I am not as smart as I sound, so please don't listen to me
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Sports are the escape for the Koala
Stopped playing fantasy football a few years ago
And basically never bet on sports, considering what the Koala essentially does for a living, it just feels like more work without any delusions of comparative advantage
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There’s a reason all the steel mills were built elsewhere on the Great Lakes
Better question frankly is why Iowa?
No way truck/rail south to Minneapolis to barge down the Mississippi beats transporting on the lake
And a DRI facility for an EAF…that’s a specialized build so that pellets from Mesabi can be used
And how much scrap can you efficiently collect in Iowa/region
@rennyzucker is correct here
This seems like a really strange place to put this plant
It should be on the Great Lakes…not the river
Granite City would likely close if Nippon didn’t have that agreement with the USG
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They may be losing control of the bond market but they’ll try something first
A 7.5% mortgage isn’t in the bell curve of the millennial US consumer model
But having gotten there, just feels
like if it got back to 6.5% for even a second Rocket would benefit from consumers reacting to the “now’s our chance” effect
So let’s see
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You know what, the Koala is feeling a little bored these days and needs some excitement in the eucalyptus tree
Let's follow along with a friend on a rates trade just to feel something
Long $RKT
Even if the USG actually does lose control of the back end, they'll surely try some serious YCC first before it's truly lost
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This isn't even limited to doctors:
99th percentile household income in NYC is ~$800k
Exclude the "tristate area" (aka Long Island, Fairfield County, Westchester County, Northern NJ)
And control for "family"
The Koala hypothesizes you aren't getting that household to move to North Dakota / Mississippi / random state with no prior ties for the same "revenue" and just a lower "burn rate"
Now...if there is a 100% raise involved, maybe a conversation starts?
But that's the harsh truth - the academic and professionally ambitious, are attracted to regions of critical economic mass because of the opportunity density
They can be pushed out "into exile" (separate topic), but it's REALLY hard to pull them out
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This is a conversation a supermajority of Americans are not ready for but will need to be had
To quote a line from Drive to Survive "Not even people who live in Milton Keynes want to live in Milton Keynes!"
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Sir, it’s also the fact the industry chooses to do this conference in Beaver Creek, one of the most expensive zip codes in the country
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Taken a small punt on Lux Metals $LXM.V in the eucalyptus tree
Trans-Taiga Corridor has been good to the Koala in the past and the geology looks fascinating
Curious to see how the drilling looks this season
TBD if it works but sometimes you have to just do things for the plot
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Not going mega size here 9 months ago when the CEO and Chair roadshowed through New York was one of the koala’s biggest mistakes of the past year
And seeing Mt Todd go today, Glenburgh is going to have suitors
Will majors be willing to pay the number required or be brave enough to go ahead of an actual JORC resource estimate is the question
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“So after over 10+ years living in redacted you moved to a state with no income taxes?”
Well guess we will find out next 12-24 months if that CEO is delusional or knows how to close a deal
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Well looks like we have our answer on Artemis $ARTG.V now
We are, and have been in hindsight for 18 months, into the middle of the cycle where capital isn’t looking to de-capitalize / harvest from the mining sector and instead realizing there is actually value creation opportunities in the sector
So it’s not about your capital returns (buyback and dividends) but your opportunity set to grow and deploy capital for attractive returns (and of course, you know, execute said opportunities without catastrophic errors)
It’s the first question phrase another way but “what’s your unique / company specific runway to create alpha for your shareholders”
An example (and the koala is open to input here): Artemis with Blackwater has been a brilliant vision and execution, but after the current optimization…what’s “the next opportunity” in that company?
And besides being in Canada so could allow some peers to utilize Canadian tax loss pools not currently being utilized…what’s the lever for a potential acquiror to create incremental value at Blackwater?
So what does Artemis do from here? How does it further drive alpha like it has since buying Blackwater from New Gold (RIP)?
You don’t sell it per se but what’s basis to get new money to buy into it?
There very well may be one, haven’t dug in beyond skimming the latest deck and a few old meeting notes, but that’s sort of where the fresh $ will get trying to decide whether to start digging deeper into the situation
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Anyways that’s just the koala organizing its thoughts out loud
Should be a great week
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What commodities will we not be talking about?
Gold/Silver
Copper
Critical Minerals
Will be the main topics
Not expecting to hear the words nickel and lithium much this week…always a good barometer to check for where fast money is and isn’t
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Permits…who has major “you can actually build the mine” permitting milestones in the next 12 months?
You have a project of scale get the permit greenlight, immediately becomes a possible m&a target
We are talking about First Mining and their Springpole project these days after all, welcome back to 2010-11
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For the royalties names as a broader subsector, the buyside is probably going to compare notes on what all the non-big 3 say when asked about Tether to see who seems more nervous or more engaged with Juan
There is going to be consolidation in the space as we see which management teams can show an ROI on the cash g&a budget of having mgmt and a deal team, shareholders will demand it
Watch this theme over the next 3-5 years, if management teams cannot generate alpha the shareholders will rightfully ask if there are too many management teams in royalty world (and let’s be honest, we all know the answer to that. But that doesn’t necessarily mean the big royalty management teams should be the surviving ones…what’s that thing about soft issues and ego making deals difficult?)
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We are, and have been in hindsight for 18 months, into the middle of the cycle where capital isn’t looking to de-capitalize / harvest from the mining sector and instead realizing there is actually value creation opportunities in the sector
So it’s not about your capital returns (buyback and dividends) but your opportunity set to grow and deploy capital for attractive returns (and of course, you know, execute said opportunities without catastrophic errors)
It’s the first question phrase another way but “what’s your unique / company specific runway to create alpha for your shareholders”
An example (and the koala is open to input here): Artemis with Blackwater has been a brilliant vision and execution, but after the current optimization…what’s “the next opportunity” in that company?
And besides being in Canada so could allow some peers to utilize Canadian tax loss pools not currently being utilized…what’s the lever for a potential acquiror to create incremental value at Blackwater?
So what does Artemis do from here? How does it further drive alpha like it has since buying Blackwater from New Gold (RIP)?
You don’t sell it per se but what’s basis to get new money to buy into it?
There very well may be one, haven’t dug in beyond skimming the latest deck and a few old meeting notes, but that’s sort of where the fresh $ will get trying to decide whether to start digging deeper into the situation
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Where is the m&a? Especially stock for stock m&a?
Remember how we all cared about gdx and Gdxj index inclusions?
The one reason growing eps or nav/share through expanding the numerator is slightly better than shrinking the denominator (aka buybacks) is because a nominally bigger market cap is eligible for more indices and thus passive flows so the re-rate pathway is “easier”
This applies across multiple subsectors
Can we just get on with it and have Hudbay buy Trekor using stock (for an illustrative example)?
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Flight delayed to Colorado so a few musings from the Koala ahead of Beaver Creek week:
Since last Beaver Creek, $GDX up ~35%
While $GLD up ~20%
Given how crude and diesel have performed this year, think barring some major changes in fuel prices you have to think next 12 months the @TraderPamplona view of GLD over GDX makes sense
A key question for every meeting is what in the portfolio today can be a major catalyst for NAV uplift before next years conference or even BMO
Because as we go into budgeting season for producers, the Koala suspects the fuel prices in everyone’s models for 2027 are probably low versus what will be used in budgeting to issue guidance in Jan/Feb
Means if energy product supply chain does normalize we probably have upside to initial guidance in 2027 BUT it’s not hard to imagine in Florida late February 2027 the buyside is normalizing company guides for different oil/diesel assumptions and bringing numbers down for 2027 all else equal
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