Q&A with Warwick Grigor, Executive Chairman/Managing Director, Far East Capital
In this interview, Warwick Grigor highlights the appeal of early-stage exploration and fast-tracked development, where risk and reward collide. Track records and management experience remain critical, with investors favouring companies that can deliver growth and production quickly.
To listen to the interview, click here:
Let’s start with an introduction and your position in the industry as an analyst, investor, and corporate executive.
I’ve been a corporate and mining analyst since 1982. When I come along to an event like Ignite, I’m always on the lookout for new stories. I put out research weekly, writing stories on companies, and try to succinctly get the message across without making it difficult for the readers.
There really is this desire to get straight to the bottom line and I try to do that, and I use these conferences to catch up with some companies I already know. But I’m always looking for new stories that I might not have seen previously.
Generally, I find it’s a lot better to talk to the management than to go off and read through all the research. I like to get to the bottom line quickly.
What kind of stories grab your attention?
Really early-stage exploration can be very promising. It’s high risk and, potentially, high reward.
Then there are the companies that have caught onto something and are growing. It’s the growth of the resource that adds the value. When you get to the point where you have done all your studies, crunched the numbers, and you’re trying to figure out how to raise the money, that’s actually one of the least attractive stages for me — when a company has proved that it has a project of merit, but still doesn’t know where the money is coming from.
I’ve been talking to quite a few companies lately that are seeing promise in getting into development with smaller starter pits and then growing from that point. Do you see a benefit to that kind of fast-tracked development cycle?
A quick deal is a good deal. I think shareholders like to see the colour of money earlier, and if a company has access to a mining lease, a mining licence, and/or access to a treatment plant, it’s a good way to produce your own money rather than having to go to the market. So that’s good.
The question is whether these projects are going to be good long-term propositions or will they give good money for a year or two, or three — but where’s the growth curve beyond that?
So, short term as opposed to long-term growth. This is an opportunity for a lot of junior Australian companies to get the ball rolling and to get some production experience, and then it’s up to management where they take the mine from there.
What are some key characteristics that you look for in a company? What makes a company stand out?
The track record is very important. If the management team has done it before and has confidence, it is worth noting. Rather than if they are new to the business and are promoters. This adds to a company’s risk profile. I think it’s important to have people who have a bit of experience and who know what they are doing. That’s very important.
What about some key commodities of interest? I remember you being quite into gold in particular, but what else is exciting at the moment?
Well, gold is always going to be there. It’s just easy for a junior company to find money and sell it for money, as opposed to a concentrate or something similar.
So right now, fertiliser is top of mind, with Aguia Resources (ASX:AGR) in particular. They’re about to turn on their treatment plant in Brazil and start selling phosphate.
Antimony is really exploding right now — everyone seems to be embracing that. Copper is also always exciting.
Where are we going next in the sector? We need to see someone turn their projects into profits.
Several years ago, there was a lot of talk about the critical mineral supply gaps and ensuring the security of supply. Is that still a major issue?
Well, it is because a lot of people have got a vested interest. I see a lot of these not so much as critical minerals, but as strategic ones.
We’re now going through a period of escalating warfare around the world, and we do need specialty metals for weapons. But the most critical mineral is oil, even though it’s not technically a mineral. We cannot advance… we cannot even stand still if we don’t have oil.
Sulphuric acid is another thing that people are suddenly thinking about. Sulphuric acid is necessary for recovering a lot of green energy metals like lithium and copper. You cannot have these benefits without sulphuric acid.
The importance of oil and gas has really been heightened over the past few weeks, with the war in Iran and the lack of access to oil. In Australia, specifically, there has been a lot of talk, especially in more remote regions where it is necessary to run operations still. How do we move forward?
Well, the first thing is to stop fighting. That’s a great start.
But we have this interruption in the supply chains, and it’s not a matter of turn on or off. It’s going to affect people’s behaviour.
I think that the world is becoming more cautious and the natural antidote to that is to make sure we are better prepared next time.
It’s very hard to analyse market trends because there is no other day-to-day volatility, and that’s causing a lot of people to stay away and remain on the sidelines because they just don’t know how to react, right?
But yes, the best thing to do is stop some of this conflict from going on.
What is your outlook for the industry moving forward?
Over the past few decades, if the US wanted a particular metal or commodity, they could just go to the market and buy it. But China has sold so much of everything and now has export restrictions, making it more difficult to just buy these same products anymore.
The US seems like it is starting to discover mining for the first time in many decades, and from a top-down approach money is going into the sector, from the big companies down to the little ones. So, we’re probably seeing one of the most glorious periods in mining seen in decades.
We’re seeing investors much more aggressively taking positions. They’re not standing on the sidelines. There is plenty of money out there if you’ve got the right story.
Write to Amy Rotman at Mining.com.au
Images: Mining.com.au
