The Prospectors

Posted on October 2, 2011 by Kevin Hull

I once heard a very accomplished and respected geologist say that the most valuable tool in exploration was the prospector.  He said that, while geologists went out looking for rock types and structures prospectors went out and found gold. This is not to say that the geologist is not a fundamental cog in the wheel of exploration, but in the early stages the value of the prospector is too often underestimated.

The life cycle of mining runs through the following phases: Geosciences, Exploration, Discovery, Development, Production and Reclamation.  While the geologist is involved at every stage the prospector is involved almost exclusively in the Exploration and Discovery stages.  The average prospector does not have the financial resources to conduct Geosciences on a property, but will take advantage of any existing data gathered through previous exploration.

While a prospector may be a geologist very often they are not.  And while a geologist may work for a resource company, an environmental company, a government agency, a non-profit or a university almost invariably a prospector works for him or herself.  Prospectors can be seasoned full time professionals or weekend enthusiasts.

While companies rely more and more on expensive airborne geophysics the prospector literally walks the width and breadth of a property searching for telltale signs of mineralization.  In fact, many of the biggest mines in Canada, modern as well as historical, have been found on property originally staked by prospectors because they spotted or uncovered something during their ground search.

The Musselwhite Gold mine, which first opened in 1997, can trace its discovery to the 1962 work of two prospecting brothers: Harold and Allan Musselwhite.  In 1979 prospectors Donald McKinnon and John Larche staked the land that eventually became the Golden Sceptre and Goliath Gold Mines in the famous Hemlo gold district.  The world class Kidd Creek mine was found because geologists observed an outcrop exposed by the trench of an unknown prospector.  There are many more stories about modern mines being discovered by simple prospecting rather than current expensive exploration techniques.

A good CEO or President of a junior exploration company will build relationships with prospectors even if a particular property being shopped to them does not fit in with their strategy or current resources.  Too many executives have burned their bridges by not showing the respect prospectors are due given the incredible contribution they continue to make to mining in Canada.

Kevin Hull – Investor Relations

Posted in Uncategorized | Leave a comment

Property Acquisitions – The Good Story

Posted on September 11, 2011 by Kevin Hull

Last time we looked at Area Plays as rationale for a property acquisition.  In this entry I will introduce the other things management will consider when picking up a new property.

Pretty much every property has a story of some sort attached to it; some interesting history or the recent discovery of a ‘showing’.  Of course a really good story gives management a reason to explore, but it does much more than that; it gives the company a means of promoting the project so money can be raised.

One of the best stories I ever heard was on a property in Ontario.  It seems that back in the very early 1900’s there was a news paper report of a gold discovery in northern Ontario, however, interestingly enough the discovery was never exploited.

So, a company picked up a small piece of the property where this discovery was supposed to have been made and did a couple of drill holes at that location.  Well, one of the holes intersected something very interesting; wood.  Apparently the company had intersected an old mine shaft in the exact area where the discovery was reported, proving a previous discovery.

The other drill holes intersected more than trace showings of copper, which led to an interesting theory on why the reported discovery was never exploited.  It was postulated that the gold discovery was bound up in copper, which, at that time, required a very expensive smelting process for separation.  Further, it was thought that the logistics of building such a smelter in this very remote location were prohibitive.  On the other hand, hauling unprocessed ore out of this remote location (through a lot of swamp and marsh) would have been equally uneconomical.

So, the company promoted the theory (told the story) that they had discovered the site of a rich historical strike of gold and that it was likely bound up in copper.  Of course before they put out the story they increased their property position, picking up a huge land position.  Additionally, and adding to the story, the property was adjacent to a well known north/south fault structure.

When it was all said and done the company had a property with a historical story, proximity to a fault structure and some decent showings from a small drill program.  All in all it was an ideal story for a good promotion and was used accordingly; the company was able to secure financing.

I should emphasize here that it is very important that junior companies construct good stories for their properties. Without them financing doesn’t take place, and without financing exploration doesn’t happen.

There are a number of elements to a story, interesting history and the area play being just two of them.  Other elements include geological structures (usually ascertained by government mapping), existing and past mines along the same structure, float samples, grab samples, channel samples, trenching samples, past drill results, geophysics and geochemistry.

Some combination of these elements will form the story, the more corroborating elements the more compelling the story.  Ideally most of these will be present, but often times there may only be one element present.

An example of this was the ‘Big Bird Anomaly’ in Ontario, which saw the promotion of a property based only on a geophysical feature so significant by its size that it attracted a great deal of interest and money. Although the property has been abandoned based on follow-up exploration it still remains an interesting enigma.

An example of a property with a great number of corroborating elements is a property in the White Gold District of the Yukon owned by Comstock Minerals.  This property had the following elements comprising its story: area play, geological structure, surface samples, geophysics and geochemistry.  The property, optioned last year, has the potential to be one of the richest properties in this exciting mining district.

This property had one other very strong component that I will write about in the next instalment; the prospector.  Look for more on this in two weeks.

Kevin Hull,
Investor Relations

Posted in Investor Education | Tagged , , , , | Leave a comment

Property Acquisitions – The Area Play

Posted on August 21, 2011 by Kevin Hull

Before we look at the first stage of mineral exploration, property acquisition, I want to comment briefly on the management of junior exploration companies.  Management of exploration companies can be ranked on a continuum between promotional and scientific.  The driving force behind a company will seldom be found at the extreme ends of this continuum but where they fall on the scale can help you to better understand how property acquisitions, exploration programs and corporate communications will unfold.

A company run by management that falls more on the promotional side may approach a property acquisition differently than a company with an emphasis on the science of geology.  An example of this can be found in ‘area plays’. Past and current success in an area is one significant criterion for any company in assessing the potential of a property, however there is a real difference in how this plays out between the two management types.

When a discovery of consequence is made the junior exploration sector will see large numbers of people rushing to where lightening has just struck. A promoter manager will seek to exploit this behaviour by picking up property around a recent discovery as fast as possible.  This manager does not take the time to become educated regarding the area of discovery, as they fear a delay will cause them to lose their opportunity to grab as much proximal land as possible.  Indeed, the property acquired may not even carry the same geological trend or host the same rock type, but that is not nearly as important to this manager as the ability to promote a property on the heels of an exciting discovery and get financing for the company.

Now this is not to say that the scientific centric manager will not also participate in an area play and quickly pick up property in proximity; if he is able to pick up immediately adjacent property he may do so without taking the time to examine it.  The well known axiom; that a mine is discovered in the ‘shadow of a head-frame’ has a great deal of truth to it.  However it is important to note here that most every company will take the time to stake or option all prospective property around a discovery before they put out news, so when the staking rush comes it is often for less prospective ground some distance from the discovery.

A shrewd manager will take the time to examine the geological maps for an area play and see if there is a property already owned that can be optioned under acceptable conditions, and has the same geological setting as the discovery.  The science oriented manager is a lot less likely to pick up a property with absolutely no merit simply because it is in the same locale as a recent discovery.

Sometimes the best opportunities come from waiting a year or more for an area play cool down, then working to option property that was hastily staked after the initial discovery and left pretty much unexplored; perhaps because of funding challenges.  This gives the science based management team time to understand the underlying geological structures of an area play before making an acquisition.

When a company is promoting their project and can only say that a discovery was made nearby you may want to ask if there is any other corroborating data on which to base your buying decision before you support that stock.

Kevin Hull,
Investor Relations

Posted in Investor Education | Tagged , , , , , | Leave a comment

“When are the drill results going to be out?”

Posted on August 9, 2011 by Kevin Hull

The investor asked ‘when are the drill results going to be out’? He had been investing in the mineral exploration field for a few years and was referring to a property that had been optioned just days earlier by one of the companies I was working for.

That incident clarified something for me that should have already been evident, but for whatever reason I hadn’t fully understood; the junior exploration sector is not educating its investors.

So, what was it about that question that led me to that conclusion? Well, had the investor understood the progression of steps necessary to evaluate and explore a property, both before and after acquiring it, he would have known to not even ask the question.

Indeed, without the right expectations an investor can find it unnerving in this industry. A person doesn’t know if they should be patient, be demanding answers, be selling off, or be picking up more shares. Management always preaches patience, but how can you know if they are simply stalling or if things are actually proceeding on pace?

Well, that’s what this blog is all about. Through a series of articles we will examine what a company goes through in selecting a property, the work needed prior to a decision to drill, the kind of things that can make a drill program complicated and more lengthy than anticipated, what happens between the time the drills stop and news is released and, where do we go from here.

Hopefully this will make life a little easier for you the investor, and perhaps even for the management in this unique industry. In the final analysis, we all want the same thing.

Kevin Hull,
Investor Relations

Posted in Investor Education | Leave a comment