exploration insights – joe mazumdar · 2020-02-03 · zn best, u worst, gdxj best etf page 5 c...

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Exploration reduxMines & Money, October 2017 – Toronto, Canada

www.explorationinsights.com

Outline

Investment clock

Exploration and M&A trends

Junior-led grassroots exploration back in

vogue

Strategic investments and JVs

Summary & Conclusions

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So what time is it?

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Source: Lion Selection Group

Zn best, U worst, GDXJ best ETF

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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

Investment clock



vogue



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Gold exploration has fallen 20% per year

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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

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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

EC

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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

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Source: Freeport McMoRan and Exploration Insights

$4.6 B in gold M&A mostly paper, >80% safe places

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Outline

Investment clock



vogue



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Focus on early part of the value curve

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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

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Source: Google Finance and Exploration Insights

Predominantly gold, copper and zinc

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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

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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

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Source: Google Finance and Exploration Insights

…and funding

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-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

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Source: Google Finance, Company presentations, Financial statements and Exploration Insights

Outline

Investment clock



vogue



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Declining reserve base for gold producers

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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

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Canada23%

USA45%

Colombia16%

Ecuador8%

Other8%

Majors seeking safe harbor

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Outline

Investment clock



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Summary

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

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Conclusions

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

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Exploration Insights

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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)

exploration insights – joe mazumdar · 2020-02-03 · zn best, u worst, gdxj best etf page 5 c...

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