Earth AI, Legacy Minerals make first greenfield palladium discovery using artificial intelligence
The companies announced the verified discovery of one of the largest palladium mineral systems in Australia.
The Agora Financial Symposium in Vancouver gives executives and representatives from mining companies the chance to pitch their stock to potential investors.
Outside the main conference area, where around 500 attendees listen to investment and economic experts from a variety of industries and perspectives, a few mining companies talk to potential and current investors at the company exhibition booths.
Following an 18-month downdraft in the sector, many investors have tough questions for these management teams.
Rick Rule has stated that the downdraft in mining is positive in the long-term. Companies that are wasting capital because of poor management, he believes, must wash out of the sector.
I took advantage of the conference to talk with a few mining executives, and asked them if they saw the cleansing that Rick believes must occur in the sector.
“A lot of companies rushed in when they could get financings,” says Ken Cunningham, President and CEO of Miranda Gold Corp. “And many are now out of cash. These companies are technically still alive, but should soon be forced to either close their doors or be taken over.”
“These companies are no longer drilling or taking samples”, says Cunningham. Rather, they have decided to end their exploration activities so that they can maintain their salaries until the market allows them to raise money again.
“This behavior brings into question the validity of their projects, and the elimination of these types of companies should be positive for the sector”, he concludes.
I spoke later with Paddy Nicol, President and CEO of Evrim Resources Corp. I learned that back in 1988, he had worked under Steve Todoruk, now a broker at Sprott Global Resource Investments.
Will inefficient companies begin to disappear from the sector, so that new capital entering the space will be more effectively deployed?
Mr. Nicol would tend to agree: “Right now, many companies are set to close shop or merge with a company that has more cash, in order to save themselves.”
Are management teams reducing their overhead?
“Junior mining companies are trying to reduce their expenses on non-exploration activities, in order to devote as much capital as possible for actual drilling. Over time, bad companies will disappear. There will be a limited number of juniors to choose from for those looking to devote capital to the sector – as was the case at the onset of the bull market.”
What do the experts at Sprott Global think of this change? I spoke with Andy Jackson, who had decades of experience in exploration geology before joining Sprott Global as an analyst.
“The juniors are becoming cheaper and more efficient with capital as the market takes its toll”, Andy believes, “but the major mining companies, who are the target buyers for juniors and their deposits, won’t touch them right now. That’s because when times are tough, these big companies slash expenses, and the easiest place to make cuts is in acquisitions and exploration. This is very irrational behavior over the long run. These are the kinds of cyclical downturns where the majors should be the most aggressive in taking over exploration projects from juniors. Instead, they hunker down to preserve cash, and acquire projects once the market has revalued the projects higher.”
What should we do as investors?
“Investors should take the place of the majors in the market, and become aggressive buyers during these cyclical downturns. Cheap exploration projects that have a good chance of producing a mine will become more expensive once major mining firms have the means and the will to bid on these projects – which ironically only happens once the market has already turned and investor funds start flowing back into the sector.”
The companies mentioned are for informational purposes and do not constitute recommendations.
Comments
Charlie Michael
Rick Rule hit the nail squarely!! All the ducks must be lined up and monetary expenses prudently managed to get the plane off the landing field. A large portion of the investment and investors have to maintain an additional bankroll to keep moving forward. Inordinately, fools think that once an ore body is discovered and opened up, they could reasonably expect immediate cash returns on such actions. Truth is, debate-ably, more cash has to be set aside to cushion the future production expenses than what is required to simply open up a prospect.
Of course there are all sorts of regulations, taxes, debits and fines, and more, that is heaped on a mine owner or mine developer. Plus equipment, milling, material transportation, fuel, government oversight, laborers, waste disposal or impound, as well as geographical logistics to keep enough room available so that everyone involved in the process can work around each other. Some of the music will be sweet and precise; while other endeavors ends in a long, hard grind.
The modern mining process is so labor and financially intensive, it’s truly a wonder that anyone makes a profit or any sort of return on the whole venture.
On TV, shows like the Gold Rush in Alaska, or the ones in Guyana and elsewhere in Africa or South America depict the real challenges of logistics and development. People find a piece of gold, vein in a rock, or gemstone, and they get all starry eyed, and soon enough, depraved and disillusioned (Gold Fever) (we all get it, no one is immune) but some can manage it better than others.