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Dave Forest

Dave Forest

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

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Solid Gold Brains

One of the most valuable things a mining company can have is expertise.

Exploring for, delineating, and mining ore bodies is an extremely tough business. The success rates for going from a discovery through to positive feasibility through to first production (and actually making money on this process) are right of the decimal point.

To paraphrase Thomas Edison, there are literally thousands of ways to not come up with an economic mine.

A lot of people are learning this the hard way.

With metals having become one of the hottest sectors on the planet this year, new players are entering the business by the score.

On my recent visit to Toronto I heard about Korean conglomerates with mandates to get into mining ASAP.

Talking with a friend in the uranium business this week, he noted that a number of major mining companies have been showing up, look to enter (or in some cases re-enter) the uranium space by acquiring or joint venturing projects.

I also had a sit-down last week with a large investment fund run by several Fortune-magazine caliber names who believe that gold is going to be the winning investment of the coming decade.

This is a lot of financial and corporate firepower being brought to bear on the mineral industry. But there's one thing many newcomers lack. Experience.

Companies that got into mining over the last few years are starting to realize just how difficult this business is. In South America, a number of major deposits purchased by overseas firms as an entry into copper and gold are sitting idle. Because their new owners lack the geological, engineering and project management skills to move the projects forward.

Those companies are realizing they need help. From people who know the mining business.

And those groups are now seeking out help. Doing deals with experienced firms not only to gain access to specific projects, but also to tap into the operational expertise of companies that are tops in the business.

This week, for example, it emerged that Aluminum Corp. of China (better known as Chalco) is in advanced talks with Rio Tinto on a number of strategic partnerships.

This is a good deal for Rio, as Chalco brings considerable cash and political clout to the table. And a great deal for Chalco, giving them access to the brain trust of the world's second-largest public mining company, a group with a proven track record of developing projects.

Going forward, those teams with mining know-how are going to be a hot commodity. Knowledge is one thing that's even harder to find than a major mineral deposit.

By. Dave Forest of Notela Resources




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  • Anonymous on March 19 2010 said:
    What most would be jr miners lack is a clear understanding of CAPEX, i.e., just exactly what it costs to mine and operate the product. In my view, any E&P jr miner in Canada, US and australia are at a significant disadvantage relative to CAPEX and most are looking for a J/V bailout from the Majors. However, if E&P done right in Indonesia, Mongolia, West & South Africa and Patagonia, an investor just might come out with winners.

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