Article title

By Hugo Melo

Building Mineral Project and Company Value During a Pandemic

Authors

Author 1

Author 2

Author 3

Author 4

The current global pandemic due to the COVID-19 virus has certainly impacted the junior mineral exploration and development sector within North America. Drill programs are being delayed, project sites are reducing the number of active staff on site, and commercial transactions are difficult due to the volatility in the markets. Over the past few weeks I've spoken with a number of CEOs and MDs who are hunkering down, cutting costs, and looking to just make it to the other end of this with sufficient capital to resume basic operations. Others were looking for ideas on how they could continue to advance their projects given the social distancing and travel restrictions currently in place for many areas.

I've spent a large portion of my career working with nano-cap and micro-cap mineral exploration and development companies, both as an employee and as a consultant. Over that time, I've had the privilege of reviewing well run organizations, and the painful process of sorting through failing projects. I'd like to think that I've learned a little in that process, specifically the kind of low-cost, high-value activities that the companies in this sector can utilize to build project and company value within the current business environment dictated by COVID-19 pandemic. For those Juniors who have a reasonable amount of working capital (or are at least willing to spend a fraction of the previously planned summer drilling budget), the pandemic and associated working environment presents an opportunity to advance aspects of a project that are often neglected.

Below is a partial list of the activities and tasks that can increase project and/or company value, help in building news flow, and provide staff with meaningful work. All of these activities can be completed within current social distancing guidelines, with many possible while working from home if non-essential business operations have been requested to close in your area. This work could be completed by in-house staff, or with the help of outside consultants/contractors - completing advisory and technical work at a distance is nothing new for myself and my consulting peers.

Investor Presentation

Now is the time to redesign your corporate/investor presentation. The presentation is your chance to make a good first impression, and it requires some effort to develop a presentation that has some impact. Color, fonts, and layout do matter. Make yours stand out from the stale commodity pricing trend charts, poorly constructed drill hole maps, and bad photographs utilized by your peers. Redesign around the corporate team's passion, the company's success to date, and the technical and commercial strategy that is going to result in a positive return for the investor. Lately I've been admiring the visuals of Pure Gold Mining Inc. (TSX-V: PGM), and the overall presentation of GT Gold Corp. (TSX-V: GTT) - neither of which I have associations with.

Electronic Data Room

More than half of the data rooms I have looked at in my career have been hastily constructed, lack necessary information, and look like they were organized by an eight year old. The data room is there to provide outside organizations a view into yours, and reflect technical capability and professionalism. Company and project data is ever changing, but that doesn't mean that you can't have a prepared data room shell that is well organized and populated with the portion of data and information that is static. Also use this time to determine the most efficient way to host and share the data room, there are a variety of data sharing platforms readily available in the market today, some are better than others.

Field Mapping & Surface Sampling

Is there a better social distancing practice than to roam the hills looking at rocks and picking a few up? If your area has not initiated stay at home orders, then this is an opportunity to complete some basic field work. Mapping is often overlooked in a rush to generate news worthy data from drilling and sampling, and too often companies assume that the regional geology maps they have are accurate enough. This is the time to get out on the project, and truly learn about every nook and cranny. Who knows, you may find a previously unknown mineralized outcrop or a long-forgotten adit. Couple this with targeted surface soil and sediment sampling to double the value and generate potentially valuable data that can be leveraged into your next drill program. There are numerous assay labs still in operation at this time, with some being designated as essential businesses due to the range of services that they provide. This work, which can be completed by one to two staff in the field, can increase project knowledge significantly at a very low cost.

Drill Hole Data & Geologic Modeling

Often in the rush to complete initial drill campaigns companies fail to fully leverage historical drill hole data sets. Time and cash flow often dictate, that initial drill targets are based on previous intercepts and desire to "drill for news". Many times this becomes a continuous cycle, spending investor money on drill programs with limited understanding of the geologic controls on materialization. I'm not going to tell you how to model or manage data, but can provide a few things to look for and avoid:

  • Don't be afraid to re-log inherited drill core from other companies or historical programs. Sometimes this can be a large undertaking, but now may be the time to do just that. Consistency in logging methods and rock type identification within a project area can't be overstated.
  • Make sure that you incorporate lithology from day one in your database. I've looked at many projects that have been around for years, with multiple drill campaigns completed, that have a great drill hole database with assay intervals, but no lithology data. Only to find out that no one has taken the time to move the lithology data from the paper logs to the database. How can you understand the mineralization if you don't understand the geology?
  • Make sure that lithology codes make sense for the size of project and local geology. Having <100 drill holes and >50 lithology codes is going to be a mess to model. When in doubt keep it simple. More complexity can be developed once the basics are understood.
  • Evaluate potential errors in databases and geologic models by going back to the drill core. Re-log as necessary. Too many database and modeling errors that are carried through multiple iterations can be resolved by a quick check of the drill core. Yes, the boxes are heavy, cumbersome and buried in the back of a warehouse, but it's not a good excuse.
  • Don't dive into building a geologic model unless there is a conceptual model developed to provide a framework. Modern modeling software can make bad models look awesome, and without some sound geologic concepts and truth to guide the modeling process, you'll probably end up in that group.

Training

Commit to your staff through training; encourage them to learn and provide them with a reason to be be excited about their job. Ask your employees to provide you with a training plan that presents the topic they wish to learn about, what training they wish to complete, and how it will help the company. Obviously they aren't going to be flying across country to complete a two week long, $10k training on the newest methods in resource modeling; however, there are many online tutorials on about any topic you can imagine at relatively low costs. There are also consultants who can complete individualized training on specific topics at distance.

M&A Strategy and Targeting

There are many in the industry who feel that there may be some significant M&A opportunities when the business environment and markets return to normal. If your company is in a strong financial position, either in cash or in share price, opportunities with accretive value may present in the coming months. Now is the time to identify both near-term M&A strategy and potential M&A targets of interest. Generate a M&A "shopping list" and complete preliminary desktop level due diligence on these potential targets with the available public information. Identifying strategy and potential targets early will aid in focusing M&A thought during what will likely be a volatile period for businesses as a whole.

In Conclusion 

This is just a small list of the low-cost, high-value tasks your organization can advance during the COVID-19 pandemic. Nothing presented is revolutionary or new, but the impact of completing this work now will better prepare your organization for a return to more normal business operations in the coming months. What could be more satisfying than seeing the work completed during this time-frame result in better drill targets, that yield excellent assays and a renewed interest in your company's project, and being prepared for the new investors or M&A opportunities that follow. I hope you get to experience that.

View the original article on LinkedIn