General Discussions, page-11325

Hi Topo,

Thanks for that story involving Price Waterhouse Cooper (PwC). I’ve had to go back read it again. This time in more detail.

I agree, RNU is in prime position to attract attention. As you'll be aware, PwC is a multinational professional service presenting a network of quality firms. Therefore, they are one of the most trusted accounting firms in the world, ie, you can believe their collective analysis are going to be relatively unbiased as opposed to an investment banker like GS.

Here’s a few key points from the story:

The top 40 mining companies recorded a combined $159-billion in net profit in 2021, compared with a combined net profit of $70-billion in 2020.

“Success will hinge on whether or not the top 40 can take a leading role in the world’s clean energy transition and continue to generate significant stakeholder value.

“To do that, miners must use their strong current financial position to meet challenges including development timelines, price volatility, geopolitical risks, stakeholder expectations, economies of scale and economic resource scarcity,” he explains.

The shift to net-zero requires more mining, not less, with the rapid scaling of low-emission systems being highly material-intensive.

Full story can be found on Mining Weekly website: pwc-suggests-miners-use-2021-gains-to-prepare-for-critical-minerals-future-2022-06-15

_ _

I think its worth returning to where we were before Putin’s invasion and when COVID really took hold in China.

We were in a situation where we were clearly coming out of the pandemic, countries were reopening, there had been large fiscal stimuluses across the world and economies were in better shape to develop the mineral-intensive renewables future. However, the extraordinary rise in inflation, particularly in the US beginning last year was the realisation that interest rates were going to rise and rise sharply during the course of this year. This environment is good for materials but not so good for ‘quality compounders’, i.e., Meta (Facebook), Netflix, tech stocks, etc, which trade at 20 - 50 times sales. These stocks have serious valuation implications in a higher interest rate environment and it is these stocks that the bull market has up until recently loved. So, as they’ve come under the microscope stocks they have tumbled and consequently, it has slowly dragged everything else with it.

By doing so we now have a situation where a very different stock market environment is taking shape. However, as the PwC story suggests, the top 40 miners will use their 2021 gains to ‘prepare’ for a critical minerals future which they have underinvested in and consequently will now have to write-off many stranded oil and coal assets.

Therefore, the question is, after years of underinvesting in exploration, increasing ESG pressure from banks and investors to cut further ties with their unsustainable or unethical projects, where will they go for the next future value?

With RNU securing enough funds (approx. A$85m) to get through the next 18 months or so of its pre-production phase and has access to another A$185 debt funding to build its proposed business models, positioning is everything. Furthermore, it appears we are blessed with the right management team to navigate our way through. Therefore, this may well be one of the best places to be quietly parked*.

All IMO, DYOR, GLTA(patient&LT)H

* not financial advice