The odds are stacked against gold juniors like never before: Abitibi Royalties CEO
Huge hurdles are stacked against gold juniors in the quest to become a mine, says Abitibi Royalties' CEO Ian Ball.
Ball, who spoke to MINING.com in March at PDAC in Toronto, was former President of McEwen Mining before moving onto Abitibi Royalties four years ago. During Ball's tenure as CEO, the company's stock has increased 3.1 times in value going from $3.27 per share to $10.44.
Ball sees a lot of headwinds in the industry. He does not see a significant gold price moves to the upside. Average gold grade is declining, which requires larger plants and more capital to move ore. Regulations are becoming more stringent. Productivity improvements are still lagging.
"As much talk as there has been about technology, we have not seen a game-changing technology since the 80s such as heap leach or autoclave," says Ball. Autoclave is pressurized ore processing to liberate more gold from ore.
"For now, to become successful in mining the odds are stacked against you like they never have been before."
Ball's company, Abitibi Royalties, is focusing its efforts on one of Canada’s largest gold mines, which is located 25 kilometres west of Val d’Or in Quebec’s Abitibi region.
"There have been well in excess 10-million-ounces-discoveries and they are making new discoveries every year, which is increasing the value of our royalty. You want to be in big mining camps and Malartic is one of the biggest in Canada," said Ball.
Abitibi’s royalty is a 3% net smelter return royalty on the eastern portion of the mine, which is owned and operated by Agnico Eagle (TSX, NYSE:AEM) and Yamana Gold (TSX:YRI) (NYSE:AUY).
The executive explained how, based on the returns of this major asset, he has switched the way investors are treated.
“When I joined Abitibi I did not have the financial means to buy 20 per cent of Abitibi but I was willing to take all of my salary and invest it back into the company on the open market each week.
"So for four years now, I’ve been taking all of my salary and investing it into the shares so I’m literally walking in the same footsteps as my shareholders. And two years ago, I went to the board and told them that I didn’t think we should be issuing any stock options and share units, people should be paid in cash so they can use that cash to go buy stocks in the market,” he said.
Creative Commons image of northern lights in Quebec courtesy of Image Editor