EDITOR: | December 11th, 2015 | 24 Comments

Mining Company IR Departments: Stuck in a Time Warp

| December 11, 2015 | 24 Comments
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[Note from the Publisher: Christopher Ecclestone was interviewed on BNN yesterday on this column, which was originally published October 21st, and was inspired as a follow up to Dr. Natasha Sharpe of Bridging Finance’s commentary at the Technology Metals Summit on why many resource companies can not secure capital.]

Four years into the “slump” of mining investment it is surprising that some mining executives (and their IR terms) are still singing from the same hymn books that brought them divine favour before 2011. If they wonder why manna is not pouring down from the heavens, then maybe they should look to their own unreconstructed promotional techniques.

In pondering what image to put on this article we were naturally drawn to the old His Master’s Voice logo which seemed cute. However looking at it, it resonated with a deeper meaning. Are not many mining company presentations these days just resonating back to the company’s management a message that they should “keep steady on the course, repeat the traditional mantras” and all with be well. Repeat it to oneself enough times and it must come true. Indeed His Master’s Voice may just be the mining CEO hearing himself, talking to himself, in a sort of eternal feedback loop.

Same Old Same Old

It was interesting that one of the non-mining company presenters at Investorintel’s recent Technology Summit highlighted the terminal ennui that investors are developing towards mining company powerpoints. Nothing much has evolved in this vehicle for channeling ideas to investors since the beginning of last decade. I have some examples dating back from before the 2008 crisis and frankly they are pretty much the same as nowadays. While social media and communications have moved on, the mining company IR departments are stuck in a timewarp. My attitude as an analyst is “Tell me something I don’t already know”. The idea that “one powerpoint fits all” is erroneous. Many investors and analysts have seen your deposits before and feel like primal-screaming if they see another chart of drillholes or fuzzy photo of a piece of core.

With production, production, production as the mantra of the moment the message that needs to be put across as to how the company will reach (profitable) production and/or how the company (or asset) is going to be acquired (while not mentioning the risk of a debtor in possession auction!). We need to see more comps with look-like companies. These used to be standard practice until around 2009 and then faded away as it seemed like bad form to trash the competitors’ valuations. However, in the current Raft of the Medusa marketplace we are suffering, if you can toss someone else to the sharks then you get to stay on the raft longer! Dr Luke Duchesne’s recent analysis here on the comps between Chesapeake Gold and similar companies should be the type of value-proposition coming back into favour in these times of limited (if any) airtime for miners. Sharpen up your elbows, folks..

gericault-raft_of_the_medusa

I suspect that companies need to start producing multiple presentations for different audiences, level of interest and levels of understanding. One for the resource, one for the PEA or PFS and one for strategy. Keeping some unchanged is entirely OK for the resource does not change over the months, neither does the last PEA. I have noticed looking at very large companies outside the mining space (yes, there is life outside mining) that it is common practice to have a lot of presentations on different themes and to have a variety of these on the corporate website. Miners seem to think that “one, and done” is acceptable. It isn’t.

The Conference Circuit

When Tracy Weslosky told me about the format for the Technology Summit the first thing that sprung to my mind was the similarity to the Davos Economic Forum that attracts the rich and powerful to a Swiss village on an annual basis. In mining terms it was rather mould-breaking because the industry had got itself into a rut of vast halls with an ever-shrinking number of booths while in lecture halls off to the side, the CEOs would drone through their presentation while a milling horde of plate-licking pen-grabbers did their best to drown out the speaker as they shuffled in and out like so many bag-ladies at Grand Central in rush-hour.

As times have gotten tougher the booths have retreated at most shows (except PDAC) with the Toronto show being regarded as the last line of defence. The theory seems to go that: “When a company gives up on PDAC, it gives up on life”. The other trade shows have been viewed as expendable if companies can maintain that last redoubt of a PDAC presence.

Likewise the dynamic has changed with the shrinking of the corporate gifts from the stuffed animals and gold flakes in tiny bottles in the glory days, to pens and chocolates two years ago, to the current situation where an understocked box of presentations under the table is sparingly doled out to punters who “look real”. Miners would claim they are “saving the rain forest” when in fact they are hoping what they save on powerpoint printing will be enough to pay the office light bill next month. The card-drop raffle for the bottle of Scotch has been forsaken as the CEO finds he needs the strong stuff for himself when facing his bankers.

The once ubiquitous and immensely useful Intierra mining maps are now collectors’ items. Be careful what you throw out as you may never see their like again. I still cherish an Ecuador map long after all the miners have fled the country in panic and disarray.

One wonders though what the point is. Quite frequently the execs and geos that really know anything have forsaken the booth five minutes after arriving, so interloping investors with real questions are left to look at the presentation they could have got off the website or receive the download from the CEO’s niece who is serving as a prop in the absence of anyone that knows anything. What is the goal of this going through the motions? I strongly suspect that unless mining markets make a Lazarus-like revival in the next few months even PDAC will start to thin out.

Conclusion

After four years of things not working for miners, it’s time to throw away the old hymn book and start singing a new song. The evolution of mining IR seems to be a step-like process. In the beginning there were factsheets then, with the invention of Powerpoint, some primitive presentations appeared. The rise of the internet added websites to the mix and these evolved in some cases into great works of art and in many cases remained relatively primitive. To take a walk back into pre-historic times one should visit that of US Antimony. Then the Supercycle began and the Powerpoint reached its apogee with whole rainforests being felled to produce these handouts and, with spiral binding and super-quality printing, all pretense at saving money went out the window. In the old textile trade saying “Never mind the quality, feel the width”.

Then came the ubiquitous USB stick which was supposed to replace the powerpoint, except that no-one ever looked at what was on them and they either went in a drawer or were given to the children to save their school projects on, after unceremoniously deleting Tinpot Mines’ grand projections of their Kryptonite mine in Upper Whoopwhoop.

With conferences increasingly looking like Hiroshima on a bad day, budgets shrunk to nothing and investors running off after the shiny baubles of other better performing sectors, the average mining management is boggled as to how they can get their voice heard out of a very dark, deep pit they find themselves in.

It’s time for the survivors to rethink their promotional models. One key thought might be that one doesn’t need to do what everyone else is doing. Try new ideas, try cheaper ideas, use the media more as its going to be harder to get face to face with investors, either large or small. And moreover, question everything you have always done and cast into the dustbin of history those time-worn practices that have outlived their utility.


Christopher Ecclestone

Editor:

Christopher Ecclestone is the EU Editor for InvestorIntel and is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten ... <Read more about Christopher Ecclestone>


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Comments

  • Tracy Weslosky

    Can you hear the round of applause from our office Christopher?! Thank you! I tell you, if I receive one more Infographic that no one reads, reviews or understands — and better yet, achieves virtually no benefit for a public company, other than indeed they are pretty pictures…or my favorite, PowerPoint’s missing the trading symbol. I must confess, when Chris Reed of NEOMETALS pulled out his PPT at the Technology Metals Summit and it had 3D animation which gives the audience an experience in viewing his property — I was loving it! PLUS – your company did a research report and UPDATES that clearly articulate the message to the INVESTOR.

    Everyone wants shortcuts, but as we all know in life — there isn’t any. You have to do the work in CLEARLY articulating the corporate message. And trust me, I know as I have been undergoing this process with INVESTORINTEL and it is a challenging process. Believe me, if I could pay someone to draw a picture of what I am doing for $5k, they could have my check today. But the bottom-line is until the message is articulated clearly, all the pretty pictures in the world will not get the company’s stock moving in the right direction.

    Darren Townsend of PEAK RESOURCES was reminding our audience about how in their funding efforts, which they successfully achieved — they were aware that they were competing against SIX HUNDRED other companies.

    I think many juniors forget that there are a LOT of planes on the tarmac seeking financing. And no matter how great you think your jet is, you can never forget that there are other jets in front of you —- and too many to count behind you.

    Great piece Christopher, and I have a video being edited from the Technology Metals Summit from both Dr. Natasha Sharpe of Bridging Finance and Amanda Lacaze from LYNAS about how to be —- the #1 jet on the tarmac.

    Kudos.

    October 21, 2015 - 9:15 AM

  • Tom

    This article reminds me of Mark Twain and his definition of a gold mine …. A hole in the ground owned by liars. So without impuning gold miners or any other junior mineral miners, to me Mr. Twains’ observation is precisely the 800 pound gorilla in the room that no one wants to talk about. As an investor who can not distinguish between a kilo of graphite and a kilo of grapes, but one who definitely knows what a kilo of $100 dollar bills looks like, all I want is accurate actionable information from reliable sources at which point I take responsibility for my own well being! Let’s hope it comes to that end.

    October 21, 2015 - 10:27 AM

  • Robin Bromby

    Christopher

    A long overdue piece, and I speak as someone who has endured mining conferences since the 1980s. When we had REE conferences in Sydney a few years back, the hall was full when Jack Lifton and Gareth Hatch spoke, but with the company presentations it was time to go and have coffee until they were over.

    The point I would add to your discussion is that so many companies don’t know how to create something newsworthy, even the ones that spend big money on PR firms. Putting out material showing drill holes, etc., just leads to stifled yawns. Why don’t more companies put their efforts into some context? For example, a small coal hopeful recently put out an announcement about their latest progress, but the release also had a detailed analysis of what was happening in the coking coal market globally, and what they expected to happen and how that would allow them an opportunity in view of their location and mining costs. I picked that up and featured in my newspaper column because their sector analysis was of interest to people who invest in coal companies; it was a very clear analysis and included details of the major Chinese coal companies and their financial situations. Meanwhile, dozens of releases land in my inbox every day that just churn out dullness.

    So here’s my tip for any company wanting media oxygen: say something new, say something interesting; then someone might take notice.

    October 21, 2015 - 3:24 PM

  • Gord Glenn

    Well put Chris! And lets not forget the logo’d hats, golf shirts, other outerwear tossed to bankers and analysts in better times. At best nostalgic collectors’ items collecting dust in the attic or more likely just forgotten.

    October 21, 2015 - 5:22 PM

  • alvarita

    The advice I would give these companies is to stop saying and start producing. Heaven forbid. It’s so old school.

    October 21, 2015 - 6:14 PM

  • hackenzac

    Tell us why then everyone is cutting production Alvarita. In rare earths for example the big 6 in China are all cutting production as well as a mighty effort we’ve heard to rein in “off the books” production. In production Lynas is hanging by a thread. Formerly in production Molycorp is out of business and most juniors if not all of them can even pass feasibility at today’s prices. So then in your words, “stop saying and start producing”, perhaps you’d care to elaborate as it seems the opposite of what market forces are dictating.

    October 22, 2015 - 12:08 PM

  • alvarita

    It’s so simple a cave man can figure it out. If the few producers are having difficulties turning a buck then it stands to reason that the non-producers don’t stand a chance unless they can produce at a magnitude less cost. I haven’t seen any verified evidence that they can. I’ve read a lot of claims, but talk is cheap, as evidenced by recent share prices. Say what you will but the market in general agrees with me. As an investor I don’t care to make a million excuses why a sector is tanking. Making excuses never made anyone money. That’s a fact.

    October 22, 2015 - 7:22 PM

  • Tracy Weslosky

    It is with pleasure that I draw your attention to the Technology Metals Summit Series hosted by InvestorIntel: Dr. Natasha Sharpe on a panel moderated by Peter Clausi marketing advantages critical to secure financing today — your going to enjoy this https://youtu.be/53MDUVzKNrw

    October 22, 2015 - 7:44 PM

  • Jack Lifton

    Robin, Chris

    First, Robin, thank you for your kind recollection of my first visit to Sydney.

    I have to say that I entirely agree with you, Chris. From the very beginning of the rare earth boom I would say to conference organizers that I would be glad to draft and present on behalf of participants, since I had noticed that every presentation was identical in format. At first eager conference organizers would put my proposal to their sponsoring clients, but after being uniformly consistently rejected they, and I, gave up.
    Here’s the standard presentation from the 2007-present period:

    1. This is our deposit (photos of mountain, valley, or excavation);
    2. This is our grade (chart manipulated to show highest grade as typical)
    3. This is our team (CREDENTIALS followed by success stories in raising money BUT NEVER IN BRINGING PROJECTS TO PRODUCTION!)
    4. These are the uses of our product (Chart of uses of downstream form of element(s) the production of which and the costs thereof are unknown to the presenter or his company;
    5. This is the net present value of our stuff (Priced as if “pounds in the ground” are equal to extracted, separated, purified, alloyed, and fabricated downstream finished forms at their highest value);
    6. This is our prediction of the future prices of our stuff (priced as if it were the downstream goods above),
    7. Our share price is an absolute bargain (as it is based on our complete lack of knowledge even of how to extract what we think we want from the rocks or how to get it into the form in which it is used);
    8. Thank you

    Did I miss much??

    Jack

    December 11, 2015 - 12:47 PM

  • Christopher Ecclestone

    You missed nothing Jack… brilliant summation…. Just shows how cookie cutter and unimaginative the mining presentation format has become. One size fits all..

    Here I am on BNN talking about the problem:

    http://www.bnn.ca/Video/player.aspx?vid=767153

    December 11, 2015 - 1:20 PM

  • Sue Glover

    Terrific article Christopher and great interview with BNN. Hope the readers will be sure to watch the commentary from Dr. Natasha Sharpe during the Technology Metals Summit 2015 that inspired the piece as it is indeed enlightening. The Cleantech & Technology Metals Summit 2016 happens May 10 & 11th in Toronto http://www.InvestorIntelSummit.com

    December 11, 2015 - 1:53 PM

  • Jack Lifton

    Chris,

    I am shocked, shocked, by the symbol that you use. Are you aware of the fact that the snowflakes who attend Harvard are “demonstrating” for its removal from the university’s coat of arms? It seems that although it is on the family crest of one of the founders from the 17th century it is also true that he was a slaveholder, so its very existence, not just its use, is a “micro-aggression” that could “trigger” bad thoughts in the clueless infantile leaders of tomorrow attending the top ranked Ivy League school. Who needs ISIS (ISIL, DAESH) when we have dangerous symbols to destroy us already in place.

    Jack

    December 11, 2015 - 2:02 PM

  • hackenzac

    Maybe bikini baristas with a powerpoint loop playing behind her would be next level enough to smash on through all the way into the popular lexicon of excitement. Bikini baristas showing us the money, yeah that’s the ticket. Lara Croft style animations would be cool too.

    December 11, 2015 - 2:33 PM

  • Jack Lifton

    Hakenzac,

    I recall many a conference where James Dines would have a booth at which two or more gorgeous young women would hand out brochures and when the great pundit himself graced the halls he would be supported (literally at his age) by two of them, one on each arm. The companies rarely understood that it was not what Dines was selling but how he was presenting it that really mattered.

    Jack

    December 11, 2015 - 2:46 PM

  • Christopher Ecclestone

    That was a precursor to the current zombie renaissance in popular culture.. with a nod to James Bond.

    December 11, 2015 - 3:32 PM

  • Jeff Thompson

    I recall about 15 years ago while looking to buy some test equipment at work, I was going through microwave waveguide catalogs (this was just before most of the manufacturers discontinued publishing print catalogs) and couldn’t stop laughing when I found one particular catalog from an obscure manufacturer had on the cover of the catalog a woman in a slinky red dress draping her hand across a table filled with examples of typical waveguide couplers for sale. This as compared to the normal dry listings of diagrams and tables of technical specs. While amusing, naturally we still ended up buying from a different company who had the better combination of specs and price.

    Those looking to buy from, or invest in/fund rare earth companies will also look for the best combination of specs and price, or rather technical data and proposed costs. So, beyond shock value, what would make their presentations/press releases/interactions/private discussions more appealing to those listening? If there was some way these companies, aware of public perceptions/expectations/timelines could somehow “beat” those expectations and surprise the investment community from time to time, on some sort of metric that matters, for example to rework a capex proposal so instead of the $300 million expected now you are asking for $180 million, to produce six 9s purity when only five 9s was expected, to announce you’ve cut your yearly recurring costs/cash burn rate from $3.6million to $3.1million, to announce that the environmental impact report that had been expected in Q2 of 2016 instead was finished early in Q1 of 2016, when most people had already assumed it would slip to Q3 of 2016 anyway.

    These are just made-up examples that I’m sure are much easier to say than to do, and not being an expert in the rare earth industry myself, I may be wrong about the specific examples of what is realistically achievable. However, for each individual company though, there is probably one or two things that they could do in a six to twelve month timeframe that would genuinely surprise the market, or generate some enthusiasm from those considering funding capex or awarding a small/medium contract or offtake agreement. I look at Newmont Mining for example demonstrating an ability over the last three years, as gold prices dropped, to lower their all-in-sustaining-costs of production from $1200/ounce to $1100/ounce to $1000/ounce to now projecting about $900/ounce in 2016 as a good example of what the market is hoping to hear from others, to show they can still keep their productions costs moving down as the commodity price also falls, to keep some sort of positive buffer zone where a small profit can still be made. Each company should try to identify those one or two things they are specifically good at where they can exceed public expectations and generate some excitement around their efforts. No doubt, many of them are already trying.

    December 11, 2015 - 3:59 PM

  • Robert Mackay

    There was an old saying in the brokerage business about analysts, “in a good market nobody needs them and in a bad market nobody wants them”.

    December 11, 2015 - 9:01 PM

  • Robert Mackay

    I forgot to add. 🙂 so I don’t get hate mail on my birthday.

    December 11, 2015 - 9:18 PM

  • Steve Mackowski

    It has always been my view that such presentations are the means to demonstrate trust through content, context and opportunity. PowerPoint can be so boring. But I suggest that’s more to do with the preso focussing more on content that context. And trust? Well that’s another discussion.

    December 12, 2015 - 2:33 AM

  • Alex

    There are two conseption – first Globalization – it means that you can buy any product and it is not important which country produce it. The main is quality and price. The second is “sanction theory” which some part of World can be discriminated. So, second theory need Zone independent supply chain. It means that with no restriction between Zones you need to have exess of production Works, that means low prices and dotation weak Zone production. The problem is that beneficiars of Weak Zone don’t want to donate this Zone producers. They prefer to buy cheaper goods from competetive Zone in the Global Zone theory.
    So, they suggested investors from weak Zone donate the production of rare-earth to keep their possibility to have profit in downstreem application.

    December 12, 2015 - 3:54 AM

  • charles.1

    My feeling is that specialty metals/REE’s etc are not well suited to retail investors. We have seen the problems that rampant marketing to retail did in the last boom, setting unrealistic goals based on a fundamental lack of knowledge. Companies with impossible projects in impossible locations/countries that should have been ignored got swept up.

    I side with Steve M on this one – the fluff of social media and lightweight communication does not pitch AT ALL to the people who really matter in specialty metals. They are the tier one funds, the industrial consumers, venture capitalists associated with industry, government funds….etc.

    Focus on building a realistic business model, not twitter feed or lightweight PR flow.

    December 13, 2015 - 8:44 PM

  • ukus

    IR Departments in junior mining companies? They don’t exist. It is a senior person or two trying to make something from nothing.

    December 13, 2015 - 10:09 PM

  • Sluggo

    Sure hope the Rare Elements Resources folks are tuned in & paying attention.

    December 14, 2015 - 9:39 AM

    • Tracy Weslosky

      They are going to be quite happy Sluggo when they see what Professor Dudley Kingsnorth has to say about them. We are just finalizing the edits and should have online here shortly.

      December 14, 2015 - 3:25 PM

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