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TABLE OF CONTENTS Aug 11 - 17, 2014 Volume 100 Number 26 - 0 comments

Giants of mining converge at Sprott Symposium

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By: Gwen Preston
2014-08-06

VANCOUVER — The Sprott Natural Resource Symposium in Vancouver in late July gathered a remarkable group of industry success stories. Robert Friedland, the legendary founder and chairman of Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF), opened the conference. Sprott U.S. Holdings chairman Rick Rule, another serially successful investor, spoke several times. And a selection of the sector’s best fund managers, newsletter writers, explorers and corporate execs took turns at the podium.

But the best panel brought together nine industry heavyweights to field some big-picture questions.

Panellist Robert Quartermain is president and CEO of Pretium Resources (TSX: PVG; NYSE: PVG), which is advancing the high-grade Brucejack project in northwest B.C. to production. Before Pretium he presided over Silver Standard Resources (TSX: SSO; NASDAQ: SSRI) for 25 years, growing the company from a junior explorer to a substantial producer with a $2-billion market capitalization.

Ronald Netolitzky has been associated with three major gold discoveries in Canada that have since been put into production — Eskay Creek, Brewery Creek and Snip — as well a series of domestic uranium discoveries and major international gold finds. He continues as a director and manager of several exploration companies.

Ronald Parratt is credited with discovering more than 15 million oz. gold in Nevada, which culminated in Fronteer Gold’s acquisition of Parratt’s AuEx Ventures. He continues to search for Nevada gold as president of Renaissance Gold (TSX: REN; US-OTC: RNSGF).

Ross Beaty is known as the exploration world’s ‘broken slot machine’ for his ability to repeatedly produce huge returns for his shareholders. Over the last 25 years he has started 12 public companies and sold most of them, converting about $1 billion of investment capital into shareholder wealth of more than $5 billion. His biggest wins came because Beaty recognized a market bottom in the early 2000s and filled companies’ portfolios with large copper deposits, which he grew as the copper price climbed and sold for huge returns.

Andy Wallace is president of Columbus Gold (TSXV: CGT; US-OTC: CBGDF), which has a suite of properties in Nevada and French Guiana. Before Columbus, Wallace spent several decades exploring for, expanding, permitting, building and operating mines in Nevada as a principal of privately held Cordex Exploration. Cordex is credited with no fewer than nine gold discoveries in Nevada, several under Wallace’s direct management, including the 5 million oz. Marigold mine and the 12 million oz. Stonehouse–Lone Tree and Daisy mines.

Mark O’Dea grew Fronteer Gold from a $2-million start-up into a high profile, development-focused company that was taken out by Newmont Mining (TSX: NMC; NYSE: NEM) in 2011 for $2.3 billion. As founder of Oxygen Capital, O’Dea now plays a leadership role in all Oxygen companies, a list that includes Pilot Gold (TSX: PLG; US-OTC: PLGTF), True Gold Mining (US-OTC: RVREF) and Pure Gold Mining (TSXV: PGM; US-OTC: LRTNF).

David Lowell is one of great exploration geologists of the past century. In his 70-plus year career he discovered 17 orebodies, including the deposit that underpins the largest copper mine in the world: Escondida.

Doug Casey is the chairman of Casey Research, which publishes several newsletters on resource investing and manages several resource-oriented funds. Casey is also the bestselling author of two books about investing.

Ronald Thiessen is president and CEO of Hunter Dickinson, a group he has worked with since 1996 and led since 2000. Under his leadership the group has closed two dozen property deals and raised well in excess of $500 million in financings, and gets credit for discovering a raft of major deposits and developing several mines. 

Each of these exploration and mining legends answered the questions posed to the panel. Some of the highlights of that session are below.

 

What are the attributes that make for a great geologist?

Robert Quartermain, Ronald Netolitzky and Andy Wallace: Perseverance.

Ronald Parratt: Multiple ideas.

Ross Beaty: Tremendous luck.

Mark O’Dea: Luck and perseverance.

David Lowell: Hard work, which is another way of saying good luck.

Ronald Thiessen: Experience on lots of properties, and patience.

What makes for a great mine finder?

RT: Being the seventh guy on a property. We have a saying in our office: “We want to be the seventh guy on a title, because the first six do all the work.”

DL: I think a mine finder is somebody who always keeps in mind that ore is rock that can be mined at a profit, and so you need to use economics in your geologic position.

MO: A willingness to fail quickly and move onto the next prospect.

RB: The harder you work, the luckier you get. You can’t win a lottery unless you buy a ticket, and the more you buy, the more likely you are to win. The other thing is to really understand that what makes a mine is sizes. For so many years in my exploration career I was focused on size, because big deposits make big shareholder gains. If you go for small targets, you have small returns — but there’s about the same amount of risk in a small project as in a large one.

RN: The most important thing is to take advantage of all the work that’s been done ahead of you and look at it seriously. You’re mining other people’s rejects, but that’s where you find lots of interesting things.

How much of the discovery process is science and how much is serendipity?

RT: I think there’s a tremendous amount of science. The serendipity is more about the economics of the time — what wasn’t a mine yesterday might be a mine tomorrow. It takes a lot of science to evaluate projects and select where you are going to put your resource dollars.

DL: I have done some scientific things, but I don’t concern myself to be a scientist. I think my success is based more on being practical and being a good prospector, and imagining what the other dimensions of the deposit are from seeing a few scraggly outcrop patches. I think one thing that is overused now are high-tech presages like geophysics and digital mapping, and so forth. I think that boot leather and drill rigs are the real effective tools.

MO: There are few real discoveries made in a year, or in a decade. We’ve made a couple but the bulk of our success as a group has been through rediscovery — you get into a data-rich environment where a property has been explored several times that really lends itself to science, because you attack it by standing on the shoulders of giants.

AW: I often wonder why I drilled a hole in one direction and not the other direction, and often I don’t have a good answer. I find it amazing that I have had 42 years of exploration and have found other people to fund my work. If you have good targets and have the money and the time, I believe you’re going to be successful and I consider myself lucky to have been able to do that.

RB: It’s not terribly difficult to learn the science of discovery, but serendipity is important too. You have to be lucky. That doesn’t always mean drill discoveries — it can also mean getting your timing right. I bought my deposits at the bottom of the cycle. Is that science? Sort of. Is it serendipity? A bit. The other thing that was not terribly clever science is that large copper deposits tend to cluster, so if you have some mineralization you tend to find more if you keep drilling. That’s about as clever as it was. We acquired large projects in good jurisdictions and hoped the copper price would go up, and we drilled nearby. So it was serendipity and science with respect to success in exploration and timing, but it was science in knowing that if you find one deposit you might find more of the same, and knowing that if you buy these things at the bottom of the market you’re setting yourself up for success.

RQ: Get out there, persevere and create your own luck.

Is it true that we’re going to have to move towards more bulk-tonnage projects because the low-hanging fruit has been picked?

RN: Whatever works, works.

RP: What we’re looking for are ore deposits that can be mined. If it happens to be 0.7 gram gold per tonne and it makes good money, that’s great. If it happens to be 5 grams gold, that’s also great. In the end it’s economics.

RB: I think in the future there will be lots of high-grade and low-grade deposits discovered, and the difference will be what makes money.

AW: You have to make the best of what you’ve got. We went through a period in our company when we decided we were only going to look for high grade and we kept finding low grade, so we sold them off. Many are now in production, so I think that was a mistake. I also don’t think we have found all the easy low-hanging fruit. I’m working on a discovery in Nevada with ore grade outcrops at surface 20 miles from Tonopah. Why it wasn’t found before I have no idea, but they still exist.

DL: I think that we’ve all seen the price of copper and gold steadily go up and I think that in the future they will have to go higher. There’s going to be some kind of serious crisis when we run for the first time in the history of the world into an absolute lack of a given important commodity. I think all of us that are trying to find mines think about the cycles, but we need to keep our eyes open to the fact that these cycles are going to be more pronounced.

Do you find yourself looking to more politically risky jurisdictions?

MO: People generally associate risk with geology, but the bulk of the risks today are not subterranean, they’re social and political. A lot of the sense of security that people have around projects in first-world countries because of security of tenure — there’s not actually less risk because of the challenge of getting your mine permitted.

RB: I’m agnostic as to where to look. Everywhere is awful. It’s a tough business and you just have to roll with the punches, but that also means metal prices will stay higher longer and that’s good for all of us.

Which company should investors be looking at for near-term gains right now?

RQ: Pretium Resources.

RN: Lincoln Mining (TSXV: LMG).

RP: Renaissance Gold.

RB: Odin Mining and Exploration (TSXV: ODN; US-OTC: ODMEF).

MO: Pilot Gold.

DL: Lowell Copper.

DC: I don’t know what to buy, but this is the time to buy.

RT: Curis Resources (TSX: CUV; US-OTC: PCCRF).



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Photos

Robert Friedland of Ivanhoe Mines talks Mega Wealth Through Mega Discoveries at the Sprott Natural Resource Symposium in Vancouver in late July. Photo by Matt Keevil.
Robert Friedland of Ivanhoe Mines talks "Mega Wealth Th...


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