EDITOR: | July 26th, 2015 | 7 Comments

Mackowksi on how to attract capital to fund your project

| July 26, 2015 | 7 Comments
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Critical Factor Analysis – Does this apply in Rare Earths development?

shrinking cash flowOver my many years in process and project development, I have aggregated a number of tools that I have found invaluable in getting to the crux of the matter, the root causes, those 2 or 3 key issues that need to be resolved before the other 20 or so problems (the noise) that keep manifesting will go away. I have discussed before about these 2 or 3, and by their going unawares can cause havoc during commissioning and even in mature operations. My fascination and now dedication with this approach can be attributed to Bill Leuders of Kepnor-Tregoe (KT), whose steadfast resolution on the universal value of the KT approach made me see the light and I have been seeing those 2 or 3 lights ever since. I call the wider group of tools that I use that includes KT as “Critical Factor Analysis (CFA)”. Interestingly, I took the same logical approach that I had used in problem solving and used it in project management. Not on small projects (a KT tool), but on large ones. That is, what are the 2 or 3 key issues on this project that need to be resolved that we should be focusing on and so avoiding the noise of those myriad of other issues. And it has worked. Identification of critical factors is a mind-opening, and opportunity opening exercise. And a very profitable one too! But, to this day, I see very few proponents of the discipline being practiced. Why that is in processing is a topic for another day and a different audience, but today I want to expand the CFA logic to address the very real concern of “Where is Rare Earths development”.

As is my way of getting to the point, allow me to take you on a journey. A journey that started when my wife and I semi-retired to Tasmania (the Washington / British Columbia part of Australia). We had a number of goals, plans and objectives that we were to take on with the property and beyond, but my personal goal, I was going to master the art of fly fishing for Tasmania’s world famous trout. Hmm! Over my fishing life I have caught many trophy fish. Not all easy I might add. I would rate sight casting lures for freshwater barramundi in a clear water, narrow pandanus lined creek as up there. But fly fishing for trout! They are never biting! They are never there! They never like my fly selection etc. etc. etc. Trout are uncatchable! Whoa Macka! Go back to CFA. Just because you are not catching trout it does not mean they are not there. You need to understand what they are eating, when they are eating and where they are eating. So I met a couple of old hands (younger than me) who were prepared to share their secrets. Now at least I have a chance! What does this have to do with rare earths development? Well……

Day dreaming a few weeks ago, my mind wandered to the poor performance of the non-China rare earths space, particularly in terms of new project development. Curious. We have excellent fundamentals don’t we? Good anticipated growth in demand, anticipated reduction in supply out of China, many successes in process development, so why are there no real success stories? “Oh that’s right, the markets dead, worst for years, not sure when anything will happen, it’s just needs a start. Blah, blah, blah”. My trout weren’t biting either. Fact: just like a trout, capital needs to eat, needs to grow, it doesn’t just stop! But why isn’t my project getting capital? This is where I lose a few friends, but hey, I can now catch trout.

Why isn’t the capital after your project? Using a modified CFA approach (let’s call it the critical failure factor analysis CFFA), think not in terms of identifying causes, but think in terms of failures to identify opportunities. What failures? Perhaps one, a combination or all of these.

  • Failure to identify the correct capital for your project.
  • Failure to present your project in a form that was acceptable to capital.
  • Failure to present your project to capital at the appropriate location.
  • Failure to present your project in a form that capital would find interesting/compulsive.

Over the years, at multitudes on conferences, seminars, investor road shows, etc. I have seen many projects trying to catch capital. Almost all suffer from one or all of the above. And they keep doing it! The same old same old! Time and time again! And they keep getting the same result. Why is that? “Oh that’s right, the markets dead, worst for years, not sure when anything will happen, it’s just needs a start. Blah, blah, blah”.

This leads me to see perhaps the most important CFF of all: Failure to see your own failure and to be able to change.

What does this mean to rare earth developers? Capital is out there and it needs to be fed, just like a trout. Either you learn how to feed it or someone else will.

Tight lines!


Steve Mackowski

Editor:

Mr Mackowski is a qualified engineer in mineral processing with over 30 years technical and operational experience in rare earths, uranium, industrial minerals, nickel, kaolin ... <Read more about Steve Mackowski>


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Comments

  • Tracy Weslosky

    What a great piece of prose Steve, and a hearty helping of wisdom with regards to the funding challenge I hear companies disclose continuously, Steve — thank you. And let me add, this includes any business (*including mine). Reviewing our processes honestly and what works versus what doesn’t is the only way to prosper.

    July 26, 2015 - 10:03 AM

  • hackenzac

    It’s a dolphin, the fish, not the cetacean.

    July 26, 2015 - 11:34 AM

    • Tracy Weslosky

      The photo was changed as the resolution was too low. Thanks.

      July 26, 2015 - 11:47 AM

  • Ricki

    Very well said Mr Mackowski. One of the biggest issues affecting each projects’ ability to “feed the trout” is the ego of management. They must realize their project is not only competing with other RE projects but other industries as well. Them throwing around terms like “world class” isn’t helpful either. Says who? And what is exactly is the definition of world class? Until there is humility and respect for the investment community most of the RE projects will continue to languish as junior companies and nothing more.

    The investment community are custodians of their inves

    July 27, 2015 - 5:45 AM

  • Alfred

    Excellent article Steve. The following will make financing of rare earth junior’s all the more difficult … for now at least…

    Just out on Chinese news service:-

    In the first half of this year, Inner Mongolia, the United States and Japan are the main export market of rare earth. Among them, 1,365 tons of rare earth exports to the US, up 40%; exports to Japan of rare earth 770.4 tons, an increase of about 130%; 223.3 tons of rare earth export to Vietnam, an increase of 45.3%.

    Chinese exports to the United States and Japan increased significantly the amount of rare earth prices fell over 30%

    http://finance.sina.com.cn/world/20150727/181022802900.shtml

    will need to use google translate to read the full story in english.

    ———————–
    Low rare earth prices and abundant supply from China sent Molycorp bankrupt, … and I suspect Lynas is not far from suffering the same faith.

    July 27, 2015 - 3:14 PM

  • Alvarita

    Fish get smart quickly after going after fake bait. I dare say many artificial lures have been tossed into the investment community and now the fish refuse to bite. Fool me once, shame on you. Fool me twice…well…you know.

    July 27, 2015 - 6:54 PM

  • Ricki

    Spot on Alvarita.

    July 27, 2015 - 9:18 PM

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