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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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A High-Profile Miner's Unusual Strategy

There's been a lot of talk lately about purchasing mining assets.

With many metals at multi-year lows, big investors have started circling. Looking at "picking off" quality projects at the bottom of the cycle. In some cases, buyers have raised billions in specialty funds dedicated to searching for mines and advanced development plays globally.

But one big player said last week that's largely been a waste of time.

That sentiment was expressed by management from Australian zinc producer MMG last week. With the firm's CEO Andrew Michelmore telling Platts that MMG's search for good assets globally has largely come up empty.

Michelmore noted that the majority of available development projects come with significant issues. Most notably low grades and high capital costs.

He said that MMG has "less than a handful" of projects they consider meaningful worldwide. Adding that almost all of those are--understandably--being developed by other groups, who aren't willing to part with them.

Faced with this dearth, Michelmore said MMG is taking another tack. Looking to exploration. Which he called a "clean sheet of paper" approach to finding deposits to feed the company's development pipeline.

The move to exploration certainly makes sense from an ease-of-work perspective. The market for advanced projects has become incredibly crowded the last few years. But few investors have been looking at earlier-stage opportunities--meaning this segment of the project spectrum is wide open.

Other big mining companies are having similar thoughts. I've had conversations with managers recently noting that with markets being soft, mega-M&A deals on large deposits are off the table. With more-affordable greenfields work being seen as a better alternative for adding new mineral reserves and resources.

The other advantage of course is that developers can tailor an exploration portfolio to their needs. Only want projects close to infrastructure? Only in a particular jurisdiction? An exploration program can easily be geared to those criteria. While the chances of finding advanced-stage assets that happen to fit the bill are next to zero.

We're going to be seeing more such work happening in many of the metals. It might be time to start investing the way the big miners are.

Here's to making your own destiny,

By Dave Forest




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