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Facilitating the New Mining Outlook

Raul Díaz - First Mining Finance Corporation
Exploration Manager, Latin America

STORY INLINE POST

Wed, 10/19/2016 - 12:10

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Q: How are companies like First Mining Finance taking advantage of current bear market conditions?

A: In bear market conditions new business models arise such as the mineral bank model created by First Mining Finance. This model encourages companies to acquire assets that would not be attainable or available in normal market conditions, and hold or bank them until the market improves. Then we can sell the properties or tender them for joint ventures, retaining a royalty or interest in the projects. At the moment, there are many resource companies that are severely undervalued and this has allowed us to acquire instead of exploring and developing new resources.

Q: In which countries has First Mining Finance’s mineral bank business model been successfully implemented?

A: This business model is applicable across all mining markets but we are looking for mineral assets in stable, mining-friendly jurisdictions across the Americas. In the past, easy access to financing encouraged the creation of exploration companies and for years this resulted in tremendous development of assets across Canada. Unfortunately, in the downturn many of these players hit a wall and were unable to raise more money. This scenario is less frequent in Mexico. However, we are seeing some M&A activity such as Timmins Gold acquiring Newstrike and First Majestic Silver’s takeover of SilverCrest. In general, opportunities abound in Canada and given that the country hosts some of the most productive and unexplored mineral belts in the world where quality assets have already been developed, we see it as particularly attractive.

Q: How has the company been able to complete a number of acquisitions without share dilutions?

A: When the company went public, we raised nearly US$5.8 million and one of the reasons we have maintained a healthy corporate treasury is that we are using shares for acquisitions. We are using cash wisely, and some of the recent acquisitions we have completed provided cash flow in addition to mineral assets. Our goal was to reach 10 million ounces in two years and so far it has been eight months and we have already reached 9 million ounces of gold equivalent. We have maintained a stable stock price since we went public and the company has appreciated considerably.

Q: What have been the most attractive assets First Mining Finance has acquired that have left the company in a positive standing in the market?

A: With the acquisitions of Coastal Gold, Gold Canyon Resources, PC Gold, and Clifton Star, First Mining Finance now holds a portfolio of 21 projects in its mineral bank. In Mexico, however, we have a different category of mineral properties, most in early stage development, some in the grass root stage, and only a few with resources. In Mexico, three of the projects that have been drilled have resources. When acquiring the assets, we look at the quality of the ounces in the mineral resource and those that have the potential to be mined considering current metal prices. The assets must be located in safe jurisdictions free of environmental and social conflicts. Producing companies in the future will look to replenish their reserves and they will seek companies like us. Our biggest strength is the number of ounces we have and at the moment we are looking for partners that will help develop these great projects.

Q: What are the qualities you look for in a partner and what are the most successful partnerships First Mining Finance has carried out?

A: Only recently have we begun to seek partners and we have already attracted Industrias Peñoles. This partnership is in its early stages and given its reputation we believe it can advance the projects optioned and make a great success story. In a partner, we look for expertise, technical and financial capacity, and a solid reputation. When making deals we must have the company commit a certain amount of funds to exploration. At this stage, it is important not to pressure too much for large payments and be very precise in where the investment is to be allocated. The company must have the freedom to concentrate on the areas it wants to explore and be given the chance to test these targets.

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