Hi Bearcatbob:
I scanned in the article in question for you and any others who have been unable to get the G&M's Report on Business, please excuse any spelling mistakes as the OCR reader doesn't always catch them and my quick once over may have missed some.
I've been quite busy at work these days but hope to begin posting on a regular basis again soon.
This article, to me seems to be the turning point we have been waiting for, what I can't scan are the pictures of CMS' father, of herself, David Lowell, Bob Smith nor the graph which demonstrates Arequipa's rise to fame with a clear caption pointing out the Nov 20 date it transferred to the TSE.
The PFG graph shows its peak in March/April with another caption dated March 21 indicating Bre-x as the cause for all gold stocks taking a dive.
A very well presented article!
All the Best!
Rick
Queen Midas -
Catherine McLeod-Seltzer found a little goldfield in southern Peru. Then she got Barrick in on the act. Now she's sitting on a billion bucks. You'd be smiling too.
by Michael McCullough
Catherine McLeod had just finished closing the sale of her company, Arequipa Resources Ltd., to Barrick Gold Corp. in September, 1996. The $1.1-billion transaction had made her, at the age of 36, a very wealthy woman. Due to be married the next month to broker Tom Seltzer, 32, she figured she'd retire, play some golf and start a family. * For about 72 hours. Then she got bored. * Shortly before the wedding, she found herself at a mining conference in Denver, Colo., where she heard Barrick executives trumpeting their joint venture with a Vancouver-based junior, Pacific Rim Mining Corp. Pacific Rim had discovered Diablillos, a property in Argentina with the potential to contain four million ounces of gold. Barrick acquired a 70% stake in the property in return for funding the drilling process to the tune of $10.5 million. * McLeod-Seltzer bought some stock in Pacific Rim, only to see it fall during the next week. She called the company's investor relations rep to get some answers. The voice at the other end of the line hadn't even heard about Barrick's endorsement. In fact, he let on that Pacific Rim had no money and couldn't even pay the drilling contractor. The principals, she discovered, had little mining experience. * One voice in McLeod-Seltzer's head told her to dump her stock. Another, louder voice told her to buy more -indeed, to take over the company. It already had a promising asset, and if she could bring in some star mining talent, it might become an investor's darling. She'd done the same thing once already with Arequipa. * McLeod-Seltzer called on some of her contacts, former Placer Dome Inc. CEO Tony Petrina and U.S. mining executive Chris Thompson, to put together an offer. Then she tapped Tom Shrake, a veteran of Placer Dome and Gibraltar Mines Ltd., to become chief geologist. Within three weeks of the February 3 takeover, Pacific Rim's shares rose from around $4 to more than $7, before being hit by the March fallout from the Bre-X affair. * Whether Diablillos becomes an operating mine or Shrake finds other ore bodies remains to be seen. Either way, McLeod Seltzer has pioneered a method of mine promotion all her own, one that resembles a talent agency as much as an exploration company. "We are set up to back a mine-finder. At Arequipa, it was David Lowell. At Pacific Rim, it's Tom Shrake," McLeod-Seltzer says. The assets are the people more than the properties.
And while she downplays it, her own good name is a part of the package. Her father, Don McLeod, worked as a mining executive and promoter, and gave Catherine her first brokerage account at the age of 6. She estimates that she learned more "sitting around talking stocks and rocks around the dinner table" than obtaining her bachelor's in business administration from Trinity Western University in Langley, B. C. - an education paid for by the proceeds of a stock called Canadian Arctic Petroleum.
She was a model kid, Don McLeod says. Serious and studious, she rarely got into trouble - "quite the opposite of her brother [Bruce, now 34 and a mining engineer]." During the summers, she worked in her father's office - "He didn't want me out in the bush with the boys," McLeod-Seltzer laughs -and later at the Royal Bank. With a little help from Don, in 1985 she landed a job at Yorkton Securities Inc., where she came under the wing of Frank Giustra, later Yorkton's chair and CEO. She quickly went from gofer to desk trader to institutional broker. In 1991, she wrote a report for a US client on the subject of mining juniors in Latin America. She could come up with just 13, but the action there was just beginning. Somehow the report landed on the desk of Tony Williams, head. of Yorkton's London natural resources group, and on his suggestion, Giustra asked McLeod-Seltzer if she'd be interested in setting up a branch in Santiago, Chile. "Oh yeah, absolutely," she replied offhandedly. "Would you like to think about it?" Giustra pressed. "I just did," McLeodSeltzer shot back.
She didn't speak any Spanish, but she soon discovered that Santiago was the place to be. The city was a plush post for mining executives on the make, and there was a large expatriate community. "You're more a somebody when you're an expat, versus being a young woman in Vancouver, [where] they expect you to be around a long time so you can work your way up," she reflects.
After less than a year in the job, however, McLeod-Seltzer wanted out. Much of her energy had been spent on the Santiago office's internal politics, and when Yorkton decided to recall her to Vancouver, she opted instead to strike out on her own. In Chile she had met David Lowell, a bookish, sixty something geologist from Arizona who had boasted a phenomenal record of eight mine discoveries, five of them in production. Lowell was poking around southern Peru, which had the same mineral belts as Chile but had been off-limits to foreign miners for 30 years. Now the Peruvian government was welcoming investment, and the Shining Path guerrilla movement was in retreat. Lowell had financed his own modest drilling program there for some months, but needed more money.
Normally, he would have entered into a joint venture with a major mining company, obtained a fee and money to drill, and received a royalty if it went into production. McLeod-Seltzer instead persuaded him to finance it himself as a mining junior. That way he could control the exploration and, with luck, see a far greater payoff down the line. "He was making a really nice living, he had a good reputation, he had written technical articles. He was not a guy who naturally wanted to be head of a VSE penny mining stock. I was the one who talked him into it. I said yes, we can raise money, we can do this and do that," McLeod-Seltzer recalls. She returned to Vancouver, buoyed by her new partnership, and said to herself, "Uhoh, I've never done this before."
She first brokered a match between Lowell's firm, Acuarios Nfinera Ltda., and a Vancouver-based junior called Thumper Resources, which became Arequipa Resources Ltd., named for a region in Southern Peru. When the relationship with Thumper founder Henry Ewanchuk soured, Lowell appointed McLeod-Seltzer president. Lowell today describes her as ,'very smart, hard-working, determined and conscientious. She's better at reading a geological report than most academic geologists are." McLeod-Seltzer was also uniquely positioned to attract the interest of institutional investors. In the shark infested lagoon that is the Vancouver capital market, she was already known, like her father, as a straight shooter. Through her Chilean experience, she had high-placed contacts in blue-chip mining companies.
For two years, McLeod-Seltzer raised the money in Canada while Lowell ran the operations in Peru. Then, in 1994, they acquired a property called Pierina, which proved to be an extraordinarily accessible deposit of perhaps 10 million ounces of gold. Arequipa became one of the stars of the Canadian junior scene, rising from $2 in December, 1995, to a peak of $34.75 in June, 1996. When a correction hit the junior mining market later that month, and Arequipa dropped back into the teens, Barrick decided to make its move. Barrick's acquisition team flew to Vancouver to propose a joint venture. Team leader Bill Biggar knew of Don McLeod, but didn't know Catherine McLeod-Seltzer from, well, a hole in the ground. It was David Lowell they wanted, his property and his reputation. But while Lowell might have been interested in a joint venture, McLeod-Seltzer was not. It was all or nothing, she told them.
Both McLeod-Seltzer and Lowell happened to be in Toronto the day in July that Barrick announced its cash-only offer of $989 million (or $27 a share) to take over Arequipa. Biggar met them for 15 minutes before the start of business that day in The King Edward Hotel, and found Lowell to be nonchalant, McLeod-Seltzer genuinely surprised. They agreed to consider the offer.
As the deadline on the deal approached, Arequipa invited rival mining company Placer Dome to perform additional sampling at Pierina. Placer's report concluded that the initial method of collection actually served to downgrade the assay results, meaning it might hold more gold than even Arequipa realized. On the basis of this and, some felt, pressure on the part of institutional backers - M c L e o d - S e I t z e r demanded a higher price. Fearing that Placer was preparing a bid, Barrick president (now vice-chairman) Bob Smith flew back to Vancouver for a series of meetings over two days. They finally agreed on an offer of $30 a share, up to half of the offer in the form of Barrick shares, for a total tab of $1.1 billion.
In the wake of the deal, some analysts have suggested that Barrick paid too much for Arequipa, but Smith discounts that argument. The deal assumed a minimum deposit of 3.5 million ounces, with estimates as high as eight million, on Pierina.
(The reserves were later confirmed at se ven million ounces.) Barrick is spending $260 million (U.S.) to bring it into production by the end of 1998. It will turn out to be the lowest-cost mine in the world," Smith says. For David Lowell, Arequipa turned out to be by far the most lucrative of his nine finds, though he chafed at having to go to meetings and navigate VSE regulations in the months leading up to the sale. He doubts he'd do it again. Around the same time as McLeod-Seltzer was making over Pacific Rim, however, he introduced her to an Australian mine-finder, Geoff Lou don, who knew of a dormant mine known as Zijinshan in China's Fujian province. The geologist there was a Canadian-trained Chinese Malaysian, Kit Mull Lee. China had been noticeably relaxing its mining regulations to permit foreign investment. But while the Chinese had seen it as an underground operation, the newly formed Zen International Re sources Ltd., founded by Lee, envisioned a more cost-efficient open-pit operation, going so far as to fly Chinese geologists and technicians to comparable operations in Papua New Guinea and Australia.
"They were blown away," McLeod- Seltzer says. Now acting as chair of Zen international, she is promoting China as
the new frontier of mining, what Peru was in 1992. She predicts that the country's mining regulations will soon be relaxed and that China will make more prime mining sites available to foreign companies. Both Zen and Pacific Rim are head quartered in the same 1,200-square-foot Howe Street office, run by the same three women-McLeod-Seltzer and her assis tants Janice Spencer and Carmen Morales -who once steered Arequipa Resources. McLeod-Seltzer remembers that when Barrick's lawyers and financial advisers came to hammer out a deal in Aug 1996, they didn't have enough chairs.
But if she scrimps on office space, she doesn't on the talent. She tells a parable about legendary promoter Thayer Lindsley (1 8 82-1976), who founded the likes of Sherritt Gordon Mines Ltd. and Falconbridge Nickel Mines Ltd. When geologists would offer Lindsley a prospective mine for $5,000, he would pay them $10,000. Not only did it serve to publicize the property, it meant the best geologists came to Lindsley first. The formula seems just as valid today.
"The market loves these guys coming out of big companies with lots of expertise and a few big finds under their belt," says Andrew Muir, a mining analyst with Canaccord Capital Corp. "They're not going to risk their reputation on bad deals." The matter of integrity has become especially important in the wake of Bre-X and other mining scams. "Nobody wants to get stuck with a Felderhof in their portfolio."
Mind you, the market premium put on Pacific Rim has more to do with the Diabliilos joint venture than anything Tom Shrake has brought to the company, Muir adds. Pummelled like the rest of the industry by the Bre-X meltdown and a flat bullion market, Pacific Rim was trading at about $1.50 in early November. McLeod-Seltzer expects a rebound as soon as slow-moving metallurgical tests on Diablillos begin to show results.
As for Zen, it remains a highly speculative play. Though lots of companies are trying, China has yet to yield a single good property, says Chet ldziszek, one of Canada's most successful geologists. "Most of them are going to be duds."
Nonetheless, both ldziszek and Muir beli . eve McLeod-Seltzer will strike gold again some day. To date, she has parlayed her father's good name and her stable of star geologists into market value. But increasingly it's her own name and reputation that have become the bankable cormmodities. On the way out of Vancouver's Four Seasons hotel following their closing dinner over the Arequipa deal, it was McLeod-Seltzer's hand that Barrick president Bob Smith took care to shake last. "Thanks a million," Smith said, smiling. Without batting an eye, McLeod-Seltzer shot back, "No, Bob. Thanks a billion." |
