Ross Beaty: I would tell him to buy a portfolio of companies held by these guys, and they’re going to be rich beyond avarice. If you’d done that three years ago, you’d have made a better investment than any other investment portfolio in this entire building.
L: That’s actually true. If you did the numbers…
Ross: Yes. This is a very smart thing for you to do with a lot of these guys’ companies. Bob has had the best-performing gold stock in the world in 2011 – I had the best-performing copper stock in the world in 2011. These are exploration discoveries, and that’s what we do well. So, you know, it’s a nice – and of course Ron had a fantastic home run in Nevada just a couple of years ago, a mature exploration district, and what did those guys do? They found an entire new gold district in the most heavily explored region in the entire world, right under the nose of all the majors, and Newmont had to come along and pay $2.5 billion to buy it from him. That’s wealth creation by any measure, and it’s wealth creation because he’s a really, really good geologist, and Mark O’Dea is a really, really good geologist, and that’s what makes the discoveries. So, buy the geological talent and listen to guys like Casey who follow these companies and find these guys. The NexTen is another group of smart guys out there, finding the opportunities under the nose of the majors and making their shareholders a ton of money. So, that’s what I would do.
L: Okay, well, give us a stock pick here. Lumina is up…
Ross: So my little portfolio is a bit of a – it’s a mixed bag. On one hand, you have a large, mature company like Pan American Silver that is a play on silver and that’s going to go up or down depending on what happens to the metal commodity, really, because it is a big company – it trades $100 million of stock a day. This morning we just bought Minefinders for $1.5 billion, and I never thought in my remotest dream I’d ever be buying another company for $1.5 billion. It seems ridiculous, but you know what? It’s going to make a much better, stronger company. It’s a stable blue chip, second-largest silver producer in the world, primary producer in the world. It just doesn’t have the wild swings that you’re going to see with explorers. So that’s at one end. On the other end, I guess, the two companies that I have that are exploration companies – one is called Anfield Nickel, and it’s a nickel exploration stock in Guatemala, but even that is fairly mature because we’re trying to sell it now. I mean, right now, we’re trying to sell the company this year and the largest value added is behind us, so I wouldn’t really recommend that particularly as an exploration stock to follow.
You could have asked me the same question that you asked Bob on Pretium with respect to Lumina Copper, which is a copper exploration project in Argentina which I thought had almost no value two years ago and now it’s – I think maybe we can sell it this year for more than $1 billion. It is currently capitalized at about $580 million, so is it too late to buy it? They had an incredible run last year. The stock chart looks like a hockey stick. It actually looks like the accumulation of carbon in the atmosphere over the last thousand years. Kind of… that’s what the stock looks like.
So it’s done very well, but it’s trading at $13 and change today, and we think we’ll be able to get more than $20 a share this year and that means it’s pretty decent, relatively low-risk return for most shareholders. It’s got very little downside, and it could maybe not double but come close to doubling. That’s this year. So it’s a decent return there, and that’s a discovery story. That’s pure and simple where luck, I think, has played a huge, huge part.
We had a property in Argentina that we didn’t think had much value. We called it the “ugly duckling” of a group of a whole bunch of copper deposits that we sold off over the last few years. Then we just all of a sudden started drilling holes in the right place, and we hit some fabulous copper results, high-grade, clean, huge. I mean everything that the major companies want to buy, and as the year went on, it just got bigger and better, and we’re still drilling fabulous holes. We got seven drills going on the property. It’s going to be – well, it was the biggest discovery of the year in the world last year for copper. There is lots of room for it to continue to grow, but ultimately the game plan is to sell it to a major, and we hope that will happen this year.
And then, in the sort of middle, my main focus this year isn’t an exploration stock at all. It’s not even a mining or mineral commodities stock, it’s a clean-energy stock called Alterra Power, the merger between Magma Energy that I started a few years ago and Plutonic Power. Alterra Power for me is kind of like a legacy company. I’m really trying to build it into a huge clean-energy company because I think it’s good for the world, it’s good for my kids, and if I can do good things and make a buck at it and make a good investment case for a company that has appreciating value over time, I’m going to make my shareholders happy as well. So that’s my main focus today. We are over the hump. We are a sustainable business now. We’ve got about $55 million per year of cash generation forever. Forever. This is not a depleting business. Once you build these clean-energy plants from wind or hydro or geothermal power, they go forever, which is an absolutely beautiful thing in contrast to mining, which is a depleting industry. So that’s what I’m doing today.
Louis: Sorry. You’re the broken slot machine. Where’s the early pick? Where’s the early-stage, you know, Anfield before it went up, Ventana before it went up, Lumina before it went up – is there one out there? Is there an early-stage Ross play?
Ross: Well, yes, but it’s not really ready – it’s not there being packaged for public company or for third-party investors.
L: We won’t tell, right, guys? We won’t tell.
Ross: Yes. So just watch this space. There you go.
L: Watch this space. Then duly program your Google News things to track the name “Ross Beaty.” Okay, Jimmy, you built Copper Mountain. What next?
Jim: Well, I think a lot of you had an opportunity to go up there and see it on Saturday; and as you can see, we’re a fairly new company. We went public in 2007, and I think, as Ross says, there was a lot of value added through the exploration. Currently our market cap’s around $600 million, and we’re just getting started as a producer. The mine now is fully operational. Our intent is to optimize it in the next few months, maximize our production, and demonstrate performance.
With regard to the exploration aspects, which we seem to be talking about – and I’m not an explorationist – but the property does have some excellent targets. We’ve got a very large property, about 18,000 acres, and we have about 5 billion pounds of resource right now and we believe as we drill some of our Titan-24 anomalies, this is going to increase. I guess lastly we see ourselves as having a very strong base for a growth company as a copper company and precious metals – about 20% of our value in sales right now is precious metals. So it’s our intent to continue to grow the company through exploration, through doing joint ventures with guys who really are successful in finding properties at an early stage, and then also looking at mergers and acquisitions that would help our shareholder value.
L: What about the Voigt zone? I remember when we were up there before you built the plant and I was talking, all this copper is great, but I’m worried about copper… what about precious metals, and there were these drill holes in this area called the Voigt zone, just a couple, that suggested you might have a more gold-rich center there. Have we tested that? What’s up with that?
Jim: I know, Louis has been pushing me in this direction forever, and this year we did put some drill holes in there. It was thought to be a fairly narrow zone, but there is a very large Titan-24 anomaly there, but they have drilled some of the areas and they did get good gold results. And as I’ve said, I’m not a geologist, so I can’t give you the details right now but we did publish them.
L: Follow-up this year?
Jim: Pardon?
L: Will there be follow-up this year?
Jim: Yes. It will be followed up. Definitely.
L: Yes. It would be very nice to see a much brighter gold lining to the story there. I mean good insurance. Okay, I can think of lots of questions I can ask these guys all day. I know their projects pretty well, but it’s a rare chance when you get to pick the brains of the best in the business, and here they are, so while you’re here, do you have any questions? Does anybody want to – yes, sir?
Ross: So the question was – Pan American Silver has a huge deposit in Argentina called Navidad. It’s the largest undeveloped silver deposit in the world, so it’s really, really big – and the question is what’s going on, and is it going to be developable because it’s in a province of Argentina that banned open-pit mining and the use of cyanide about eight years ago. They kind of swept the baby out with the bathwater because there was a gold deposit in the mountains in a really beautiful area. They didn’t want to mine that, so they said the whole province is off the territory for mining. So this deposit was then discovered. It’s in the middle of nowhere. It’s in a very nice, empty part of this Patagonian plain of Argentina, and it’s a huge deposit. There’s more than a billion ounces of silver, clean. It’s right on surface. It’s a beautiful, beautiful ore body, and it’ll double Pan American Silver’s production from 24 million ounces to 48 million ounces in, say, three years. The province, as Louis just said, the province just north of this particular province of Chubut is called Rio Negro. They also had a ban on the use of cyanide and mining, and they just overturned that in December – at the end of December – so what we expect will happen is in March this year, the government of Chubut has written a new law that’s going to zone the province into places that you can mine and places you can’t mine. The mountains will be no mining, right along the ocean will be no mining, and the center would be pro-mining. We’ve seen the law. The governor assures us it will be passed. There are some processes to go through, but we think it will happen in March, and that will open the way for development of Navidad. That will be a real game-changer for us.
L: We’ve seen laws like this before. The Santa Cruz province where Ron’s operating, they also did something like this where they set out an area that was specifically “miners welcome here,” and it happens to be where Ron is operating on the Deseado Massif. So there is precedent there. Okay, more questions. The question was, we’ve heard about going south into Latin America and the idea of the lower-hanging fruit having been picked and having to go farther afield to look for big, world-class deposits; are you guys doing that? Are any of you looking to go into what might have previously been regarded as too risky or not worth the trouble? Where are the new frontiers, and is anybody taking them on? Ron?
Ron Netolitzky: I think I’m coming to the conclusion that I’m liking working where the jurisdictions are as safe as I can get at my age. I mean you have enough exploration risk in this world to take on excessive political risk. Now, if there’s a wonderful deposit that’s already been identified, then you can look at it and say you play it from the political risk because you’ve got no exploration risks, but taking both on – not for me.
Bob: Well, we’re in British Columbia and although some people think there’s risk around that, we think it’d be mitigated. Projects have been developed here, with what Jim’s just done, so projects get permitted in development here, and I’m a bit like Ron nowadays… keeping my focus a little closer to home.
Duane: Well, as I described earlier, we went into Eastern Mexico where we had no competition. Many of the things we’ve staked never had a claim on it before, and we’re getting incredible assays, and two things are already obvious – one going to be a mine and one that we think will be a mine and we’re just getting started in that area, but the other frontier is depth. You look at the Hudson Bay Mining in Flin Flon, Manitoba. They were mining there for 80 years, and they just found as big a zone, not just found, but a few years ago, found as big a zone as they had mined for 80 years underneath, straight below. I mean they’re mining stuff that’s 4% copper and 7% zinc and a quarter-ounce gold, and it’s underneath, so there’s going to be a lot of exploration to depth. There are these new techniques where you can see deeper with geophysics, and in old areas where there are lots of mines, people are going to go down to depth. Look at Pebble, the discovery at depth, and look at Oyu Tolgoi. There’s going to be more exploration to depth in old, established areas.
