The Rules of Investing

One sector with 50 years of growth ahead

The Rules of Investing

Livewire Markets

There have been few times in history that one could look at an industry or sector and confidently expect decades of growth ahead. But this is the situation that the resources industry finds itself in today, particularly companies exposed to decarbonisation.

Governments around the world have committed to emissions reductions targets that start from 2030, going all the way out to 2070. And there is a range of metals that will be required in great quantities if we're to have any chance of meeting those targets.

Owen Hegarty OAM, Executive Chairman of EMR Capital and founder of the 'Mighty Ox' (Oxiana Resources), is acutely aware of this. 

From the obvious beneficiaries, through to the counter-intuitive, he's built a portfolio of companies that are set to ride this wave of growing demand.

In this special episode of The Rules of Investing to celebrate 1,000,000 downloads, I speak to Owen about his experience building the Mighty Ox, why potash is critical for feeding a growing population, and he identifies one recently listed ASX copper miner that's set to benefit as the world goes green. 



Books recommended:

  • The 7 Habits of Highly Effective People: Powerful lessons in personal change, by Stephen R Covey. Available on Amazon and Booktopia
  • The 8th Habit: From effectiveness to greatness, by Stephen R Covey. Available on Amazon and Booktopia

Edited transcript

Patrick Poke

Hi, Owen. Welcome to the show. Good to be chatting with you.

Owen Hegarty

Thank you, Patrick. Lovely to be here.

Patrick Poke

It's great to have you here for this special million downloads episode. Trying something a little bit different today, so I hope it's fun for you and also for the audience. Let's rewind a little bit to the mid '90s.

You'd just had a very successful career at Rio Tinto. You were the managing director there, I believe it was managing director of Rio Tinto, Asia, as well as head of their Australian copper and gold assets.

But in '94 you left Rio Tinto and about 12 months later, you popped up at Oxiana. Tell me, did you foresee the kind of bull run that was coming in commodities in the years ahead or was it a case of fortuitous timing?

Owen Hegarty

Well, a little bit of everything, I suppose, Patrick. I mean, the 24 years with Rio Tinto, I was lucky enough to be involved with most of their companies, most of their countries and most of their commodities.

So very lucky to have that sort of background and experience actually, wonderful people, wonderful company. And a lot of the work was going more and more in terms of investment and commodity demand and so on, going more and more to Asia.

And I was lucky enough to spend quite a bit of time in Asia. I was based in Hong Kong, based in Taiwan, did a lot of travelling in that part of the world. And you could actually see the economies growing at the time.

So it was pretty clear that you were going to have good, strong demand coming for a long period of time given the number of people there in Asia, and particularly in the commodities that we were close to and knew well, which included copper, other base metals, precious metals, gold and so on.

Taking the leap from the big end of town to the small end of town was quite a leap, of course, from a personal perspective, as well as a corporate perspective, but we could see the opportunity out there with that growth in Asia in our metals, Patrick.

So yes, in a way, we saw it coming, but we were lucky enough to be in a very good position to see it coming. Part of our job, in a way. And we saw the opportunity to get involved in a smaller public company and we started the Mighty Ox at that time.

Patrick Poke

You mentioned the growth that you were seeing in Asia. Was that the primary thing you could see driving the resources super cycle, or was there also a supply side that you were seeing as well?

Owen Hegarty

Well, the demand was driving, of course. And China was starting to grow at that time as well and you were starting to see the numbers becoming much bigger, and we'd actually spent quite a bit of time in China and other places, Indonesia, et cetera.

You could see the demand growing, as I say, almost under your feet there. And we knew that the supply side was going to be challenged. And we are supply side people, we are mining people, so we had to put the focus on that.

And of course, Australia is perfectly positioned to take advantage of that. And that's still the case, Patrick. I mean, yes, it was true in the '80s and '90s and it's still true now in the '20s.

Patrick Poke

What are some of the similarities or differences you see between where we stand in the commodity cycle today compared to where we were sitting in the late '90s?

Owen Hegarty

There is a difference, no question about that. In the late '80s, '90s and so on, you were seeing the Asian market grow. The rest of the world was growing too, but most of the growth was coming from our part of the world, in Asia.

And everybody looking to grow their business, to grow their company, to grow their own livelihoods, all looking to get on that super highway of economic growth and prosperity, countrywide, corporate-wise and so on. And it happened. And very strong demand for all of the commodities we were involved in.

So what's the difference now? Now, that's been going for the last multiple decades. You've had part of the super cycle, you've had 40 something years of all of that. Now, what's different? What is added to that? What's the booster here?

The booster is now the whole energy transition thematic. So it's all renewables and electric vehicles and net zero and decarbonisation and so on. So that is now going to add another boost, another dimension.

It's no longer a thematic. People and countries are actually starting to put targets on it. It's 2030, 2040, 2050, '60, and the Indian Prime Minister, Narendra Modi, has gone out to 2070. So we've got 50 years to run of the whole decarb energy transition complex, if you like.

That's going to add demand because you've already got the underlying demand there that's going to add onto up of that. And of course, it adds to our supply challenges because, as I say, we're supply-side people. And again, Australia is perfectly positioned to be able to take advantage of that, Patrick.

Patrick Poke

Well, let's move on to around 2008. Obviously, Oxiana had a great run through that early 2000s period, but then in 2008, all of a sudden there was a merger announced with Zinifex. Where did that come from? How did it first come up?

Owen Hegarty

Well, I think like-minded people at that time, looking to grow their business and grow value generally for all of their shareholders and stakeholders generally. That's what I was doing. Obviously, that was my job as the CEO of the Mighty Ox.

The Mighty Ox had actually grown very successfully. The overnight success only took 15 years or thereabouts, Patrick. Equally, Zinifex was a strong and growing base metals company here in Australia, but had offshore projects and so on as well.

It made sense for us as boards and management to put those assets together, to get bigger, to become more competitive and stronger. And that's how it came together at that time. Ran into a bit of a speed bump there in 2008, 2009.

You will remember that. Everybody remembers that, called the global financial crisis, but survived very well. Had to peel off one or two assets and make a few changes, but survived as OZ Minerals, and OZ Minerals is still one of the best performing market stocks on the ASX in the past 20 or 30 years.

So it's actually done very well. So it got through the speed hump.

Patrick Poke

Yeah. There was some concerns there when Prominent Hill was coming to the end of its life, whether they really had any options left, but it seems like the new asset, Carrapateena, seems to be performing quite well for them now.

Going back to that global financial crisis period, when the merger was announced, OZ Minerals was expected to have about $1.9 billion of net cash on the books. It was only about 12 or 18 months later though that, as you said, you had to sell off some of those assets.

From what I can gather, it did seem as though it was somewhat of a distressed asset sale. Correct me if I'm wrong, but that seems to be what the literature from the time suggests. What do you think went wrong there and were there any useful lessons you were able to take away from that?

Owen Hegarty

Well, look, very interesting. I can't remember all of the detail, as you would expect, but it was a very tough time for everybody, for businesses, for people, for companies, for countries. It was very, very difficult indeed.

As far as the debt goes, remember, it was a financial crisis. The banks weren't lending to each other. You couldn't find anybody in the banks to talk to. The debt levels of the merged company weren't actually very high.

They were actually quite modest and moderate in a way, but you couldn't find anybody to talk to in terms of rolling it over or what have you. So it became difficult for the company at that time, which is why they had to go into the business of looking to shed one or two assets, which they did, and in the end, quite successfully, actually.

Okay. So what do you learn from that? Well, what you know also very clearly is our mantra, our narrative, is we are going to see long, strong, continued growth in demand for commodities. It's going to go out, as I said, for 50 years, according now to India.

And that's fine, but you won't be without the humps and bumps along the way. And this was a particular hump and a bump. We've just been through one here, Patrick, with COVID, right? So you saw what happened during COVID as well at the beginning of 2020. End of 2019, beginning of 2020, the market just tanks and people were saying, well, what's happening? Wasn't a financial crisis per se, it was simply a market crisis. Commodities down, stock market down, all your leading indicators were well and truly down.

Okay. And people say, well, are we going to get a recovery? Well, sure we're going to get a recovery. We didn't know whether it was going to be V-shape, W-shape, L-shape, M-shape, inverse square root shape, whatever shape it was going to be, but we sure got the recovery ultimately. And it was a very, very sharp V-shape recovery, which is actually a terrific thing because it tells you that the world, with its great industrial diversity across countries and so on, can actually recover very quickly.

There was a lot of working together, not only at the health and safety level, but at the economic level as well in terms of financial markets and so on. So the recovery was very, very sharp and we're now back on track for all of that.

I should say, Patrick, the mining industry has actually come through COVID very, very well, as it did, by the way, ultimately post the global financial crisis, as well as the Asian financial crisis going back 10 years before that.

The mining industry is very well prepared for any health and safety, occupational health type issues. It's always well prepared for emergency type issues and is quite remote in terms of the community. You can manage those things much better in remote areas. So the mining industry actually came through that very, very strongly.

We've seen one in around about 2000, short one in 2009, 2010. We've seen one here in 2020. So we've got another 10 years to wait for the next one, Patrick!

Patrick Poke

Oh, that sounds good — another 10 year bull market would be very welcome! Some of the assets that were once part of Oxiana have now found their way back into your portfolio at EMR Capital. How did that come about?

Owen Hegarty

Well, again, very interesting question, Patrick. For example, the gold mine in Indonesia, Martabe, was an asset that we'd bought in Oxiana and that was one of the assets that after the merger came out, I was associated with the acquisition of it.

Acquired it for the second time and we actually put the money together out of Hong Kong and Indonesia and we built that mine in Indonesia, the Martabe gold mine. Cracker of a gold mine, spinning like a top. Got it up to 300,000, 400,000 ounces per annum. Very successful, not only financially, technically, socially, sustainably, if you like. A terrific beacon there.

The Hong Kong owner sold Martabe to EMR Capital and then ultimately EMR Capital disposed of it, but the thing about that, Patrick, having bought it, I suppose, bought and sold it three times, if you like — it looks a bit odd on the CV — it's a very, very good deposit; a very, very good operation, ultimately.

Very good support in that part of the world, up in north Sumatra, there from the local communities and so on. I mean, you've got to work hard at it. You've got to build trust and confidence and support and cooperation in and around and amongst those communities.

That's the most important thing you can do. Well, it doesn't matter, actually, if it's in north Sumatra or the red dust of Mount Isa — you need the support and cooperation of all those local people. We always had an attraction, I suppose, to that Martabe gold mine. That's how that came and went a little bit inside the family.

Equally, at Golden Grove in Western Australia, that was a mine that we bought in the Ox from Newmont at the time. Again, it was a little bit unloved, and didn't fit completely inside the Newmont portfolio because it wasn't 100% gold.

Yes, there was gold there, but it was zinc and base metals, I suppose, so a little bit on the underloved side. We in the Ox bought it from there and then it was an asset that went to MMG out of Oz Minerals and then we bought it back from MMG.

You will remember MMG, big Chinese group. They bought the very big South American copper asset called Las Bambas, and so all their money, all their people, all their attention was going over to Peru and therefore, there was less capital and less attention, if you like, for the Golden Grove asset here in Western Australia.

We were able to secure Golden Grove and set about reinvesting, putting people back, putting technical know-how and various other innovations and improvements into place. That is now still part of the family, if you like, inside 29 Metals.

That's how those sorts of things came around. The lesson there is really that you've got to go like a barracuda, in a way, for those quality assets. Do your work well, identify the quality assets and don't give up.

Patrick Poke

Do you like going back to assets that you've owned before and revisiting them? Is that something that's a part of your process?

Owen Hegarty

Well, it can be, it can be. It's one part of the pipeline. The advantage, of course, is that you know the asset very well, warts and all, and you know the people very well and in my case I know their mothers and fathers, having been there for some period of time.

The other thing, of course, is that with a good understanding of the bigger companies, you know what the bigger companies, more or less, how they think strategically about some of these things, so that's also a hunting ground for us, if you like.

The bigger companies only really want to manage five or six or eight, or whatever it happens to be, of their top 10 businesses and some of the smaller businesses don't fit one way or another and simply don't get the attention. That's a hunting ground for us to give them the attention and improve volumes, improve productivity and so on, if the opportunity is there.

We would call it, from our business perspective, a competitive advantage, if you like — apart from the fact we've been doing it for a long period of time. We do know many of the assets very well, we know many of the people very well and we know many of the corporates and their strategy very well, Patrick.

Patrick Poke

There's certainly been some pretty incredible businesses created in Australia off the back of selling assets by the majors. I don't want to mention too many by name, as I'm sure you see some of them as competitors, but it's pretty incredible, particularly over the last 10 years, how many great Australian listed resources companies have been born out of the unloved and rejected assets of the majors.

Bit of a change of tack for you though. I want to talk about the UK and the coal assets that you have there. There's the west Cumbria coal mine that you've been developing there for a few years. It has been mired in a little bit of controversy, which may be based on a misunderstanding of what the asset actually produces and what it's used for. Could you explain what that asset actually produces and why it's different to thermal coal?

Owen Hegarty

Yes. Just quickly in terms of background. In EMR Capital, we're copper, gold, based in precious metals, on the one side and on the bulk commodity side, we prefer potash and we prefer metallurgical coal, so we prefer met coal.

Going back a few years now, when we were looking around the world for undeveloped metallurgical coal assets, there weren't a lot of them going around and they've got to have quality.

If you're going to be in the bulk commodities business, Patrick, you need to have quality, certainly as a private equity group, and you also need to have an infrastructure solution. We don't want to be building railway lines and ports and harbours all around the countryside anywhere. You would prefer all of that infrastructure in position.

One we identified that fitted the bill was the west Cumbria metallurgical coal deposit. It had been mined many years ago, going back 40 or 50 years, for met coal — for steel-making coal — and it was right next door to infrastructure. It had railway line, port, people, very supportive community in that part of the world, all looking for work, if you like, like everybody in the world.

They're all looking for work one way or the other and so it has various certain development on it already that we were very comfortable taking it over and getting into business there. Highly competitive, low cost, long life project.

We're confident about that and met coal is probably only 15% of the world's total coal mined and used. Most of it, of course, is thermal coal, energy coal — goes into power stations. Metallurgical coal goes into steel mills. That's effectively its exclusive use — to provide steel.

Okay. Thermal coal, well, there are alternatives. Renewables, uranium and various other things for energy production. Metallurgical coal, no serious competing material at this time.

Even though in the blast furnaces, people are talking about, yes, we'll inject some hydrogen, already doing some of that. Yes, we will have carbon capture and usage, CCSU and so on. Yes, we'll have all of those things. Yes, we need higher quality met coal. Yes, we need more scrap and that will come naturally. Yes, we need higher quality iron ore and so on and so forth, but you still need a long strong diet of good quality metallurgical coal and particularly if it can be closer to the steel mills, in terms of its end use, cutting down on transport costs and therefore emissions from that perspective. That's what attracted us to that.

We're still long strong believers in metallurgical coal, certainly out to 2070 and beyond, Patrick, and this particular asset, still a project, not operating yet, but we're looking to get the final clearances.

Here it is in the UK, up in west Cumbria, not very far away from Glasgow, and there's been a bit of chat going on up there in Glasgow in recent times at COP26, so we kept a very low profile, but I have to say coal, met coal, came out of COP26, in a way, very, very well.

People are starting to understand two or three things. First of all, that there is a difference between metallurgical coal and thermal and energy coal and secondly, that this is a transition. It's not a quick-fix, silver-bullet, magic-pudding cliff that you can do it overnight.

Decarbonisation will take some time, and taking some time, Patrick, is not an excuse just to kick it down the road, so to speak. Taking some time means you've got to develop the technology. You've got to test it out, you've got to implement it, got to commission it and get all of those things in. The work that going on around the world is just amazing, and the future will come forward faster, for sure.

You saw it happen here during COVID. It just came at us very quickly. It happened over the last 30 or 40 years in terms of longer, stronger commodity demand. Now the world — and particularly China — has got such a massive industrial base and research and technical R&D (research and development) base, if you like, that all of those technologies will be developed.

We in Australia will be playing our part. We in our business, of course, as a mining group, will be playing our part in supplying those metals and commodities and so on, but Australia in particular has a very serious competitive advantage in all of those things now.

We don't have the industrial might of China or Europe or the United States, but we've got very serious competitive advantage in the things we do well: mining, processing, mining equipment, technical services and so on and so forth. Little bit off track there, Patrick, but a terrific outlook.

Patrick Poke

What about electric arc furnaces? They seem to be the direction that the steel making industry wants to go in over the next few years. How would the mass take up of that over blast furnaces affect the demand for coking coal?

Owen Hegarty

Well, again, it will be a transition. As the world has developed over the past 200 years or thereabouts, you are seeing more and more arc electric furnaces because of course the scraps are rising, but it takes time for that scrap to arrive.

So if you go out 50 years, yes, you'll be able to see more and more steel produced by the EAF process because there's more scrap available, DRI (direct reduced iron) and so on. But the developing economies, India, other parts of Asia, and continued in China, you'll still have that basic oxygen furnace, blast furnace technology, that needs that diet.

So again, it is a transition. It is a process, not a marathon. It's a journey. It's gradual incrementalism, but it will certainly happen.

Patrick Poke

Well, the big topic I really wanted to speak to you about today is potash, which you referred to earlier. How do you see supply and demand moving forward for potash? Do you think the scale of that is big enough to meet the world's demands or do we need to be developing more and more potash assets?

Owen Hegarty

Yes. Yes. Well, you're quite right. The supply-demand for potash going forward will be under pressure on the demand side. There is good supply of potash about, or will be. Potential supply — put it that way.

They need development. You've got to get permitted. You've got to get it. The capital costs will be higher, operating costs are higher than current operations that are gradually depleting. So there's an equation there. 

The market is 75 million tonnes a year, and it's growing quite well, growing quite fast anyway. For us, it's a very good underlining of our thematic in terms of looking for products.

As you know, the population is growing. People are living longer. People are eating more. I'm living proof that people are eating more and living longer and they need higher protein diets and that sort of thing. There's less arable land. So more fertiliser will be required. And potash is a key ingredient in the overall fertilisers.

And the supply side, as I say, there's a lot of it about in the world in the Earth's surface, but it's a question of actually getting the right project.

We like potash. We don't want to compete with the bigger guys, the BHPs and so on, but we see selective opportunities there in that potash fertiliser space.

Patrick Poke

Before we get into any more specifics, it might be good to understand the two types of potash. Could you explain what they're called and what the key differences are?

Owen Hegarty

Yes. Well, the regular good ordinary brand potash is called MOP, muriate of potash, and that's the 70 to 75 million tonnes a year market and that's potassium chloride, KCl, and that's the most prevalent and growing quite fast.

SOP, sulphate of potash, is a smaller market, five to seven million tonnes per annum, growing actually faster, but it's used mainly, almost exclusively, on what they call chloride-resistant crops. Avocados and almonds and fresh fruit and vegetables and so on, tend to prefer the SOP. They don't like the chloride as much.

Patrick Poke

So higher value crops. Is that right?

Owen Hegarty

Yes. Yes. Higher value crops, rather than the big, broad acre wheats and corns and so on. So it's the higher value fresh fruit and veg and avocados and so on in California and other food basins of the world. And we are in both. We have a project in MOP and we have a project in SOP.

Patrick Poke

Well, let's start with talking about the MOP project, which I believe is the Highfield project. Could you tell us a little bit about that? There are several potash projects on the ASX. What was it about that project that attracted you to it?

Owen Hegarty

What attracted us to Highfield in Spain? Okay. So it's HFR, listed on the ASX. It's a single project in northern Spain, just outside the city of Pamplona. Spain is, generally speaking, a long, strong mining country. So a lot of experience in all of that.

The availability of the tonnes, the grade, the other key success factors you need, what are the secrets to success, if you like, when it comes to a particular deposit or operation — Highfield has got all of them.

It has got good availability. You've got lots and lots of upside there. You've really got half of what they call the Ebro sub basin, or most of the sub basin there. So oodles and oodles of upside and very, very long life — that's what it attracted us to it.

And not very far below the surface, it was available, and we knew the people involved. We knew the people who pegged the ground, did the work, and so on and so forth. So that helped, that gave us some comfort. So it's got all of those things about it.

And as I was saying a bit earlier in respect of the bulk commodities, if you're going to be in those bulk commodities, and particularly if you're a mighty mouse, EMR type of thing, you need the infrastructure solution. You don't want to be building railways and ports and so on. And this has (the required infrastrucure - ed.).

It's in the middle of Europe, and in the middle of the market. You're right next to ports, you're on the railway system, you've got energy, you've got power, you've got people, and you've got terrific access to all the markets. So that's basically what attracted us to Highfield, Patrick. And we own about 30% or something like that.

Patrick Poke

Cross over to the other side of the Atlantic now. There's another potash project you're involved in with Peak Minerals. (This is an unlisted company that's wholly owned by EMR Capital, not to be confused with the ASX listed company by the same name - Ed) Could you tell us a little bit about that one? Again, what attracted you to the project?

Owen Hegarty

Yes. Well, Patrick, that's an SOP project over there in Utah. Down to the south of Salt Lake City is the Sevier Playa. In other words, it's the Sevier salt lake, and the project will be built on that particular lake.

So we've done all the environmental work, done all the detailed technical work and so on. We're in the stages now of financing. Permitting is all done and getting prepared for construction and then ultimate operation. It's SOP.

What attracted us to that, apart from the fact that it's in potash and SOP, very mining friendly jurisdiction there in Utah. You will remember actually that Utah was the home to some of the very big mining companies and construction companies throughout the US.

And they branched down into South American soil. Good, mining friendly jurisdictions in there. Good support from the local government and governors and communities. And again, like communities all around the world, they were looking to get work and growth and development for themselves and their children and their grandchildren. So it had that about it.

It's a good quality material on the lake and relatively straightforward. All of our test work is relatively straightforward in terms of getting the brine running. And it's the brine that you then evaporate in solar ponds on the surface, and then you process that result and concentrate it and it becomes SOP.

Patrick Poke

So you're not digging it out of the ground at all then?

Owen Hegarty

It's not a digging process per se. It's an evaporation process from brines, getting the brines running. The potassium sulphate is actually contained in that brine. The chlorides are gone. So God has done the work for us there. The chlorides have gone. And you're left with the resultant SOP.

It's a terrific project. I mean, they take time. You've got to get the evaporate right. You've got to get the timing right. Got to get the chemistry right. And so on and so forth. But we're very confident it will go very well.

Also, Patrick, it's right in the middle of the market. So it will disappear across to the east, back into America or down into California for the high value fruit and veg, almonds, avocados, and so on, and also down into Mexico. And we can get it down into Peru as well.

There's probably not enough for all of those places, because we'll ultimately get to about, I think, 300,000 or 400,000 tonnes per annum or something like that. It's quite a big SOP operation, but very competitive in terms of its cost. You're using the sun, using solar energy if you like.

Right in the middle of the market. Infrastructure already exists — you don't have to build any of that out. And so it will be very competitive for a very long period of time. It's a sort of 40 to 50 year life.

Patrick Poke

You've mentioned a couple of times the importance of getting the mining jurisdiction right. I feel like this is perhaps something that's underappreciated by a lot of mining investors, particularly retail investors. Could you talk about that specifically? Just how much attention do you pay to that?

Owen Hegarty

Yes. Well, it is the first thing that you look at, certainly, and the jurisdictions here in Australia, for example, are mainly controlled by the states, that's the mining rules and regulations, et cetera. And we've been doing it for a very long period of time.

Yes, we have a bit of a whinge and a grizzle and a sledge every now and again, with respect to the government, the regulator, but really they're very supportive, very reliable, and very mining friendly, in a way.

And they're very supportive when it comes to research and development and 457 visas and various other things. You can get all of those things. You got to fight hard for them from time to time, but you can pretty well get all of those things.

Okay. Now you contrast that with some of the Asian countries that just have never had that mining development before, then you're sort of starting afresh in a way, and therefore you have to work with the jurisdictions, work with the national government, work with the provincial government, and particularly work with the communities in terms of getting an understanding of what it is you're about to do.

It's one thing to go in and get all the exploration work done and so on. You do it from afar, then you do it near. You make your discovery, and you've got to be confident that you're going to be able to develop and be there for the long term. So clearly, it's not just the national government, and the rules, and regulations, and the mining permit. It's not just the provincial government.

You really have to do your work so well ultimately on the ground with the local people because they are ultimately your social licence. Because it's their valley that you've invaded, if you like. You have to win their trust, their confidence, their support, their cooperation.

We spent a lot of time at that. You have to be confident that going into a new jurisdiction, not only at the national, federal, provincial level, but particularly at the local level, that you are going to be able to do your work and build their trust and cooperation.

That's the single most important thing about going to these places. And it doesn't matter whether you're in the middle of the Pilbara or the red dust of Mount Isa, or the rainforest of north Sumatra, or the Atacama Desert. You really must have that.

That's so important for your long-term sustainable business. So we take that very, very seriously. It's one thing to do the drill work, and the resource work, and the engineering, and the construction — we can do that in our sleep — but it's so important to get that social work done on the ground, Patrick.

Patrick Poke

Well, before we move into my favourite questions, I want to put you on the spot about probably what I think is the biggest question for any mining investor to consider. Looking out over the next five to 10 years, so long term but not ultra long term, taking all things into account — supply, demand, etcetera — what commodity do you think is going to have the best performance?

Owen Hegarty

Over that period of time, five to 10 years, and perhaps longer term, copper will go very well because it's used in everything — every electrical application, every growth. It's a producer good. It's a consumer good. It's an investment good. It's an infrastructure good. It's in everything.

Now, of course, with the whole energy transition dynamic, copper is used in all of those things. Doesn't matter whether it's renewables, or electric vehicles, or however it's done, you need Dr Copper in there. So it's got another growth spurt. Copper is one of our favourites for sure.

But Patrick, also all of the other battery metals complex. They are competing with each other. They're jostling for position there, but they will all be used one way or the other. That's lithium, cobalt, nickel. Nickel has just got another spurt. That's the complex that we like and fortunately we're very familiar with that complex as well, so that helps.

The steel industry will continue to go very, very well indeed, as will all other things that are actually going on out there. But we particularly like where you've seen copper, which has got a very strong growth profile anyway. But it's now got that extra — the booster — it's had its third booster, if you like.

Patrick Poke

Well, that's it for the main part of the interview, but I have three favourite questions which I like to ask my guests. First, tell me about a book that's influenced you as an investor. What lessons did you take from it?

Owen Hegarty

Very good question. Most people these days read a lot of books; they get a lot of information. We've got so much information coming at us all the time. We're always reading, I suppose, in a way.

Particularly after I left the Rio Tinto organisation, the mothership, going from the big end of town to the smaller end of town, a lot of things are done for you in the mothership, but in the smaller outfit, you are literally on your own. You've got to do it all yourself. And particularly looking to grow the business, and I mentioned a bit earlier that we are looking to grow our business in Asia and copper, and gold and so on and so forth.

And so, what are the key success factors in growing that business and the opportunities there? Well, you need very good people, of course. And of course, you need the people with the skills, the hardware, and you need people with the motivation. You need the commitment, that's the software side of it.

So how do you build? It's one thing to go to school, and go to university, and go to tech and so on and so forth. And you can build up that skill set, but how do you build up that commitment? So as a leader, I suppose, put on the spot of looking to build the team over a period of time and build culture, how do you do that?

What are the key success factors? What are the buttons? What must you do to help guide, coach, lead people through that whole process, whether it's the people who directly report to you, whether it's other stakeholders, other folks in and around the companies and so on? I did actually a lot of reading about all of that.

How do you build that? Looking at going from Good to Great, In Search of Excellence, all those sorts of books, or just a few of them. Now, there's a plethora of them, in terms of advice that you can get. But one of the fellows is a man called Stephen Covey, who wrote The 7 Habits of Highly Effective People. And then he wrote The 8th Habit. He did a lot of lectures too. Almost evangelical actually, was Covey.

But Stephen Covey was very, very important because he made The 7 Habits very simple, very clear. These people have done an amazing job and these are the key success factors; these are the seven habits.

These are the things that they do — it doesn't mean that if you do them, they're going to work for you. Or it doesn't mean if you do them, you'll do them as well as other people have, but there's a very, very clear theme in there.

So we used those in the company and so on. We built up the trust. We built up the confidence, we built up the culture that equipped the tools that we had in terms of the technical capability to do our work well.

Patrick Poke

Well, as always, if you're looking for that book, I will put a link in the description. Next question for you: tell us about your biggest loss or gain. What lessons did you take away from the experience?

Owen Hegarty

Yes. Yes. Well, look, I think we're always learning more from our losses than our gains.

Patrick Poke

I always think so!

Owen Hegarty

And I've had a few of them! I've got a whole library full of mistakes and losses and so on, Patrick! So singling one out is a bit hard. But one of the very serious lessons that I've learned, and not just in Rio Tinto, but in all manner of my career, if you can call it that, from the big end of town, to growing the Mighty Ox and then in EMR Capital more as a private equity investor, most key, absolutely fundamental — you must do your due diligence well. You must do your work well if you're looking at something. At the moment we're looking at multiple assets, so all around the world, for acquisition, for improvement and so on.

You must do your work well as an individual, and you must lead the work that that's happening, but you must also make sure that the boys and girls actually on the ground are doing their work very well.

You must have the best people, particularly when you're getting into something, when you're building something, because whatever it is that you build is going to last forever. So you must make sure that you do your work well there.

So your due diligence and the work that you do in that area must be superb. And in fact, it's not just me banging on about all of that and people like Stephen Covey and so on and so forth. But you'll see a lot of the leaders are very fussy when it comes to people. And that's one of the secrets of success. You've got to be fussy — don't be slow — but you've got to be fussy about those things, Patrick.

Patrick Poke

I've got one more question, but before I ask it, I always like to insert a disclaimer: don't try this at home. We're not actually suggesting that anybody goes out there, puts all of their money in a single stock and forgets about it for five years.

This is supposed to be an exercise in long term thinking and hopefully a little bit of fun. So with that being said, if the markets were going to close for the next five years, starting tomorrow, and you could only own shares in one company, what would it be?

Owen Hegarty

Well, I've been talking about copper, I've been talking about experience and so on and so forth. And of course, we recently successfully floated in Australia in July 2021, on the ASX, 29 Metals. And it's a copper, base metals company. It also has cobalt. And Patrick, it's got all of the ingredients.

29 Metals has a good, strong demand profile for those metals, challenges to supply, and the people that have populated both the board and the senior management team are people that we have known, worked with, and been very comfortable with before.

That gives us the confidence that 29M is going to do very, very well. And of course, I happen to be the chairman. So a little bit on that side there, if you like, but we are very confident it will go very well in this market.

Patrick Poke

That's all right. We don't have any rules against talking your own book here!

Owen Hegarty

Thank you!

Patrick Poke

Well, Owen, thanks so much for chatting to us today. It's been wonderful to get your insights and thanks for being part of this special video podcast.

Owen Hegarty

Lovely. Thank you, Patrick! And thank you for the opportunity to have a bit of a go on Livewire. Well done!


The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over...

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