MAGGIE [00:00:01] Welcome to the Hearts and Minds podcast. Conversations on Impact and investing. I'm Maggie O'Neill. Thank you for joining us today. Hearts and minds is a unique philanthropic organisation. It consists of an ASX listed investment company, H.M. Won and Sewn Hearts and Minds, an annual conference that gathers provocative thinkers for a one day event like no other. Together, Hearts and Minds is proud to support leading Australian medical research organisations and since 2016 we have donated over $65 million. In this podcast series, we are bringing you in on meaningful conversations, on impact and investing to discover more about the incredible people in the hearts and minds ecosystem. Today, it is my pleasure to introduce this episode with Jeremy Bond, founder of Terra Capital, at a 2023 conference fund manager. I hope you enjoyed the conversation hosted by Hearts and Minds CEO Charlie Lanchester. 

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CHARLIE [00:00:54] I'm thrilled to introduce today's guest, Jeremy Bond, one of our 2023 conference fund managers with prior experience at Rapid Measure Capital. Jeremy founded Terra Capital in 2010, where he runs a global fund focussed on the natural resources and green energy sectors. Jeremy recently presented at the 2023 Sane Hearts and Minds conference, pitching his top stock pick uranium development business called Next Gen. Today, Jeremy joins us to discuss the current market, his investment approach, and of course, his stock recommendation. Welcome to the podcast. 

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JEREMY [00:01:23] Thank you so much for having me. 

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CHARLIE [00:01:25] Before we get into any of the, meaty stuff, let's talk about the conference itself. What was it like getting up in front of all those people? I know you had a bit of a bit of training beforehand, but, it's it's a high pressure situation. How did it feel? 

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JEREMY [00:01:37] I mean, first, it was a huge honour to be invited. And it was great to be a part of of such wonderful event. But yeah, it was, it's pretty nerve wracking. I think once I was up there, it went quite quickly. But, yes, I thought I'd be up on stage of the opera house any time in my life, so that was quite exciting. 

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CHARLIE [00:01:54] Yeah. Yeah, absolutely. And obviously at its core, we're trying to raise money for medical research here in Australia. What did you know about Stone Hearts and Minds before we approached him? 

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JEREMY [00:02:04] So, so the conference itself had attended. I think I've ended all of them. Obviously, it's a wonderful event in terms of the Victor Chang and some of the charities I had been involved in. In a small way, I guess, as a donor. And I'd been out to the Victor Chang Institute, and seeing the incredible work they do out there. And I'd highly recommend if anyone got the opportunity to do it to go out there. It's really pretty incredible. So I had a understanding, I guess, of the conference and the the wonderful work that goes behind it as well. 

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CHARLIE [00:02:32] Yeah, fantastic. Well, look, it's great to have you, as part of the sun heart to man's family. We look forward to, again welcoming back this year. So pressure. pressures back on. So now turning to, your investment career. You know, how did you get into it? Did you always envision yourself as a as a fund manager? 

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JEREMY [00:02:50] Maybe not funds management, per se, I guess. But I started trading shares, I think, when I was 12, so I guess I always, I always had a passion. And on the mining side, look, I grew up in Perth, so sort of get there's a fair chance you end up in mining if you're from Perth. And and so it was I had some experience growing up going out to mine sites. So there was opened up in something, I guess, when I was in my teenage years that I thought I'd be a resource fund manager, but I guess some of the signs were there. 

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CHARLIE [00:03:21] And what drew you to Sydney? Obviously born and bred in Perth and at that mining background. But then you've moved here. You're based here. What drew you here and how is it managing a sort of global sector? From from Sydney. 

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JEREMY [00:03:35] Yeah. I mean, so I was working at a hedge fund in London, prior to moving to Sydney. And when we finished up there, when I finished up with my wife, we we moved to Sydney. Look, I think it's still for a funds management business. I think still being on the East Coast actually makes more sense. It's where the pools of capital are. And, you know, we go to Perth a lot. Obviously we have half our investments here in Australia and I say a lot of them are in WA. The rest are global. So we we do do a lot of travel I think I've been Chile, Argentina, South East Asia, Europe, the US twice and twice already this year. So it's a quite a bit of travel involved. I guess part of the appeal of the job, to be honest, is going out to funny places. It's certainly not holiday destinations, but there are there are interesting places to go to. 

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CHARLIE [00:04:21] Yeah. And look at another aspect of the, the resource sector, which I don't envy you is volatility. You know, I had a quick look at your returns, which have been fantastic, since inception. But, you know, the ups and the downs on a monthly basis can be quite extreme. How do you sort of get away from that short term noise and, and look to that. Yeah. Really good long term performance. 

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JEREMY [00:04:44] It's a really good question because we're investing for the most part long term. And so we run a portfolio relatively concentrated. And the top ten positions make up 50% of the portfolio. And they tend to be long term holds. And you will have to wear some volatility, I guess, over the period to see, the thesis that you've invested in. So, you know, you're investing in a management team to build them on to expand them on. And so, you know, we try to encourage people not to look on the month to month basis because you're making an investment for usually it's a five year sort of journey. I guess you want to block out the noise from a what happens month to month, and whether that's the commodity prices or just the market in general. So I guess it's an education for our investors or the broader market. This is what you're investing in. There will be volatility. But you know, the volatility will ideally lead to returns over the long term. 

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CHARLIE [00:05:37] And how do you balance the micro. You know you talk about you know management being important obviously and how they are able to transform those mine sites. with the macro which is the global supply demand equations, currencies, all that sort of stuff. How do you balance those two? 

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JEREMY [00:05:53] Yeah. It's one of the, I guess the things when you when you speak to allocators or whoever, it's a, you know, bottom up or top down. And I guess in our sector we are bottom up first and foremost. But you got to have a top down view because as you said, like the commodity prices don't matter. And so we're first and foremost bottom up. And we are a stock picking fund. And obviously that's the nature of being. That's why we relatively concentrated. But we have to have, you know, pretty robust supply demand models. And and you have to take a view on the commodities because the different times there might be commodities that you don't want to invest in, or there might be times when you want to be pretty heavily overweight commodities. And so yeah, you have to be you know, we have monthly commodity committee meetings, and we have external people that sit on those those committees. And it is a big part of the job. But but first and foremost, we we are bottom up first and foremost. 

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CHARLIE [00:06:44] Yeah. I mean, my view is that resources is a kind of specialist sector. Yeah. And in the Australian market, we have a lot of active managers who still have resources as big part of their benchmark, but actually aren't really specialists in that part of the market. 

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JEREMY [00:06:58] And, and typically they tend to be underweight commodities I think is is fair. I mean it's a special sector. It's got it's certainly there's less funds. So we started our fund in 2010, I think there was 12 funds in our Morningstar cohort. And with the only one left. So there's been you know, the sector from 2010 to 2020 was was pretty tough. I think. I think of the first five years of a fund, the small resource index went down 80% or something. So like it it it was tough. And and so there's been a huge knowledge vacuum or human capital vacuum created. But that does provide the opportunity I think we we entered a bull market, a structural bull market. Remember lack of supply in 2020. There's obviously as you said volatility there. The last few years have have been choppy in commodities. There's been some places that have been great but others have been have been tough. But but I think there's structural bull market driven by lack of supplies there. But you know there's there's still a low allocation to commodities. And even in the generalist managers I think most would be under allocated to commodities basically where the index sits. And so if you do get, you know, an outperformance of commodities, then you are going to have to see that money coming back. And we can see from our own fund there's more interest in the sector. It's certainly, you know, it's sort of a circle, a wagon, I guess, experience for us where a lot of these groups, whether it's sovereign wealth funds or wealth managers, whoever might be, they might not have ever invested in the sector. Oh, they haven't, you know, for ten years or whoever did it has not does not work there anymore. And so it's it's sort of taking people a while to get up the curve. But I think people are understanding that, you know, this lack of supply and, and then the demand drivers from decarbonisation and iron data centres, all that is real. And so there's their exposure. There's so many places to get exposure. There's so many ways to get it from a funds management perspective. 

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CHARLIE [00:08:47] And tell us a bit more about Terra Capital, how you came to found it. Who you work with, how did that come about? 

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JEREMY [00:08:53] Yeah. So when I actually started the fund when I was pretty young, and probably pretty naive, I guess, I was 28, I think, when I started. So we've run for 14 years. So I worked at a hedge fund in London, a special suits fund, but it was basically 85% commodity equity. So that's sort of all I've ever done in my career. And I set that up by myself. And, and we started with a pretty small amount of money. I think it's ten, $10 million, something like that. And the fund's grown and the team's grown. We run two funds. We have a long only natural resource fund, which, as you mentioned, is global. So it's about 50% Aussie equities and 50% North American equities. Bank. They're the two main jurisdictions for for investing. And then we have a grey metals fund which follows a similar mandate, but no fossil fuels and no gold. That's I guess some people have that, ESG bent a bit and some don't. So it's just to offer that to both sets of investors. In terms of team Matthew Lang. So it's my business partner. We've been together on the fund for over ten years. Dylan Kelly's head of research. And then we have, you know, a geologist or have a mining engineer on the team as well. And. Yeah, so we're slowly building at the time, we're probably looking for another analyst, I guess, and that'll probably happen either over the next year. 

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CHARLIE [00:10:01] And in terms of commodities, I mean, we've seen, lithium go up and come back down. We've seen, you know, seeing copper price very strong. Yeah. Give us some of your latest thoughts. 

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JEREMY [00:10:11] Look, I think that's where we are in this in the cycle is that we're an upswing in the cycle. But it is going to be you want to be an active manager, I guess, in this cycle, because I think you're seeing commodities going up and down quite aggressively. And and while I think the trend is up and certainly in copper, we certainly feel that way. You can see these these movements be quite short and sharp. Lithium is maybe not the best example but but you know well it's a good example. It's up and up up and down quickly. But that's less supply constrained maybe in some of the other commodities. But for the most part most commodities are severely supply constrained. So if you get an uptick in whether it's demand or even general is buying in, the companies would say to you. Get these quite aggressive price spikes. And the same time, if you get any supply disruptions like we've seen in so manganese recently, there's other commodities of the same. You'll get these quick price spikes. But they can they can readjust quickly. So certainly the trend long term is definitely up in most of these commodities. But you need to be relatively nimble. I think at the moment in the early stage of the cycle. 

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CHARLIE [00:11:13] And let's talk about uranium, because that relates to, next gen, which was your pick at the conference. May it started off super well. I think it was up incredibly strongly. It's come back a little bit. 

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JEREMY [00:11:24] Out of the gate. 

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CHARLIE [00:11:26] We still got six months to go, so. 

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JEREMY [00:11:28] We do. 

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CHARLIE [00:11:28] Full confidence that it's going to do. 

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JEREMY [00:11:30] Likewise. Likewise, I was chatting to actually leak a, yesterday on that. I just hosted a site visit out there which we couldn't attend, but we will be attending one later in the year. So look, the uranium thesis we really like and that that's obviously the first piece of the puzzle that we talk to. And other sign that market still remains incredibly tight. The spot price has come down. It's come down and on super low volume. And we are at a seasonality period where, you know, typically though utilities are not buying. You know, if you look at and you tried to buy any, any sort of size in the market, it's not there. So we've got every confidence that price will continue to rise. And if you look at what Cameco is currently holding and because that a prompt holding at terms of this, their stock, it's as low as it's ever been. So we really still like the thesis and the sentiment towards the the commodities is turning and it's turning relatively quickly considering how negative it was for a long time. In terms of the company itself, you know, the company's super well funded now, a lot of cash on the balance sheet. And the real hurdle we're looking for now is the permitting. So they've submitted a, environmental impact study that should be finalised, I guess it's September, October, November sometime in that region. And what can I see in that, in that region that's been made, faunal has never been knocked back from the permit. So we've got every confidence that that becomes final in that period that I mentioned. And then it's it's 3 to 6 months for an at final permit and then even into construction. And look when that it is a it's a beautiful deposit. It will be a beautiful mine. In terms of free cash flow at current prices, you're looking at a top four mine in the world, you know, from it's free cash flow generation in the margin it generates. So it's a very unique deposit and therefore makes it a unique company. 

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CHARLIE [00:13:05] Excellent. Well, we'll look forward to some of those catalysts over the next few months. 

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JEREMY [00:13:08] Yeah, I'm hoping we get that before the November period. 

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CHARLIE [00:13:11] And look, we're delighted to have you back again this year for the conference in Adelaide on the 15th of November. I'm going to ask a cheeky question. You know what? If you had to choose another one right now, what stuck with that V? And I'm sure it will change by the time November comes or will. 

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JEREMY [00:13:26] Change by November. I mean, I see a lot next generation, but some of the other day. But in terms of providing something different, maybe to give an example of a company that we've gone insane this year, you know, we went out to the Vicuna district, which is in the Atacama Desert in borders Chile and Argentina to see a group of companies called Family in Canada with a Swedish originally, but the Lundeen family. So they've Lundin Mining, they've fellow mining. They have three different deposits or three companies. There's a bunch of assets in the one region which I think will be consolidated. And this, this will end up being one of the great copper minds of our generation. They were all one company to begin with. They've been split out and they've been hugely successful as as separate entities. I think with the huge success they've had drilling, each one of those deposits particularly fell on an index. I think there's a likelihood that maybe we'll come back together. So when we look at fellow mining, you know, they they drill kilometre holes of 1% copper equivalent, which you just don't see anywhere else in the world. I think they'll have a racehorse out this year. And I really wouldn't be surprised if that ends up back in London mining. So if I had to pick a company at the moment, I think fellow mining looks super attractive. I think the resource will blow people away. And and I think it makes a lot of sense to tie it into Jose Maria, which sits in London mining. So yeah, I think I think the fundamentals are there for a beautiful resource to be delineated this year. And I think there might be some M&A as well. 

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CHARLIE [00:14:45] Fantastic. Well, look, thank you, Jeremy, for being with us today. I think you've given a great, insight into how you operate at Terra Capital. Well done for, not only starting it when you're 28, but hanging in there through, that period. And I do think it's a great time to be a specialist resource manager. So reach out to Jeremy at Terra Capital if you're interested. And we look forward to seeing you in November in Adelaide, I can't wait. 

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JEREMY [00:15:09] Thanks so much. 

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MAGGIE [00:15:11] And that concludes today's episode. We hope you enjoyed our conversation and gained some valuable insights into Jeremy's investment approach, current outlook, and of course, his 2023 stock recommendation, Next Gen. Don't forget to subscribe to the Hearts and Minds podcast wherever you listen so you never miss an episode. Hudson Minds acknowledges the traditional custodians of the land on which we work and record this podcast. The Gadigal people of the Eora nation. We pay our respects to their elders, past, present and emerging. And finally, a quick reminder the content of this podcast is for informational purposes only and does not constitute financial advice. Please consult a professional advisor before making any investment decisions. Thanks again for joining us today. 

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