|By Remy Blaire|
Photos provided by Andy Jackson
The thought of an exploration trip may conjure up images of far-flung locales and rugged all-terrain boots. The closest that many come to an expedition for natural resources is in a Hollywood thriller, but this is the everyday job for exploration juniors and the investment analysts who follow them. While many investors may be wary of the risks associated with early stage exploration projects, seasoned mining investment analysts have developed guidelines to determine the economic potential of such projects. With a slim chance of a project yielding an economic mine, how do potential investors seek out the next big opportunity? And how are projects evaluated to arrive at an investment recommendation?
Sprott Global Resource Investments Ltd.’s Andy Jackson is an economic geologist who is as comfortable in the bush as he is at his desk in Carlsbad, California. Born and raised in landlocked Zimbabwe, Jackson spent his childhood schooling surrounded by the bush. After his undergraduate degree in Zimbabwe and time in the military, he resided in Namibia, Botswana and South Africa and became accustomed to the harsh dry heat of the desert and the febrile humidity of the tropics. His advanced education brought him to the cooler climes of Canada where he completed an M.Sc. in Economic Geology at the University of Western Ontario. Jackson would go on to circumnavigate the world for Gencor/Billiton and Placer Dome. With expertise in precious and base metals, coal and diamonds, he carried out exploration programs in Africa, Asia, Australia, Europe and in North and South America. He has hands-on experience with fieldwork and management, playing a part in the discovery of several epithermal gold deposits in Turkey, a greenstone gold deposit in Botswana, a major Carlin-style deposit in the United States and a copper-gold porphyry deposit in Indonesia. All, except the last of these, have been developed.
Andy Jackson: Crucero, SE Peru – Lupaka Gold
Partnering with Rick Rule:
After thirty years working in the major mining companies, Jackson joined Rick Rule’s Global Resource Investments as a technical advisor. It has been over a decade since Jackson and Rick Rule teamed up to form a powerhouse of knowledge in the natural resources sector. With Rule’s extensive expertise in contrarian securities investing and Jackson’s background in economic geology and major mining operations, the pair are able to identify early stage exploration projects that may emerge as major deposits. Sprott Global Resource Investments Ltd. is uniquely qualified to perform geological and financial evaluations on projects and companies.
Jackson outlined how he goes from investment idea to client recommendation:
1. Scour global developments and review company news: dissect exploration results in press releases and company announcements, reading between the lines to answer the ‘who, what, why, where and when’ questions.
2. Research the company: go through the provided presentations and dig deeper into publically available information on the organization and its properties.
3. Initiate contact with management: speak with company management and board members. Get to know the team behind the project and its strategy. Identify any red flags: amount of working capital, debt, burn rate, exploration program and budget, G&A expenditure, asset ownership and project jurisdiction.
4. Carry out a field review or site visit: once a company passes the initial review process, a tour of the site is scheduled. Jackson says, “Reading exploration reports for projects is never quite the same as getting your feet on the ground and seeing the rocks for yourself.”
Visits to sites may involve travel in light aircraft, helicopters, ATVs or small boats, but it is an essential part of the review process. For projects in high-rainfall tropical areas, it is particularly important to get to site. “In areas like these it’s difficult to see fresh rock in outcrop,” Jackson says. “It’s essential to review the drill core. Without inspecting the core it can be close to impossible to determine the controls on mineralization, and hence the potential size of a project.”
Asked how he handles visits to the more remote areas of the world, Jackson says he doesn’t see this as an issue. It is not just Jackson’s understanding of mining permits, deposit ownership and ever-changing governmental rules and regulations – it’s his years of being on the ground in all sorts of situations that give him insight into potential projects. It also helps to have a strong stomach. Jackson says munching on mopane worms in Botswana, or chewing on pickled crocodile’s tail and chicken’s feet in China, comes with the territory. As for personal safety, he relies on street smarts as much as book smarts.
Newly Extracted Drill Core: MOD Resources T3 prospect, NW Botswana
A Career in Exploration?
Jackson says the mining industry has changed hugely over the last forty years. Back when he was first starting out, the typical career path for a newly qualified geologist was to find employment with a major mining company. Mentorship could be taken for granted and exploration was part of the business model for the major mining houses. However, for the past ten to fifteen years, the majors have shied away from grassroots exploration and new graduates can no longer count on this career path. Most exploration geologists now enter the field with junior companies, but there may be drawbacks for aspiring explorationists taking this route, as they are often viewed simply as ‘cheap labor’, they don’t always get well mentored, and there is seldom any promise of long-term job security.
The business model for exploration has also evolved. Climbing the career ladder as a geologist in the natural resources sector now requires an understanding of mining legislation, finance and other aspects, in addition to the old-time technically focused skill sets.
Trends on the Horizon:
As we head into the New Year, Jackson expects the junior mining companies to continue their emergence from partial hibernation and to increase exploration expenditure. This will result in accelerated discoveries and hence potential targets for investment.
The majors will also increasingly re-engage in greenfields exploration. In recent years, they have come to the realization that their exploration pipelines were becoming depleted, and the rate of discovery in the brownfields areas around their existing operations, has dropped. They are now increasingly funding junior companies to do greenfields exploration. Jackson says “the exploration pendulum is now swinging back towards the juniors … and that means more targets for Sprott’s investors.”
Cotabambas, E Peru – Panoro (May 2013)
Andrew is a widely experienced economic geologist with a background of 40 years in the exploration and mining industry. He holds an M.Sc. in economic geology, and is a Fellow of the Society of Economic Geologists.
Andrew spent 12 years with Billiton / Gencor, becoming Exploration Manager for Southeast Asia, Turkey and North America from 1991–1996. He joined Placer Dome in 1996 and over a period of 10 years with Placer, held the positions of Exploration Manager for Canada, Exploration Manager for North and Central America, and Manager Global Near-Mine Exploration (covering 17 mines worldwide). He also headed a specialized target generation team that targeted very large gold deposits worldwide using advanced geological concepts.
Andrew has managed exploration programs on every continent, excluding Antarctica, establishing expertise in a wide range of commodities including precious metals, base metals, diamonds and coal. He has played a part in the discovery of three epithermal gold deposits in Turkey, a greenstone gold deposit in Botswana, a major Carlin-style deposit in the United States and a copper-gold porphyry deposit in Indonesia. All except the last of these have been developed or are currently in construction.
Andrew joined Sprott Global Resource Investments Ltd in 2006 and draws on his experience to identify top exploration teams and early stage exploration projects that have the potential to become world-class deposits.
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