168: From Rare Earths to Broader Metals: Investment Opportunities & Strategic Priorities for the West
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As we approach our fifth anniversary, today we have our sixth South African guest. We've had the former chairman of De Beers, Bruce Cleaver. We've had the irrepressible CEO of Bordeaux Index, Gary Boom. Brett Gorvey, the former chair of Christie's Contemporary Art. Brian Mennell, founder of TechMed. And Lord Anthony St. John, amongst his many roles, chairman of the uranium business, Yellow Cake, which we've talked about uranium a lot on the show and why I'm bullish and have felt that the energy transition is going to need uranium as an element.

However, we are discussing resources today, and we've been very fortunate to find someone who will rank amongst the most qualified anywhere in the world. He was the former CFO of Billiton. Then as CEO, he built Extrata into one of the world's largest diversified mining companies over a 10-year period, and he grew the market value from around $500 million to $60 billion.

employing over 90,000 people operating in 22 countries before the merger with Glencore. And then in 2015, he and his partner successfully closed the X2 Resources Fund after raising $6 billion. And he's held a number of other significant roles in the commodity world and is now the founder and managing partner of Vision Blue Resources.

In 2015, in the Queen's birthday honours, he was appointed a Knight Bachelor for services to Holocaust commemoration and education, and he was the treasurer and CEO of the Conservative Party, and he has been a cricket umpire. No one would describe you as idle. So Mick Davis, welcome to the Money Maze podcast. Thank you very much. Lovely to be here. Well, if anyone thinks the world of commodities is dull, they only need to read The World for Sale, a book written by Xavier Blas and Jack Farshy, which I've given to many friends, who

I hope we're going to examine the most important supply-demand mismatches, how you assess the energy transition, where the opportunities lie, challenges, what your company, Vision Blue Resources, is seeking to build, and how you think investors are positioned. Quick shout-out and thanks to Rick Saunders, a friend of mine and of the show and an investor in Vision Blue who made the introduction.

Mick, you have had a front row seat for the monumental swings in the commodity space over the last few decades. But let's just turn the clock back. You're South African. How did you earn your first rand? I became a very boring chartered accountant. Well, I know you went to Rhodes and I know you joined ESCOM. For those who don't know, ESCOM was, I think, at one stage when it had its AAA rating, one of the most highly regarded utilities in the world.

It was. I can't say that today, but it was there. Single B rating today. We'll leave that alone. But you were and became CFO of Escom and then you pivoted to join Billiton. So just give us a little bit of a sense of, was that just a lucky strike or was it part of a master plan? It definitely was not part of a master plan. Planning is not my forte in the sense of careers or anything like that. I think it's probably the result of unrequited ambition.

So I was, as you correctly say, I was CFO of Eskom at quite a young age. The chief executive retired. I thought that I should be the next chief executive. The board thought differently. And so I was in the market. I had done a transaction with what became Billiton, which was then General Mining, in terms of providing the capital and electricity, long-term electricity contract for the

the hillside aluminium smelter that they owned and developed. And I got, therefore, developed a relationship with Brian Gilbertson, who was their chief executive and chairman. And he approached me when he heard that I was leaving Eskom to come over to General Mining because it was unbundling all its non-mining interests and it was going to focus entirely on mining and wanted to build this international presence.

So for some mistaken belief of his, he thought that I had all the relevant experience to do that. So I joined them and the rest is history. Before we get to Vision Blue, let's just pause on Xtrata because I ran into somebody, you might remember Nick Lawson from Deutsche Bank, a former managing director, and he worked on some of the deals. He now runs, by the way, Ocean Wall, which is a very nimble boutique investment bank. He said, and I quote him, you and your colleagues were the most prepared and effective team he ever worked with at Deutsche Bank.

What management insight would you share with us and listeners from your time there that allowed you to be such efficient executors? First of all, you have to have conviction. You can't build a company without having a conviction which you basically follow. There comes a time when you change your convictions if circumstances change, but you have to be faithful to that conviction.

Be very clear in your own mind as to what are the things that will create value and create additional optionality. The whole thing about building a business is the creation of optionality. And then utilizing the environment and the events that take place at a point in time to exercise that optionality. It's very difficult to strategize and plan, but you should know when the fish swims past you that that's the fish that you want to catch.

So you have to have that sort of built into your DNA and then act very, very decisively when you see those opportunities. So strategic in the sense of the conviction, opportunistic in the sense of exercising the optionalities that you have. And basically go for it. You have to have momentum. And our mantra in Extrata was ongoing momentum. Let's just talk about Vision Blue. What was the motivation to start it? First of all, I just came out of the Conservative Party election.

I was the first person Boris Johnson fired when he became leader of the party. So I had really nothing to do. And the world was beginning to coalesce around the whole question of what are the implications of containing and reducing greenhouse gas emissions. And I saw a lot of concentration on the downstream side of it, where people were talking about technologies and things they're going to do, and governments were talking about all their plans and their targets.

It all sounded wonderful, but there was no commentary at all on the upstream enabling of that, which is essentially the minerals and metals which you require to achieve the battery storage, build the windmills, the photovoltaic cells, etc. So I saw a deficit in supply.

in what would be a world of burgeoning demand. That suggested to me that if we could create a vehicle which identified projects which we could develop into producing assets, that would make a huge amount of sense. That was the genesis of VBR. Is it true to say that the Chinese have and maintain a stranglehold on the majority of those key elements?

It is true and it is actually quite frightening from many respects. First of all, there is without doubt a strategic deficit in relation of the West in the context of China's dominance. So not only do they produce themselves, dig a whole lot of stuff out of the ground, but they actually dominate the downstream or midstream downstream process helmet through to the building of battery cells, etc.,

So if you look at something like graphite, for instance, graphite is the core component of anodes for most batteries today in motor vehicles. And a growing component of that, they probably mine about 60% of the world's graphite, but they process almost 100% of that graphite into anode.

That's a startling statistic. And you can speak the same thing about rare earths, lithium, etc. So there's no doubt there is a strategic deficit. And it is concerning both from a geopolitical point of view, but also clearly from the point of view of who's going to end up with the value proposition when this thing settles down. At the moment, it's China who's in the pole position. Okay.

We're going to talk about geopolitics a little bit later, but I am not qualified to talk about rare earths. But I spoke to a South African investor, Andrew Vaglio, who I've known in a long time. And he said, I understand that actually these rare earth elements are not all that rare, but they are expensive to isolate and not been profitable to mine. Is that fair? Yes. I mean, so rare earths are not that rare. There's a lot of rare earths around. Right. There are fewer outside China, ionic clay deposits. We

which are the much easier rare earths to actually mine, much more low cost, and with a predominance of both the heavy and the light rare earths. I think that's point number one. Point number two, the complexity in rare earths is the separation of the elements. And there again, China has a lock on that technology. There's hardly any separation capability in the West. So anybody who has a rare earth mine outside China is at the moment sending his concentrate to China.

You start VBR, you raise your initial transfer capital. How did you prioritize what are a number of different options within that universe? So again, I have to say opportunism is the hallmark here. So when we thought about what do we want to invest in, we wanted to invest in resources which were scalable into significant size. In other words, resources that other people in the industry would at some point in time want to own.

once they were developed. And so they were going to be long-term, they're going to be significant contributors of product.

Secondly, we wanted to be involved in commodities which did not require a significant tertiary expenditure on logistics. In other words, we were looking for high-value, low-volume as opposed to low-value, high-volume commodities. Thirdly, we wanted to be able to build assets on a modular basis. In other words, not have to have a billion-dollar project. We want to be able to build the project slowly, improve the concept, and manage the risks accordingly.

One of the big challenges of the mining industry in the last mining boom, when people decided they all got conviction, was they went into projects and the project all ran over time, over budget by orders of magnitude, and they all destroyed value.

Managing large projects is very, very complicated and very difficult. It's not only the UK government that gets it wrong. Mining companies have for generations got it wrong. If you can contain the projects inside, you have a better chance of managing them. And so we wanted a modular prospect. So we looked for those characteristics and then we looked for commodities where we could have a reasonable chance

of developing in company or in alliance with others, midstream to downstream processing outside China. Because our business proposition was to give a non-Chinese capability

and non-Chinese development of product to the industry, because we thought that would actually be an important component of it. And I think prescient, given where I think the Trump government is coming from, which will not be from an ESG climate change perspective, but certainly will be from the point of view of strategic deficit to China. And reinforcing supply chain certainty. So before we continue this conversation, we're going to take a short break to have a note from our sponsors.

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Let's just stay with that energy transition and those elements, because again, it's the prioritization. Capital has to be allocated. It's scarce. How have you thought about you being opportunistic? Yes, I understand that. But let's talk a little bit about the graphite, lithium, those elements and how they shake up in the cocktail. Because if I've understood correctly, some stuff originally that was going to be essential like cobalt is now less essential. Yeah. I mean, I say one does try and take into account

your understanding of the cocktail, you just said, and how that cocktail is going to develop and whether technology will change. Having said that, that's a very difficult crystal ball to look into. It is not transparent. It's not easy to understand what the developments are going to be. So technological change will take place. But the thing that one has to understand, if you think about the motor car industry, they have to bake in.

their technological proposition seven to 10 years ahead of the actual commercial production of vehicles. And so while there will be technological changes, you have a period of time in which you can be quite certain as to what the products that you're developing, what its place is going to be. So, I mean, it's not as complicated as it actually sounds. I also think that irrespective of how the cocktail changes, the elements within the cocktail are unlikely to change dramatically.

And there will always be a space even for cobalt, for instance. So I think, yeah, we do think about that. Primarily, we think about availability of opportunity and the cost of entry. So a couple of years ago, I mean, lithium was the rage. And the cost to enter a lithium project was outrageously high. And I could not see how we could actually earn a decent return on capital invested.

Whereas I could get into graphite at a much lower cost because natural graphite was emerging as a component for the anode. Previously, it had been synthetic graphite. So natural graphite was emerging as an important component. So it was an easier entry opportunity.

If we think about that energy transition, there's been lots of mixed messages and changing of emphasis. Some of it's government-driven, and some of it's a realization that this whole journey is not going to happen as quickly. How are you processing, if you'll excuse the pun, those forces and the timelines? I never believed the timelines.

projections that people were making were based on a set of statements made by governments at fancy conferences every year that they were going to achieve this by this date and that by that date. And you just had to look at it and say, this is never going to be attainable. First of all, they don't have the capacity within their countries to invest that sort of money that was needed to be invested to do that. The implications on the cost to society were so significant that

I never believed the political environment conduced it to allowing that to happen existed. I just didn't think that was the case. So I never trusted those things. We took a much more circumscribed view of the direction of travel, but we certainly subscribe to the fact that the world is going through a major metamorphosis.

that the way it thought about its deriving its energy needs as primary energy, the way it campaigned that energy, the way that it was thinking about how it should live its life was going to lead to fundamental changes. And we were seeing that clearly in electric cars. We're seeing that in the emergence of greater blocks of renewable energy at reduced cost. And so our judgment was that even if we took half the estimates of growth

we had a significant deficit of supply in relation to where the demand was going to be. And the reason why that deficit of supply existed is because the major mining companies who basically were the engine room of the industry were in a non-growth phase.

And the reasons for that go back to blowing their brains out during the super cycle fueled by China, the lack of trust of their shareholders in the judgment calls that they were making. So enormous pressure upon boards of directors and management to curtail expansion and to run the existing assets to maximize cash. And then secondly, the fact that the cost of capital of these companies has gone up tremendously, mainly because the moral hazard is

that has now become a factor in the minds of investors about investing in mining.

because of impacts on ESG, impacts on community, whether they have got their license in the appropriate way, et cetera, et cetera, has withdrawn capital, both not only from the equity markets, but also from the debt markets. So their cost of capital is so much higher, and therefore their ability to get into projects effectively economically has been constrained. So putting all of that together means there has not been a huge amount of supply development. And therefore, there is a deficit, there will continue to be a deficit.

And so staying with that auto theme, if one reads the papers, of course, it is doom and gloom for the German manufacturers as an example. When you're at the company level and you're dealing and talking to these large manufacturers that have these long runways, as you described, and they have to plan and they see all this Chinese competition coming, how does that play out? So they all recognize that they need to ensure a sustainable, secure, long-term supply.

They all recognize about the fact that reliance on supply from China is problematic. First of all, the political issues, which we don't need to talk about right now, but the other thing is the ESG issues, that there is a view, and to a certain extent, a very legitimate view, that the processes used in China are

Okay. Are not environmentally benign. And so there's an issue. The other issue is that also attached to the whole question of governance and sustainability, they want to understand, they want to know that they can have a level of traceability that

on the resource that they're putting into their batteries or whatever components of the car that they're doing. And that traceability must be able to deliver a secure answer that these resources were gained appropriately, they mined appropriately, the impact on the environment is as low as possible, the sort of people they used in the mining environment are employed appropriately, they're safe, they're secure, they're healthy, etc. All the things that go with it. So they want all of that.

And so they want to speak to people like us who have produced in these projects and who have a good reputation in terms of delivering these things. And that's wonderful. On the other hand, they want the cheap cost of supply out of China. And you can't have both at the moment. So there's a price to be paid for your long-term, sustainable, secure economy.

benign, ESG benign supply versus getting the cheapest rate out of China. And China is capable of producing these things a whole lot cheaper than anybody else for a whole bunch of reasons. Got it. Now, when we come back to Vision Blue and you think about your major projects, I had a little look at how you are allocating capital. Can you just give us a sense of your largest project and sort of the economics around that? So our three biggest investments are one in rare earths,

Brazil. The second is a silicon producer in North America. And the third is graphite at the moment in mining Madagascar and a producer where we can find the appropriate place to locate the anode things. And our thinking was at the time that we looked, first of all, as I said, as the fundamental proposition about the rocks in the ground.

If you don't have the best rocks in the ground, you can't have the best projects. So that drove our investment in these three propositions. The iron and clay deposit, which is the heart of Cerro Verde, has 50% value, 50% heavy metals and light metal. It is the only in-production project of its kind outside China. So that for us, from a strategic point of view, said it had a lot of value and has a huge, it's a very large, significant deposit, use growth potential,

With that, we believe that we could actually find, in alliance with others, a route to separation outside China over time, so we could enhance the value proposition of that investment. So that drove our thinking in there, and hence our willingness with others, like EMG for instance, to allocate a significant amount of capital to it. On silica in the United States, based on a very high-quality quartz deposit in Canada,

and a very low-cost development of a smelter in Tennessee, where we have low-cost power, low-cost reagents, et cetera. And the ability to use a very, very high-quality metal, which is appropriate for photovoltaic cells, appropriate for aluminium industry, for the polymetallics, appropriate for the defence industry. And so we saw a unique product there, again, in competition to whatever China could provide.

And the graphite is simply because for the moment, the future of anode for most batteries is natural graphite. And we have a very good deposit, a large scale deposit, very scalable. And we have access to a technology to do the spheronization and the coating of that graphite. And so we have a valuable downstream optionality. So it was simply driven on the properties of those investments that drove us to allocate the biggest amount of capital to them.

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Let's just talk about those geographical areas I've seen from your reports during Madagascar, Mauritius, the US, Zambia, Kazakhstan. FT had an interesting article on the terrifying crackdown on mining companies because of Africa's kind of coup belt. How do you weigh up where the red lines are? It's complicated because you have to be able to put the minerals together.

And let me say to you that what I'm going to talk about now has its own manifestations in first world countries. My biggest challenge when I was running Extrata was when Australia decided they were going to change the basis of taxing mining companies.

after we had all done our big investments. And it was during the super cycle, commodity prices have gone through the roof and they said, actually, we want more of the rent than we're getting at the moment. So they basically developed a new tax system where we would pay normal tax on normal profits, but anything above normal profits per their definition, they would take for themselves. So essentially they were becoming my partner without making an investment.

So we fought that eventually successfully, but nevertheless to say to you what takes place in the third world is not necessarily only a third world phenomenon. So the challenge is to try and understand the country risks, the sovereign risks that you're getting into.

And if you can understand them, whether you can mitigate them. So if you make that judgment, then I think you can invest. So I've never made a decision based on the fact, well, it's a complicated geography. It's got a whole bunch of risks. So I want a 40% RRR before I invest. And that will make me happy because many of these risks are binary. If they take place, you've got nothing.

And so I think that from the point of view is how well you can identify the territory. And that becomes down to your previous knowledge, your judgment, your investigation of the areas, how you interact with the people, what propositions you can put together where you can draw in the local community who see a benefit from having you there well above simply employing a few of the community as your employees.

that they see you as an engine for growing health and educational solutions, that you create a sustainable proposition even off the mine, closes it down. And if you can do that and you can understand the fiscal and political forces, you can make a judgment call as to whether you can mitigate the risks.

So that's what we do. But having said that, every country has its unique challenges. And the challenge in many third world countries is that today you can have a very sensible conversation with a very sensible government and come to very sensible outcomes.

And tomorrow you can have a different government and all of that goes out of the window. And so you constantly have to be in tune with what is happening and constantly having to demonstrate that you are a force for good in that society. So it doesn't matter what their political positions is, what their economic and social philosophies are, that they see you

And so it sounds to me as if the backdrop and thesis generally for the mission that you're on and the demand for those programs.

product has absolutely been reinforced. Has the timeline shifted out because of all these other factors that have come to play? In this industry, the timeline always shifts out. What can I say to you? It's an industry which always, always, always has delays and disappoints on that basis. And that's just because of the complexities around the projects.

The amount of regulation that one has to manage through, the number of permits one has to get, the way that you have to deal with communities and get through them, NGOs who've come in for their own purposes to protect environments and things like that. It is an enormously complex business.

establishing, building and operating a venture. And so your timelines are never met. They're always delayed. I think the challenge that we're facing at the moment over and above that is the fact that there is clear uncertainty in the investor community as to what the direction of travel is going to be in relation to the change of president in the United States. My own view is that

They will come from a different direction in the sense that in the Biden administration, everything was associated with climate change, environmental issues and stuff like that. In the Trump administration, everything is going to be about America's strategic position, its defensive capability, the context of not wanting to have this deficit to China. They will end up in exactly the same place. There will be a need for these commodities and there will be need for intervention by governments to

to help lower the cost of capital that companies have, lower the regulatory environment, reduce the regulatory barriers, and provide some assistance, financial assistance,

for the development of new technologies to facilitate midstream and downstream processing in the West. And that doesn't matter where you come from in the spectrum, that's where you have to end up. And I think that's where we are going to end up. Yeah. In fact, we've had Scott Besant on the show, who is now Treasury Secretary. And I listened to him at the Senate hearings yesterday, which was fascinating. But I would say that that was very much France's center.

Going up to the larger world of resources, which you know so well, I mean, at a superficial level, I look at obviously this huge build out of the data centers, but we're going to have a huge rebuild, we think, at some point of Ukraine. I see China is going ahead with this YTHP, which will be the largest hydroelectric project ever in the world. It's extraordinary, even if it's a long timeline. And presumably now, the rebuild of Los Angeles is also going to be consuming.

Is there, at another level, an undersupply of the broader, typically more available metals? Good question. I think two additional aspects. We have been waiting for the last 30 years for America to retool its infrastructure. Travel to any major city in America and you just come to the conclusion they need work there. Also, the second facet is the industrialization of India. India always flatters and doesn't quite get there, but at some point in time, they will get their act together. With their demographic advantage, they'll

they will be a force to reckon with. All of that translates into massive demand, as you say, for these enabling commodities, iron ore for steel production, copper in significant ways, etc. And there again is the same supply deficit issues that I described with the critical minerals supporting battery storage and renewable energy, that there has not been development in significant capacity.

The potential for the projects are there, but it requires the investment. And here is the crux, that it requires a manifest change by the investor community to re-embrace investment in resources. If they do not, I think we're going to have a very, very tough time. You'll see commodity prices going up very, very high. And in that sense, balancing the supply-demand demographic. So we have moved from the time when I brought...

with Brian Gilbertson, Billiton to the UK, and when I floated Extrata in the UK, et cetera, the United Kingdom had become one of the greatest creators of new capital from the mining industry, far outstripping New York and others. That doesn't exist at all at the moment. Public markets are no longer the source of capital. So you have to rely on Haitian capital, which is the long-term pension ones in North America. But they have, as I said, this concept of the moral hazard of investing in the mining industry.

or sovereign wealth funds as the other portion form. Beyond that,

If they don't come to the table in a big way, the public markets have to. And that requires a complete reassessment of their position on resource companies and investing in cyclical industries. And I want to get down into that in a second. But you talked about India, which was on my list. I just did want to talk about China because in a conversation I listened to back in 2021, I quote you, you said you were more worried about China failing than succeeding. Yeah.

Where are we now with China? I still repeat that word. So I am concerned about the failure. So I think the imposition of a much tighter control over the Chinese economy, which has been the result of

of President Xi's different initiatives, whether it is anti-corruption initiatives or securing more centralizing power, et cetera, results in a much more constrained economic environment in China. So entrepreneurs are less likely to take risks. People are much more likely to be circumspect in how they deploy money or deploy money at all, et cetera. So I think that's point number one. Point number two is the rising cost of labor.

more people are leaving the workforce than entering the workforce. So they have a demographic disadvantage in China. The third element is that there is a propensity for social unrest in the urban areas in China, which is very significant. I mean, we don't hear about that, but it exists. The only way you can combat social unrest is through either greater economic development and more jobs and basically full stomachs,

Or alternatively, you create a diversion. And those diversions are costly and they're risky. And I'm concerned that we are on the cusp of whether he can supply the economic fulfillment or the diversionary fulfillment. And if it goes the diversionary fulfillment, then I think we have a problem.

Right. And for those who don't look at these more obscure data points, it's interesting to see that the 30-year China bond is now yielding 1.8%, whereas Japan, the epicenter of deflation is 2.35%. So the market's already picking up this issue. Now, as a

Investor as I have tried to be all these years, you look at the mining space, the listed mining space, you've just referred to investor sort of appetite and perception. There's a lot of value out there, I would argue. And today in the FT, of course, there's this conversation going on or maybe not going on between Rios and Glencore. As an investor, which is not what Vision Blue is doing, but broadly of these large commodity firms, how do you assess the value proposition? So I think your thesis is right. I think there's a lot of value.

So if you look at commodity prices over the last 12 months, I mean, obviously gold and silver have gone up a lot, 30 plus percent.

Copper, 8%. Aluminium, zinc, 15%. So there has been quite significant movement in commodity prices, even though the markets are certainly based on the Vidal. I mean, there's been some commodities where there has been significant price reduction. Uranium is actually one of them. But the actual resource companies themselves, their share prices have meandered.

And in fact, if you look at gold companies, I mean, a couple of large gold companies in Canada, their share prices have gone down. Yep, yep. But they really have meandered. So I think there is a lot of latent value to be had in investment in these companies. The key issue that investors should have is what is management going to be doing going forward? I mean, clearly there are some companies who are in a state of flux like Anglo-American because of the

pressures on them and their need to actually review their business model and their investment proposition and what they're going to do about that. But I would think that you've got a market which is ready for consolidation. And I think that's quite an exciting time to be playing in this market because it means that companies can expand their exposure to the market without having to go into initial project builds and

At the same time, realize a lot of the value that remains there on the table as a result of the fact that you've got these, I think, quite suppressed share prices. Yeah, and one's reminded of Warren Buffett's line that you want to buy inexpensively and remain patient. And that's what I'm trying to do myself. If we war game that geopolitical situation a little bit...

What happens if the US, because it gets more acrimonious, imposes some sort of trade ban or we get a blockade of Taiwan? What's the impact on the commodity world then? Well, good question. I mean, very difficult to actually give you an answer, a pithy answer, which says it will be this and it will be that because it's complex. We're dealing with complexity. We're dealing with the potential of risks to take place without us understanding where they will lead to.

And so I think that one has to be very cautious about making these predictions. But if we do get into that sort of scenario we're talking about, trade wars, global conflict or global tension, if not conflict, the high global tension or conflict, then you see a constraint in trade, which is going to have an impact on the one hand on economic growth, which is clearly negative. On the other hand, you're going to see a rise in costs,

and an inflationary environment. And so on the one hand, it would be negative for demand. On the other hand, it's positive for demand and certainly positive in terms of pricing. But I would say that because the underlying requirement for the West to ensure security of supply

of resource is going to require this ongoing investment and that investment is going to be lagged and therefore commodity prices are likely to be reasonably robust even in that environment. Got it. A really interesting point that you made, which I want to come back to, which is the investor appetite sort of globally.

David Tate, who's CEO of the World Gold Council, World Gold Council is a sponsor of the show, had a really interesting conversation and they've done a lot of work around there. It's just how beneficial a lot of these mining projects have become to the communities and how, in a way, the old view is really an old view and it's an outdated view. His question, actually, because he had a question when he knew I was interviewing you, is what does the future of mining look like?

Good question. And I think that his perspective that you've relayed to me is entirely right. This view that there is a moral hazard to investing in mining is entirely misplaced. In fact, it has very little foundation, even if one wants to drag up horror stories of rogue mining companies in past years. The point is that mining companies can only succeed with significant investment in the communities in which they reside.

Secondly, the facts are that they have been, as he correctly pointed out, massively beneficial for community development right across the third world and even in the first world. The development of standards, international standards...

by the mining industry in terms of how they would look at their environmental propositions, their relationships with employees and communities, etc., have grown by leaps and bounds and have set exceptionally high levels of attainment. And so I think that the industry itself has created an ecosystem around it which makes it a definite and definitive force for good.

in these areas. So I think that no country can actually develop its potential if it's resource based without an active mining sector. The question is, in my mind, is two things. One is, is the cost of capital going to be such that investment mining companies can compete? And that's an open question for me at the moment. The cost of capital is too high and it has to be brought down.

Secondly, can the environment in which they have to compete in be made more benign by the rationalization of a plethora of regulation, which has taken mining companies. When I started in the industry, if you found a resource which was viable and you invested in it, it took you eight to 10 years to get into production. Now we're talking about 15 to 17 years.

That is an incredibly long time and it's a very costly period of time. That has to be brought back. And the question is, is there going to be a mindset that will allow that to happen? That requires governments, it requires NGOs, it requires supranational organizations to get together and come up with logical and rational solutions to this particular problem. And the third thing is how mining companies can create a constructive and sustainable relationship between

with governments in third world countries which transitioned from one government to another. And that has always been the Achilles heel of our industry.

So I'll give you for instance, I want to go and invest in company X. I want to be certain about the fact that I'm going to have tenure on the property, that I've got a reasonable relationship with the workforce. I'm not going to have strikes every day. My environmental obligations are rational, et cetera, et cetera. But the other thing that I want is I want to understand certainty about how is the rent going to be allocated between myself and

the risk taker and the government. Because the government, which is the guardian of society at any one point in time, has a right to extract rent from those things and use that rent productively in society. But how do I know what my level of rent is going to be? And our challenge has been is that this has been the biggest variable. So we start out on one basis, we invest money and we find it changes.

And so we think, well, what we'll do is we'll have tax stabilization agreements. So we'll have these long-term agreements which set out, this is going to be the thing. And we'll have a long-term agreement on royalties and there'll be free carries for governments to have exercise and stuff like that. None of it works.

Because at any one point in time, governments will turn around and say, today we're not getting our fair share of the rent. Don't tell me it's going to come in 10 years' time. I want to know today that I'm getting my fair share of the rent. And so we have to rethink the agreements that we make with governments to give them an ability to access that rent from the time that we start accessing the rent. And not on the basis that, well, you can get it when we've got our investment back.

And also do it on a basis where it appears to be manifestly fair over the life cycle of the project and not just fair at one point in time. So I think there's a big challenge for the industry in rethinking and reimagining how to create those relationships with governments as they develop projects. There are other issues as well. I mean, you know, I think that the challenges within Panama are

where we have one of the world's largest copper projects, mines, closing down because of the actions of civil society. Not the actions of government, the actions of civil society is a very important issue to understand. So,

The thing that minor companies have, they have to be in tune with the dynamics and the temperature and the mood music across society all the time will enable them to respond to changing dynamics. And that again requires a different mindset in the way we think about things because up to now we thought about our own communities and

But these things transcend communities across society. So I think there's a change that needs to take place. If we get those right, then I think you can have a vibrant, successful mining industry across the world. Moving to some general questions, a friend of the show, but you know the gentleman as well, Stephen Zimmerman, who ran Mercury, said, how important is Greenland?

Not as important as people think it is. Okay. I saw titanium and some other metals might be under the melting ice cap. That's correct. And they might or may not be there. I've been entertained by people's stories about Greenland for many, many years. Right. There are some areas where you are going to actually be able to establish productive mining areas in Greenland. I don't think it's going to be one of them. Okay. It's very clear that you are very driven. How?

How would you explain that drive? I don't really know. I mean, I could say to you, I did not grow up in a terribly wealthy family. I mean, my parents were hard workers and made sure that we had a great education, but we didn't live in any luxury at all. I'd like to say that was the thing that drove me, but it wasn't. And I'd like to say that I have this incredible desire to be preeminent or somebody and that that doesn't drive me either.

I just sort of think that I saw opportunity and when opportunity came my way, I decided to take it because I sort of believed in myself and I believe in my own judgment. And I sort of think if you see opportunity, don't take it. It's sort of a waste. And so I'm driven by the fact that if you have an opportunity to do something, you should do it because not many people get those opportunities. Question on philanthropy. You've been a very generous donor. How do you measure impact?

That's a very good question. And so much of the philanthropy we give, at times, my wife, Barbara, and I turn around and say to ourselves, it's just sort of pissing against the wind. You know, we've just had no impact at all. Great cause, sounds wonderful, nothing wrong with what we've done, but have we changed things? No, we haven't. Lately, I've tried to sort of become a strategic philanthropist in the sense of making strategic investments in trying to make sure that we are changing the

the environment as opposed to directly addressing the particular need. So there are a lot of legitimate bleeding stump causes which you can write out big checks to because you feel emotionally compelled to do so. People in extreme poverty who can't eat that day, who don't know where to sleep, who can't get particular access to healthcare. And all those things have their place.

I'm trying to think about how we actually change society in a way which can eradicate the particular things that we're looking at. So we focus in on children at risk, on healthcare, on the arts and things like that. And so trying to invest in the strategic nature of things allows better to assess impact. But I have to say to you, it is a very inexact science.

And most of the time we fail rather than succeed. And we feel good about what we do, but we fail to determine actually that we made the ultimate impact that we want to make. But we continue to try.

I think we asked that question of Chris Hone, who's been a guest and does a lot, you know, in some fantastic charitable sort of work. And hopefully he's coming back on. Now, as I mentioned earlier on, you are the first person to my knowledge that's been on our show of 185 guests who is a cricket or was a cricket umpire. And as I read this transcript of a speech you gave to the Melbourne Mining Club, it turns out that you have been

properly umpiring and I think as somebody who came from Bristol and saw Barry Richards bat you've actually been there who's the best batsman you've ever seen at work so the best batsman I ever saw at work umpiring was Graham Pollock but I thought he was an extraordinarily gifted batsman with an unbelievable ability

early eye for the ball and just consummate timing. And very attractive batsman was with the left hand. Left hand is always very attractive. He was the best batsman I personally saw. And today, if you had to name the batsman that you most admire? Goodness. I mean, I think there's so many really good batsmen out there.

family, good batsmen out there. But I think Joe Roode actually, I think, deserves the top of my hat in terms of his consistency. Well, we had A-Rod on the show talking about baseball, so I thought it was about time we, for at least our American listeners, might not be quite so interested in that. You commented that the person you have admired very, very highly was Abraham Lincoln. And I wondered which of his qualities you've most tried to emulate.

I'm not sure that I emulated, but the thing that I admired about him most was the fact that he was prepared to work with people who were his rivals and who were antagonistic. And so much in business and also in political leadership is people setting up their businesses or their cabinets, trying to avoid strong, capable people who

who could rival them for power or for position. And he deliberately set out to actually create, in his first cabinet after he was elected, the best possible people he could have, even though some of them were antagonistic to him and some of them could be his rivals for power. And I think too many people basically find that very difficult. And when I get asked a question by somebody,

What is the most important lesson you've learned from leadership? It's find people who are smarter and better than you to work in your team, and you'll definitely succeed. And the question we ask a lot, because we've got a number of students around the world who listen to the show, what's your advice to young people thinking about careers generally?

I think that you have to take the opportunity as it comes your way and not hesitate. You see something which you think matches your talent and your perspectives, grab it and grow with it because nothing is forever. It doesn't matter if you make a mistake. You always get experience and experience is valuable and you grow your personal asset, but you can't do that unless you grab the opportunity.

My final question is, you've been CEO and Treasurer of the Conservative Party, who deserved, many would argue, to be voted out. We have in its place what I would describe as a hapless UK government. It doesn't seem to understand many of the basics about creating growth and stimulating the right environments. Many of us, like you, we here are trying to build businesses against the headwind of an unfriendly government. What do you think is the runway for

for the UK given lots of great entrepreneurial stuff going on and yet a headwind that is almost self-destructive. Well, I agree with that. And I think that the current government is doing more to drive away entrepreneurs and limit the capacity of business to grow and employ people. And everything they're doing is counterproductive, even though they say they're for growth. The manifestation of the policy is anti-growth. And I think they're creating a set of class wars, new class wars, which are not going to be constructive.

But the biggest challenge I think that the United Kingdom faces is the fact that there is a ceiling on low inflationary growth because of the cap on productivity.

It requires a massive investment to unlock the productivity capacity of the United Kingdom, both in terms of infrastructure and in terms of education. Unless they focus in on that, we're dead. We will become an ever-decreasing proposition in the world in terms of a place to live in, a place to create value, et cetera. They have to address that. That, for me, is the most fundamental thing. If they can address that, they can then start addressing the

the tensions within society, which exist right now, not only in the UK, but everywhere across the world in the United States. Great. Well, that was a little departure from our normal conversation, but important given that your perspective is valuable and you've been there sort of, even if Boris Johnson did fire you. I'm not sure if that's a virtue or a... I have no comment to make on that. So we're going to conclude. What an extraordinarily interesting space. And you've said some things, many things that I've written down, and I'm just going to take two

of those conclusions. One is that the investment community, and they are our key audience, need to embrace the dynamics around mining, understand that it is significantly changed from visions of 20 years ago, and that it's absolutely essential for the West and for the projects that need to be undertaken for that cost of capital to fall and capital to be accessible. So that was point number one. And I think that

Point number two is that businesses, you talked about, it's about creating optionality. And business plans, and we've seen them all, are absolutely terrific. But there is that equal need to recognize there's an unknown out there as these businesses build. And you obviously did that exceptionally well at Xtrade. I'm doing it at Vision Blue. So it's been great to have both the business insight from you and the sort of the metallurgical insights at what is a really interesting point in time. So Mick, thank you so much for being here today. Thank you very much. Great.

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