Did you see the great interview with Vancouver-based mining magnate Robert Friedland in today's Financial Review? It's worth three dollars to read the interview (how's that for inflation?).
Friedland is talking up the Aussie float of Ivanhoe Australia Limited (ASX:IVA). He is a world class promoter and, depending on your perspective a visionary the likes of Andrew Forrest.
His strategy is simple. Buy a distressed asset. Front up the money to drill it like nobody's business. Demonstrate that it's worth a lot more than you paid for it. Then find a JV partner to front up the rest of the capital to make it a producer.
Robert Friedland is also a big fan of "polymetallic mineralisation," a kind of selling Peter's gold to pay for Paul's copper production. When you have a world-class polymetallic deposit, you can use the cash-flow generated from one metal to sustain, or at least off-set the production costs, in another.
Friedland thinks he's got a goer at Mount Isa. "The Mount Isa mining district is one of the top five mineralised districts on planet earth," he told the Fin. "It doesn't have to apologise to anyone. There's the Witwatersrand in South Africa, there's Norilsk in Russia, there's the Cadillac district fault in Canada, there's the main structure in Chile. This is one of the great mining regions in the world."
He may be right. Yet IVA's shares are selling nearly 18% below the float price of $2 per share. Even polymetallic assets get quashed when you have a bear market in base metals and a one-day decline of four percent in the gold price to US$825.
Yet Robert Friedland is probably on to something. And he points out that these great new ore bodies of the mining world (charity calendar coming out soon) will replace many tired, old, bed-ridden mines at the end of their productive life. "Our view, and we talk to Rio (ASX: RIO) about this a lot, is around the year 2012 or 2013 we are going to have a crisis in copper because a lot of the great copper mines are like little old ladies lying in bed waiting to die."
Younger mines will have plenty of cost blow outs (see Ravensthorpe). They will have to endure volatility in underlying commodity prices. But they have one thing the older mines don't: a lot of ore in the ground. That's worth something, especially at today's shares prices.
Dan Denning
The Daily Reckoning Australia
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About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
Comment by Elmar on 13 August 2008:
Where is there a link to the full interview "Mining Baron warns China will fight BHP-Rio deal"???
I can not find a link anywhere!