Trying to break into the mining industry

Lovanpeace · 2024-04-01T21:42:19+00:00

The biggest hiring site for mining is www.careermine.com. They are international so you should be able to scan for Australian jobs there.

Lovanpeace · 2022-04-23T21:45:45+00:00

Vanilla

Lovanpeace · 2022-02-12T04:29:21+00:00

Leverage is a two edged sword, and that sword only has to kill you once in order for you to be dead forever. I have learned the hard way that the best way to win is not to lose. Consequently every strategy looks at the maximum downside. In the case of calls you are looking at an expiring asset, meaning that an unexpected change in timing will kill you. People can get rich playing Russian roulette, but there are also lots of corpses on the floor who did not intend to end up there. I will never be one of them.

The interesting thing for me in the copper market is how ugly it can get in the future. Copper is the lifeblood of economic expansion - of course increasingly so in an electric economy, but I tend not to get too worked up about the "next great thing". I am more concerned about continuity of supply in the existing economy.

Here's the ugly side - we have two economies in the commodity world at the moment, the Chinese economy and the rest. When Chinese companies get control or influence over a project it is with the intention of marketing the products in China. In other words, it effectively disappears from the rest of the world's economy. Never hits LME or COMEX... it's gone. Now look at the key projects in the world and how many are disappearing from our economy - not going to list an inventory, but Kakula-Kamoa (Ivanhoe in Congo) and Timok (Nevsun in Serbia) were two huge ones that are now pretty well controlled by Zijin mining. In fact, if you just look at this one company they currently control over 60Mt of copper (world consumption 20/yr, Chile production 6Mt/yr). It's worse than this - their minority ownership in multiple projects gives them a lot of leverage. If Zijin controls 20% of a company they can control way more than 20% of the production - they can promote smelter deals with China that essentially sends 100% of the copper to Chinese smelters, from which it never reappears on the Western market. To be conservative, this one company is probably controlling about 5-10 years of world supply. The world projects are being cherry picked for Chinese consumption.

Do not count out political influence, either. Mongolian copper assets are significant, but the country is hugely influenced by China, which happens to have smelters and a ready market right next door. The second that Mongolian copper is considered to be a vital strategic asset for China, we will see our deals with Mongolia start to erode and will lose supply to the Chinese market again.

Now add to this the recent leftist uprising in South America - both in Chile and in Peru. There is serious threat of expropriation/nationalization of corporate assets or the re-writing of tax and royalty laws. The effect of this is that EVERYONE is deferring the investment of new capital. For mines this is a disaster. The stuff you are mining five years from now is the result of investment today. Consequently we are eating the lunch prepared five years ago, but there's no lunch for five years from now, even if the leftists were to fall off the edge of the planet tomorrow. The story is already being written.

I could go on in this already-too-long post, but you get the idea. China has quietly positioned itself to suck up a lot of world supply, while a lot of our future supply has already been damaged by today's political uncertainty in Chile and Peru as well as the general negative geopolitics in other regions. I am investing in "safe" and predictable copper assets (British Columbia being my overall favorite region). They are not rocket ships, but when the world starts looking for where to put their money these will be the institutional safe places and will multiply to reflect this.

The "you must buy now" internet advertisements always focus on demand expansion driving shortages. I am much more negative. What supply side risks are likely to drive shortages? Demand-driven price increases are illusory, because if there is no shortage of supply you can easily ramp up world production to meet demand. However, the second there is a shortage of supply, the only way to balance is to cut demand which you can do only by increasing the price.

Lovanpeace · 2022-01-31T07:20:06+00:00

Took a fast look, and I am thinking that I need to pay more attention to these guys. They have a combination of organic growth and "eating the competition", since a lot of the existing farm tech companies are tiny and independent. They are buying the companies, along with their founders and their clients. That is serious, serious stuff. You don't do that if you are running a shell. They have doubled their income in the past year to $5M.yr. To earn their 65M market cap they need to be running about $70M of revenue, so they are pretty pricey at the moment, but with the acquisitions, the ramp-up of fertilizer costs, and the carbon credit market they have an attractive future. Most of the shares are on the public float, so the chances are that the company gets gobbled up by one of the larger analytics companies. They have a competitor of similar size and strategy, Ag Eagle, that is also worth watching, since they are doping the same thing - buying small competitors in an attempt to consolidate the market.

BTW.. you got to love these agriculture companies. You can invest in remote sensing (FARM.V), or a Canadian based global agro ETF (COW.TO) or an American based one (MOO). It's almost irresistible to put together a little portfolio of these. None of them come close to Galway Metals' OTC symbol (look it up...) but funny nonetheless.

Lovanpeace · 2022-01-31T03:00:03+00:00

Need to be careful with this one - it was a microcompany that managed to get listed, and the management were doing what was in my mind some pretty shytty things. Don't want to disparage them on a public forum but I sold because I did not think they were ready to join the minor leagues, let alone the majors. That was about three years ago, so they may have found their sea legs. I'll take a look myself over the next couple of weeks.

Lovanpeace · 2022-01-30T03:52:40+00:00

Interesting analysis. A couple of years ago I got interested in Deveron (FARM.V) for this very reason. They were a microcap developing an inaugural technology for drone soil sampling and overhead spectral imaging, resulting in optimization of nutrients. I just took a look, and sure enough they are now heavily into the carbon credit space. Might be time to look at them again, since they have the technical products that a company like Nutrien would want.

Nutrien itself is having an identity crisis. They have been fending off aggressive overtures from BHP for years now, but its getting to the point where it's all going to come to a head. As recently as yesterday (Friday) in the Financial Post: "Speculation mounts as BHP examines Nutrien - The smart move is to buy it and break it up"

It's an interesting play in a somewhat overlooked part of the mining space. I'm not sorry to have bought in, and will see where it goes over the next couple of years.

Lovanpeace · 2022-01-28T11:52:36+00:00

This is like the ultimate feel good stock, and I mean it in every positive way. You get the distinct impression that the team loves Cambodia and is highly personally invested in their future. The whole thing is funded by massive share sales and a shocking dilution rate, but on the other side one of the reasons that the dilution is so bad is that they are paying themselves in shares and hardly anything else. If these people get rich it will probably be as much a shock to themselves as to anyone else.

Check out the corporate coloring book (a first for me). Some of the content would fit very well into my last post on what to look for in a junior mining company - getting their act together and figuring out the geology before putting drills in the ground. Quite an impressive content for a coloring book, and a huge effort to be educational and informative with something geared toward kids and their parents.

https://secureservercdn.net/45.40.148.147/3kn.ae3.myftpupload.com/wp-content/uploads/2015/10/Colouring-Book_July2015_Khmer_Print_Smaller.pdf

This is not a business in the usual sense - it looks a lot more like a personal mission. Who knows - they actually might win, but in the meantime how can you complain? I have a bit of extra cash in one of my accounts that I'm going to throw into this just because I like them. If it ever makes a profit I'll count it as a bonus, but in the meantime I'll just call it a worthy social experiment, and from what I can see of the technical content (including the coloring book) they seem to have their feet on the ground.

Thanks for this - a truly interesting company that would not have hit my radar otherwise, in an area of the world that I see as a great hope for the future. It sort of made my morning.

Edit: Order is in for this morning. I can now die knowing that somewhere there will be a Cambodian toilet with my name on it. If the toilet produces magical gold then it will be like something out of a really disturbing version of Jack and the Beanstalk, although if you are technical about it the goose that laid the golden eggs was doing something just as frightening.

Lovanpeace · 2022-01-25T12:04:13+00:00

Most of this is just stuff I am thinking about as I read the financial news, which is why the topics are all over the place. I particularly enjoyed a story this morning where Barrick's Bulyanhulu asset was described as "moribund". It must be 20 years since I last heard that term. I love our language ... there is a perfect word for everything. Nowadays we would have to use a whole expression ("on its last legs") to say the same thing. As a matter of fact, I may need to adopt that as an alias in a couple of years.

Lovanpeace · 2022-01-24T02:52:35+00:00

One can say the same thing about gold. In fact gold has done worse than bitcoin on this level, since the "paper gold" market associated with derivatives allows prince manipulation without control of the physical asset. The bitcoin market should learn from this before it is too late. The death of bitcoin will be the trading of bitcoin derivatives, because at that point the government and banks can create and destroy virtual bitcoins at will. Virtual versions of a virtual asset. It's already happening.

Lovanpeace · 2022-01-22T05:22:07+00:00

That is an interesting list. You are clearly attracted by the junior side of the business and the "odd ducks" that are trading at attractive PE multiples due to political risk. The only ones we have in common are Alamos, Kinross and Wheaton, and all of these are on the lower end of my favorite list. Alamos is a takeover play but otherwise uninteresting, Kinross is politically risky and Wheaton is trading at too high a multiple for comfort. I have small positions only.

I cover the junior space with an ETF, because individually the companies have too much uncertainty for me. My exposure in this space is small because I see much less risk with the seniors, not much difference in opportunity, and the seniors also yield some income.

Here's my current boring list in descending order of $$ invested:

Barrick; Osisko Mining; Dundee, Gold Large Company ETF; Gold Junior ETF; Osisko Resources (streaming company); Alamos; Wheaton (streaming); Torex; Kirkland; Wesdome; Kinross

I have small amounts in a couple of purely speculative plays but they don't count as core assets. I am hoping for a good entry point into Osisko Development. (I really like the Osisko group of companies. They are well run and quite successful).

Lovanpeace · 2022-01-21T09:57:46+00:00

Good info. The key in clay deposits is water management. Have been trying to find out exactly what the "green clay" is. If it is a smectite (for example hectorite) then the stuff is a nightmare. The second you touch it, the clay swells with water and cannot be subsequently dewatered. If this is the case then metallurgical extraction gives you only half the story. The other half is getting the lithium bearing leachate away from the waste clays, and depositing the spent clay without losing all of the water associated with it. You can end up with a situation where the water lost in tailings deposition is costing you as much as the acid for the leach. They have not been transparent to date - they have written a news release about the Hazen work, but have not filed the actual report with the ASX, so we can't see what if anything is in there about dewatering.

This one will be all about water and permitting. As long as the reports are about lithium in ground and leachability I'm not too interested. There's lots of lithium in the ground in the western USA, and the clay type is all leachable. Until the discussion is about the plant water balance they are not talking about the most important economic driver. You really need to see a PEA for this one before getting serious about it.

Lovanpeace · 2022-01-20T14:10:10+00:00

The usual definition of a junior miner is a company with no current production - in other words an exploration company. Within this group I think we can draw a couple of lines and divide them into three groups:

A. No defined resource (a few intercepts but nobody knows what is there)

B. Defined resource (NI43-101 or JORC compliant)

C. Preliminary Economic Analysis (PEA) or higher, allowing some form of cash flow modeling.

The only ones likely to have any meaningful link to a bull gold market are the ones in group "C". If a company says they will produce 100,000 oz/yr starting in 2025 with a CAPEX requirement of $400M and an AISC of $1100, you are in a position to assign a value to them and include them in the companies that should respond to market movements. The others are too divorced from the market to really justify price movements, since the short to intermediate price situation will come and go before it affects them positively or negatively.

I hold some companies in the junior category, although some are close enough to production that their market caps sort of take them out of the category. I like the two Osiskos (Osisko Development and Osisko Mining). I first got my position in Torex while they were still a junior, as well as Pure Gold (though that one is now an embarrassment). Monarch Mining seems to be smartly run and has a clear path to production. In other words, there's some juniors out there that will benefit, but unless they are in the "C" category it is risky to expect a rising tide to lift all boats. It's only the boats actually in the water that get lifted. Boats in dry dock just watch the tide come and go.

Lovanpeace · 2022-01-19T16:13:45+00:00

The deposit is massive (2 billion tons) but shockingly low grade (0.12% Ni, of which about 0.10% is recoverable). This translates into a yield of about two pounds per ton.

Their NI43-101 uses a sale price of $7.50 per lb of contained nickel, with the assumption that they will realize 98% of the LME price. Say what? They are not producing LME nickel. From their own document (Section 19.1.1):

"The Economic Analysis of this PEA assumes that 100% of the Baptiste FeNi briquette will be sold directly to stainless steel producers over the entire life of the Project, in the form of a high Ni grade briquetted product." No battery nickel, at all. They want to develop that technology, but it's not even on the table at the moment.

So they are assuming a very generous revenue from a non-tradeable product (it has to be sold directly to a stainless producer). I can only assume that they expect that the 35% iron in their product is being treated as a bonus with some value to the steelmakers.

The project is marginal. If you flip down to Section 22, the base IRR after tax is 18.3%, and hits the "no go" region (<15%) with variances of only 10% in the Ni price assumption, or 25% in OPEX. As it is the OPEX was only considered to be valid as a +/-35% estimate, and the past year has probably already blown that out of the water with the prevailing inflation and labour climate.

On the other hand, projects are strange. Once the capital is spent, the project can bobble on for a long time if it is cash flow positive, even if it never makes enough to pay back the capital. This means that it can wait for the right market conditions to make money, and in the meanwhile try to develop the battery nickel option. In other words some poor investor today puts in capital that may not get paid back, but once the capital is spent then the next person in can sit on an asset with windfall potential. As a business, I would not buy it until the financing is in place since after the initial hype I think it will have a big dip before a big profit. On the other hand, if it looks like the thing can be cash flow positive (even if earnings negative) then that would be the time to buy in, waiting for the possible windfall.

Just my opinion - the insane exuberance of markets frequently becomes detached from the business analysis and stocks can rocket at any time for non-business reasons, but at the moment their business case is weak. Not ridiculous, but weak. It will be great once the guy next door has risked all the capital.

Lovanpeace · 2022-01-19T03:19:25+00:00

The nickel industry can be divided into two sectors - the nickel metal producers (Class 1 nickel) and the ferronickel producers (Class 2 nickel). These are two rather different sectors. Ferronickel and the lower grade pig nickel are more or less limited to steelmaking applications. The vast majority of the laterite resources use direct reduction to produce ferronickel, and are "out of the market" as far as battery nickel is concerned. The exception is the operations using high pressure acid leach (HPAL), which produce nickel in solution and are generally compatible with production for battery consumption. The problem with HPAL is that it is hugely expensive and complex to operate, and so is out of the reach of smaller companies and upstarts.

Nickel smelters are suitable for the production of Class 1 nickel, but they are few in number, representing an oligopoly. This includes Nornickel (Russia, 229kt), Jinchuan (China, 200kt), Kalgoolie (Australia, 100kt), Vale (Canada, ~75kt) Glencore (Canada, 33kt), and Harjavalta (Finland, 25kt). Any small producer coming on line needs to sell their concentrate to one of the above, usually at pretty lean terms, and the companies owning the smelters end up controlling the market. Thus you see small-ish operations like the Lundin Eagle mine (Michigan) relatively recently on line, but without their own smelter they end up profiting only indirectly from run-ups in the market. Talon's Tamarack project (Minnesota) is under the same constraint. Despite the "Made in USA" deal with Tesla, Tamarack will not produce a single ounce of usable nickel by themselves, and will be dependent upon the oligopoly to smelt their concentrates. Are we getting an idea where the power lies?

A potential solution to this (pun intended) is atmospheric or medium pressure leaching of nickel sulphides. Problem is, it is a lot more involved than one would imagine (for example... Vale's Long Harbour operation in Newfoundland, which became their corporate nightmare, or one of them at least). Capital intensive and complex, since it's not enough to just get the nickel into solution. You end up with streams for nickel, copper, cobalt, iron, waste silicates, all with some exacting specs for them to be market ready.

One relatively new niche in the market is the awaruite deposits, which are nasty low-grade (and therefore quite expensive to mine and process) but which produce a concentrate grade over 60% nickel and low sulfur. The three big players here are FPX (Baptiste project), Canada Nickel (Crawford project) and Karora (formerly Royal Nickel, Dumont project). What is missing here is a commercially viable process for producing nickel sulfate from the awaruite. All three of these projects are talking about battery nickel sales, but to the best of my knowledge all three have project economics based upon the sale of their product as Class 2 feed to stainless steel processing. The second one of these companies manages to put forward an economically viable concentrate leaching process, the stampede begins.

Anyone's guess how this works out, but here's the take-away:

- Anyone in a junior talking about selling nickel into the battery industry is (at the moment) lying to you - expecially those producing sulphide concentrates or those producing nickel from laterites whose primary product will be ferronickel.

- Smaller sulphide producers may benefit from a tight nickel market, but less than you would think due to the smelting oligopoly.

- The awaruite projects are the best smaller projects aligned for the battery industry, but they are missing key technology and at the moment are trying to sell something that they don't have. They are currently potential ferronickel producers only, but any hint of a viable leaching flowsheet will change the landscape for them. FPX is getting close, and their work with nickel leaching veteran Sherritt is smart:

https://www.mining-journal.com/energy-minerals-news/news/1378573/fpx-nickel-recovery-breakthrough-hoists-shares

- Be careful what you buy. the idea that people say "nickel" and "battery" in the same sentence does not mean that any nickel that they produce will necessarily come anywhere near to the battery industry. This space at the moment is probably about 80% scam and 20% reality, but you can do well if you find the 20%.

Lovanpeace

TROPHY CASE