Why you never put “Great” in your company name.
The Oxford Dictionary has this to say:
Line breaks: gla|cial
Pronunciation: /ˈɡleɪsɪəl , -ʃ(ə)l/
Definition of glacial in English:
Extremely slow (like the movement of a glacier):
‘an official described progress in the talks as glacial’
First Mover Disadvantage?
Back in the dim distant past when Molycorp was the bizarrely named subsidiary of a major company and out of the public eye, back when Avalon’s main project was tin in Nova Scotia (smirk) and when most of the rest of the Rare Earth crowd were not even a twinkle in a promoter’s eye there was Great Western. This company was Ur-REE stock and that potentially gave it a headstart on everyone else. It was a takeover target (from Molycorp) when the rest of the space were in short trousers. It was (potentially) vertically integrated (with Less Common Metals and the facility in Troy Michigan) some years before Molycorp bought Silmet. It was doing everything right.
The iconoclastic former management are gone though and the new crew at the company then hewed to the “tried and untrue” modus operandi of the rest of the REE space with the obsession with consultants, who scarcely could name the Lanthanide Series in 2009 and suddenly became rent-a-gurus applying tenets that applied for other metals to the altogether more complicated REE dominion. Budgets blew-out and the timetable to production went the way of the Dodo.
In any case, in the Rare Earth Stakes, Great Western “threw a shoe” at the first turn and has been plodding along ever since.
Get our daily investorintel update
The Tailings/Ore Stockpile
When GWG first appeared on my radar screen one of the chief attractions was that it had not only a past producing mine (which only Molycorp, which was then private, could boast of) but also a substantial tailings/ore stockpile resource that was sometimes mentioned as grading 7% TREE. Even Molycorp didn’t have any exploitable tailings of note.
The trend in recent times of turning to old rockpiles that frequently have higher grades than in the legacy deposits underground has been a welcome one. The processing usually does not have any mining cost besides moving the material to the processing plant and frequently it is already crushed to a size that is able to go straight into the concentrating process or at least does not need the expense of heavy-duty initial jaw-crushing. Alas in the case of Great Western in their rush for size, the initial plans went out the window and tailings became a mere sideshow. However we have gone back through the filings of the company and in our opinion the tailings and ore stockpile were a resource not to be sneezed at and could have helped GWG achieve production (and cashflow) much faster than it is likely to do. Indeed it would be in production now and the credibility bump from having done so would have made it a stand-out name.
To quote Venmyn Deloitte’s Report on the Feasibility Study.. “The Historic Main Rock Dump is composed of heterogeneous material consisting of a mixture of REE-enriched monazite material and granitoid country rock varying in size from clay grain size fractions through to boulders >1m in size. The Historic Main Rock Dump was wedge-shaped and draped over the south-eastern slope of the Steenkampskraal Koppie east of the existing inclined shaft.
The Historic Small Rock Dump located near the top of the Steenkampskraal Koppie, and was created during the 1950 to 1951 surface exploitation of the mineralised monazite vein by the Vanrhynsdorp Mining Syndicate and was composed predominantly of monazite mineralisation.
The Anglo American Corporation mining activities from 1952 to 1963 resulted in the development of two separate TSF’s within the Steenkampskraal Project area, variously named the Upper, SD1 or Tailings Dump 1 and the Lower, SD2 or Tailings Dump 2. The two facilities contain REE bearing material composed of partially processed, oxidised fines from the historic Anglo American Corporation plant.
In 1986 Anglo American Prospecting Services (Pty) Ltd (Palmer 1986) estimated that around 54,000t of low grade (5% to 8% REO+ThO2) material was estimated to be present on the waste dumps and within the historic TSFs, quoted as diluted RoM based on a minimum stope width of 91cm (Jones, 2012).
In 1996 Rareco prepared an estimate (non-NI43-101) that was undertaken by Mendelsohn, the results of which were:
- 43,500t of historic TSF on surface containing 9.52% REO; and
- 41,500t in the waste rock dumps containing 5 to 7% REO.
The 2011 drilling and pit sampling campaign indicated that the Historic Main Rock Dump contained approximately 41,500t mineralised material at an approximate mean grade of 4.81% TREO+Y2O3”.
The fact that this RICHLY-mineralized material has been largely ignored (except for mass earthmoving of the tailings/ore from one place to another) leaves us unsurprised that GWG has turned a first mover advantage into an also-ran status.
Back in the distant past when the Engdahl/Billingsley/Malashewski team ruled the roost the initial plan at Steenkampskraal was put to me as a Chinese inspired “cheap and cheerful” processing operation that would be “plastic tubing and corrugated sheet iron”. The mooted budget was a back of the envelope $25mn, if I recall rightly. This was music to my ears as everywhere around me I was surrounding by braying promoters for the other REE companies that were talking of budgets that would make a Pharaoh blush.
For the last 18 months, I have been looking favorably at anyone that can take a pilot plant, morph it into a small scale mining operation and then (hopefully) self-fund to a larger operation.
Great Western have gone the other way, starting modest and then throwing caution to the wind with Cecil B. De Mille-like gusto. It looks like the Blair Witch Project morphed into the Ten Commandments. All this coincided with the chances of getting funded for any type of project going into sharp retreat.
In eschewing a “soft” start-up using the tailings being put through a “right-sized” plant GWG not only missed the boat but waved at it as it was sailing away..
We have often compared the Rare Earth space to a horse race. The allusion has served us well as life has come to mimic art (or sport, as the case may be). However to continue in that vein, GWG is like the horse that gets to start halfway around the course…way ahead of all the others and yet still manages to throw away this advantage. It has become less of a sprinter and more of a plodding cart-horse.
What to do? Well many businesses outside the mining space are prone to changing plans once they have started building things in response to changed market conditions. Too often in mining alas the “path not taken” is not to be considered even when it is not too far down the track to double back and set things back on the right course. GWG has complicated things though by piling on debt which has become its cruel taskmaster that drives it forward on a mistaken path when economic reality would suggest pursuing another outcome. Whether GWG can return to the “small is beautiful” course is now doubtful and, if not, then it just risks becoming yet another salutary lesson in how not to do it.
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>