TOL - 18th Aug, 2023
The new King of Kal(goorlie)
When the crowds are distracted with the hope of what might be, sometimes it pays to look where others aren’t.
Last week heading north along the Goldfields Highway, I encountered a truck.
This truck was no ordinary truck. It had 3 trailers carrying everything from steel tubes, a couple of utes and a few pallets. A Road Train.
Surrounded by red dirt, a few crows, and a very straight road, I had a difficult decision to make.
I was running a little behind for a company presentation, I had a truck in front that was ~60 mtrs long, that was speed limited 10km below the actual speed limit and I was in a Hybrid Yaris Cross.
Branded as Toyota’s ‘Urban SUV’, it was a little out of its comfort zone about 600kms from the nearest CBD.
As I found a straight stretch of road, and no cars in the distance, I spotted an opportunity to overtake. Main Roads WA says passing a roadtrain is like overtaking 12 cars. To the truck driver’s credit, he indicated right, I assumed giving me safe passage, I planted my foot on the accelerator cautiously, and embarked on the manoeuvre.
Reassuringly, I felt a rush of torque and the journey past the truck was relatively swift. I was safely back on the left-hand side of the road, with 10 minutes to spare before the next car.
As I drove past a slew of gold mines, and a ‘Two Up’ site, I was genuinely impressed how the 1.5L 3 cylinder car, was handling Australia’s harshest road conditions with confidence.
In the rear view mirror, in the distance, was Kalgoorlie. In 1893 three Irish prospectors stumbled across a hill, where according to the Eastern Goldfields Historical society, they found 100oz of gold within a week, or call it ~1/4 of a gold bar. Not bad doing. A week later 1400 men arrived, and a new gold field began.
Since that initial find, WA has gone on to be Australia’s largest exporter of gold (~210 tonnes p.a) and is estimated to have the largest gold reserves in the world (~57k tonnes), according to the WA Dept of Mines. Kalgoorlie is now home to one of Australia’s largest gold mines right on its doorstep.
But there is a new king in town. The insatiable demand for all things new energy, has seen relatively obscure exploration companies command $1billion valuations on the hope of what may lay underground.
At the same time those companies with spodumene production, exposed to lithium carbonate prices or the battery supply chain, are generating billions of dollars of cash and are now firmly entrenched in Australia’s top 50 companies. And if the performance of this Hybrid Yaris on a remote road in WA is any indicator, that could well see the transition continue.
In contrast, Australia’s gold companies seem to be unfortunately suffering from a lack of relevance, plagued by higher costs, and limited enthusiasm for new exploration (despite gold prices being within a whisker of their all-time highs).
When the crowds are distracted with the hope of what might be, sometimes it pays to look where others aren’t.
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Nick joined Eley Griffiths in September 2016 after 6 years at the global equity research house CLSA, in both analytical and research sales roles in the US & Australia. Prior to financial markets Nick spent 4 years as a practicing lawyer.
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Nick joined Eley Griffiths in September 2016 after 6 years at the global equity research house CLSA, in both analytical and research sales roles in the US & Australia. Prior to financial markets Nick spent 4 years as a practicing lawyer.
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Nick joined Eley Griffiths in September 2016 after 6 years at the global equity research house CLSA, in both analytical and research sales roles in the US & Australia. Prior to financial markets Nick spent 4 years as a practicing lawyer.
Expertise
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