Hot Chili (HCH) - Copper-Gold Player To Spice Up Your Portfolio? (Transcript)

September 1 2020, 16:44 GMT+01:00

Hot Chili (HCH)

  • ASX: HCH
  • Shares Outstanding: 2.36B
  • Share price AUD$0.05 (01.09.2020)
  • Market Cap: AUD$108.605M

Hot Chili is an ASX-listed copper-gold explorer, developer and producer with assets in (you guessed it) Chile. It claims to have delivered 5 of the world’s best copper-gold porphyry drill results, confirming its flagship Cortadera project as one of 'the most significant copper-gold discoveries of the past decade in Chile.' If this is the case, why are trading volumes so low and why is the share price close to a 10-year low? Chile is far from the easiest mining jurisdiction to operate and permit in, and there is quite a negative investor sentiment around it. Is there a meaningful discount being applied to Hot Chili's market cap?

Easterday now believes that Hot Chili is well-positioned and he is ready to get this copper-gold mining story off the ground and take advantage of this favourable copper-gold environment.

Can Hot Chili's advanced Chilean coastal portfolio finally deliver value to investors after 12 long years? What is the plan to turn this copper-gold miner into a profitable enterprise?

We Discuss:

  1. 2:05 - Company Overview
  2. 3:07 - Past Success and History of Hot Chili
  3. 9:55 - Stagnant Share Price, Yet Claims of Take-Off?
  4. 17:09 - Production Aspect: What Do They Have?
  5. 24:38 - Unlocking the Potential: How and When?
  6. 29:11 - Recent Raises: What's the Money For?
  7. 30:42 - Management Shareholding
  8. 31:35 - Mining in Chile: Hold Ups and Nuances
  9. 33:27 - Exit Strategies: JV's and Sales Potential
  10. 37:23 - Overhang Concerns and Share Register
  11. 39:52 - Cash Position and Burn Rate
  12. 41:05 - View on the Gold Market: Is the Price Sustainable?

Matthew Gordon: Christian, how are you doing, sir?

Christian Easterday: Very good to see you.

Matthew Gordon: Thanks for coming on the show. First time we have met, it’s the first time we've spoken, I'm looking forward to hearing about this story.

Christian Easterday: We are in a really interesting position. I thought it would be great to meet you and tell the Hot Chili story and get all the tough questions. We are a Copper-Gold developer on the ASX in the junior space. We listed the company 10 years ago, going over to Chile to find and develop large Copper-Gold projects. That was back in 2010, we had a very big early success with a project that a synonymous with our name - Productora - big discovery on the coast. And then there's been a complete revitalization of the company in the last 18 months since we took on this world-class discovery, Cortadera right next to the Productora.

We're a Copper-Gold developer based out of Chile with our head office in Perth. And I'm looking forward to chatting with you today.

Matthew Gordon: Good, thanks for that rundown. I always try to understand a little bit about the management team's capabilities: their experience, their track record, and you've kind of hit upon a few touch points there. You have had a previous success of Productora. Why don't you tell us about what you did there and why you are calling it a success?

Christian Easterday: It is a very, very tough your business plan with your chairman, my founder Murray Black, and I went over to Chile with a bit of a vision to move into the large-scale space. Myself and Murray have a lot of experience over here in the Gold space in Western Australia. I'm a geologist of 23-years experience and a lot of expertise around us. We went over there to break into a really tough environment in Chile with the, ‘no use it or lose it’ clause means most of the majors are there. And finding big opportunities was what drew us to Chile. It is a very stable jurisdiction. And I suppose we went over there privately and went through a very large consolidation phase.

I'm bringing together a number of opportunities with deals with the Chilean majors. That was 2.5-years of my time sitting over in Chile and just not leaving them alone as the world fell apart in the last year, obviously. We were very successful in that process. And we were one of the first companies in many, many years to do a deal with Codelco. We did a deal with one of the top 3 CMPcap, and that got us into consolidating the Productora project on the coastline 600km North of Santiago.

That was a discovery that availed itself within three months of listing. The company short from insignificance to a USD$250M company quite rapidly. We deployed USD$100M into that project, rolled it into a Prefeasibility, defined a quarter of a billion tons of open pitable material on the coast. It was a very exciting start to live for the company. So deal-making and consolidation is very much in our nature.

We were supported for many, many years by some very large shareholders, some very notable people that you would well know the names of: the Rick Rules of the world with Sprott, and the Gordon Gaults of the world with Taurus, and indeed, our own chairman Murray Black. We were backed with a very big vision. Unfortunately, I'll put this story into context: Hot Chili then hit a brick wall like most of the market did. Copper price moved from USD$3.30/lbs back down to $2/lbs, and really over the last 5 or 6-years, prior to the acquisition of Cortadera 18 months ago, Hot Chili was on life support.

The ASX went from some 40 large Copper developer peers, on to about 4 of us. We were one of the survivors. We survived a nuclear Holocaust. And we were able to do that by very prudently managing the company, keeping alive and being supported by those major shareholders. And they really gave us the opportunity to take this next step, finished the consolidation, take this Productora success, as I called it that, unfortunately, the tide went out and you find out who's naked - we had our pants halfway down to our ankles. We needed to build the remaining scale through the skillset that the management group had, which was pulling this area together, and of course that culminated in us finding the Cortadera private discovery and the rest has been history in the last 18-months since that happened.

Matthew Gordon: I just want to be clear: it was success in terms of your ability to aggregate and put together a package to create a story in Chile, predicated on the Copper price then. Copper price fell away and you've, as you say, your phrase was ‘life support’ for a while, supported by institutions. Your experience is in South America. It is in Chile. It is with Gold-Copper, right?

Christian Easterday: That's right. We're a bit of a flag bearer for the Australian market; we are one of the few juniors that went over to Chile from Australia and were able to succeed. We have a very big footprint there. We are a very well-established player in the coastline of Chile and in the large Copper-Gold space.

Matthew Gordon: Tell me: 23-years at it, what else have you been involved with?

Christian Easterday: The start of my career actually was over here in Western Australia where I live with my family. I'm a Gold geologist by background. I was an explorationist, had a very, very lucky start to my career working with one of the stalwarts of the industry over here, Peter Cook. I joined Peter and Hill 50 Gold back when I started. Most people know that story and we had a great success there turning around a WMC operation and then eventually being taken over four years later by Harmony Gold for $250M.

So that's where I started my career. I was very lucky getting a lot of discoveries. I got the Gold bug and the discovery bug, went on and worked with Placer Dome in their exploration group over here in Western Australia. I had a lot of experience with the Global Generative Group and started going over and starting to spread my wings as, at the same time as a young geologists, I was dreaming of bigger things and completing my Masters in mineral economics while I was working and then completing my MBA and then ultimately getting a phone call one day from a gentleman that I knew that I used to use his drill rigs at Hill 50 at that Gold project when I was at Placer - that was Murray Black. He is a very well-established guy. Over here he owns large drilling businesses and a lot of the Kalgoorlie guys, and he asked me to come and work for him when I was a very young guy. I got a lot of luck and got very enthusiastic about the industry and dreamed of eventually having one of my own companies to go and succeed at finding something big and developing it and building a company.

Matthew Gordon: Let's talk about that because the beginning of Hot Chili, it started well, it's fallen away. You're telling me 18-months ago was a kind of catalyst moment and things have changed since then. I'm looking at the share price from 2017 - fairly flat, not much is happening. The market is not reacting to what you are doing. So again, define for me what you mean 18-months ago, things started to take off, what do you mean by that?

Christian Easterday: If you look at the Hot Chili price, it's really a bit of a hill and then a come down quite significantly after that initial star of the market back in 2012, 13, et cetera, winning diggers and dealers awards and building a quarter of a billion market cap quickly. Trough that very big trough, we were level to USD$0.01c a share from $0.80. A lot of CEOs would be horrified to want to rerun that record. I think that the measure of success with any company is about your endurance and never giving up on the vision that you have. When we came down to the beginning of 2019 at $0.01, and supported by our major shareholders, it's because 2-years before that, we were told that there was a discovery that was made on the other side of the Pan-American highway to Productora, and we were very fortunate to be able to get our hands on that information, look at that, start looking at scenarios as to what that would mean for our project, which was sitting there, unfortunately snookered. We had a Copper price that would not support being built at the scale it was. Alternatively, we had half the mine life we needed to bring that development through. I've said this before, it was a rabbit out of the hat moment, but it was about pulling the rabbit out of the hat.

This was a Chilean family, very, very wealthy, one of the big families of Chile, they controlled it. They had been handed it back by a Chilean billionaire that discovered this thing. And for all intents and purposes, they were not selling this asset. We went to them, we spent 2-years building that relationship, looking at every way we could to get them into a conversation to say, let's put this together with Productora and we finally succeeded.

It was two years of watching our share price get decimated, with a master plan and really not blinking. And we were able to pull that off at a very low point in the market capitalization, and that took real grit. And to be able to do that, announce this private discovery that had not been closed off, it had been walked away from with 800m intercepts from surface, no close out drilling and the suggestion that the grade was getting better at depth - that took a lot of convincing for a lot of people that were financing me to survive, to see if we could even pull something like that off. Given our pedigree and deal making, I think that most people know that born in the DNA of what we do at Hot Chili very well is the relationship and the deals that we are able to pull off.

We did that in 2019 and we saw Hot Chili last year achieve, to come back to your question, it looks pretty flat. If we look in from the beginning of 2019, you see about a 413% increase in the share price as we start at one via some of the top Copper-Gold intercepts being rolled out globally for the last 2-years, we've achieved 6 of the top 25 now. I think we actually finished as the 3rd best performing share price on the market. And really, share price is what this game is all about for investors. Last year was a very big return for our shareholders on that turnaround strategy and the announcement of that deal, and obviously the success that's unfolded since.

If we then follow back to this year, Matthew, and I'm going over to PDAC and the price is very good, and as I arrive we're sort of watching this virus in China and wouldn't you know, in this business, you hit another moment in the market. That pretty much levelled most of the ASX junior space who backed nearly all of our gains from last year in finding a potential world-class deposit right next to our existing development.

Since then we've been able to secure a number of things that would have very much worried the market and exacerbated that evaporation of gain. We got back from PDAC straight into Chile with the virus following us. And while I was there for 10-days we nailed a few very, very important deals which have now hit the market, restored the confidence that this discovery is going to see a lot of life come out of it. And what that has meant is in the past three weeks alone, I think we probably more than doubled the share price off the back of what is about to happen. There is an exercise of looking carefully at what we've done in the last 18-months as to what's going on with the market cap and share price.

Matthew Gordon: I get some of the volatility there, and statistics are a wonderful thing: if you measure it from a low enough point to a high enough point, you will find there's some great numbers there, right? So, congratulations.

Christian Easterday: Matthew, I'm very happy you say that because when you look at the entirety of the time, for CEOs to not talk about the bad times and not explain them away, let's not cherry pick too much of all of our victories on the battlefield.

Matthew Gordon: You talk about endurance. You have got to be enduring and I think that's right. It's not necessarily what shareholders want because they're looking for returns and they're looking for growth constantly. Yours has been a bit of a battle.

Christian Easterday:  That’s right, Matthew, you've got it. You have got to keep yourself in the fight.

Matthew Gordon: I bet you'd swap a few of those awards for a bit more consistency in the market, right?

Christian Easterday: That would be nice.

Matthew Gordon: It would. Let's talk about what you're trying to construct here, get the back story, and obviously with Murray Black's involvement, he's well known in Australia, but there's a much bigger audience you're talking to here. The team, the projects you put together, I think if they take a while in South America and Africa, places that like, to gain trust and the will to put those deals together. So that's not necessarily something shareholders understand, or prospective shareholders would understand the need for. You put together some assets, there's been some kind of consolidation around naming protocol, recently you called it Costa Feugo.

I want to actually understand what it means because you talk yourself about yourself as a producer, a developer and an explorer. Can we go in and break that down? Let's talk about the production component because that should be a big re-rate moment, right? That should be when people say, ‘oh, they're a Gold producer’.  In this Gold environment you should be taking advantage of that, but I'm not sure that's happening. Tell me what it is that you've got and what people don't understand.

Christian Easterday: You've got to put everything into context and there are a few moving parts there. Let's tackle the production one first: you look at a company like us, we put USD$100M into Productora. Again, most CEOs would be embarrassed to point out how much has been invested. I look at that as a huge opportunity and always have. If we could unlock that investment through what we've done with consolidation, there's your first value block right there. Because that's a 10-year open pit project that really was all about where was the other 10 years of production. And then you're dealing with a very, very sexy project. Our investment in Productora, when I was over in Chile after PDAC, I talked about a few things that we did. The first was to talk to the Corolla family, that our own Cortadera and say, look, these next milestone payments that the company owes to buy this 100%, let's push that out a year. This environment is not going to be conducive for Hot Chili to be going out and start putting down these big payments and funding that out of the market. We need time to put the meat on the bone, to rerate this stock and continue to do that. That was all about dilution management and about taking this forward sensibly. And the relationships that you talk about, the shareholders, they don't really see it - that's when they do see it; that we can walk up to a family like that and be able to negotiate that just like that. There's a lot of goodwill that's been built with our relationship there.

 But what we also did in Sydney, in a discussion with a very close partner of ours, and he was sent to dinner to pass me a message from some of the highest circles in the Chilean government that that our assistance with a local community and the employment in the township in which we operate 15km away, Vallenar, the government-run agency and army operates a processing facility there. Some 400 people that are employed in that processing facility, and really, they were out of ore sources in the area and that mill was running at less than 0.5%, a half full capacity. And they wanted the opportunity to be able to mine that ore source sitting next to their processing facility.

I looked at that really as something of a distraction until that point where it was brought upon, the importance of what that was securing for jobs, goodwill towards the community, towards the government, and that was really important to me, firstly. What that also allowed me was an opportunity; it's never been the game in town for Hot Chili to sit there and see small production out of its assets. We are aiming for something very, very big here, we always have. But in the meantime, that also helps with the funding, and what junior sits there in this market and says, I will turn on cashflow USD$1.4M to $2M p/a, not put up any capital or operating costs and take a cheque.

So we were able to sign that deal out. We were able to execute it and put it in place effectively, but it was the bigger meaning for what that also meant for me. This was about a mining license being granted over our key asset and put in place now. This suddenly brought Hot Chili from a visionary big developer in four or five years, when Christian can put all these moving parts together, to actually saying, no we've got production now. We can see what that ore body is going to process like, that's going to assist with our Productora Feasibility move forward. We're going to assist the local community with jobs and we're going to have a lot more involvement with the government agencies in relation to how all of this is going to be put together for a lot more jobs.

So that was the first thing on the production basis. One of the other things Matthew, that I'll point out is perhaps the market isn't seeing what we're about to do next with that production. I foreshadowed it and said we were in discussions to lift that up, but wouldn't it be fantastic to see Hot Chili earning a hell of a lot more than that annually while still actually showing no real material impact to a 167Mt reserve. This is production at 120,000t/pa. Maybe that might be higher soon if discussions go well, but I'm unsure that everyone can do the maths.

Matthew Gordon: Okay, do the maths for them.

Christian Easterday: Well, if you are in a fantastic place and you talked about even doubling that - USD$4M/pa. What P/E ratio do you want to choose? Do you want to choose 10 or 20 or somewhere in between? Then multiply that against our market cap. That puts most of our market cap to bed straightaway. I think from that perspective, we have a funding strength that's been developed out of that. In my recent presentation, and it may be a bit cheeky to say, producer, developer, explorer, more than taking a cheque.

Matthew Gordon: That's where I was coming at it from, and I'm glad you've explained it like that because it's not the money. I did view it as a distraction before this conversation. It is almost meaningless and you should be focusing on the big prize, but the way you've described it in terms of the doors that it has opened for you, and you are right; having a little bit of income is no bad thing, but the market wants to see you focus on the main prize, which is the development component. You have spent USD$100M on Productora? That is a big chunk of change. What I'm not seeing is, if you don't mind, let's park the production, we understand why you've done it. You did recognize it as a distraction, but it has some upside to it, but I'm going to park that because you are not really a producer, the big prize is development.

Christian Easterday: The way we go after it, it's exactly what you said. Before that meeting and before it was put to me in the way it was put to me by the government, through the intermediary, that is the key motivator for us. I viewed it as a distraction because, exactly as you said, Matthew, USD$1.4M, $2M/pa -that's great. It's very helpful. We're trying to put together a billion ton play here on the coastline of Chile. That’s where the prize is, the prize for all shareholders.

Matthew Gordon: Let's come back to that because that's the only way this company is going to significantly change its market cap. You need to help me with understanding how you're going to do that. You spent USD$100M. You said you could unlock the potential of that. What does that actually mean? How do you recoup that USD$100M and beyond?

Christian Easterday: Let's do exactly what you're saying: let's step up from the little step, let's go to the next, what I would classify as a moderate step: restoring USD$100M of value. What was wrong with Productora? Either the grade needed to be 50% up, or the size of it needed to be twice. So when you pull off a deal that within the first 5,000m of drilling, you've just confirmed what you spent two years running scenarios on, putting it through your financial modelling and convincing some of the largest investors in the world, such as the Sprott Group, that if you can get this thing, you've just solved your problem. That's about restoring the USD$100M. What we're here for, and our shareholders are here for, is not to be a USD$2M revenue, restore USD$100M so we get back to even, this is about taking the company and trying to emulate something similar to what SolGold has very successfully done over in Ecuador. That is the bigger prize. And to do that, you need to, I have a lot of luck - let's not forget that in all of this. We had a lot of luck. We chose the right asset. We fought hard to get it. We knew that it would solve those initial two-value steps. Now it's about where those world-class drilling intercepts are taking us. So the next steps, which we're very much focusing on and really it's all hands on board at the moment.

We were very lucky to a point, in your talk about who are the people behind Hot Chili? What's the capability there? We're talking a very big game in terms of tier one assets to put together to unlock the ultimate value here in a market where tier one assets are very, very hard to find globally. You look at the top 50 undeveloped Copper projects in the world. What have we got 4 of them that are not controlled by majors. We stepped down to the next 20, and we sat on the ASX, how many ASX players are holding a tier one, even close to a tier one asset in Copper-Gold? When we say tier one, we're talking 5M tons of Copper metal,  often 5Moz to 10Moz of Gold on average. We're talking about the USD$40Bn in ground value. So that's what our shareholders want us to be focused on. And that's very much what we're on the cusp of delivering - our first step, our first chunk of meat on that bone. And that is our first resource.

Matthew Gordon: What was the timing on that?

Christian Easterday: It's something that most people are really, really anxious about. So as you said, I think some of your respondents are on a website called HotCopper over here, and get emailed these things quite often from that forum. I know that the entire retail market of Australia is holding their breath. The price is lifting. We've been putting out some fantastic announcements in the lead up to this resource, which means a lot of work and thought is going into what we're about to do here. Because when we put this resource out, clearly, we wanted to keep drilling. COVID changed that. We pivoted all of that team towards putting a first estimate and almost a marker in the sand as to, really, Hot Chili has come in here and drilled 20,000m. How big can this thing be?

You add that to 23,000m drilled up previously and we look, and we say, well, gee, you've had Rio Tinto exploration up in the Patterson, drilling the fantastic Winter discovery. And very helpfully for Hot Chili, put half a billion tons into the market at 0.35 Copper and 0.25 Gold. And now that they put a half a tier one asset as a first step for them. It's very, very helpful for Hot Chili.

Matthew Gordon: What was the answer?

Christian Easterday: In the coming couple of weeks is what I'm hoping. My answer is a very long-winded answer.

Matthew Gordon: We got there. You're going to bring in a resource, you've raised a little bit of money recently back in May and in June, what are you doing with it?

Christian Easterday: Pretty simple: it was going towards drilling. It was going towards the extension of our purchase agreement on this to push that out a year in advance. And most importantly, that was going towards the put together of this first resource on Cortadera, asset one addition to Productora. It was about then bringing in the first of our high-grade satellites with a resource on that San Antonio and really amalgamating this into one big combined development. We also have work going on, on a Scoping Study to put all of this together. And just the other day we announced our first metallurgical results, which was really the glue that proves that all of these ore sources within 15km of each other can actually be processed in the same processing facility, using saltwater, which is very important in Chile for a big development. And more importantly, that these things are all enjoying very, very strong recoveries. Now we can look at it as one combined development: Costa Fuego, Christian has rolled out a new name. That's because all of these ore sources are going to go through one plant now.

Matthew Gordon: You don't have many shares yourself. Is Murray making all the money here?

Christian Easterday: No. I don't have the financial resources of a Murray Black, clearly, but I used to have a larger shareholding. It's been whittled down over the years. I had put quite a lot of money personally, into Hot Chili in the market when I can, keeping up with placements while I can. I'm certainly well within the top 20 and hopefully not far off the top 10, but no, I don't have as many shares as Murray Black, but everyone knows that that Murray and I started this company. We are part of the Kalgoorlie group and our group is still the largest shareholder that control Hot Chili.

Matthew Gordon: This year, I know you're a bit coy on the timing for the resource, but is that informing us that it's tough to actually get anything done at Chili at the moment? Is that the problem? Is that COVID related or is there more to it?

Christian Easterday: All of the resource work is going on mainly over here in Australia. I started to talk about, and then forgot to finish about the people behind us. Back when we made the discovery hole of the high-grade core at Cortadera which really changed everything for what our view and the market's view of what Cortadera could become we appointed Steve Darwin, obviously one of the most preeminent geologists in the world. He is leading the team for the SolGold discovery and drill out, and they've done a fantastic job there. We really adopted, with Steve, a brand-new team that was very specialised in putting together porphyries, working on Cascabal amongst others. Most of that work going is over here in Australia with Mining Plus as our independent resource guys. Steve Darwin and a big team leading the modelling behind that to provide very accurate understanding as to where this resource is and how to target it. So, sheerly on the ground we're drilling and certainly we're impacted there. Chili has not been immune to Corona virus. We're having to operate very differently. We're not drilling as fast as we used to because we've got single shift drilling – 2-week, red team and blue team. And we have a lot of procedures to make sure we can keep operating, but the resources aren't being held up at all by operations in Chile. But the one thing that is holding things up, and I would have hoped to have had the resource out already, maybe even last week, but we have a lot of groups that are involved in data room with the company and there are a lot of eyes on this. We're doing it to an extremely high standard, and we know that this is the first watermark and we want to get it right. When we've got it right, and we'll be putting it out.

Matthew Gordon: What do you mean people are in your data room? What are they doing? Who are they?

Christian Easterday: Look, you pull off an acquisition like Cortadera, I think most people knew what the strategy was – 1 + 1 =3 = one of the oldest strategies in the book in the mining sector for pulling off what we were trying to do. Most people recognised where this was going very early. We received a lot of inbound interest from some of the largest mining companies in the world and their teams. A lot of them have been over the project and a lot of them keep up good dialogue with Chili as we've been growing this thing, risking it, answering things like, can it come out? Is it going to get bigger? Where's the grade, what's the next step? This next step with the resources, that is a very big part of our next step.

Matthew Gordon: You are selling Hot Chili - is that what you're telling me?

Christian Easterday: No.

Matthew Gordon: So why don’t you be clear? Be clear with me.

Christian Easterday: We certainly are very interested in speaking with much larger, more capable groups that these types of assets that may assist us in being able to bring the most value to the floor with Hot Chili's shareholders. And that might be through contemplating funding arrangements such as joint ventures and perhaps even not cornerstone stakes in the company.

Matthew Gordon: And JVs? Are you looking for an operator for you? What are you trying to get out of these conversations?

Christian Easterday: No, I think you look forward as to where does this all go and what's the best journey for the shareholder? I'll speak, frankly now: these guys are here to build this up, put some wrapping paper and a bow on it and sell it.  I think that any CEO that's not looking at all options to create the most value for the company is not doing their job. We don't have any perceptions about that.

Matthew Gordon: Are you tired of it? You've been at this a long time. Do you want someone to come in here and just take it over? Is that the best thing for the board and the shareholders?

Christian Easterday: Fatigue builds into all of these things, but I think discovery is in my blood and when you find something like Cortadera, you've also got to step back and say, how many geologists or CEOs are going to even be able to walk around the market and say, we're about to, but we have the chance to potentially define a tier one discovery. That's what gets me out of bed, and gets most of our board and management team out of bed every day. We're very, very much motivated by what can unfold here and certainly no fatigue to be running, to sell it quickly, no. The market cap of what Chili is here, we've got a vision for where this can take us. Until we get there, I don't think we are really wanting to do anything in a rushed manner.

Matthew Gordon: Just going back to the share registry, you've name-dropped a few big, big names in there who I presume are still here today, because there's a massive overhang for them, given the successes of the past and where the price is today. Are you concerned as part of your growth story that you're telling that you're going to be held back by people dumping as soon as the price hits something comparable to what they paid?

Christian Easterday: Again, let's be very frank here, most people that know me in person, have been into my office turn around behind my desk and say, what does the number 500 mean? It's something my wife put on the wall in red in very big numbers, a lot of people ask me at the beginning of the company, what does 500 mean Christian? Back then I used to say, this is either a minimum $500M company we're building, this is a minimum of 500Mt that we want to build, or this is a maximum of 500M shares that I want on issue by the time we are able to reach full value for our shareholders. So, look, 2 of those 3 things are still alive.

Matthew Gordon: Tell me about the share count.

Christian Easterday: The amount of shares that I've got on issue? When you talk about overhang and volume, we have a lot of volume. We have a register that I spent years ensuring that we had a consolidated heavy weight register, and it was one of our strengths for many, many years. And to be able to pull off Cortadera, unfortunately we had to loosen up that register. And with that, yes, you see a lot of volume come into a stock that has 2Bn shares or so. Not dissimilar to where SolGold is, but you sit there and look at the SolGold story, and Nick, very similar situation: $30M market cap, three P, delivered 6, 7 world-class intercepts, very similar to where we are. Must've been looking at everyone and thinking, what do I have to do? And just like that, you see a move by Newcrest, BHP, a capital rising, and within seven months, USD$30M company that's worth USD$1Bn. Can we do it?  I think that there's precedent, given their register, there's a little of the impediment that you would think would be in front of us.

Matthew Gordon: If you compare yourself to the right company, there's always precedent. I'm more concerned about you. I want to understand how you're going to get there. You're sitting at whatever it is, sort of $80, well, AUD$70M-ish today. How much cash have you got in the bank?

Christian Easterday: We just completed, about 6, 7-weeks ago, an USD$8.9M placement and entitlements issue to our shareholders. We're pretty good with treasury at the moment. And one of the benefits, if there is a silver lining to the cloud of drilling at half the speed I used to, is that I'm not burning money very quickly. And in addition, we're about to see our first cheque from production on a monthly basis. We are we are okay right now.

Matthew Gordon: Until when?

Christian Easterday: I think that most people could do a timeline and say, within the first quarter of next year, Christian is probably looking for money. Between now and then I think a few other things are playing out in the background that that my well mean that…I think I've got a track record of who is being able to fund this company effectively. I don't think that I see anything changing there, but we're not contemplating raising capital anytime soon. Certainly, we'd be looking at next year at this stage.

Matthew Gordon: What's your take on the Gold market at the moment? Do you think it's going to sustain?

Christian Easterday: Wow, I think. That is my word for the day with Gold. USD$2,050, I think it's pulled back a little today. junior. I remember in 1997, as a young geologist on a drill rig, the next year it hit USD$265 p/oz. I've been around a little, but it's pretty stunning at the moment.

Matthew Gordon:  But that’s my point: it's stunning at the moment. As an MD, you got to have a view of where this thing's going because you have got to pick the right time to raise cash. Either it's going to be cheap or it's going to be expensive. What's your take on it and when will you leave those conversations to?

Christian Easterday:  Again, we were talking about it earlier, what can you control what can't you control? I can't control the commodity price. We seem to be coming into a real purple patch where there's very few instances in my career where stars have aligned, and I don't want to jinx anything at the moment, Matthew, because the stars have aligned with the Copper price and with the Gold price at the very moment Hot Chili is about to take this massive leap forward in terms of how much metal we have in those two key commodities. And one of the things in the Hot Chili story that I also think the market is very much missing, when you do these numbers and you say you've got a quarter of a billion of Productora and could Cortadera’s first resource be anything like, you know, you can do the math pretty quickly as to where we start and then apply a Gold credit. When you've done that maths, workout that Hot Chili is about to hold one of the biggest Gold resources on the ASX outside of a major, then multiply it by 2,000. I think it's one of the most exciting aspects of the story unfolding here. I'm sure that we'll be able to put onto a bubble graph to adequately represent that.

Matthew Gordon: Let's see how that goes. I think people are trying to understand the scale of this, and I know you are throwing some numbers out there, but they need you to put this resource out to get a sense of that. They can actually work out with the numbers are because it's been a quiet 3-years; not much has happened for you guys. The stars are aligning in terms of Copper price coming back up, Gold is doing its thing. So right now it's great, but are you going to be able to take advantage of it, is I suspect, the big question out there?

Christian Easterday: That's right. When you have those stars align, my experience is that you've got to move quickly. We're very lucky that we've been able to move very quickly. And to be delivering what we talk about delivering very shortly in the coming weeks, I couldn't be happier with how that's worked out. Also, like I said, Matthew, two weeks is a long time in the market, so I don't want to say anything too soon and jinx what's going on here. I'm sort of like a cat that's got the cream at the moment. I know where this is heading. I smile a lot in these interviews. But exactly, as you said, proof will be in the pudding. Let's get the number out. That'll be the starting point. Let your drill rigs keep turning. Let's see where this goes.

Matthew Gordon: Christian, thank you very much for today. Brilliant first introduction to your company. I appreciate you being frank – we like that. Pick up the phone, let us know when there's something to say.

Christian Easterday: Excellent. Alright. I really appreciate that. Thank you, Matthew.

Company Website: https://www.hotchili.net.au/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Club Waitlist CTA
Share this article

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Crux Investor does not verify information provided by contributors or video interviewees on this site, and makes no assurance as to the adequacy, completeness or accuracy of any such information. Crux Investor steadfastly disclaims any liability or responsibility for the outcome of any investments made by users of this site or our branded affiliates. Users of this site (and our branded affiliates) should consult with their own financial advisors to assist them in making investment decisions. By accessing this site and our branded affiliates, you agree to the terms of service and privacy policy.