Nice little piece on GVG (from SH) from the Gold Show, things seem to be moving along nicely...
Resource Report: Junior Resource Investing: It's All About the People
Monday, January 22, 2007
By Resourcex
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Experienced personnel give Grenville new vision
If the 2007 Vancouver Resource Investment Conference has taught investors anything, it's that investing in resource companies and junior resource companies in particular is about investing in people.
The phrase "gold rush" is largely a thing of the past. Minerals require more talent than ever before to find and profitably extract from the earth. That means well-connected, experienced management who hire brilliant geologists, who in turn calculate the best possible scenarios for samples, trenching, drilling targets, and so on.
One worthwhile talk given at the Resource Investment Conference on Sunday was entitled "Picking Juniors", at which four newsletter veterans - Bob Bishop (Gold Mining Stock Report), John Kaiser (Bottom Fish Report), Lou Paquette (Emerging Growth Stocks) and Greg McCoach (The Mining Speculator) - spoke at some length about how they pick juniors for their portfolios. Eric Coffin, who moderated the panel, asked the panelists which of the following was most important in choosing a junior resource investment: Property, Management or Market.
The common answer was no surprise, really. Bob Bishop said, "You're buying people when you buy these companies. That's the starting point." John Kaiser followed with, "I do a people tree. Who are they connected with? What other deals have they had?" All agreed that management was most essential to their filter system, if not fundamental to it.
The consensus was reassuring, because when I do due diligence, I generally call the company in question. I go out of my way to speak with the CEO personally. In doing so, I learn about the esprit de corps of the team. I get an idea of what's motivating them - money lined pockets or real investment value.
Last Friday, I spoke with the CEOs of two companies I've been following. Paul Gill is part of the new management team at Grenville Gold (TSX: V.GVG, BullBoards). The management change is exceptionally relevant in this case because along with it came a great deal of expertise, competence and vision.
Primarily, Grenville has shifted emphasis from exploration to development. The new management team, headed by Len De Melt and Paul Gill, decided that diamond exploration was too much like finding a needle in a haystack, and less likely to be fruitful than buying properties with existing resources and developing that resource base.
This shift began, however, with people making intelligent decisions. In October last year the company announced additions and changes to its board of directors, including the appointment of Len De Melt as Chairman of the Board and the addition of Paul Gill, who shortly afterward became CEO.
De Melt, who was a founding director at Norsemont (TSX: V.NOM, BullBoards), is responsible for starting and building six mines including Gulf Oil's Rabbit Lake uranium mine, a Syncrude oil sands mine, Denison Mines' Quintette coal mine, Homestake's Golden Bear gold mine, BHP's (NYSE: BHP, BullBoards) Ekati diamond mine and Goldust's Croiner gold mine. De Melt's thirty-year pedigree in mining is formidable: he is an engineering technologist, a graduate of the Haileybury School of Mines, holds a BA in business and a diploma of mechanical studies from BCIT.
De Melt's relationship with Paul Gill is a lengthy one, and vets what John Kaiser said at the conference on Sunday: It's about people and their connections. Gill was also a co-founding director of Norsemont, and has served in numerous positions in juniors, from corporate secretary right on up to President and everything in between.
At Grenville Gold, this emphasis on people runs the gamut from senior management to geologist to project management. Gill emphasizes the importance of communication on the ground in developing the company's four acquisitions Peru.
"We've hired 23 local Peruvians that have worked in those four mines," he told me. "We've hired previous geologists and mining engineers and people who have experience at the mines, administrators, etcetera. So they know the mine, they're familiar with all the past paperwork and they're communicating that with our independent geologists who will be down there."
The four mines Gill is referring to include more than 50 claims in the San Mateo district of Peru, about 100 kilometers from Lima, all of which were acquired late in 2006. The mines, Silveria, Germaina, Pacacocha and Milotingo, produced concentrations of primarily silver, but also of copper, lead, zinc and gold between the 1960s and 1990s. Grenville has obtained production records, mine plans and related information to assist the reporting process, though none has yet been made publicly available.
Gill's team believes that with modern mining technology, the company will be able to increase recovery levels at the mines and further delineate profitable resources. Gill suggested as well a possibility of processing existing tailings on the properties, which could allow Grenville to generate some quick revenues to fund ongoing exploration, and retard the dilution of outstanding shares.
To determine more precisely how profitable these four past producing mines may be, the company has sent an independent geologist to the area. This week, work is to begin on technical reports for each of the properties, starting with Pacacocha and Milotingo, which are most accessible. The independent geologist, or in 43-101 terms, Qualified Person (QP), will determine a National Instrument 43-101 compliant resource estimates for each of the properties, and determine the feasibility of each of the mines being reopened and/or expanded.
Gill's story contras ts sharply with the other CEO I spoke to last Friday, and the difference speaks volumes about the theme of resource investing being about people first, properties second. In short, I asked the person in question (I'll leave him nameless) about the status of a property the company had commenced drilling on but which it had neglected to report on since. He reluctantly admitted that previous management had hired a junior geologist to design the drill program.
"I don't think we did a very good job of it," the CEO told me. "We let a junior geologist lead the project and we don't think the holes were placed where they should have been, and at the proper angles, and so on."
The moral of the story? Get to know the companies you're interested in. Call them. Visit them at the Vancouver Investment Conference. Ask about expertise, past successes and connections, because more than anything else, people are what matter in the business of resource investment.
By Doug Hadfield, Senior Editor, Resourcex |
