Roulston: the mining revolution may not be publicized

POSTED ON June 08, 2015 BY Lawrence Roulston
CATEGORY Mining,

Geologist Lawrence Roulston is the founder of Resource Opportunities and the President of Quintana Resources Capital ULC

For decades, public companies were essential in order to pool lots of small investments which came largely from individuals. Those investors knew (or at least should have known) that they were speculating on high risk/high reward ventures. There were some spectacular successes that made it all worthwhile.

Over the past few years, the industry has become far too self-serving, with big salaries and perks skimming off a lot of the shareholder capital and skewing the odds even further against having a decent prospect for a payoff.

As a result, the retail investors have largely fled the industry. Those who are left are typically fully invested and deep under water.

As often happens (not coincidentally) the best opportunities coincide with the time that investors are most reluctant to get in.

Money now is coming from people who are most familiar with the industry, those who know it is cyclical and who know that the time to buy is when the industry is out of favor and prices are low. Much of that money is institutional, and come in fairly large chunks. As such, the pubco is less important. For the moment, the whole system is still geared to pubcos, with many of the players having vested interests in pubcos, meaning they will push to have the money flow through pubcos.

There is a massive amount of money in private equity groups that are looking at the junior mining industry now: many billions of dollars are available. But, those investors are looking for quantifiable returns, not speculation. As such, that money is, for the most part, going into more advanced projects, typically at the development or operations stage. Many of those investors don't have the ability to properly evaluate a development-stage mining project and therefore continue to sit on the sidelines. Early stage exploration is completely out of their realm.

"Exploration" covers a broad range, from grass roots through to projects going into feasibility studies.

At this time, MOST of the money coming in is directed toward the more advanced-stage end of the spectrum. There will be a dearth of projects in the pipeline in due course.

While so many commentators focus on the so-called "slow down" in China, the world will use more metal this year than we used last year, and we will use more metal next year than this year. At the same time, existing mines are steadily depleting. There is an on-going need to find and develop new mines.

As a personal sidenote: I looked at a project last week that is being sold by a major. We are interested in funding it. After some discussion with the group putting the bid together, we all concluded that there was no value in doing this through a pubco, so it will be done privately. As a private transaction, there will be no news release. The point is, there could be a lot of deals happening which simply don't show up in the media.

Lawrence Roulston

Lawrence Roulston is a mining professional who with over 35 years of diverse hands-on experience is uniquely qualified to develop business and strategic ventures, to identify, evaluate and negotiate opportunities, and to lead other growth-oriented value creation initiatives. In addition to being President of QRC, he also serves as a board member of Q-Holdings portfolio companies, including Western Pacific Resources Corp. (TSXV: WRP) and KBL Mining Ltd. (ASX: KBL). From 1998 to mid-2014, Mr. Roulston was a mining analyst and consultant, as well as the editor of “Resource Opportunities”, an independent investment publication focused on the mining industry. Prior to this, Mr. Roulston was an analyst or executive with various companies in the resources industry, including: Analyst of Cominco Ltd., a major metal producer, now part of Teck Resources Ltd.; Senior Analyst of McIntyre Mines Ltd., an operator of a major coal mining operation in Canada; Manager of Pembina Resources, a Calgary-based mid-tier oil and gas production company, which was then part of the Mannix family holdings; VP of Ventures West Minerals, a group of mineral exploration and development companies; VP of Coromandel Resources Ltd., a mineral exploration company; President of Canmex Minerals Corp., a mineral exploration company and part of the Lundin Group; and VP and Director of the Mintax Group, a mining investment fund. Mr. Roulston holds a B.Sc. in geology and graduate-level training in engineering and business from the University of British Columbia. More →

LawrenceRoulston@ceo.ca

Lawrence Roulston

LawrenceRoulston@ceo.ca

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