exploration insights – joe mazumdar · 2020-02-03 · zn best, u worst, gdxj best etf page 5 c...
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CO
-ED
ITO
R/A
NA
LYST–
J. MA
ZUM
DA
R
Exploration reduxMines & Money, October 2017 – Toronto, Canada
www.explorationinsights.com
Outline
Page 2
Investment clock
Exploration and M&A trends
Junior-led grassroots exploration back in
vogue
Strategic investments and JVs
Summary & Conclusions
CO
-ED
ITO
R/A
NA
LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Outline
Page 3
Investment clock
Exploration and M&A trends
Junior-led grassroots exploration back in
vogue
Strategic investments and JVs
Summary & Conclusions
CO
-ED
ITO
R/A
NA
LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
So what time is it?
Page 4
CO
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Rwww.explorationinsights.com
Source: Lion Selection Group
Zn best, U worst, GDXJ best ETF
Page 5
CO
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LY
ST
-J
. MA
ZU
MD
ARSource: Investing.com and Exploration Insights
Uranium worst performing commodity
GDXJ best performing ETF
Zinc best performing commodity
-50% 0% 50% 100% 150% 200%
Au
Ag
GDXJ
GDX
Pt
Pd
Cu
Pb
Zn
XBM
U
URA
USD Peak
Current
Outline
Page 6
Investment clock
Exploration and M&A trends
Junior-led grassroots exploration back in
vogue
Strategic investments and JVs
Summary & Conclusions
CO
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R/A
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LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Gold exploration has fallen 20% per year
Page 7
CO
-ED
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ST
-J
. MA
ZU
MD
ARSource: S&P Global Market Intelligence and Exploration Insights
0%
20%
40%
60%
80%
100%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
199
719
98
199
92
00
02
00
12
00
22
00
32
00
42
00
52
00
62
00
72
00
82
00
92
010
20
112
012
20
132
014
20
152
016
Gra
ssroo
ts ex
plo
ratio
n e
xp
en
ditu
res a
s a p
ortio
n
of to
tal (%
)
An
nu
al
go
ld e
xp
lora
tio
n e
xp
en
dit
ure
s (U
SD
, m
illi
on
)Grassroots Late stage
Brownfields Grassroots %
15 year CAGR +16% over 3 cycles
4 year CAGR -20%
-6% CAGR
+40% CAGR
+44% CAGR
Major gold producers exploration budget = G&A
Page 8
CO
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. MA
ZU
MD
AR
Source: Barrick Gold and Exploration Insights
M&A Homestake
M&A Placer Dome
Global Financial Crisis
Andes porphyry program
Alturas discovery (19
targets, 4 HSE)
Chairman Thornton
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
199
7
199
8
199
9
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
H1
20
17
Ex
plo
rati
on
an
d G
&A
ex
pen
dit
ure
s a
s a
p
rop
ort
ion
of
Sa
les
Rev
enu
e (%
)Exploration G&A
Copper exploration has fallen 22% per year
Page 9
EC
O-E
DIT
OR
/AN
AL
YS
T-
J. M
AZ
UM
DA
RSource: S&P Global Market Intelligence and Exploration Insights
15 year CAGR +20% over 3 cycles
4 year CAGR -22%
-11% CAGR
+80% CAGR
+60% CAGR
1/3 on greenfield
PD acquisition Added due to PD
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17SG
&A
an
d E
xp
lora
tio
n e
xp
end
itu
res
as
a p
rop
ort
ion
of
rev
enu
es (
%) Exploration SG&A
Major copper producers exploration budget < G&A
Page 10
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AR
Source: Freeport McMoRan and Exploration Insights
$4.6 B in gold M&A mostly paper, >80% safe places
Page 11
CO
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-J
. MA
ZU
MD
AR
Outline
Page 12
Investment clock
Exploration and M&A trends
Junior-led grassroots exploration back in
vogue
Strategic investments and JVs
Summary & Conclusions
CO
-ED
ITO
R/A
NA
LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Focus on early part of the value curve
Page 13
CO
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J. M
AZ
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Rwww.explorationinsights.comSource: Modified after Lassonde
274%
-100%
0%
100%
200%
300%
400%
500%
600%
700%
800%
900%
1000%
NV
O.V
GT
T.V
CO
R.V
AU
.V
AZ
S.V
NH
K.T
TK
.V
CD
B.V
KG
.V
GQ
C.V
CE
M.V
RE
G.V
ER
D.T
VL
C.V
Per
cen
t ch
ange
in s
har
e p
rice
(%
) Pct to peak Peak to now
Rewarded by market
Page 14
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Source: Google Finance and Exploration Insights
Predominantly gold, copper and zinc
Page 15
CO
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Source: Company presentations and Exploration Insights
Gold57%Copper
22%
Zinc14%
Silver7%
Australia/Canada/USA/Finland
50%
Peru22%
Dominican Republic
7%
Colombia7%
Mongolia7%
Bulgaria7%
Predominantly mining friendly jurisdictions
Page 16
CO
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ST
-J
. MA
ZU
MD
AR
Source: Company presentations and Exploration Insights
$172
$0
$250
$500
$750
$1,000
$1,250
$1,500
Mar
ket
cap
ital
izat
ion
(C
$ m
illi
on
)
Higher valuations
Page 17
CO
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. MA
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MD
AR
Source: Google Finance and Exploration Insights
…and funding
Page 18
CO
-ED
ITO
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LY
ST
-J
. MA
ZU
MD
ARSource: TMX Group
-14%
+64%
$-
$10,000
$20,000
$30,000
$40,000
$50,000
2016 YTD 2017 YTD
Fin
an
cin
gs
(C$
mil
lio
n)
TSX financings (C$ million)
TSX-V financings (C$ million)
$14
$0
$20
$40
$60
$80
$100
Cas
h p
osi
tio
ns
(C$
mil
lio
n)
…so cashed up
Page 19
CO
-ED
ITO
R/A
NA
LY
ST
-J
. MA
ZU
MD
AR
Source: Google Finance, Company presentations, Financial statements and Exploration Insights
Outline
Page 20
Investment clock
Exploration and M&A trends
Junior-led grassroots exploration back in
vogue
Strategic investments and JVs
Summary & Conclusions
CO
-ED
ITO
R/A
NA
LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Declining reserve base for gold producers
Page 21
CO
-ED
ITO
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NA
LY
ST
-J
. MA
ZU
MD
ARSource: Goldcorp, June 2017
8% CAGR decline in reserves from 2012
to 2016
$0
$100
$200
$300
$400F
un
din
g f
or
jun
iors
(C
$m
illi
on
)
Majors funding juniors ~$800 M
Page 22
CO
-ED
ITO
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LY
ST
-J
. MA
ZU
MD
ARSource: Company press releases and Exploration Insights
Canada23%
USA45%
Colombia16%
Ecuador8%
Other8%
Majors seeking safe harbor
Page 23
CO
-ED
ITO
R/A
NA
LY
ST
-J
. MA
ZU
MD
ARSource: Company press releases and Exploration Insights
Outline
Page 24
Investment clock
Exploration and M&A trends
Junior-led grassroots exploration back in
vogue
Strategic investments and JVs
Summary & Conclusions
CO
-ED
ITO
R/A
NA
LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Summary
Page 25
Investment clock is after four? Zinc best performer since December 2015
and Uranium the worst Best ETF – GDXJ – junior gold sector Exploration expenditures have fallen ~20%
CAGR since peak in 2012 Falling grassroots gold exploration but
stable in copper Major gold producer at 2-4% of revenue for
exploration budgets whereas major copper producer is 0.5-1.5%
M&A focused on paper transactions for junior producers in safe jurisdictions
CO
-ED
ITO
R/A
NA
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J. M
AZ
UM
DA
Rwww.explorationinsights.com
Conclusions
Page 26
We want to be in the early part of the value curve (2/3 rd of EI portfolio in explorers/ prospect generators)
Market recognizes the value rewarding predominantly gold explorers in safe jurisdictions with positive results
Grassroots exploration companies are at better funding levels than a few years ago and higher valuations
In the face of declining reserves, majors have been more involved in using juniors as proxy for grassroots exploration
Focus is on gold in safe jurisdictions but forays have been made into Colombia and Ecuador
`C
O-E
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OR
/AN
AL
YS
T–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Exploration Insights
Page 27
CO
-ED
ITO
R/A
NA
LY
ST–
J. M
AZ
UM
DA
Rwww.explorationinsights.com
Independent, unbiased and technical commentary on the junior mining sector
Brent Cook - Independent exploration analyst with over 30 years of experience in both property economics and geology evaluations.
Joe Mazumdar – Geologist (10 years), commodity analyst & trader, equity analyst (9 years), corporate dev/strategic planning (4 years)
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