Q. Can you tell us more about your time spent in Australia with Monash University and your field work at Mt Isa?
I lived there from 1992 to 1997 while I did my PhD.
I chose to study the extensional history and architecture of the western part of the Mount Isa Inlier.
It was very field-based so I ended up spending two to three months every year camped in the outback mapping and figuring out the structural history of some fairly big, complicated areas.
That PhD work led to a post doctorate, which wrapped up in 1997. I decided at that time to step away from academia and get into industry and mineral exploration and that has been my focus ever since.
My time at Monash was absolutely invaluable and unique.
Q. Why is Canada such an attractive option for Australian miners?
Having lived and worked on projects in both countries, three reasons come immediately to mind: the similar geology, geopolitical stability and security of tenure; essentially they share the same merits.
Both countries were founded on mining and continue to have world-class miners and Tier-1 mining camps.
Second, Canada was founded with the same political/legal system as Australia.
Every mining jurisdiction has its challenges, but miners can enjoy security of tenure and work through a legal system if there is an issue.
Finally, Canadian gold companies, like Australian companies have a foreign-currency exchange advantage.
Gold breached $2000 per ounce in Australian dollars and gold is trading at $1845 per ounce in Canadian dollars. That’s pretty attractive.
Q. Can you please tell me a bit about the Oxygen Capital business model? What is the incubator concept about?
The Oxygen Capital team is a private mining house that I put together with two business partners – Donald McInnes and Sean Tetzlaff.
Essentially, we create and structure new mining companies based on exploration and development opportunities that we identify.
We put our own equity to work, take these companies public and build independent management teams and boards around each one. Over the past 19 years, we have built nine companies along with an incredible multidisciplinary team of experts in exploration, discovery, resource estimation, finance, mine development, operations and CSR.
We have built all of our companies around the mantra of “good projects in good places” and generally focus on brownfield data rich projects in good jurisdictions where a lot of the exploration risk has been removed, or minimised.
We like projects that have a lot of historical data that we can reinterpret, and focus on finding the prize that is often left behind. Frequently, that prize is huge.
We have been able to have repeated success with this business model and scientific approach to data analysis and discovery.
There are currently four companies in the Oxygen Group: Liberty Gold, Pure Gold Mining, Discovery Metals and Sun Metals.
Each is run by a dedicated management team, and independent board. Importantly, they are focused on Tier 1 jurisdictions in places like Red Lake, Ontario; the Great Basin in Nevada, Idaho, Utah; north central British Columbia; and northern Mexico.
Q. How has Oxygen Capital maintained relevance in Canada’s struggling junior mining sector?
In this business, like in any cyclical business, if you get the timing right the results can be spectacular and beautiful. If you get it wrong, things can turn bad quickly.
And getting the timing right isn’t just a matter of luck (although that helps), it is a matter of discipline and endurance and a commitment to building the best pipeline you can in a bear market when things are cheap.
Since 2013 we’ve been in a bear market. That seems to have turned now thankfully, but during this period, we stuck to our knitting.
We have been focused on buying, exploring, advancing great projects in great places. The past four years have been a gestation period for our projects and companies and we are now ready to start serving up a pipeline to the world at a time when our industry desperately needs new projects and new production.
Q. I understand that brown fields projects are generating the best returns in Canada right now, why is that?
You’re quite right, brownfield discoveries have been the story.
Kirkland Lake Gold, for example, epitomizes that theme today. It is a real life example of an asset that was tired and difficult and got completely rejuvenated by exploration success and the discovery of massive upside and resource and grade expansion.
The same story underpinned the history of Goldcorp. The Red Lake mine went from producing 53,000oz at 8 g/t in 1995 to producing 552,000oz at 77 g/t in 2004 after the discovery of the High Grade Zone.
We see a similar theme, for example, at our Madsen project owned by Pure Gold. Madsen was a past producing mine in Red Lake Ontario, just down the road from the Red Lake mine.
We acquired it in 2014 for under C$10m, drilled off 2.5moz of gold at about 9 g/t, and have transformed it into the highest grade gold development project in Canada today. It is on the cusp of production. It is very exciting.
Q. What effect has the cannabis industry had on Canadian mining?
In Canada, for the past few years, a huge percentage of risk capital has flowed into the cannabis industry, which has had a really negative impact on capital available to the junior mining sector.
The numbers are stark: in 2018, cannabis companies raised $4b, versus $217m raised for junior mining.
I think we are seeing this trend starting to change. Especially as gold prices are now beginning to rally and North American investors are wanting to get positioned in an industry that they correctly see as deeply undervalued.
I feel that over time, as cannabis companies mature and become real operating businesses, the bloom will come off the rose, so to speak. Reality will set in and investors looking for better returns will turn to other sectors, like mining.
Q. Can we expect another round of mergers and acquisitions from Australian companies any time soon?
I think it is quite possible.
Although I do think that window may be closing soon if North American investors start getting seriously positioned in the space.
With gold breaking through US$1400, we are seeing a lot of renewed interest out there and the value gap between Australian and North American mining companies is beginning to narrow.
But there is still a ways to go. Between the geopolitical stability, value and security of tenure we just discussed, this is one of the most attractive and profitable gold mining countries in the world.
