An Interview with Dr. Nicole Adshead-Bell
Dr Nicole Adshead-Bell is a geologist with over two decades of capital markets and minerals sector experience. She will be speaking at our Keynote Finance Lunch event at #AMERoundup on Tuesday, January 29, 2019.
What brought you to finance?
My background is economic and structural geology. I knew nothing about the finance side of the mining sector while at university, which is a major oversight of many undergraduate degrees that produce technical graduates. I completed a PhD in economic and structural geology in January 2000. At the time the mining industry was in a significant downturn and long-term job prospects were limited (and I did not want to be an academic). I was consulting in the Northern Territory in central Australia and had a day where I came into close contact with King Brown snakes, almost fell down an abandoned mine shaft, and had to run from two bushfires whilst mapping! I had an epiphany that day and decided I was not getting paid sufficiently to do this for the next ten years, so I commenced investigating alternate career options using ‘transferable skills’. Investment banking and management consulting appeared to be viable options based on internet searches. I moved to Vancouver in 2001 as my husband (also a geologist) was transferred from Australia. With the aim of moving to the finance side of mining I met as many people as possible. This resulted in my first job on the finance side, after meeting my future boss at a bar during Roundup in 2003. I was working for a junior explorer at the time and he ran the research team for a precious metals fund with an office in Vancouver. He was looking for a younger geologist to join the team. At the time I had no idea how rarely a buy side opportunity arises, particularly in Vancouver. In fact, my career evolution (which was initially driven by the sector downturn) has since influenced a number of my university peers to transition to the finance side of mining.
What do you enjoy most about financing in mineral exploration?
Marrying my technical background with capital market experience. Throughout my capital market-career I have had the privilege of visiting more than 250 exploration, development and mining projects around the world. This has been gratifying on many levels, including the ability to increase industry knowledge about all aspects of the business; from social to political, permitting, economic, technical and also meeting a wide range of smart people.
What are the main challenges in financing mineral exploration?
- Finding capital providers that want to speculate on the extreme risk of mineral exploration.
- The key driver in the demand for equities of any type is capital inflows. The higher the capital inflow (or demand for a type of equity), the easier it is to finance. A rising commodity price and/or a series of major new discoveries always increases investor appetite.
- Passive investing (ETFs) capital inflows have increased at the expense of actively managed funds, which have undergone capital outflows. ETFs only buy mining shares in the secondary market. They do not participate in new equity issues.
- Capital inflows into private equity have also increased at the expense of fund flows into traditional funds. Private equity typically buys large positions in, or purchases 100% of, development and mining projects/companies, not mineral exploration.
- Poor ethical behaviour affects everyone negatively, thereby raising the collective cost of capital. It’s analogous to how insurance premiums rise after a major negative event
What are the positive trends we are seeing in this industry?
- This may not be a welcome statement, but the recent reduction in discoveries will drive metals prices higher, which in turn will entice investors to gain greater exposure to the sector, i.e., capital inflows should increase and the cost of capital will decrease! It will always be a cyclical business because of the basic rules of supply and demand.
- Improvements in big data analysis should help with pattern recognition.
What are you most excited about?
The opportunity to use the more than 15 years of what I have learned from the capital market side of the business to take advantage of the next bull market, because this time I promise not to waste it!
What have been the surprises?
- The continued disconnect between compensation and performance that needs to reconnect, including annual compensation and termination without cause/change of control payouts.
- Relationships between board and management are not as productive as I would have expected.
- Shareholder apathy. Shareholders are owners and most seem reluctant to get involved in fixing issues.
- Widely known unethical behaviour rarely gets punished.
What are the biggest misunderstandings about financing mineral exploration (from an issuer’s perspective)?
- Understand the financing environment and the groups or individuals most likely to write a cheque. Know your audience.
- Do what you say you are going to do. Provide a clear use of proceeds and deliver to that plan. Those companies that do this will continue to attract capital and generally trade at a relative premium. Trust is the rarest commodity in our business and those that generate trust in the investing community will trade at a “trust premium”.
How does ‘low-carbon future’ come into play in financing?
It is already impacting financing as the so-called battery metals that are perceived to be important to a ‘low-carbon future’ are attracting a higher-than-deserved percentage of the available exploration capital, e.g., there is no shortage of lithium or graphite in the world, so why look for more? The knock-on effect is reducing the demand for shares in companies exploring for other metals.
What is the main take-away you wish attendees to get from your Keynote speech?
- For companies to understand their value and always have a financing strategy as part of their business plan.
- Trust is the rarest commodity and lowers the cost of capital.
As a naturalized Canadian, Vancouver-resident, former volunteer on the Roundup Organizing Committee and former member of the Board of Directors of AMEBC, I am proud to be associated with the conference. I have had the privilege of seeing Roundup evolve over the last 18 years, first as a volunteer and then as a delegate, to become one of Canada’s premier mineral sector events. As a geologist it is also satisfying to observe that Roundup has maintained its technical heart, rather than becoming more of an investment show.