“[…] what the data demonstrate is over the next 30 years, we need to mine 115% more copper than we’ve mined since the Stone Age. […] if we round that out, it’s double. So, we need to mine double the amount of copper than we’ve mined since […] we were walking around using stones as tools.” 

— Dr. Adam Simon

In this episode of the Resource Insider Podcast, Jamie sits down with Dr. Adam Simon, a professor and expert in natural resources economics, to explore the challenges and future of copper mining, the energy transition, and the essential role of responsible mining in global development.

Adam provides insights into the demand for copper driven by green initiatives and the massive supply challenges facing the mining industry. They discuss the complexities of meeting climate goals without compromising on metal supply, the underappreciated role of mining in modern society, and what policymakers and tech companies need to address to support responsible mining.

In this episode, Adam and I discuss:

• The projected demand for copper and other critical metals due to green energy initiatives

• The role of academia and the media in shaping public perception about mining

• Why the U.S. and other governments need to support responsible mining for the energy transition

• The under-discussed supply chain risks and potential solutions, including new mining projects

Please enjoy!

Listen to the episode on Apple Podcasts, Spotify, YouTube, SoundCloud, or on your favourite podcast platform.

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The transcript of this episode is included below.

Note: Transcripts may contain a few typos.

Transcript:

[00:00:00] Jamie: All right, Adam, welcome to the Resource Insider Podcast. Thank you very much for joining me this afternoon, but I guess it’s pretty early in the morning for you right now.

[00:00:10] Adam: Yeah. Thanks, Jamie. I’m happy to be here to talk about copper.

[00:00:13] Jamie: So, let me start for our listeners back home how this came about, because anyone who’s been following, investing in, or thinking about the copper space for the last several years has probably heard a statistic somewhere along the line of over the next 30 years, we need to mine more copper than we have done in all of human history to this date. And I have heard senior mining company CEOs say this and junior mining company CEOs and geologists and bankers and investors and no one has ever referenced anyone that I’ve ever heard. And I think I found myself repeating this sometimes too. And then I think I said at one time too many out loud and I thought I should probably really figure out where this statistic comes from. And after a little bit of digging, it turns out this statistic comes from you and a colleague in a report you wrote for the International Energy Forum. So, I am here today to learn why that appears to be true and what the ramifications of that might be, and potentially what we in the mining industry and elsewhere might be able to do about it.

[00:01:20] Adam: Yeah, thanks, Jamie. So, I’ve worked on copper for about 20 years. I focused on copper for my PhD dissertation and I’ve done a lot of research on copper globally. And over the last 10 years, following all of the news about the energy transition, I got really interested in all of the various media outlets coverage of copper and how much we need and you see this I mean it’s almost hourly in media outlets around the world and a couple of years ago I visited Cornell University and gave a talk and a friend of mine Larry Cathles who’s an Emeritus Professor there. He and I hatched this plan to calculate things for ourselves. So, what we did is we looked at historic copper demand. So how much copper has society used every year from 1900 through today? And those data are out there. So, everybody agrees that we know how much copper has been consumed by society. And what we did is We then took various climate mitigation strategies, whether it’s, you know, the European Green New Deal or the Inflation Reduction Act, and we said, okay, let’s calculate how much copper we need if, for example, all of the vehicles in the United States immediately become battery electric vehicles, all of the vehicles in the EU become battery electric vehicles. And so, we went through and we sort of got nerdy on it. And we did all of the map. You know, we looked in detail at batteries, battery sizes, number of kilometers that miles drive. So, we made it really quantitative, and the study that we published with the IEF, it shows conclusively exactly how much copper, like down to the kilogram of copper, is needed per year for the next 30 years for all for various climate mitigation strategies. So, switching to hybrid electric vehicles, switching to battery electric vehicles. If everyone switches to a combination of solar and wind, we calculated how much copper is needed. If everybody has 28 days of battery backup and 28 days we chose because that allows you not only to ride out a hurricane but to last several weeks after the hurricane has gone through your area. And what the data demonstrate is over the next 30 years, we need to mine 115% more copper than we’ve mined since the Stone Age. So, if we round that out, it’s double. So, we need to mine double the amount of copper than we’ve mined since, you know, we were walking around using stones as tools.

[00:04:04] Jamie: And is that assuming we hit all these targets of everyone? Driving electric vehicle, everyone having solar power, everyone having 28 days of battery backup, or is that

[00:04:15] Adam: It, it assumes that no, let me restate that. So, it’s what we did is we simply took existing climate legislation and said, okay. In order to achieve the legislation as it’s written in order to achieve the inflation reduction act. So, if you know if the entire United States gets rid of coal and natural gas, it’s gone no more oil. No more petrol. It’s gone. So a fossil fuel free world That’s what we calculated and we did that because we wanted to really get a sense of you know mathematically how much copper does this actually require and we chose copper because copper is the most fundamental mineral to all technologies, you know, you can play around with the ratio of nickel to cobalt in a cathode, you can play around with how much aluminum versus manganese is in a battery, you know, you can even transition from NMC batteries, you know, lithium ion NMC batteries to aluminum batteries, but you still need copper. And even though we might be able to decrease the amount of copper, we still need a phenomenal amount of copper. And so that was the whole goal behind our study is unbiased, unpolitical, non ideological. How much copper do we need to achieve each one of these various scenarios?

[00:05:36] Jamie: And does this, I’m sorry, I’m digging into this because I, you know, when I read through your report, it mentioned this was kind of the business-as-usual scenario. And I guess you’re accounting for all these projections and I don’t know, like, cause it’s taking into account things like there will be no more ICE vehicles by 2035 and things like that in California and this sort of thing. Right. Is this taking into account just like standard growth and urbanization in places like India and Sub-Saharan Africa and all these places where people are kind of getting lifted out of poverty over time and consuming more metals over time?

[00:06:12] Adam: It is. So, so we started with calculating business as usual. So, taking copper consumption globally for 120 years and projecting into the future. The, a compound annual growth rate for copper consumption that is consistent with historical growth rates. And, you know, you bring up a really good point. You know, if we think about per capita consumption of copper in the United States, the European Union, other more technologically and economically advanced countries, we consume about double the amount of copper per year than less developed countries. And if you put that in numbers, it’s about 1.4 billion people that consume copper at the rate that we do in the US and Canada and the EU. We’ve got another 6.6 billion people around the world who use half or even less copper. So, business as usual is simply the amount of copper that we need to continue to develop globally. And then we calculated on top of that how much additional copper is needed for various energy transition scenarios.

[00:07:26] Jamie: So, what is the response you got to this? So, you released this obviously, you know, everyone in the mining industry is ecstatic to see something like this, but there’s a lot more people that care about copper than just the miners. There’s the people that actually use it. What was the response you got? Was it. Was it disbelief? Was it disinterest? Was it fascination? Like, what, what were people coming to you and saying?

[00:07:50] Adam: So, so initially our goal was to publish this in one of the many sort of mainstream academic journals. And without naming names, your listeners can probably think of names that they’ve heard of. And Larry and I submitted it for publication and we thought, you know what, let’s just There’s no opinions here. It’s literally just math. And we provide, with the study, a comprehensive spreadsheet that literally details, line by line, how we did the math and what the numbers are that went into all of the equations. So, we thought, you know, let’s publish this in an academic journal. And we attempted to publish it in about six journals, and it was summarily rejected by each of them. And it didn’t even go to an associate editor. So, in each of the cases, we would get an email back that said something along the lines of, while we can, while your study is interesting, we don’t think that it is of wide enough interest, globally, to merit publication in our journals. Which really threw us for a loop, because if copper is the most fundamental metal for all things electrification, how can this not be of interest? So, I then reached out to Joseph McMonigle, who’s the Secretary General for the IEF. And I pitched this idea to him. I said, you know, look, would you be interested in publishing this? And he said, sure. And we had it fact checked by about 20 experts around the world. So, Larry and I were really open sending all of the details to about 20 PhDs around the world. Many of whom have had careers in the mining industry. And they fact checked every letter in the study. And since it’s been published, it’s been picked up by over a thousand outlets around the world. So, we’ve been really happy with that.

[00:09:44] Jamie: Yeah. So, I mean, what do you make? What is your conclusion in terms of why the more mainstream academic journals rejected it? Because, you know, you just said it’s been picked up by over a thousand groups pushing this out to the world. So clearly, it’s not a lack of interest, right? There’s clearly thousands of people interested in this. I would say there’s probably millions of people interested in this. So how would you, what would you, how would you characterize that?

[00:10:09] Adam: You know, all I can do is offer some opinions and some hypotheticals. I think in academia in the United States and others similarly economically developed countries. Academia has, over the last few decades, lost an appreciation for the role that mining plays for humans. And it’s not a role that’s just, you know, your newest iPhone or your newest laptop, but it’s literally development globally. And if you look at how mining is portrayed in academia, you know, whether it’s textbooks or college classes, syllabi, it’s generally portrayed negatively. You know, mining is used as examples of here is how pollution happens. And I think what that does is it almost inculcates students going through high school and college Some of whom become professors. They just developed this, you know, it’s not a hatred, but it’s a very strong dislike of mining. So, you know, now we’re at a, we’re at a, you know, a fork in the road where it’s pretty crystal clear that if we if the collective we in academia want the energy transition to happen, we need the resources to make that happen. But that means that we, as an academic community, have to support responsible mining. And I just don’t think academics are ready to make that next step.

[00:11:43] Jamie: And you, would you say that’s true across the geology schools and the engineering schools, in addition to sort of maybe more general sciences or business or what have you, like, do you even see that? I mean, and we should have, I’ll start people who are listening to this. We’ll have seen an introduction to your background by the time they’re listening to this. We didn’t talk about your background yet, but you are a professor at the University of Michigan. Have you seen that amongst your peers, even geologists that are a little hands off from mining these days, or is there a, what do you think?

[00:12:15] Adam: Yeah, I think it’s, you know, it goes beyond even hands off, you know, I think what I observe and it’s not across all faculty. I would say it’s a majority of faculty who think they understand mining. And they’ve convinced themselves that mining is to some extent inherently evil, you know. There’s the resource there’s it’s colonialism. It’s the resource curse. It’s forcing the extraction of minerals on land owned by another group of people and taking all of that value away for some benefit of a small group of people and I think they’ve simplified it to an extent that does a disservice to not the mining industry, but it does a disservice to the students taking classes because the students are taking classes and up on the stage, you know, to the students, it’s an expert in whatever field it is. And so, if that expert only uses mining in the context of negatives, then that’s what students take away. And I think that’s really what we’re seeing in academia writ large today.

[00:13:23] Jamie: How have you found these people recognize, like reconcile this? Like, how do they do the mental gymnastics to say, you know, mining’s bad. We need we don’t want to do it. Well, whilst also saying we need to electrify the entire world. We need to take all these steps because of climate change. We still need our standard of living and our quality of life. Like, is that just sort of swept under the rug and ignored? Or have you seen at least attempts at credible arguments about how we’ve take these steps without the mining.

[00:13:56] Adam: I honestly, I think I like your terminology there, mental gymnastics. I don’t hear many credible arguments, you know, I’ve heard arguments that range from, well, Adam, do you really think people in Sub-Saharan Africa want to have a lifestyle similar to ours in Michigan? And I don’t know how to even respond to something like that, because when I travel around Sub-Saharan Africa, trust me, everybody there wants a lifestyle somewhere closer to where we are than where they are today. I think a lot of people who view the mining industry in a negative way, they exonerate themselves from any any part of the benefit of the mining industry right. And so, you know, you’ve got people that will upgrade their phone every single September when a new one rolls out, even though the old one works perfectly fine and probably would work for the next 10 years. And if you engage them in a conversation of all of the resources needed for that new phone every single year or all of the resources needed for you know, refrigerating foods and hospital infrastructure, they ignore it. And I think it’s sort of on some level it’s, they know that they enjoy the benefits of mining, but they don’t want to give the perception that they support mining. And for a lot of people, I don’t know that they really understand why they have that viewpoint. I don’t think they’ve really thought it through.

[00:15:30] Jamie: This is a bit of a point of never-ending frustration for me because. There are so many call it climate change champions out there that are insistent that we must, you know, change to renewable energy and take all these steps to address emissions. But unwilling to look at any real solutions to actually do that, you know, I’ve had numerous debates with, you know, very well-educated people from Oxford, people from industry, people from banks, who’s who basically have just said, look, you know, we just need to stop emitting. We just need to stop emitting you know, the CEO of Fortescue, you know, Andrew Forrest and I think he’s worth like $20 billion. He’s putting in place you know, a hydrogen, green hydrogen plant at Fortescue. And he’s basically said, look, we need to lead the world and it’s got to be zero emissions. And I don’t see how anyone can spend more than 10 minutes, just looking at the math of what that would require to understand that going from what we are today to zero emissions is not only unlikely, but impossible over the next, say 30 years, which is often the timeframe that’s been given and then. Even if we were to do that, the like sheer amount of copper and nickel and cobalt and lithium, et cetera, et cetera, et cetera, that would be required as astronomical. And there’s a complete unwillingness to look at the compromises that will be made. And I know, I don’t know if I expect you to have an answer to that. It’s just, I’m like shocked at how the cognitive dissonance that often occurs here.

[00:17:03] Adam: I agree. You know, I teach a few classes at the University of Michigan, one of which is, it’s called Natural Resources, Economics, and the Environment. And over the course of the semester, you know, I get somewhere between 120 and 150 students, depending on the size of the classroom. And over the course of the semester, it’s interesting to listen to students, to talk to them before and after classes, and to really hear how their perceptions change over the course of the semester. You know, I get students who come in and say, I’m anti-mining. Mining is colonialism. Mining is bad. Mining is pollution. I am also 100% pro-energy transition. And so, over the course of the semester, for that student, what I do is I present them with lots of information. And I encourage the students as they take in this information, which is factual, and I have students do a lot of their own calculations, you know. Let’s figure out how much copper we need, how much cobalt we need, how much lithium we need. And at the end of the semester, what I find is, across the board, those students have changed their own perception of mining. I haven’t changed it, but they changed it. And they’ve changed it through information gathering and really teaching themselves about how much of each of these metals we need. For students who come in who are pro-mining and who are let’s say anti energy transition. They also changed similarly over the course of the semester, which is that they are pro-mining throughout, but over the course of the semester, their capitalism, you know, kicks in and they see how much financial opportunity exists in responsible mining. And what they do by the end of the semester is they really develop an appreciation for 21st century mining. Right? And mining, I mean, it’s got a checkered history, but so does everything else. And if we think about mining today and mining into the future, you know, we’re always going to expect some accidents going to happen somewhere. There’s some risk involved. But the students at the end of the semester who came in pro-mining, they realize how well mining can be done, so they feel more empowered to be able to have conversations about mining and they recognize that even if they’re, you know, they can be pro-oil, they can be pro-natural gas, but they recognize now how much of each of these metals we need just for business-as-usual growth. So, it’s sort of, it’s an all of the above.

[00:19:40] Jamie: So. We’ve talked about this demand, this kind of looming demand that very few people are aware of. Let’s talk a little bit about the supply, right? Because say, and I want to also talk about what it takes to kind of bridge that gap or what conceptually it will take, but let’s for a moment, assume that the entire world got on board and said, hey, you know what, there’s this, you know, massive demand coming on copper, let’s meet it. What do we do there? Because, you know, as I understand it, and you’ve done, obviously, more research than I have on this, those mines don’t exist today, right? Like, they’re not they’re not, there’s not enough known projects to meet that demand globally, I would think. And I don’t even mean projects that are not built. I mean, they’re not, they’ve not been discovered yet to meet that demand.

[00:20:31] Adam: Yeah, so, so in order to tackle that, we looked at historic mine production from 1900 to 2018, and we picked 2018 because then there’s no impact of the pandemic. And what we did is. We then used 118 years of mine production data. So that’s business as usual. That’s here’s how much copper mining companies in aggregate have produced every year. And what we did is we then mathematically modeled future mined copper production, assuming that the future is the same as the past. And when we did that what that math reveals is that If mining companies over the next several decades could operate and make the same number of discoveries and open the same number of mines at the same rate as they have for the last century, we would just about be able to meet business as usual demand. So that’s hypothetical. Then what we did is we dug into mining company reports for all the publicly traded mining companies. And we pulled data from countries where companies don’t disclose those data, but you can make some pretty good you can come up with some pretty good numbers. And what you realize is that over the next decade, globally, mining companies have released, communicated to the public, that from all existing mining operations, they will produce about the same amount of copper in 2032 as they did in 2022. Right. And so, this is from the mining companies, right?

[00:22:09] Jamie: 2022. Okay. Yeah.

[00:22:10] Adam: They know their mines better than anybody else. They know copper reserves, they know production rates. So based on future, you know, based on modeled market prices for copper and based on the amount of copper in every deposit, what we’re going to see over the next decade is copper production for mines is going to decline. And, you know, this is probably most notable if you look at, for example, Chile, which produces about a fifth of the world’s copper. Their national mining company, Codelco, they have released this in multiple ways over the last couple of years that they’re really concerned. Because Codelco and copper production in Chile, that has been Chile’s economy for 60 years. And they’ve told us that they’re going to start producing less copper after about 2029 2030. So, what we see then is, mining companies are not going to meet, not only they’re not going to meet the demand for the energy transition, but they’re going to struggle to meet, you know, forecasted annual growth rates for copper consumption from existing mines. Now, then you ask, okay, well, what are the mines in the pipeline? And there are a few, you know, Ivanhoe’s got their Kamoa-Kakula project in the Democratic Republic of the Congo, and that’s going to be truly a world class mine. And then you look and say, well, where else? And you hit zero really quickly, right? You look at places, for example the Resolution Mine in Arizona, which is a joint venture between Rio Tinto and BHP. That deposit was discovered almost 30 plus years ago, and it still is not in production. That deposit alone would overnight provide about 25 percent of domestic copper for the United States. They can’t get the final permits to, to start mining. You look at deposits in Alaska, like the Pebble deposit, which is in this pristine environment. I mean, I love, I have to say one of my favorite things to eat is wild caught salmon from Alaska. And I don’t want any. Possible damage to those aquatic ecosystems, but the Pebble deposit, it would overnight become the world’s leading producer, not only of copper, but copper plus gold, plus silver, plus molybdenum, plus other metals we need for the energy transition. Tellurium, we need tellurium to make cadmium, telluride, photovoltaics, thin film solar panels. And that deposit is, I mean, it’s likely to be unmined for the next few decades. So, the pipeline, it just isn’t there. And again, this is not political or ideological. It’s just the math.

[00:24:52] Jamie: Well, it’s actually almost worse than that if you think about it, because there’s mines kind of getting taken off the board now, right? Like we just God, what was the first quantum mine in Panama that just got shut down by the Panamanian government? And then we just saw Canada block the acquisition of the Warintza deposit in Ecuador by the Chinese for, you know, you know, security reasons. So, like, not only are we seeing known projects not get put into production, we’re seeing mines that are already built being stopped for whatever it is, environmental, political, social reasons. So. What let’s assume, like, what do you think has to happen for meeting that demand to be like conceivably achievable? Like, what do you, what would you like to see happen?

[00:25:40] Adam: Yeah, I think among the things that needs to happen is we need politicians in the US and other countries who are on an hourly, certainly a daily basis, advocate in some way, shape, form or fashion for the energy transition away from ice vehicles to battery electric vehicles. That’s all great. We need those politicians to come out and publicly support responsible mining, you know, in the last few years in the US. We have an administration who has You know sort of one side is all things energy transition. How many new battery manufacturing facilities can you build? Let’s count them, right? I mean, it’s just phenomenal the hundreds of billions of dollars that have been pumped into downstream manufacturing while at the same time the same administration has taken large areas of land in the United States off limits for mining, you know, you look in northern Minnesota there are several what could be really important domestic sources of copper groups off limits. You look at Resolution off limits. You look at Pebble off limits. And so, you can’t have, you can’t have it both ways. You can’t have the, you can’t expect to achieve the energy transition without the resources to make it happen. So, we need politicians to come out and in public acknowledge that this is a wicked problem. But we have a recipe to solve the problem. And here’s how we’re going to do it. And, you know, I think on one side of the political island, the United States. There’s a fear that’s gonna, it’s going to frustrate some of their constituents, but I think that the politicians can move their constituents in the right direction by taking a more public proactive stance in support of responsible mining. I also think politicians, you know, when is the last time we heard of, a roundtable, you know, a roundtable summit at the White House with the CEOs of the world’s top 50 mining companies, right? I mean, if I were Biden, and I really wanted to make the energy transition happen the way it’s described in the IRA. That’s something I might do. I might call up the CEO of, you know, Freeport and and Ivanhoe and Rio and the next 50 and say, all right, I want all of you in D. C. We’re all going to sit down and then I’m going to ask you, what do you need to make this happen? And you’re going to tell me what you need. And, you know, people in the US will say, oh, we’re doing a little bit of this. You know, there’s a little bit of mining money that went into mining engineering and mining geology at West Virginia and North Dakota. But it’s a drop in the bucket of what actually needs to happen. And if you ask those CEOs when they have been called, they’ll say never.

[00:28:35] Jamie: It’s kind of interesting, you know, just thinking about it now that in many ways, the United States is underrepresented in the mining industry, right? Like so many mining companies are based in Canada and Australia in the United Kingdom, you know, where the US you know, just so clearly dominates in tech. So clearly dominates in energy. It’s mining kind of been like the, you know, the, what do they say? The redheaded stepchild that’s been like ignored a little bit. And I think as a result it’s really not on people’s radar and in the United States and politicians and mining companies and CEOs have very limited from what I can see from the outside influence with the political class compared to say you know, the energy CEOs or the energy service CEOs who we see make the jump between government and back and forth to running these companies all the time, or the tech CEOs, right. Who are always part of these, you know, round tables or panels or what have you, but mining has been largely ignored. Do you think it’s because so few comparatively mining companies are based in the United States, or do you think it’s just because it’s. relatively a small industry.

[00:29:48] Adam: I think it’s probably a combination of, it’s a smaller industry than oil and gas. And it’s an industry that has always done its job and done its job relatively well behind the scenes, making all of the metals available for downstream manufacturing. You know, you’re right. I mean, how many times a day do we see Elon Musk is in the news about some new advertisement? But we don’t see the CEO of BHP, for example, the world’s biggest mining companies in the news, you know, almost ever. We don’t see that CEO in the news saying, you know what, we’re here to support Elon because without us, none of what he wants to happen is possible. And I think that you know, if you look at oil and gas, they spend a lot more money on public relations. You know, on average if you have a digital subscription to the New York Times or the Wall Street Journal or the Atlantic or any of the newspapers that sell advertising, you know, I’ll scroll through and there’ll be an advertisement for Chevron or Exxon or, you know, another major oil and gas company. I have never had an ad pop up from a Rio Tinto or from an Ivanhoe. They’re just not there. And I think, you know, this is it in some ways it’s to the detriment of the metals mining industry. Because the only time the public does hear about metals mining is when there is an accident. That’s it.

[00:31:23] Jamie: Yeah. Or when like some executives getting fined, you’re going to jail for bribery or something like that in some destination, you know, part of the problem is that mining is like the, almost the opposite of a consumer product. Right? Like we all use oil. We all fill our cars up with gas. Like it does play at least a small role in our everyday life. Most people have no conception of the role metal play, except for, you know, like looking at it as part of a piece of equipment or whatever but that’s it. That’s the extent of it. So, okay. I’m going to tell you my pet theory and people who listen to this podcast are probably going to be sick of me saying this, but I want to get your opinion on this. The only way for mining to matter, in my opinion, is two things have to happen. I think the United States will have to form some sort of sovereign wealth fund or investment program where they invest directly into mining metals, mining and metals projects. We are seeing that already to a degree, the Department of Energy, the Department of Defense investing in different projects. And I think the mining industry is coming up on a massive consolidation, but not in the way people think. I don’t think it’s going to be all the gold projects together or copper, whatever. I think the tech companies are going to start integrating mining companies and mining projects into their supply chain, right? If we look back, whatever it was 50 years ago, you know, we used to see Chevron and Exxon owning mining projects. We used to see them, you know, I read, I remember as a kid, as a high school student, I read Jack Welsh’s book the CEO of GE, and he talked about selling off a copper mine that GE owned somewhere in the United States, used to see these conglomerates building out their supply chain. That, you know, we’ve gone through a, call it a 50-year period of you know, decentralization in the mining industry. I think it’s going to swing the other way. And I think that’s the only way these industries get the clout that they need and have access to capital at low enough costs to actually go and buy these things and put them into production and pay the price. That’s required right or wrong. What do you think?

[00:33:32] Adam: Yeah, I agree with you. I think mining companies are in desperate need of de risking exploration for new deposits around the world and they need capital, you know I’m calling in from Indonesia, which is a country that is it’s blessed with all possible resources I mean they have an abundance of coal. They’ve got an abundance of oil. They have now an abundance of nickel leading the world in global nickel production. Which by the way, also is going to have a huge impact on cobalt production, which has the potential to reduce cobalt mining in the DRC. And, you know, when I’m here meeting with undergraduate and graduate students and professors, you know, asking them about the presence of the mining industry, It’s really small except for a few companies. And you know, one, one of the things that’s been in the news this week here is Freeport-McMoran, which is a US based company. They produce about 10 percent of the world’s copper. They have now just flipped the switch on a new smelter. So, taking copper concentrate and then ultimately producing copper cathode. Plus, other metals associated with copper, gold, silver, moly, maybe tellurium and selenium, although I don’t think they’ve released that. And the cost for that smelter, Freeport publicizes, 3.7 billion dollars. Now, that seems like a lot of money, but it’s really not. You know, at the University of Michigan, I and, talk about how students here were shocked when you start talking about the amount of money that people spend. The University of Michigan as a business, which it’s really a business. Our academic side of the business is about $3 billion a year, so that’s a smelter. Our hospital system is about $9 billion a year, so that’s roughly two and a half smelters. So, the money is out there. But it’s not being spent in a way that will actually address supply chain shortages.

[00:35:31] Jamie: Yeah, I mean, I think to put it in an even better perspective, if you look at like what Microsoft has committed to building data centers over the next two, it’s hundreds of billions of dollars, hundreds. And this is just one small part of their business, right? If you look at. Apple. Okay. You know, the ear pods at Apple, if they were a standalone business, they would be a Fortune 100 company just to the sale of the ear pods. Right? So, a smelter is a, it’s a rounding error for the, you know, Steve jobs could have put one of those on his credit card. Like it’s tiny in the grand scheme of things for these tech companies.

[00:36:06] Adam: Yeah, it’s not expensive. You know, if if any of these companies, any of these tech companies, if they really wanted to eliminate concerns, for example, about child labor in cobalt mining in the DRC, there is plenty of opportunity for these tech companies to actually pony up, move out of plausible deniability. Well, we didn’t know that there were Children who were mining the cobalt and put boots on the ground and spend the money to help develop the cobalt industry in the DRC you know, I was in the DRC last August for a month, starting a new project on cobalt supply chains. And, you know, I met a lot of men because who wake up in the morning and put in an 18-hour day with a pick and shovel digging cobalt ore out of the ground. And my wife and I have co-parented four kids, two sons and two daughters. Both of my sons are about 6’5 and I thought to myself, if it was the difference between starvation and my sons and I would dig shafts, we’d be digging shafts. And when you meet the people there, they want safety, they want to develop 21st century mines. So, where’s the money to make that happen? You know, I think maybe what we’re really saying is why isn’t the tech industry stepping up? You know, on the subject of data centers, there was an announcement this week that one of the big tech companies is signing an agreement with a new startup for small modular nuclear reactors. You know, that’s great. But where are all the resources going to come from those, for those nuclear reactors? I mean, you need a lot of copper per reactor. You need a lot of uranium per reactor. So there again, they’re only focused on downstream manufacturing, making sure the electricity can be provided to cool the data centers. But there, there seems to be. No meaningful interest in putting their dollars into upstream production of the minerals industry. I mean, sitting last night at dinner here in, in Jogja, in Indonesia. I mean, you know, I pitched to a professor, I said, what if one of these tech companies came to you and said, we want you to develop a mining exploration program to scour Indonesia for all of the possible copper deposits that are here. And then we want you to develop a program to do all of the environmental impact assessments. You know, how much would that cost? And without giving you the dollars here, Jamie, it’s a fraction of what it would cost at the University of Michigan, but nobody’s doing it. Why not? You know, you can then go from that to you take a country such as Indonesia development doesn’t happen for free right?

[00:38:49] Adam: Charity is not going to develop all of the various areas of Indonesia, or Sub-Saharan Africa, or Latin America. So, you have lots of places around the world that have the resources we need. They’ve got wicked smart people who can help solve these problems, but there’s no investment.

[00:39:06] Jamie: So why isn’t that happening in your opinion? Why aren’t these tech companies doing that? I mean, I actually know people who have worked in sort of supply chain management and blah, blah, blah, you know, high quality supply chain for Apple, for example, sourcing these things. Why don’t they just say, oh, for God’s sakes, I’ll just buy the damn thing and make sure it’s done right. It’s a rounding error to our balance sheet.

[00:39:29] Adam: I wish I knew that answer.

[00:39:32] Jamie: You know, in some ways it touches what you said earlier, right? Maybe the mining industry has just done too good of a job, right? It’s kind of like you’re working behind the scenes, the metals there when you want to buy it, it’s at a price that’s reasonable and like, that’s it. It’s not a problem. So why fix it? Do you think there’s an element to that?

[00:39:48] Adam: I think there has to be. And historically, you know, demand increased at a pretty, you know, consistent rate year over year. Now what we’re talking about is demand on steroids. Right? We’re not talking about just regular demand for metals. We’re talking about demand is going to increase significantly, and it’s going to increase really rapidly, right? I mean, boom, within a few years, we need double the amount of copper we’ve mined for the history of humanity. Coupled with the fact, you know, back to your you know, your Apple product, that sits in your ear that’s designed to be obsolete in 18 to 24 months I mean how great a marketing gimmick is that you’re going to buy something from us that we literally are going to tell you in two years will not work anymore. It is not recyclable. So, you’re going to throw it in the trash and then you’re going to come back to us and buy something new from us for more money. I think that Mining companies have always been there to provide the incremental increase in demand. But with those air pods, what are all of the metals that 10 years ago we didn’t even need? You know, before we had cadmium telluride solar panels, we didn’t need tellurium before we had lithium-ion batteries in, you know, battery electric vehicles. We didn’t need the quantities of lithium, cobalt, nickel, manganese, aluminum, copper, et cetera. And it’s that rapid increase in demand that is really going to, it’s really going to come back and it’s going to bite the tech industry and society in general in the ass. When 30 years from now there are going to be a lot of people saying, you know, oh, why didn’t you tell us? We didn’t know we needed to mine faster.

[00:41:33] Jamie: Yeah. I mean, what do you think has to happen? What is the catalyst? What has to happen for that to occur for, you know, Elon Musk at Tesla or whomever to say, Oh God, like we need to start putting money to work here. What do you think that is?

[00:41:47] Adam: I think that the people with the power of the pen simply need to make the decision that they are willing to put their money into something on the upstream supply. That’s it. That’s all that needs to happen. I mean, honestly, if Elon called me up and he said, Adam, I want to get into copper and cobalt mining in the DRC. Help me make it happen. We could make it happen, right? I mean, seriously we could go to the DRC, we could partner with faculty and students at the University of Lubumbashi and other places, and we could develop a program to supply all of the cobalt that Tesla needs, right? That could happen, and it could happen on a time scale of years to maybe at most a decade, but we’re not getting those phone calls from people in tech who want to spend that money.

[00:42:38] Jamie: Yeah, I think my thought is that something very painful has to happen before there’s action to be, that’s taken, that there has to be a shortage and there has to be a hard time getting something.

[00:42:51] Adam: Well, I guess. I was going to say, I think that’s happening for people on the political left in the US right. I mean, yeah. In the last month, Florida has been slammed with two hurricanes. I mean, it was basically like, you know, God took Florida and, you know, Mike Tyson in his prime and said, I’m going to hit you twice before. And so, they’re down and out and we’ve got people in Florida. And it’s truly a tragedy, right? I mean, myself, nobody wants somebody to have to live through the aftermath of a hurricane. But on one side of the political aisle, we have people telling us that the way to minimize future hurricanes is to rapidly move away from internal combustion engines. And you say, okay, well, here’s the recipe. Oh no, but we also, we don’t want a mine either.

[00:43:39] Jamie: Yeah. Do you think metal prices need to go up? What are your view on that? To bring these things into production?

[00:43:46] Adam: With the current business model, metal prices have to go up to stimulate mining companies to invest more in exploration. More in research and development, new technologies to explore from mineral deposits and to allow mining companies to flip the switch on existing deposits. You know, in, in the US in the western state of Idaho, there’s what we call the Idaho Cobalt Belt. Well, it’s called the cobalt belt cause there’s a lot of cobalt and we know where there are several cobalt deposits. None of them are being mined because the price of cobalt’s too low. So, if the government were to look at that and say, okay. Here is a domestic source of cobalt. We really need cobalt. What is the price that mining company X needs to flip the switch and operate and produce cobalt from this mine for 10 years, 20 years, 30 years? We’ll guarantee that. Right? Some sort of price floor. We’ll eliminate that risk. So if you, as a mining company, you have discovered a cobalt deposit, you have put together your business plan to develop, operate, maintain, and produce cobalt for the life of the mine, and you tell us, you know, it doesn’t have to necessarily be the cash cost on a, you know, dollars per ton of cobalt production, but it could be something along those lines, right? Where you tell us if you need X dollars per ton of cobalt in order to operate in the black. We will guarantee that. So, if market prices go up, you can benefit from that. You take the excess. But if market prices drop lower than your cash cost to operate demand, we’ll cover that. I mean, to me, again, that seems really simple. And we’re doing that in so many other ways with downstream manufacturing. Right? I mean, I think on some level you look at America’s big three automakers, right? They’re certainly, while there was not any, nothing on the level of collusion, right, the DOE looked at the big three and said, okay, what do you guys need in order to transition to battery electric vehicles? And let’s build in subsidies. To me, those subsidies are the same as a price floor for cobalt mining. I mean, you can quibble about the legal definition of terms, but it’s fundamentally the same thing with lithium. You know, you’ve got Albemarle lithium that has access to the Kings Mountain lithium deposit in western North Carolina. It’s one of the biggest lithium deposits in the entire world. And so why not go to Albemarle and say, you know what you tell us, what’s the price floor, right? That’d be great. What do you need us to guarantee? So that if lithium prices are above that, you profit. If lithium prices drop below that, we guarantee that we will cover the difference. Albemarle would start producing lithium from that mine next year.

[00:46:32] Jamie: Have you ever seen this happen? Is there a precedent for this anywhere? These sort of, building in these price floors to critical commodities?

[00:46:39] Adam: Yeah, you know, I, I have I have, I’ve gone down the rabbit hole trying to find really good crystal-clear examples. And in, in what you come up with is, you know, good examples would be the Civil War, World War I, World War II, where if you look at the federal spending as a percent of GDP, it went through the roof, and if you look at World War II with Roosevelt, you know, what did Roosevelt do? He literally, and maybe it wasn’t him personally, but some people suggest it was, he called up people like Henry Ford and he said, you know, look, I know that you’ve got really successful auto manufacturing facilities, but I need you to build bombers. I need you to build tanks, and I need you to build them yesterday. Can you do that for me? And Henry Ford said, yes, sir, we can. And, you know, everybody’s probably seen Rosie the Riveter, you know, I mean, that was 20 miles from my house at Willow Run airport. And literally in the span of weeks to months, these entire production facilities transitioned from making, you know, whatever the model T of 1940 was to building B2 bombers at the rate of something on the order of one per hour. When we look at the medical industry. You know, in the United States, there’s a lot of concern about the cost for prescription drugs. And among the really positive things that our current president has done is he has put price caps on insulin, right? I mean, that’s phenomenal, right? People with diabetes, that is literally the difference between life and death. And so, there are precedents, and maybe they’re not exactly the same, but it the examples that are out there indicate everything is doable. We just need the people who are in positions of leadership to actually lead

[00:48:32] Jamie: If the US government this is my, I’m thinking this through as we talk about it, what a price floor under certain commodities, what do you think would be the repercussion on the price of those commodities globally, right? If there’s a price floor on copper of $5 in the United States. What’s it, what’s the price of copper in China after that, as given China buys, I think something like half of the world’s copper goes to China at this point. How does that, does it potentially undermine the United States as competitiveness in manufacturing and electrification and all these things? Or does it just sort of bring up the price globally? What are your views on that? I’m kind of putting you on the spot here, so I don’t expect you to have it. Perfect answer.

[00:49:14] Adam: I would hope that what it would do, what I would hope is that it wouldn’t be the US only, that it would be a multi country effort. You know, you take all the countries in the OECD and it’s each of those countries that advocate the most strongly for the energy transition. So, what if they got together as a group and said, you know what, let’s use our collective power to put in place these price floors. And I think what that has the potential to do is that would buoy up global prices. That would provide certainty for mining companies to invest more in exploration, to discover the new copper deposits that we need to meet demand.

[00:49:57] Jamie: You know, we’re coming up on an hour now. So, I just have a couple questions left. And I, you know, I want to be respectful of your time. You’re supposed to start your day in Indonesia. Is there anything going on, any discoveries anywhere in the world that you’re particularly excited about that you think there’s a really perhaps under acknowledged or under understood element in the mining industry today.

[00:50:17] Adam: I think in the African Copper Belt. Which stretches roughly from Angola across the southern part of the DRC into Zambia. The discovery of the Kamoa-Kakula deposit, you know, a decade or so ago by Ivanhoe. That, that, that’s a game changer for the African Copper Belt because they discovered a type of copper mineralization that previously was relatively unknown in that area.

[00:50:46] Jamie: This is sedimentary copper, right? Is that right?

[00:50:48] Adam: It’s sedimentary hosted copper, exactly. And most of the deposits in the DRC in Zambia, what you’re mining is copper oxide close to the surface. So, if people can picture like malachite and azurite and beautiful green patinas, it’s oxidized copper that you’re mining. At Kamoa-Kakula, it’s the sulfides at depth that are being mined and that is really, that has, I think, unleashed a lot of interest in searching for and discovering similar copper sulfide deposits in the African Copper Belt. The resolution deposit in Arizona. That deposit contains, it’s got a grade of one and a half weight percent copper, which is about triple the average copper grade at similar porphyry copper deposits around the world. That deposit has the potential to literally redefine 21st century underground mining. I mean, it is responsible mining in a way that people just can’t conceive of with lots of autonomous vehicles to make it a lot safer. The footprint of mining is way lower than the footprint of mining the same amount of copper from an open pit deposit. So, I think what we’re seeing in the mining industry is we’re seeing a combination of the discovery of massive copper sulfide deposits in the African Copper Belt, and we’re seeing underground mining being done at current market prices. And I think that bodes well for copper because Most of the worlds near surface deposits, we already have found them and we’re mining them out or they’ve been mined out. So, we know that we have to go a little bit deeper below the surface in order to find copper deposits in 25 and 30 and 35.

[00:52:35] Jamie: Do you think that’s the future of copper mining? Is it underground? Is it these, maybe these big block cave mines done at scale? Yeah.

[00:52:41] Adam: I think that’s the future. You know, you look at resolution, you look at Grasberg here in Indonesia, you look at Chuquicamata. I mean Chuquicamata is arguably one of the world’s two largest open pit mines relative to Bingham Canyon outside Salt Lake City. And Chuquicamata, they were mining there for a hundred years. And now they’re mining underground and they anticipate another hundred years underground. So, you’ve got some surface footprint. But if you look, for example, at the surface footprint of these massive underground mines, it is much smaller than building and operating a huge open pit mine. And I think on that note, you know, you go back to Pebble in Alaska, there are ways to be creative there. I mean, among the concerns at Pebble is, yes, you’re going to disturb the land area where the open pit deposit will be constructed. And that has potentially negative impacts on the ecosystem, but I think they’re manageable. The bigger concern is around how do you store the tailings, the mine waste, and storing those tailings in an impoundment that is upstream of the Bristol Bay and, you know, the pristine aquatic ecosystem there. Well, why not take those tailings, dehydrate, dry stack, and get them out of there? Right. We’re seeing this happen. There’s a mine in northern Minnesota called Tamarack, and it’s a company called Talon, which is a joint venture with Rio. And Talon has done, they’ve done something in Minnesota that’s just wicked smart. What they did is, to alleviate the concerns about tailings, they said, okay, there’s a rail line that exists from here to North Dakota. There is a suitable landfill in North Dakota. So, what we’re going to do is we’re going to take all the tailings from the Tamarack facility, which is going to produce nickel and copper and cobalt domestically. We’re going to dehydrate those tailings, move them west to North Dakota, and we’re going to store them in an area. That is in no way connected to the boundary waters, which are the big concern. So, you know, there are some really bright examples in the mining industry that I don’t think the general public is aware of.

[00:54:53] Jamie: Okay. Thank you for that. Adam, one last question. If I were to give you a million dollars and you had to buy invest in one metal, can’t be copper because we’ve talked too much about that. What would that be? And say you had to hold it for 10 years. You had to hold it for 10 years.

[00:55:13] Adam: Yeah, I think the backbone for our built environment is steel and iron is that backbone. So, if I think about development around the world and the amount of steel that we need, you know, we globally consume about 300 percent more steel this year than we did in 1960. And we’ve seen how much steel has been used in China over the last 20 years as they went from a severely underdeveloped economy to the world’s number two. We’ve seen it happen in South Korea. So, I think steel and iron, that’d be where I’d put my money.

[00:55:50] Jamie: Okay. Well then, we need a second question to that because iron is not one market. It’s a different geographical market. So where would you invest in iron then?

[00:56:00] Adam: I think the really large banded iron formations that are mined in Australia. You know, they are going to produce iron for decades and decades, if not centuries.

[00:56:09] Jamie: And easy access to China and Asia and India.

[00:56:12] Adam: Absolutely. Yep. Yeah. That, that, that’d be a good place to, to store my million dollars.

[00:56:18] Jamie: That’s a good one. We haven’t had that answer before. So, I like that one.

[00:56:21] Adam: Yeah. Happy to send you my Venmo information. If somebody wants to pony up that million.

[00:56:26] Jamie: All right. I’ll put it in the show notes. Okay. Thank you very much for taking the time today, Adam. Very much. Appreciate it.

[00:56:32] Adam: Absolutely, Jamie. It’s a pleasure to be here. Thank you very much.

[00:56:35] Jamie: If anyone wants to learn more about your work, what you’re doing, is there a good place to check that out?

[00:56:40] Adam: Yeah, you know, I don’t know if I can say my email address online, but I’m happy for people to send me an email.

[00:56:46] Jamie: If you want to get a lot of emails, please do.

[00:56:48] Adam: Yeah. So, my email address is my last name, simonac@umich.edu. And you could probably stick that in the show notes. But I love talking about this topic. You know, I really do. I’m blessed to have traveled all over the world, done research on seven continents and about 75 countries. And I think about the energy transition in two ways, the energy transition to renewables in the more developed economies, And the energy transition to energy for six and a half billion people. And it’s those six and a half billion people that I’m focused on providing the resources to make sure their children and grandchildren can have lives that are similar to what my children were blessed to grow up with

[00:57:35] Jamie: Yeah. I mean, we could have a whole other conversation. I think it’s almost a billion people have access to no electricity, right? They don’t have a light bulb in their house. There’s nothing to read by at night. And, you know, they’re not worried about solar panels or windmills. They’re just worried about anything.

[00:57:51] Adam: Absolutely. And I think that number grossly underestimates the amount of people without energy. You know, if you actually look at how we calculate that, we consider a human to have access to energy if they have enough electricity to light one light bulb for four hours a day and charge two electronic devices. That’s access to energy. That is way different than the access to energy in my 4, 000 square foot house with four kids and a spouse. I mean, it is orders of magnitude difference. So, when we talk about access to energy, it’s not a light bulb and two smart phones. It’s access to medical infrastructure, healthcare infrastructure, etc.

[00:58:30] Jamie: All right, we’re going to have to save that for round two. Thank you very much today, Adam.

[00:58:34] Adam: Thank you, Jamie.

[00:58:35] Jamie: I appreciate your time.

[00:58:35] Adam: Thanks a lot.

“Understanding your resource, your mining methods, and your efficiency—those are the three things that determine the success of a mining operation. Most companies don’t get those right.”
— Mark Cutifani

Mark Cutifani has spent over 40 years in the mining industry, rising from a cadet in a coal mine to one of the most respected leaders in global mining.

As the former CEO of Anglo American and now Chairman of Vale Base Metals, Mark has seen it all.

In this candid conversation, we dive into his journey, from his early days in Wollongong to his leadership at some of the world’s largest mining companies.

In this episode, Mark and I discuss:

• His early life, including his unconventional motivation for joining the mining industry.

• The key leadership lessons he has learned throughout his career.

• How he doubled productivity and cut costs by 45% at Anglo American.

• The importance of understanding your assets and how mining strategies can be redefined to maximize value.

• The under-appreciated role of mining today, from its impact on urbanization and agriculture to its role in the energy transition.

• His insights on the future of the mining industry and how companies can position themselves to thrive in a more competitive and nationalistic world.

Please enjoy!

Listen to the episode on Apple Podcasts, Spotify, YouTube, SoundCloud, or on your favourite podcast platform.

Enjoyed this episode? Sign up to our free newsletter to access to the latest podcasts, expert insights, and exclusive reports on our recent deals.

The transcript of this episode is included below.

Note: Transcripts may contain a few typos.

Transcript:

[00:00:00] Jamie: Okay. Mark, thank you very much for sitting down with me today.

[00:00:04] Mark: Thanks, Jamie. Great to be here.

[00:00:06] Jamie: So we’re going to get into your view of the mining industry today, your kind of long and illustrious career. But I was thinking about how I wanted to start this interview and I recently read something that I thought might be an interesting place to pick off. So do you know what the most common career goal or like aspirational career is of a high school student today is?

[00:00:35] Mark: It’s probably not mine uh, would be my best guess. And so I’d be, I’d love to hear what it is today.

[00:00:44] Jamie: Okay, so in like the 1950s to the 60s, it was an astronaut, which fair enough, who doesn’t want to be an astronaut? But today it is social media influencer, is the number one career goal. Of like a 17, 18 year old and when I was reading your bio, as I understand it at 17 or 18 year old years old, you left high school and went and worked at a coal mine.

[00:01:14] Mark: Yes, I did.

[00:01:15] Jamie: And it’s hard to imagine the average 18 year old today getting excited about that option, but it, it sounds like you were, and I’d love to understand what was going through your head at that time and how that all came about. I know you’re from a coal mining town originally, but what kind of led to that?

[00:01:36] Mark: Well, you’re going to laugh. Uh, oh, congratulations, by the way, in choosing a career that everybody wants to be by the sound in terms of social media. So well done.

[00:01:46] Jamie: Well, I’m also, I’m, I’m also a mining engineer. So I, I have a bit of, I have a bit of both in me, I suppose.

[00:01:54] Mark: Well, I was asked that question recently. Another thing I was doing, um, and people were quite shocked by the answer, and I said that the three things that motivated me to join the mining industry were, one, girlfriend, two, being able to stay in Wollongong and continue to surf, And three, being able to earn money to pay my way through university, because my father being an immigrant from Italy, had a very traditional view about the sort of career choices I should make, being either a doctor or a lawyer.

I certainly wasn’t going to be a doctor. I’d applied and got into university to be a lawyer, but that would have meant I would have had to have gone to Sydney. And the family couldn’t help pay my way, I’d have to pay my own way. And I had a friend who was working in one of the local coal mines and said, Well, gee, we’ve got a cadet position going.

He said the trouble is, there’s about 150 applicants. I said, well, just throw my name down because if I could get that, I could go to Wollongong University, do mining. I’d be there for at least six years. I’d be earning a wage and I could support myself. So, the reality, I was lucky enough to get it, obviously.

But the motivation to join the industry. We’re certainly not as altruistic as I would like to tell the story, that’s the truth.

[00:03:23] Jamie: Okay, so we’ve got women, pop, women, surfing, and money, basically. Those are the

[00:03:29] Mark: Well, I’d like to say a woman. A woman, sorry, yes. It’s more about the girlfriend, but again at 18, I mean, what do you know about career choices and the opportunities?

What struck me? And this is the probably more interesting part. I thought, well, I could start in December and I had three months before I had to pick up the law degree and start up in Sydney. So I figured that if I really didn’t like the choice I’d made, I could change my mind. And 47 years later, I still think I made the right choice.

[00:04:04] Jamie: Yeah, you’re not going back to law school any time soon?

[00:04:07] Mark: No, not at all.

[00:04:09] Jamie: So what does a, you know, what does an 18 year old do at a coal mine when, as a cadet? What do, I mean, cadet, I don’t, I wouldn’t think is a role that exists at many coal mines today. What does that look like?

[00:04:21] Mark: Well, firstly what they do is they in the cadet role, you get experience in every department in the mine, and the plan is you do it over four years, then you go and do university full time, and you’re doing it part time university, and then you go and do two years full time to finish your degree up. In my case I got to do the early start and about three years in, I said to them I’d like to go and work as a miner, but also I don’t want to leave and do two years full time. I’d prefer to keep working and still do the two year full time university, but work on night shift. So I was able to finish the degree in the same amount of time, but I kept working all the way through. One, because I’d become a bit of an entrepreneur and I was investing in a few things as a young guy. I knew a new condo and things like that. And so I grew used to having money to spend. So, the good side of the employment is I saw every department. I worked in finance. So I worked in all of the departments and I was the guy. That if they couldn’t find anybody that would have to do a difficult job, I was the one who put my hand up and said, yeah, I’ll do a crack at it. And so the great thing about that is that I got a wonderfully diverse team. Exposure to all facets of mining which really triggered the thinking you could literally pick any career and there would be something available for you in mining. And that’s the great thing about the industry. It’s so diverse and so many opportunities.

[00:05:59] Jamie: You know, you mentioned that you kind of had that three months before school started to figure out if this was a world you wanted to live in. What Was there a moment in that three months where you were like, okay, this is for me. I love mining. Or did it happen more gradually after that? Or was there this kind of watershed moment where you’re like, this is quite special?

[00:06:21] Mark: No, probably for the first time that I really had a chance to think about career options, because I took the time to ask people. about what were the career options. It was really interesting. One of my relatives said, oh, well, your aspiration must be to be a mine manager. And I said, well, no, not really. I said, the mine manager at our mine is 30 years old. And I said, there’s a bigger career beyond that. They said, well, what’s beyond the mine manager. And we talked about the regional manager, we talked about ultimately the global head of Rio Tinto, or CLA at that time, out of Melbourne and it was something that you didn’t appreciate until you’re in the business and you ask lots of questions. And then when you looked at all the career options, I said, you know what, this is going to be quite interesting and what struck me. In the conversation was a technical background with, uh, if you, you add finance to it. And I ended up doing I did three years of an MBA and then got offered the biggest gold general manager role in the industry in Kalgoorlie. And I didn’t finish the last year, but I got the background I wanted. So there were so many options. So in that three months, I did my homework. And that’s when I thought, you know, this is a good choice. I had an option of going to BHP in personnel as well.

[00:07:47] Jamie: Like HR effectively.

[00:07:49] Mark: Yeah. In HR. And I actually looked at HR and I looked at the technical side and I said, you know what, a technical grounding in an industrial profession probably gives you a lot more openings further down the track.

And the way I describe, when somebody says to me, you’re one of the few mining guys that’s actually the CEO, I said, the one advantage I have is I know what I’m looking at in terms of a mine. And it is an advantage. But I mean, the skill sets were quite a much broader today. But in, in those times, the ability to understand what you’re looking at, the resource potential is something that I think has differentiated me. Through 47 years in the industry,

[00:08:36] Jamie: You know, it’s really interesting to me personally that you say that because I said, I’m a mining engineer as well. And I always knew I wanted to go into business. My father’s an electrical engineer. And when I was looking at university programs, I very clearly remember a conversation I had with him where we talked about, like, You can always learn business, but if you have that technical grounding of an industry, it just gives you so much more opportunity within that space. And somewhat similar to you. I mean, I had, I didn’t have a particular fascination with holes in the ground when I was 18, but I, I wanted a job where I could travel. I wanted to be able to work outside and not be in office. I wanted to, you know, make some money and mining kind of stuck. Stuck a lot of those boxes for someone that grew up in a pretty small town and hadn’t been many places. So it’s, it’s interesting to see the parallels there.

[00:09:27] Mark: Yeah. What I hadn’t appreciated in mining, and I only reflected on this after I finished my program. It’s a very broad course. So you do electrical, you do mechanical, you do civil, you do all the engineering disciplines because they’re all part of what you do. Whereas in many of the engineering disciplines, they’re much more specific. And I always say the smart guys, men and women are the electrical engineers or the chemical engineers. And we as the mining guys, we sort of tend to Be at the tail end, but it’s a much broader discipline. Yeah. That also goes more into management and again I found that to be quite useful in later years in terms of the broader management. Yeah. But I’ve inquisitive that, that think makes a difference. If you’re inquisitive you tend to sort of hunt things down, try and understand what makes them work.

[00:10:25] Jamie: I’m laughing because I remembering a professor I had in university who was a mining engineer and he worked in South Africa for years sort of big open pit mines. And he said, ah, you know, the mining engineers are the only ones that understand everything. He’s like, the rest of them are just rivet counters is what he said. which I don’t think it’s fair, which I don’t necessarily think is fair, but

[00:10:48] Mark: I think that’s right. I know there’s one thing that I do remember. We had a Chinese head of mechanical engineering and mechanics in particular. And being one of the mining engineers in a much broader class, we weren’t good for homework. And we tended to have many other activities that we put a higher priority on. And He said, okay, the exam this time around will be open book. And everybody’s going, oh, that makes it easy. Anyway, I remember but the open book was you’re allowed one page of notes. So I put my my key formulas on that one page, but the exam was not like anything we’d ever seen. And what you had to do was interpret what the question was and apply your formulas appropriately. And there were only three of us that passed the exam and I got 90 percent and because I had the formulas, I understood the logic and was able to, you know, it was a quick sort of application to me. And I remember him saying to me, he’s, you’re brighter than you look. So that’s still what I.

[00:12:14] Jamie: High praise.

[00:12:17] Mark: But, it was interesting if, if you’re in understand it, so it’s a matter of understanding what’s right and understanding the actual course and the logic of stuff is really important. And that’s what I’ve always done is dug into the theory to try and understand the topic. And that generally stood me in reasonably good stead.

[00:12:41] Jamie: And it sounds like, you know, even very early on in the industry, you had, well, you understood the potential for what a career in mining could lead someone and you had pretty big aspirations. It sounds like to take a leadership role at a major company.

[00:13:00] Mark: So I was always motivated to, I remember the career coaching conversation I had at CRA. Is this it? What, where do you want to burn? I said, I’m not sure yet, but the one thing I do know is I don’t want to be in a role and think this is it.

[00:13:17] Jamie: Yeah.

[00:13:18] Mark: Um, And I said, you know, I, I can see I’d like to be an under manager or I’d like to be a mine manager, look at Ray and Bruce, 30 years of age, and they’re in those roles and they can look forward. Think about what they might be doing next. I said I don’t know if I could be the CEO of CRA or Rio or something like that, but I just don’t want to get to a place and think, you know, for the rest of my life, this is where I’m going to be. And I’m 66 and I’m still in the same place. I don’t want to think this is it. And I keep working and I won’t retire.

[00:13:55] Jamie: Was there anyone early on that sort of took an interest in you or sort of acted as a mentor that helped you kind of.

[00:14:11] Mark: Um, I’ve been lucky. I’ve had lots of wonderful, wonderful people that have helped me on the way through. I remember a guy called Rod Rustin, who was the general manager at Westlake at the time. Had some real challenges. Uh, and, uh, And, uh, he taught me about planning and, and he got it down to understand where you want the business to be and your job as the chief design engineer is to invent ways to get there.

And I thought that was a wonderful way of sort of saying, be creative. Let’s, let’s define what best is, and you show us how to get there. And for a rural kid learning about planning and those sorts of things, and you’re, you’re being basically told. Go and out how we get there. Mm-Hmm. , that was a great opportunity and the feedback you got from the rest of the team was fantastic.

One other guy that I remember very well when I was about 32, 33 running the super pit in Kalgoorlie, which was the, myself and Tony O’Neal were, uh, I was the general manager and he was the mine manager. We developed, um, a whole new concept in Kalgoorlie, which really changed gold mining in Australia in many ways in the West Australia.

And I remember, um, the Chief Operating Officer of a home state in the US, uh, was, uh, sort of a self appointed mentor, and he’d bring me a book every three months when he visited the site, and I had to read the book, and the books were The Worldly Philosophers, Um, the covenant, which is the story of South Africa and the irony there is I ended up working in South Africa for six years, uh, and all these books about personal development and non mining stuff.

[00:15:55] Jamie: Yeah.

[00:15:55] Mark: And he said, my job is to create a full person that, that could lead the company one day. And, and he took a personal interest and he was tough. He was demanding, but also, supportive and, um, with someone that I could run ideas past without worrying that he might be critical because it was a dumb idea. Um, and I’ve had a few guys like that in my career, and so I’ve been very lucky.

[00:16:22] Jamie: What, what was the first leadership role you really took in the industry? When did you go from sort of engineer, uh, sort of, or, or, cadet initially, into taking a role where you were leading other people, making decisions, having a lot of responsibility?

[00:16:37] Mark: So the first, So there were, there were supervisory roles, and I was a mine manager, a mine superintendent at one stage, but I, I guess the, the first management role was to manage Copland, uh, so the mine where I started. I was in the management, uh, the, the manager’s role. I was probably about 27 at the time. And, um, the intention was to close the operation and there were two operations, Coal Cliff and Dark’s Forest, so they were connected. And my boss said to me, don’t touch anything. We want to close the place in 12 months. And they’ve been trying to close the place for a number of years. But in Australia at the time, it was very difficult to close stuff, the unions were very strong, uh, and politically the company was a bit nervous about shutting it. Lee Clifford actually was the, the head of the coal division. And, um, uh, we developed a plan. Rob Ruston was involved, the guy I mentioned earlier. And we developed a plan where we could actually halve our costs. And, uh, in the conversations with the team, uh, I was trying to, I was thinking about how do you, how do you, um, articulate the severity of where we are as a business, if we don’t do something different, we’re gone to, um, that, that in many ways. Uh, these were all the senior guys in the business and, and roles were bid by seniority, the amount of time you’re in the business. So the part of the business I was running were all the senior union guys. So they’re all 55 years and older. And they quite frankly, weren’t too worried. If it had to be a closure because they’d walk out with redundancy. So I then said to them that I’d been told I wasn’t allowed to touch anything. And I said that we’re known as F Troop. Now F Troop, uh, for those that can remember way back then was a TV show about the worst army team in the U S cavalry, uh, Ken Berry, Forrest Tucker, and for those my age, I’ll remember the show. So it was the worst of the army. Now a crop. And I said, that was our reputation. And that was extremely insulting to everybody. But I said, we’ve got an opportunity to show that we’re A Troop. And in the next two and a half years, safety, no accidents. We doubled productivity and we halved our costs. Very similar to the Anglo story in many ways.

[00:19:19] Jamie: Yeah,

[00:19:21] Mark: it was about a group of people who were galvanized. Behind the concept, nothing to do with money. It was all about showing that they were people that could deliver something special. And so it was us together as a small team, creating something very different. So I sort of created us against the world. But they were the ones who designed the change. And so for me, it was a great learning experience because I try to work out how to motivate people. And a group that were about to retire, they didn’t have anything else to motivate aside from that personal motivation and self pride and pride in themselves and pride in what they could do together. And, um, um, they were wonderful. And in the end, it wasn’t my success. It was their success. They did a wonderful job, but it was a great learning experience.

[00:20:12] Jamie: I’m really, Personally interested in how, how you achieve that, right? Because you’re 27 years old. These guys are twice your age. They’re approaching retirement. They’ve got a, you know, a good soft landing on the other end of that. There, it sounds like they’re being mildly disparaged, but disparaged by the company. So how do, what do you, How do you actually implement change, that change of culture and attitude? Is this, are you standing up and giving speeches? Are you sitting down one on one with these people? Are you working with key leaders and helping to propagate it through the, the, you know, the, through the F troop or, or whatever? How, how does the actually implemented those, those changes?

[00:20:55] Mark: All above. And, um, what, what Rod Rustin did in his role in the business? He defined what we had to achieve, just, you need to achieve this cost number, um, and given that labor is 50 percent of your cost, you can only do it with half the people. And by the way, you have to double your production at the same time. And so, uh, sorry, it was half the people and we had to improve our production by about 25%. So you had half the people, you had to improve 25 percent. So I started with that, and I said, the alternative is there is no operation. The most guy said, well, who cares? And I said, well, don’t forget there are young men coming through that if we don’t survive, they don’t have something to come to. So at this point, it’s not simply about us, it’s about who follows. And creating employment for potentially their own kids. So how do you bring the imperative back to them? It was a conversation. So one, it was honest. It was an honest conversation about how we were perceived. And by the way, you said they were mildly disparaged? No, they were openly disparaged and they knew it. I was the first guy to actually say After it now, after it was a bit of a makeup, but they knew they were being disparaged.

[00:22:21] Jamie: And was that warranted at the time? Had they underperformed to a degree that warranted the disparagement or was there more to it than that?

[00:22:30] Mark: Um, partly, but also a function of, uh, they didn’t think they were being respected as they should have been. So I think it was both ways. But at the end. It’s the leader that has to be the one that is accountable for making a change. So my first conversation was, I know we haven’t done all the things we should have done as a company. I know we haven’t provided consistency of approach or strategic direction, but here’s where we are and here are the challenges we confront. And from my perspective, I can listen better, be more responsive to what’s important to you. But at the same time, I can’t deliver everything. And so it was a really open conversation about who we were. Now, the advantage I had is I grew up as a young guy with that, with some of those people. So they knew me and I’d been through as a minor and I’d worked underground. They knew, knew I had my degree and this was my first management job. And I told them, I said, I’m basically told not to touch anything because things could go on the way they are. They’ll be able to demonstrate to the government that we should be closed. I said, none of us should want that as an outcome, even if it’s not for us, it’s who follows. And it was that conversation, not as, not as a sort of on the pedestal, it was a conversation in the bathroom, what we used to call the change rooms. We had them all around and we had this conversation about the good, the bad and the ugly, felt both ways. What did we need to change? And I said, look, there are three things we have to do. The question is how I’ve got a view, but if it’s just my view, it’s not going to work. We need to have a view. And over the next two to three weeks, we workshop with everybody different ways and means of designing an intervention that would work. And it was significant. And that was great.

[00:24:41] Jamie: And what was the final outcome here? Presumably that mine did not get shut down and improved performance.

[00:24:46] Mark: It went for another ten years. Went for another 10 years. We got another 10. Now, it’s getting towards the end of the life of the resource, but there was still at least another 10 years that we could get, and they gave it their best and we exceeded all the outcomes that we targeted, and they got another 10 years life the operation. Now, most of those guys retired. But again, think more than anything each guy retired proud of what had been achieved because they weren’t disparaged. People knew what they’d done.

[00:25:18] Jamie: Is there anything about that outcome that surprised you at the time? Were you shocked at how well it went? Were you, was that what you expected? Has it, did it change your view on managing people, managing these businesses?

[00:25:35] Mark: Um, it was, once you’re in the conversation, the changes occurred quicker than I’d anticipate. Um, and the real part of that, I think, is they had something to prove. And again, it was a bit of a, a bit of a risk telling everybody that everybody sees this as F Troop um, because you’ve got nowhere to go if, if that goes badly. But I said to them, I said, look, we’ve got nothing to lose. Thanks. I said, I know most of you personally, I know who you are, and I know that you know how to run this place better than I do, and I’m asking for your help, and let’s see if we can create a bit of a future here for who may follow. And two person, they stood up. There were a few, there’s always a cynic and yeah, but it’ll be the same. No, we’ll, we’ll do all this and they’ll still fire us in 12 months time. And, there are a few tests too, cause we changed some of the industrial practices, using contractors, doing things that they would never agree on. And once we got to that performance level, and it was about the end of the two years, they started to test. Our resolve on sticking to some of the work practice changes, because they said, we know you’re making money now. And so we had a couple of squirmishes, uh, in testing our resolve and, but we stood our ground and we worked it out together, so, yeah. It was a great experience and ultimately ended up being the reason I ended up going to Kalgoorlie because I had someone come in to audit the work we’d done on maintenance and other things. And at the end of it, he said, look, I’m going over to run, the gold mines for Alan Bond and, the new stuff that they’ve just bought. And we need some different thinking. And, he said, we’d like you to consider the role, as a general manager of the KMA Goldmine. So it was the start of the super thing, but it was the Coakleaf experience that he said, what you’ve done with the team is very different and they’re a tough old team. And he said, he said, I’ve never seen a group of guys so committed to achieving something. So, it’s funny how the things you do turn, turn out.

[00:27:59] Jamie: And you alluded to this at the beginning of this, this topic, that this is not dissimilar from what you experienced at Anglo some years later, Anglo American.

[00:28:10] Mark: Yeah, because when, when I started at Anglo, uh, look, firstly, Anglo has been a wonderful company for a long period of time.

[00:28:19] Jamie: I think it’s 107 years old. Do I have that right? Something about that? Yeah.

[00:28:23] Mark: Yeah. Centenary was, uh, 2017. And , the world had become a much more aggressive, much modernized, so you had the rise of CRA, uh, around the iron ore assets in Australia, which is Rio. And Rio came back in and took up a big position because CRA had had started to outstrip its major competitors and it, it did a lot of things very different on the organization side. Which, which I think made a real difference. BHP, was stepping out, becoming more global. Xstrata, Mick had done a wonderful job bringing Xstrata out of the Billiton, you know, the, the mix. And then BHP, Billiton came together, and Anglo got left behind. And, with that, uh, there was restructuring. Cynthia was appointed, uh, I think around 2000. 2006 2007. She started to introduce some changes. They didn’t go all that well, although she made some serious changes, particularly in safety and other areas that I thought were company changing. But in 2013, we were missing our targets. We’d fallen well behind our major competitors. And I think our market cap was about 25, 26 billion. And, and we’re a company that in my view should have been double that at least. And so when I started Anglo, what I did find is we depleted our technical teams across the board. So as, as the group tried to manage its cost structures down, it looked at costs and not value. So it was cutting. The key areas that ultimately contribute long term value and drive productivities. And so we had to reset, we had to do something very different with the assets people. So as a starting point, it needed a. A major makeover, and um, in the period 13 14, we did a lot of restructuring of the business to set it up.

[00:30:33] Jamie: So, I have some statistics here that I have taken from the internet, so we’ll see if they’re correct. Tell me, you can’t believe everything you read on the internet, so tell me if I’ve got these right. But, from your time Starting at Anglo, it says safety improved considerably, 93 percent reduction in fatalities, occupational health improved considerably, 90 percent drop in new cases, environmental incidents down 97%, production increased by 12%, productivity more than doubled, unit costs improved by 45%, EBITDA, Increased by 40%. Did those all kind of ring true to you?

[00:31:20] Mark: Yeah, the doubling of productivity and the real cost reductions were in the range 40 to 45, I guess the most important statistic for me. From April 13 to my last day, we had delivered an average 22 percent return to shareholders. So if you invested a dollar on the first day and, and looked at it on the last day, it was worth 5. That was over nine years. So, that first two or three years were tough. Well, we did, we, we went from 68 assets down to 37 assets. But the 37 assets we kept all improved by more than 40 percent. In the period in that same period. So instead of losing 45 percent of your production, because you’ve reduced your asset base, we actually increased production over that period. That’s how we doubled productivity. Cause we went from 160, 000 people to 95, 000 people producing the same amount.

[00:32:26] Jamie: So I’m just thinking about how to address this. So you, you, you come into this role, this is one of the oldest mining companies in the world, an absolute behemoth, you know, I’ve worked for major contractors, I’ve never worked for major mining companies, but I presume the bureaucracy at that point must have been, you know, Very complex. Where do you, you know, you get parachuted in as CEO, where do you even begin to start thinking about turning the ship and solving these problems? How do you even identify and prioritize the problems? Like, what is your, what is your first, you know, you know, you think of a president, right? The first hundred days of his, uh, in office, what does he do? What’s your first hundred days as CEO of Anglo American look like?

[00:33:13] Mark: We did the first hundred days. We literally did. Oh, did you? Okay. So, so nothing new. And we call, we did a 100 day review. And in mining, if I just say most companies, and I mean most companies, don’t understand the resources they have in the ground and the potential to deliver better productivity or lower operating costs. They just, they don’t, they don’t pay attention to the nature of the resource, how big it could be, and we’re going through the same process at Vale. So that’s first point. Do we understand what we’re standing on? Second thing. is, are our mining methods. And there’s, there’s almost an infinite amount of mining strategies you can apply depending on what you’re trying to achieve. And three, Are we efficient in doing what we’ve decided to do? And so I focus on those three areas and you get put a team together. We call a salt and pepper team, a few external players that have been around for many years with internal people who understand why we’ve done certain stuff. We did an asset review. And the asset review took about six months, but we had enough in that first hundred days. And I talked to every person, every, the top 150 people one on one to our conversations right across the organization. So there was enough information to say, we’ve got to do something very difficult with our resources. Our mining strategies in key areas need to be rebuilt. And our efficiencies are probably half what they need to be. And then the asset review, which finished about three or four months later, confirm exactly where those points were. And it also identified that about 45 percent of the assets were never going to really add material value. So the question was, do you sell or maybe even shut those assets and redirect the capital that’s invested in them into other parts of the portfolio where you can get a three or four times return. And so it became around, it became focused on the assets that could really make a difference, change the mining, the understanding of the resource and the mining strategy, and then introduce industrial logic like a Ford or a petroleum plant in terms of efficiencies. And so it was a three part restructuring of the business over the next couple of years. And, and that drove productivity, operating cost reductions. Also because you’re focusing on planning the way you’re doing things, you’re also getting at safety environment. You also, I think we’re also the first group to really identify the importance of sustainability and social partnerships with communities. That was the other big issue because we were in emerging markets more so than a Rio or A BHP, we had to work with our communities in a very different way than, uh, what they had available to them with the big assets. And so it was a very different type of approach.

[00:36:36] Jamie: When you’re, you know, it’s interesting you say that sort of industrial logic approach. When, when I listened to you say this, it makes me think of I read Jack Welsh’s book. I think it was winning when I was in high school. And he talks about, you know, anything that, uh, General Electric, GE, couldn’t be a number one or number two in the world in, they shut down or sold off in their portfolio. And they really prioritized a more core. Set of assets and, and corporations. And it sounds like you sort of took a similar approach that, that these mines that you didn’t, or am I misunderstanding that?

[00:37:12] Mark: So, um, yes and no. First point, understand the assets you have and the potential they have. And most companies don’t understand the best the asset can put. So I go back to my co op live experience.

[00:37:32] Jamie: Yep.

[00:37:33] Mark: I had to reverse, you reversed, we reversed engineered the business. So my challenge to the asset team is reverse engineer every one of these businesses to be in the bottom half of the cost curve. And those that can’t be, we then got to question whether they’ve got a role in the portfolio. Because if you’re not in the bottom half of the cost curve, because of the volatility of commodity prices, there are going to be times when you don’t make cash. Right. You’ll make short term decisions to protect cash and you’ll destroy the underlying ability of the asset to deliver as good as it could be. So we made some, gave them some rules of thumb in terms of the way to look at the assets. And that’s how we then said 45 percent of the assets and that only represented about 20 percent of the production. So it sounds worse than it is.

[00:38:26] Jamie: So 45 percent of the assets only represented 20 percent of the production.

[00:38:31] Mark: Correct.

[00:38:31] Jamie: And presumably that’s the most expensive production as well too.

[00:38:35] Mark: Yes. Yes. And someone said, oh, Cutifani is shrinking the business. No, Cutifani wasn’t shrinking the business. Cutifani was going to increase the production, but do it far more efficiently. So the important thing was we actually increased our production by 12%. Uh, 14 percent by 2019 actually, but we did it at a 30 percent in nominal terms, lower price. So we doubled our margins. So we doubled the money we made. So our share price, and when I started the share price was trading 13 to 17, we ended up getting up to 40, over 40 plus dividends and everything else. But the key was take a bit of Jack Welch. Take a bit of, uh, when Alcoa was doing in control and capable and running its processes very efficiently. So it took a bit of the Alcoa stuff, took a bit of the best of what I could see in the industry, but then went out and said, and we have a guy that helps us, uh, Tony, I know, Does the mining work that I, that we worked on, he was brilliant on the mining side. The guy called Mick McAleer came out of the steel industry and was very systems orientated control systems, planning, acid integrity work. He was the best I’d seen there. And a guy called Tony Filmer, who used to run the technical group at CRA before they decided they didn’t need technology, we snapped him up and he helped with Tony O’Neill and Mick transformed the way we thought about our business. Cause the other thing was we didn’t have the big Pilbara assets, iron ore. We didn’t have Kharajas, we didn’t have Bowen Basin in coal. We didn’t have these big copper assets. We had deep difficult mines in platinum. We had small iron ore in Cumba. We had some copper assets, so we had to turn those assets into world class operations, which required a whole different approach to the way we were running the business.

[00:40:36] Jamie: And, and something I’d like to note here, what, what are the years you did this, mark? When did you start it? Was it 2013? Do I have that right?

[00:40:45] Mark: 2013.

[00:40:45] Jamie: Yeah.

[00:40:46] Mark: In 2013…

[00:40:48] Jamie: So, I mean, you had a pretty shitty market behind you most of that time too. Like,

[00:40:54] Mark: Well, ’15 was the worst.

[00:40:55] Jamie: You weren’t, you weren’t hiding behind a massive bull market that could, you could hide all the, the inefficiencies in.

[00:41:02] Mark: Well, I, I, I got a, I, I we’re all human. I recently, somebody said, oh, Mark had a, what, what’d they call me? A Fairweather, CEO. And I said, well, wait a minute. In 2015, prices were their lowest. If you looked at the basket process, the lowest they’ve been in 50 years. And I said, I had to cut 70,000 jobs, show me where that qualifies as being fair weather. We had to do the most significant restructure in the industry in 50 years. To get to the outcome, somebody said to me that when we were doing that, people were actually very respectful because we took the time to explain the problems to people and we engage them. And so even though we had to do some really tough stuff and we made mistakes. People understood the problem because we’d explained it and we involved them, uh, as we did the restructuring. So ’15 was our lowest ebb, if you like, and you’re not quite sure if the industry, if it’s going to work because China, you didn’t know if China was, um, going into a recession. So at the end of ’15, we weren’t quite sure whether it was the right call. And I had to make an even deeper cut and said, look, I may have to cut even more assets To get the debt down, but in ’15, we took 15 percent out of our costs in 12 months. So in ’16, we started to come back up. De Beers had a good, uh, first quarter in 16. People saw that our net debt was actually over a billion better than we thought it would be because we cut so much in the cost. And we started to get momentum in ’16. So, uh, ’14, ’15, we’re pretty tough.

[00:42:51] Jamie: Cause you went from 160,000 people to 90,000, I think is that those numbers ring true. And so how do you communicate that across an organization, right? When you’re, you’re cutting huge swaths of people, how do you in a sort of global organization, really reliant on people to be successful? How do you maintain that? Spirit Corps and, and, and momentum while still having to jettison a lot, a lot of jobs, unfortunately.

[00:43:21] Mark: First thing is the team was key. We confronted together the need to make change and, and the team was fully engaged on the need to make change. And then as the prices drop, people knew we had a problem. So iron ore went from $120 a ton to $40 a ton, so nobody needed to tell the Kumba team. That we’re in deep trouble. And our Kumba cost was $77 a ton. And we said, guys, we’ve got to get them under $40. And so our restructuring, uh, we changed the mining strategy. Tony O’Neill worked with Norman Mbazima and Tony recommended a whole change in the way we operated the mine. So remember that comment I made about resource and the mining strategy. Tony said, we’ve got to turn this mine around 90 degrees. Now, when you say change the whole mining strategy, it takes two years to implement that change. And we went from $77 a tonne break even. To $35 a time in the space of two years. So we had to explain it. Norman had to announce significant cuts in people against that context. But when you explain it and they see the prices, they get it. And it’s a difficult conversation, but it’s an honest and open conversation where people understand the industry. And so it’s, it’s really about being open. Now I made one terrible mistake, which, you know, you, you, you think in hindsight. When we define the 37 assets that would remain, I used in a, in an off the cuff remark, I used call the word “core”, which meant those assets that weren’t in the 37 were non-core. Well, can you imagine thinking that you are now non-core you’re working in a business that’s non-core. So you sort of want to pull the words back and stuff them back into your mouth. And so I said, look, I’ve made a mistake. That’s not the right way to talk about it, but I am talking about where we will focus our capital and people need to wear it. And I said, the most important thing is, you know, in a business where you’re going, and in many cases, you we divested, so we didn’t close them. And as I said, in domestic divestments, if we decided not to put more capital in, you’re better off selling to the asset to someone who’s going to give it a crack. And so those types of conversations, I think help make it, make it more constructive. But every word in those situations, you’ve got to be very careful to make sure it’s the right messaging. And as I said, you learn a few things and that was the, the one really important mistake that I’ve taken with me. And as, as a few of the Australian wags did, I’m non-core. So it ended up being one of those conversations that we had a bit of fun with, but, um, it was really important. You’ve got to get the people thing right. And I’ve always talked about people in the business. But as I said, we either create a business where 90,000 people got jobs or there’s none. And I said, the none’s not going to happen. We’re going to do what we have to do to make sure this business survives.

[00:46:42] Jamie: You’ve said something a few minutes ago that stuck in my mind, which is that most CEOs or management teams do not understand the assets they have. I you know, in my more limited experience than you, I would say that actually that really rings true to me. What, what makes you say that? And why do you think that is? You know, why do leaders in these companies not understand the projects they have?

[00:47:11] Mark: Let’s see. Um, I make that comment of us as professionals as a broad statement on the professional side. Plus you’ve got a lot of people who are running businesses that don’t have that experience. But if your professional team doesn’t understand the full scope of the resource and the optionality you have inside the resource, then in all likelihood, you’re not going to have the right mining methods in our industry, understanding the resource. And you would know the process we go through to model these things, but even mining strategies, you’ve got an infinite number of ways to extract the resource. And people tend to go with what they know, whereas I think maybe 5 percent of the engineers in the world, mining guys, look for new ways to do things, and I tell the story in the super pit back in Kalgoorlie in 1988, I met a guy who was talking about a mining strategy for the super pit that no one had ever seen before. And therefore they all said he was a lunatic and the geo said, he’s going to dilute the ore body. And this is Tony O’Neill and the mining guy said, well, that won’t work. And I came in out of coal, and Tony took me through the mining strategy he had in his mind. He came out of the big iron ore mines in the Pilbara. So the big iron ore mines used this big gear to mine these big ore bodies. We had small, narrow vein gold ore bodies. But we have lots of them. And they’ve been mined by underground methods. So we were mining around big holes in the ground. So it’s dangerous, or high risk, two, technically difficult, and it had all these levels of complexity. And Tony’s strategy to deal with all that was quite unique. And we had one conversation, I said, he’s got it. He’s actually got the right idea. So we then spent the next six weeks building a model, a financial model and an operating model to help people understand the concept. It took us probably another six months to get the group aligned on it. And then when we executed, it’s been a great success and it’s still operating today. And it’s one of the great successes, I think, in mining, in mining history in the last 50 or 60 years. And it was, you know, two 30 year olds that said, you know, we’re going to do something really different. Tony was the guy that got it or, or was the one who proposed it. And I helped him market that whole approach to the whole organization, and we put it into financial terms. So I was able to get the accountants on board, but that is rare in the industry. And we’ve done that a number of times. And Anglo, the Anglo conversation, you know, let’s drop 45 percent of the assets and increase our production. In the first conversation, people thought we were nuts. And we said, well, wait a minute, let’s look at Kumba. Let’s look at Mogalakwena, which is the big platinum mine, which was a platinum mine that people hadn’t really conceived how good it could be. And we went through asset by asset, changing people’s understanding. So it’s experience and it’s that inquisitive, what could be different type approach. So generally we sort of follow what’s been done. We don’t question how do we do it, you know, in a very different way. And that’s what I think we’ve brought to the industry.

[00:51:01] Jamie: It’s, it’s a really interesting conversation because I, I’m just thinking about it now, how many major or mid tier miners are propped up by one or two really high quality assets and then they drag along a bunch of mid tier, or sorry, a bunch of mediocre assets that make little or no money, right? And so much of the value of the business is contained in a, in a relatively small number of the assets owned by some of these companies. I mean, I’m sure we can all think of examples, but it’s, it does seem there’s a, somewhat of an unwillingness to, uh, cut the dead weight or to, or to have that thinking.

[00:51:35] Mark: So look, the major players have got good people because one of the good things about being a major is you’ve got a balance sheet, you’ve got cash flow. And therefore good people are attracted to those types of businesses because you can see a career and I won’t name anyone, but you know, they’re in iron ore or they’re in coal or they’re in copper and, and the ability to attract the best people is one of the ways you keep ahead of the industry. But what it does also run the risk of is you sub optimize. The ore body allows you to not be as efficient as you probably should be. And, and I’ve sort of moved between, the smaller group and the top end because I find that in that mid cluster, There’s so much more opportunity and so many assets that have been sub optimized and so much more potential that, that’s been a really interesting space to work. Yes. I’ve worked with Anglo and ran, ran the, ran one of the majors. Because at that time, Anglo was the most complex Anglo and Glencore are the two most complex major businesses because of the nature of the assets and the fact they’ve gone down trading, commercial approaches, and Anglo are did a lot of work under Peter Whitcutt in creating very different commercial model, which was very successful. So the big assets in my view, risk that, uh, less than inventive, innovative approach, uh, but in the end, it catches up with you. But in Anglo, one thing I had to say about Anglo, the reason we went the innovation approach is we didn’t have the same assets, so we had to, so in a very simple way. The nature of our assets meant that our structural cost base used to increase about seven or 8 percent a year because we were going deeper, quicker with the nature of the ore body, but if you’ve got iron ore or coal, you’re not going as deep as quick. So your structural cost base doesn’t move as quick. So we needed to move twice as fast to Rio, BHP. and Vale just to keep up. And in actual fact, we outpaced them for about seven years in our cost reduction strategy. So we moved quicker. We moved from the 49th percentile cost position to the 29th percentile. So we outpaced the three big operations on cost reduction because of the innovation that we introduced and the way we reconfigured assets. So reconfiguration plus new innovation. That was the key to Anglo’s outperformance, in my view, over that, the last seven years.

[00:54:24] Jamie: Would you have any advice for the CEO of a smaller single asset or mid tier company that, you know, doesn’t have the balance sheet of an Anglo or a BHP to necessarily hire the, you know, large teams of the most experienced people, but does want to understand their assets better and optimize them? How would you approach that if you were in that position today?

[00:54:47] Mark: Yeah, I think single asset companies, uh, and by the way, that’s a fascinating place to be, and it’s interesting and, and there’s some wonderful work being done by single asset leaders. The key is geology and understanding the potential of the resource. And the earlier you can work out the potential, then the smarter you can be with your capital in getting early cash flow. And understanding that you won’t, um, I’m trying to think of the right word. You won’t, destroy value longer term. So the key in a small company is get cashflow running as quick as you can, and then use your cashflow to then increase the size and scope of the business on the basis that you can actually self fund that growth. So you need to understand the ore body and its potential. I once did an exercise where, uh, I can talk about it now, cause it’s sort of all past history when Inco. When we did the, uh, we were joining Phelps Dodge, and we’re looking at creating this big copper company in the nickel wars many years back and, and I was, uh, leading the valuation of Phelps Dodge. And I remember presenting to the board, here’s the valuation of Phelps Dodge, and here’s the Tenke asset in the DRC. And I said, I’m valuing it somewhere between five, zero and $5 billion. And I sort of looked at me and said, what I said, I’m valuing it somewhere between five and 5 billion. And they said, well, that’s not all that helpful. I said, well, let me explain. If we were to develop it and it was sitting in the backyard in Canada, It’s a $5 billion net present value business, but it’s in the DRC. So my recommendation is we go in with a much smaller footprint. We use smaller amount of capital, mine the high grade, develop a cash flow, and then incrementally. What we call bootstrap it up to its potential. So I said, if you said, what’s the value, I’d call it a billion with the potential to get a $5 billion payoff if you’re comfortable in managing the politics. And so that bootstrapping strategy is the right type of strategy for small companies to think about when they’re developing a single asset. You can’t do a Rio or a BHP or an Anglo. You’ve got to think very differently. So you’ve got to be flexible. Okay. And that’s the key. And you see a lot of that night, I always love to see Jim Rutherford. He used to be on the Anglo board. He’s he’s the chair of Centamin. He sort of understands that dichotomy and, whilst he’s a financially trained guy, he’s been around long enough to see how those approaches can be applied. He’s doing a great job at Centamin. I think. So it’s great to watch that sort of thing playout. But, but understand your own body and what your options are.

[00:58:01] Jamie: How different is it working for a diversified miner or leading a diversified miner like an Anglo that’s, you know, got projects all over the world, but it’s also got them across a variety of commodities than a company that’s, uh, you know, a single commodity company, whether it’s, you know, a Freeport with a focus on copper or an Inco, which focus at nickel at the time. How does that change your perspective of a leader in the things you need to consider, right? Because you also need to think of your weighting across different commodities and where you want exposure and, you know, to a degree you’re, you’re being asked to predict the future, right? Because, you know, it takes years, sometimes decades to build a mine and you don’t want to build it in the wrong commodity in the wrong place that no one’s going to want in 15 years from now. How do you, how do you approach that challenge versus we’re a copper miner, we mine copper and that’s what it is.

[00:58:53] Mark: So if I’m in a single commodity, so let me start there, whether it’s gold, nickel, wherever it may be, what’s my position on the cost curve? And if I’m in a single commodity, I will want to be lower in the cost curve because my exposure to a single commodity and free cash flow is different. So you’ve got to be in the bottom half of the cost curve, but I want to be closer to the, the first quartile, say bottom of the second quartile. Because I’ve got more degrees of freedom as the price. So keep your debt low and know what you’ll do and what you’ll stop when times get tough, so what’s critical and has to be done, make sure it gets done, particularly when you’re going to afford it, but get it done and then have a package of, uh, expenditures that you can defer for a period when times are tougher and understand how to. How to manage your discretionary costs through the cycle. In a diversified, you’ve got a bit more degrees of freedom. But I still think you need the discipline by each commodity to manage that cashflow with the same logic, but you’ve got a bit more scope as a diversified to allow something to continue to invest if it’s long term accretive and the rest of the portfolio is doing pretty well. So you’ve got a lot more flexibility, and you’ve got. A lot more resource to call on to deal with a particular problem in a diversifier. So, the individual logic that you want your commodity leaders to follow is no different to being single commodity, but that you give them more freedom to put longer term investments in place and hold them in place longer. I also think the diversifieds have got the ability to, look more into, you know, Fundamental innovation as a, so at an Anglo, the way we set up our cost reduction program, which was very successful. Um, and while some would argue some of the longer term stuff wasn’t as economic in the short term, but by its very nature, that’s quite deliberate. So we would have continuous improvement at the operating side. So a general manager dealing with all sorts of issues on a daily basis, we would expect to see them improve the business three to 5%, maybe 10 percent for a really good GM or an asset that’s not doing well on an annual basis. So you’re looking for continuous efficiency improvement. And that’s why your operating model is important. The second lot is the discipline hand. So you’ve got really senior mining engineer at the center saying, you know what? The best electric shovel in the world delivers 40 million tons a year. This is what literally happened at Anglo. Well, 45 million was the best electric shovels are in the, um, coal basin in the US and Peabody’s got the best one. We said, well, why haven’t we got the best assets? So at Dawson and those operations, we said we wanted to be at 50 million tons. So you’re driving best practice through that knowledge of the industry and then they’re helping the guys implement change. And the third level, long term innovation. Not long term innovation from mining, but long term innovation from other industries. Radical ideas that will change the industry. So we had our cost improvement of productivity and programs in three levels and major diversifieds have got that capacity. And for Anglo, that was a key. I think differentiator, particularly the middle package and Donovan and the guys throwing across the fence new technologies for the guys to think about to improve our operations and, the bigger you are, the more, more latitude you’ve got in that area.

[01:03:03] Jamie: And where did you harvest ideas from? Were you looking to energy, to, you know, manufacturing? Where, where did you find the best or some of the most relevant ideas coming out of?

[01:03:13] Mark: So the operating model and the asset integrity work, we got out of the steel industry through Mick McAleer. So our operating model, where our experiences was, we could improve the efficiency of an operating site by 30 to 50%. So it was the discipline of planning and scheduling work. So if you looked across the mining industry, only about 30 percent of the work that is carried out is properly planned. And the difference between properly planned work.

[01:03:40] Jamie: That’s shocking. That’s a shocking.

[01:03:42] Mark: It is shocking, but it’s the reality. And that’s up to many audits, uh, before we introduced the operating model.

It’s not planned at the right level to do that. So it’s that logic about planning and executing work. The, the, uh, as I said, the, Uh, energy sector, uh, energy efficiency. Energy represents 20 to 30 percent of that cost. So how do you improve the efficiency of equipment? And in our eco two man program. We cut our energy consumption by about 25%. And with new technologies like course particle recovery, we can reduce our energy consumption by around 20 to 30%. This is what we’re looking at at Vale. We, we reduce our water consumption by 50 percent and we reduce, and we improve our operating throughputs by around 20%. So there are technologies that we get from processing, energy sector, uh, water in terms of understanding how to recover more water so that our water consumption. So all those industries we do what we call open forums. We said, okay, we want to reduce our water consumption by 50 percent. So we’d have all these people brought in for three days working the problem. The one criteria was we weren’t allowed to have more than 30 percent of the people in those four from external organizations that came from mining. We wanted them to be excellent. And the ideas that they brought to the table helped change how we looked at the problems in our industry.

[01:05:20] Jamie: Interesting. And, and when you’re leading one of these diversified miners, how do you, how do you make decisions on how you want to grow those businesses? Right? So at one point you’ve optimized your current assets. Things are going well, you’ve increased, you know, production, you’ve increased profits. How do you go about thinking about growing these businesses? Are you just looking for, okay, these are, you know, the best assets we can find out there that we can get the most out of agnostic of commodity or do you take a view on copper or uranium or what have you and you say okay we need to find exposure to that commodity how do how does that work

[01:06:05] Mark: i think the way We thought about it was what markets do you think will grow? And I don’t know who coined it, but we use the term future facing commodities. So we could say the demand for copper being key to the energy transition. So copper, nickel, lithium. But when we looked at, you know, those three commodities, we sort of said, well, copper, we’ve got a starting point, but we think development of Quellaveco, that’s a great place because copper’s in broad demand for a number of applications. So we thought that was a good bet. And that’s turned out to be a good bet. Uh, nickel. A little bit tougher because Indonesia is such a big player. They’re going to dominate supply maybe for five years, but long term nickels are the place to be. But you’re probably going to have to be patient to about 2028-29, where you’re really going to start to see increasing prices, but it’s a good place to be, and that’s why the Vale position was interesting for me. Lithium, right place to be from a demand point of view. But the world’s full of lithium. There’s lots of lithium everywhere. And so, thinking about, okay, is that a good place to be now? Or am I better off letting people develop lots of stuff? People are going to lose money. And at some point when the demand is starting to look like it’s going to run ahead of the ability of the industry to supply, there will be some assets you can pick up that will do pretty well. So your strategy in those areas is different depending on your view on demand and supply dynamics.

[01:07:53] Jamie: You’re the, the chair of a Vale Base Metals today. Obviously you led Anglo for a long time, Anglo American. What in your mind? What are the things going on in the world today that are driving decision making on where you want to be investing? Or, and you can speak for Vale, or you can speak generally across the industry, where these sort of major miners are looking to deploy capital today. What are the, what are the factors that are, they see as an opportunity and perhaps as a risk that they’re concerned about or trying to avoid?

[01:08:28] Mark: So if you’ve got a great iron ore asset, even at $70 a ton, whatever the number may be, it’s still a good place to be, but you’re going to have to be tight on your costs and your ability to throw lots of capital at those businesses becoming a lot tougher because you’ve got Guinea and other areas that will, will impact the supply side, but it’s still a good place to be. The world’s going to need steel. In fact, the most important metal for the energy transition is steel.

[01:09:02] Jamie: Yeah.

[01:09:02] Mark: Cause of the infrastructure. So, so there’s a big tick there. Copper, broad demand base, even if you see some substitution, if you’ve got a good copper deposit, you’re in a good place to be, um, again, It’s thinking about where you can leverage the best margins and returns. And so your capital allocation decisions are really important. And, and sometimes, you know, miners make decisions that people are critical of because they say, well, wait a minute, you’ve, I’ll give you a good example where we criticized for Woodsmith, the investment in Woodsmith, which is the Anglo polyhalide deposit. And, in us talking about that. In the end, you don’t know exactly when the market will be there, but it’s a unique product. You can mine it, and it doesn’t have to go through a lot of processing. Carbon footprint is 85 percent below other competitors, and it’s a multi salt product. Which is quite unique. Now it’s going to take time. So the question becomes, how do you put your foot on something like that and nurture it until it times, until it’s time comes? And so I still think it’s a great asset. The question is when? And that’s the, that’s a big challenge for miners because you know, you, you, you’re thinking about short term and yeah, where does a major investment, if you look at the money that BHP’s put into it’s phosphate deposits. So it’s, it’s deposits in Canada. It’s put a lot of money in there and it’s taken a long time, but in the end, that will be a, uh, a set of assets that will pay off long term. So how do you get that balance right? And you know, you’re going to get it. You’re going to, you know, as a lady, you’re going to cop some flack for somebody that thinks about the dividend in the next quarter. But if you’re going to create one of these houses. That builds off the critical mass that’s been established, then you’ve got to make some of those decisions, but then how you manage it through the process is actually,

[01:11:20] Jamie: It’s, it’s a really interesting time, right? Because we’ve all, I feel like the mining industry, I mean, I’ll, I’ll espouse my personal theory here and you can tell me where I’m wrong. So I feel like the mining industry is in a bit of identity crisis or a state of crisis right now. We see. The junior mid tier industry is extremely starved for capital right now. The exploration companies are dying on the vine right now. There’s no money that is looking to go into them, certainly in Canada, to a lesser degree in Australia. On the other hand, we constantly hear espoused, uh, you know, the energy transition, urbanization, this massive coming demand driver for metals. And, you know, we’ve, I’ve heard the term. You know, we need to mine more copper over the next, whatever it is, 25 years. And we have an all of human history today that, that comes down the pike a lot. And yet we’ve barely seen copper price move in any major way over the last several years. And we, you know, we’re seeing gold price hit all time highs, but gold miners just perform marginally. And so there’s a lot of conflicting signals right now. And I also, and I’m going to put a little tangent here. I also don’t see there are a tremendous amount of major discoveries being made or, or new mines being found. So how does the industry address this coming demand wave in theory, which has, you know, been just around the corner for the last decade or so versus the reality of a very complicated market right now. Is it just the six? Is it? Is it M&A right now within the industry and a consolidation? I mean, we saw BHP take a run at Anglo earlier this year as a potential acquisition. Are we going to see a consolidation of the major miners? Are we going to see someone start writing checks into exploration again to try to find these next tier one deposits? How do you, I realize I’m asking an incredibly complex question, but like, how do you envision this playing out? And I have some pet theories, but I’d love to hear yours.

[01:13:32] Mark: First thing, you know, as leaders in the industry, we have to go look in the mirror and admit what a lousy job we’ve done promoting our role in society. And people know I’ve been on, I’ve been harping on this for 20 years. And, um, some people say, well, you’re involved in. You’re doing too much of it. And I said, well, yeah, we have to do it. Everybody has to do their bit. Um, that may not doing it isn’t an excuse or me doing it because no one else is doing it. Yeah, we got to change the dialogue. We aren’t helping people understand how important we are today. When somebody, I say, look, I’m not, and I said, well, what do you do? Like, I actually say now I work for the industry that has the most significant, significantly positive environmental footprint on the face of the planet. Can you guess what industry I’m involved in? No one has guessed it yet that it’s mining and it’s not the obvious answer and, uh, the last time I said that they said, well, how do you get that to be net positive? And I said, well, if you just think about agriculture and without fertilizers and mechanized gear, which all come from mining products, instead of 40 percent of the planet, we’d make 50 to 60 percent of the planet to feed 8 billion people. We make agriculture or allow agriculture to be done in a much smaller footprint. So that’s a human footprint. Urban environments. If I look out your back window, I see all these high rise buildings. And infrastructure is all being concentrated. So the populations are concentrated. So our urban footprint is 15%, not 30%. Without mining, we couldn’t do it. So when I look at, we take up 0. 3 percent of the Earth’s surface. 0. 3%. And we say we reduce the human footprint by 30%. We are the key and nobody knows. And when I talk about mining products and what they’re useful, which is everything, because you don’t create matter. We still, whilst we still theoretically understand how we might do it with energy. It’s not something we do every day. So mining is relevant to society is not very well explained as a consequence from discovery to development, it now takes us 20 years where it used to take six or seven years. So we’ve got to help people understand how important mining is and so that the conversations on access to land. Have to be on the understanding that we need mining to support 8 billion people on the planet. Now, the question is, and I’m not suggesting unfettered access. But turning 20 years back into six or seven years is the only way we’re going to be able to deal with the energy transition. We’re the only way we’re going to be able to deal with a lack of water to support the globe and everything everybody wants to do. And a whole range of other things are not possible without mining. So the question is. Mining plus circular economy. So it’s not simply about money. It’s about how money can actually help create a circular economy. Cause many of the products that are used in buildings, we’ve got processes and technologies that can actually allow those technologies or those materials to be reused. So we’re the key to the future as well. And I think we’ve got to think differently and tell our story differently.

[01:17:18] Jamie: What do you think is the catalyst to make people or to enable people to kind of wake up and sort of appreciating the impact of mining? I mean, it’s, I agree with you that the industry needs to frame and champion this better, but certainly there’s a a lot of people that I think would refuse to acknowledge that based on somewhat ideological environmental positions. And what I often fear is that the only path to people acknowledging the importance of mining and to a similar degree, energy and fossil fuels is some sort of catastrophic failure of the system, right? Where there isn’t enough copper or the lights don’t turn on one day or there’s food shortages because, you know, something like 40 percent of people are fed off synthetic fertilizers or some version of that. That’s what I’m somewhat concerned about.

[01:18:10] Mark: We’re in that world now. We are in that world now, whether we like it or not. Whether it’s climate change, and I’m not going to debate, you know, the body of scientific evidence supports it. Um, and it’s not all man made, I know that. But we’re contributing to it. And we’re contributing materially to the problem and we can make a difference. So climate change, water will be, will be rapidly following climate changes, another, uh, environmental catastrophe and might be food. Um, you know, I, I’m involved with the power of nutrition as people know, and those issues are coming at us at a rate of knots and helping people understand how we find solutions and how we improve the speed to those solutions requires us as leaders to do a better job communicating to not the, well, it must be the public, but to get to key stakeholders. Sure. When somebody said, we did stuff at the Vatican, trying to engage with a broad range of, religious groups, not simply Catholic, but Catholics, the full Christian groupings, Jewish, Muslim, Hindu. And we said that explaining how important mining was to the world was something people didn’t understand. And in fact, the indigenous groups got it better than we got it in the cities because they used the earth in different ways. The Greeks understood it 2,000 years ago. So it’s, it’s getting the key players, the multilaterals, the United Nations. Let’s talk to Mr. Gutierrez and explain why mining is so important to his energy transition imperative. We need to engage those groups much more effectively. Rohitesh Dhawan, the ICMM has been a great champion for these conversations in the last three or four years, but he needs every one of the leaders in that group to talk more than he does. And to be champions, and they’re not, and we all need to be champions of the debate, and get those conversations engaged. And the one thing, and I’ve used this many times, when we got to the Anglican Church, And the Archbishop of Canterbury was involved in the work we did with the church groups. After five years, he came out with a press statement and said, Look, we’ve, we’ve looked at the Bible for the last five years. We can’t find any, any passage that argues against mining. Therefore, from our point of view, we can support mining as long as it’s done responsibly. Now, people say, oh, well, that’s a bit, that’s a bit of a giggle. I said, no, it’s not. I said, when you, and Christine Lagarde asked me, and she was at the Vatican on an ethical business conference as I was there, and she said, why did you start this mining stuff with the Vatican? I said, Christine, it’s 1. 6 billion people, a bit bigger than China. If I can get the church talking about how important mining is, and at least have local communities engage with our industry and be supportive if they do things properly, that’s a game changer for literally everyone. It changes the world. And I said, so it’s not a bad place to start, but we’ve also got to do the multilaterals. We’ve got to work with governments. We’ve got to work with all the key players that make those decisions. And we have to explain to communities why it’s so important maybe to develop this part of the town to actually support the rest of the, the countryside, the support to be successful. And so we have to do a much better job on the ground with our communities. Cause in the end, if you can get your local community relationships, right, you’ll be successful as a miner. So

[01:22:05] Jamie: Mhmm.

[01:22:06] Mark: To go from here to here and be able to cover all of those conversations. And we’re not good at it as miners.

[01:22:14] Jamie: Just thinking about what you’re saying and how, how do you envision sort of key stakeholder relationships changing in the mining industry over the coming years? Let me frame where that question’s coming from, in addition to what you’re saying. Because I think it’s a very interesting element, sort of bringing the Catholic Church or the Anglican Church on board and thinking about the constituencies that they influence and educate. But I look at, you know, we have a war going on in Europe right now. We have a war in the Middle East right now. In Canada, we have the China, we have the Canadian government blocking Chinese acquisitions of assets that are in South America, uh, but owned by Canadian companies. So the whole political landscape that mining operates in is, is changing pretty drastically, I would say over the last couple of years. Five or six years, right? We’re going from a very open border, uh, world to a much more nationalistic world, it appears to me. And that has so many implications for supply chains and whatnot. How do you envision, you know, you’re working for Vale obviously, but the whole industry addressing these challenges and sort of predicting what’s coming down the pipe. Is it. Is it closer relationships with certain governments? Is it? I don’t know. I don’t have an answer. But how do you start thinking about these problems and preparing for what might be a very different future?

[01:23:48] Mark: Well, one thing that, when Brexit was occurring, I was asked the question, what do you think of Brexit? And I said, look, I’m against anything that puts a barrier in terms of trade between nations. Today, whether we understand it or not, health of our global citizens is better than it’s ever been life expectancy. And we’ve got all sorts of issues across the block. And we could all do a lot better in helping those that, that are struggling. But trade is the key and comparative advantage. Anything that constrains trade, wars, they’re all difficult and will create, pockets of poverty that, that, we can see already emerging. Immigration, mobilization of people moving to other areas, wars, all those sorts of things are all issues. That work against trade, which is the key to lifting everybody out of poverty and, and, and, and improving everyone’s life.

And we’ve all got a responsibility in one way, shape, or another, and that’s a personal view. And it is a very personal view to try and make a difference. And, I think that, Our ability, um, critical minerals is a good example and critical minerals is an opportunity for the mining industry to talk about what it does and how it makes a difference. It’s also key where it can become an opportunity for cooperation not competition. Now there will be competition and there’s a obvious debate around the Chinese and domination in rare earths. Thank you. There’s the US repositioning itself in Africa, uh, looking to access critical minerals. Every country’s in the same place. These minerals are now strategic. And what I’ve said is it’s okay to be competitive, but let’s not be destructive in stopping each other from doing things. Let’s be competitive and understand how we can be constructive and not close off options, which then means people are pushed towards. You know, instead of trading, we’re firing bullets.

[01:26:02] Jamie: Yeah.

[01:26:02] Mark: So that conversation about, resources and access to resources, I think is critical. And we’re in an industry where, I’d like to see trade unfettered, almost unfettered. It has to be. Uh, we have to protect human rights and, and, and, uh, value chains being appropriately managed, but, uh, trade’s the key, and that’s my greatest fear, and I think the stakeholders, as you asked, what’s the stakeholder question, that’s why the multilaterals, uh, Faith based organizations can be more powerful than almost any because when I, when I look at faith based organizations, I don’t see religion. I see values, I see culture, and being respectful of people’s values and beliefs means that we can dialogue and find common ground. And when you talk it to a theologian, and I’m not religious, it’s just an observation on values and beliefs, that if we can at least get those dialogues running across borders. Also through the multilaterals and through other institutions and organizations, even organized labor and other groups that are concerned with human rights. It changes the nature of the dialogue, and I understand the politics, and I’m not a, I’m not a right wing loony or a left wing loony, I’m around the center depending on the circumstances, but I believe that the dialogue that sits across politics is absolutely key to maintain balance in the way we relate to each other and talk to each other, and again, it might be idealistic, but we’ve got to get out there as leaders and you and try and talk a sensible conversation as opposed to a polarizing political conversation. I think that’s clear to them.

[01:28:01] Jamie: Yeah. Yeah. It’s interesting. And do you think that the Western miners and the Western mining investment infrastructure, shall we say, is going to be able to, I mean, I don’t think it, I don’t think it has been as competitive as it once was against a Chinese investment who have really secured many of the assets globally, you know, these sort of state back entities, some of the sovereign wealth funds, obviously pouring a tremendous amount of money into into this industry, you know, I look at these, these sort of state players and I see, you know, they’re locking down assets with less concern about those assets being profitable and more concerned about them simply being feedstock into the other industries that they’re building. And are the, are the Western miners going to be able to remain competitive against that? You know, when an Anglo or a Vale needs to be a profitable company under its own right, can they compete against the Chinese, uh, state backed entity that just needs the iron ore, or a copper or lithium or what have you.

[01:29:11] Mark: First thing, um, I’m a, an absolute believer in the power of innovation and, and reward for innovation. So I’m open market. I’m an entrepreneur. I’m, I, I want to see innovation. I want to encourage innovation in every way we can. I do see problems where governments, um, overly interfere, they always influence, but where they interfere and create market disconnects that don’t allow the markets to work reasonably efficiently. And by the way, all markets need regulation and appropriate management on the basis of fairness across society because if you get that wrong, then you’ve got all sorts of other issues. So there’s a balance. What I’ve said in my dialogue with American leaders who are sort of saying, well, we’ve got to get critical minerals and we’re not going to take it from them. We’re not going to take it from them. We’re going to take it from these guys. I think. Their concern is that they can’t get certain materials, therefore they’re going to have to lock away supply. That is an entirely logical and appropriate response to, let’s say, the Chinese dominating certain markets. But I think there’s a different dialogue, and it’s a bit like the old song, The Russians love their children too. There’s a conversation. That the US and China have, I would love to see where they work out. Let’s, let’s find a compromise here, and I can only hope that in the US and in China, there’s a willingness to dialogue because the alternatives are unpalatable, and in some parts of the world, we’re seeing the alternatives play out now. And we want to see that come back. We need dialogue. So, it’s what is it jaw, jaw not war, war. And I think those sorts of issues are becoming more and more important in the world today. And in the end, we are so reliant on the leadership of China, the US and other key players that, in my view, as business leaders, if we can provide, or if we can model the behavior we would like to see, Then at least it shows that it can be done, that companies can be profitable as Anglo was the most profitable company over that period that we were involved in with the innovation and, and, and looking at how we did things differently. There are things that we can do to help each other. By the way, I would never be as arrogant to suggest that we were the example. I’m saying Microsoft, those technology companies have been so successful. What can we learn on the positive side? And at the end of the day, why wouldn’t you encourage other countries to have successful businesses? But there are a set of rules that we do need to try and align on as leaders. And I think we’ve lost that dialogue to some degree. And we need it. And as miners, because we’re across all jurisdictions, we’ve got a better dialogue amongst our industry leaders. And I think politicians have got on a country by country basis. It would be good if we could help maybe bring some of those conversations together.

[01:32:45] Jamie: It’s true. Mining really does give you a unique viewpoint of so many places in the world that the average, the average business leader doesn’t get either. Do you think, you know, you mentioned, you know, the Microsofts or whomever these sort of big, hyper successful tech companies. Do you think there’s a world where. They start to think, okay, maybe we need to start thinking about locking down our own supply chains. Maybe we’d need to be buying the tier one nickel mines or copper mines or or what have you. We need to build chips. We I mean, because if you think about throughout my career, I think probably most of your career. The mining industry has kind of become more decentralized, right? There’s been more companies. There’s been more breakup, whereas in previous, yeah, but in previous generations, you had mines owned by General Electric, by major energy companies. You had mines as components of other companies. And I wonder if we’re entering a consolidation phase where, you know, the only one who has cheap enough capital to go really be competitive and buying these things are the Teslas or the Microsoft or the Apples of the world that can go out and compete.

[01:33:52] Mark: It’s happening now. It’s happening now. Um, I, I had a conversation with Jeff Beamell in 2011.

[01:33:59] Jamie: CEO of General Electric.

[01:34:01] Mark: Yeah. We built a processing plant, a water processing plant in South Africa, and he was supplying some of the technology. And he asked me the question, he said, if, in my conversation at General Electric. What should I talk to my team about in terms of threats in respect of minerals? And I said, I said, in 10 to 20 years time, your biggest issue will be that you won’t be able to get the materials you need to make the products you produce. And he said, what do you mean by that? And I said, well, when I used my seven years, it used to take seven years, at that stage it used to take 15 years, now it’s 20 years. So I said, we just do the maths and the curves and yes, you’ll improve your efficiencies, but you’re going to run out of key materials. Now I call them special materials or materials you need to make your product. That world is now, so auto manufacturers and a whole range of other players who need very specific technologies and materials are locking their supply away as we speak. It’s happening now. Countries are saying, you know what, we’re going to have to reposition in Africa, and I won’t say who, but they’re all looking at how do they take a position in Africa, get access to copper, nickel, rare earths, a whole range of, it’s happening now. So it’s not a, this is not, 20 or 30 years away, this is in the world we’re in today.

[01:35:25] Jamie: Okay. You know, Mark, we, we’ve been at this for about an hour and a half now. This is one of my longer podcasts and I literally have pages of questions I could keep going through, but I want to, you know, start wrapping things up and be respectful of your time. Um, Is there anything happening in the mine industry right now that you’re either very excited about or maybe concerned about that people are not aware of that people that should be on people’s radar that isn’t.

[01:35:49] Mark: So I’m always excited about our industry because I think we could do so much better. I think we do so many things so well and I think Rohetish and the guys at the ICMM have been doing some really good work and really messaging quite well. I think it’s important as leaders we amplify that message. So I don’t think we’re doing our job in supporting enough, that’s first point. Second point, I think our own self awareness is increasing quite rapidly, particularly through critical minerals and trying to work out how we improve our messaging because critical minerals is an opportunity in many ways for us to talk about the industry. So how do we do that in a constructive way? So I think I’m excited that the messaging that we were driving 15 years ago, and was really difficult, is becoming easier because of critical minerals. The trouble is, the reason critical minerals are critical is because we’ve got climate change, we’ve got water, we’ve got these, so those issues worry me. And I think that we can do so much more to support those. And I think that the message is getting out that we could be a lot more assertive, a lot more vocal, a lot more assertive, and a lot more constructive in helping people understand how we can do things without, uh, destroying the planet. In fact, it’s the opposite of how we help preserve and create a more sustainable planet. So I think the understanding of those issues, the technologies that are available for us to improve the way we do our work. The improved safety performance are all things that, that I think, um, are going in the right direction, but need to go quicker. So, I’m excited about those sorts of things, those opportunities, and I’m excited about what I see in young people. I remember as an 18 year old, we talked about it earlier, you know, Wollongong, surf, girlfriend, earning my way through, you know, work and, or paying my way through university. They were the big issues at, at that time. It, it wasn’t about saving the planet or making a difference with the development of the internet, the awareness of young people in terms of the fragility of the planet.

[01:38:06] Jamie: Mm-hmm. ,

[01:38:07] Mark: the importance of making a difference. We’ve got a young generation that I think will change, as they should, the nature of the planet, and the dialogues that are possible with their awareness and their understanding of how fragile things are, I think is a great hope for the future, and so I’m ever the optimist, I’ve got seven kids and eight grandkids and anything I can do to help them have a different set of conversations and be leaders in a different, in, in how we have different conversations across the globe is, is my great hope for the future.

[01:38:44] Jamie: Okay. Thank you. All right. So I’ve got a couple of rapid fire questions before we close it off. There’s supposed to be, we’ll see how they go. We’ll see how we do. So number one, if you could buy, so all your money, all your wealth stripped away from you, you’ve got 10 million. You can buy a royalty or stream on one commodity. What do you do? What do you buy it on?

[01:39:11] Mark: Copper.

[01:39:11] Jamie: Copper. Okay. If you were 30 years old, starting a company today that was a service business to the mining industry, what would you be focused on?

[01:39:23] Mark: Resource and mining strategies.

[01:39:25] Jamie: Resource and mining strategies.

[01:39:26] Mark: We’re absolutely short that role and the last great thinker in my view in the industry was Oscar Stefan. We miss him terribly.

[01:39:37] Jamie: And this is effectively resource estimates and then wrapping the economics around that building up my plan.

[01:39:43] Mark: It’s such a big issue to the industry and it’s a skill we’re losing.

[01:39:47] Jamie: If you could have dinner with any historical figure, who would it be?

[01:39:55] Mark: Now, I’ve been asked this question, and I gave a, uh, uh, there’s so many different ways you could come at this one. Um, I guess you’d have to say Jesus Christ, um, Genghis Khan, Adolf Hitler. One, maybe you could change the course of history. Or two, you could learn something. Or three. You can have a very different perspective on the world. There’s a list there of people that have made such a difference, good and bad.

[01:40:27] Jamie: Yeah. So what would you have to eat? You’d eat olives, fermented mare’s milk, and schnitzel, I guess. That’d be quite the dinner.

[01:40:36] Mark: If it were certain characters, you’d probably suggest Arsenic, and me going down with him might be good for the world, but with others, you know, There might be pearls of wisdom, but, um, somebody that’s made a difference, and by the way, it could be Mother Teresa, uh, and listening to their perspectives, good or bad, is always a learning experience and instructive, good and bad. Um, there’s such a long list of people that I could, Humphrey Bogart, coolest guy that ever lived.

[01:41:12] Jamie: Okay. Last question. Any books you’d recommend? You mentioned you had a mentor that, you know, gave you a book every three months. Anything that really stood out? Anything you’ve recommended consistently to people you are working with? Or…

[01:41:23] Mark: Yeah, Viclav Smal. Viclav Smal. The, The Way the World Really Works.

[01:41:29] Jamie: Yeah, I have read that book. It’s great. Yeah.

[01:41:32] Mark: Yeah. It’s an eye opener for people and it’s one of the things that I think should be on the course for all kids. Uh, because I think it would change their perspective. And as I say, if you can get the kids before they’re 11 years old, you can actually have an influence on what career decisions they make, which I learned last week.

[01:41:49] Jamie: Okay. Mark, thank you very much for your time today. Any final words, final thoughts, anything people should be thinking about and you want to leave our listeners with

[01:41:58] Mark: Jamie, thank you for the opportunity. Thank you for what you do in talking about our industry and the things we do. Uh, it’s very important for us to get our message out. We don’t do it terribly well. And so we appreciate gentlemen like yourself trying to get the message out and help people understand what we do. And thanks for the opportunity.

[01:42:19] Jamie: Very much appreciated. Very happy to have you on here. You’re the first CEO of a, of a really major international mining company we’ve had, and it’s something I’ve wanted to do for a long time. So thank you for taking the time today.

[01:42:31] Mark: Thanks Jamie. And all the best.

“From 2004 to 2023, global spending on wind and solar totaled $4.7 trillion. And yet, during that same time period, hydrocarbon use increased 3.2 times faster. […] anything that we’re doing is more than offset by the behavior of China and India and the other countries that are starving. […] There are 1.2 billion people — 20 percent of the world’s population — that are still without access to electricity. Almost all of those people live in developing countries. […] They want a quality of life that we’ve achieved over the last 100 years that extended our lifespan by 40 years in that time. So I just, I don’t think there’s really an energy transition going on.” 
— John Harpole

John Harpole has spent over 40 years moving billions of cubic feet of natural gas across America.

He is the Founder and President of Mercator Energy, a company that brokers natural gas for producers and end-users in the western United States.

Today, Mercator manages over a billion cubic feet of gas per day, representing about 1% of US natural gas production.

In an industry known for its volatility, where fortunes are made and lost in a day, John has unprecedented access to information.

In this episode, John and I discuss:

• Regional differences in natural gas prices and the factors driving demand in the U.S. and internationally.

• How regulatory barriers in states like California and New York could lead to disastrous energy shortages and soaring prices.

• The “myth” of the energy transition and why fossil fuels remain essential for energy and food security.

• The untapped potential of the Permian Basin and how investors can find opportunities amidst an overabundance of cheap natural gas.

• The impending surge in natural gas exports from the U.S. and the investment opportunities it presents.

• Where John would invest his own money in the natural gas industry today.

Please enjoy!

This is the first long form interview with the man who built the world’s largest mining private equity firm: Oskar Lewnowski.

Over the last decade, Orion Resource Partners has gone from startup financier to the world’s dominant mining investment firm.

There is very little information about Orion publicly available, and Oskar has never done a podcast before. After meeting last year, he agreed to sit down with me for an interview and take us behind the curtain.

As public markets plunge into increased volatility, private equity investing is delivering some of the highest returns for the investors. Understanding the Orion strategy will be critical to any resource investor looking to capitalize on the commodity boom currently underway.

In this interview with Oskar, I’ll show you:

• The Big Bet: The single commodity Oskar would invest in if he could only make one big bet.

• The Orion Strategy: Inside Orion Resource Partners’ all-encompassing approach to delivering returns in the mining and metals sector.

• The Magic of Accountability: The innovative financing model that ensures projects stay on track and management teams are incentivized to deliver for shareholders.

• Leadership: Oskar’s hands-on leadership style and visionary strategies that put Orion at the forefront.

• Mastering Risk: How Orion proactively manages risk and prevents issues from escalating.

• The Future of Metals: Oskar’s view on the global trends shaping the mining industry and how Orion is taking advantage of it.

This interview offers a truly unique perspective. Don’t miss it.

Listen to the episode on Apple Podcasts, Spotify, YouTube, SoundCloud, or on your favourite podcast platform.

Enjoyed this episode? Sign up to our free newsletter to access to the latest podcasts, expert insights, and exclusive reports on our recent deals.

The transcript of this episode is included below.

Note: Transcripts may contain a few typos.

Transcript:

[00:00:00] Jamie: All right, Oscar, welcome to the podcast today.

[00:00:02] Oskar: Thank you for taking the time out to meet with me.

[00:00:06] Jamie: So, this is your first podcast.

[00:00:11] Oskar: It is.

[00:00:12] Jamie: And I appreciate you taking the time today. Obviously, I’ve had the chance over the last year or so to get to meet you, some of the members of your team. And I’ve been really fascinated by what you’ve built here at Orion. And I think for listeners at home now who might not be familiar with Orion, what it is, what you do. I’d love to just give a brief overview of where we are today. Cause you know, we’re sitting right across from Bryant Park in New York and Manhattan. We’re on the 25th floor of a beautiful office tower. You guys, as I understand, just celebrated your 10-year anniversary at Orion. And can you give us the 30,000 foot of like what Orion is today and what you guys do?

[00:01:10] Oskar: Sure, glad to. Orion seeks to be across various products investable in respect to any and all areas of the mining vertical So, should you like to look at mining from the lens of technology? We have a venture capital business. Should you like to look at mining purely in the form of public equities? We have a public equities product. Should you like to invest in the construction end of mining as the building of mines? We have a construction financing product, and so on, so on. So, we have a number of different investable products that all work jointly to try and give insight to people in the, across the entire mining vertical, from the ore production all the way through to futures hedging. That’s, that’s the goal of the organization, and hopefully we have, after 10 years now, achieved that successfully.

[00:02:06] Jamie: And who are your, your clients? What kind of investors do you service, your LPs?

[00:02:11] Oskar: So. Our, our biggest source of capital are U. S. pension plans and sovereign wealth funds. So, our investor base is actually more on the large ticket, small number side of things rather than, say, a lot of small endowments, foundations, those kinds of things. So, we have a very concentrated, large investor base.

[00:02:37] Jamie: Okay, so you can see I have a lot of notes here in front of me. I do want to get into everything you’re doing in detail today, but I’d like to actually sort of take a step back first. And so, you’re ten years in now. I’m in this sort of beautiful, gleaming office today. If you were to take us back sort of ten years from now, when Orion started, can you kind of lay the, can you paint the picture for what I would be looking at then and what you were What you were thinking at that time?

[00:03:05] Oskar: Sure. Well, 10 years ago which was actually last September, we spun out of another firm called Red Kite. And Red Kite was in its heyday I believe the largest metals trading hedge fund in the world. And at Red Kite, I was one of the three founding partners there. We decided that it would be very useful for our physical trading business to actually finance mines as a way to secure supply. And so, we built a mine finance product alongside the trading business. And then when the mine finance business sort of matured a little bit we decided as a group that it actually behooved us to separate the business and so we did. And Orion was born out of that, out of that separation.

[00:03:51] Jamie: And were you doing, you know, physical trading similar to like a Glencore or a Trafigura?

[00:03:56] Oskar: Yes, yes.

[00:03:57] Jamie: Not just derivatives?

[00:03:57] Oskar: Absolutely. Yes, correct. So, absolutely. We did in the day at Red Kite, we did a lot of physical trading, and we continue that tradition here at Orion. Our physical offtake business is a central core of what we do. It informs us on the mine supply side. It’s a really good real time catalyst to understand if there’s anything going wrong at the mine because it shows up very quickly in production. If there’s missteps at the line, it also helps us understand the flow of physical business. It acts as a natural long position, so it’s useful for hedging as well, for the commodities futures product. So, it is actually a core activity of the business. It’s something that is really central to us since we started the business.

[00:04:47] Jamie: Do you guys, and maybe at Red Kite it’s different than here at Orion, but do you actually facilitate physical transport of goods? Whether on a train or a ship or what have you?

[00:04:57] Oskar: Absolutely. So, we take sight of cargo, physical material at a port or at a mine gate. We transship it, we insure it, we deliver to customers, we pay to merge when we have to at port. Yeah. And we actually consign to rail cars and move material around the world.

[00:05:19] Jamie: So, have you ever read the book The World for Sale?

[00:05:22] Oskar: Yes.

[00:05:22] Jamie: Yeah. And so, in that book they talk about, and for those listening at home, this is a book by two great Bloomberg journalists that really dive into the history of the commodities trading businesses. And Glencore featured heavily in there. And they talk about how Glassenberg sort of saw the writing on the wall that the margins were kind of getting squeezed out of trading and that he wanted, and he needed to own the actual assets. And it sounds like you guys had a similar realization at Red Kite. Is that fair to say that?

[00:05:56] Oskar: Yeah, it’s fair to say. Yeah. I mean, we realize that the best way to control the margin of the physical trade is to actually own the supply, right? And you don’t need to necessarily own the mine to own the supply. What you really need to do is own a long term off take contract. Now, obviously, if you’re negotiating with yourself because you own the mine, that contract is a lot easier to sort out. But it’s not necessary. And the most successful trading houses have a mix of those things. They own assets that they control and that they run their off takes off of. In some cases, they actually provide the service to a third party and it’s the mixing and matching of those things that creates a great trading book.

[00:06:39] Jamie: Do you have much of a view on there’s like the traders that became miners, I think probably the Glencore is the best example of that.

[00:06:46] Oskar: Yeah, and the traffic rulers.

[00:06:47] Jamie: Yeah. And then there’s the miners that I presume more quietly built out their own trading houses like the BHPs or something like that. Do you have a view of whether it’s easier to go one way or the other?

[00:07:00] Oskar: It’s easier to be a trader and become a miner than be a miner and become a trader. They’re very different skill sets. Right. When you are a trader physical and otherwise, you are an LME person, and you go to the LME dinner. Yeah. If you are a mining guy, then you go to PAC, right?

[00:07:17] Jamie: CIM. Yeah. And CIM.

[00:07:19] Oskar: And you go to those meetings. You don’t see very many traders at the one meeting. You don’t see any mines at the other meeting. So, there are separate worlds and there are fewer than a handful of successful stories about merging those two skills.

[00:07:33] Jamie: Yeah. So, when you wake up in the morning, look at yourself in the mirror. Do you see a trader or a miner at heart?

[00:07:41] Oskar: I see a trader. I don’t like looking in the mirror in the morning. It’s not a pretty thing, but…

[00:07:46] Jamie: So, you’re at Red Kite. Red Kite, as I understand it, still exists.

[00:07:50] Oskar: I believe so, yeah.

[00:07:52] Jamie: You left and started Orion, as I understand it, focused on the mine finance business.

[00:07:58] Oskar: Correct.

[00:07:59] Jamie: So, most of the people listening to this podcast are investors in mining. But very different than the way you would invest in mine. They’re primarily retail investors. They buy equities mostly in the public markets. Can you give us the overview of what mine finance is and what stage you’re really looking at there?

[00:08:18] Oskar: Okay, so, development of a mine, which is really a development of a project. It’s typically not called a mine until it actually produces, right? Until then, it’s really a project. A project development has two general phases. One, exploration, and the second, execution. So, they’re differentiated by what the primary activity is. So, exploration is really, as you would expect, finding the rock, finding the ore body, determining what its size is, and getting an idea of, how economically viable it is, right? Execution is, I have a viable ore body, I have a good set of economics, now I actually have to construct the mine. So that’s a building exercise. And usually, roughly said that the amount of money spent to get to a production asset is about 20 percent exploration and about 80 percent construction. So, exploration is riskier because you may find nothing after spending a bunch of money. But execution is much bigger dollar signs, but much, generally much lower risk. We are firmly in the execution camp. We are not really finance, financiers of exploration. There’s a whole, as you can imagine, there’s a whole junior mining market out there. You know, Canadian based largely, but also Australia and other countries, and they fund exploration. Once you get to us and you need the really big checks written, then you have a mine plan, you have a budget, you have permits, and then you’re ready to actually pour cement, right? And that’s where our money comes in. And what we try to do is we try to make sure that the entirety of, in our view, the scope of work and the amount of money necessary to achieve that scope of work has to be spoken for, right? You don’t want to build 90 percent of a mine because then you have nothing, but lit cash on fire, right? So, you have to know that you have all the money necessary in your estimation or in Orion’s estimation to finish a mine. And that’s what we do. And so, what we’re essentially underwriting there is a project that’s unfinanced. It trades roughly in the market at about a 4 times NAV, whereas a cash flowing growth asset trades at north of one times NAV.

[00:10:34] Jamie: And so, you’re clipping that margin.

[00:10:36] Oskar: And you’re clipping that margin, right? One divided by 4 is a two and a half multiple, right? So that, that’s essentially what we’re underwriting.

[00:10:43] Jamie: And for people at home not familiar with NAV or NAV, that stands for Net Asset Value, which is a calculation of the underlying value of the assets, typically.

[00:10:52] Oskar: Correct.

[00:10:52] Jamie: Yep. So, okay, so, is it safe to say, you know, a lot of the, especially the junior mining speculators they’re looking to knock it out of the park, right? They’re looking for those 10x returns, you know, they’re willing to, to eat some losses along the way to search for that 10x. You’re looking at a much more structured product and deployment of capital.

[00:11:14] Oskar: Exactly. Early-stage exploration is, you know, venture capital for rocks, essentially. And that is, I’m going to write a couple of zeros, I’m going to maybe cover my face once or twice, and then hopefully the rest of the time I’ve got a 3x or 5-dagger or however you want to call it. And that’s a very VC model in a way. And that works for various people that like that kind of risk. To our thinking, that’s not really very institutional in nature. And we’re looking for, um, investors, and investors are looking for us to hit singles, doubles, triples, not grand slams, right?

[00:11:49] Jamie: So, when you were sort of devising this, and what you’re saying now is, it sounds pretty obvious, and you know, this exists in infrastructure, and basically every other industry in the world. But, and I’m not an expert on this, but when I look at all the other mining PE funds, private equity funds in the world, first of all, there aren’t that many that are around for the long run and there aren’t as many, I think, that sort of take the approach that you’re taking. There’s a lot more equity focused and a lot less sort of structured finance. So, did you come at that, like, did you understand the needs of the clients you wish to service or was this just sort of how you viewed the industry, and you were scratching your own itch there?

[00:12:39] Oskar: I like the scratching your own itch analogy. I think that’s kind of more appropriate actually. It doesn’t do anyone a favor to put something together that an investor likes, that’s a great story, but isn’t fit for purpose, right? So, what a lot of people have done over time is they’ve invested in PE structures that mimic what you’d call a retail investor approach, which is early-stage equity. Which leads you to a too concentrated position. No flexibility in your capital structure and passive exits, right? Yeah. To exit your equity position, you need somebody else to buy your equity position, which means you can’t really drive that success, because unless you have all the money together to actually build a mine, you don’t have any alternative path. You either, right, if you have, if you’re looking at this from a perspective of, I’ve just funded this exploration success story, either I build a mine and go public and exit that way, or I sell this discovery to, to a third party.

[00:13:45] Jamie: Yeah.

[00:13:46] Oskar: And if you can’t sell it, and you don’t have the money to build it, then the person that you’re selling it to knows you don’t have the money to build it. You have no leverage in that transaction.

[00:13:58] Jamie: And you see this a lot, these PE funds that get trapped, right? Exactly. It’s like they own all of it, or a large, or most of it. They list it. They raise some other money. They still own the money. 40 to 60 percent of this thing. There’s no way they can sell that stock in the open market. No one else wants to finance it if they won’t finance it.

[00:14:15] Oskar: Exactly.

[00:14:15] Jamie: And then they’re trapped.

[00:14:16] Oskar: They’re trapped. Exactly, exactly right. And that is been the bane of existence for many a person in this space because they know that there’s this overhang of paper that wants to be sold. And they’re not going to get in front of that because that sales process will crush the price, right? And if they know that you can’t sell it and then there’s no financing in place because you have no more money to follow your money to actually build it, you end up in this sort of you know, sort of impasse.

[00:14:47] Jamie: Yeah. So how do you guys do things differently? How do you avoid that trap?

[00:14:53] Oskar: Well, first of all, the best way to avoid that trap is not to walk down that road where the trap is, right? And that is, right? And the way to do that is not to get involved in those early stage, more middle stage exploration plays. There’s a famous sort of curve with many different names, the most common is the Lassonde Curve, right? And that’s very low value through exploration and all the hype gets told, the share price runs up, then the people realize, oh no, oh no. There’s nobody going to buy this, but we now need, you know, a billion dollars to build the asset. Where is that coming from? The share price comes back down. Construction finances raise. This finally happens. Then the share price runs up, and then you have a publicly traded cash flowing entity, right? What we want to do is we want to get in at that trough in the Lassonde Curve and we want to get out on the first day of commercial production.

[00:15:50] Jamie: And you’re using, in these scenarios, a combination of debt, a combination of royalties and off takes, a combination of equity. Is that fair to say?

[00:15:59] Oskar: Yeah, so, what we talked about at the beginning was that there’s no point in financing the first dollar of a mine construction if you don’t have the money to finance the completion of the mine construction, right? Ninety percent of a mine is just a big hole in the ground, right? So, you have to speak for all the money, and you certainly don’t want to take that check and write one big equity check for it, right? You certainly want leverage, and you certainly want to be, you know, clever in structuring how, you know, that mine package, mine financing package is built. And for that you need to have a lot of different options in your house to do that. Because every mine is different, every cash flow profile is different. You have to bespoke your package to the needs of the client, right? And that’s not possible if you don’t have the ability to do any and all of those different kinds of structural financial tools in your tool belt. And Orion is one of the few organizations that has enough experience, enough expertise. In all of these kinds of structuring options to really tailor properly the package to the, to the needs of the mine. Additionally, what a lot of people forget to do or do poorly, that we’ve, you know, sometimes through, you know, hard yards ourselves, have to be said, learned about, is how to milestone properly, right? So, if, if you have a billion dollars that you need to build a mine, the worst thing you can do is go to the mine manager and say here’s a billion dollars call me in three years and let me know I went right, so…

[00:17:30] Jamie: You have some nice dinners.

[00:17:32] Oskar: Yeah, that’s right. Yeah. Oh, that’s Ferrari. It’s new on the lot. How’s that happen? So, what we do is we don’t finance all the money up front. We have different stages different requirements both financial budgetary, personnel and operational readiness You to draw money from us. So, you have to meet every milestone for the next ticket to arrive.

[00:17:57] Jamie: So, you accomplish X, that unlocks Y amount of capital.

[00:18:00] Oskar: Exactly right.

[00:18:00] Jamie: So, I have a question here for later, I’m going to pull it forward. So, agree or disagree? So, mining as an industry massively overcompensates its managers and massively underperforms.

[00:18:14] Oskar: I don’t believe it massively overcompensates its managers. I believe that compensation schemes could be better tailored towards success. But if you compare mining executives to oil and gas executives, for example, they’re certainly not overpaid, right? But the incentive alignment could be improved. Only about 20 percent of mining projects get built on time and on budget. On time is within six months of original timeline, and on budget is within 15 percent of original budget. So, it’s an industry that is woefully inadequate as far as returning capital properly to its shareholders, because overruns lead to dilution, lead to delays, lead to worsening conditions for mining companies and lead to long term on an industry wide basis lead to people exiting their interest in investing in the space, right? And there’s many a paper been written about value destruction in mining and don’t need to belabor that. What we have to do is we have to find a way to do that more cleverly and that path exists.

[00:19:26] Jamie: And it’s the milestones part of that, right?

[00:19:27] Oskar: Milestones are certainly part of that proper structuring of covenants for, for debt facilities is part of that, balancing the debt facilities with structures around production linked financing so that the part of the financing package is linked to production so that the company feels more comfortable about its relative leverage is important. The ability to intervene rapidly, which is important. Mining companies that have things go wrong quite often don’t have the budget or the wherewithal to deal with the problem when it’s still minor and the problem escalates. And as you know, in any of these sort of construction projects, one small thing near a bottleneck or a critical path can have a cascade effect across the entire project. And by the time you get to figure out what the original problem was, it’s morphed into something much bigger, right? There, Orion is very happy to be hands on with folks. What we do quite often is understand there’s a problem, and because we’ve seen that problem in another asset that we’ve investigated or funded, we know how to solve the problem and who the person is that can solve that problem. So, nipping stuff in the butt is another big advantage that we have. Another big lesson that we learned over time to, to have open dialogue about what is going poorly and sorting it out quickly.

[00:20:53] Jamie: You know, when you get got into this career, did you start with like, you’re we’re in New York, not exactly a mining hub. I think you grew up here, if I understand.

[00:21:03] Oskar: I did, yeah.

[00:21:05] Jamie: Were you fascinated with mining or were you fascinated with finance early on?

[00:21:08] Oskar: I was actually fascinated with finance and fascinated with finance as a sort of an oxymoron. I mean, I don’t know how. You know, finance isn’t really that fascinating as a career, but it’s where I started, right? And I really got into mining quite a while ago almost by accident. I was, you know, busy being a general corporate banker, but I got sent out to Central Asia very early in my career.

[00:21:38] Jamie: Where specifically?

[00:21:39] Oskar: I was sent out to Kazakhstan, I was sent out to Azerbaijan and I worked on a lot of the sort of post-Soviet mining industry and oil and gas industry sort of restructuring.

[00:21:49] Jamie: So, this is taking these sorts of state run organizations and listing them on a

[00:21:54] Oskar: Exactly. Listing them, selling them, running privatization campaigns for, for people’s equity in these, in these businesses. So yeah, I did, I did a lot of that at Credit Suisse.

[00:22:06] Jamie: Ah, yeah. I mean, have you, I assume you may have read Bill Browder’s book and sort of his early career in, in doing something similar.

[00:22:14] Oskar: Yeah, he was more oil and gas and very much Russia focused, and I guess I was lucky enough not to be Russia focused. And more mining than oil and gas. But yeah, essentially this was the wild east back in the day and figuring out stuff that never had to be figured out before. And it’s a really steep learning curve but fun too.

[00:22:38] Jamie: And so, did you kind of fall in love with the sector and see the opportunity there?

[00:22:42] Oskar: I did actually, yeah, I kind of fell in love with it. I’d say mining for most of the people in mining is kind of a love hate relationship. You have to, you have to kind of love it, but it drives you crazy too. At times, right. Yeah. But it’s, you know, it’s kept me busy. And mostly out of trouble.

[00:22:58] Jamie: So, if we come to today, you guys have been doing this for ten years now, it’s a very different world today. Where do you see the opportunities in mining today? Where is Orion and yourself focused on in the future?

[00:23:16] Oskar: Well, a lot has been said in the press and a lot of other sort of public announcements have been made about the importance of decarbonizing the economy and sort of you know, removing fossil fuels from the energy systems and replacing them with, you know, renewable energy. A lot less has been said, although, you know, certainly some, something’s been said about how important mining is to that conversion, right? The amount of lithium, the amount of graphite, the amount of copper necessary for a successful transition is finally starting to be understood by people. And the need for upstream supply for downstream assets be they geothermal wellfields, solar panels wind farms is finally sort of being understood by the OEMs, by general industry, by the government. You know, belatedly, the U. S. government is, it’s sort of cottoned on to the fact that they need to do something about securing critical materials to the U. S. The EU has also initiated a program as well about a year ago now to try and secure supply. So that is obviously a very big thematic that’s, that’s a booster of demand. I think the other things that are probably a little bit less well understood, that are also big sources of incremental demand for metals are the use of a great deal of metal in military situation. So regional conflicts that we’re going through now are vast consumers of metal, right? So that has to be replaced as well. That’s another source. As of about 5 or 6 years ago now, the world has finally moved to being predominantly urban. So more than 50 percent of the world’s population lives in the cities. Cities are much bigger consumers of metals than the countryside is, right? You’re moving essentially from wood construction to cement and steel construction. So that’s another big source of demand. And then lastly, incremental sources of new energy requirement. Not just for transitions, but also the amount of data centers and AI data centers that are cropping up now that need energy and need infrastructure for that energy. That’s all incremental sources of demand. And now, the important word to understand there is that they’re incremental. Right? There’s still all the underlying historical needs for metals that always existed. Like you still need copper for tubing. Right? You still need all that kind of stuff. This is all new sources of demand.

[00:25:54] Jamie: Well, the stat I read from one of the banks, one of the research groups, is that it’s something like in the next 25 years there needs to be more copper mines than all of human history up to this date or something like that.

[00:26:08] Oskar: That’s a quote that a lot of people have made. I think most recently the CEO of Rio Tinto said that at a conference. And it’s true. We do need to mine more copper in the next 25 years if we’re going to meet our urbanization demographic requirements, we’re going to meet military requirements, we’re going to need to meet energy transition requirements data center, all that stuff means we need to produce more copper. Closer to 50 million pounds of copper versus about 25 million today.

[00:26:40] Jamie: And so, we’re seeing like today, the majors reacting to this in a big way, right? We like Anglo’s now in play. BHP put a bit in for them. Glencore is kind of going around that too. So, you can see the biggest mining companies in the world are making big steps to lock down supply. But they’re really only locking down existing supply, right?

[00:27:04] Oskar: Exactly. They’re changing the ownership of supply, not adding to it.

[00:27:07] Jamie: Even, I think, was it last week, we saw the UAE Sovereign Wealth Fund, they bought a big chunk of KCM, Vedanta’s Zambian copper mine, a billion dollars, I think, for 50 percent of it. So, that’s great, and it’s good to see money flowing into, sort of, consolidation and bringing these sorts of assets offline. We still need more mines, right? We need a lot more copper mines.

[00:27:33] Oskar: We need to do three things better. One, we need to incrementally improve recycling.

[00:27:39] Jamie: Okay.

[00:27:40] Oskar: Because that’s copper breathing air. That’s, is it, is it the highest, best use of copper? Or can you recycle that into, into A better use. That’s one thing. Second, you need to maximize out substitution or thrifting. Right? So, you need to say, do I really need zinc for this? Do I really need copper for this? Is there a way to use less to get the same result? Or substitute it out with something that’s not as constrained physically as this metal is, for example. Right. So, in battery chemistry, is there a way to run a battery chemistry without cobalt? If you can figure that out, and people are talking about how to do that. Then all of a sudden cobalt becomes less of a tight market, right, because you don’t need as much for what you’re using. And then the last thing, the last one is obviously primary new supply, which is the building of mines. You need all three of those working together to have any hope of meeting these demand size targets that people are talking about.

[00:28:41] Jamie: Okay. So, with respect to the primary supply, this is going to be kind of a hard question to answer, I think.

[00:28:50] Oskar: Oh, good.

[00:28:51] Jamie: What has to happen to incentivize miners, governments, the key players here, to actually go out and make that happen? To develop new mines, to explore aggressively for new mines? Is it simply metal prices need to rise to incentivize that? Is it regulations need to change? I mean, I don’t know. Certainly, you know, America and Canada and the Western world is a little, I think a little slow to the game. You know, the Chinese have been picking up critical assets in Africa, now aggressively in Latin America for years now. What has to happen for, let’s call it, North America and Western Europe to catch up there? Or can they? I think I asked you two different questions.

[00:29:38] Oskar: Yeah, it’s okay. A complex compound question. Okay. No. Suffice it to say that the West needs to catch up. It’s not a what if or do we need to or can we or should we. It’s almost an existential question for the West at this point. If they don’t get this together, they’re looking at a long-term slowdown and decay of the economy. Their way of life. You need to do this, right? It’s a nice to have type outcome for them. Not everybody realizes that. Not everybody buys into that. Not everybody is as fully convinced as I might be that that’s true, right? So, the first thing that needs to happen is education, right? And that’s where something like a podcast comes in because these people that have various sort of agendas and have various you know, issues that they have to contend with.

[00:30:35] Jamie: And you hear that, Biden, are you listening right now?

[00:30:39] Oskar: I actually think, I think, I think, I think actually Joe is actually on board with this. I think the IRA is a really powerful piece of legislation in that direction. Right. I also, for what it’s worth, I think Donald Trump kind of sees this as one of the few bipartisan things he can actually agree with the Democrats on, so I think that that’s super helpful. But you’re right, I mean the Chinese Belt and Road Initiative has given them a pretty massive head start on this and we need to catch up, but if anybody can, it’ll be the sort of, the Western powers, pretty, you know, innovative, pretty fast at catching up. What has to happen is you need an incentive price of production. Where you asked about incentive prices. So, you need that to happen, right? Otherwise, there’s no economic benefit to the West and to the people that provide private capital to actually deploy it in this space, right? So, you know, you can, you can, you have a dollar, you can spend it on a lot of different ways to convince somebody to spend it on building a mine. Means that the mine has to return in something economic relative to its risk Versus other projects, right? And you know, is that a solar Panel is that a wind farm or is it a mine, right? The first initiative has always been for people to go downstream and fund green projects. But the returns there are, for infrastructure returns, are single digit returns now, right? The really interesting returns are now upstream, right? That’s starting to be recognized and money is moving in that direction. But you need incentive price of production. And you need certainty, and that certainty is really a question of permitting at this point, right? The last thing you want to do is spend all this money on a mine project, you know, we’re talking about hundreds of millions of dollars in some cases, only to be told that the mine is a no go because some permitting issue came up that you knew about, that other people knew about, but they just ignored, and they didn’t want to deal with it. And then they say no. And then you’re sitting there with all this money spent and nothing to show for it. That needs to change. You need certainty. You can certainly say no to a mine. You can say, I don’t like this mine. I don’t think this is in the right area. It shouldn’t be built. But, to say it’s okay and then wait till a lot of money has been spent and then say no is a problem.

[00:33:01] Jamie: So, in the lead up to this conversation, I’ve been trying to think about the problem and the solution here. I have a pet theory, but I want your feedback. So, the, you know, the problem with competing against, say, the Chinese, is You know, often they’re state sponsored. They don’t really need to make money on the acquisitions of the mines. From what I can see, you know, in the case of things like lithium, they’re just securing the feed for their downstream industries, right? And all the money is made in making the batteries or the solar panels or whatever, and they’re able to outbid almost everybody else in the world for assets. How does Because North America, you know, the Canadian, U. S., Australian mining industries compete with that when companies, private equity firms, et cetera, they actually need to make money on these investments? They have shareholders they answer to. So, I have two theories here. One is that there will need to be some form of public private partnership where the government is providing capital in order to secure assets for, for some form of national interest. Or two, that the only people that can maybe afford to compete here are the big tech companies whose cost of capital are so low who trade at such high multiples that, you know, the Teslas or the Microsofts or what have you, they’re able to actually go down and lock, lock down their feed of whatever minerals that is critical to them and not be concerned to the same degree about making money as obviously a mining company would be. What do you think?

[00:34:48] Oskar: I think you’ve identified certainly a key problem, right? Which is that the political situation in China and the SOEs that work for the Chinese state aren’t. always rational economic actors, right? They, they have a geopolitical element to them and they, they think very long term and they, they may be willing to lose money up front on something just to secure supply and to ensure the ability to bottleneck other geopolitical actors, right? And you’ve seen that in Rare Earths. You’ve seen that in a couple other situations recently. So, you’re right. That, that, you know, that’s not a level playing field from the perspective of the West, right? I’m not as deeply concerned by that, and I’ll tell you why. Making decisions on a non-rational basis, a non-economically rational basis will tend to cause problems for you in the long term too, right? So, you’ve seen a number of investments that the Chinese made under their Belt and Road Initiative in Africa go sideways really badly, right? So, there’s only so long that the, that the any kind of economy, even the Chinese economy, can tolerate abject negative returns, right? And you’ve seen that in a number of projects where they’ve overbid where they’ve constructed ports and railway systems in different countries and those railways are empty. You’ve seen, even in China itself, you’ve seen the Chinese build airports where there’s no, there’s no landing slots, right, for airplanes. So yes, you can be economically irrational, but eventually that’s going to end up costing you. And I think that is something that the West can avoid making as a mistake, that may be a mistake over time. That doesn’t solve your problem immediately, obviously. This is sort of more of a longer-term evolution of thinking. But nearby, you’re right. There’s got to be an ability for the West to compete on an economically rational basis against a, a player that’s not necessarily that and the way I think that works really ultimately is that you have a Western balanced price mechanism that, that essentially guarantees at least for some portion of the minds output, a floor price and then a floor price It looks like a price that provides a certain positive level of return to the investor and the mine and doesn’t allow a non-economic actor like the Chinese government to underbid the prices, right? Because that’s, that’s something else that happens, right, is you go in and you write yourself an economic case for an investment and then the Chinese come in and they underbid the price that you think you’re going to get for your output and then, you end up having to close your operation down, right? So interesting example today in cobalt, right? The Chinese have gone from producing China has always gone from producing 10,000 I think it’s tons maybe of cobalt to producing 100,000, right? And the whole market in the world for cobalt every year is 150,000 tons.

[00:38:01] Jamie: Okay, so they’ve just flooded the market.

[00:38:03] Oskar: They’ve just flooded the market, destroyed any ability in the West for anybody to make any money on cobalt. Everybody shuts and the West shuts down their cobalt production.

[00:38:10] Jamie: Then the Chinese can buy up all those mines if they want to as well.

[00:38:13] Oskar: Exactly right. So as long as you knew that there was going to be a guarantee from either an OEM, a tech company, or the government, or somebody that says we’re going to guarantee 40 percent of your productions at this price and with that you just about survive, then the Chinese can’t play that game with you, right? They can’t just, you know, take you out.

[00:38:33] Jamie: So, do you envision that happening kind of like on us or maybe North American based assets, or do you envision that happening for US companies on global assets that they’re involved? How, how does that might be?

[00:38:52] Oskar: I don’t know your realm? No, no. I just, I don’t, I, I don’t know how that happens. I’m just hypothesizing that that’s a path that, that people have talked about taking. To, you know, secure supply, because you don’t want to end up being completely dependent on the Chinese for sources of materials.

[00:39:11] Jamie: There’s a lot of discussion, obviously, today in terms of sort of on-shoring to America, right?

[00:39:19] Oskar: Yeah, or friend-shoring.

[00:39:21] Jamie: Yeah, probably chip manufacturing being the most prescient. But I think that there is a time when the actual deposits of onshoring for, you know, be it lithium or nickel or cobalt or what have you, there is going to be a focus on securing those in, in friendly countries in North America again. But I think, you know, to your point earlier, that means real, in a lot of places, overhauling of regulations, right? Or at least, or at least clarifying the regulatory environment. Do you think that happens?

[00:39:59] Oskar: I do believe that happens. I really just hope it’s not some kind of traumatic event.

[00:40:05] Jamie: Yeah.

[00:40:05] Oskar: That forces that to happen, right? You know, you want to, you want to take care of it before, you want to take care of those kind of problems before they become acute, right? And that’s a question of political will. And, and sometimes it takes, it takes something traumatic you know for, for the people to, to do that. I hope not, but, but who knows?

[00:40:27] Jamie: I think it probably will. You know, I think about even just Canada, right? Like it took a global pandemic for us to realize maybe we should be able to produce some vaccines within our own country. I hope you’re right. I have a hard time, seeing the politicians prioritizing that, or even being able to prioritize it if they wanted to without kind of everyday people feeling the pain of some sort of shortage of something that’s critical.

[00:40:54] Oskar: Yeah, but politicians hate when people feel pain.

[00:40:57] Jamie: Which is why they’ll try to, they’ll have the ability to solve it then.

[00:41:01] Oskar: But yeah, but this question is, if you could solve it with a band aid now, or general surgery a year from now, would you rather Fix it with a band aid. I would have thought so. But you’re right. Sometimes it takes a wound for it to work.

[00:41:15] Jamie: I would rather fix it with a band aid. I don’t know if, you know, in every country politicians even realize that band aid is necessary. So, I guess we’ll see.

[00:41:25] Oskar: We’ll see. I mean, the other thing to remember, right, is it isn’t just about permitting, right? It’s and or government acquiescence to allowing for a rebuilt mining industry in North America, right? It’s also about having the skill set to do that, right? The U. S. has had a, had a real issue with a mining workforce and a mine engineering workforce that’s aging rapidly and with very little in the form of next generation expertise being homegrown here, right? In order for the U. S. to actually build out a mining business again, it needs metallurgists, needs geologists, needs process engineering. All those guys that do that now or have done that for the in the U. S. for years are all in their late 50s early 60s at this point and the people beyond behind them are all chemical engineers or well electrical engineers are all computer coding you know they’re not learning how to do stuff that’s necessary and to make it even worse a lot of the more advanced kit that is necessary for mining these some of the equipment It’s made in China now. It’s not made in the United States anymore, right? I mean, okay, clearly, we still have Caterpillar, and we have, you know, some of the yellow kit that is necessary is made in the United States, but a lot of more specialized mining equipment, we exported all that production to China now.

[00:43:05] Jamie: Ball mills, et cetera, yeah.

[00:43:06] Oskar: Yeah, it’s not made here anymore.

[00:43:07] Jamie: I have that in my notes, actually. You know, what do you, how is Orion preparing for a talent gap? Because, you know, you’ve, you know, got a lot of money to deploy and, and support companies. And I look at myself, you know, I’m 38, I’m a mining engineer. Most people I know doing that job are, are in their 60s now. You know, there’s not a lot of people between me and the 60-year-old.

[00:43:33] Oskar: So that means you just get promoted faster.

[00:43:37] Jamie: Heaven forbid that mining company. But now how do you think about that? Right? Because you guys have been around 10 years. I assume you want to be around for a lot more, you know, how do you look for talent? Both in terms of who’s working for Orion and then who’s working at your portfolio company.

[00:43:56] Oskar: It’s a real challenge for us I mean, you know. Our technical team is based out in Colorado, right? You know, near the Colorado School of Mines. But most of the guys in our tech team are with one or two exceptions. They’re all in their late 50s, early 60s, right? And the people that we’re finding that have those skill sets are not Americans. They’re, in some cases, Canadians, and in some cases, Australians. But in a lot of cases, they’re Chileans, they’re Peruvian. You know, they’re not, and, you know, I don’t know. In inducing them to come, to move to, to the United States to do something is a challenge too. It’s a language challenge. It’s an education challenge. It’s an expense challenge. Right. It’s a visa challenge for, you know, certain you know as well. Yeah. So, we’re having to go to where they are as opposed to them coming to where we are in a lot of cases.

[00:44:48] Jamie: Does that mean, so as, so you have offices in the United States, Australia, London. Chile? Do I have that one right?

[00:44:57] Oskar: No, but we have Chilean expats working for us in those offices, for example.

[00:45:03] Jamie: Yeah, is that how you approach it? You set up an office, maybe set up a satellite office in the region?

[00:45:08] Oskar: Yeah, we are thinking of setting up a satellite office in the region. And in somewhere in the Middle East to get some of the talent there because there’s a quite a bit of talent over there We don’t know if we’re gonna do that, but we’re thinking about it But it’s you know, if you’re if you want to build a brand new mine somewhere in you know, Michigan Getting the right people there to build the mine effectively is not easy, right? It’s really challenging. And that’s another, I mean, that’s another problem that takes time to solve. You can’t just throw money at that.

[00:45:42] Jamie: If you think of the young engineers, right, they can go work at a mining company and make 150, 000 a year, or they can go become computer engineers and make 400, 000 a year in Silicon Valley.

[00:45:51] Oskar: That’s right. You can go to the office, have your dry cleaning done for you. Macchiato sent to your desk, or you can sit out in a base camp in the middle of Manitoba.

[00:46:01] Jamie: Yeah, so the case is that those jobs are not really being compensated properly to attract the talent. And for that you need higher metal prices.

[00:46:10] Oskar: There you go.

[00:46:13] Jamie: How do you guys, when you’re investing, think about teams versus assets? Because, you know, the best mining asset in the world is basically worthless without the right team to operate it and to extract it.

[00:46:29] Oskar: Yeah, but vice versa is also true. A really good mining team with an asset that shouldn’t be built is also a waste of time, right?

[00:46:37] Jamie: So how do these sort of sit in your evaluation process? Do they hold equal weight? How do you view that?

[00:46:43] Oskar: Well, our view is actually, interestingly enough, a little bit of a combination, right? We tend to believe that really good assets attract really good mining teams. Right, one of the best ways to know if an asset’s worth looking at is to look at the management team that is running that asset. Because if they are good at what they do, they will have invested, investigated that asset itself, and decided whether or not it’s worth their time to be there. I mean, very few management teams want to take on a challenging asset if they don’t have to.

[00:47:17] Jamie: They have better options.

[00:47:17] Oskar: They have better options, right? So, a good management team and a good asset tend to sort of correlate with each other. And so, we think ultimately, it’s almost always easier to change some of the management team instead of changing the asset. Because the asset is what mother nature gave you. You have to deal with it as it comes. But by and large, and this is the benefit of being in this business for so long, is we kind of know everybody in the space. We know who’s good and who’s, you know, who’s the A team, who’s the B team. And so, A team assets and A team membership tends to correlate. And so, for us, the home run is, you know, not having to choose between the two. Let’s put it that way.

[00:47:59] Jamie: Are most of your investments made with sort of the very well-known entities? In the sector, you know, I know like the Robert Friedlands of the world, for example, or do you have a lot of sort of lesser-known teams that you guys have found to be very good and don’t maybe necessarily have quite the public image as some of, some of the better-known entrepreneurs in the space?

[00:48:23] Oskar: I think that the winning combination is a little bit of both of those, right? You want your sort of, you know, pedigree names, your sort of, you know, your Frank Giustra’s and, and Regents and, and Friedlands of the, of the world. But you also have to understand that those, those names attract decent valuations, right? And so, you’re going to necessarily have to work that much harder to return something that, that you want to. The smaller, less known teams don’t attract those. those high-end valuations, but you have to, you’re taking a bit more risk that they can actually accomplish what, what you, what you think they should be able to accomplish.

[00:49:07] Jamie: So, I’m really glad you said this, because there’s this ethos, especially in junior mining, of investing in the, you know, the rockstar mining entrepreneurs, the Ross Beatys or the Robert Fruins, guys that have had these repeat successes. And a lot of the finance types, what they say to people is, you know, bet on Ross Beaty, he’s done this, or, or whomever.

[00:49:29] Oskar: Yeah.

[00:49:29] Jamie: The problem is I have seen is the reputation is priced in by the time most people get to invest right? It’s a premium because they’ve had XYZ.

[00:49:39] Oskar: And they deserve it right? It’s not it’s not like it’s not like the premium is just sort of magical It’s earned right and all those names you mentioned are all people that we have invested with and in our in our view deserve the recognition that they’ve earned right and we’re happy to be alongside them.

[00:49:56] Jamie: Yeah.

[00:49:57] Oskar: But the really big home runs are going to be outside of that sphere because the step in valuation the purchase price is Just more reasonable in some ways, right?

[00:50:10] Jamie: And that’s what I was going to say. All the big wins I’ve ever made are from relatively unknown groups of people. That are not, they have a lot of experience doing, typically I look for technical roles, because that’s where I’m maybe most apt to evaluate someone, and then they’ve stepped into the, okay, this is their first time with their own company, but they’ve worked heavily, and that’s where I’ve always had the best success.

[00:50:32] Oskar: Yeah, I mean, that’s absolutely right. The risk you’re taking is that sometimes the entrepreneurial exploration mindset that these folks have, that have found this really, you know, this jewel, jewelry box or this sort of gem of a mind somewhere, you know, after 20 years of running around finding different things, right, is, are they capable of transitioning themselves from the entrepreneurial exploration, watch every dime mentality to, okay, oh my God, I’ve got a billion dollar kitty now and I actually have to construct this mine and I have to hire a whole group of other people that I don’t necessarily know that well because I’ve just been running around with an exploration hat on. But now I actually have to manage the permitting cycle, I have to manage legal. I have to manage accounting. I have to hire a thousand people. I need to negotiate contracts and long lead item equipment. I have all this stuff to do, and there’s no way that guy that ran a small exploration company can do all that. He needs to, or she needs to rely on a whole new set of people. And can that person work within that structure effectively is a big transitional challenge for people like that.

[00:51:47] Jamie: There’s not many people that have done it successfully, right? I would make the case that most mining companies, as they go from exploration development to production, need to rotate out management teams to some degree, right? You need to bring in different leaders.

[00:52:02] Oskar: Management teams and boards, too.

[00:52:04] Jamie: And boards, okay.

[00:52:05] Oskar: Right, because sometimes what you can do is if you’re a manager that has a particularly good focus on one thing, you can rely on board members that have expertise in other areas, to help you out, right? So, what you don’t want is your board to be the, your buddies from, you know, from Canadian Finishing School or McGill or wherever, right? That you like, you know, that you play tiddlywinks with on the weekend and they’re all, you’re on board and they’re all making thirty, forty thousand dollars a year for four board meetings and having a good time. You know, that, that kind of board, Is just a, a disaster, right? So, you need to amend your board as well.

[00:52:46] Jamie: Now the average person. listening to this podcast is not ever going to own enough shares in a company to make a real, have a real voice in terms of changing up a board or influencing a management team. How do you guys approach that? Saying, okay, well, maybe it’s time for certain people to, to graduate out of this role and bring in a specialized mine builder or operator or financier of some sort.

[00:53:14] Oskar: Again, that goes back to what we talked about earlier, which is the milestone, right? So, one of the milestones that we typically develop inside a process is, how many people have you hired for these jobs? Have you, how many people have you canvassed for the job of mine manager? Who’s your procurement manager? Who have you brought on board for your corporate relations, IR, you know, how, how are these people, let’s see their CVs, let’s understand who you’ve picked and why you’ve picked them. That tells us a lot about you as a person, as a, as the CEO, is if you’ve picked your buddy that lives three houses down or if you’ve picked somebody that, you know, has a, has a pedigree. That tells us a little bit about how you want to run your business and that, that’s important, right? So, we, we try and make sure that we understand management teams and particularly management team plans. Right?

[00:54:09] Jamie: Do you assist with that? I mean, if someone says, look, you know, I haven’t done this before, what do you think? Thanks for the money. Now what do I do?

[00:54:17] Oskar: No, absolutely. So, we strongly prefer when people that want our money are also open to listening to us, right? And that goes back to what we said earlier about if there’s a problem, the worst thing you can do is try and hide that problem or downplay that problem because it won’t work. You can’t hide it from us for very long and we’ll take our own assessment as to how serious the problem is. So, if people are open with us, willing to talk to us, take our advice then it’s much more of a partnership, much more collaborative and that makes us much more comfortable. And good management teams should know where their blind spots are. They should know, I don’t, I’ve not done this before. I can use help here. And there’s nothing wrong with that. Doesn’t make you worse of a CEO or president to, to know what you know and what you don’t know. That just means that you, that you’re working, you know, for the best interests of everybody that’s a shareholder.

[00:55:16] Jamie: You know, it seems to me like a lot of mining companies, it’s a never-ending series of solving problems that come up, unexpected problems that come up. How do you guys look at sort of setbacks and investments you’ve made, because I’m sure you’ve had them at one time or another. How do you look at solving those problems?

[00:55:34] Oskar: Yeah, I mean, I think of what you say is fair that there’s problems in any ramp up or any construction project. I think. There’s two classes of problems, right? There’s unforeseeable problems, right? You know, a washout on a road and you’re trying to get equipment up to the mine. That’s an unforeseeable problem. Okay, maybe you should know that there’s a rainy season, but you know, maybe you’ve constructed the road, and you think it’s okay. That’s an unforeseeable problem. Then it’s a matter of how do you deal with that emergency, right? A foreseeable problem is a different, you Like, you should have known that this was going to be an issue, right? That, that is a concern, and that is a sort of review of how things happen and why things happen, right? The worst, though, is a foreseeable problem that becomes a recurring problem. And that’s when changes need to happen, right? So, you’ve made this mistake, you’ve done this incorrectly, and you knew you did it incorrectly and you learned from it, and then you did it again. That means there’s something systematically incorrect here and needs to change, right? And, you know, you’re allowed to, you’re allowed to learn from your mistakes, but you’re not allowed to repeat your mistakes. And that, if there’s a pattern of that happening in management, then something needs to change. Is that a complicated answer to your question?

[00:57:05] Jamie: I think that’s a clear answer to my question. Subtle, but clear. When, you know, you said something earlier that, about, you know, it’s hard to be passionate about finance, right? Finance is, you know, stereotypically a very boring career path, but, you know, potentially a lucrative one. But when I look at what you guys have done compared to your peer group in the mining industry, I see a lot of creativity there, right? You have a private equity firm, you have a, a long equities fund, you have a VC fund, you have a royalty fund, you have a trade finance division. I think there’s a bunch of other things that I’m not even aware of. How do you, you know, I can’t think of a comparable in the mining space that does this. How do you think, how do you think about creativity in this world and coming up with that? Like what, I think you’ve been not formulating this question well, but like I think you’ve done a very good job of being creative here. And where do you think that comes from in a traditionally very dry industry?

[00:58:21] Oskar: I think it comes from sort of a, a need to, for continuous improvement, right? So, as I said, we started out in a, in a different organization as a hedge fund, and then we realized that in order to improve our returns, we needed to have a physical business. And then we realized in order to improve on our physical business, we needed to have access to mine supply. Then we realized that one of the most interesting forms of, of financing are royalties and streams, and that the royalties and streaming businesses were pretty anodyne and pretty vanilla, and there’s ways to make those more interesting, and so we made those more interesting. More of a royalty product around that. Then we realized that as, as you alluded to earlier, that more mining needs to happen in the next 25 years than happened in the last 250 years. Realized that doing that without trying to make it sustainable, is a non-starter, right? So, we have to find ways to make mining more sustainable. Technology is part of that solution. So, we’ve built a technology business around that, right? So, it’s a matter of everything we do, we say, hey, this could be done better. What’s a way to do that better? Let’s create a product that takes advantage of that. And then just that mindset is, yeah, it’s driven us to where we are now.

[00:59:34] Jamie: I mean, what you’re saying sounds very basic and obvious, but

[00:59:37] Oskar: I’m good at that basic and obvious stuff.

[00:59:39] Jamie: But no one, there’s very few groups that do it. Like, it is an outlier, I think, to have this sort of range of, of products and solutions, and yeah.

[00:59:49] Oskar: Long may it last. I don’t know that I’m going to stay an outlier. I found I guess one of the, that imitation is a serious form of flattery, and that quite a few of my peers have, over the years, looked at what we do and sort of Taking a page out of our book and trying to accomplish the same. So, and I have no objection to that. I think it’s actually good for the industry overall to have more investable options than they do now, you know, more power to them for doing that. And I think it’s good for mining overall. And my view is always what’s good for mining overall is good for Orion. So, you know. Welcome to the party, frankly.

[01:00:29] Jamie: Is there anyone or any group that you look up to or take inspiration from or learn from, whether in mining or other industries, historic, otherwise?

[01:00:41] Oskar: I wouldn’t say there’s another group in mining that I kind of look up to in that sense, but I would say that a lot of the innovative ideas that we see in mining actually come out of the oil and gas space. So, we always keep an eye on that you know, industry and get some ideas about how they do things. And I think that’s stood us in good stead. Examples on the, on the royalty side that we talked about before, the VVP structures that they have in oil and gas are much more flexible in some ways than what we do in streaming here in the mining space. So, borrowing some of those ideas is something that we took a look at and have implemented. So that, that’s an example of that. So, there’s a broader range of ideas to go after. Some of the stuff that we’re looking at in technology, we’ve borrowed some ideas from, from some of the other VC firms, you know, the Breakthrough Energy folks in this world. And so, they have some pretty good structures and some good ideas on how to deploy capital. So, you know, borrowed those ideas.

[01:01:47] Jamie: Do you think there’s ever a world where Orion diversifies the commodities you invest in? Do you do energy or agriculture or commodity adjacent, like infrastructure for commodities?

[01:01:58] Oskar: I would say if there is a place that we would go to, it’ll be in the last thing that you just mentioned, which is really infrastructure.

[01:02:06] Jamie: Terminals and storage.

[01:02:07] Oskar: Yeah, exactly. So, mining is the beginning of a processing supply chain that ends with finished goods, right? And there’s a world in there where there’s mines, there’s processing, refining. Right? And then there’s a little bit, you know, sort of end use, you know production. The Chinese have, as you know, built way too many smelters and processing plants now. But specialized processing plants I think are something that would be very interesting to get involved in.

[01:02:40] Jamie: Yeah. I’m always, I’ve always been fascinated by this story of Rockefeller controlling oil and gas by controlling the railways, right? Being able to, so no. And I recently invested in a frac sand terminal in North Dakota, and I’ve always been interested in those, those key choke points for assets and how, and this has been like a pet fascination for me for years, and saying, why don’t more mining companies, and the traders do an excellent job of this, but why don’t more mining companies try to own and control these key choke points, and I don’t know if all of them do and they find themselves exposed to that. So, I don’t know where I’m going with that, but I’m, I’m happy to sit here and say that.

[01:03:23] Oskar: No, no. Look, it, it’s fair to say that mining companies are. generally, run by people that, that are engineering, geology focused engine, you know, sort of process guys. They’re not sure strategic thinkers. And for them, the big step out is to buy another mining company. Right. And you know, there’s very few of them that decide, okay, I’m going to own, you know, I’m going to own a part of the, from the mind gate to a port and put in the port and we control access through that. A little bit of that happens in Australia. I mean, there’s this sort of whole Fortescue rail situation, right? So, there’s a little bit of that, but by and large, I think mining companies have been, you know, asked to stick to their knitting on that front, and I think they take the view that mining is hard enough as it is. Not to add something that they don’t really understand to it. The potential answer, the direction might be the other way around, right? Where the OEMs and the end-users kind of migrate upstream to the mining areas, right? I mean, the U. S. had its history of that in the past, where Ford Motor Company vertically integrated all the way back to making steel for the cars that it, you know, so I don’t know if everything, you know, is all cyclical again and we end up going back to some kind of more vertical integration that way.

[01:04:37] Jamie: And this kind of gets me back to my point earlier. We’re like, at what point is, you know, Tesla’s cost of capital is going to be so low that they can just buy any and all lithium mines that they want in the United States or nickel or whatever it is they’re trying to control for, and the mining companies won’t be able to compete with them. Does that happen? I don’t know. But

[01:04:57] Oskar: I don’t know. I mean, it might. But would that, would that really be a problem? It wouldn’t be a problem. It’d be great. Yeah. Okay. I’m not, I’m not an object to that, you know.

[01:05:08] Jamie: So, we’re just over an hour now and you’ve been very generous of your time. So, I’m going to wrap it up, but I have. Three fun questions for you.

[01:05:16] Oskar: Oh, good.

[01:05:17] Jamie: Okay. So, alright. Picture this. Orion’s gone. You have a hundred million dollars. You’re allowed to invest in one commodity in the form of a stream or royalty. What do you do?

[01:05:30] Oskar: I invest in a tin stream.

[01:05:32] Jamie: Tin stream? Interesting.

[01:05:36] Oskar: You asked.

[01:05:36] Jamie: I asked. Can you elaborate?

[01:05:39] Oskar: Oh, it didn’t say I had to elaborate, but alright. I think tin is the forgotten commodity.

[01:05:43] Jamie: Yeah.

[01:05:44] Oskar: I think it’s super important for all electronics. I think it’s largely replacing or has replaced lead as a soldering agent. It’s super important in a couple of other pretty interesting technologies. It’s, you know, alongside copper, it’s important in brass for armaments and munitions. It’s also the bed that in which you make all flat glass is a molten tin bed.

[01:06:10] Jamie: And where does most tin come from? I know Indonesia is a big supplier.

[01:06:13] Oskar: Indonesia, Bolivia, is another big country.

[01:06:18] Jamie: So, no stable jurisdictions.

[01:06:20] Oskar: Yeah. And there’s no tin mines in the United States or anywhere near the United States. And yeah, and the Congo is the other big one DRC. And, and it’s important, it’s incredibly important metal and we don’t have enough of it and there are not that many new mines being built. It’s tough to find. So, I’d love a tin stream. Okay. Thank you very much.

[01:06:42] Jamie: Next question. We are currently sitting in New York City Why have you not moved to Florida like all the other financiers and in New York at this point? I thought that was the trend post COVID.

[01:06:54] Oskar: My wife won’t let me while the kids are in school. It’s the honest answer to that question.

[01:06:58] Jamie: Fair enough. Okay, two more then we’re done.

[01:07:03] Oskar: Okay.

[01:07:04] Jamie: There’s gonna be someone who’s listening to this podcast Who’s got a lot of money and says? You That Oskar guy seems pretty smart. How do I give him my money? What is the correct, can an individual invest in Orion or is this purely for institutions?

[01:07:20] Oskar: Purely for institutions.

[01:07:22] Jamie: Okay. So, for those of you who are thinking that you’re out of luck, sorry. And then the last question, if I’m a mining entrepreneur in my thirties, forties, twenties, what have you, and I think I’d really like to get some money out of those guys, what do I have to do to get that, for the project that I’m building or working on?

[01:07:42] Oskar: You need to have at least a pre-feasibility study, preferably a feasibility study. You need to have a techno economic model that goes with that feasibility study. You need to show us your permit application plan. And you need to give us access to all the data that you have in your data room on the geology of the mine that you’ve, you know, discovered what kind of processing plan you have, what kind of mind plan you have. That’s all part of the submission that you’ve made to us in the first place and the feasibility. We need to be able to assess your ESG credentials to some degree and then just contact us if you have most or all of that stuff.

[01:08:24] Jamie: Okay, so we have now eliminated 99.9 percent of Canadian companies. For that 0. 1 percent left.

[01:08:30] Oskar: No, you have not you don’t have to have everything fully baked, but you have to show us. That you’ve thought about it, that you have a plan to address it, and that you may need some budget to complete it. That’s generally enough. We will work with you. In some cases, we work with companies for several years to get them up and ready to construct. We’ve also been not known to buy mining companies outright. So, if you have something that you think is worthy of, of that kind of attention let us know.

[01:09:08] Jamie: All right, Oscar, thank you very much.

[01:09:11] Oskar: Thank you, sir.