Rocks or People?
The final day of this year's Mines and Money conference in Hong Kong included panel discussions on mining in Asia and the investment targets of Chinese SOEs, and a pitch battle between juniors.
Two panels during the final day of the three-day Mines and Money (M&M) Asia conference in Hong Kong focused on mining in Asia and the investment targets of Chinese state-owned enterprises (SOEs). The day ended with a pitch 'battle' between three junior companies, adjudicated by four investors.
The day started, however, with an interesting presentation from Eddie Rigg, the deputy chairman of Argonaut Ltd. Mr Rigg, who was chairing the morning session, took the opportunity to explore the conundrum; what is more important in mining, the rocks or the people?
By way of an answer, Mr Rigg subdivided mining into eight stages; exploration, discovery, scoping studies, feasibility studies, construction, commissioning, production and late life. He argued that 'rocks' were more important in the first three stages, suggesting that many discoveries could be attributed to luck rather than necessarily to geological skill.
'People' became more important during the next three phases (feasibility, construction and commissioning) because crucial, often complicated, decisions are taken at these stages. Rocks become more important than people, again, during production as the geology is able to make money for investors almost regardless of management — in Mr Rigg's words, "when you have a great asset, you have a great asset".
Finally, in the 'late life' of a mine, people again become more important as they can make decisions that will extend, or transform, the operation. So, in answer to the question he posed, Mr Rigg suggests; rocks, people, rocks, people. Feel free to comment!
In the first keynote panel on Thursday, April 4, four Asian mining experts discussed the investment targets of Chinese SOEs. Dr George Fang, executive director at Zijin Mining Group, noted that the company had started investing outside China in 2006 and now had projects in ten countries — these now account for over 40% of the company's profits.
Zijin is focused on gold and copper, both of which he described as 'strategic' for China. The company targets on high quality assets where it can enter a partnership with a reliable local company. There must be upside resource potential, but integration is "front and centre" if the venture is to work.
Leo Zhao, the CEO of Zhaojin International Mining, said his company is also actively targeting assets overseas. He insisted that Chinese companies had learned from their historic mistakes, and were less involved now in early-stage ventures. Chinese SOEs are now "smarter", he said, and rely more on partnerships.
BOC International Holdings is also active according to its global head of commodities, Arthur Fan, who quoted statistics demonstrating the rapid rise in the investment by Chinese companies overseas.
Benjamin Wu, a senior manager at private company Asia Minerals Ltd but previously at the state-owned City Metals Group, outlined some of the differences in takeover protocols between state-owned and private companies in China.
All the panellists were agreed on the need for communication, transparency and on having local partners. With regard to cultural differences, the consensus was that both partners needed to "keep learning".
Mining in Asia was discussed during a panel discussion involving five CEOs with practical experience; Richard Bruce Ness of Merdeka Copper, John Lamb of Myanmar Metals, Bharat Parashar of Ceylon Graphite, Andrew Stewart of Xanadu Mines and Artem Volynets of Chaarat Gold Holdings.
Several panellists spoke of the difficulties caused by land regulations across the continent, not least forestry restrictions in Indonesia. Mr Parashar said regulations were always an issue but were the same across all sectors. It was important that foreigners worked within the local system, he said, and did not impose their own rules.
Mr Stewart stressed that (as elsewhere) security of tenure and stability was critical, with Mr Lamb adding that "clear and defensible" titles were required. There were still problems in Myanmar, he admitted, and the land-tenure pathway was not always clear.
Mr Volynets commented that it was the implementation of laws that were sometimes a challenge, but this was alleviated if you had the support of the local community — always "think local", he said. As in the previous panel, everyone was agreed on the need for good lines of communication, transparency and on having reliable partners. All were also agreed that illegal mining activities were an issue throughout the region, but that this problem was reduced, again, if your company had local support.
Mr Stewart had the final word, describing Asia as "an exciting part of the world that doesn't get the attention it deserves, especially as that is where the consumption is centred".
M&M Asia came to an end with Mining Beacon's traditional 'battle' between junior companies in front of investors. Three companies had three minutes each to 'pitch' to a panel of four investors; Markus Grimm (director of Allied Strategic Resources), Edward Gustely (managing director of Penida Capital), Garrick Mendham (executive director of RH Mining Resources) and Peter Nicholson (managing director, Australia, at Resource Capital Funds). The judges then had seven minutes to interrogate each CEO.
Stuart Jones introduced HPQ Materials, which is developing high-purity quartz sand for the solar PV and semi-conductor markets. He made a persuasive argument that this sector needs alternative suppliers of this surprisingly rare commodity (sand in the Sahara is apparently the wrong shape). The company was formed in 2015 following the acquisition of a suitable quartz mine in north Queensland.
Sergey Novokhatskiy presented a video of SC EastGeology's gold exploration project in the Krasnoyarkiy region of Siberia. The company was formed five years ago when it gained its first licence for a placer deposit. Mr Novokhatskiy was criticised by the judges for focusing too much on the region's scenic value, and of being light on geological and operating facts in what is a greenfield area.
Geoff Stanley's slides on Panthera Resources were well received by the judges, but no-one had a good word for overseas investments in India — "India is for Indians" was one comment. This was made even more problematic by a "permitting malaise" at the UK company's Bhukia gold project in Rajasthan (although the site has undoubted potential and a new local partner has recently been announced).
The judges were unanimous; HPQ Materials.