Junior mineral exploration companies exist to responsibly create value for their shareholders – this was the consensus following a lively panel discussion at the AME Speaker Series event, “Junior Company Playbook: Positioning Your Company for Success.”
Michael Gray, Zara Boldt, Bart Melek and Rosie Moore took the stage to share how companies can best present themselves and their stories to investors and analysts. More than 120 attendees gained insight into how they can best position their companies to navigate volatile markets, and especially for a gradual upswing in the market.
Bart Melek, global head of commodity strategy for TD Securities, provided an overview of current market conditions. These include a temporary “feeding frenzy for commodities” by Chinese traders following U.S. president Donald Trump’s pledge to grow infrastructure investment, which fuelled expectations of a medium- to long-term deficit environment. Melek predicted that long-term scarcity in commodities would lead to an improved market for junior companies, and that gradual, as opposed to aggressive, increases in U.S. Federal Reserve interest rates would be good for the industry, and in particular for the price of gold – with flat to negative real interest rates due to increased inflation.
Zara Boldt, CFO and corporate secretary for Strongbow Exploration Inc., and Rosie Moore, a consulting geologist and analyst, offered advice on where juniors should focus their efforts in attracting investment. After all, as Moore pointed out, analysts are busy people – they “like to be spoon-fed. You’re competing for their attention.” Boldt noted the questions that key investors would have: the costs to run the company; the potential for discoveries; what’s happening competitively in the jurisdiction; the risk as to relationships with communities and stakeholders; and the strength and quality of investor communication. Moore focused on the six Ps for investment: People – having a good team (chief mitigators of all risk); Paper – the structure of shares (amount, ownership, timing and price of issuance); Project – the quality and stage of the exploration project; Price – the current value of the company relative to its assets; Promoter – the importance of having someone who can tell the story; and Patience – the value of time.
A focal point of the discussion was on quality of communication via the presentations that companies pitch to investors to attract new shareholders. The importance of showing the company’s share capital structure up front was emphasized, as well as clearly letting people know how you plan to mitigate risk, such as focusing on high-grade, high-margin targets that can withstand swings in the commodity price. A PowerPoint slide on the technical people involved in the project is important, as well as the way the story is conveyed. Melek noted that it was important to be concise while attracting investment: “Be concise. Don’t confuse me with too many three-dimensional geological models.” By contrast, Boldt noted that the ability to explain a project’s geology was very important when seeking financing. Boldt suggested that presenters “have really technical information in an appendix.”
Michael Gray, senior vice-president and team head, Canadian mining equity research commodities and global markets, Macquarie Capital Markets Canada Ltd., noted that it was imperative that “management needs to be able to communicate the story,” and that those who have a track record of deal-making and creating value for shareholders in addition to the technical strength of a project will garner a premium valuation. Gray also encouraged presenters to take public speaking courses to the extent that they are able to enhance this key skill set.
In short, positioning a company for success is largely about communication – an open style with investors that concisely delivers the information they need is important. And as Moore noted, a “laser eye” on delivering value to shareholders and a passion to succeed – “just dying to make that discovery” – are keys to success.
Interested in learning more? Be sure to register for Capital Markets for Geologists, offered as a pre-AME Roundup short course on January 20 to 21, 2018. Find details at http://roundup.amebc.ca/ events/capital-markets-for-geologists/.
AME extends its thanks to Women in Mining BC as an event partner and to sponsors Berkwood Resources Ltd., International Samuel Exploration Corp., PearTree Securities and Secova Metals Corp. for making the event possible.