As I looked for Christmas prezzies for Isabel’s little ones, a thought occurred. Snakes and ladders - the small-co mining exploration business is a dead ringer for it.
Watching Jubilee Platinum, a little platinum explorer which has just announced some good assays and a fund-raising, brought it home. Except the game is turned on its head! The target is not escape, but the opposite. Players progress up the board trying to get caught out via a takeover by a predator at the top price.
For counters read companies, for rolled dice read drilled boreholes. En route there are snakes of worthless samples or reserves of minerals discovered, but too costly to mine. Ladders are good analysis results and cost-covering joint-ventures.
Instead of sliding along surreptitiously, players have to attract as much attention as possible. Otherwise, how are they going to win in the highly competitive race for a place on major companies’ shopping lists? The name of the game is to get bought out. If you’re lucky you keep a job as well.
High time for a learning toy for mining
Maybe someone should invent an update, suitable for 21st century kids that’s all about learning the business of business life! Call it Mining for Money or The Gold Rush! After all there’s Monopoly to gently teach the property finance game. It’s high time for some junior lessons in another industry!
While the stakes in the business world are in millions of dollars, heart-breaks are proportionately greater, too.
Players in the for-real mining minors and explorers’ game tend to be entrepreneurial types who’ve had careers in the industry. Very often they are mining engineers or geologists. Back earlier in their careers they were operating on the ground as employees of the mining majors. They were the ones who hired the staff and dealt with the local officials from South America to the Congo, Mogadon to Mongolia. They learnt how to get things done!
Quite a few were savvy about money raising, too. They’d have listened or performed at presentations to brokers and investors. Very useful later when they themselves sought investors on the stock markets.
Move on a few years, into the 90s, and our would-be entrepreneurs would have been on low pay, or out of work in the mining slump. Their employers were cutting costs by out-sourcing the expensive exploration work. Here was their chance. They still had local contacts among the land-owners or the licence givers. So they switched to prospecting in the world’s major financial districts for money to set up exploration companies.
Colin Bird, a former engineer who has been playing the game with Jubilee Platinum. He spent the 70s and 80s mining everything from copper and gold to coal. Well travelled, Bird’s worked in Botswana, Zambia, Scotland, Saudi Arabia and Canada. By 2002 he was out of day-to-day mining and had put together a company. He was ready for the stock market.
Jubilee Platinum came with a string of options to prospect, and acquired interests in South Africa, Madagascar, Sierre Leone, Ethiopia and Canada. That, and a mining investment backer, was enough to get it onto London’s Alternative Investment Market. This is the home of hundreds of resource companies.
That was relatively the easy bit. Jubilee Platinum and Colin Bird had only begun the long game of getting together enough exiting prospects to attract a bidder.
Mining entrepreneurs have to be financiers, too
Nothing is easy in mining. The ore is all too often in nasty places. If it’s not the temperature, the hardness of the rock or the fact that its hundreds of miles off the road, then the problem will be fighting. Many of Africa’s best holes are in war zones.
The bill for operating in those conditions is steep. Men and machinery have to be transported to the site. That is, if they can be found. With money chasing metals after the Asia boom, jobs to fill far outnumber the available experts or equipment required.
So bank balances of sums with loads of noughts in them are needed. Problem! Our new mining entrepreneurs have to be good financiers, too.
Colin Bird seems to be pulling it off. Jubilee is well-funded. Now, after years of raising small bits of money, he has just finished a rights issue for £11 million. It is for Jubilee’s Tjate project on its South African territory to bring it up to a “bankable feasibility” stage. This is the final stage of assessment of a project before the button is pressed to start a mine.
Jubilee hopes that the final study on the potential mine can start next year. Then hopefully mining can begin in three years’ time.
A study at an earlier stage – a scoping study – showed it could be economically feasible to build a mine at Tjate at a cost of around $470m. It looks as though Jubilee could produce around 200,000 tones of ore a month there. The ore would contain a mix of platinum with nickel and copper. Brokers seem to think that this values the mine at around £200m. One research report went as far as to suggest that the company could then be worth getting on for £600m.
Attention-grabbing publicity for Jubilee
Now here is a good example of just how cautious or sceptical investors are about the mining explorers. Tjate is only one of the highly promising platinum properties Jubilee owns. It has gold and nickel as well as platinum prospects in Madagascar. Yet at 94p a share the value of the whole company in the stock market is only £95m.
Of course, all of this news is providing just the sort of attention that an explorer needs. The market rumour mill is now actually pin-pointing potential buyers for Tjate. It could, it is suggested, be sold off to AngloPlat’s Implats, or one of the other big boys.
So now may be the time Jubilee stops just playing the game hopefully and actually arrives at the top of the last ladder. It could even get bought. If it avoids snakes!
Keep prospecting.
Erin and Isabel
