Yellow Lab Life Capital

I am not as smart as I sound, so please don't listen to me

[Yellow Lab Life Capital @YellowLabLife]

EUCALYPTUS TREE, Jan 3, 2022 (Newswire) 7:00 AM:

The koala is an unrestricted free agent

There is no pre-contract or handshake on a max deal to be signed on a certain date

What will come in '22, let's see, but until then no compliance regime

Let the mayhem begin...

[Yellow Lab Life Capital @YellowLabLife]

Don't care how bullish anyone on #coaltwitter has ever been in the past decade, no one was ever crazy enough to say out loud "the PRB...yea, I'm bullish the PRB"

And now we are seeing sell side reports titled:

"Key Takeaways from NARM Site Visit"

[Yellow Lab Life Capital @YellowLabLife]

@jtourzan Sports are the escape for the Koala

Stopped playing fantasy football a few years ago

And basically never bet on sports, considering what the Koala essentially does for a living, it just feels like more work without any delusions of comparative advantage

[Yellow Lab Life Capital @YellowLabLife]

You know what, the Koala is feeling a little bored these days and needs some excitement in the eucalyptus tree

Let's follow along with a friend on a rates trade just to feel something

Long $RKT

Even if the USG actually does lose control of the back end, they'll surely try some serious YCC first before it's truly lost

[Arrakis Global @ArrakisGlobal]

$RKT has huge torque if rates reverse

Long.

[Yellow Lab Life Capital @YellowLabLife]

There’s a reason all the steel mills were built elsewhere on the Great Lakes

Better question frankly is why Iowa?

No way truck/rail south to Minneapolis to barge down the Mississippi beats transporting on the lake

And a DRI facility for an EAF…that’s a specialized build so that pellets from Mesabi can be used

And how much scrap can you efficiently collect in Iowa/region

@rennyzucker is correct here

This seems like a really strange place to put this plant

It should be on the Great Lakes…not the river

Granite City would likely close if Nippon didn’t have that agreement with the USG

[Yellow Lab Life Capital @YellowLabLife]

They may be losing control of the bond market but they’ll try something first

A 7.5% mortgage isn’t in the bell curve of the millennial US consumer model

But having gotten there, just feels
like if it got back to 6.5% for even a second Rocket would benefit from consumers reacting to the “now’s our chance” effect

So let’s see

[Yellow Lab Life Capital @YellowLabLife]

This isn't even limited to doctors:

99th percentile household income in NYC is ~$800k

Exclude the "tristate area" (aka Long Island, Fairfield County, Westchester County, Northern NJ)

And control for "family"

The Koala hypothesizes you aren't getting that household to move to North Dakota / Mississippi / random state with no prior ties for the same "revenue" and just a lower "burn rate"

Now...if there is a 100% raise involved, maybe a conversation starts?

But that's the harsh truth - the academic and professionally ambitious, are attracted to regions of critical economic mass because of the opportunity density

They can be pushed out "into exile" (separate topic), but it's REALLY hard to pull them out

[Yellow Lab Life Capital @YellowLabLife]

@HJB2_0 This is a conversation a supermajority of Americans are not ready for but will need to be had

To quote a line from Drive to Survive "Not even people who live in Milton Keynes want to live in Milton Keynes!"

[Yellow Lab Life Capital @YellowLabLife]

@DPGEO @YukonBrandon The $20 burrito/bowl is very real my friend

[Yellow Lab Life Capital @YellowLabLife]

Taken a small punt on Lux Metals $LXM.V in the eucalyptus tree

Trans-Taiga Corridor has been good to the Koala in the past and the geology looks fascinating

Curious to see how the drilling looks this season

TBD if it works but sometimes you have to just do things for the plot

[Yellow Lab Life Capital @YellowLabLife]

Not going mega size here 9 months ago when the CEO and Chair roadshowed through New York was one of the koala’s biggest mistakes of the past year

And seeing Mt Todd go today, Glenburgh is going to have suitors

Will majors be willing to pay the number required or be brave enough to go ahead of an actual JORC resource estimate is the question

[Haplo @HC_Haplo]

$BNZ Nothing to see here...

[Yellow Lab Life Capital @YellowLabLife]

“So after over 10+ years living in redacted you moved to a state with no income taxes?”

Well guess we will find out next 12-24 months if that CEO is delusional or knows how to close a deal

[Yellow Lab Life Capital @YellowLabLife]

Mt Todd has “been around”

So going to reserve judgment until we hear what the Artemis team says to explain their process and filter as they surely looked at tens of projects

Why this one?

It’s only 5% of pro forma company so they sorta have license to do another one of these too and they’ve earned the market’s trust

But also tells you they couldn’t sell themselves to a major at a number they liked (“take your nil premium and shove it” probably was said in Canadian English at some point) so could see some fast money filter out

If it u/p GDX today by more than 3% that would be an overreaction probably but I’m not expecting that unless a ton of fast $$ goes for the door now that a takeover is off the table near term

[Yellow Lab Life Capital @YellowLabLife]

Well looks like we have our answer on Artemis $ARTG.V now

[Yellow Lab Life Capital @YellowLabLife]

We are, and have been in hindsight for 18 months, into the middle of the cycle where capital isn’t looking to de-capitalize / harvest from the mining sector and instead realizing there is actually value creation opportunities in the sector

So it’s not about your capital returns (buyback and dividends) but your opportunity set to grow and deploy capital for attractive returns (and of course, you know, execute said opportunities without catastrophic errors)

It’s the first question phrase another way but “what’s your unique / company specific runway to create alpha for your shareholders”

An example (and the koala is open to input here): Artemis with Blackwater has been a brilliant vision and execution, but after the current optimization…what’s “the next opportunity” in that company?

And besides being in Canada so could allow some peers to utilize Canadian tax loss pools not currently being utilized…what’s the lever for a potential acquiror to create incremental value at Blackwater?

So what does Artemis do from here? How does it further drive alpha like it has since buying Blackwater from New Gold (RIP)?

You don’t sell it per se but what’s basis to get new money to buy into it?

There very well may be one, haven’t dug in beyond skimming the latest deck and a few old meeting notes, but that’s sort of where the fresh $ will get trying to decide whether to start digging deeper into the situation

3/n

[Yellow Lab Life Capital @YellowLabLife]

Anyways that’s just the koala organizing its thoughts out loud

Should be a great week

7/7

[Yellow Lab Life Capital @YellowLabLife]

Flight delayed to Colorado so a few musings from the Koala ahead of Beaver Creek week:

Since last Beaver Creek, $GDX up ~35%

While $GLD up ~20%

Given how crude and diesel have performed this year, think barring some major changes in fuel prices you have to think next 12 months the @TraderPamplona view of GLD over GDX makes sense

A key question for every meeting is what in the portfolio today can be a major catalyst for NAV uplift before next years conference or even BMO

Because as we go into budgeting season for producers, the Koala suspects the fuel prices in everyone’s models for 2027 are probably low versus what will be used in budgeting to issue guidance in Jan/Feb

Means if energy product supply chain does normalize we probably have upside to initial guidance in 2027 BUT it’s not hard to imagine in Florida late February 2027 the buyside is normalizing company guides for different oil/diesel assumptions and bringing numbers down for 2027 all else equal

1/n

[Yellow Lab Life Capital @YellowLabLife]

What commodities will we not be talking about?

Gold/Silver
Copper
Critical Minerals

Will be the main topics

Not expecting to hear the words nickel and lithium much this week…always a good barometer to check for where fast money is and isn’t

6/n