The following is an excerpt from the newly published biography "Mining exploration - the life and times of Duncan R. Derry" by his son Douglas L. Derry. Over a half century, Duncan Derry travelled extensively internationally working as an economic geologist, and served as an informal ambassador of Canadian geology around the world.
By late 1953 Duncan realized that the time had come for a career change. He was almost 48 years old and believed that if he were to make a change, it should be reasonably soon. He saw little opportunity for promotion within Ventures Limited, had been considering establishing himself as a consultant, and had been approached by Rio Tinto about heading up a new exploration program in Canada. He was also frustrated with a variety of inefficiencies within the sprawling Ventures’ empire. He set some of these issues out in an undated draft letter to Thayer Lindsley and in a report on organizational changes.
As a salaried geologist I probably have as good a job as anyone in the country, so far as pay is concerned, but even so, by the time I have carried life insurance and given some help to relatives in England I find I can only break even with the aid of a little investment and speculation. The next stage for a geologist, if he wants to have either more personal independence or more income is to (a) go on to some such job as exploration manager or (b) go into consulting work.
The growth during the last six years of Ventures-controlled companies concerned with exploration, and their taking over of work formerly done by Ventures itself, has resulted in a number of problems of co-ordination and organization.
Lindsley would, as it turned out, soon be encouraged by his board of directors to retire as president of Ventures which then merged with its subsidiary Falconbridge, under the Falconbridge name. Exploration would quieten down.
In September 1954, Duncan joined Rio Tinto, a British company which had in the early 20th century been the largest single producer of copper in the world through its mines in southwest Spain. More recently, it had been a passive investor in these declining mines, and also in successful copper mines in Rhodesia. The company at this time had decided, under its new managing director, Mr. J. N. V. (Val) Duncan (later Sir) to again become an active mining company, setting up mining exploration organizations in South Africa, Australia and Canada. Duncan Derry was hired to lead the Canadian program, with active involvement internationally, as well.
In preparation for joining Rio Tinto, he wrote a report setting out the approach that he thought Rio Tinto should take in establishing an exploration program in Canada. This report drew on his considerable experience and sets out proposed techniques, the most promising districts to explore and the probable costs. He emphasized the importance of persistence of any program over five to ten years, the need to have the authority and freedom to make financial commitments quickly in response to opportunities, and the importance of diversifying one’s exploration bets.
Duncan joined as president of the newly formed Rio Canadian Exploration (Riocanex) and Vice President Exploration of its Canadian parent company, Rio Tinto (Canada) Ltd. (later renamed Rio Tinto Mining Company of Canada). Riocanex was an exploration company looking for mines generally – gold, base metals and perhaps uranium. However, upon joining he was asked by Val Duncan to look into known uranium deposits. The Rio Tinto interest arose from a confidential interest of the U.K. government in acquiring a source of supply of uranium and being willing to put £10 million toward the project.
A number of properties were known to exist in Canada, but the price of uranium of approximately $7.25 per pound was insufficient to make them economically viable. This was true of properties in Blind River, Ont., owned by Joe Hirshhorn, a U.S. entrepreneur and financier. Hirshhorn had been turned down over developing the Algom Mines properties, comprised of Quirke Lake and Nordic, by several companies that thought the costs were too high to justify an investment, so he was keen when approached by the Rio Tinto people in the fall of 1954. After visiting the properties, which were only part of quite a number that Hirshhorn owned, Duncan wrote that Algom was “clearly the outstanding among the uranium properties not yet in production or financed for production”. The properties would cost approximately $40 million to develop.
Early correspondence gave Hirshhorn the codename “Hornedbeast”. He was a flamboyant character who had worked his way on Wall Street from office boy to stockbroker, earning $168,000 by the age of seventeen. A shrewd investor, he sold off his Wall Street investments two months before the market collapse of 1929 for $4 million. He then turned his interests to gold and uranium mining prospects in Canada.
Hirshhorn welcomed Rio Tinto’s involvement, suggesting they contribute $30 million in debentures, which would come with 30% of the common shares, later negotiated to 40%. However, the sticking point was over who should have operating control, since Hirshhorn did not want to lose control and Rio Tinto was not prepared to risk such a large amount without controlling the development of the properties. The initial discussions in Canada were led by Oscar Weiss, president of Riocanex who provided an update on discussions to that time and also described Hirshhorn:
The handling of H. is not very difficult as long as his financial interests and personal feelings are satisfied. Phelps Dodge and New Jersey Zinc failed in their negotiations because their attitude was the usual attitude of large companies and they tried to obtain absolute and immediate control. A man of the nature of H., and in possession of an allegedly first class large deposit, would never accept this type of treatment. This little man is undoubtedly a genius of the type which started large mining houses in Africa such as Oppenheimer’s, Burnutos, Joel’s etc., and now that he is sitting on the top of a first class solid mining proposition, which will make him immensely wealthy, he will probably rapidly become a pillar of society and will remain so unless he finds himself in a tight corner, in which case the pillar might shift its position and attitude. The fact that he has a growing up family, and that he is already a rich man, also indicates that he will take the same road as others of his type.
Gradually Hirshhorn came around to accepting that Rio Tinto would have operating control. Coincident with these developments, the Canadian government took an active interest in the development of uranium as supplier to the U.S. Atomic Energy Commission which was motivated by military supply concerns as was the case with nickel. All uranium would have to be sold to Eldorado Mining and Refining, an agency of the government at a guaranteed negotiated price and most of this would be sold to AEC. Thus the British opportunity and funding fell away with no opportunity for U.K. sales until at least 1962.
This was replaced by price negotiations between Val Duncan and C.D. Howe’s, Department of Supply, ultimately setting the price for this first contract to a ceiling of something over $10 per pound, based on estimating the costs of production and a five year return of capital. In tandem, frenzied attempts to raise that capital were ultimately successful. Rio Tinto transferred its U.K. opportunity to Australia where the company acquired and developed the Mary Kathleen uranium properties in Northern Queensland with the U.K. as the key customer.
Duncan Derry was not without reservations on the Blind River property due to its marginal grade, as he wrote:
Quite apart from the availability or otherwise of large funds I feel that any large financing deals on these relatively low grade properties are pretty risky at the moment and I feel more than ever relieved that we got everything settled so satisfactorily on Algom. I do think we should consider the financing of the smaller high grade type of property, such as in Athabasca, where we can see a profit on the basic price of $7.25 per pound. One such is Lake Cinch which has had some very encouraging drilling results over the past few weeks and looks like a grade of 0.3% or better. Just in case there would be any interest I am making some tentative enquiries to the principals who are led by Mrs. Viola MacMillan who is the Queen Bee of Canadian prospectors.
As the arrangement with Hirshhorn progressed, they considered the concept of a “package deal” whereby Rio Tinto would acquire all of the other Hirshhorn uranium properties, such as Pronto, Northspan, Milliken, Panel and many others (under the Rio Tinto Mining Canada banner with Hirshhorn as chairman). “We have been having some difficulty handling the matter of newspaper reports about the package deal. Joe, before leaving for Chile, made a trip to Blind River to reassure and comfort his staff there who might have heard about the deal. The net result was that so many people heard about it that reports came flowing in from the north like pigeons and before long the rumours were reported in the papers.”
The demand from Washington for uranium spurred a hive of activity, with so many potential producers making contract submissions to the Canadian government that supply started to exceed demand. Rio Tinto wanted to increase its contract beyond 2,000 tons per day, but there was concern at possible proration instead. They wanted to make three more applications for properties, over and above the initial two, being Lake Nordic, Spanish-American and Panel, and found that the likely price to be received would not justify the projected $50 million cost of bringing the properties into production. In spite of continued uncertainty as to volumes and prices from Washington, discussions with the Canadian government of $10.37 per pound and purchase volumes of 7,000 tons per day (4,000 from Nordic and 3,000 from Panel) continued.
Oscar Weiss’s assessment of Joe Hirshhorn turned out to be close to what followed. The Rio Tinto people found him a handful to deal with and he was later convicted of breaking Canadian foreign exchange laws and deported from the country (though reversed upon appeal) and fined for illegal securities sales. He also became a major collector of art and sculpture from the 19th and 20th centuries, eventually donating and then leaving in his will 12,000 works and a $7 million endowment to the Smithsonian in Washington as part of the Joseph H. Hirshhorn Museum and Sculpture Garden. However, Oscar Weiss also became a thorn in the side of Rio Tinto and within a couple of years he was out of the picture.
-- "Mining exploration - the life and times of Duncan R. Derry" is available from Ben McNally Books at 366 Bay Street in Toronto, and at www.poplarlane.net.
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