JOHANNESBURG (miningweekly.com) – South Africa looks a lot like the global gold mining industry in that it has not encouraged reinvestment in its mining industry’s future, says Barrick Gold president and CE Dr Mark Bristow.
"In fact, if anything, South Africa has harvested what it received back in 1994," adds Bristow, a hugely successful discovery-and-development protagonist, who was asked by Mining Weekly to provide guidance on how South Africa should go about attracting investment in exploration.
While South Africa has met all the demands from all of its stakeholders, it has depleted an industry that has considerably long lead times when it comes to discovery and development.
The opportunity is there, in Bristow's view, to apply some innovative exploration thinking in a different setting, accompanied by the return of an effort to develop geological research skills at the highest level, as was the case in the past.
As South Africa’s exploration strategy gets drafted, questions on how to attract investment in greenfield exploration in particular are being asked, as well as what metals and minerals should be targeted.
Barrick, under Bristow's leadership, has just delivered its tenth consecutive quarter of meeting or beating its guidance.
To its great credit, Barrick, as a gold and copper major, continues to be intensely involved in exploration, which was reinforced during Monday's presentation of dividend-rich results by an eye-catching headline, which read: “Exploration drives the Barrick train”.
Bristow is highly critical of the global gold industry depleting itself through the lack of quality replacement via greenfield exploration in particular.
In seeing South Africa as looking a lot like the global gold industry for failing to encourage reinvestment in mining’s future, he is also scathing about those who state that it is easier to buy mining assets than to find them.
On how South Africa should go about attracting exploration investment, he says: “You’ve got to create the climate and then you attract the actors. South Africa is still robust enough. It’s market still has global investors. So, with a friendly face to capital, it could very quickly attract global investment.”
Barrick currently has prospective new properties in Tanzania, Egypt, Guyana, Japan and Nevada, and Bristow sees South Africa as being in need of discovering and developing metals beyond gold and platinum-group metals, although he still regards Barberton as having many opportunities in gold, and also sees gold-opportunity gaps along the Witwatersrand
“South Africa’s got nickel, vanadium, titanium and what nobody can get away from, iron-ore for steel,” he said, adding that these metals had not been invested in because they were a low-hanging fruit for so long.
“Then, go back to what used to take place at Rhodes University, in Grahamstown, where the exploration course was like an MBA course. One of my senior colleagues come from there. It was a world-leading exploration centre. R&D requires extraordinary scientific skills and geology is a marriage between innovation or art, creativity and solid science. It’s not easy to just switch on.
"Fundamentally, there are two types of exploration. There is real scientific exploration and that is the tougher of the two because you have to have filters and you have to be able to turnover targets. Then there is prospecting, which is largely opportunist. Like most of the explorers in the world today, they are opportunists.
"Many juniors dust off old targets that haven’t made it and they come out into the market every time at the top of the cycle. The difference now is that the gold industry has had a long bull market. It’s been a bull market from 1999, and the industry has been stripped of quality replacement opportunities. You don’t get quality replacement opportunities unless you're exploring, and that’s what Barrick’s doing," says Bristow.
Mining Weekly: What is the benefit to Barrick stakeholders of greenfield exploration being such an integral part of Barrick’s business?
Bristow: It’s quite interesting. Barrick lost its way through a couple of badly timed deals during the last bull market. But before that, it was built on significant brown and greenfield exploration, as was Randgold Resources. Cultural memory is quite important when you manage something because that helps me, in my aspiration of repositioning the culture, for want of a better word. It’s really DNA and one of the building blocks of the business. Senior executives spending time with our stakeholders is important. Everyone has to rush around meeting fund managers who are, of course, representatives of our shareholders. But equally important are the host country states and our workers and our communities. So, we’ve got some of our people in South America at the moment, who are visiting governments such as the government of Guyana and a couple of other countries. The team will continue to go to where we have engagement, and it is in those countries that I’ve personally spoken to senior Ministers or Presidents, and we’ll go and spend time with their Geological Surveys and it’s interesting. Part of South America is working very hard to unpick their natural resource industry on the back of wanting more, and there is another big swathe in northern South America, going into Central America, where there are new governments and leaders who are looking to attract investment. We’ve certainly engaged there.
It's now nearly a year that we’ve been working with the Egyptians to get the tender sorted out because, again, we don’t want to just acquire a tender. We want to know the rules of the game. We were able to tidy up the exploration permits and we worked as an industry. One has to get good ground and to have the rules set properly so that you know that if you find something, you have the right to mine it. All this is in contrast to the promotion of instant gratification that the hot market breeds, that same-old, same-old. When you get to the rules being set properly and you find something, there are opportunities because, as I always say to my team, if there's one thing I’d like to do is to find another Morila. If I don’t, I’d like to find the person who has found another Morila before he knows he’s found it. Then a third one is the opportunity to buy high-quality assets because mining is so inefficient, and that’s more opportunistic. The first two are really in our hands, and to do that, you’ve got to teach people what a good asset looks like because so many people in our industry actually don’t even know how to calculate an NPV. They talk about it, but they don't really understand the impact. We’ve probably looked at three dozen gold projects to due diligence and of those, at least 30 haven’t provided the return.
An interesting debate now is on what makes a tier 1 copper deposit, and that’s a very complicated question because if you are dealing with sediment-hosted copper like in the DRC, for instance, or parts of Europe, Poland, it is high grade, and then it’s really down to mining methodology and metallurgy complexity. But if you are dealing with porphyries, it’s very different and the big challenge in porphyries is the depth below surface, and how much stuff you have to move before you get to things. There are very many projects that require significantly higher copper prices to make a return. But when you get copper and gold, that’s a completely different story and Reko Diq, in Pakistan, is one of those that we’re looking at now.
Quality replacement opportunities come with proper exploring and Barrick has many examples of exploration successes. Barrick’s Goldrush is an exploration success and Fourmile, which is still in the making, is an even better high-grade success. Pueblo Viejo is a product of the new team with an understanding of the business and utilising the invested capital to support a 200% life extension of more than 20 years. That’s about metallurgy and understanding the orebody. There is continued replacement both at Kibali and Loulo-Gounkoto. We’re comfortable replacing ounces but you’ve got to look at the next big one. When you find the next big one, you create value. With Barrick, Veladero, Goldstrike, Cortez, Pipeline and Turquoise Ridge are beacon deposits. The work that we’ve been doing in the Tethyan metallogenic belt, which extends from Turkey to east of Pakistan, there is still enormous range of amazing porphyry and so much more still to discover. One of the things that has been successful recently is the ongoing Russian commitment to geological survey work and national research. The changes to legislation in South America are going to drive out any semblance of R&D, but we haven’t made any strategic decisions to withdraw because this is the time you should be exploring in those countries and then a lot of the cycle will come back again.
Should South Africa encourage both majors and juniors to explore and should juniors be incentivised by a flow-through tax incentive scheme similar to the one in Canada, for instance?
You need both majors and juniors, but fund managers should not put pressure on juniors to, in easy money times, go after anything. The hunt for mega deposits takes time and tenacity. Canada still probably represents the most entrepreneurial economy when it comes to mining and the capacity of the stock exchanges to support high-risk investment. In the last bull market, everyone threw money at anything, like we’re seeing now, and some juniors tended wrongly to secure old, previously uneconomic assets. Today the industry is not making considered decisions and what frustrates me is that some fund managers are obsessed with short-termism. There has been a massive transition away from specialist investors to passive investment, which has distorted the market materially. It’s a very different market today than when I first started.
How can South Africa encourage foreign investment into greenfield exploration?
South Africa made a point of ignoring international firms. It did a very good job of driving out its own home-grown world-class mining companies and now it’s got to try and bring them back, and markets have memories. The risk is that when you change to attract, the first arrivals are not the best. What you have really got to do is to try and attract global money. Then you’ve also got to have home-grown entrepreneurs because otherwise you don’t get the full benefits of an emerging investment climate. You’ve got to create the climate and then you attract the actors. South Africa is still robust enough. It’s market still has global investors. So, with a friendly face to capital, it could very quickly attract global investment.
Barrick's exploration in Japan is an example of significant progression. The New York- and Toronto-listed company is part of the Japan Gold Strategic Alliance. The initial phase of geochemical screening has been completed on all original alliance projects and advancement into new claim areas added since commencement is under way. Gravity surveying, which is 100% complete in Kyushu and Honshu, has commenced in the Kitami region in Hokkaido.
Based on results to date, follow-up activities have been initiated at the Mizobe project and Mizobe-Onoyama projects, located in the Hokusatsu region of the southern Kyushu epithermal gold province. These include infill geochemical sampling, prospecting and mapping to locate the source of anomalous drainages and rock float, which were identified during the initial screening phase.
Seventy-seven new applications were submitted to extend areas of interest around the existing Togi, Buho and Kanehana projects.