cash position at that point and thinking, my God, what am I going to do with this? What am I going to find to

deploy this into? And then I watched Vilo drill this exceptional hole up in the community district. And both of those were situations that they thought were heavily misunderstood. And they're similar to champion, I guess, in their own respects. And that sense that people didn't want to look at them for a reason. And actually they're they, they, they combine and they connect. So GT was a, a discovery up in BC in the Golden Triangle. This geologist, Charlie Greg had gone and, and done some

brilliant work. He found this EPI thermal gold system very high grade, extremely discontinuous. You couldn't, there's no structure to it, but the grades had built a market cap and people have gotten excited. But it's kind of a veins form. You just had to mine the whole cloud and take the average of the whole distribution. So even there though there was all this 5G hits, really you just had to mine the whole thing and probably it's going to be

like a gram and a half. And I think when the market realized that it collapsed. So I had this big run up and then this big collapse and people felt like, I think they'd been, I don't know. The reality is when a stock falls, people like to blame a lot of things or complain. But I wasn't there for that part. Instead, I, I watched this drill hole.

It was like TTD 085 get drilled. And I believe it was 2018, like September of 2018. And they had like 500 meters and it was a wall of copper gold, like just completely continuous for half a kilometer. I was like .8 or something like that. But then it had some like higher grade zones in the middle. And I was like, Oh my God.

And and then immediately started mapping out the topography and looking at it and being like, yeah, OK, you know, there's you got Red Chris across the street, which looks like an analog in the same system, like the ratios of gold to copper. It's the 1st hole in and you're like, so Charlie had gone and found the EPI thermal system. Then people are always like, wow, this must there has to be a porphy nearby and they usually don't find it or it's not there. It sucks.

And Charlie when then immediately next program found the porphyry like first try. It was incredible. And so he deserves all the credit in the world for that. And it was one of the best discoveries I felt like I'd seen and the stock didn't move. Thank you. Like they were still holding some residual market cap from

the previous discovery. Just kind of too bad because they, it would have been a lot more extraordinary explosive if it had just been sitting as like a $10 million company, but it was like a 5060 and then maybe added like $10 million in market cap on that. And they did financing after that hole came out. And I think I was the biggest order in it. I was like, Oh my God, everyone's going to be clamoring to get in. And it was kind of like, you can have whatever you want.

And I'm like, left it. And then after I'm like looking at this and I'm just like buying every share I can. I'm trying to buy as much as I can without running the price up like a month or so straight. It's just me on the board. I'm just buying, buying, buying, buying, buying. And I'm like, what is going on? And I, you know, talk, start calling around. It's like, hey, what do you guys think of GT? And you get the feedback.

Oh yeah, yeah, I know we've seen splashy holes like this before from GT. I'm like, I realized that they just, it was kind of a haunted house to people. They've been burned by the EPI thermal system. I don't even think they realized what this they'd really hit here. And and so I've just kept buying it up and then offered to finance it. I said, listen, I think what you should do is the market doesn't recognize the value of this. Well, sorry, actually, I'll

compress the story. They had a second hole. The 2nd hole was even better than the first and it was extraordinary. The stock finally Rep people got excited, but then the company started arm waving that there was a third step out and the alteration looked just like the first two and the market was like, oh, they hit, Oh my God, this thing's going to be like this big and that means like this is gone. And so the whole market had gotten that in their head. They're buying with the

excitement of that. Then the holes came and the whole actually did hit. It just didn't hit anything close to what the previous two did. And so I think people felt like they'd been misled or lied to and they just the stock which had gone from like $0.60 after post, you know, it'd been like 50 to 60 before the big discovery hole went up like 6570, maybe 80 after screamed up

to like 2:20. And then when the whole came out, like collapsed down to below where I've been buying up the stock or around same level as if nothing had been. No value had been added by this point. Like no market cap had been added to the company from this discovery. Except the thing about that was the market cap. The market wasn't looking at this thing and modeling the deposit, trying to figure out what it would take for this to be a mine and actually be

meaningful. They were just saying, I've been told the next one's the next hole's good, next hole bad. Oh no, that bad. I sell and they sold it all out and that we looked at it and we're like, I wasn't looking for. I thought the threshold it needed for that to become like clearly a mine was it just needed to show the mineralization extended a certain distance. And so it showed continuity. Even if it's bleeding out, there's some strength of the

system, a certain distance. I could, you know what that meant for the shape that I could assume existed would be enough and that would be critical mass. And I got what I was looking for in the market. Thought it was the worst news ever. And they dumped it and they started drilling the surface holes and it looked like it

might come to surface. And I remember they put it further holes and going, I remember telling one really influential person in the industry sitting there walking him through it, he's like, you really think this is a mind, Aaron? I'm like, I think this is 2 drill holes away from being a mind and I think they're probably going to hit. I can't be sure, but I think this is 2 drill holes from a mine and I'm paying 0 for that

in the market like. And so the drill holes came and they were way better than what I was hoping for showing this thing was tracking the surface and and the stock continued to go down. Can you sell down? No one cared and I was sitting there and I went out. This is actually funny because I had met Muddy Waters through an activist short selling campaign. I ran on a company called a Sanko Gold and they had joined in on that.

And this is shortly after we had closed out and completed that trade, which had been a really big success. They had, you know, kept asking what else is here? What else you and I'm like, well, you know, like I don't run around looking for short selling ideas in mining. I I look for, you know, the alpha and the opportunities on the asymmetric to the upside, like that's what you're looking for. And I look at this company GT gold. So, you know, I start walking through it. They ask questions.

I'm like, sure. I mean, I'll show you why it's I think it's amazing and map it out to show the volumes. I show like the topography, I show the different ways you can mine it. I show like the infrastructure, what I think the capital costs will be what you can reasonably infer the meddler you will be from the district kind of your range and and costs with so on so forth and what I think will

be the economics of the project. And I'm like, yeah, I think this is the first thing I've seen in greenfields. It's going to sell to a major in copper in a long time, like five years or so. I just going to this is going to go to big boy and and then, you know, I talked to them after and they've been buying. It's like you guys are buying long and you're fun like junior mining. Are you sure that's like, are your LP's OK with this kind of thing? But you know, for them it was

like a small little position. And but then as it as it grew and as the drilling came in and the deposit got proven out, the metallurgy came in, the conviction came in. Like, yeah, they ended up really partnering in the sense that they came in and bought a lot and, and shared a similar mindset. And we're convicted on the same belief that that I held over AK-2 and, and ended up selling to Newmont for most 1/2 a billion. And it was the first sale of a copper project to a major in in

a long time. It ended up being exactly what we thought. I remember getting a call after from someone. Saying, hey, Darren, like I got to ask you, I got a call from some very fairly well known person, a talking head in the industry. It would be really negative on the project saying all the reasons why it sucked, which I I didn't understand, but we're just all you need to do is use a protractor and you could see

they were wrong. And I heard a rumor that you had basically extorted Newmont into blackmailed them into by the company and threatened to short their stock or something or publish on them if they didn't. But see you. I'm like, I mean, listen, man, that guy that is like, I'm not that cool. If you want to tell people that story, I'm OK with that being my the myth of me. But no, that's not it. Yeah. It was just a good project. But yeah, GT was like that.

And then we sold. It's at one point we'd gone to, you know, if Lucas Lundeen or my brother had reached out to him to see if he wanted to invest in the company and, and he'd come back with some pretty strong interest as he'd walked through the technical aspects in our work on the, on the project. It didn't didn't end up coming to fruition, which ended up leading to a lot of the tension, I believe, I think between ourselves and the chairman, which obviously came to head in

the proxy matter. But you know, not to dig that stuff back up. It was a big success for us. And I guess it was a big success for him in the end too, but the investment didn't come to fruition. But you know, I took a meeting with him at a conference and this company, Filo, he had. And I remember going through it and just kind of like sitting in the meeting learning about it for the first time and kind of been like, Jesus, this is one of

the best projects in the world. Like it's it's obvious. I just laughing. I'm like, what I can say is you're not being priced. What's obvious is like this is clearly one of the best copper deposits in the world. And what's also obvious is you're not being priced by the market. This is not really a, you're trading on, you know, relative levels of apathy.

You're just floating at neutral buoyancy effectively on the markets apathy because it's like it's an Argentine, it's on the Andes, it's right up against the border between Argentina and Chile. You know, trying to get to something where you can develop a project there and trying to get the Argentinian and the Chilean government at a point where they're both willing to work together and transact and

agree to unlock something. It's kind of like waiting for the solar eclipse, so or lunar eclipse. And they're like, what a really difficult capital markets proposition. What an incredible discovery. I didn't really buy it for that reason, but I thought it was brilliant project. And then they went and shortly after I'd sold GT, they drilled this hole and they just hit this extraordinary grade. And I, I remember just sitting there looking at in the morning and being like, Oh my God.

And then thinking about it and being like, I think that I think I just watched like $5 billion get created in a company that's trading for hundreds of millions. And being like, this is the greatest discovery I've seen in my life. The frequency with which you'll see a discovery of this magnitude like this is different now. This isn't like the world needs

this project now. And when the world needs the project, you get these monster things that, you know, they can be at the like Grasberg, like these things come forward because they're just too powerful. And I thought I'd watch an asset cross that threshold. And I was watching BHP in Rio Tinto cash flow like the market capitalist company, like every week and being like, you know,

this is a crown. Like these companies are built off a couple copper projects that they were, they have a fractional ownership of something that looks like this. And that makes up BH PS like copper division, like 50% ownerships in like a couple of these, you know, like this is a, this can they have, they're, you know, the largest copper mining companies on earth have like 3 crown jewels, fractional pieces

of them. And this can this can be one of their penultimate crown jewels in their crown and can re cement it for like 200 years like you. That's how long this thing will chug for. You know, can you afford to take the risk of a week's cash flow if your BHP or Rio like what you can't afford not to you get one of these like once every 20 years. Like you have to move. You have to, it cost you nothing to plant your flag. And I thought that some one of them would move.

And so, and it's such a freak that you get a discovery like that in the strongest hands in the sector. What always happens is like the because there's so much randomness in discovery, the frequency with which you get a brilliant discovery and hands commensurate to handle it without conflict, without stealing, without corruption and

things like that. That happens once this object of immense value forms in the middle of nothing and a ragtag group of individuals to see that happen in the hands of like the Lundin family. And it was like, Oh my God, I'm going to see this once in my career maybe. And if I can't move on this, then like I don't deserve a job. And so I just said like, screw it, like you got no choice.

You just got to go. And so we we plowed in, just plowed in and ended up making about as much money as we made in multiple years of dragging GT for it in a matter of moments, which is the funniest thing in a matter of months and not needing to do anything or have much of an active role. But you know, BHP soon came in and invested, you know, probably like a, a double from where we, we bought in that day.

But the reality is the stock went $5 billion or $3 billion, whatever it is you think it's worth. This was a discovery that was worth the MPV was so high. The outcome of the IT was the outcome of the company was going to have nothing to do with the MPV. It was just a function of leverage because like you can't get someone to pay now for something that's probably got like a $20 billion MPV doesn't happen, right?

So, but you watch that much value get created, a small company, it can't cover the gap instantly. It just can't go from like hundreds, millions to three billion, 4 billion in a in a moment. It's a very slow grind. That was the first thing I always dreamed of, like a Boise's Bay moment. Like these, these things that we haven't had in the market since then, these things are just worth so much.

And everyone comes in and it takes so long because they can't get there because it takes so much capital to take them to their ultimate valuation. Everyone makes so much money and everyone's in on it. You know, like one of those things concede a bull market on its own for how much capital it gets redeployed on its tail. And there hasn't been those. There haven't been those like Supernova tier ones.

And I thought Vila was kind of potentially in that caliber, except it's funnily enough, almost it was so tightly held that not many people made money on it. But other than the Lundin family and BHP and their largest shareholder and one other fund who was in there very early before the discovery. But yeah, it was incredible to watch. But it was in Argentina. And there was a perception that it was hard. And and so a there's two things. One, people just thought

Argentina's too hard. I just didn't think that mattered when you had a deposit of that caliber. And I didn't almost didn't matter where it was. I mean, like, it's like when Kumo Kukula got discovered in the middle of the DRC. Yeah, the middle of DRC is brutal, but not when you've got Robert and Kumo Kukula. You know, there's a guy who can handle and there's a deposit that like needs to come forward. So it's it's just different when you see things like this. And yeah, it was, yeah.

That ended up being probably the biggest one of all. Obviously ended up getting sold to, you know, the joint take out between BHP and and Lundin. And in the end it ended the way we thought or about or about what we thought it would sell for and just a brilliant, brilliant discovery. So I think when I look at investing in the sector and

things like that, I play a lot of poker growing up, my brother and I did. And what we discussed is like in this sector, the way we invest, the type of things you invest in, you don't play ACE 10 off suit. You just don't like, it's a violent sector. The consequence of losing the hand is, is immense. And you play pocket aces and pocket kings only. And you watch a lot of Ace 10's and Ace jacks go by and you fold and fold and fold and it hurts because you think it's a good

opportunity. Sometimes they work out. You're like, I should have played it, but you don't. You play pocket aces and pocket kings. You play hands that almost no matter what happens preflop, you have to enter the hand. You just have to enter the hand. Filo was one of those. GT was one of those champions, one of those there's, you know, obviously being a certain number of others. You could can you lose the hand? Yeah, of course you can lose the hand. There's lots of ways you can get hurt.

And you know, my my brother's boss made the comment once. I've never forgotten it. And he's like, you can be the best gunfighter on Earth. You're getting enough gunfights. You're getting tagged. That's just it and that's the reality of of investing and especially in the sectors we invest in. But but when you got Paz Kadesis or Pocket Kings, it almost doesn't matter what happens. You still have to enter the hand and play and see the flop.

So that's, that's kind of, yeah, I'm rambling a bit, but. That's a wicked synopsis. Yeah, a wicked synopsis. And it's, it's like the what you describe is these moments where you can see it, you're certain and the market doesn't see it yet. And those are the circumstances that, like lead to tremendous opportunity and tremendous like, yeah, monetary gain from investing. Yeah, yeah, absolutely. Do you ever see that the other

way around where the market is really excited? I think something is spectacular, but you don't. Oh yeah. Oh yeah, all the time. I think you know what thing I like to talk about is like it's and I have a tendency to answer questions in roundabout ways, so I apologize. So I'm going to try to be more direct. Yes, I see it all the time. Do I short those things? Yes. Do I always short those things? No. Are when I see those things are those things.

What percentage of the time are they a good short candidate? Less than 50, maybe 50, just a lot of things that need to come together for it makes sense to short something. I see a lot of things that I think are completely overblown or I don't want to use the F word, but let's just say not truthful and, and I think you can't short it. It doesn't matter. People are never going to figure

it out. And the guys running it are just too talented at, at talking and, and going and marketing and attracting like retail capital from whatever sector there is. And you guys are forces in nature. And you got to respect, you have to respect people's talents. You have to respect their toughness. You know, you don't, you don't get in fights that you're not extremely confident you're going to win it just don't get in fights at all. It's probably a good strategy

too. But you know, I found, I think I'm at the start of my career, I was a bit more immature at the stuff. I thought I'm right, you're wrong. This is a scam and therefore it should go down and it would work that way. I didn't start to be a short seller, but you just live in the sector and you RIP things to pieces. You'll find there's a lot of scams and then you'll watch them play out and sometimes they blow up for the reasons you thought.

And never do I see that happen and the market actually understand what happened. That was actually, that's been one of the most fascinating things because watching all the post mortems of the market, it's been like, you know, it was tough. Yeah, it was just a challenging whatever. Or they just they just got this thing wrong. And I heard this. And it becomes the narrative that goes around and everyone repeats the group think or the statement they heard.

Because most people do their gather their information on deposits just by talking to people and and gather and being information gatherers from conversations rather than going and reading tech reports and trying to break them down. And solve the gaps in them and things like that. So, but who's in my train of thought a bit, I suppose. I see them all the time. Have a For something to be short, it's tough. You need liquidity for one.

I don't think people understand how hard short something is if you haven't done it. It's terrifying, like I get scared in long positions, but every long position I enter has to has to meet one criteria. It has to be like in what world can I not make this bet or but more importantly, in what world can I not get off this for more where I'm buying it at the level I am buying it at, you know, like versus what I think it's worth and the number of different ways and outcomes and

pass to fruition. This can take or to points where I can gain liquidity like like, how the heck do I lose money on this? And I, I really need to feel like that to ever go big in anything. And on the short side, you can always get hurt and hurt extremely badly, no matter how right you are. And the one thing that's interesting about money is you can time it sometimes. And that's what made a Sanko different. So I published a, I published a

short selling report on a Sanko gold in 2016. Took a big risk in doing so, but I was positive. But we made Senko different was it was liquid and I thought I could time it so I, I could track it with satellites, would give me elevation scans. I could rebuild their block model. So they had said that they had their previously, you know, the previous guys hadn't drilled under the pit. There's no drilling data.

But I, we had actually found the drilling data on the way back machine by Internet archives from like 10 years ago. It's like, so I took it and I replotted out, built, rebuilt the block model from and that was all the drilling they had that they'd used to build the block model. So I had the same data and then I remodeled it and I'm like, oh, this is ridiculous. It's like half the gold there. Actually, I thought it was less than half.

I think I published half, but I thought there's maybe 40% and, and there's clearly going to. Yeah. Anyways, but I could build my own block model. I could map out where they were mining, I could track the pit limits, I could fly satellites, I could scan it to 30 centimeters accuracy. And I could, I knew every level of the mine. And I had my own block model. And I was seeing what was coming out of it versus what I thought would come out, which is a fraction of what they had.

And I knew I was right and I could predict the future on it. So I knew when the pit was going to close and that was different. I could time it. And actually I think that was one of the more impactful things that ended up getting Muddy Waters interested. So initially I, they came in after I published on that and, and they had questions about another company and I'd done a ton of work in the other company. I said, yeah, it's a scam. Not a good short though. And explain why.

And it's like, you know, we talked about a sanko a bit and they're like, yeah, we don't really do mining though, and we're not really interested in it. Like interesting report, like the work. But it's like debating the existence of God mining. You know, it's, it's my line geologist versus your lying

geologist. Great. And I'm like, yeah, The thing is, man, it's like when you short things, you know, you're right, but maybe it's being propped up by a guy and you don't know when he's running out of liquidity. You know, you can't tell. You know, you'll be right eventually, or you believe that the timing is tough. I was like, this is down by the laws of physics, man. I can time this for you. I can show you what's going to happen every stage of this.

And you know, when we're going back down and walking through it. And I think that had a pretty profound impact on him. And so we did that and it was, it was remarkable accuracy. I think what we predicted. It was like, I was even shocked by how accurate it all ended up playing out towards our expectations. Not so many that one doable and it obviously just become the market darling at the time it was. So it's pretty liquid and you could you could get a lot of

borrowing. Oftentimes you just literally there's another borrow available. You can't short things naked and people always talk about naked shorts. That's not a thing. You know, you need to get borrow and there's just often not there for a lot of things. And so it's pretty rare you get things that are overvalued and have liquidity and have borrow available. And even when they do for it to be a good idea. Like, man, you know, when you're

down 50% on a long, it hurts. It really hurts when you're down 50% on a short. Oh my God, is a terrifying, you know, so you, you said that you shorted, you shorted 5,000,000 bucks or something. You're trying to make 20%. You know, you're trying to make $1,000,000 fucking rips on you. All right, it goes up 50. Now you're down 2 1/2, you're trying to make a million, you're down 2 1/2. OK, you know, and you're like, like, oh, that's a tough one.

And what do you do? Are you walk away or you're like, no, I'm still right. Or do you, you press it? Do you increase it? That's like, well, if you hold on, I mean, you got to, you got to make 3 1/2 just to get to where you you wanted to get now, like that's a long way from where you are. And that's a big percentage drop. And then or you can just increase it. You can short more. OK, so you short another two and a half million. You short of five before now you short, you down 50%.

You short two and a half million more. You're now short $10 million and it goes another 50%. You just lose another $5,000,000 and suddenly you're like, I'm down seven and a half million dollars. I set out trying to make $1,000,000. Oh my God, like what is happening here? Like it is as a I've been there. It is terrifying. It is like the most stomach churning feeling on Earth. So short selling is extremely difficult. Being rights isn't enough on your thesis.

You can you can. It's Yeah, I can't. I can't explain to you the pain. If you're like if that situation, you start with five trying to make a chameleon goes 50%. You had 2 1/2 goes another 50%. Usually when I'll short something is when I feel like, in what world can this double again? It has to satisfy that criteria. So you see something you're like, I think that's worth 100 million bucks, man. And it goes to like half a billion. You're like, that's insane. I don't short it.

I'm not going to put a big short on that. Like can that go to a billion, dude? I've seen guys promote like, like, like complete moose pasture up to a billion. Like of course it can go to a billion. And they've got actually there's something, something real there. It goes to 2 billion. You're like, Oh my God, like, but can it go to four?

I'm like, well, I've seen a lot of crazy pumps and critical minerals and things like that, and these assets that are never going to see the light of the day go to 4 billion before. So I guess in theory it can. Then it goes to 4 billion and you're like, wow, can it go to 8? You're like, probably not. Then it goes up even more and you're like goes to like 6 and you're like OK, 12's different. You know, getting our company to $12 billion in mining is a

different thing. Like you're talking like being a major now, like that's not going to happen on this, on this piece of junk. And at that point it's like, OK, now I'll short it. But like you can't short it because you think it's overvalued or it's extremely overvalued. You got to feel like, in what world could this ever possibly double again, like ever like it like that double S again, it's going to compete with, you know,

Ken Ross or something like that. And you get those opportunities, you just don't get them that often. Short selling novices. They they, they don't realize that their returns are path dependent, that you know, if you short something at 10 bucks and it does eventually go to 0 but it goes via 100, your losses are incredible. Yeah, again, it's just one of those. It's one of those pains you can't experience, you can't describe unless you've experienced it.

So I never want to be back there ever again. And luckily in that situation, I'm talking about where I'd been there, I came out ahead. But what a white knock overnight. So yeah, I feel like maybe that was, yeah, I definitely walked away saying never again, that's for sure. No, I mean, short selling is not my my focus. I mean again, mining is asymmetric to the upside. You walk around looking for longest occasion. You stumble across shorts.

You, you said one other thing that I want to ask you about in

in this conversation, and that was that you've got this real ambition to, to actually run a mining company. And yeah, I, I want to hear you expand upon that. I know you've got involvement in a in a gold business already, but where does that stem from? Yeah, I would love to. I'd love to. Where does it stem from? Listen, you use the word ambition. Does it stem from ambition? Yeah, to some extent it does. Is that the primary driver? No, I think it stems from belief

more than anything. I'll address the ambition aspect. I want to build a mind. Yeah. I mean, I, I found something early come the, you know, predominant force in the market for the primary financiers and things sold them, had them come to fruition that way. It's great shorted things publicly, obviously had those come to fruition. Have I But you know, building something feels like feels like that's something obviously I haven't done.

And when I look at assets, usually it's very rare you get something you're like, you need a lot of exits. You need to look at any, any time you go, OK, let me step it back one minute. When you invest in mining things and you either need to be in small enough that you can get out in a hurry, or you can just get out relatively unscathed if you don't like what you see. Or you need to be in a large enough that you can take control of the situation and change it

if you don't like what you see. And the worst place to be in no man's land in the shooting zone or you know, is, is when you're in too big to have any influence over the company or so too small to have any influence over the company, but too big to get out. And I see a lot of guys end up in that situation and stuck behind bad management and corrupt individuals and things like this and complicit boards and and just frustrated, banging

their hands against the wall. But in a relatively liquid situation and with no power, you can't be there. So anytime you go into an investment, you need a lot of different outs. You need to say, OK, you know, you need a bunch of if then sequences that lead to success. And your worst case scenario is not that bad. Like y'all get hurt, but it's not going to be a mortal wound.

So what I haven't really ever had before in a project was where I thought one of the outs was you just build your way, you can build your way forward. I couldn't build GT No way I can handle that like FILO. Like come on, I can't take on Filo. I mean, you're kidding me. Like it's you need BHP to drive forward Filo.

But what I found is that when people execute on simple projects, it's most amazing rewrite. I've never seen anyone execute on a fairly. It's funny, I've watched, I think I said earlier, if you really study things and you pull them apart, you start to see some very obvious relationships. And what ends up happening is the market doesn't ever do that. And some people do, but the market on mass holistically on average does not do that. And so they don't really understand what assets sold, why

they sold. You know, sometimes they think someone just extorted the world's largest gold mining company from his small desk and divine them. They think things like that. But and but when you when you really write them apart and you understand the nuances and differences, you see things where it's like they occur with

such extreme frequencies. I remember in GT looking at that and explaining to the company, it's like, listen, I don't really want to say what the criteria is, but you know, give it away too much. But I was like. Sorry to butt in here, but JD, I have to. I have to reveal something. We we managed to squeeze this

out of Darren post conversation. He wasn't he wasn't willing to say it when we're talking, of course, but we had to pry him on what are these criteria that actually leads to take out within two years and he told us one of them. What was that mate? That. One that one thing was in this study that they do put out are they pricing things based on using Sandvik ground support. It's so true mate, you check the criteria to make sure you are a guaranteed takeover. Sam, you've got to use Sam the

ground support mate. Gotta use the company that is at the forefront of R&D, the forefront of technology when it comes to ground support. Don't believe it, look at their there's a mixed bolt mate. This is a dynamic resin bolt. I'll let the man Derek heard explain it himself. How has ground support changed over like the the last 20 years for example? Some people might say not much at the end of the day because it looks like a, a steel bolt or a,

a splitty or a friction bolt. Depends, you know what you call it sort of thing. But they've been around forever and a day because they're a good product at the end of the day and they they do their job. But there's been a lot of evolution on sort of the that are dynamic capability of products, you know, that can hold more capacity, more energy. Again, as these conditions become more challenging, you know, there's more requirements for, you know, higher capacity

products at the end of the day. The other thing that's that's probably changed over the years is the, the frequency of use probably ground support probably was a almost an afterthought, you know, 20-30 years ago. Now it's critical as part of the development cycle, you know, to provide again, provide that safe working environment. How good is that mate? The company at the forefront the cutting edge of underground mining technology. Go sand at ground support.

Back to Darren. If you look at every project I've ever seen in my career that satisfied this basic criteria set here and actually satisfied it wasn't like just a fake phony resource scam pretending to be that it was a real project. Because people talk about the Lassong Curve a lot, which I think is a heavily misunderstood thing.

But like, do you know what the average life expectancy of one of those companies post their first economic study and the answer was a year before they got taken out. Whatever, whether it's PA or PFS, do you know what the longest survivor was of those companies? There was about 10-2 years. None of them had made it longer than two years without being bought out, Not single ones. People are like, oh, you get stuck in the doldrums of this.

You're like, no, you don't. Not if you're in a certain tier. And you know, I broke down all the tiers of assets to the company and why? And I was like, like, you fit. You're not in a, you're not a Tier 1 project, but you fit in this tier. And that tier is an interesting tier. And nothing in that tier has ever survived or in two years post study. GT didn't either. And, and that was a 100% hit

rate and across things. And every single one of those projects outlined just had something about it that made your skin crawl, that every night you went to bed just terrified of that risk factor and you couldn't think about it and stop thinking about it for, you know, in the case of GT, it had a very obvious 1. And I was terrified of it every single night. It had it not been for that risk factor, I would never have sold it for half a billion.

I mean, you would have played for billions on that project, but it had that. I don't want to say what it was, but and that didn't mean it wasn't going to get taken out. And when I ranked like the risk factors in the, you know, soil your underpants factor scale of all those different assets all been taken out, I'm like, this is basically like second quartile risk. Like we're not talking like active coup going on in the country.

You know, we're not, you're not talking about subordinated minority interest to a private Turkish conglomerate type of risk. So I, I, when you look at projects, I guess where I'm going and in development projects, I watched a perception form in my career that building minds was a really bad idea. And I've heard that from a lot of people, a lot of people I respect and you know, but I thought that that that opinion was falsely formed.

I'm like, well, you know, they, you think that because you watched all these companies try to build mines and blow up, but you don't understand what they all blew up because they're all resource scams, real gold projects. And you don't understand that because I'd studied those projects and it shorted a lot of them because I thought they're resource scams. And it's just, we just went through a world where the gold price collapsed. No new discoveries were made with the driest like decade.

And it does. I mean, the only projects getting pushed forward we're we're not projects that were real. They were the projects where you could turn the knobs on like the Krieging or the Interpolant and blow out the resource or fuck with the wireframes and just, you know, 2X3X the actual resource. And then get, you know, like the chain of custody of information is some guy. You just need one guy to go do a block model. The wireframe could be Joe Blow,

it can be your buddy. OK, just needs to sign off. You do that, you get your resource, you pass it off to another group who does, who then says, OK, well, I take that as a given now. And now I build you your mind plant and here's your feasibility study and your MPV is $2 billion. Amazing. It's not like there's like multiple audits along the way. You just need to get Joe Blow to sign off. That's the most important thing. You do that, boom, you're good.

And but the only things that went forward that looked like they were good enough to go forward, only it looked like they were good enough to go forward because I want to crank the knobs on them. There weren't any real projects. And so you watch resource Cam after resource Cam get built and blow up for various reasons. And people are like destructive building minds. Terrible idea.

And then they also came off a decade of access where people were just blowing their brains out, you know, with pro cyclical mentality buying, you know, paying the same insane prices. And so, you know, the the industry is ending this period of austerity. And then the only thing they got for the sins of they just incurred in the bull market of the early 2000s and culminating up to about, you know, the 2010

ish time. And then then you watch a bunch of scams get built only and there's no price environment for real projects to go forward. And then so that's what happened. That's where that mentality came from in my understanding and my belief. And then I watched some guys try for some other projects. I did work on them and I thought, I think that one's going to work, you know, and not that I can make that full determination myself, but you get a sense for it.

You're like, I don't see any problems with this. I don't see any obvious things where I see with it make my skin crawl and and tend to hurt people. I don't see all the earthworks. I don't see all the redirecting water dealing with mocky earth, you know, saying you can move it for X dollars when you you know, it's straightforward projects building straightforward like while your CapEx is assembling a

mill assembly doesn't go wrong. It's like you know, they just you can price it exactly and then just put it together and bolt it together on site. Things like that. You're like, these are simple builds, simple projects, simple regions, good location for the tailings, good location for the mill, good infrastructure, good access to mining services, good workers, all the likes. And you're like, and they're

doing it prudently. They're passing off the parts of the project that they shouldn't be taking on themselves or doing it to good counterparties. I have friends who are technical experts in various regions, call them, but for verification, get it? You're like, huh, I think that one's going to work. Yeah, watch them build. You're like, yeah, it's not that. It's not that interesting of a project, though. It doesn't have a big MPV, but they're going to build it.

It'll make money and they do it. And the thing just turns into this like, like ends up selling or trading for like 2-3 X what it's worth. And you're like, Oh my God, people plow in. They think it's like the greatest thing they've ever seen. You're like, my God, these guys are rock stars. The greatest technical team ever. Because they built a mind. It didn't screw it up when everyone else did. And I'm not saying they don't deserve their reputation. A lot of these people I think

are amazing. But they stayed within themselves. They bought a real project. It was simple, it was elegant. They executed it in a simple fashion. And every time I've seen someone do that, it's been an extraordinary success. So there's that. And you know, we, you know, our largest investment right now is a company called Mayfair Gold.

And Mayfair is to us that and we watched, I watched Atlantic Gold in this fellow Steven Dean build Atlantic Gold and he built a 5000 ton a day project in Nova Scotia. I believe it was like on a highway on power and you're building on bedrock flat, no real pre strip sitting right there. Bit of a nugget swarm. You know, I thought the resource was sketchy at first. Did more work and I'm like it's it's I think it's kind of there. It probably works. I'm like, I can't poke any holes

in this. I think this actually works, but it's small. It was like 450,000 oz 1.2g. This is built with goals like 1400. OK guys, guys won't even look at 400,000 oz at 1.2g today at 3:30, three $100 goals. I mean he was building was 1400. You know, like, how the heck do you do that? I haven't seen someone build this or something that look like that. And he builds it and he builds like 120 million, a 140 million CAD.

And I remember calling a friend of mine, you know, who is kind of responsible for that mind build and asking him like, hey, dude, can you just connect me with the guys that built that mind? Like I, I just want to understand how that happened, how you do that. And he's just like, oh, he's not Australian. He's like, as you guys would say, too easy and walks through and you know, it's just like it's all there, man. Power's there, the road's there. The workforce is there.

It's drive and drive out. You don't need to deal with the camp. It's, you know, the it's a creature of just your elegance, simplicity gets it up and running, gets a trading and evaluation. I couldn't believe it reach. And then he sells it to Saint Barbara for like 800 million bucks or something. And I was just flabbergasting like, whoa. And then he had this backer, this guy named Ryan BD and Steven and Ryan had just absolutely hit a home run there.

And then I watched him go buy this other project off New Gold Blackwater. And it looked like a good project. You're like, I mean, Gold was like almost 2000 at the time, I want to say when they bought it. And you're like, that's a good looking project. I think that probably works. And you're like, it's pretty much really permitted. You look at it and it kind of looked like a bigger Atlantic Gold. You're like, it's like the same flow sheet, very similar thing.

It's a very similar build actually. It's a power line, but it's not complicated getting power there. You know, like the First Nation situation was very complex, but they navigated it and and it was also like had been well advanced by the time I got it down that path. And you're like, that doesn't look like a scary build, just looks like a bigger version of Atlantic Gold almost. I think that's going to work. And I think Steven and Ryan LED

from the front. They believed in their bones and they wrote the checks from the front every single time. It was epic. Love that and all the respect in the world for guys that do that. They say like, no, this is awesome. I believe in it. You can get behind me or you can miss out. We're driving this forward. We're just taking immense risk.

And now there you have made an extraordinary amount of money for doing so. And look, with that three rated suit, getting that thing into into production, it's remarkable. And then I watch G mining go and buy this like thing for like it was like 100 million USI can't remember in Brazil. And it's a simple project and they built it and they they're like, yeah, that's going to work. I mean, it's not very sexy. The MPV is not huge. The resource isn't huge.

It's, it's a good little project though. And they built that good little project and look what they're, look what they've become. And I just watched that. I watched the rewrite. I watched The Power of Just prudence and the what it does for your cost of capital and your credibility in the market is people staying within themselves and executing on simple projects smartly.

But understanding that people don't understand elegance and projects and how that that what people suck at is understanding joint probability. Human beings by nature really are poor at understanding two things. Compounding exponential rates of increase. They don't really understand inherently and they don't understand joint probability. And they look at projects and they're like, yeah, that's like, yeah, it's like, I think it's like an 8% chance that that's good, 8% chance, that's good.

That's probably an 8% chance that's good. You know, like, oh man, yeah, this is awesome. You're like, well, cool, what's pointing to the power of 3? It's like less than a coin flip, you know, and now add in a .9 over there and a pointed over there on those two factors, on those risk factors and suddenly you've got to like a, you know, a one in four or one in three chance of success.

And one of them is their head. And people are like, you know, if it just hadn't been for that, they're like, no dude, that's, that's not how probability. And so it would would you know, when you get these elegant objects where the risk factors are so low because like mines are just victims of joint probability. There's so many risk factors. If every risk factors got a probability of 10, you got a

problem. So you need really, really high probabilities on it across the board on all various factors or you need huge margins of error and safety or you can withstand a lot of bad luck And, and I find might succeed on elegance. And I find any time people execute on those and stay within themselves, the it's extraordinary. And then there's there's ancillary factors. I'm talking for a long time on this, but do you ever need me to speed it up? You can just kind of go like

that and I'll take the hint. But but you know, building,

bringing technical teams under your umbrella, like from a fun perspective. Yeah, I love the building. Entire technical team. Expensive, you know, you got to keep them fed, but you know, having networks with technical people and working with people and succeeding together and working as a team, there's a lot of value in that. The learning opportunity is extraordinary.

You know, learning, going through permitting, being involved in that, learning it, dealing with First Nations, trying to figure out how to work for mutually beneficial outcomes. You know, navigating that, navigating the difficulties, the, the, you know, how do you maintain positive relationships and dealing with the intensity of negotiations and making sure you, you get through that with mutual respect and all those types of things. Like those are things you kind of need to go through.

So it's incredible learning opportunities from it as well. There's incredible opportunities to build to pull certain skill sets into your your network, which you can then leverage for other opportunities potentially. Sharpen your pencil and you can then apply the lessons learned from those groups elsewhere. And then, but most importantly of all, you know, I think I explained this in the other interview I did that you guys were referencing or probably touched on this.

You know, I always use companies like I definitely talked about this, but for me, like my, my focus on companies is on like a decision making matrix. I think that's the powerful thing. I think that's the most powerful thing. You just say, OK, cool. You try to figure out, OK, when you look at companies, people are generally bad or it's difficult or have a hard time figuring out what's a more talented team or a better

structured entity than another. And so they're looking for like financial things and EPS multiples and things like this and try to, they think if I can, you know, do smart accounting, I can figure it out. Maybe you can, but it is it's all worthless unless you can see through see through the numbers and see talent or see brilliance. And, and because at the end of the day, it's like you take it to something where people obviously understand sports.

You know, I remember reading this watching this reading or watching this quote from Roger Federer. And these things are obviously kind of cliche and lame, but this one actually kind of got me. He was talking about like the percentage of points he'd won in his career. He was like just about 50 and you're like, that is incredible, but everyone. 52 I think. Yeah, but you put Roger Federer, you got to realize he's playing most of his points against like, competition that he's never

going to lose to, right? He only really faces the challenge when he gets the finals. And through these dominant runs, you understand the other opponent has a 0% chance basically against this guy, even though that's because that teeny margin and that's the power. But The thing is, there's so many shots and so many points they such as robust and deep sample size that the power of a slight edge inefficiency over a relevant sample size is extraordinary. And you know, look at the best

golfers in the world. We're in awe of Scotty Shuffler right now for what he's doing. Like it's amazed. It's but like it's a it's one shot around, you know, it's one ship that he doesn't hit a little huff around. It's it, that's, it's that's the that's the edge they're grinding for. You know, it's amazing that he's he wins by three strokes in a major. Like, why is that amazing? Because it's that hard.

The margins aren't that thin. And we understand that when we look at sports, we understand the inevitability of these marginal advantages with relevant sample sizes. We don't understand it with companies typically and investing and people have a hard time saying, well, how do I get to that? How do I see that? And it's tough and things play out over many years and management's changing and all that.

So culture understand the spot, a culture that's dominant decision making matrix is dominant. And so you know, it's like everyone understands it's like Formula One cars. OK, this is be a good example. I think if I think you watch F1 and you and you say if you gave investors and they were their job was to go analyze F1 cars and put them on a comp sheet and predict winners and losers, they'd have a really hard time knowing nothing. They'd say these are identical objects.

You watch F1, you say that car has no chance. That is no chance. That is no chance because that one corners better over here in this. And like over the course of, you know, just give them a hundred turns, like it's going to be like 1000 turns in the race. Give them a hundred like they're going to be, you know, long gone. And companies are like that. If you pull away a little bit with every decision, it doesn't matter if you have a better asset.

You're starting, you know, we understand you can put like the the McLaren car of yesteryear, you can give it a one lap lead over the Red Bull and you think, Oh my God, that's cheap. Well, no, I mean, we all understand that the Red Bull is going to dominate them and pass them by lap 10. The same thing happens in companies. So anyways, that's a very long winded way of saying I think mining is a very fertile place for good decision making. And I think it's inherently structure.

It's the people and companies have a hard time employing good decision making. I was just talking like my neighbor about it and he works for some large companies. Like how big is like your team? And I remember you told me the number. I was like, Oh my God, that's a lot of people. You're like, God, that's a big bureaucratic entity. I was shocked. It was like 5 times bigger than what I thought it would be. Holy grow. That's a lot of people, a lot of

committees, a lot of things. He's telling me the size of like their ESG department and, and like the power of it. I'm like, whoa. But I, I think there's a huge opportunity in mining and in gold actually, especially in gold for a nimble entity that makes good decisions and aggressive decisions to take the strategy.

You know, we generally employed and investing in the sector and apply it to a company or find individuals that share the philosophy and, and have them apply to the company and support them. And, and I think that can yield extraordinary success for a number of reasons.

I think that the industry is perfectly set up for, I think gold special in that regard. You know, there was my brother, my brother told me this one time and again, this is one of these things that always stuck with me and I thought was really simple but very profound, which was he's just like, it's like, like everyone's been on the copper thesis forever, my entire career, the supply demand thesis. And he's like, he was kind of like, who cares, man?

And it's a really good thesis and I was interested in it. I couldn't ever get confidence. I don't really make macro bets again, solving the world's hard. It's a lot easier to solve companies and drill holes. But it's just like how many copper bull markets you seen during, I'm like, well, zero. I've heard of 1 though, you know, try a super cycle. And he's like, you know, how many bull markets in gold have you seen moments of like exuberance, euphoria and capital

flowing in and all this? And that's just like, I've seen a bunch of them even though not much had happened in gold or for a lot of those periods of times where they formed. But you got these pulses and it's just like gold makes bull markets more frequently and more violently than anything else. And it's because it's it's not driven by these big industrial things. It's driven by like central banks. It's driven by global conflict.

It's driven by, you know, people trying to run away from the US reserve currency, you know, shift assets out of the SWIFT banking system. Who knows what. You know, it's just, and the world is such a violent, volatile place. There's always some major conflict, major strife, major. Like how many things have you seen in the last 10 years, like major global events? They're just being jarring and and it just, that's when it's driven by that the frequency of those markets and the capital

flows come faster. The ground is shaking more frequently. And I always thought that was a brilliant thought. And I was like, kind of just was like, yeah, holy crow, how would I focus on anything else? And so I think the playing and on top of that, it just, you look at copper, you're fascinated. Copper, it's just not that many ways to play it.

There's so many gold companies and there's gold companies from like very small scale, micro scale, teeny heat bleaches, small projects, medium size, bigger, medium size, small unit size, large size, super size jurisdictions, the range of jurisdictions, the breadth of jurisdictions, the breadth of scale, the breadth of market caps, you name it. The playing field is diverse. The ground is shaking, the money is coming and and going and faster.

That's where opportunity is. That's where opera if you're, and I've always believed that when you have that type of a landscape, it kind of hit me. I'm like, man, in that landscape, how much value is there just being an object of

stability? If you know that other people are going to get washed out frequently and so much the money is procyclical and is forced to be largely deployed all the time, That's like the washouts are going to be brutal and you're going to be able to buy things on fire sale. So you should always send a decent position of cash.

And like how much value is there in being in in a position of strength and other people are in a position of weakness, knowing those positions of weakness and strength come and oscillate back and forth so fast. And it seemed immense. And so, you know, that was my my dominant philosophies in investing in the sector was to do that always structure yourself the so you will always be in a position of strength to

the best of your ability. I mean, there's no always in anything, but when others are in a position of weakness and have the confidence to move in those moments and it's never the bottom is not usually obvious. There's only one time in my entire career I've seen a moment where I couldn't believe I was like, there's no way you don't make money buying this. Like remembering COVID, seeing some things are like royalties on potash, trading at a few X cash flow or things like that.

And you're like, OK, that's, that's a freebie. That's just structural. I just buy, thank God I had some liquidity, you know, to buy some of those things. But yeah. And so that's the gold landscape. And I'm just like, well, you know, I play from the investment side. That's great. But man, what could you do if you're a company, think of all the different ways and the more diverse ways you could play the field.

And, and if you can just go and build a company that has a an incredible culture and decision making, you can set the culture of the company. You can create a culture where people lay information unfiltered on the table and surrounded by a bunch of extremely bright people who then digest it and try to make rational decisions.

And you know what? I, one of my mottos for investing in the sector is, you know, on the front foot and terrified all the time and you're scared constantly investing the sector and you're crazy if you're not. You should, you should be thinking about risk every night you go to bed. And honestly, you can't help it if you're paying attention, but you can never let it put you on the back foot. It's you.

You can only, you have to be aggressive to be successful, but you have to be very, very fearful at the same time. It's A and a company that reflects that the things like that, that has a bunch of really bright, talented people that has it's ethically aligned that who are, you know, are generally incorruptible and and you don't, you know, like one cancer. I see in companies all the time as guys go and they don't want to talk about their their losses, only want to talk about

their wins. The meetings that went well, the conversations that led to something they don't want to talk about, the conversation they had with with whomever that they screwed up and they burned a bridge. And the problem is when you start getting filtered information on a table, you don't know how it's filtered and what you're missing. You start making decisions around bad information. It's not that useful.

So having a small room of really bright, talented, aligned, ethical human beings of that mentality and having an object to play the field in that way, I think you could achieve extraordinary things. And I think that you could, you know, I don't know the insides of a bunch of companies. I, there's a few I could probably name that I think reflect that to some extent. And I think they've done some brilliant moves and brilliant things. I think there's a huge opportunity for that.

And I think there's room for more. And I, I would, would love to see that through. I just, I just, I believe in that thesis about as much as anything I've ever believed in in my career. And so that's a very long, sorry, long winded answer to to what you asked. But I think those are the primary facets. And for us, we believe Mayfair represents that. And you know, there's a whole story there and a reason why there was a reason why the market didn't like it. It was very obvious.

And then we watch things change and in a very meaningful way. And it's a it's an object of it's one of those objects of elegance doesn't jump off the page of people, but there's a it's the coalescence of elegant factors make it extraordinary in our mind. And yeah, so that's our focus through that company is to is the whole hopefully build something that reflects that. It's not our company. We are the largest shareholder, but it's not our company.

So, you know, at the same time, you still have to build a company. You can't force it you, but you can hopefully guide it and steer it.

That that rationale of creating a sort of network of of super switched on people just getting to to integrate and work closely with people from different fields and getting the experience from from permitting. And all those various sort of facets must must come back with a lot of sort of spades as as an investor as well. So yeah, that that really

resonates. Appreciate you massively sharing the sharing your time Darren and and hearing about your thinking in in every single facet of what you do. Really enjoyed this conversation. Well, thank you. Appreciate that. Thanks for having me. Thanks so much mate. Mate that was a fantastic conversation, so stoked to to share that one and a massive thank you to our fantastic partners Rounded Sandy Ground support and Cross Boundary

energy. Peter Roo. Now remember, I'm an idiot. JD is an idiot. If you thought any of this was anything other than entertainment, you're an idiot. And you need it right out of disclaimer.