Must-Haves for a Successful Pitch
I caught up with Mines and Money London speaker and Partner at Pathway Capital Marcel De Groot to discuss what he looks for in a pitch, the qualities that put him off a pitch, and some of his most successful investment decisions.
Marcel De Groot, Partner, Pathway Capital
Marcel De Groot co-founded Pathway Capital Ltd. In September 2004 and has been its president since October 2004. Pathway collaborates with successful mining entrepreneurs in creating new ventures. Examples include Peru Copper (acquired by Chinalco), and Sandstorm Gold.
Marcel has been involved in numerous successful companies as a director. He is currently director of Asanko Gold, Anthem United, and Lowell Copper. He is a past director of Underworld Resources (acquired by Kinross), Esperanza Resources (acquired by Alamos Gold), and Northern Dynasty Minerals.
Marcel’s Pathway Capital worked on Peru Copper (Marcel’s partner David De Witt was a board member), and the company was bought out for C$850 million in 2007 by Chinalco.
How should mining projects best pitch you?
We look for a clear plan to create shareholder value being executed upon by a team with a successful track record. It's critical management has made a meaningful investment into the company (aligning interests with shareholders) and are focused solely on running that company as you don’t want to be orphaned if they have success elsewhere. You want to back teams who understand that things can go wrong and ensure they maintain a healthy a balance sheet and good corporate structure. The team must have all the key elements in place i.e. finance, marketing, technical, social etc. The project must have the appropriate scale or potential for scale so investors will still make money even as there are challenges along the way.
What one thing most puts you off when miners are pitching you?
Chasers. Companies jumping into the flavor of the month commodity or area play. Typically you will see a patch work management team recycling a tired project which contains less-than-economic grade/tonnage of the commodity, or using “close-ology” as a play. The outcome tends to be pretty ugly for the last investors in. We prefer successful teams focused on uncovering/developing projects with robust economics based on the long term price trend.
Which emerging regions interest you?
Ethiopia is opening up and has all the right characteristics to become a significant player in the industry. The geologic potential is very significant as it contains a significant area of the Nubian Shield, which has been demonstrated to host World Class gold and base metal deposits such as the Bisha mine. It has received minimal exploration activity in the past partly because vast areas have been tied up with the holders conducting limited exploration activity. The government is now pushing individuals and companies to perform the necessary work required under the mining code or lose the project. This will make it easier for serious exploration companies to move in.
Ethiopia also has significant infrastructure including roads and very cheap power though out much of the country. It is interesting that Newmont has quietly been there for several years now conducting exploration work.
Cote d’Ivoire has a significant number of greenstone belts but has received relatively limited exploration when compared to neighboring countries.
What one book would you recommend someone wanting to get into mining / mining investment?
I am going to cheat and give you two. First is Get Smarter: Life and Business Lessons by Seymour Schulich and Derek DeCloet. It offers excellent insights into our industry from a true industry legend. The second is Never Rest on Your Ores by Norman B. Keevil which summarizes the history of Teck, providing many lessons along the way.
What is the best investment decision you have made? What is the worst?
My best investment was Peru Copper. David Lowell was looking for copper projects in 2002 and came across Toromocho. After analysing the project his theory was that it was larger and higher grade than the historic resource indicated. He needed four drill holes to test the theory and was proven correct. The attractive feature was that even if he was wrong the project’s option value would be higher than our entry point. The first money in returned 150X.
My worst investments were those made while I was in university studying commerce. I had friends who were geology students who did summer work for companies. The market started to go up and we thought we were pretty smart as we were making good returns. Turns out we didn’t have a clue as to what we were doing and lost all of our money as the market corrected. I made classic mistakes such as buying stocks that were running and mistaking promotions for real companies. It was an expensive education but it was very valuable to learn some key lessons early.
Marcel De Groot is a speaker at Mines and Money London 2019, taking place 25-27 November at the Business Design Centre.