There is money to be had if junior miners present the right
project, was the message at this years Mines & Money
| Source: Mines & Money
junior miners that IM spoke to said
they felt the market was broken the speakers at the
event were a lot more optimistic. Rick Rule, chairman of Sprott
US Holdings, said that he believed the market was in the same
situation today as it was in 2009.
have endured the pain now please stay around for the gain," was
the most-quoted (and tweeted) phrase of the conference, but the
other observations made were just as impactful.
believe we are in a stealth bull market. Charts are flattening
and beginning to rise. I believe we are in a period of
bifurcation, Rule said.
Rule made the
distinction between a rising middle class in emerging economies
and more wealth in the established economies. He said that in
2009 and in emerging economies a person with more wealth would
be more likely to upgrade the goods around them, while in
established economies people will spend money on
invisible items, apps for your phone.
part of the story changed since 2009 2010? I would argue
that the same set of circumstances that existed in 2009 exist
today, he explained.
Glennie, managing partner, London, Blakes Cassels &
Graydon, agreed that financing had not dried up for junior
Financing for juniors and mid tier companies has not
dried up, he said, It is not all doom and gloom but
its time for creativity and luminance.
further, Glennie said that he believed the Sirius Resources
financing which raised $83m shows that if
there is a good project the money is definitely
What makes a good project?
So what does
make a good project? Mark Bristow, CEO of Randgold Resources
set out a checklist of questions that his company believes any
investor should ask when determining whether to invest in a
start-up project or not (see below). This was praised by Toby
Bradbury, an independent advisor, as being a good checklist to
people understand what makes a good story. The most important
thing is a good management team, Jason Burkitt, partner,
UK Mining, PwC, told delegates a sentiment that was echoed by many
Its people, people and people, Dr Elena
Clarici, managing director investments, Meridian Equity
Partners, told the audience when asked what she looks for when
looking for a project to invest in.
checklist for determining value creating from a
Does it apply principally to gold?
Have we identified and understood the country
Does it fit our values?
Will we have active management
Will it enhance our partnering
Does it diversify our geographical
Does it have a reserve potential greater than
3m ounces of gold?
Does it have the potential to be + 250 000 oz
per year producer
Can we move it up the value curve?
Does it have the potential to be in the lowest
total unit cost quartile?
Can it produce an IRR in excess of
Does it have a payback of less than 5
Is it accretionary to our share
What we have seen as investors lately
is that you can have a good resource but people can destroy
this. People may not have the experience and they can destroy
the asset, she added.
important is explaining niche markets like industrial
minerals to investors, Burkitt said.
niche commodity most investors wont be able to understand
the market and so you need to articulate that, he
not necessarily a bad thing. Some investors are looking for a
fair amount of risk, he added.
as Burkitt showed, the more releases the company puts out to
market, the more locations it lists at and the more it engages
with the community and the public, the more trading volume a
mining company will see.
Strauss, founder, Strauss partners, shareholders in place need
to be able to understand the process of bringing a resource to
This is a
sentiment that was explained by Bristow earlier in the week
also, and seconded by Bradbury.
it is important to match the shareholders expectations,
Hossie, CEO, London Mining, meanwhile said for him three things
were important when determining a projects worth: where
the project will add value; the path to production; and also
who else is funding the project.
Streaming, which is when a funder makes an agreement with a
mining company to purchase all or part of their production at a
low, fixed, predetermined price to which both parties agree,
was also discussed.
Using this model the funder avoids variations in operating
costs, reducing downside risk, while providing the upside of
significant leverage to the price of the streamed product,
Randy Smallwood, CEO of Silver Wheaton, explained
Silver Wheaton Corp. provided options for Vale, Glencore and
several other companies last year to the tune of $7.7bn market
Smallwood added that streaming now represents $17bn in
These are top tier companies in mining that have
recognised the value in streaming, he said, We have
now even started funding prefeasibility studies, this is a
first and is like a deposit almost, he continued.
For mining companies theres no doubt that
streaming is becoming more attractive as a new source of
capital, he added.
Conclusions of Mines & Money
So, while Rick Rule and other speakers provided examples of
how the market is turning, it remains to be seen whether the
idea of a stealth bull market will take hold.
Resource nationalism remains an issue, lower mineral and
metal demand (and therefore prices) have certainly hit this
space over the last year and there is no shortage of
projects that have been completed but need the capital
impetus to get to the final stage.
But there is hope in the fact that investors are clearly
willing to engage with the community and that the tide does
appear to be turning even if it is slowly.