-- Posted Sunday, 17 March 2013 | | Disqus
Source: Brian Sylvester of The Gold Report
It's been years since Quebec had a big discovery. Eric Lemieux, a mining analyst with Laurentian Bank Securities in Montreal, believes the province is overdue. Mining-friendly infrastructure policies like Plan Nord could give Quebec the push it needs, but the return to power of the Parti Quebecois has affected some projects and general market sentiment. Lemieux tells The Gold Report how to prosper if the Parti Quebecois swings back to mining-positive policies as he cautiously predicts.
The Gold Report: Eric, what do you look for in mining companies?
Eric Lemieux: I focus on the technical aspects such as geology, the geological models, the history of the projects and the general location. The devil is in the details. Successful mineral exploration projects are based on discovery; good management and good project generation can enhance that.
TGR: What are some tangible ways that good management manifests itself?
EL: By focusing on the business plan. I always appreciate when management is focused on leading one company; not one project, one company. I have a hard time with a president who wears two or more hats. I truly appreciate focus.
TGR: You also pay close attention to the size of the share float—the smaller, the better, generally speaking. What's a reasonable size share float?
EL: There's a whole range. I have to understand the history of the company, which is sometimes not immediately evident. My thesis is that a low share count leverages a company to discovery. If there is a discovery, the stock will move significantly.
A healthy share structure is something like a human body. You don't want to be overweight; you don't want to be too thin. There's a balance. I always appreciate management that tries to keep the share structure as tight as possible through smart and well timed equity raisings.
TGR: Do you pay a lot of attention to things like burn rate?
EL: Yes. In a market where financing opportunities are difficult, investors have to put an emphasis on the burn rate. There are certainly costs in running a company, but we've all heard stories about exaggerated corporate administrative fees. For example, I always cringe when I see companies that have two to three investor relations firms. It's overpaying and overkill—even more so when the investor relations firms are paid in shares for that service. Good management should be able to sell the story of their company.
TGR: Do you like to see a geo at the helm?
EL: Ideally, but not necessarily. There are some people who are able to surround themselves with able competent geological teams; they know enough to find somebody who will support them with that technical knowledge base. I appreciate a company with a vice president of exploration who is a geo, but it's not necessarily always an equation for success. That person has to be surrounded by professionals that have that background.
TGR: What if it's just a money guy?
EL: This is an industry where there are not only technical aspects; financing can be just as important. It's part of the recipe of success. It takes a combination of expertise: finance, technical, lawyers. Finance people can run the boat very well provided they have a team.
TGR: Plan Nord is a strategy to support economic development by building more roads and infrastructure in far northern Quebec. There's been an election not long ago and the Parti Quebecois (PQ) won. Is the new provincial government publically supporting Plan Nord?
EL: There have been some advances and then some steps back. It's hard to say that it is really supporting it. I think the PQ wants to disassociate itself from the past government, but I'm optimistic. It should support this project in the long term because this is a plan that could provide many benefits and wealth creation opportunities.
TGR: If Plan Nord is delayed, will companies be left in the lurch? Some companies are directly depending on those roads in their feasibility studies.
EL: Many companies—from iron ore developers in the Labrador Trough, some rare earth plays, lithium explorers and developers, and a slew of others—would truly benefit from the road/rail infrastructure and hydroelectric availability of Plan Nord.
TGR: What impact are large low-grade mines having on exploration in northwestern Quebec and northeastern Ontario?
EL: In theory, projects should be stimulating more exploration and development of large, low-grade mesothermal gold deposits, but the general market conditions are making these targets a little bit less attractive. Focus I believe is now on grade, not only size. It's the grade—grade is king and bigger is not always better. It's easier to obtain a profitability ratio when the target is small and it's a high-grade deposit.
TGR: What message would you like to deliver to retail investors still seeking homeruns in this market?
EL: You have to try to fingerprint the next winner. A project should have good geology and a strong technical team, which increase the probability of discovery. There will be winners. Last year, there were companies in the Dominican Republic. But there are still some discoveries to be made. Quebec, which hasn't had a discovery since 2004, needs one. I'm sure there are some other winners out there.
Again, I highlight that our everyday lives require materials that are mined with risk to workers and financial challenges to mining companies. I hope the Parti Quebecois takes measure; society cannot take full measure of the value of the resources if they are not found, developed or mined profitably.
TGR: I've enjoyed speaking with you. Thanks, Eric.
Eric Lemieux is a mining analyst who joined Laurentian Bank Securities in 2008. He worked for nine years as a consultant responsible for applying Regulation NI 43-101. He has worked at the Montreal Exchange, and prior to that managed exploration projects for Cambior, Noranda and Soquem. He holds two master's degrees, in mineral economics from Colorado School of Mines and in metamorphic-structural geology from Laval University.
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-- Posted Sunday, 17 March 2013 | Digg This Article
| Source: GoldSeek.com
