Economic Geology Students Attend Field Trip To The
Vancouver Stock Exchange

Murray W. Hitzman

Many university economic geology programs leave out the "economic" and concentrate solely on the scientific aspects of the field. To ensure that Colorado School of Mines students have a good introduction to the business of exploration and mining, a field trip was organized to the Vancouver Stock Exchange in January of 1998. The field trip included visits to a variety of participants in the Vancouver minerals industry, from securities and law firms to both junior and senior minerals companies. The trip was timed to coincide with a major international conference, "Pathways to Discovery", which the students also attended.

Prior to the trip the students undertook individual projects on various aspects of the upcoming trip and heard from four speakers: Prof. Murray Hitzman of Colorado School of Mines on mining scandals including the 19th century Colorado diamond hoax and the more recent Bre-X affair; Tom Loucks of Royal Gold on valuation of exploration and mining properties; Ralph Fitch of General Minerals Corporation on forming a junior exploration company; and Douglas Silver of Balfour Holdings on the rules and regulations of setting up a company on the Vancouver exchange.

After flying to Vancouver in the middle of the Superbowl game, and later celebrating the Bronco's win over Green Bay, the group began the trip early Monday morning (January 26) with a visit to Hunter Dickinson Inc. Mark Rebagliati, Chief Exploration Manager, led an energized one-hour presentation on concepts for exploration success using several case studies including Farallon Resources Ltd.'s Campo Morado discovery in Mexico. The presentation included a number of points that the group was to hear over and over again throughout the trip: success depends on solid geological knowledge, sufficient capitalization, risk taking, and excellent communication skills.

Next was a visit to the Vancouver Stock Exchange (VSE). Alexia Helgason led a one-and-a-half hour tour of the exchange that included visits to the computerized trading room and discussions with staff involved with pre-listing, listing, ethics, and technical issues. The students learned that the exchange is a self-regulatory organization, which supplies approximately 25% of the world's total mineral exploration funding, raising greater than $2.3 billion in 1996/97. The VSE is a venture capital exchange specializing in the minerals industry, with exploration/mining representing 70% of the VSE's market capitalization, approximately $9.4 billion. The VSE is set apart from other stock exchanges through its simple criteria for listing and small up-front listing fees. These features make it the exchange of choice for many new and emerging junior minerals companies. Since 1990, the VSE has operated through the fully automated Vancouver Computerized Trading System (VCT), which provides on-line quotes and information on the depth of the market to the 54 national and regional Member Firms of the exchange. A visit to this new "trading floor" was one of the highlights of the trip.

After a quick walk of several blocks, the group arrived at the 21st floor office of the legal firm of Campney and Murphy. Following a short delay while the students got their first skyscraper view of Vancouver's north shore from the boardroom, David Raffa presented some of the most important legal aspects of the mineral exploration business. He discussed important procedures to follow when working as a consultant, including the use of contracts, professional advice on international tax complications, and the importance of understanding legal guidelines in producing professional reports. Mr. Raffa also discussed some of the legal aspects of publicly listing a company, and distributed packages of information on the process of "going public," as well as VSE regulatory requirements for geological/engineering reports on mineral properties. Mr. Raffa stated that the bottom line is that the minerals business abounds in legal complications. As many company officials stated during the visit to Vancouver, "Get a good attorney early in the game-you can't afford not to!"

The final visit of the day was to Yorkton Securities Inc., a leader in securing money for junior to mid-capital companies specializing in the mining, mineral exploration, and oil and gas industries. Bob Cross, Chairman and CEO, gave an extremely informative briefing on venture financing in mining and mineral exploration with a focus on the history of mining/exploration finance from the boom days of several years ago (Yorkton raised over $4 billion in investment capital over the past five years) to the present dog days. The informal environment and open agenda encouraged discussion between Mr. Cross and the CSM group, many of whom discovered that geologists can also find interesting employment as mining analysts.

Tuesday morning began at Viceroy Resources Corp., where coffee and doughnuts eased the group into a dynamic presentation by Paul Saxton, CEO, and Linda Thorstad, Vice President, Corporate Relations. Viceroy Resources is a mid-tier gold producer focused primarily on the Americas. The company has three main operations-Brewery Creek Mine, Yukon Territory; Castle Mountain Mine, California; and Paredones Amarillos Deposit, Baja, Mexico. Building on their successes, Viceroy plans to increase exploration activity and rebalance their global exposure to focus on the Americas. They described how a major part of their success stems from their aggressive hedging program, where they sold forward (at US$406) 158,000 ounces of gold for 1998 and 111,200 ounces for 1999. Viceroy looks forward to successful growth with "Going for gold" as their vision. The upbeat presentation was followed by a number of questions from the students, particularly the women in the group who questioned Ms. Thorstad on the best means of succeeding in the business.

Teck Corporation provided the group with its first encounter with a major company during the trip. Sitting in the stunning corporate boardroom, Mr. William Meyer, Vice President, Exploration, reviewed Teck's diversified operations around the world. Teck focuses on development and production, rather than exploration, and currently produces gold, copper, zinc, lead, molybdenum, niobium, silver, and metallurgical coal. Mr. Meyer explained Teck's strategy of actively pursuing the acquisition and development of grassroots to early-stage projects through joint ventures and stock purchase. This strategy, combined with a solid financial base, has allowed Teck to participate in a myriad of projects and develop a number of resources discovered by junior companies. Commenting on the low commodity prices, Mr. Meyer remarked that their acquisitions department is currently working overtime examining opportunities throughout the world.

Showing the spirit of the junior companies, the theme of the presentation given by Mansfield Minerals Inc. was to "never give up." The Mansfield group explained that given the right attitude there is never an insurmountable task, whether it involves financing, acquisition, or exploration activities. Chairman of the Board Brian D. Edgar stressed that there are some fundamental principles upon which to start and run a junior exploration company, these include: having the right group of people; having a well-defined business plan and methodology; never forgetting that money is paramount and always to use other people's money; reputation is critical; understanding the political, environmental, and exploration climate in which you operate; and avoiding under- or over-diversification. The underlying message of the meeting was that a person needs to be a good communicator (promoter) as well as smart, tenacious, flexible, and inventive to succeed.

The group got to meet one Colorado School of Mines graduate, Eric Friedland, Director of DiamondWorks, who had successfully started his own company. After leaving CSM, Mr. Friedland took $100,000 profits from a mining investment and plowed it into a grassroots property in the Fairbanks district, which turned into the Fort Knox deposit. The capital derived from this success was merged with capital from his brother, Robert Friedland, to launch another junior exploration company, Diamond Fields Resources. Though an exploration vehicle for diamonds, the junior discovered the Voisey's Bay Ni-Cu-Co deposit. The discovery resulted in a remarkable jump in share price for the company and provided the capital to finance a number of other exploration ventures. Mr. Friedland discussed DiamondWorks' strategy of investing in what are generally considered risky countries to get into areas ahead of the competition. He fielded a barrage of questions from the group and encouraged the students to develop their entrepreneurial talents. Many of the students left with visions of discovering the next Voisey's Bay.

Moving from the modern magnificence of the Waterfront Centre to the art deco style of the Marine Building, we met with Andrew Milligan, Executive Vice President of Cornucopia Resources Ltd. Despite the depressed gold market and the immediate issues facing the junior mining and exploration sector in Vancouver, the Cornucopia management were generous in their time explaining their strategy of dealing with the current down-turn in the market. Cornucopia have reduced overheads by limiting production at their sole mine, the Mineral Ridge property in Nevada. Mr. Milligan and crew provided a no-holds-barred view of operating a junior company and clearly communicated that one of the best parts of the job was having fun.

The final company visit of the tour was with Placer Dome Inc., where we were fortunate to be briefed by Sandy Laird, Executive Vice-President, who outlined some of the basic principles that have made Placer Dome a success. He first emphasized the importance of being flexible to change, using the organizational structure of Placer Dome as an example. He then discussed the critical importance of ethics in the mining industry. Mr. Laird also stressed the importance of exploration to replenish reserves and noted that Placer Dome has one of the highest budgets for exploration. Finally, he discussed how creating innovative teams of scientists and engineers for specific projects can lead to successful mines, even where other companies have failed. Mr. Laird shared his personal experiences of the industry in a wide-ranging discussion at the end of his presentation.

Following our two days of meetings the students then participated in the Society of Economic Geologists/B.C. Chamber of Mines "Pathways to Discovery" conference. The conference talks rounded out the field trip by providing a superb overview of recent discoveries around the world and corporate strategies for discovery. In addition, eleven of the students presented posters at the conference on their thesis research or on the results of research on Zambian copper deposits conducted as part of a graduate economic geology course last fall.

We would like to thank all of the companies that took time to meet with us and were such gracious hosts. Thanks are also due to Brian Edgar, Myron Goldstein, and Doug Silver for helping to arrange the meetings. Finally, the trip would not have been possible without the funds donated by many exploration and mining companies and the Society of Economic Geologists. This group of companies includes: ASARCO, Balfour Holdings, General Minerals, Kinross Gold, Metallica Resources, Newcrest Resources, North Mining, Royal Gold, Teck, and WGM. In addition, several individuals also contributed including Michael Page of ESI and Laurence James. This financial aid made the trip a possibility for the students. The knowledge gained from this trip will certainly help to nurture the next generation of ore finders and entrepreneurs.