Hello all at SI:
Ive diversified across most of the desert dirts because I have no way of determining which would succeed and fail. With Friday's press release for IPM, I figured, "What the heck, IPM's management has cost me money, so what's another $75 to start posting on SI."
Naxos did it right, IPM did it wrong. Here's my opinion why:
Suppose you staked some desert dirt land and hoped to develop an assay procedure and economic recovery procedure to mine the ore. How would you do it?
You can try what IPM did. They hired a lot of employees to do in-house R & D on a recovery method. They played with their chemistry sets, as it were, trying this and that and eventually coming up with something that seemed to give good numbers, at considerable time, effort and expense. Trouble is, they didn't have any means with which to evaluate the efficacy of their efforts. They finally brought in outside companies - Bateman and BD - to evaluate their work and lo and behold, they said it wouldn't work. Back to the drawing board, and you've pissed off all the sharedholders. Why did IPM fail here? By doing the R & D in-house, you limit the talent pool to your in-house employees. How do you know these employees will be able to develop an economic recovery procedure? You spend a lot of money on salaries and chemistry sets, but you don't know if they'll succeed. This is why IPM is back to square one. Now, they're doing what they should have done in the first place. They have an outside mining engineering company, Bateman, doing the work to come up with an economic recovery method. Gee, shouldn't they have done that in the first place? As regards the development of a fire assay, they apparently dropped the ball again. From what I can tell, a practical fire assay existed a LONG time ago. Maxam fire assays Peoria 7, Peoria South and Coyote Peak, the latter being adjacent to and immediately south of IPM's deposit. Couldn't IPM just call Hewitt, Maxam's consulting firm and ask to use their method, which gives similar numbers to what they finally released on Friday? BTW, all Maxam does is get an ore sample, grind it, perhaps gravity concentrate it (I forget if Dale Runyon told me they gravity concentrate for the fire assay as well as the recovery method), and fire-assay the result. Not really rocket science, it seems.
OR you can do what Naxos did. They aren't spending any money on an in-house R&D dept. Like I said before, you don't know if in-house R&D can come up with anything. It's far better to outsource the R&D, so as to maximize the talent pool. You send samples of the ore to labs and scientists all over the country and beyond to see if anyone can come up with an economic recovery method. If someone develops an economic recovery method, you then do a deal to get the rights to the method in return for an equity stake. This is what Naxos is doing, and it appears they have found a winner in Johnson-Lett.
In my opinion as a shareholder of both IPM and Naxos, Jay Taylor has it wrong. He says in his most recent telephone update that "...unlike IPM, Naxos is not run by people who have had experience building mines."But you don't need in-house people who have experience running mines. You can outsource that. Naxos has hired Johnson-Lett because they have a promising recovery method. Naxos has hired Ledoux to evaluate it and assay Franklin Lake ore. Naxos has hired Behre-Dolbear to collect COC ore samples; ultimately, if the Johnson process works out, Naxos will prove out the entire deposit by getting BD to drill the lake, and Ledoux to assay it using Johnson's process. You don't need a phalanx of in-house mining engineers to do THAT, do you? And suppose at the end of the day, BD signs off on the entire proving out of Franklin Lake using the Johnson Process and Ledoux's assays. How do you build a mine? Easy, you outsource that too. You simply hire Kilborn, Bateman and/or other outside companies to get the permitting, get the plant designed, built and run. You hire investment bankers to raise the financing. And so forth. Or you can entertain takeover bids too and let Barrick deal with it.
In my opinion as a shareholder of both these companies, IPM did it wrong because they wanted to be heros and do everything in-house. Naxos looks like it may succeed because they are outsourcing the work and drawing upon the best outside talent they can find. For the same reason, I think Maxam Gold will succeed. They outsourced from the beginning, hiring Hewitt to assay the ore and develop the recovery procedure.
I'd like to leave everyone with this thought. There seems to be only about four people working at head office for Naxos - the receptionist, secretary, Jimmy John and Matt Walters. Naxos now appears to have an economic recovery method and assay method from Johnson-Lett and has BD taking COC ore and Ledoux testing it. Maxam Gold has only a few employees too and outsourced by hiring Hewlett to develop a recovery method and assay method and Maxam is now proceeding into production in April, 1998. In comparison, IPM has a truckload of employees on the payroll, and all they have to show for their in-house effort after all this time and effort and money is just a fire assay method. HOW MANY IN-HOUSE DESERT DIRT EMPLOYEES DOES IT TAKE TO SCREW IN A LIGHT BULB?
Rand W.
P.S. Any responses would be appreciated. |
