Fluid Tailings – Time to Kick The Habit?

Date: November 12, 2015 Author: Ken Kuchling Comments: 8 Replies

What is one thing that we constantly hear about negatively yet we continue to do it (although we know it can be bad for us)? Is that thing smoking or is it fluid tailings storage? Can we break either of these habits?

Short term pain for long term gain.

Those of us in the mining industry constantly hear from stakeholders about the negative impacts of fluid tailings storage. By “fluid” I mean conventional tailings that can liquify and flow great distances. We know of numerous mines that have had failures, resulting in fatalities and catastrophic damage. Check out the horrific example video below. It appears some people were walking or driving mid-way up the dam face.

We also know of many mines that have used fluid tailings their entire operating lives without any incidents. Therefore some say it is fine to continue doing that.

The question for me has become whether the mining industry should kick the habit of fluid tailings storage even though not every dam has failed.

Quitting isn’t easy

Quitting smoking takes real effort, some pain, maybe a change in lifestyle, but most importantly an overall commitment to quit. It isn’t easy but pays off in the long run.

The same holds for fluid tailings storage.

Moving away from conventional tailings storage requires real effort, some pain, a change in operating style, and a commitment to quit. It won’t be easy but will pay off in the long run by avoiding major tailings incidents, less negative press, and fewer environmental permitting issues. No longer will consultants and regulators be disputing factors of safety of 1.2 versus 1.5, when they could be discussing factors of safety of 5 versus 10.

Quitting fluid tailings storage may bring relief to stakeholders, shareholders, regulators, and mine management. They’ll all sleep better at night knowing there isn’t a large mass of fluid being restrained simply by a dam at a factor of safety of 1.5. Engineers say they can design dams that will be stable for perpetuity. Even if one agrees with that statement, that is still no guarantee that failures won’t happen somewhere.

Conclusion

The bottom line is that no one wants to sit downwind of a smoker and no one wants to live downstream of a tailings dam. Perhaps it is time for the mining industry to kick the habit of fluid tailings storage, regardless of the cost and discomfort. Short term pain for long term gain.

In another blog post I have discussed how tailings storage always require a tradeoff between cost and risk. Normally lower cost options present high risks, and vice versa. How much risk is acceptable to a company or to the public? You can read that post at this link “Tailings Disposal Method Risk“.

For those wishing to pursue the dry stack approach, a series of laboratory tests are required to characterize the talings, the process, and the placement method. You can see a checklist of the test options at this blog post “Filtered Tailings Testing Checklist“.

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Constraints: Use Them to Your Advantage

Date: August 22, 2015 Author: Ken Kuchling Comments: Leave a reply

I recently read a business book called “A Beautiful Constraint: How to Transform Your Limitations into Advantages, and Why It’s Everyone’s Business” by Adam Morgan and Mark Barden. It describes how to use constraints, like lack of time, or money, or resources and use them to help transform your company for the better.

Here’s an Amazon link to the book.

The book discusses how to shift away from the typical “victim” role by understanding how our routines control things, ask the right questions, and focus on “how” and not “if”.

Focus on HOW and not IF

A good example: one of the recommendations in the book is in your team meetings no one on your team is allowed to utter the words “we can’t because…”. They must replace those words with “we can if…”. This forces the generation of ideas and promotes a positive attitude rather than a victim attitude.

The book describes how many innovative ideas are due to constraints and those innovations would never have come about without those constraints.

To force innovation in your organization you can create artificial constraints for your team. This will foster innovative thinking and push for “outside the box” ideas. The tougher the constraint, the greater the challenge for your team. Possibly the greater the final outcome too.

The term Theory of Constraints may be common to some. However that concept is different than what is being discussed in the book. The TOC essentially relies on managing a constraint or eliminating it, and then addressing the next constraint in sequence.

The book authors instead propose to exploit the constraint or leverage it to create a new possibility. Hence the title “beautiful constraint”.

Mining has no shortage of constraints

We all know the mining industry has more than enough constraints placed upon it today. It may be lack of funding, lack of skilled talent, environmental pressures, supply-demand issues, social issues, or security issues. Each mining project may have additional constraints, so one probably doesn’t need to create artificial constraints for the team.

The mining industry has no option but to try to use these constraints in a constructive manner. Miners must not let them pull the industry down nor simply wait until they go away. When people say “Mining is cyclical and it will all turn around soon.”, that’s an example of waiting for the constraint to go away.

How long do you wait before taking your own action?

The bottom line is that the book is an eye opener and enlightening. It may be telling some of us what we already know deep inside but don’t acknowledge openly. Don’t wait any longer, start innovating, and don’t be afraid of grand innovations.

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Using Pumped Sand to Build Mine Roads

Date: July 26, 2015 Author: Ken Kuchling Comments: 3 Replies

Several years ago I did some geotechnical consulting for BHP’s bauxite mining projects along the north coast of Suriname. The mines were located in swampy terrain, underlain by very soft clays. The picture below shows the typical landscape when crossing one of the swamps. Haul roads were needed to access the small satellite bauxite pits, which were spread apart several kilometres. The high ground in the background is one such bauxite deposit.

Suriname swamp road for mine

Unfortunately where haul road construction was concerned, there were no nearby gravel pits or road aggregate supplies. However there were significant amounts of fine sand on the high ground “islands” in the swamp. Road building mainly relied on end dumping truck loads of sand, allowing it to settle and sink into the swamp. Then continue adding more and more sand until the settling process stopped. This resulted in high cost roads and very slow progress in construction. Periodic rainfalls, daily during wet season, would cause havoc with the trafficability on the fine sands.

Swamp vegetation to the rescue

How soft were the swamps clays? See the photo to the right.

Where there was significant swamp vegetation (like in the photo above), it would be buried by the fill, helping to form a mat. This supported the road fill and minimized the sand losses into the sub-grade. However in some parts of the swamp the vegetation was minimal and therefore sand settlement losses could be high.

Geotextiles were applied in some areas, using a geogrid. These were successful although large amounts of sand were still required as the entire road would compress the underlying clay.

Once a road was built, the next issue was the trafficability on the fine sand surface, especially after rains. The sand would rut and require constant grading and repair.

Final road capping would consist of hard laterite when available. Laterite is a high iron off-grade bauxite that could be compacted to form a hard surface but would still degrade and get slippery when wet.

If coarse aggregate had been available locally, road performance would have been much better. However we had to work with what was available.

Geo-cells would have helped

A few years later I saw a video about a geo-cell solution for building roads with sand only. The website is The PRS-Neoweb™ Cellular Confinement System (www.prs-med.com). I think there are other similar geotextiles available but this is one that is well described on their website. Sand is placed into the geoweb, which eventually forms a stiffer layer. I assume that one could place the sand using mobile equipment or by hydraulically pumping coarse sand as a slurry.

In hindsight, I would have liked the opportunity to test the geo-cell system in the swamps of Suriname. Potentially it would have been a good solution to prevent both sand losses and to create a more trafficable surface.

I’m not certain if the best location for the geo-cell would have been along the sub-base of the road to support the sand load or near the surface to help create a more trafficable surface. Maybe it would have been beneficial in both situations.

Building a road over a swamp in Suriname is somewhat similar to building a road out onto a tailings pond. Possibly the geo-cells would have application there too.

Use Hydraulic Sand

Another large earthwork project we undertook in Suriname was building a dragline walkway across a swamp. The walkway was 4 km long, 30 m wide and about 2 m thick. That required a lot of fill. This walkway was built using hydraulic sand. Boskalis, a Dutch dredging company, collect sand from the bottom of the Suriname River, barged it to a staging site about 5 km from the walkway, and then pumped the sand to the construction site.

The hydraulic sand was discharged between two bunds where it quickly settled out. It was somewhat similar to a tailings disposal operation. Placing the sand using this approach was low cost and didn’t require trucks driving out onto the swamp. It also advanced the road with a very shallow front face, avoiding slumping failures or mudwaves ahead of the advance. A few softer sections of the walkway route also incorporated geotextiles.

Engineering teams need to look at options since different procedures may be required when building roads over swamps due to the unstable conditions one may encounter.

Conclusion

Geotextiles have many applications in the mining industry. There can be significant up-front costs to purchase and install them but don’t let that scare you away. The savings may been seen down the line. They are definitely worth a look.

The big issue in Suriname were clays, both under the roads and in the overburden above the bauxite deposits. Clays can have many forms, all of which can be problematic to deal with. I have written another blog post about my experiences with the different types of clay and how they may behave. If interested, check it out at “Clays and Mining – Friends or Foes?“

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Meetups and Mining Millennials

Date: July 20, 2015 Author: Ken Kuchling Comments: 4 Replies

Over the last year I have had many encounters with the Toronto tech start-up community. I have noticed some similarities with the junior mining industry but some differences also.

The tech start-up model is similar to the junior mining business model as it relates to early stage funding followed by additional financing rounds. One obvious difference is that mining mainly uses the public financing route (IPO’s) while the tech industry relies on private equity venture capital (VC’s).

There are also some less obvious differences.

Generally the tech industry is young, vibrant, technology-savvy, and applies the latest in social technology to collaborate. The mining industry seems to be lagging behind on many of these aspects.

The following article will describe a few of my observations. As you read through this, ask yourself “Should the mining industry be doing these things?”

Tech Meetups and Networking

My first experience with the tech industry was associated with the many after-hours networking meetings called “meetups”. They are held weeknights from 6 to 9 pm and consist of guest speakers, expert panels, and for general networking purposes. Often guest speakers will describe their learnings in starting new companies and failures they had along the way.

The meetups may also provide “how-to” advice for techniques like Google Analytics, Facebook advertising, Google Adwords, email marketing, etc.).

Attending these meetups is usually free. They are typically held after hours at different tech company offices and they often provide free beer and pizza. One can see the entire industry working together for the betterment of the industry.

How to Organize Meetups

Scheduling of meetups is done via the online software platforms Meetup or eventbrite. Both of these work well for announcing the meeting notice and tracking signups and attendees.

By the way, meetups are not only tech-related; they are also held for interest groups for hiking, theatre, writing, yoga, business marketing, etc. The platforms provide a good way to manage communities. Unfortunately here in Toronto there are no geology or mining related meetups so the mining industry may be missing out on a good way to build a more collaborative community.

The mining industry does have some local meetings, as far as I know there are mainly three after-hour mining events. The CIM has a monthly luncheon with a cost of $50-$65 (not exactly inclusive to everybody). There is a Toronto Geological Discussion Group that holds monthly meetings and seems to be comprised of the older geologist demographic. The third event is Mining 4 Beer, which a small group that meets intermittently at a local bar. These few events limit the amount of buzz for those working in the mining industry. There are a lot of mining companies here with a lot of mining people but not a lot of vibrancy.

Where to hold an event

Most of the tech meetups are held in local tech offices. These offices are great. They have an open concept, pool tables, ping pong, video games, fully stocked kitchen. Who wouldn’t want to work there?

The last time I was in the offices of a large engineering firm I felt like a lab rat in a cubical maze. I’m not saying engineering offices can switch to a tech office layout, but more enjoyment of the office environment might help draw more people to the mining industry.

Perhaps it’s easier to have a positive work attitude when money is being thrown at you (as is happening in the tech world) rather than having to scratch and claw for funds like mining must do right now. However I suggest if one wants more smart young people to come into the industry then one needs to adapt. This means more than just buying the latest 3D geological software. It means creating an environment that people want to work in.

In the late 1990’s I was working in the Diavik engineering office in Calgary. They provided a unique office layout whereby everyone had an “office” but no front wall on the office so you couldn’t shut yourself in. There were numerous map layout tables scattered throughout the office to purposely foster discussion among the team.

A similar type philosophy is used by Apple in their office layout design where even the kitchen placement has a purpose. People should mingle and run into one another to promote conversation. Discussion is good. Camping out in an office is not good.

Keep it short and to the point

Another thing I noticed with the tech industry is that when start-up tech companies are given an opportunity to tell their story, typically they only have 5 to 10 minutes to pitch. No long winded thirty page PowerPoint presentation to explain what they are doing.

The tech industry is also big on the “elevator pitch”, a one minute verbal summary of what they are doing. The tech people are taught to be concise. If you can’t explain it in plain language in one minute then it’s too complicated.

For comparison, many mining investor presentations can be long, highly technical, and tailored to other technical people and not the average person. One must ask who is the real target audience for those presentations?

Communication methods

The tech industry relies a lot on remote workers. They might be overseas or spread around Canada. For communication and collaboration, they use various online systems such as Slack, Google Hangout, Trello. No more long email threads with five people cc’d on each email. Slack uses a chatting approach, similar to text messaging, which makes it easier to follow the conversation and share files.

Can the mining industry be taught to use something new like Slack? I don’t see a problem with that as long as one honestly wants to learn it. It’s really not that complicated.

For interest, another blog provides some more discussion on online collaboration software “Online Collaboration and Management Tools“.

Conclusion

The bottom line is that I can see a great difference in the attitude and atmosphere in the tech industry compared to the mining industry. The junior mining game was the precursor for the tech start-up industry but has not kept pace with evolving work techniques.

As senior personnel retire from mining, the loss of this mining experience will be felt. However the new ideas that may follow could be a positive outcome.

Mining Takeovers – Should Governments Be (Heavily) Involved?

Date: July 13, 2015 Author: Ken Kuchling Comments: 5 Replies

I have seen some on-line discussions about whether governments should be regulating corporate takeovers, some of which may be outside their own borders. The fear from some groups is that mine assets may be acquired by less than desirable acquirers.

One specific example that I have seen is related to the 2015 disposition of foreign resource assets by both Barrick and Ivanhoe to Zijin, a Chinese company. I don’t know much about Zijin, other than having heard Norway’s government directed its $790 billion oil fund to sell holdings in some companies because of their environmental performance. Zijin was one of these companies.

In light of the Norway decision, some groups are questioning whether Zijin should be allowed to buy mining assets currently owned by Canadian or American companies.

Its a balancing act

It appears that some groups would like their governments to step in and prevent a company from selling their mining assets to another company that may have a poor reputation or limited financial capacity. The fear is the new company would operate in a non-sustainable manner and ignore local environmental rules.

Government sanctioning of deals gets tricky in that how do they define which companies have poor reputations and which don’t. Also how can they dictate to the shareholders of a company, possibly nearing bankruptcy, that they cannot sell their assets to a certain interested party?

Governments have stepped in and blocked acquisitions in the past but these were mainly related to deals involving antitrust issues or technology of national interest.

It will be interesting to see whether the idea of governments sanctioning the acceptability of acquirers in the mining industry will gain traction.

It may be an overstep for the government of one country to block the acquisition of a foreign property when the owner may not have the capability to develop the project while the acquirer does.

The foreign government may want to see their own resources developed but another government may be hindering that by blocking transfer of ownership.

The last thing we want are more country-to-country disputes. I presume the only option in this case is to revoke the mineral concessions and assign them to someone willing to develop them. One company will lose an asset, which creates new issues related to compensation. It also harms the reputation of that country as a place to invest in. Unfortunately it had no choice if a foreign government was getting in the way.

Conclusion

The bottom line is whether the government of one country have the veto rights to prevent development in another country? Does the government of one country have the right to decide the environmental standards in another via prevention of an asset sale?

This will be an interesting issue to continue to watch in the future.

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New Mining Software and 43-101 Legal Issues

Date: July 6, 2015 Author: Ken Kuchling Comments: 2 Replies

NI 43-101 puts a fair amount of legal liability on the Qualified Person preparing a resource or reserve estimate or sign off on an advanced study. The QP is to be responsible for the accuracy of their work and take legal responsibility.

Every so often some new mining software comes along and I often wonder what are the risks in using it? Some examples of new mining software that I have heard about (but not personally used) nor have seen mentioned in any 43-101 studies are SimSched, the ThreeDify’s software packages, NPV One, and Bentley.

Is the software doing everything correctly?

Given that as a QP I am legally responsible for my work, I am bit apprehensive about how I can be assured the new software will provide reliable and accurate results for which I accept legal liability. The last thing I would want to do is issue a public technical report which is found to be in error due to a software bug.

Irrespective of 43-101, if you are working at a mining operation the last thing you want to do is present management with an incorrect reserve, pit design, or production plan.

If you are a consultant, how agreeable will your client be when you tell him that his study was done using a novel software package and not one of the industry standard packages, and there was an error in it?

I recall working with a major mining company and there was a reluctance to adopt any new software that was unproven and not an industry standard. Money was not the issue; the company’s concern was with the risk in using unproven software.

What if you have a limited budget?

How do you view new software if you have a limited budget? The new software may be cheaper, may appear to be be great, and may be a technological improvement and all at a lower cost. However the software risk still remains. There is no guarantee that all software output is correct simply because it comes from a computer.

As a QP, I suggest the onus is on the software developers to demonstrate that they can produce reliable and comparable results under all conditions. They need to be able to convince the future users that their software is accurate.

Perhaps over time the new software will gain wider adoption and be generally accepted. We may see more 43-101 reports that use it and hence it will get more overall acceptance.

Another question when developing a market for new software is whether it is better to focus on more consultant adoption or more mining company adoption?

Will mining companies use the software if their consultants are using it, or will consultants use it if more companies adopt it? It’s an interesting discussion that new software vendors must deal with in trying to grow their market share.

Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website. The entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.

Mine Approvals May Be Hinging on the Corporate Bank Account

Date: June 30, 2015 Author: Ken Kuchling Comments: 1 Reply

A few months ago there were some discussions on a now defunct blog site “I THINK MINING” and on a website (https://lindsaynewlandbowker.wordpress.com) regarding whether mine environmental approvals should be linked to the overall financial health of the parent company.

This point was raised in regards to the Mount Polley tailing dam incident as well as other notable tailings failures. The logic behind the idea was that the potentially high cleanup cost for tailings failures could exceed the financial capacity of a small mining company and then the failure cleanup cost would need to be borne by the taxpayer.

Are reclamation bonds of sufficient size?

Closure bonds for final reclamation are standard practice in current permitting approvals and part of the normal course of business. However what is being newly proposed is the requirement to have sufficient corporate funds in the bank account to pay remediation costs for some hypothetical failure. This has not been part of the current environmental approval process as far as I know. Depending on the type of failure scenario one envisioned, the hypothetical cleanup cost could range from low to enormous.

A failure cleanup fund

One of the options being proposed is that the various mining companies in a jurisdiction each contribute money to a failure cleanup fund that could be used for mitigation purposes.

The ultimate goal of this idea may be better environmental practice or simply as a means to curtail mine development by handcuffing smaller companies.

Many deposits are too small for the major miners so the intermediate companies are the only ones interested in them. However if they don’t have the financial reserves in the corporate bank account, then their projects would not get approved.

Small companies would only be explorers

It would impact on the ability for the smaller or intermediate miners to develop new mines if the corporate bank account of the parent company becomes a large part of the mine permitting process. Not only would they need to finance the construction capital cost, which is not easy these days, but they would also need to finance a tailings failure cleanup fund.

It will be interesting to see if this suggested permitting approach gains any traction in the future because it could have a significant impact on the operating approach of the junior industry. Perhaps everyone could really only be exploration companies.

One impact from this might be that new operators will be pushed towards dry stack tailings. Possibly the added costs for dry stacking could be offset against the need for the tailings failure fund.

Regardless of how it would be done, this would become an added cost to the mining industry at a time when it doesn’t need more cost pressures.

Independent Consultants Are Growing

Date: June 23, 2015 Author: Ken Kuchling Comments: 2 Replies

I have read quite a few articles indicating that the mining industry is seeing a shortage of experienced people, on both the technical and management side of the business. Apparently the baby boomer generation is now nearing their retirement or early-retirement stage and there is a gap in the number of experienced people following behind.

Many of these retirees enter the “independent consultant” stage of their careers.

I also hear from recruiters that there is a shortage of engineers willing to take remote or international assignments. This is particularly difficult when a senior level candidate has a growing family.

Can the independent engineers help out?

In a previous article (14. Miners – Why Have Your Own Independent Consultant?) I discussed why mining companies (or even consulting firms) should make use of the independent engineers as advisers or Board members.

I understand from colleagues in the mining industry that many of the people nearing retirement are willing to take on consulting assignments or board or directors roles or other management roles. They are often willing to work part time and independently. Or they may work as “associates” with engineering firms.

So there likely is a significant network of experienced people out there. It’s just a matter of being able to tap into that network when someone needs specific expertise.

So how can one do this?

LinkedIn currently seems to be the only global network for technical people. It is a great way to connect with engineers and geologists industry wide.

LinkedIn members work everywhere, at mine operations, consulting firms, financial houses, as independents, or even retired. Almost every technical person I know is registered on LinkedIn.

The question is how to find these people when you are looking for a specific independent expertise for a short term or over the longer term.

Networking

Networking with people you already know is the most common approach. However what if you need someone with particular knowledge?

LinkedIn is a great search mechanism for technical experts. With a keyword search one can identify a lot of experts with very specific skill sets. The problem is that many of the experts highlighted by the LinkedIn search may be fully employed at mining operations or with large consulting firms and may not be the person you are looking for.

To my knowledge, there is no searchable online registry solely intended for independent geologists and engineers. It would be in the interests of the mining industry to have some type of easily searchable independent consultant directory to be able to tap into the expertise that is out there. I understand that MineLife.org is attempting to build such an online service but it still appears to be early in the development stage.

Mining Cashflow Sensitivity Analyses – Be Careful

Date: June 15, 2015 Author: Ken Kuchling Comments: 1 Reply

One of the requirements of NI 43-101 for Item 22 Economic Analysis is “sensitivity or other analysis using variants in commodity price, grade, capital and operating costs, or other significant parameters, as appropriate, and discuss the impact of the results.”

The typical result of this 43-101 requirement is the graph seen below (“a spider graph”, which is easily generated from a cashflow model. Simply change a few numbers in the Excel file and then you get the new economics. The standard conclusions derived from this chart are that metal price has the greatest impact on project economics followed by the operating cost. Those are probably accurate conclusions, but is the chart is not telling the true story.

I have created this same spider graph in multiple economic studies so I understand the limitations with it. The main assumption is that all of the sensitivity economics are based on the exact same mineral reserve and production schedule.

That assumption may be applicable when applying a variable capital cost but is not applicable when applying varying metal prices and operating costs.

Does anyone really think that, in the example shown, the NPV is $120M with a 20% decrease in metal price or 20% increase in operating cost? This project is still economic with a positive NPV.

In my view, a project could potentially be uneconomic with such a significant decrease in metal price but that is not reflected by the sensitivity analysis. Reducing the metal price would result in a change to the cutoff grade. This changes the waste-to-ore ratio within the same pit. So assuming the same size mineral reserve is not correct in this scenario.

Changes in economic parameters would impact the original pit optimization used to define the pit upon which everything is based.

A smaller pit size results in a smaller ore tonnage, which may justify a smaller fleet and smaller processing plant, which would have higher operating costs and lower capital costs.

A smaller mineral reserve would produce a different production schedule and shorter mine life. It can get quite complex to examine it properly.

Hence the shortcut is to simply change inputs to the cashflow model and generate outputs that are questionable but meet the 43-101 requirements.

The sensitivity information is not just nice to have. Every mining project has some flaws, which can be major or minor. Management understandably have a difficult task in making go/no-go decisions. Financial institutions have similar dilemmas when deciding on whether or not to finance a project. You can read that blog post at this link “Flawed Mining Projects – No Such Thing as Perfection“

So if the spider chart isnt he best way to tackle the risk issue, what way is better? In another blog post I discuss an different approach using the probabilistic risk evaluation (Monte Carlo). Its isn’t new but now well adopted yet by the mining industry. You can learn more at “Mining Financial Modeling – Make it Better!“

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Junior Mining – Are People Still Investing?

Date: June 8, 2015 Author: Ken Kuchling Comments: 3 Replies

Update: This blog was originally written in June 2015, however many of the observations made then still hold in late 2018.

The general consensus over the last couple of years is that the junior mining sector is still in a state of flux.

I briefly touched on this in a previous article “12. Financings – It Helps to Have a Credible Path Forward”.

It is still difficult for junior miners to get funding and the stock prices of have been on a downward trend. Some observers say this just a temporary phase and the stock prices will cycle, as they have in the past. I’m not convinced that this will be the case, although I am hoping.

Metal prices may recover, but will stock prices?

I am reasonably confident that metal prices will improve over time, but I am not sure that alone will result in the junior mining sector invigorating. I think there is a long term shift in how personal investments are being made and how the mining industry is being viewed. The following blog has some personal opinions on the present and the future.

Mining companies are constantly in the media with stories of cost over-runs, mine shutdowns, fatalities, strikes & protests, and environmental incidents.

In addition, the junior mining sector has had a few notable scams that nobody ever forgets about.

In some instances management were over promoting sub-optimal projects simply for the purpose of raising the stock price and cashing out. Not many companies fell into this category, but enough to create an unfavorable image of the industry.

I think it will take time to recover from the image being created by the events described above. Unfortunately new incidents only build on the perceived legacy.

The implementation of sustainable and green mining practices is an attempt to rehabilitate the image of mining, but is anyone out there listening?

Are investment practices changing?

Regarding today’s investment practices, I have three general observations:

Yield Investors: When many of us baby boomers were younger with a steady job, we were willing to speculate on mining stocks hoping for the big payoff. At the time there were some well publicized payoffs. Also there wasn’t much else to speculate on.

Now those same baby boomers are moving into retirement and financial planners are push them into fixed income and dividend paying investments. Be happy with a 2% to 5% yield. The risk tolerance for many of these investors has shifted from speculation / growth to income / capital retention.

I’m not sure how many of these people will ever re-enter the mining stock market. The majority of miners don’t pay any significant yield. Looking at the yield for Barrick (2%), Goldcorp (0.8%), and Yamana (0.85%), their yields are lower than those for the more conservative bank stocks (4%-6%).

Where to speculate now? Where might the 30 to 40 year old’s speculate today? Younger people today may still speculate with their free cash, but they are not hoping to be investors in the next Voisey’s Bay, Kidd Creek, or Hemlo. They have never even heard of them.

They are hoping to be investors in the next Apple, Google, or Facebook, or a cannabis company. The dot.com bubble of 1999–2000 was a case of junior mining speculators jumping into technology and it was a bust. However currently several of the new breed of dot.com companies that have IPO’d are getting huge share price increases. Is it still a tech bubble? Not so much anymore.

I don’t know whether the younger speculators will ever have interest in the mining sector since they never heard of it. There is so much other investing activity happening out there.
The perception of mining: The mining and energy news shown in the media is not helping the industry by focusing mainly on the negative aspects. The resource business appears to be somewhat analogous to the meat industry. Everyone likes their nicely packaged rows of chicken and beef at the grocery store but nobody wants to see how it actually gets to the store. Everyone also loves their metallic gadgets and the energy used to power them, but please don’t show how it actually gets from mine to store shelf. It can be quite upsetting.
Complexity: To invest in a mining stock or understand a mining IR presentation, one needs a basic understanding of mining and geology. To understand a tech stock or bank stock, one does not need to be an expert in that industry. People will intuitively have a better comfort level with them.

Can mining companies provide more yield?

An interesting group of companies are the mid tier producers that have operating mines and generate profits, but do not pay a dividend. I will be curious to see how these companies shares will perform since they don’t satisfy the yield investor nor may they satisfy the pure speculator looking for order of magnitude capital gains.

The larger mining companies will always have their investors like pension funds and mutual funds, however the junior miners may be a different story.

Possibly private equity and equity-based crowdfunding will be one of the long term solutions.

I have heard of one geological consulting firm that was trying to foster a plan to help crowdfunders with their 43-101 report even though they don’t yet have the money to pay for the report.

I also understand that Canada now has a few private equity stock exchanges that allow PE to change hands, which may facilitate more private equity involvement.

Conclusion

The bottom line is the mining industry needs to have a self-examination with respect to what the future holds. There is talk that mining needs to change its business model, but very little suggestion regarding what changes to make.

The growing population changing demographics, competition for equity funding, and society’s urbanization may result in fundamental, and permanent, changes to how the financial side of the junior mining industry can function. Just my opinion.

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