How a Multipolar World Reshapes Mining (Michael Willoughby)

And that's why the mining sector in the West is capped. And that's the underlying problem for Western markets is the incentivisation is not the same as an emerging market which has a much more diverse pool of capital. Fascinating. I mean, we, we, we did a deep dive in the Fortescue and as well been been reading about like sort of Sino gold and that sort of at the same sort of time when that kind of got started. And yeah, it's crazy.

It's crazy to to read about, you know, Jay Klein at the time speaking about journeys that would take 15 hours. And by the time he sort of left the country in that venture, it's taking five hours because there's highways crossing valleys, there's, you know, plane trips going, there's airports being built in places where barely a city before.

Well, sometimes there's no cars. So I remember we'd catch a train out from Beijing West train station, like most Thursdays nights and we wouldn't even know where we're going. We'd get into third class. We'd just play poker, eat nuts and drink beer in, in the train. And like all the, all the passengers would come and play with us and talk to us. And, and then you'd get just get off somewhere and, you know, try and find a restaurant and somewhere to stay.

And, you know, the next day you'd have 500 people outside of wherever you were staying trying to sell you something. You might get a couple of horses and away you go into that. Yeah, it's amazing. Like you'd knock on the door and say, oh, you know, if you've got dinner and they go, what do you want? Chicken, cow, pig, you know, OK, we'll have lamb. They'd build a fire on the road outside of the house and they'll they'll put the lamb on it, give you some beer. You just sit.

There's no cars going past. It's it's crazy. What an experience, all right. JD we're, we're joined by Willow today and Willow, you're unlike any other guest, I think we've ever had on our show, not just because you're an investment banker and we, you know, we usually don't let investment bankers on the show, but but because, I mean, you're one of them. You've got one of the most unusual, I guess, stories or like your, your own journey.

You grew up in SA, you went to high school in Japan, Uni in China, 27 odd years with JP Morgan, SCB and HSBC doing enormous kind of, you know, metals and mining M and a transactions. A lot of our listeners would be familiar with the likes of, you know, Dundee for Norman star or red Crest for new Crest or Galaxy aura Cobra, IGO, Tianchi, Yanko Rio. I mean, these were, these were big, big deals. You were a part of them.

These days you've, you've kicked off Pacific one, which is, you know, a, a business you own and, and continuing your career. I think you've got a pretty unique lens of the world, not only your, your history, your trajectory, but your insights into that, the kind of Asian capital world, having lived there, you know, speaking the, the language as yourself. We're we're delighted that you're joining us.

And as we're going to kind of reflect on the week that's gone and and some of the big themes that as we look ahead, I want to money mine. Great. Thank you. Thank you, guys. It's a great service. I'll listen to you every week and I know a lot of other people do as well. It's fantastic. As flattering Willow, we're we're very excited and I think for the the reasons that Trav just outlined, your background makes you pretty uniquely suited for the conversation we're going to have.

Although he's going to be cagey when we ask him about companies, mate, because every investment banker will actually not really tell you what they really think when you ask him about companies. It's just it's good business, good business. Not publicly, yeah. On the theme of geopolitics and cost of capital, where funding

is coming from in the resources world, where it might come from in five years and 10 years time though, yeah, you're pretty primed. So I think we should start the conversation in that kind of spot because we caught up a little while ago and we spoke about the big shifts underway as well as your positioning in in Asia and how you sort of see the flows as well as your experience in working in junk bond markets

in in debt markets. So I want to, I want to sort of start this conversation at a kind of broad level and understand what you think of the big trends in the cost of capital and how miners are getting financed as we sort of see it today. Yeah. So if if you're a Western listed miner, you've you've always kind of done it one way. You, you get project funding, you you go to the equity market and you raise equity.

And when emerging markets were pretty small, you know, that was, that was the only way did it. Some of the bigger projects the Japanese financed, you know, along with the majors, iron ore and coal and and copper and other things. And, and that was very effective. And, you know, over the last 10 years especially, we've noticed that a lot of the Western countries have really been hollowed out in terms of their industrial capacity. And that includes mining and

certainly processing. And one of the surprising things to me is a lot of the Western politicians don't actually try and solve the problem. They just Band-Aid over it with, you know, handouts. I mean, what it, what is the problem? The problem is that the two things Western equity capital is, is now a lot more expensive

than emerging market capital. And I don't really like to call it emerging markets because China, Japan, Korea, they've emerged, you know, they're, they're the industrial economies, not, not the West anymore. So it's an average of 66% more expensive is Western equity capital. When you look at, you know, very similar companies and a number of them over the last 10 years. So that's, that's a huge difference. And then debt capital, I mean, that's very easy to, to

reference. You've got Japanese and Chinese five year bond rates, which are below 2%. You've got US and most Western countries about 4 1/2 percent. I mean that, that that makes a huge difference to your IRR on a, on a project. And so if you're just doing it with Western capital, you're competing against companies, whether government sponsored or not, that, that are competing with far lower cost of capital and therefore much higher IRRS.

And so how do you acquire a, a, you know, a cop of mine, for example, with a much higher cost of capital relative to your competitors? You can't. To to tap into that point because I think we start talking about cost of capital and we're at real risk of losing the people that are not from a, a finance kind of background. So. It's everything. It's everything in a capital intensive industry.

Yeah, exactly. And so if we can really break it down to, to the nuts and bolts and what the ramifications of a high cost of capital are or you know, from say an Australian perspective or from a miner's perspective. Yeah. So if if you're a Zigen, for example, and you trade on 12 times EBITDA and you're you're buying something at four times EBITDA, fantastic, because that for that EBITDA just goes straight to your 12 times and

there's value created. If you're trading on four times EBITDA and you're buying something for four times EBITDA, well, it's pretty hard to create value off the bat from that. And you certainly can't pay what Zijin can. So that that, that's just a simple example. And the same applies to let's say you're investing a billion dollars of capital in into a project and you need a required greater return. That's very hard when your cost of equity is is so low, so, so high.

Sorry. And we've skipped over a little bit because the key point is why, why is that? I mean, cost of debt, you can probably understand, you know, the Western countries are in a higher lever, but why is cost of equity so high for Western companies given that all we hear is that I've, you know, the US market has higher multiples and, and it does, it does for other industries, it does certainly for tech and it does for infrastructure.

Well, why mining? Well, if the problem with the Western equity markets is that they're now 85% institutionally owned, right? And what does that mean? That means you just crowd capital into where the LP's or the, you know, the ultimate asset allocators want. And what do they want? Well, they want, they're happy to have volatility in operational cash flows like tech, but it has to be capital light.

So I have to be able to invest in like 10 of them to, to have two or three of them come off fantastic. And if it's capital heavy, well, it better not be volatile. So infrastructure love that. In fact, I don't really care what I pay for infrastructure is because I know the return that I'm getting. But mining's in between, isn't it? It's, it's high capital intensity and it's very high volatility. And as a generalist, which I used to be, you know that that's

the worst of both worlds. Why, why am I going to bid more than four times EBITDA for a company like that? And that's why the mining sector in the West is capped. And that's the underlying problem for Western markets is the incentivization is not the same as an emerging market, which has a much more diverse pool of capital. So retail in China, for example, is 80% of the stock market completely different. I mean, that's, that's how Western markets were 50 years ago.

And that therein lies the difference in capital formation and the difference in capital cost. And then that gives an advantage to those, those companies.

And it's, it's not just China. It's it's, it's Korea, Indonesia, India, Saudi, Yeah. So when you think about the, the equity markets though the, you know quite famously the the Chinese broader indices, they haven't performed phenomenally well in in recent decades say that the last 15 years since the, the, the GFC Despite that they have gotten bigger, there is more and more companies being being listed there. So the the kind of gross market cap is growing of the

performance kind of hasn't. Is that something you think is part of the the natural evolution and in time we'll do well or because of the system there that that's not going to perform in time well? When it's a retail centric market, you know, sometimes you don't get the valuations that you would in the US. So, you know, if you go back seven or eight years, a lot of the Chinese tech companies listed in the US for the higher valuations that that makes

sense. But most of the manufacturing, either directly or indirectly and heavy industrials have all gravitated towards those markets. And, and either it's in a chemicals, I think China is twice the size of the US and EU combined in chemicals output. So you look at a hydroxide plant, you go, well, why can't it work in the West? We you don't have the supply chain backing it up. You don't have the cost of the

inputs that can compete. And and if we think about these, these sort of holes of money at kind of traversing those 2 E East and West with a specific example in mind, FMGA little while ago announced this, remember the US $2 billion bond bond deal. How do you think about those bits of financing because they're, they're a relatively, you know, unique piece or maybe the first of that kind of type of financing? Do you think that's something we

continue to see more of? So you should be able to get a, a lower interest rate because the underlying government bond is a lower interest rate in China. So that's great. But then because you're reporting in Australian dollars or U.S. dollars and that's your functional currency, you you're going to have to swap it back into that Western currency. And that's expensive. And that's the reason why a lot of people don't do it.

But in the case of Fortescue, they sell to China and they can sell an RnB and that would naturally hedge their R&B exposure and thereby reduce their net cost of interest. So it can work. It's not for everyone, but in five years time it'll be a lot more popular to do that. Isn't that interesting, right? So they get, they get a, a 2%.

I mean, it's like, you know, you look at it and you're like, this is the lowest cost of capital you can have as a western minor to well, lowest cost of debt oriented a 2% coupon on a, on a $2 billion loan. But you know, are they, are they, are they able to do that? And because because like China has a political or will to, you know, want to, to de de dollarize as well. Like if they're selling in R&B, is that is that is there some advantage and incentive for for

that? I think we all overestimate the

government's hand in a lot of this. I mean, that is the Chinese banks wanting to expand outside of China. I mean, look at what they've done in Indonesia. The Chinese government, the Indonesian government didn't have much to do with that really. It was zinc Shan and a whole bunch of very private, very proud Chinese companies that put maybe 50 billion in capital now in Indonesia and nickel to build

up all of that industrial size. And, and it's only now that the governments are kind of getting involved. The capital came in because of the the. Government goal setting. Yeah, the, I mean the, the industrial park like tax in tax breaks for, you know, big, big windows of time and everything that was the, the landscape that allowed capital to to accumulate though, was it not? That was that was part of it. Yeah, part of it. But you know, the the capital from Tinxion wasn't government

capital. Sure. Like every government, you have an industrial policy that encourages lending to certain sectors, but it doesn't dictate, oh, we're going to go and spend forty, $50 billion in Indonesia and and ruin the nickel market. Mate, we've just got to jump in with a quick public service announcement. We are one short week away from Africa Down Under Adu. Less than less than a week mate. The conference starts on

Wednesday next week. Only a few sleeps to go. 3rd to the 5th so it's a Wednesday to the Friday we're gonna we're gonna be there come come come check like we'll be there Wednesday morning. So if you're gonna buy your tickets to come to Africa Down Under, now is the time to pull the trigger. If you're gonna go, I don't. I don't even think there's many tickets left, mate. The selling like hot cakes. So you bought? Cakes. There's a number of reasons why you want to get yourself down there.

You've got the biggest African miners, you've got the up and coming ones, you've got the the juniors that are doing big things. We've seen deals. Don't forget the delegates of from all of different countries. Delegates, a lot going on that front. When you invest in Africa, you need to understand the playing field. You want to get in front of the face of these delegates. You want to speak with them. The biggest and the biggest African mining convention outside of Indaba? Phenomenal.

That's crazy right here in Perth. Get your tickets in the show notes. Africa down under September 3rd to 5th. Yeah, it, it is a, a fascinating example in, in terms of more money that's coming into the metals and market space traders and the the commodity traders with a lot of these guys being, you know, energy first traders, they've entered the the space. We saw another example just recently with Capuchi, the Ivanhoe mine and a deal with Mercuria, who have always been

an energy trader. Is that another sort of source of capital? I mean, they're really muscling in on one another now. Do you do you see that trend continuing? That's fantastic, isn't it, Because they go back maybe 7 or 8 years. There's a few big bankruptcies in, in trading companies, particularly in Asia, only on I think was one of them and there was a few more. And so a lot of the banks pulled back from financing the traders into particularly metals deals.

And you know, you remember maybe 15 years ago, there was all of that LME, all of those LME problems with security over and then a lot of the banks got out of it. So it was very hard for the traders to get any size and the metals market is what, 8 to 10 times smaller than oil. So well, let's just stay in oil and make money there, which a lot of them have made huge amounts of money and now they

need to expand outside of oil. And so metals is obvious, but Glencor and TRAF have had the lion's share of the the best markets. So now you've got 8 to 10 others that are heritage oil, but coming very, very aggressively into providing fundings either off takes or prepaid or hybrid type structures. That's different from equity, can have equity warrants or or debt and it depends how it's

structured. But the banks tend to sit behind those prepaid facilities and lever it to between 50 and 80%. So the trading company ends up not having to put so much equity into those facilities. And, and from another sort of source of capital, you've got the, the streamers and the royalty players getting bigger and bigger. If if we kind of piece it all together, what what do you make of the, the, the statement that there's a, a shortage of money

for mining companies? There's definitely a shortage of capital for mining companies at certain stages of their development. So right now, I mean, and it's fantastic that the, the Perth retail brokers and brokers are raising all this money for, for, for mining development companies because that's really hard capital to, to get. So the exploration capital is a bit easier now to get.

But the problem is when you come to actually funding the, the, the construction or, or the bigger capital and you're a $50 million market cap company and you've got 400 million of CapEx to spend. You know, how do I do that? And there's not necessarily capital available for that from traditional sources. And that's why, you know, we sit there going, you've got to, you've got to look at layering your capital structure. So how do I get a Japanese

trading house in here? How do I get a royalty structure in here? How do I do off take, how do I then bring Japanese or Korean or Exim bank debt in the project financing level at a lower cost? And how do I layer all of those capital structures so that the equity market understands what I'm doing? It's not too complex, which is very important in an Australian context. And and so my cost of capital is low enough that it justifies me

doing the project. That HUD Bay example that we spoke about a couple weeks ago, that feels like a a prime example to to, to put forward in, in unlocking like the first kind of steps of that with the Japanese trading houses coming in. Right, fantastic.

I mean, what? What a great result the HUD Bay, you know, both of them, but, but HUD Bay into in particular. So they've basically just taken all of the capital CapEx needs away from themselves. Mitsubishi comes in and and funds it all. HUD Bay was trading at, you know, round numbers, let's say .7 times they've brought in capital at 1.1 times MPV, great value arbitrage. I mean everyone that can do that should do that.

Even if you don't even need the capital, you should be buying back shares to reduce your your equity count because you're replacing expensive equity with with cheap equity. The inevitability of of the world need for these metals. It's just like it's so compelling, it's so obvious. But where is the capital going to come from to bring, you know, these new developments online if it, if it is, you know, scarce? So it's not going to come from Western equity markets.

That's where it's not going to come from. And where it is coming from is industrial, IE Korea, Japan, China, Indonesia and emerging markets. I mean the, the capital coming out of Indonesia now is enormous and a lot of it we don't see because they might not be public companies or they're not listed on ASX or NYSE, but but that is

huge capital. Is that because they understand like the, the need for these materials because they have the, the industrial downstream component in some respects or they're tied to it in some respects? So they're like, they've got the foresight to think, you know, 20-30 years in the future. Well, yes, partly because if you, you know, live in Jakarta or you live in Shanghai or, or you live in Riyadh, you see masses of construction every day

and OK, things are growing. Let's let's get on board that train. But I, I think the, the bigger issue is, is when you're growing an economy, those materials are really important and the security of those are really important. But more than anything, they're

just arbitraging the the. The higher cost of capital in the West, so they're saying, well, this is a gap in Western markets where where it's too expensive for them to play with, you know, and, and maybe the the processing's too environmentally unfriendly and, and there's a whole lot of other issues, but that's a gap that our capital can play in that we're not

competing with the West tell. Me, tell me more about like, you know what the ways in which you're seeing this capital, you know, find it's way into into Western projects. Yeah, So it, and this is the thing, it's not, it's, you can't just go out to auction and say, you know, highest bidder wins to be my partner. That's not how it works.

I mean, these are big sophisticated companies usually that, that have their own checks and balances and their own systems and their, you know, every timetable is different and they're all looking for a different thing. So it's a bit of a challenge, particularly to a midcap or a small cap to yeah, you can, you can go to Japan and have a whole heap of meetings. But what does that mean? And then how do I compare that to Korea or Indonesia or China

or Saudi or UAE or India? There's no one you can go to that's that's going to compare all of those together and say that that's what makes sense for you because most of the service providers have they either want you to raise equity or they want you to do a high yield bond or they're, you know, they've done a few deals in Japan. So that's great. We want to go there, but they don't know about the other side of it. So it's very, you know, they don't know about off take agreements.

So it's very hard to layer that capital structure efficiently. That's the opportunity for P1, isn't it? I was going to say that's where that's where a great advisor sort of how do you how do you pace in US junk bonds in that in that kind of market because they've at an interesting history financing Aussie resource projects. Yeah. So I, I was at JP Morgan for a long time and you know, they have a very powerful US centric higher bond desk, which is. I've heard Chris Allison talk

about it, yeah. Right, So it's a it's a it's a great market. You know, it's not not something to be scared of it because before you know, you obviously had Fortescue, right. And that was that was a fantastic way of financing what what they achieved and, and. What no one else kind of would have financed. Right, because because you can get capital, it's just a it's

just price, right. And I think, I think actually Minrose said that on, on the call it you know, execution risk is not big, it's just a question of price and that, and that's great. It's bullet finance. So you, you know, for five years plus you can sit there and you've got the finance and the next five year cycle doesn't really matter so much. But then you then you just simply roll it over and whatever price you know it is at the time, that's how you've got to time it and.

And the, the, you know, with regards to that priciness, you know, the, the cost of that, how do you paste that in with what it might cost from these Asian kind of players that you think about? Yeah.

So I mean that's purely debt and usually it, it's a little bit more costly than a loan, only a little bit and that changes over time. So that's debt from Asian players and, and you know, believing RMB loans and debt aside, you know, a lot of the capital is equity like. So you know, I guess the next step down is, is kind of off taking prepays with, with warrants. So equity warrants to give a bit more of a return.

And then you go all the way down to a Lisco equity investment minority or or an asset level investment minority, which the completely different style of of capital. Yeah. And the, the, I suppose like the growth of the Nordic bonds to, to finance more spicy types of projects is, is a, is another trend that we're kind of pretty

astute to at the moment as well. Well, I think, I think given private capital is growing so fast that that sort of structure is, is going to make a lot more sense and open other doors for, for mining companies. So the Nordic bond is, you know, yes, I think it originally it, you know, it was for Nordic mums and dads at home, but it's just a structure that then you can sell to lots of different credit funds and, and I think we'll see more structures like that over time.

So it like where does the cap like let's say you know, min raise raises money in the US junk bond market. Are they US investors or are they, are they, are they investors that are actually like Asian centric? I I didn't set up that question, but that is a good question. So that used to be principally US investors so that a book would print usually be like 8090% US, very US heavy.

But over time all of those US funds have established their offices in Hong Kong and Singapore and other other parts of the world. And so now the book is at least 5050, you know, US, Asia and sometimes a lot more Asia heavy. And the reason, the reason for metals and mining in particular is that Asian issuance is much larger in metals and mining than it is in the US because there's a lot of companies, there's a

lot of need. A lot of the Chinese companies raise short term debt and bonds from markets and that's the way they finance themselves. And so if you're a portfolio manager sitting in Hong Kong, you're going, yeah, I've, I've seen this, this sort of gold company, you know, 100 times before. I've seen this sort of aluminium company. I know how the supply chain works because I already have investments in bonds in a, in a

bunch of the, the peers. And that's why for metals and mining company companies, Asia is a really important part. So is the US It's, but it's important to understand that they're two different buckets of capital. So the way, the way in which the, the, the, I suppose the government forces in very recent history are trying to level the playing field from a cost of capital. It's I, I, I'll get angry kind of talking about it, but but it's, it's frustrating in a lot of ways.

Do you have the same frustration in, in, in, I suppose the, you know, the approaches we've seen today of government to lower the cost of capital of, of, of Western mining, you know, projects and companies. Yeah. I mean, look, I mean, and we could talk about geopolitics for a long time, but clearly, you know, the US is not as strong as it was 10 years ago and China on every objective measure is a superpower. Like it or not it it just is.

I'd say the West band aids some of these problems, you know, they're short term sugar hit get a good headline. Voters are happy because something's being done, but no one really understand. You know, it doesn't appear that the government's really are even bothering to understand what the underlying problems are, what, what are the causes for a lot of

these things. And then I'm I'm sure some in the government are, but but if they did, then you would form policies, underlying policies to address some of those issues, not not handouts and band aids and sugar hits. And the problem is the more we sugar hit and the less economic it becomes. I mean, in Brea, So I get it, you, you need security of supply and, and it's not that bigger industry. So it's, you know, it's relatively easy to solve, but you've, what have you really

done? You've now got a structurally higher cost supply of of inputs into the industrial complex, you know, and in the military, I mean, as we've seen in Ukraine, you need very cheap production to to multiply your, your forces and having Caicos inputs is not the answer. You, you said we could kind of speak for hours about this, this geopolitical theme and I think we easily could.

So let's tap into it for for a bit because it's kind of implicit in what we were talking about with with the funding there. You know, it's it's, it's the kind of read through line. And is it going to be that easy to have capital flow from from east to West and all these sorts

of things? So do you, do you see there being difficulty in, you know, countries like Indonesia, for instance, if we're trying to have that money come in to Australia, like they're in a a kind of funny middle ground between Asia, China and Australia and and the US, Do you see there being blockages on a geopolitical front to that

capital flowing? I hope not because what what is happening now is becoming a multipolar world and lots of bilateral negotiations between countries, which are, you know, is different to what we've seen in the last, you know, since World War 2. And if you're saying that I think you've as a company, you need to start to be multipolar as well. So if I'm thinking about my SO what's the easiest way to equalize the cost of capital?

Well, it's get a partner in with a lower cost of capital than I do and supplement my capital with that partner. Now do I just pick one country and that's the country I want to go to? I don't think so. I think from now on you need to be multi polar.

You need to have a Japanese partner, a Korean partner, a Chinese partner, a Indonesian partner, a Arab partner, an Indian partner. I mean, that would be fantastic. And then none of them have power over you, but you have access to each bucket of capital depending on what you want to build, expand, buy. Because it's all different. It's all different costs and it's all different terms and

they're all different cultures. When you think about the the mining companies that could potentially do something like this, you'd have to be of some sort of scale. And at least in the West, there's really not that many mining companies that are of sufficient scale that could have the bandwidth to set up relationships in all the countries you've just mentioned. Do you think I'm right in saying

that? Yeah. So I think Semitomo Metals just put 5.5 million into Mirador, for example, in, you know, how, how does that, how does that form? How, how, how was that originated? How many counterparties would have Mirador talked to before they decided on, on that? I, I think it's really hard to navigate. And then, you know, you go to the Middle East and you can fly around for weeks. And I mean, it's a big place. There's lots of cities and they're all different countries.

You know, it's not A and, and, and you know, Asia's obviously very different depending on the countries as well. And, and it's for a lot of the companies, they, they, they, some, some of them will see a lot of the, the counterparties, but they'll often be the traders as opposed to the investment guys. And so do you. Are you really talking to the people that you need to talk to to influence an investment decision?

And and do you think one of the other sort of ramifications of this multi polar world is inflation? Yeah. And undoubtedly, you know, because if we're reducing the efficiency of the supply chain, then you're getting cost imposts at every point. And the more closed you get, the higher inflation you're going to get, particularly if you reduce interest rates.

You've got, you've got some, some interesting views to share with us for me when we got up a couple weeks ago, mate, just in relation to to how how people might choose to combat inflation and look for store stores of value. Do you mind sharing that? Yeah, right. I, I'm, I mean, this is obviously all very personal opinions, but you know, if I'm a government anywhere else than the USII historically have just looked to U.S. Treasuries as my store of value. That's where most of the world

look to store their value. And, and now that's looking less certain and, and certainly you don't want to have most of your wealth parked in that store of value. And so gold and Bitcoin and maybe silver are the first, first places to turn to because there's no real alternative. Like a digital RnB currency is not not ready and, and people aren't ready to accept that wholesale yet.

So, so where to next? Because gold's only a certain size and it's already gone up Bitcoin, not sure whether that's a store of value or of a, or a good way to transfer value. But if I was a Middle Eastern government, I would start buying and storing metals with positive contango. So they're, you know, aluminium, copper, zinc, nickel, and and that is a store of real wealth. It can't be taken away from me because the property laws change in a country.

It, it, it can't, it's not going to change because someone changes interest rates or I can't move my money from here to there. It is a real store of wealth. And I, I think that's probably the next leg in in metals as everyone searches for somewhere to put to park their reserves. That that has pretty real borders to it as well because of the the physical kind of constraints of of a lot of these

things. And you speak about doing it with gold, but gold being a, a finite kind of market, it's the same issue with, with a lot of these. So we're not there yet, but they'll, they'll touch a boundary. And if you know a a number of countries of significant wealth tried to do this, you touch that boundary pretty pretty soon as well, don't you think? Yeah, I think we're, we're starting to see it. I mean, the, the, there's a lot of economies that are slowing.

You know, the industrial output of China, for example, has slowed steels slowing, you know, and that that naturally feeds into copper and other metals. But but we're not necessarily seeing those metal prices weak, I think because we are seeing a bit more storage that's off LME and off, yeah, not public.

When you say like like storing the ones with positive contango, are you, are you talking about any, any financial trades to, to go along with just buying the physical and storing it or you're just you're just saying that the ones with positive contango would be more attractive in general? You could do. I don't think you'd make it that complex necessarily. You you just want to store your wealth in a diverse set of assets, particularly ones that can't be taken away or don't inflate away.

That doesn't really matter what inflation is when you've got metals, because that's going to match or better inflation. This could have pretty, pretty severe implications on metal prices in a in a pretty short period of time if if you know, multiple, yeah, like Arab countries come to a similar conclusion and a similar point in time and start doing that.

Yeah. Even worse than that, if you think multi polarity could be bad for inflation, what this could do to the the price of a a computer, you know anything, a fan, an air conditioner be pretty pretty huge.

Right. You know, I think we're living through the start of a of a massive change in geopolitics, which is is exciting and terrifying at the same time. And I, I tend to think with these things that people don't really act until the the problem is really in their face. So the problem has started to happen. So the we've got. To lower, we've got to lower interest rates, right, because people don't think inflation is

going to be an issue like. Well, the the value of treasuries really has to start deteriorating to a serious degree before people will act on on these things. And maybe they diversify their measure to euros, yen, Bitcoin, gold, and then you start to see the metals kind of move. Yeah, I, I think it's, I mean, look, there's a natural status quo bias that you want things to remain the same because that's the easiest way to think about the future. But ultimately they, they never do.

And it's usually long cycles, but that means when they they shift, they shift big. And and for the mining companies out there, this would in effect pull up the bridge behind them. The ones that have built the project would kind of get to the promised landish because they are now receiving higher prices. But the builds to build a new mine would go up significantly because or the input costs go up. So it's it's got a kind of compounding effect.

So how do you think about the the mining companies in this world? So that's right. So you'd have inflation of costs, but you'd also have a lot more M&A where it's not just countries, it's going to be families and, and, and big companies with big reserves, they want to store that wealth and the gold in particular, but also other metals. Buying metal in the ground is still metal, just not mine yet. So that, that's still a hedge against inflation and geopolitics.

It's just that you're owning land. So I, I think it's got big, big positive implications. So, you know, and bringing this back to maybe a mining company running a mining company is hard. You know, it's, it's not just the financials and it's, you know, it is native title, it is regulatory. It is, you've got, you've got so many moving pieces and it, you know, it's very, very difficult to go from a explorer and a developer to actually constructing a mine.

But but please keep going because, you know, I think the rewards will come. And I, I feel like with all the topics we've spoken about, Willow, there's one we need to piece in here and that's energy. Because energy, when you think about like the cost of energy in China versus the US and where that's kind of heading in a, in a world trying to combat

climate. And it, it is a significantly moving part, especially if we pull in the, the Arab states as well, which have a, a very cheap cost of, of energy. So what ramifications do does the price of energy have on all these things that you've been thinking about? Well, I think it, it, it's so yes, it's energy, but it's more using that as a concept. So, So what the US was really good at in the 40s, fifties and 60s was underlying productive infrastructure, right? And that includes energy.

And so, you know, let's just take a few of the, the, the building blocks, so the inputs into some of these processing units. So, you know, China has twice the electricity capacity of, of the US that that is amazing. And building absolutely massive infrastructure to, to underline that advantage. It produces twice the chemical content that the US and EU does combined, right?

That that is just such a big advantage in in unit cost in in rail freight, it's about twice as big as the USI mean in mining engineers, there's 20,000 mining engineers every year graduating in China, there's maybe 1000 in in, you know, in Australia way less. Yeah, exactly right. The scale is just a completely different size. And all of that is in productive capacity. It's not in super yachts and it's not in watches and it's not

in handbags anymore. It is in productive capacity that is very, very powerful and it and then it multiplies over the rest of the economy. But China you'd imagine would want to get to that, that high level where where brand attaches value and and you can become a a service type economy like this is what all these other countries did a while ago. So yes, and I guess we all sit here going, oh, well, labour cost is cheaper in China. It's not that much cheaper.

In some ways it's it's more expensive, but labour's not a key input into a lot of this anymore because robotics is kind of taking out. So where do we do we care whether robotics are in China or the US or any other country? We don't. All we really care about is the input. The other input costs like electricity, chemicals, copper. You know what? What makes robotics rarest? Copper. Aluminium. You know, where does 60% of the world's copper go to China. 6% goes to the US.

Jeez, has a a lot to think about there. It man, there's a lot to reflect on in the whole. Yeah, that entire bit, you know, super fascinating. I feel like those are the themes that are going to kind of define the next, next decade in, in our industry geopolitics for sure. And yeah, I appreciate you sharing them.

We're going to pivot to talk about some some news of the week. And this this is like a relatively new, new thing we've been doing, Willow. But grade control is one of the segments where, you know, give a letter A to F on a on, on, on a certain kind of corporate action of the week. Are you up for that? Are you are you actually going to give grades to companies? Yeah, because I'll give them all A's because they're other

clients. Prospective clients, first up, BHB have signalled that Nickel W is up for sale again now to give you a slight out. You can yeah, you can get creative on, on the grading. I'll, I'll, I'll say I'll leave it at that. Well, I think all of the majors need to simplify like like Rio just announced as well. And if they're not going to productively develop and harness these assets, then let's try and maximize value by by working out who's the best operator and owner of those assets.

So I think it's a great idea that you concentrate on your most productive assets and give someone else a chance on the others. Yeah, I, I, I I'll give them, I'll give them an, an A when they actually like transact you. I think they're going to have to pay someone to take Nicola W off of them because of the, the pretty inordinate rehab liability associated with, with what's happened to Cam Ballot

there. But but I mean, this, you know, the return on capital they were getting at in the nickel business, even in the years before the nickel market went to, to ship with, with, with like atrocious compared to the other parts of their business. This, this wasn't like a a game

changer for, for BHP. It's like a social project to, to keep big employment in WA And I think they were kind of stuck with it. You know, they're finally going to part ways with it. It'll be a a change for West Australians, but it's kind of inevitable. So yeah, So what if no one buys it and and then the government's forced to keep it I because why doesn't BHP just go to the government, say, well, you gave a handout to all of these guys did. Yeah, they already did, right.

That was like, you know, they, they put the foot on the on the government's neck in the lead up to them actually announcing that this would go into care maintenance. I mean, I think the cost involved to restart a smelter. But since, but since then, since then to your point like near star and all these guys have have got handouts and likely more handouts to kind of come. So it's a a really sort of poignant question to to frame and let's hope we don't get to

that. So what if the government comes back and says sorry, what if there's the only buyer is Chinese of the smelter, not the mines, and they've got the tech and the and the capital to fix it and and create jobs. You know what? You know what very interesting question is? This the first big test of Ferb. That would that. That'd be a. That would be a big test. Yeah, that would be a big test. What the Chinese did with with us for 30-40, fifty years was

have joint ventures. We would go there, there would be JVS and we would learn and it's, you know, eating a bit of your own humble pie. But bring them in and have it as a joint venture where we actually learn why they can do stuff so much cheaper. And, you know, maybe some of those things actually aren't attainable for us, but there sure as hell will be a few things that we can learn from, and that could potentially be one way to put forward a

solution. Can you imagine the car industry in Australia without Toyota, Mitsubishi, Nissan, GM and Ford? They don't have an industry. Yeah. So maybe, maybe there's a bit of that. Yeah, yeah, we might need to get creative on a a solution and I'm sure BHP is already having to. I'd, I'd actually, I'd actually prefer, you know, if you ever prove that then and and see some other form of like government handout or bail out here. That happens. I'm changing my citizenship,

mate. I'm I'm done. Welcome to Singapore. Does China need any citizen all? Right. Next one that I want to talk about is, Wolf, just very recently come out with the trading halt that Burkina wants to up their stake in Kiaka subsidiary. Yeah. What do you grade this one? So it just underlines, well, that's greater than a because, you know, they might be a client like, but it just underlines how dangerous emerging markets are.

I mean, Even so, it's very hard for a junior to have any kind of political force in a country like that. But even if you look at EGA and their dispute with Guinea, I mean, Egas just pulled out and they've had their license taken away. That's 1.4 billion in capital that the UAE put into Guinea. But I think someone in the UAE is going to notice. And why did Guinea do that? Well, Gee, there's a few other countries that have some influence over the Guinea government, don't they?

So. Well, as I, as I understand it, they, they did fail to, to make a few promises. So it's not completely black and white in, in the Guinea Ghanaian scenario. Yeah. I mean, I, I think you're, you're bang on, right with, with regards to, to Wolf, like the, the AM risk is something we've all kind of been aware of and that's why they've traded at, at

such a, a low multiple. Like, yeah, they've had a great run the last sort of three years, but we're they've executed phenomenally and they are on the cusp of doubling their kind of production. So very, very curious to see what the outcome is. You love you love Wolf because you see the cash flow they make, but you always like the the true test. You talk about the true test affair, but the true test for Wolf is like, can they ever get

that money out? They've had five of these types of things in the last few years, and every time they just bounce back within a within a couple of days they're. Like that's the, you know, like there'll be a government coup, whatever. And they do. You always buy the dip on the coup coup order. Yeah, yeah, yeah. But whatever. But there were was a change in mining code, yeah as well. And this is like an, you know, hey, yeah, you're not being grandfathered. You're jumping on the new code.

And let's see what sort of valuable consideration turns out to be. If they can't, if they can't spend the money like X like that they make it at a kiaka and samrat. If they can't spend that X Bikina farso then all they inevitably do all they can inevitably do is just like reinvest in the country, become a a larger portion of became a fire associ GDP and become more beholden to the government in the process. Like that's what. You're. Yeah, yeah. Exactly the same, Yeah, until

recently. Next up, what have we got? Mining services. A bit of a slightly change in tech here, but the mining services multiples have expanded dramatically in the last month to to two months. Curious to to hear how closely you pay attention to these ones, Willow. Sure. So I, I think it's a, it's a wide variety of different companies, right. And if you're just doing dry hire, you know, big trucks that are capital intensive and you're a small cap, you're never going to win.

That is never a win because your cost of capital is always going to be too high to compete with particularly McMahon, which now get the money from Indonesia, Burma, Indonesia. How long will TS be around? You know, so that, that big dump truck open pit stuff is, is difficult and I suspect you'll see some other capital coming in to support the existing players

or, or, or form new players. The, the, the industry leader is, is probably FLS myth in which is a Danish company and that does a lot of the processing equipment and gavares and a whole bunch of different stuff. They trade on 9 1/2 times EBITDA and it's 80% services, mining services mainly, but sorry the the, the the other bit of that is that underground services are completely different and it's really difficult to find skilled underground people.

The skill set of being an underground, you know, mining service provider versus open pit is very different. It's more specialized, being underground and that specialization is scarce. But the people who have that specialization, JD of underground service providing or underground mining, they always repeat one thing to me whenever I talk to them. We use Sandvik ground support.

It's the. Mandrick Ground Support, Just like the best people want to work with the best people, the best people also want to use the best equipment in the industry and that is provided by the team with the R&D squad at the cutting edge of technology Sandwich ground. Support not just the best, the best ground support mate, but the safest ground support, the most innovative like you talk about. And it goes. They too have the best team. It's true, and it goes one step

further. They've also got manufacturing and distribution hubs in every corner of the world, so they can get on the phone with you quickly, or you can just put your order in through the new app that they've got and they can get that out to you quick, smart, so that you keep getting the tons out of the ground and keep producing that metal that makes the world go round. I don't think there's a ground that can't be supported by Sandy ground support.

Go Sandy ground support. And and management teams and when we're talking to non Australian capital providers, we every conversation is stop looking at just the geology, start looking at the management team that is going to produce the value. Because a, a really good management team can produce huge value out of a average geology. A bad management team can destroy any geology. Is this, yeah, not, not all mining services companies are the same. Not all of them are are capital

intensive. A lot of them are. But like some of them, some of them are capital light. Osinka, you had Zoomy on the other day. Yeah, yeah. And like, that's a, that's a, you know, great example of parallel that is still listed on the ACX like G&G, like bring up the chart, 4 bucks 40 trading on like I saw, I saw one broken note trading on 24 times FY20, 6 earnings now like kind of remarkable multiples.

But if you go back in time and you know, back to us, when the period that Jimmy was talking about with the Senko, the multiples of that he was talking about with, with the Senko at one point in time were just astronomical as well. Like we we have lived through an era where mining services multiples like where we're crazy. Where are all the new mine builds?

Yeah. And, and, and now we're now we're seeing like ASX listed mining services companies, both Capital Heavy and Capital Light expanding pretty heavily on the you can see that on the focus charts we'll bring up right now by market tech. Yeah, I mean, it's great to see them actually get a bit of love. So I'll give it an A for, for that because so many of these companies, their share prices in the in the doldrums for years and years and years.

So you can expand that to McMahon's like you mentioned MIH Parenti as well. They're well north of 2 bucks now. So they're all having their kind of day in the sun and want to see how they how they capitalize on this opportunity if they if they kind of can. Last, last one to give a grade to Willow. 2 days ago was the 20th anniversary of a very interesting kind of corporate, corporate event in Australian mining history.

It was the 26th of August. 20 years ago was the the, the day in which Rio accidentally let their Shavalana iron ore project tenements lapse. This Junior Kazaley picked those up at the time. Now then, then there was this big court battle that played out. You know, you were, you're paying attention to Marcus. I'm sure you remember this. We had to learn about it in history books, but Rio ended up kind of, you know, arguing about

how this all played out. Apparently something got like they wanted to, you know, renew the tenements, but something got caught up at A at a post station in like some remote part of Australia anyway, but it lapsed. They did, you know, things in the and and because they only picked them up in in short

order. Now, in the court battle that kind of played out, what what Rio did is they argued that it was in the public interest for the tenements to be given back to them, even though they they lapsed. And they suggested that they would, they would develop these tenements, not themselves, but they do an asset swap with BHP because Shavalana is in BHP territory surrounded by BHP infrastructure, not Rio's infrastructure, right? So OK, we're, we're going to develop it.

And amazingly, right, the ministerial decision comes in the minister, the minister kind of overrides everything and gives the tenements back to Rio Tinto 20 years later. Well, by the way, because they only had to pay the Rio, the, the legal costs for, for Rio. 20 years later, Rio, Rio Tinto's still not done an asset swap with BHP.

The, the project is undeveloped and it's, and it's worthy of being developed like the grade this project is, you know, it's, it's, it's above the average grade that the majors are producing today by, you know, substantial margin and great impurities and the likes. So how do you, how do you, how do you rate Rio Tinto and, and the government on, on this, on the decision to actually give the tenements back to Rio Tinto A plus? For Rio, obviously, and special

mention to the lobbyists. They earned their fees there, yeah. And I and I don't think we need to mark the government, do we? That's, you know, that's above all of that. We can mark the government here. Yeah, that's an F for for the Australian government that was clearly not in the in the national interest and. Joint F. Because I like to have to pay the legal fees for, for just being smart and on the ball. Yeah. Yeah. A fascinating 1. All right, let's move into sweet

and sour deal. We've got a few to to run through here. I want to start with capital raises because we've had a few juicy ones. First and foremost, Linus, $750 million. These guys are kept at nearly $14 billion today. The share prices run dramatically. I, I, I'm kind of gobsmacked by this one. How do you sort of think about this sweet or sour deal and and what are your thoughts on it, Willow? Great time to raise capital. So.

So why not? Particularly when there's a whole bunch of public capital coming in to help a lot of the other potential competitors. And that's probably not going to be positive for Linus's profits, are they? So yeah, let's raise capital. I, I think you're right. I mean, this is just over 5% dilution that is. Right, It's a great deal for them raise the money while yeah, like. Feed the ducks while they quack. What'd you say they were? They were trading at 24 times

last 12 months for revenue. Like. Just reported $8 million. Capital intensive business, it's truly, truly remarkable valuation if you. They trade on a big premium to the Chinese rare earth companies, by the way. So that's fantastic. That's. Yeah, there you go. Are they worth it? I'm I'm not an equity adder. Of course, OK, Cyprium, this one more in your in your wheelhouse in the sense that the Tenito group took a 9.9% shareholding.

They upsized this from a $60 million raise to an $80 million raise. They were a $60 million market cap coming into this raise. They. Did have a fair bit of debt though. There was a combination of the con notes. And they'll pay down some of that with this. Yeah, yeah, yeah. Sweet or sour deal? Sweet, wait for them, raise the capital, organise the capital structure so that they can fight another day.

If bringing in a family like that is is a better way to get a better outcome for the equity raise and lower your cost of capital, then that's what you got to do. Do you think, do you think doing the, the, that you know, the equity raise at the corporate level was you know, and, and the dilution involved and everything like that, Like could they have structured something differently at the asset level or do you think you think it's the structuring is fine as is?

Maybe, but there's a whole lot of issues with the capital structure already with the offtake and and other parts of how they acquired that asset. So I, I think they were probably their hands were tied and and equity was the easiest way to address it. Gotcha. Fair enough. I'll give it a yeah, I'll give it a good deal as well. Yeah.

I mean, it was, it was done at a pretty tight discount and they've raised an enormous amount of equity relative what their market cap like was and you don't always get to do that at a pretty tight discount. Yeah, good deal. Markets are open and take take the capital and see if the the asset can move one step closer to production. I don't even want to mention the other two really, but some more troubled kind of company supreme historically troubled companies.

Well, don't worry. But like Peninsula raising 70 million bucks, they've just had a whirlwind of issues in relation to production woes combined with, you know, contracted revenue and core if you they, they raised 50 million bucks this week as well. Any thoughts on on either of those 2 Willow? No, but when the ducks are quacking you, you, you raise equity. That's and I, I just question, you know, so for all of these companies that are raising a bit of equity, but maybe not enough

to get them to the next step. I mean, what's, what's the next step? You know, you've raised enough to kind of just keep it going. How do you get to the next step? You coming back to the market? Bit of a hope strategy, right? Like they are taking advantage in the core example that the lithium price has has kicked up, kicked up, but do you just have to wait for the next kick up? Well, maybe you wait for the next kick up to raise the capital.

You really need to to to to achieve all all your your plans. Yeah, I think on that point you've kind of got to give them credit for taking the hit and getting the capital on board. Yeah, but it does leave you in a bit of no man's land there. In a sense, the Peninsula 1 was like a, you know, a coalescence of various the buckles all come in head to head. So I want to see how they they move forward from here.

They've had a few final raises, but they they they have the strategy of keep coming back, unfortunately. So yeah, hopefully this one is the last one for them. I'm going to give, I actually, I'm going to give these ones a a day just because when the ducks are cracking like you, you raise equity. I get that. But I do think when you have the preponderance of equity raises, it actually, it actually dilutes the total capital. Like like there's there's so much capital willing to

participate in the space. What can that capital do? It can participate in, in equity raises of like, I don't know, mediocre opportunities or it can find a home in companies and development opportunities that that have legs. And I don't love seeing huge raises for mediocre projects because like it, yeah, it just kind of cannibalizes long run capital availability in my opinion. So I'll give them, I'll give them AD. Controversial. Yeah.

All right, projects not yeah. All righty, let's talk about a

couple of hidden gems. I know you've got a few thoughts on this front. Willow books or podcasts or places of interest that have sprung up recently that you you want to share? Perth weather's colder than I thought. We're coming out the back end of it, don't worry. I well, not, not really. I, you know, I'm, I'm a big reader and listen to podcasts a lot and, you know, a few books came to mind that would might be helpful that I, I thought were really good. Goliath. What's that about?

Goliath is about the history of antitrust in the US, which basically shows the long term cycles from the mid 1800s through to now and how the governments have kind of managed, you know, to break up Standard Oil and put it back together and Busters. So and, and it goes just beyond blue and red, but but to much longer term cycles. And we're in one at the moment. It's fascinating to them, you know, to look at the 30s and look at now and it's very, very

similar. You know, in 1923, Andrew Mellon had a monopoly of aluminium. Well, what's the first thing when he became, believe it or not, Finance Secretary? Well, put up tariffs for aluminium. That's easy. Yeah. That is great. That one's going on the list. Any other? Oh, sorry, history of uranium. I might just give me one minute on this. It's fascinating. So World War Two, biggest producer of uranium in the world is DRC. Fine. It's owned by Belgium.

Germany invade Belgium, first thing they do is bring down some ships to DRC and go, where's the uranium? And they've gone. Oh no, they've taken another flood on the mines. It's all all gone. And a couple of weeks later the the Belgian delegation turns up in in the US and goes, we've, we've got something you might want. It's a whole bunch of uranium. They go, no, no, we've got plenty which we don't need any

of that. And they go, that's fine, here's my card if you need some of it later, you've got my number. About six months later they go, yeah, OK, we get it. We'd like that. Please, please come in. Let's talk about it. And so he, he comes in and they negotiate price, which I, I figured that maybe it was $20 billion, the biggest ever foreign deal that the US had done at the time, you know, confirm that the money has changed hands and, you know, the US has gone right.

Well, where is it? Where is it? And he's throwing the keys across the table and goes down in dock 46. That's such a great story. Yeah, that one's definitely going on the list. You've you've got a few others there. We that's to get chip wars. Yeah, well, most people have read Chip Wars, which kind of talks about the, the, the semiconductor supply chain, which is fascinating. It has a lot of similarities or rhymes a lot with a lot of the

metals supply chains. Choke Points, which is written by the same guy, which talks about the, the financial or economic war that that countries wage against each other. And you know, the US, China thing's pretty, pretty interesting for that at the moment. 2 that are kind of unrelated to mining, the brilliant abyss, which is all about under the sea, which when, when we think about seabed mining, which I'm, I, I think is a good idea in some circumstances. We've destroyed so much of the

sea thus far. It's just important to kind of understand what we're destroying before we just blindly go and do it. I'm not saying seabed mining definitely does that because it doesn't in most cases. But the other one is the hidden life of trees. So I love this stuff. So it's about old growth forests and how they communicate over, over thousands of years.

You know, they support all just so that each tree has personalities and they support old stumps that died for, you know, sometimes 200 and 5300 years and others that they don't like they'll just let die. It's pretty cool. That's remarkable. I'll have to. I'll have to do a bit of reading myself there. You're student of history. I also love it. How how is how's the history there going to, you know, inform any any decisions or oppositions you make right now?

Well, the, sorry, the book I don't have in here is called Range, which compares, I'll get back to Question, which compares Federer to Tiger Woods and how they were brought up. So Federer had played, I don't know, 20 different sports and then, you know, just decided, Oh well, I might as well play tennis. And, and that's why he's so naturally skilled. But Tiger Woods only ever played

golf. But I think just all of these inputs, so, you know, understanding equity markets, understanding industrials, not just mining, because a lot of people in mining have only ever done mining. They haven't, you know, understand different languages, different countries, different systems and, and, and read broadly. That gives you a lot more pieces of the puzzle that you can put together to form a solution

that. Disciplinary Learning. Yeah. And a couple podcasts to to wrap it up. Oh, the rest is history and an empire with great, great stories. But they're running out of history now. 600 episodes in. Yeah, and multipolarity is a pretty, pretty honest take on on China, US relativity and and EU politics, and that's pretty cool. All right on on the theme of podcast, most people have sort of speaking spoken with.

I would have rambled about this one, but founders is a a fantastic pod and on the book front in it recently read the big rich on the Texan oil families, the four families that dominated that over the last hundred 150 years was

fascinating. A lot of parallels with with resources and with Texas. There's seemingly a lot of relatability to to WA and our uniqueness, which is was fascinating and read over the weekend, The rise and fall of Alan Bond. An interesting kind of take, but awesome to learn about WA in in the Sixties, 70s and 80s and and that kind of era. So there's a couple in the mix. Thank you so much for joining us, Willow.

The the way you think and the experiences you sort of bring to the table are, are fascinating and make for, for such a rich conversation. So appreciate you making the time for us. Yeah, thanks for having me and congratulations on a great, great show. Do. You wanna do? You wanna help us? Thank our partners. Willow, you can hang out for this. Our show. Thank you so much to our partners, mate. We've got our Axis Mineral Services. They're crush rocks from big to

small. They do sand bit ground support the the only name you need to know in the ground support industry. Africa down under tickets up for sale right now. Conference is next week from September 3rd to 5th. And last but not least, mate. Focused by market deck Uduru Uduru Uduru. 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 to read out a disclaimer.