Notes from The Sunday Roast Podcast - 02 Feb 2022
Posted: Sat Jun 25, 2022 4:16 pm
Notes from The Sunday Roast Podcast - 02 Feb 2022
Interview: https://audioboom.com/posts/8023506-mid ... ld-aim-ggp
* New zone of mineralisation?
- Really significant intercept from HAD104 with 6g at over a 62.5m interval plus copper, especially of interest to GGP Exploration & Geological teams
- 200m south of Eastern Breccia (EB) so an opportunity to expand that part of ore body
- 6g material is what we associate with SE Crescent but hundreds of metres away from it
- Does it mean EB blends into a High Grade (HG) zone or SE Crescent and its very HG material actually expands down in that S/SE direction or is it a new area and further drilling unlocks this?
- Creates a very large potential zonation within Havieron that can carry this very HG, an exciting intercept, really significant.
* Potentially the largest SP catalyst for GGP currently is the 5% FMV exercise according to recent Broker updates and will lift NCM’s ownership to 75%, is it a good way to value GGP and Havieron?
- Shaun inherited process as a legacy, will try to execute process as best as he can
- GGP’s preference is for a Commercial Agreement (CA) by mid Feb, the nature of CA’s means if agreed, it will be acceptable to GGP but there has probably been some compromise in valuing that number
- In his experience a CA is usually agreed within JV’s vs through arbitration and likes to think NCM agree with this view
- The alternative is a very lengthy independent process via arbitration
- Only a 3 year old discovery, it’s a multi-decade asset requiring a minimum of 3 to 5 years to understand the extent of and a really challenging process to fair value an asset at this early stage of maturity
- Still plenty of unknowns around EB, SE Crescent expansion and intercepts etc. to consider.
* Would an inability to reach a mutual agreement mean Havieron will be valued against something like the VALMIN Code method?
- Correct and the code can consider these kind of issues (i.e. unknowns as listed in answer above)
- Reiterates an interesting exercise at this pretty early stage of Havieron’s development
- Ultimately, feels he can drive an outcome that works for GGP shareholders
* Hypothetically, taking a round figure of 20Moz x $1000 USD per ounce (due to a low AISC), is $1Bn (approx. £650m omitting the copper) a realistic valuation?
- Firstly, quality of resource and of earnings and Free Cash Flow (FCF) is extraordinary
- Lowest quartile cost (in global comparison of mines), a low risk-low capex pathway to development all lends itself to these ounces being worth more than an ounce in a different project inc. the sovereign risk (i.e. advantage) of being in Western Australia (WA)
- Difficulties in the nature of valuing a project like Havieron at a relatively early stage of development and understanding an exploration target is not directly comparative to a confirmed JORC resource of 20Moz
- Thinks Havieron is a Telfer type opportunity which is around 20 Moz so a fair assumption, but as so early in the process the challenge lies in that VALMIN valuations can lend themselves to a broad range of values
- This creates some uncertainty around the outcome both NCM & GGP, so should encourage both to come to a CA, equally if it does go into the VALMIN process, it does create scenarios with a broad range of outcomes so hard to give a specific number, it is nuanced but he is ensuring GGP are thoroughly prepared for those discussions.
* Why I should buy GGP besides Havieron?
- Firstly, Havieron is a world class asset in a Tier 1 jurisdiction being developed by a major such as NCM, a low risk - low capex multi decade asset containing copper and gold, the best mining companies contain copper and we also have other base metal opportunities too and still in the very early days of understanding Havieron - the tip of the iceberg - so much more to come
- Beyond that, he is a great believer in the drill bit and unlocking option value sitting within the portfolio, stepping out from Havieron remarks we’re in Elephant country and still in the early days of understanding the Paterson which has to date unlocked Telfer (a top 5 gold mine in Australia last 30 year), Havieron (probably same endowment as Telfer) and Rio Tinto with Winu up to the north.
- This is the right postcode to be looking for gold and copper as where it’s already been found, both on the mining lease at Havieron, our 100% owned Scallywag ground, Juri JV (also with NEWCREST), all of which is a fascinating and rich area for exploration
- No quicker way to unlock shareholder value than by finding another quarter, half or full Havieron
- Outcropping ore bodies at surface such as Telfer (discovered 45 years ago in comparison to Havieron) in Oz have been discovered already generally in Oz, but modern geological techniques allow us to peer through cover
- GGP’s competitive advantage is the team have the expertise to explore under cover
- Same skill set being applied to Ernst Giles (east of the prolific gold area Kalgoorlie and also under a similar Archean Greenstone belt) is under cover and under explored
- Agreeing access to hopefully be there this year. Again, elephant country and has had previous interest from majors (such as Newmont previously)
- Also have tenements such as Panorama & Bromus (Gold and base metal targets) that we plan to spend time, energy and effort unlocking too in 2022
- With our meaningful market cap and access to capital we do talk to other companies of all sizes about opportunities with partnerships and JV’s for tenements in and out of the Paterson inc. scenarios where GGP can play Big Brother (such as in Tasmania as covered in previous interviews)
- During his tenure, developed the team’s mining, exploration, processing and geological skills with top tier talent
- GGP turning into a top destination for talent, attracting JV opportunities and will help to maximise the potential of our own assets
- Combination of great people with great assets to unlock.
* Although 5% FMV exercise is contentious the scenario is that during 2022, you could expect to receive a lump sum and what plans might you have?
- Priority is fully funding Havieron, the first $50m USD pays existing NCM loan balance, remainder goes to developing starter mine for Havieron (note: $73m required approx. and of course a larger amount could see spare cash)
- In parallel with that, have been engaging with banks (about a dozen Tier 1 commercial banks have been wanting to engage) as they see Havieron as a world class, low risk-low capex, brownfield development opportunity (with a major partner like NCM) so they really want to be involved
- If we can bring in some debt, if there is funds available through the option exercise (which of course may not happen, but if it is), that may be our pathway to being full funded
- Being fully funded is a huge catalyst for value and usually helps rerate companies, so keen to complete debt process, add to that this 5% option and potentially gives a lot of confidence around Havieron being fully funded but potentially also well-funded (dependent on 5% outcome) to unlock other opportunities in the portfolio including further expansion at Havieron.
* Telfer is close by and has processed over 20Moz over time, how much is that worth compared to the current value of GGP?
- They are comparatively close at 45km away so we can share infrastructure as it is a truckable distance
- Telfer has been in operation for some 35 years and it has taken them this long to process and mine around 13m of those ounces
- Perhaps puts it into context as to why this sits in a major and if you go back in time, what would you pay for Telfer at its dawn…..it would have been an eye watering sum as it has been a grand old lady of Oz mining
- Like to think Havieron has a similar opportunity and to understand if it is of a similar 20Moz endowment could take 3 to 5 years of drilling out to understand and unlock
- Havieron goes down to some 1350 vertical metres and still open, the logistics of drilling down 1350m plus cover at an angle are intensive, so as the decline is put in place it will enable underground drilling platforms which will accelerate, economise and decrease the cycle time of information
- Speed of exploration and drill information is going to continuously accelerate as Havieron develops over the next 3 years and will help unlock the value.
* Thought of splitting assets into various companies so you can sell assets individually if approached by different majors?
- Interesting but really focused on building a multi asset, multi-billion dollar mining house with Havieron as a platform to build it from, so unlikely
- Not allergic to making money however, if someone wants to buy an asset at a value that otherwise would take years to unlock, then of course we would consider it if someone accelerates our pathway to creating value, really interested to do that
- Shaun uses examples from career where growth was achieved inc. a sale of a well at Sakari and market cap and asset growth achieved while CFO at Northern Star Resources from a single mine to multiple assets.
* Looks as if the crown jewels are Havieron, if NCM came to you with a big enough offer, would you sell it all?
- Brilliant question, looking at his vision for Greatland as a multi asset platform, not what he hopes will happen
- However if they think someone can offer us the value that we can unlock at Havieron over 3 to 5 years today and derisk that for our shareholders and presumably, we’d rather that money today than in 5 years’ time, then we would have to take that seriously and ultimately it would be put to shareholders and up to them to make that decision
- But it would be with a tinge of sadness, not allergic to making money but we’ve got something really special here and the challenge to shareholders and management is that we do unlock the full value of it
- That comes with patience and the hard work of developing and planning it out over the future years but yeah if we can take a short cut to that, we’d have to think about it.
* Your reply tells me that you want to carry on and develop Havieron and an offer would have to be pretty special otherwise you carry on with an immense cash cow once it’s completed, maybe 5 years away?
- One of the brilliant things about Havieron is its pathway to Free Cash Flow (FCF) or Cash Cow status as NCM don’t want a gap year at Telfer, it’s coming to the end of its life so we’ve already started the decline before the Feasibility Study (FS)
- Certainly from a GGP POV, tremendous demonstration of the conviction we have around Havieron.
- The fact that NCM is self-funding the first $250m USD and further spending $180m to extend Telfer’s mine life by 24 months, it is perhaps reasonable to think this reflects their view on the quality of Havieron
- NCM want to bring ore out of Havieron into Telfer in the short term , they don’t want have to demobilise Telfer around the cost implications and then around remobilising Havieron and find 1200 people
- One of the advantages besides infrastructure is the people are there, tough market to get mining personnel in and we already have 1200 of them at Telfer
- Therefore undertaking this fast track process to decline into the HG SE Crescent, put 5g plus material through the mill and create early FCF and then GGP can invest those funds developing the greater Havieron project and indeed the rest of the portfolio
- This has been developed exactly like a mid-cap would want to do it, a fast process to FCF
- Extremely fortunate to have that strict alignment and support with NCM, they’re not looking to sit back on this drilling out for 10 years, developing it tailor made for GGP’s balance sheet which is a relatively small starter mine, high cash flows and reinvest that in the greater Havieron story
(Note: Some repetition on quality of staff and Havieron attractiveness and quality followed)
* What do you think could potentially derail GGP over the next few years?
- Compelling low cost-low risk pathway to production, having said that I talk about going through an initial small scale PFS on asset followed by a Definitive FS this year, getting past the 5% option agreement, being fully funded all of these create value but also challenges
- We would have liked the PFS to be a hundred times bigger, so each of them create challenges, so we need to get through that, I’m reminded of the Churchill quote of ‘When you’re going through Hell….keep going’
- Opportunity is to have this good team work diligently through the process, give our shareholders and NCM the confidence that we have the team to execute the plan and that there is an opportunity to create value as we unlock and understand Havieron and the full portfolio and augment sensibly with fiscal discipline as we have a wonderful platform to create a PM and Base Metals mining company
- None of us are going to die of boredom, lots to do and we enjoy the challenge and love the team
- Not to say there aren’t challenges as no development is linear but we have a very clear vision of where we’re headed.
* Do you see the stock at the minute as undervalued?
- Approaches questions like that as more in the way of the opportunity
- If GGP consistently continue to hit strong mineralisation as done to date, you have to think the value and increasing value continues to be proved and we derisk the pathway to understanding this in a value sense
- Have a great platform to create further value.
* Favourite takeaway of choice?
- Little daughter usually wants Fish & Chips of late but if up to me, think we might be going for a Chinese takeaway!
Interview: https://audioboom.com/posts/8023506-mid ... ld-aim-ggp
* New zone of mineralisation?
- Really significant intercept from HAD104 with 6g at over a 62.5m interval plus copper, especially of interest to GGP Exploration & Geological teams
- 200m south of Eastern Breccia (EB) so an opportunity to expand that part of ore body
- 6g material is what we associate with SE Crescent but hundreds of metres away from it
- Does it mean EB blends into a High Grade (HG) zone or SE Crescent and its very HG material actually expands down in that S/SE direction or is it a new area and further drilling unlocks this?
- Creates a very large potential zonation within Havieron that can carry this very HG, an exciting intercept, really significant.
* Potentially the largest SP catalyst for GGP currently is the 5% FMV exercise according to recent Broker updates and will lift NCM’s ownership to 75%, is it a good way to value GGP and Havieron?
- Shaun inherited process as a legacy, will try to execute process as best as he can
- GGP’s preference is for a Commercial Agreement (CA) by mid Feb, the nature of CA’s means if agreed, it will be acceptable to GGP but there has probably been some compromise in valuing that number
- In his experience a CA is usually agreed within JV’s vs through arbitration and likes to think NCM agree with this view
- The alternative is a very lengthy independent process via arbitration
- Only a 3 year old discovery, it’s a multi-decade asset requiring a minimum of 3 to 5 years to understand the extent of and a really challenging process to fair value an asset at this early stage of maturity
- Still plenty of unknowns around EB, SE Crescent expansion and intercepts etc. to consider.
* Would an inability to reach a mutual agreement mean Havieron will be valued against something like the VALMIN Code method?
- Correct and the code can consider these kind of issues (i.e. unknowns as listed in answer above)
- Reiterates an interesting exercise at this pretty early stage of Havieron’s development
- Ultimately, feels he can drive an outcome that works for GGP shareholders
* Hypothetically, taking a round figure of 20Moz x $1000 USD per ounce (due to a low AISC), is $1Bn (approx. £650m omitting the copper) a realistic valuation?
- Firstly, quality of resource and of earnings and Free Cash Flow (FCF) is extraordinary
- Lowest quartile cost (in global comparison of mines), a low risk-low capex pathway to development all lends itself to these ounces being worth more than an ounce in a different project inc. the sovereign risk (i.e. advantage) of being in Western Australia (WA)
- Difficulties in the nature of valuing a project like Havieron at a relatively early stage of development and understanding an exploration target is not directly comparative to a confirmed JORC resource of 20Moz
- Thinks Havieron is a Telfer type opportunity which is around 20 Moz so a fair assumption, but as so early in the process the challenge lies in that VALMIN valuations can lend themselves to a broad range of values
- This creates some uncertainty around the outcome both NCM & GGP, so should encourage both to come to a CA, equally if it does go into the VALMIN process, it does create scenarios with a broad range of outcomes so hard to give a specific number, it is nuanced but he is ensuring GGP are thoroughly prepared for those discussions.
* Why I should buy GGP besides Havieron?
- Firstly, Havieron is a world class asset in a Tier 1 jurisdiction being developed by a major such as NCM, a low risk - low capex multi decade asset containing copper and gold, the best mining companies contain copper and we also have other base metal opportunities too and still in the very early days of understanding Havieron - the tip of the iceberg - so much more to come
- Beyond that, he is a great believer in the drill bit and unlocking option value sitting within the portfolio, stepping out from Havieron remarks we’re in Elephant country and still in the early days of understanding the Paterson which has to date unlocked Telfer (a top 5 gold mine in Australia last 30 year), Havieron (probably same endowment as Telfer) and Rio Tinto with Winu up to the north.
- This is the right postcode to be looking for gold and copper as where it’s already been found, both on the mining lease at Havieron, our 100% owned Scallywag ground, Juri JV (also with NEWCREST), all of which is a fascinating and rich area for exploration
- No quicker way to unlock shareholder value than by finding another quarter, half or full Havieron
- Outcropping ore bodies at surface such as Telfer (discovered 45 years ago in comparison to Havieron) in Oz have been discovered already generally in Oz, but modern geological techniques allow us to peer through cover
- GGP’s competitive advantage is the team have the expertise to explore under cover
- Same skill set being applied to Ernst Giles (east of the prolific gold area Kalgoorlie and also under a similar Archean Greenstone belt) is under cover and under explored
- Agreeing access to hopefully be there this year. Again, elephant country and has had previous interest from majors (such as Newmont previously)
- Also have tenements such as Panorama & Bromus (Gold and base metal targets) that we plan to spend time, energy and effort unlocking too in 2022
- With our meaningful market cap and access to capital we do talk to other companies of all sizes about opportunities with partnerships and JV’s for tenements in and out of the Paterson inc. scenarios where GGP can play Big Brother (such as in Tasmania as covered in previous interviews)
- During his tenure, developed the team’s mining, exploration, processing and geological skills with top tier talent
- GGP turning into a top destination for talent, attracting JV opportunities and will help to maximise the potential of our own assets
- Combination of great people with great assets to unlock.
* Although 5% FMV exercise is contentious the scenario is that during 2022, you could expect to receive a lump sum and what plans might you have?
- Priority is fully funding Havieron, the first $50m USD pays existing NCM loan balance, remainder goes to developing starter mine for Havieron (note: $73m required approx. and of course a larger amount could see spare cash)
- In parallel with that, have been engaging with banks (about a dozen Tier 1 commercial banks have been wanting to engage) as they see Havieron as a world class, low risk-low capex, brownfield development opportunity (with a major partner like NCM) so they really want to be involved
- If we can bring in some debt, if there is funds available through the option exercise (which of course may not happen, but if it is), that may be our pathway to being full funded
- Being fully funded is a huge catalyst for value and usually helps rerate companies, so keen to complete debt process, add to that this 5% option and potentially gives a lot of confidence around Havieron being fully funded but potentially also well-funded (dependent on 5% outcome) to unlock other opportunities in the portfolio including further expansion at Havieron.
* Telfer is close by and has processed over 20Moz over time, how much is that worth compared to the current value of GGP?
- They are comparatively close at 45km away so we can share infrastructure as it is a truckable distance
- Telfer has been in operation for some 35 years and it has taken them this long to process and mine around 13m of those ounces
- Perhaps puts it into context as to why this sits in a major and if you go back in time, what would you pay for Telfer at its dawn…..it would have been an eye watering sum as it has been a grand old lady of Oz mining
- Like to think Havieron has a similar opportunity and to understand if it is of a similar 20Moz endowment could take 3 to 5 years of drilling out to understand and unlock
- Havieron goes down to some 1350 vertical metres and still open, the logistics of drilling down 1350m plus cover at an angle are intensive, so as the decline is put in place it will enable underground drilling platforms which will accelerate, economise and decrease the cycle time of information
- Speed of exploration and drill information is going to continuously accelerate as Havieron develops over the next 3 years and will help unlock the value.
* Thought of splitting assets into various companies so you can sell assets individually if approached by different majors?
- Interesting but really focused on building a multi asset, multi-billion dollar mining house with Havieron as a platform to build it from, so unlikely
- Not allergic to making money however, if someone wants to buy an asset at a value that otherwise would take years to unlock, then of course we would consider it if someone accelerates our pathway to creating value, really interested to do that
- Shaun uses examples from career where growth was achieved inc. a sale of a well at Sakari and market cap and asset growth achieved while CFO at Northern Star Resources from a single mine to multiple assets.
* Looks as if the crown jewels are Havieron, if NCM came to you with a big enough offer, would you sell it all?
- Brilliant question, looking at his vision for Greatland as a multi asset platform, not what he hopes will happen
- However if they think someone can offer us the value that we can unlock at Havieron over 3 to 5 years today and derisk that for our shareholders and presumably, we’d rather that money today than in 5 years’ time, then we would have to take that seriously and ultimately it would be put to shareholders and up to them to make that decision
- But it would be with a tinge of sadness, not allergic to making money but we’ve got something really special here and the challenge to shareholders and management is that we do unlock the full value of it
- That comes with patience and the hard work of developing and planning it out over the future years but yeah if we can take a short cut to that, we’d have to think about it.
* Your reply tells me that you want to carry on and develop Havieron and an offer would have to be pretty special otherwise you carry on with an immense cash cow once it’s completed, maybe 5 years away?
- One of the brilliant things about Havieron is its pathway to Free Cash Flow (FCF) or Cash Cow status as NCM don’t want a gap year at Telfer, it’s coming to the end of its life so we’ve already started the decline before the Feasibility Study (FS)
- Certainly from a GGP POV, tremendous demonstration of the conviction we have around Havieron.
- The fact that NCM is self-funding the first $250m USD and further spending $180m to extend Telfer’s mine life by 24 months, it is perhaps reasonable to think this reflects their view on the quality of Havieron
- NCM want to bring ore out of Havieron into Telfer in the short term , they don’t want have to demobilise Telfer around the cost implications and then around remobilising Havieron and find 1200 people
- One of the advantages besides infrastructure is the people are there, tough market to get mining personnel in and we already have 1200 of them at Telfer
- Therefore undertaking this fast track process to decline into the HG SE Crescent, put 5g plus material through the mill and create early FCF and then GGP can invest those funds developing the greater Havieron project and indeed the rest of the portfolio
- This has been developed exactly like a mid-cap would want to do it, a fast process to FCF
- Extremely fortunate to have that strict alignment and support with NCM, they’re not looking to sit back on this drilling out for 10 years, developing it tailor made for GGP’s balance sheet which is a relatively small starter mine, high cash flows and reinvest that in the greater Havieron story
(Note: Some repetition on quality of staff and Havieron attractiveness and quality followed)
* What do you think could potentially derail GGP over the next few years?
- Compelling low cost-low risk pathway to production, having said that I talk about going through an initial small scale PFS on asset followed by a Definitive FS this year, getting past the 5% option agreement, being fully funded all of these create value but also challenges
- We would have liked the PFS to be a hundred times bigger, so each of them create challenges, so we need to get through that, I’m reminded of the Churchill quote of ‘When you’re going through Hell….keep going’
- Opportunity is to have this good team work diligently through the process, give our shareholders and NCM the confidence that we have the team to execute the plan and that there is an opportunity to create value as we unlock and understand Havieron and the full portfolio and augment sensibly with fiscal discipline as we have a wonderful platform to create a PM and Base Metals mining company
- None of us are going to die of boredom, lots to do and we enjoy the challenge and love the team
- Not to say there aren’t challenges as no development is linear but we have a very clear vision of where we’re headed.
* Do you see the stock at the minute as undervalued?
- Approaches questions like that as more in the way of the opportunity
- If GGP consistently continue to hit strong mineralisation as done to date, you have to think the value and increasing value continues to be proved and we derisk the pathway to understanding this in a value sense
- Have a great platform to create further value.
* Favourite takeaway of choice?
- Little daughter usually wants Fish & Chips of late but if up to me, think we might be going for a Chinese takeaway!