Weathering The Storm by Jp Colin

Weathering the Storm“Think Differently”

PDAC 2013

Jean-Pierre ColinCapital Markets Strategies

[email protected]

Mobile: 416-573-4300

Captain Jack Sparrow in Pirates of the Caribbean:"True enough, this compass does not point north.""...Where does it point?""It points to the thing you want most in this world.”

mailto:[email protected]

Think Differently - Weathering the Storm - PDAC 2013

2

Survival of an Industry

Charles Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”

Is the financial crisis temporary? Who wants you to believe this? Is this a down cycle or a fundamental and permanent shift in

capital markets?

If this is a temporary crisis For how long? What will make it revert? Who will survive?

March 6, 2013


3Juniors Lag Large Caps in Funding

and the financing window for juniors is shorter

Volume of Financings over Time

Large CapsJuniors

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2013

time


4Sources of Funds Continually Evolve

Grub StakingSeed Investmentsby Syndicates of Private Investors

IPO’sVSEMSEMEASEWSEEvolution to TSX, TSXV, AIM

SecondaryFundraisingRetail DistributionsFlow-Through FundsSelect Group of Institutional Investors and Banks with ExpertiseCanadian, USA and European Portfolio Managers and Letter Writers

High Net Worth IndividualsFamily OfficesHedge FundsMainly newcomers to the industryStill active but many sitting on the sidelines this year

Off-TakesRoyalty DealsGovernments and large Corporations in Asia and Middle EastNew Wealth Seeking International Mining OpportunitiesDifferent Negotiation TacticsLonger Lead TimesNew IntermediariesAre Many of Our Traditional Brokers Becoming Obsolete?

1980

2013

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When Survival is at Stake

There is No Plan “B”

Develop a Strategy

Engage Shareholders

Manage Dilution

Maintain Ownership Title of Core Properties

Goal, as always, is to advance towards building a mine

Methodology? There is only one: “Think Differently”

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6

Apple Computer Ad Campaign

March 6, 2013

Apple once held an Ad Campaign entitled “Think Differently”.

It read like this:

"Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They invent. They imagine. They heal. They explore. They create. They inspire. They push the human race forward. Maybe they have to be crazy. How else can you stare at an empty canvas and see a work of art? Or sit in silence and hear a song that’s never been written? Or gaze at a red planet and see a laboratory on wheels? We make tools for these kinds of people. While some see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do."


7

Lofty Goals: Mines & Shuttles

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33Successful Mines

Best and Unique

Accomplish-ments

Requires thousands

of skill sets to

build: no subset is substitute

No one individual can build one

You can name the

CEO!

Few people

have seen it on TV

500person team

March 6, 2013 Think Differently - Weathering the Storm - PDAC 2013

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33Successful Space Shuttles

Best and Unique

Accomplish-ments

Requires thousands

of skill sets to

build: no subset is substitute

No one individual can build one

Can you name the

CEO?

4 Billion people

have seen it on TV

50,000 person team

March 6, 2013 Think Differently - Weathering the Storm - PDAC 2013

10March 6, 2013 Think Differently - Weathering the Storm - PDAC 2013

MineTechnologically

RiskyLarge Team

RequiredNo Margin for

Errors

Capital Intensive

Space Shuttle

Technologically Risky

Large Team Required

No Margin for Errors

Capital Intensive

99% of a Project = Failurethe project must be 100% completed

and each time it is different than the last timethere is no cookie cutter formula


11Only 33 New Mines Opened in Canada in the Last 33 Years

33 New Mine Operators

Fewer Mining Companies with Feasibility Study

Some Juniors with PEA

Many Juniors with Resources & Reserves

Thousands of Early Exploration Juniors

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33 Mines are Outliers that think differently Distribution of thousands of Junior Exploration Companies or Distribution of thousands of Flying Machines

March 6, 2013

33 Mines and

33 Shuttles

thinking differently to achieve outlier status

conventional “me too” thinkingconventional “me too” thinking


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Investment Check List

The 7 “Ps” of Successful Investments in Mining

Most juniors often fail to address what is most important to investors In “feeding frenzy” capital markets, in the rising tide when all the boats go up, the

problem isn’t apparent

In a financial crisis, it’s very easy to point to the lack of investors instead of looking introspectively But, it isn’t just the pitch deck that needs attention It’s the entire corporate strategy that needs to change

What criteria are used by experienced professionals? Research Analysts, Investment Bankers Retail Brokers, Institutional Desks Institutional Investors, Flow-Through Funds, Portfolio Managers

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PeopleMining companies with perceived good management

PropertyMining companies with good properties

PriceMining companies with low market valuations

PlanMining companies with strategic plans that appeal to investors

PromotionMining companies with perceived good promotional capabilities

PatienceMining companies with credible timelines

7 P’s of Mining Investments

PersistenceRecognizable mining companiesMarch 6, 2013


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People Property Price Promotion Plan Persistence

Patience

The art of winning an unfair game

Peter Brand in Moneyball: “Baseball thinking is medieval, they are asking all the wrong questions and if I say it to anybody I'm...I'm ostracized. I'm a rebel, so that's why I'm...I'm cagey about this with you, that's why I respect you Mr. Beane and if you want full disclosure, I think it's a good thing you got Damon off of your payroll. I think it opens up all kinds of interesting possibilities.”

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Patience

Wise & balanced board of directors Not just “my friends and drinking buddies” Consult with board members

C-Suite (CEO,CFO,COO) who have survived crises Older executives with relevant experience Not people learning as they go along at your expense

Forward-looking Technical Staff Exploration geologists, field geologists, engineers, metallurgists Continually review and question assumptions, don’t allow group-think

Consultants to save funds and … think differently Moneyball = an example of success when funds are very scarce

Change the way your company plays the mining game

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Patience

Hire Mentors

It’s not uncommon in a VC office, or local coffee shop in Silicon Valley to see the 20-something first-time entrepreneur in jeans and a t-shirt sitting across the table from the 50-something entrepreneur wearing jeans and sandals. It just happens that the 50-something is a third generation entrepreneur and ridiculously wealthy. He or she’s not helping the first-time entrepreneur because of the money, but as Randy Komisar would say; “he or she wants to be part of the future”. They want to give back! They are paying it forward.

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Patience

Hire More Women

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Patience

Hire Locals & First Nations

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Patience

Hire Young People

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Patience

Pay Good Wages

Robert Bosch: “I don’t pay good wages because I have a lot of money; I have a lot of money because I pay good wages.”

Simple Wisdom: “If you pay peanuts, you get monkeys.”

Cut your expansive drilling budget a bit to stretch for The best of the best people Put some money into your thinking Not all the money in the ground Mines are made, not found

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Patience

BlackRock Metals Inc. is a privately financed Canadian mining company:

100% owned world-class iron ore, vanadium and titanium property

In one of the most prolific mining regions in the world High-performance culture is guided by its core values of

putting people first operating on budget in a safe environmentally sound

manner and maintaining a high standard of social responsibility and

social acceptance of its projects

BlackRock is still awaiting its newest final feasibility study, yet:

has commenced mine construction production will have been achieved in record time financed in part by off-take agreements

March 6, 2013


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Patience

Captain Jack Sparrow in Pirates of the Caribbean:"True enough, this compass does not point north.""...Where does it point?""It points to the thing you want most in this world.”

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Patience

Prioritize your properties and pick only one Limited funds impedes achieving a Valuation Milestone Spending on several properties reduces the impact of

the limited cash

Consider the spectrum of investor segments Gold Bugs vs. Base Metal Investors Safe Jurisdictions vs. Riskier Higher Return States Early Stage vs. Advanced Stage

Deal with investor risk

Don’t build half bridges

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Main Property of MeritExpenditure Requirement

Fashionable PropertyExpenditure Requirement

Available Cash property fully financed to advance to a value creation milestone

Secondary Property of Geological InterestExpenditure Requirement

Dormant PropertiesExpenditure Requirement

Limited Funds

Do One Thing

and

Do That Particular Thing Very Well


Patience

March 6, 2013

Only some Gold Bugs like base metals

Only some investors like Gold

Universe of Gold

InvestorsUniverse of Base Metal Investors


Patience

Only some investors like risky jurisdictions

Only some investors like safe Jurisdictions

Universe of Safe

JurisdictionInvestors

Universe of ComplicatedJurisdiction

Investors


Patience

Only some speculators like production

Only some investors like early stage juniors

Universe of

InvestorsIn

Early Stage Juniors

Universe of Investors in

Advanced Stage Juniors


Patience


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Patience

Maintain ownership title through the financial crisis

Renegotiate with co-operative industry colleagues JVsEarn-insOptions

Help industry colleagues maintain ownership titlee.g. Celine Dion’s Golf Course in Terrebonne, Quebec

Opportunity to acquire new properties

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Patience

Eli in The Book of Eli: “People had more than they needed, people didn't know what was precious and what wasn't, people threw away things they kill each other for now.”

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Patience

Valuation Parameters If it costs $15 to find one oz. of Au then don’t raise exploration funds at $5 market

cap per oz. Low Capital Expenditures + Low Operating Costs are financed first

Comparables You must not be better than your peers; you must be the best at something e.g. best in the region, best in a commodity, closer to markets, closer to

production, best grades at best cut-offs, lowest cost structure, lowest market cap per lb. etc.

Independent opinions of value News Letter Writers; Research Analysts; 43-101 reports Who else thinks you are undervalued and WHY?

Address dilution head-on Reverse Stock splits are not the solution Stock Consolidations are not the solution Detour Gold emerged out of Pelangio Mines

A new company was created Property was sold, stock was not diluted

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Future Pressure on Stock Price

Short Term Investment Horizon

Rigorous Investment Criteria

Flow-Through Investors

Retail Investors

Institutional Investors


Patience

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Patience

Gordon Gekko in Wall Street: “I don't throw darts at a board. I bet on sure things. Read Sun-tzu, The Art of War. Every battle is won before it is ever fought.”

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Patience

What is your Value Proposition? Why will your stock price rise? Demonstrate this assertion with hard evidence

Finance enough to reach a Valuation Milestone Do not build half a bridge; it is as useful as no bridge at all

e.g. As disclosed in Barrick’s Q2 2012 Report, preliminary results of a review indicated an increase in capital costs of its Pascua-Lama project to $7.5-$8.0 billion and a delay in first production to mid-2014

Show evidence of your Valuation Milestone Formation Capital did everything right, they reached Full Feasibility, Full

Permits, but Without financing the stock price has languished Investors have not made money

Liquidity is Value; Displace Peers; Exit Strategy

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Patience

What is good promotion?

“I need to meet more investors because my stock is down,” says the CEO

“Well, how much promotion have you done so far?” says the Thinker “Oh, I do a lot, and I spend a lot on promotion, years of meetings, in

Canada, USA, Europe, many retail brokers too,” says the CEO “Well, maybe this proves your promotion isn’t working because your

stock hasn’t appreciated during this period of promotion. In fact, you have proven beyond doubt that, whatever your promotion is, your methodology isn’t working,” says the Thinker

You don’t need to meet more investors yet, you must fix your story first! That doesn’t mean a fancier PowerPoint, it means a new overall business strategy, a new value proposition, basically, a new business! When you are ready, then, meet new investors.

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JK Rowling: “I really don’t believe in magic.”

Ensure your strategic plan adheres to strict logic.

Demonstrate that if your plan is successful it

will make money for investors

You have the ability to fulfill the plan with aplomb…

People Property Price Promotion Plan Persistence Patience

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Demonstrate you have the ability to fulfill the plan with aplomb

A plum

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Zig Ziglar: "If you wait until all the lights are green before you leave home, you will never get started on your trip to the top.”

Plan a strategy

Measure Progress

Eliminate Debt

Think Big – Think Differently

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Develop a suitable foundation that inspires your potential investors at the start of your presentation

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Reach a Valuation Milestone

Do not build half a bridge

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99% of a Plan is not a strategy, it doesn’t work

A beautiful car without a battery is useless

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March 6, 2013

It’s ironic that the most important instant in presentations is a tiny fraction of the 30 minutes spent with investors but no effective adjustments to the plan can be made at that very crucial moment

Do not try to alter your plan during investor presentations


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Every detail is a major decision

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March 6, 2013

Acquisition and expenditure programme of PropertyManage Capital Spending.

Value Creation MilestoneIf successful, the current expenditures lead to a significantly higher share price and value.

Next Valuation MilestoneDetermine how you survive the crisis that follows even if you survive the current one?

Production or SaleQuality of data is established throughout the process before future production and/or due diligence by a potential senior buyer or production team.

Exit StrategyDemonstrate you can realistically achieve an Exit Strategy.

Today…

$UCCE$$


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March 6, 2013

Hope for the BestThe unexpected is always upon us

Plan for the WorstLightning strikes unexpectedly

Adapt to the Financial CrisisMake your company robustExpect unusual setbacksMaintain flexibility

e.g. Creation of NIM in 1980s


46


NIM Limited Partnerships of the 1980s

1st public Junior Flow Through Share funds raised over $730,000,000 invested in over 400 mining companies in Canada 9 public limited partnerships

Created in the summer of 1984 in a very slow capital markets environment, while sharing innovative ideas and thinking differently aided by just the perfect amount of fine red wine on an outdoor patio on the island of Stanley Park one sunny afternoon on a seemingly very ordinary Sunday.

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Abraham Lincoln: “If once you forfeit the confidence of your fellow-citizens, you can never regain their respect and esteem.”

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Plan the Ultimate

Sally Ride: “Even though NASA tries to simulate launch, and we practice in simulators, it's not the same - it's not even close to the same.”

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Voisey’s Bay Mine Even the best of plans are subject to change The 1993 discovery of Voisey's Bay by prospectors

Albert Chislett and Chris Verbiski, was almost accidental. The Diamond Field Resources managers were focused

on diamonds and initially showed little interest in the nickel-copper prospect.

Of course, they changed their minds when drilling revealed core rich in massive sulphides, with stunningly rich grades of nickel.

The property fetched $4.3 billion in 1996 after a takeover battle.

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Mark Zuckerberg: “There are people who are really good managers, people who can manage a big organization, and then there are people who are very analytic or focused on strategy.”

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Wolfden Resources

TSX listed and successfully sold (purchased by Zinifex, now China MinMetals) for approximately 1/2 billion dollars.

Ewan Downie created Wolfden which became an acquirer of dozens of mining properties that no one wanted in Nunavut. Wolfden adopted the strategy of the little fish eating the even smaller fish and the little fish grew and grew. Then one day an even bigger fish ate Wolfden and investors made a lot of money.

uNCONVENTIONAL tHINKING: we made money for investors by being acquired instead of being the one doing the acquiring.

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Patience

Miyagi in The Karate Kid: “Wax on, right hand. Wax off, left hand. Wax on, wax off. Breathe in through nose, out the mouth. Wax on, wax off. Don't forget to breathe, very important. You learn plenty.”

Daniel: “I learn plenty, yeah, I learned how to sand your decks maybe. I washed your car, paint your house, paint your fence. I learn plenty!”

Miyagi: “Ah, not everything is as seems...”

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Patience

John F. Kennedy: “When written in Chinese, the word "crisis" is composed of two characters. One represents danger and the other represents opportunity.”

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Patience

Caratax Management Ltd. Created in 1993, when the mining capital markets were dead FIRST ever diamond Flow Through Share fund manager FIRST fund manager ever to proclaim that there would be diamond

mines in Canada well before any such mines existed FIRST ever to proclaim that, ironically, Canadians would not own

nor control most of the diamond mines discovered by Canadians in Canada and on Canadian soil because Canadian financial institutions were not thinking outside the box.

Foreign companies bought many of these mines with foreign capital.

"Those who think something cannot be done should not stand in the way of those who are actually doing it."Farallon Management Mantra

March 6, 2013


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Patience

Blue Note Metals Inc. $6,000,000 market cap, didn’t even own the asset We raised $150,000,000 at market via subscription

receipts BN re-opened a mine all within 3 years, thinking

differently

Walter Duranty: “You can’t make an omelette without breaking a few eggs.”

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Patience

Puget Ventures/Global Cobalt

Thinks Differently because the acquisition of Karakul Cobalt Deposit in Altai, Russia, and

current corporate transition is a game-changing expansion of the company

that will allow for the evolution of a leading strategic metals player

focused on the creation of a new mining district in the crossroads of Central Asia

As first mover into this new region, the Company will be able to leverage the world-class Karakul

has the potential to become the world's largest primary-cobalt deposit outside of Africa

bring on stream a number of projects that are under right of first refusal, creating a mining district with enormous potential

March 6, 2013


57People Property Price Promotion Plan Persistence

Patience

Joshua, the NORAD computer, in War Games: “A strange game, Global Thermonuclear War. The only winning move is not to play.”

March 6, 2013



Patience Virginia Gold

TSX listed and assets successfully sold to Goldcorp for $1,300,000,000

I was honoured that Andre Gaumond, President of Virginia, asked me to join his board in 1993. Virginia was a pure exploration play of very high risk mining prospects in Quebec.

For 10 years nothing great seemed to happen at Virginia and Andre and I would tell each other month after month:

"Never Give Up”

It worked!

March 6, 2013



Patience

Ernest Hemmingway: “The first draft of anything is shit.”

March 6, 2013



Patience Detour Gold

For me, the story of Detour Lake started in 2001, when I got involved with an orphan company and relentlessly promoted the opportunity in the mining and finance world.

Ironically, no one on Bay Street, not even the best of experts, seemed to think that this property could ever amount to anything (except the Pelangio Mines board, Eric Sprott, Franco Nevada and Gerald Panneton).

Today, 10+ years later, Detour Gold is a $3 billion market cap public company, perhaps one of Canada's largest gold mines.

The lesson: "When you think differently or ahead of your time, expect to be all alone for a long while."

March 6, 2013



Patience

Winston Churchill: “If you have ten thousand regulations you destroy all respect for the law.”

March 6, 2013



Patience

Celebrate Our Outstanding Jedi

A Very Incomplete List: Ray Goldie, Graham Farquason, Murray Pezim, Chuck Fipke, Ron Thiessen, Bob Dickinson, Gerald Panneton, Bob Schaefer, Dick Whittington, Andre Gaumond, Ingrid Hibbard, Bob Wares, Erin Chutter, Ewan Downie, Jim Gill, Charles Beaudry, Alex Stewart, Robert Cudney, Laurie Curtis, Stephen Stewart, Fred Archibald, Rob McEwen, Sean Cleary, Jean Rainville, Edward Yu, Mark Monaghan, Abraham Drost, Jim Rogers, Lawrence Page, Roger Scammel, John Cullen, Rene Galipeau, Frank Smeenk, Tom Larsen, Tom Meredith, Frank Callaghan, Scott Bending, Mari-Ann Green, Natasha Blackburn, Alex MacDonald, Stan Bharti, Shawn Wallace, Jim Watt, Joe Conway, Pierre Lebel, Dennis Milburn, Nicholas Colin, John Kearney, Judy Baker, Michael Judson, Guy Hebert, Michel Bouchard, Hugh Morris, Jacques Perron, Pierre Gauthier, Emma Drapell, Gary Pelangio, and all the people in this room

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What Can the Junior Mining Industry Do?

Celebrate Industry Successes; it’s well-deserved! Honour our mining Jedi Heroic successes not well-known outside the industry Disasters like Bre-Ex are well-known

Advocate why investment in Junior Mining is important; because it is!

Ensure Governments understand the problems of raising capital and the consequences; they need votes every once in a while!

Should we foster flow-through style deductions for hard dollar expenses? i.e. “20% Hard Movement”

Demonstrate value to the investment community; they are greedy!

Attract international capital; they get it!

Insist on regulatory simplification; it’s way out of control!

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What Can the Junior Mining Industry Do?

Discredit Lies of Naysayers

Illegitimi non carborundum

Discredit the unfounded rhetoric of Naysayers It is loud and powerful, threatening Junior Mining Survival

It spreads negativity about Juniors and with no remorse

Where do cowardly naysayers hide? Canadian banks (not all) and other large financial institutions

They are among senior executives and decision-makers

Investment funds, mutual funds and portfolio managers (not all)

Some executives of large mining companies! They roam among us. They are “inside the tent”

How can the industry discredit rhetoric of naysayers? The Junior Mining Industry needs a public debate on its survival

Discredit negativity publicly with well-researched facts and denounce unfounded prejudice

Don’t give your business to organizations that hide the naysayersMarch 6, 2013


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Capital Markets Strategies

At Capital Markets Strategies my colleague, Emma Drapell, and I inspire our clients

to change, to think differently, to create, to make a mine where just before there was

… absolutely nothing.

March 6, 2013

Weathering the Storm“Think Differently”

PDAC 2013

Jean-Pierre ColinCapital Markets Strategies

[email protected]

Mobile: 416-573-4300

THANK YOU"Would you tell me, please, which way I ought to go from here?"asked Alice. "That depends a good deal on where you want to get to," said the Cat. “I don’t know where I want to go,” said Alice. “Then, it doesn’t matter which road you take,” said the Cat.

mailto:[email protected]


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Jean-Pierre Colin DCS, LL.L., MBA – Mining

Executive

Jean-Pierre Colin is a Mining Executive and provides corporate strategy consulting services to boards and shareholders of public companies and serves on audit committees, corporate governance committees and compensation committees. He is a Director of Premier Gold Mines Limited (TSX: PG), Director of Xmet Inc. (TSXV: XME) and Director of Global Cobalt Corporation (TSXV: PVS). For 30 years, Mr. Colin was an investment banker responsible for corporate finance and M&A from 1980 to 2010, formerly Director and Head of Corporate Finance at Octagon Capital Corporation, an investment banker with Desjardins Securities Inc., Executive Vice-President of Deacon Capital Corporation (now Dundee Capital), and Senior Vice President of Richardson Greenshields of Canada Limited (now RBC). Mr. Colin was also the founder of JP Colin Securities Inc., a securities dealer focused on corporate finance services to public mining companies. He is the former Faculty of Arts Co-Chair of the Waterloo Advisory Council of the University of Waterloo, former founder and President of Caratax Management Ltd., the manager of Canada’s first diamond exploration public flow-through share limited partnerships, a founder of NIM Management, the manager of over $730 million of flow through funds, a co-founder of Detour Gold Corporation, and a former director of numerous other successful public mining companies in Canada including Wolfden Resources Inc., Pelangio Mines Inc., and Virginia Gold Mines Inc. He is a Member of the Bar of the Province of Quebec and holds a Master of Business Administration from the University of Western Ontario, a Civil Law Degree from the University of Ottawa and a Certificate in Comparative Law from the University of Manitoba

March 6, 2013

Weathering The Storm by Jp Colin

Documents

captain jack

large team

junior mining

capital markets

corporate

capital intensive

stock price

mining district