Listen in to an extended conversation with Mr. Brian Ostroff, CEO of Arianne Phosphate (TSXV:DAN). Please note this is not sponsored content.
Peter Bell: Hello, I'm Peter Bell and I'm here with Mr. Brian Ostroff of Arianne Phosphate. Hello Brian.
Brian Ostroff: Hello. Very nice to be talking to you.
Peter Bell: June 7th 2019, I had the pleasure of going through some of your recent interviews and studying them. Wow. The one with Lobo Tiggre is full of good information. Thank you for sharing all your insight into the phosphate markets? I haven't heard enough about it for years now.
Brian Ostroff: You're welcome. I appreciate the interest. To your point, phosphate is not overly sexy. Especially when compared to things like precious metals or energy or EV batteries, but it's really what supports life. Right now it's probably not getting the attention, but I think that the macro is pretty compelling. The time will come that people are going to start to care again.
Peter Bell: The macro on several levels, as well. Reading through the notes and even the call yesterday with Kerem, Next Bull Market Move, I didn't see mention of mining M&A. There's a heartbeat out there in mining M&A.
Brian Ostroff: Certainly. It's been a while since the sector has seen that. For all commodities, it has not been wonderful compared to more traditional big cap markets. Even some of the fringe markets like crypto and cannabis. At the end of the day, it really is something that matters. Something for your for your listeners to think about -- can they name anything that hasn't actually been mined or grown?
Brian Ostroff: It's wonderful to look at all of this other stuff, but when it really comes down to brass tacks it's the mining that matters. That business is going to continue. When valuations are down where they are, there is opportunity for large companies to expand their footprint. It's also a great opportunity for investors, your listeners, to really look at. For years, by and large the sector has been dormant.
Peter Bell: And sometimes it comes roaring back to life, doesn't it?
Brian Ostroff: That it does. And it happens time and time and time again. It was so obvious, yet no one does it. These patterns they occur time and time again. Investors swear they'll buy the stuff out of favor and sell the stuff that it is ripping higher. Inevitably, FOMO fear of missing out really causes people to to chase rather than sit back and look for opportunities that have been overlooked. That's really the time that you should be looking at them and buying them.
Peter Bell: Maybe I'd add one more to FOMO, fear of joining in FOJI. I do believe that Mister Market suffers from that one from time to time. I see an example of that in the disconnect between equity valuations versus potential project valuations. I think I heard mention of a 4% P/NAV ratio at project versus company valuation in one of your interviews. Amazing discount. Lots of questions, technical financial considerations that come to mind. I would point out that I recently encountered a story of a coal project in BC, where shares were trading for 50 cents or so and then the company announced a deal that resulted in a two dollar distribution of capital. And then the company was funded beyond that for additional work, as well! They had done a deal on the project value, which was five times or ten times or some multiple of their market cap, rather than their market cap. That was mining M&A.
Brian Ostroff: And that's a great story. It really does seem to reward those investors that maybe spend a little bit more time looking at the company's fundamentals, rather than that company's share price. These things do happen.
Brian Ostroff: Certainly, with regards to Arianne, the company that I'm CEO of, I think you have opportunities like that. As you mentioned, we trad at four percent of our NPV, which is incredibly cheap. When you layer on other things, like "It is the world's largest greenfield phosphate deposit." And, "it's in a secure jurisdiction." Itn compounds.
Brian Ostroff: Most phosphate deposits of any magnitude are in the Middle East and North Africa. We are in the Province of Quebec. It's safe. We make high-purity product. We have a collaboration agreement with the First Nations. We have our permits. It's one thing in early days to sit with these extremely low valuations because there's still a lot to be proven. With greater uncertainty, you're going to get lower valuations. To see Arianne having gone through all of these junctures where you could ultimately kill a project by not getting its permits or the economics not being robust or what-have-you -- we're through all of that and this company is still trading at those kinds of valuations? A shovel-ready project in a first world country -- it's amazing to me.
Peter Bell: For Windermere, I wonder if any big wins before where you had taken a project through a full exploration cycle as you've done here?
Brian Ostroff: Thanks for mentioning Windermere. Some of your listeners may know, I am a partner at Windemere. We are a mining fund. We tend to operate really more in the realm of private equity for small mining companies. We take positions early and we do what we can to to help advance them. What Windermere has tended to do is to move these projects until there's some form of liquidity event. Yes, we have been successful in numerous cases. Early days of a company called Exploration Orbite, we were the first institutional investor in that name. That was a crazy story. It shows when you have the timing and the right sector in a market that's looking for that sector, things can can really go. That was a situation where, in a period of about a year, the company went from about a $10 million dollar market cap to a $1B billion dollar market cap. That's just crazy. Some of your listeners that have been in this game for a long time do you understand that when a sector turns, these things can happen.
Brian Ostroff: We were also very successful in a company called Adventure Gold. Again, the first institutional investor in there. We were investors for many years and continued to work with management to move the project forward. They were bought out by Probe. I'm sure investors know Probe, it is a decent sized company.
Brian Ostroff: Currently, Arianne is Windemere's largest holding. I referred to it as as our oldest child. We definitely have a few other children in the house, but Arianne is probably the most advanced here.
Peter Bell: Wonderful. So much to discuss. Thanks for some of the background information there. I appreciate it very much. To hear you mention the Port of Saguenay and the North Shore Terminal -- was I correct in understanding that the final permits weren't yours to get? The port has undertaken some permitting? What happened?
Brian Ostroff: To walk it back a couple of steps, one of the things that's fortunate about the Arianne project is that it is in an area where a lot of infrastructure already exists. That, ultimately, can be a killer of big projects. Simply because you might be looking at a couple of billion dollars just to see that the roads and the power and water and everything you'd require gets put in before you even begin to work on the project. In the case of Arianne, all project infrastructure is by and large there already. There's a hydroelectric dam that's 30 kilometres away and we've contracted for our life-of-mine supply. There are a couple of large oversized haul roads that are already there, carrying large trucking loads up and down. Yes, to your point, that road leads down to the Saguenay River that is a big waterway. A lot of ships moving up and down the Saguenay -- Rio Tinto's ships are bringing in their aluminum boxite along that that river. The Port of Saguenay does exist. Currently all of their loading facilities are on the south shore of the river. We will require a loading facility on the north shore and that did require some permitting, so that was the responsibility of the Port of Saguenay. Last October, they were able to get that permit. In terms of infrastructure for the project, we are in very good shape.
Peter Bell: Amazing to think about the Middle East and some of these far-flung locations. One of the benefits I think that people perceive in some of those settings is the ability to play politics a little bit, locally. Maybe simplify some of the processes of mine development? Or make it look like they're simplified? To look at Quebec, it's not talk -- it's the real thing. It's stunning to hear that this project has been able to coordinate permitting from the local port to add a new terminal on the other side of the river. That just demonstrates to me the strength of Quebec again. It's open for business.
Brian Ostroff: Quebec is a great mining jurisdiction. This project is very important to Quebec. They've been very supportive and understandably so. You're looking at a project that is projected to bring about $12.5B billion dollars in economic benefit to the region of Quebec in the first 25 years. Big employment revenue. In fact, just during the construction phase of the mine facility, it'll generate about $200 million dollars in employment revenue. That's just over the first couple of years as it's being built. Of course, it's going to generate big tax revenue. The government has been very supportive. They also are an investor in Arianne.
Brian Ostroff: Currently, the government of Quebec owns just over 7% and I can say that working with them has been has been great.
Peter Bell: Any lessons learned from lithium in Quebec. Any comments on that in the marketing side?
Brian Ostroff: Not really. For all of it, lithium was never a commodity that Windermere involved itself in. On a personal level, I do know a fair amount about a bunch of commodities. However, lithium is not one of them. I know that there have definitely been some challenges in a couple of projects that are ongoing here.
Brian Ostroff: With regards to our project, the nature of our deposit is a hard rock deposit. Most most phosphate deposits are sedimentary. With that, there's some challenges in the mineralogy and the contaminants. Well over 90% of the world's phosphate deposits are hosted in a sedimentary setting. Arianne has hard rock deposit. These types of deposits are extremely rare. There's maybe a dozen of them operating in the world. They are able to make a very high-purity phosphate. Again, it's a hard rock mine. It would be the same as a gold mine or a copper mine -- blast, crush, float, and ship. You really aren't going to have any anything special in the way of how you have to process this or how you would mine it. With that, it definitely removes a lot of the uncertainty around the project and the ability to produce our phosphate concentrate.
Peter Bell: Can I ask about the the shape of the pit? I haven't seen any of the diagrams of it.
Brian Ostroff: Sure. This is going to be an open pit. It is quite large. For context, today Arianne including inferred is well over a billion tonnes. It makes it the world's single largest greenfield phosphate deposit, as mentioned. It is going to be an open pit. It does outcrop right at surface and in the tens of years that this will be producing, you're just going to wind up something that gets bigger and bigger. It does make for very easy mining. The strip ratio is low at one-to-one. As a result of that, we have very competitive costs. It will make our product very competitive on the world market and very profitable to shareholders.
Peter Bell: Again, in terms of the macro context Quebec -- I wonder if you can demonstrate an ability to get over the capex hurdle? I think it's realistic, given the financial support for mining development in Quebec. If you can get over that capex hurdle and demonstrate a first launch of a project like this, then is there room for another one of these billion dollar projects -- hard rock phosphate in Quebec?
Brian Ostroff: Finding a hard rock phosphate deposit in the world is a rare thing, as I said. Today you've got less than maybe five or six percent of the world's total phosphate coming from igneous deposits. These hard rock deposits are rare. They do make a very high-purity phosphate. It doesn't have a lot of the contaminants that you'll find in most of these other phosphate deposits. Namely, radioactive elements and heavy metals. The beauty, as well, aside from the environmental side of things is that this product, because of its premium quality, sells at premium prices. Historically, a phosphate concentrate like ours will trade at over 50 percent higher price than the standard benchmark phosphate.
Peter Bell: And to compare that statement with the fact that you're in the lowest-cost decile -- can you can you speak to those two together?
Brian Ostroff: Sure. As work has been done by the banks that are reviewing the project and in discussions with us about putting together the debt package, they had brought in independent consultancy group to assess the phosphate market as a whole, globally. Where does Arianne sit in this grand scheme of things? On a cash cost basis, as you say they have us in the bottom decile -- the bottom 10% of all phosphate mines by nutrient value. Going back to the igneous mines, they projected we will be the lowest cash cost provider of phosphate from an igneous mine! Of course, that gives us a great advantage. The mine is going to be so big that we have a lot of torque to the upside. But because we are well-placed on the cost curve, we are really in a good position should markets continue to hang around these levels for a while.
Peter Bell: I wondered about that cost curve, if it was adjusting in some way. Thank you for saying "per nutrient value", right? You're including the fact that this is a premium product in the statement that this is the lowest decile cost.
Brian Ostroff: Correct.
Brian Ostroff: And to expand on that, the average grade of phosphate rock is roughly a 30% phosphate content. By-and-large, you get paid for your phosphate content plus a few other aspects. In our case, we produce a 39%. We will receive a much higher price. In essence, our cost of production gets amortized over 39% versus 30%. Yes, "per nutrient value"n we are projected to be in the bottom 10% cash cost.
Peter Bell: What an interesting cost curve. The operating costs for phosphate production, globally?
Brian Ostroff: That's one of the things, Peter. The excitement around gold or things like that are sometimes easier for investors to get their head around. If you mine gold in in Siberia, Argentina, or Nevada, that gold is all the same. It all trades at the same price. In the case of phosphate, price changes depending on the nature of the deposit. It isn't a one-size-fits-all. Maybe there is a bit more work that needs to be done on the part of investors.
Brian Ostroff: Again, in the case of Arianne we do arguably have the best and purest phosphate concentrate that will be available on the market. Why does that matter? Of course, environmental concerns and quality.
Brian Ostroff: Although most phosphate does wind up in fertilizer, there is a growing amount that winds up in human applications. It's a preservative in foods. If any of your listeners drink Coke, they're drinking phosphate. It's in animal feeds. In detergents and toothpastes. When you're talking about phosphate that is being consumed directly into the human body, you want it as pure as clean as it is possible. In terms of who winds up being our customer, the fertilizer guys will be customers but there is a whole other segment in the market. The high-purity players that have obviously expressed a high level of interest in trying to get some of our product.
Peter Bell: Wonderful. Thinking about the fact that a majority, 85%, of phosphate production globally was owned by downstream players in the fertilizer space. To hear about high-purity players as a new entrant or a growing part of the demand profile, globally. Very significant. Being in Canada, it all fits together very nicely with freight on board and global access.
Brian Ostroff: Absolutely. These are very interesting points. When you look at the phosphate business, 85% of the world's phosphate mines are owned by the guys who make the downstream product, whether it's the fertilizer, phosphoric acid, or what have you. If they don't own it, then they have to go out and buy the the phosphate concentrate from third-party suppliers. By the time it gets shipped and you make your product, it's definitely a bit of a challenge to the economics!
Brian Ostroff: Look into the future -- the guys who are currently selling that phosphate rock to the guys who don't are expanding their own downstream operations. If you really look into the future where that number today is 85%, I could see that number being 90% integrated in the future. If you look at what phosphate production is coming on-stream over the next few years, Arianne is really the only one of any material size and scope that is independent. The other expansions that are projected to come on-stream over the next few years are by guys who integrated themselves. What that means is the places in the world and the companies in the world that are short phosphate concentrate are going to find it harder and harder to get product. Maybe not so much harder and harder as more and more expensive. The supply of independent phosphate concentrate is going to diminish. When you look at Arianne, that really puts us in a pretty attractive place.
Peter Bell: Wonderful stuff. The big question for me is about waiting. Your choice as a management team and investors to have that vision and the lasting power. Any thoughts on that? Is that a prudent strategy? Would you do it again?
Brian Ostroff: To a large degree, particularly in the commodity markets, sometimes it's just where you are in the cycle. Really, what we have seen in in phosphate pricing from 2012 to 2017 is that prices declined quite a bit. In so doing, it pretty much killed just about every other phosphate project out there. If it was an exploration or early stage development, it probably died. If it was a brownfield expansion, decisions were taken not to expand production given pricing. Arianne was really the only project that continued to move forward during that period of time. As the company went and accomplished all of its milestones, it really did that into an environment where arguably fewer and fewer people cared. Certainly fewer and fewer investors were paying attention. There's a funny thing, which is that the cure to a low commodity price is a low commodity price.
Brian Ostroff: Over that five-year stretch of time, where no one was looking to bring-on more supply, you still had growing demand. The nice thing about phosphate is demand grows every single year at roughly 2%, which means you need an additional four to five million tons of phosphate come on-stream each year. You go through a period of 2012 to 2017 with no increases in supply, but demand continues to grow -- it chews up whatever excess supply is out there. Then, all of a sudden, 2018 rolls around and the price of phosphate goes up roughly 25%. Now, all of a sudden, "where are we going to get this phosphate from?" There is phosphate out there, but now everyone's scrambling because they're behind the curve. Once again, I think Arianne is very well situated. During that period of time, Arianne continued to advance its project, although out of the limelight. We continued to advance the project so that, today, it is in a position to be able to build and capitalize on that change point of this supply-demand curve.
Peter Bell: It's an example of how long it takes. Go to the real mining conferences and listen to people from real mining companies -- they talk about the years and years that go into getting these things ready to go into production. People outside of mining often don't appreciate the timelines involved. Note, that may be particularly relevant with phosphate where so much production is from sedimentary deposits rather than hard rock projects. Are hard rock projects are slower to build?
Peter Bell: Everything seems to be within normal range from what I can see here for Arianne. Especially given equity markets having a legendary bear phase. You mentioned fertilizer prices being up -- wonderful point in your interview with Lobo there about the positive divergence. Maybe I'd read a quote here from it,
Peter Bell: "Logic would dictate that the crop prices go up first and then the farmer has more money they can pay more for the fertilizer. What has turned this on his head is that in 2018 fertilizer prices went up, but grain prices didn't." That's something you said and it's a very good point.
Brian Ostroff: Thank you. Historically, you would tend to see the grain prices move first. When the farmer has more money and he wants to plant more, he'll pay more and cause more demand for the fertilizer. In 2018, that just didn't happen. The farmer in 2017 did not have a particularly great year. Yet, in 2018, he wound up paying more for fertilizer, despite his revenues not going up because grain prices didn't go up. To me, there's something fundamental there. Now, in the back quarter of 2018 and maybe the first quarter of 2019, prices of fertilizer did back off a little bit. I think most would attribute it to the flooding that had gone on in the plains. The farmer was just unable to apply fertilizer, so you did have a bit of a backup in inventories. That's being worked through now. I suspect we head into the back half here of 2019 and into 2020, we will see a resumption in the up-trend of fertilizer prices.
Peter Bell: It's almost telling that the prices weren't down more in the 2019 turn over. Higher fertilizer prices in 2018 give an incentive for all those fertilizer providers to make sure they have product on the shelf for 2019. Surprise weather hits and you have nasty potential for a whipsaw there.
Peter Bell: One thing Lobo said, "You mentioned off mic when we talked before that you do have some funders stepped up and they want to see you arrange the offtake deals." That was an interview from a month or so ago. We have now seen another offtake deal from you. This time with a Chinese entity. Congratulations on that.
Brian Ostroff: Thank you. I'll go two steps backward and then move forward. Again, Arianne and our Lac a Paul project is very advanced. It's move forward to the point of discussions with financiers around construction financing. We've received very favorable responses from a lot of the large debt players with an interest in being involved, provided that we could get some off-take on the books. In the back quarter of 2018, we were able to sign two offtake agreements. Then, I guess about six weeks ago now, we also had signed a deal with a substantial Indian fertiliser trading company. That's a big deal because, today, India is the world's largest importer of phosphate. Aligning ourselves with this group, we think is going to be great in terms of finding markets for a product.
Brian Ostroff: Now, your comment about our recent corporate news was surrounding an MoU with a Chinese group. To be clear, this is just at the MOU stage. Both parties agree to work towards an agreement, but the idea here is for this group to get access to the project on various levels. Including, of course, the off-take in exchange for providing financing for the project itself. This is key. We'll see how it plays out, but if we're successful in putting together this deal then both parties will be very happy. Arianne gets the financing that it will require to build the mine and the Chinese will get the phosphate. A good, high-quality phosphate that they're looking for.
Brian Ostroff: As a tangent, the Chinese angle is very interesting when it comes to phosphate. For all of it, China has been in equilibrium when it comes to phosphate. For a country like that with over a billion people to be self-sufficient is impressive. They are one of the few.
Brian Ostroff: North America runs a deficit of phosphate. South America runs a deficit in phosphate. Western Europe runs a deficit in phosphate. And a lot of parts of Asia run deficits in phosphate. To date, that did not include China. What is interesting is a lot of industry analysts now believe that China is going to be heading into a deficit. To me, that's a game changer. You've got India at over a billion people, they are the world's largest importer. And now you could be looking at another country of over a billion people that would have to start to import phosphate? Just those two countries alone make up about 35% of the world's population. And both countries certainly have the means to go and secure the supply of this needed commodity.
Brian Ostroff: I think the the agreement that we are working towards with the Chinese is important. It's great for Arianne, but I think it also indicates on a macro level that phosphate prices, after being low over the last five-six years, should probably start to wake up.
Peter Bell: And to say the words "resource globalism". China has a mandate to invest in the best resource projects around the world. What you're talking about here with the high-quality product with no heavy metals, this is a safety and product quality thing. I've heard you mentioned blending and all the downstream stuff that could be going on, were there any numbers with the new Chinese entity of what proportion of production they would commit to take? I didn't see any.
Brian Ostroff: Not as of yet. Right now, we have a basic idea in terms of what they are looking to accomplish if we are successful in putting together an agreement. We will see how it turns out. I think another takeaway, as you mentioned, is how, at the end of the day, the Chinese are looking at world-class assets for their needs. The fact that they've reached out and have started a conversation with Arianne indicates the true nature of what our deposit is.
Brian Ostroff: Most people who listen to your show are investors, so here's the key takeaway from where I sit. You have a massive disconnect here. On the one hand, there's the corporate world -- the fertilizer companies. I can tell you that Arianne is regarded as a Best of Breed. Most major fertilizer companies in the world know who we are. They're aware of our project and have had various discussions with us on different levels. I always joke that I can walk into a fertilizer conference and all the people there know Arianne and our Lac a Paul deposit, but I can walk up and down Bay Street and almost no one knows.
Brian Ostroff: As a fund manager, that's really where the opportunity is. You want to see that kind of disconnect. You know you have a company that has moved forward, is well-known, and well thought of in their industry but the stock has been completely ignored. That's the opportunity.
Peter Bell: Absolutely. There's a tweet floating around from Ian Cassel recently where he makes precisely that point. He's a wealth of knowledge. A fund manager for micro cap and nano cap stocks. He makes the point that there's an important food chain in terms of processing of ideas. By virtue of you guys waiting, you're in a unique spot.
Peter Bell: When you were CEO, was the company better known on Bay Street in the past?
Brian Ostroff: I'd say no. In the early days, 2011-2012 this sector was a little bit more widely followed. There were more firms out there that catered to the small cap mining space and Arianne did have a bit of a following. After a five-year bear market, a lot of these firms that did cater to this small cap world have folded. Really, Arianne became an orphan over that period of time.
Brian Ostroff: Sadly, my experience is that, after 30 years in the business, by and large investors do it absolutely backwards. They look at a stock and based on what the stock is doing, they make a judgment on the company. As opposed to, really, what they should be doing, which is looking at the company and then making a judgment on the stock. We all see it, "a stock is going up, it's a great company it's a great company." People come to that conclusion because the stocks been going up. The flipside, the stock goes down -- what an awful company. No one bothers to keep up with the company. For investors who are willing to take the norm and turn it on its head, that's really where they will make money over the longer term.
Peter Bell: Wonderful. I heard you mentioned before an old analyst report on Arianne going back maybe five years when the company had a $100M market cap. Laying out key objectives going forward and projecting $200M. The fact that you've met those goals, the feasibility study, the permits, the portsl, agreements with First Nations, and now financing -- world's largest greenfield project! Best of class. Amazing how despite all that, the market cap is half of what it was at the time the analysts report was written.
Brian Ostroff: It's truly amazing to me. If I could only use one graphic to really explain this there's a graphic there that shows our five-year share price. Sadly, it goes from the top left to the bottom right on this gradual slope downwards. Superimposed on that chart is everything that Arianne had done. Every major milestone over the last five years. That's all the things that you've said -- permitting, off-take agreements, Indian trader deal, a couple of good additions to our Board, all the way through. You pretty much see that at just about every corporate milestone that we've hit, the stock just continued to sink lower. Today, we sit here at a $50 million dollar Canadian market cap for what is arguably the best of class project.
Brian Ostroff: If we were in production even at today's prices, you're looking at gross profits annually of well over $200 million US a year. This company has hit the ball out of the park when it comes to corporate milestones. It has done absolutely everything right and yet, as as you point out, there was an analyst report from five years ago when the company had a hundred million dollar market cap highlighting that Arianne Arian did it all these things right then it could see a $200 million dollar market cap. Here we are today, having done all of these things -- not only do we not have that $200M market cap, we don't even have that $100M market cap that we had at the time! Today, we sit at a $50 million dollar market cap.
Peter Bell: And the project economics have been demonstrated with increasing confidence. Sometimes these little juniors can do a deal based on project value rather than market cap because your counterparty knows what the project's worth, they need it, and they have the capital to make something happen! Again, to point out all the M&A that's going on in the gold space -- things seem to be heating up. I feel like funding for new projects is more likely in the next 18 months then I would have thought in prior years.
Brian Ostroff: When a company looks to put together their project financing, a good portion of it is going to come in the form of debt. These guys who provide the debt will lend money and expect to get it back. They expect to make a reasonable return for having lent that money. They don't look at equity. They look at a project. They look at something on a project level -- if we lend this money and you build this project then what are the economics going to look like? What is your free cash flow going to look like? With that, will you be able to pay back my loan? Whether a company has a $5M market cap or $200M market cap, the lender to the project is looking at the project. Of course, you're going to have to pair up that debt with some equity. Depending on the value of your equity, that's going to determine how much stock you might have to issue. The bulk of project financing comes in debt and the guys who lend the money look at the project, they don't look at the stock.
Brian Ostroff: It's funny, I've never walked into a banker's office that's been interested in providing some debt to to Arianne and they've looked at me and said, "Your stock is trading at X Y & Z..." They don't do that. They can look at projected cash flows and how secure is it? As low as we are on the cost curve and being in a safe jurisdiction like Canada, the banks have definitely expressed an interest here.
Peter Bell: To clarify, does Arianne own 100% equity in the project? There's no project equity split or or project debt facilities that have been created yet.
Brian Ostroff: Today Arianne is the 100% owner of the Lac a Paul project.
Peter Bell: Wonderful. And the corporate side of Arianne how are things? It's a whole can of worms to get into, but to briefly mention it. I believe you mentioned to Lobo that there's $1M cash in Treasury. Positive working capital.
Brian Ostroff: To clarify, recently the Quebec government made a subsequent investment into Arianne. They had invested a $1.5M dollars and that will last for a bit as we continue to move our other discussions forward. One of the interesting points that you just brought up is that we own a hundred percent of the asset -- is there the opportunity to maybe do a JV or get the overall project funding in place by maybe giving up part on a project level?
Brian Ostroff: Windermere is roughly hanging around just under 20% level in Arianne. The Quebec government, as I mentioned, is in the neighborhood of about 7%. I, myself, am a large shareholder. In my thirty years, this is one of the best things that I've seen. Personally, my direct and indirect holdings, I've purchased 3.6 million shares of Arianne stock. I do truly believe it when when I say that I think that this is a mispriced opportunity. We'll see how that plays out, but where I sit you know these types of opportunities don't come along that often.
Peter Bell: And from the micro all the way back to the macro, again, to hear you say, "Saudi Arabia is the second largest phosphate player but they don't sell any phosphate concentrate." Wow. I was surprised to hear you say that with Lobo.
Brian Ostroff: It is the nature of the business. Again, 85% of the phosphate mined out there is owned by the guys who make the downstream product. The example I give is a guy who has wool -- he would sell the wool to the suit maker for $50 and it would cost the suit maker maybe $25 to turn it into a suit. He'd sell it to his wholesaler for $275 and and they'd put the $200 in his pocket. One day, the guy with the wool figures it out and says "Why is the suit maker making all the margin? It's really my wool." All of a sudden the price of the wool is now $200 and and the guy who's making the suit isn't making the margin -- it's the guy with the wool! That's really what the phosphate business is -- the guy with the phosphate rock is the one who has the ability to almost set the price. Or he can make his own product and, in so doing, capture more margin.
Brian Ostroff: Most businesses really do control the mine and the downstream. The guys who do have the extra phosphate concentrate are now looking to expand their own downstream operations! That's why I think that it'll continue to put a bit of a squeeze on the guys who don't have enough of their own phosphates rock. Again, that's India, some Western countries, and now it looks like China as well.
Peter Bell: Amazing. Headline news coming soon! Brian Ostroff, Arianne Phosphate. $DAN on the TSX Venture. Brian, thank you very much for talking to me today.
Brian Ostroff: Thank you, Peter. Thank you for the time in the interest.
Peter Bell: Goodbye.
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