The Ink Zone
November
2000
Number 99
Fragile Threads
In Successful Mineral Exploration
The Links Between Serendipity and Science
The trade journals and international symposia often contain announcements of important ore deposit discoveries. Proudly, individuals are sited as cornerstone in the process. The exploration techniques are reviewed and several touted as instrumentally leading directly to the first drill hole in ore. Often the bar room reasons for the discovery after the first successful hole differ from the well thought out or politically correct reason given later. Some analysts will even review the management structure, the working environment, calculate the value added relative to the exploration expenditures / investment, and perhaps even focus on identifying the new strategies for future efforts. Clearly, there is a tremendous amount to be learned from successful programs, almost as much as should be gained from the unsuccessful ones.
I am not the first person to study the discovery process, nor do I offer any unique perspective not already widely considered by my fellow explorationists. There continues a fluid debate between the scientific-based well-schooled exploration groups and the lucky prospectors. Which is the key to discovery, science or serendipity? Perhaps it is not an either or choice, but rather the links between that are the most critical elements.
My thesis, a simple one really, is that we often focus much of our efforts on what we do well, not the weak links. Even the strongest program has weaker portions and sometimes the threads between our strengths are fragile to almost accidental. Do we pay enough attention to weaknesses - subtle connections? If we do not, perhaps we should.
The cornerstones to the management for successful mineral deposit discovery, I believe, are to understand that both luck and organized science work and can be enhanced by:
Maintaining a positive air of problem solving rather than negative “can't do it” approach. (1)
Recognizing the opportunities (2)
Respectful delegation (3)
Listening and building two-way communication (4)
All ideas are good ideas and will lead to other ideas (5)
Back the project champion (6)
Continual prioritization of ideas, concepts, targets, and projects (7)
Being connected and networking (8)
Maintain a fluid, flexible, aggressive, and open environment (9)
Listen to the positive ideas as well as the negative (10)
Be technically involved, but not in the way (11)
Being open minded (12)
Ask good questions (13)
Remember both luck and organized science works (14)
Maintaining a high level of credibility with senior management (15)
I believe that a manager can maximize the chances for the subtle connections between the teams obvious strengths will not be broken if he or she provide a positive working environment. I would like to illustrate my thesis by the example of the Phelps Dodge Exploration / CVRD copper / gold discovery at Sossego, Brazil.
?* Illustrate when it is a fragile thread
August 15, 1994, I was asked to move to Santiago Chile to take over the company exploration program in South America. A life-long ambition, the chance to continue my fascination with the South American geology and mineral deposits up close rather than from a distance made this decision an easy one. By September 15, I was in Santiago and full immersions in the intense competition within the richest copper province then know on the surface of the planet.
Part of the opportunity was to hire a new chief geologist. With the help of several other company people, contacted a friend just about the time he was looking seriously at joining another company and move to Chile. Using the ?* friendship of several people with our new man, we were able to convince him to join us. By November, he and his family were, packing and starting for a new life in Chile.
My instructions, from several high level leaders in the company, were clear, find a mine in South America. One boss said to make Chile work, while others suggested that we plan and move into new areas. Different emphasis perhaps, but the same message, move to South America and find a mine. By January, both families were in Santiago, learning to drive among the herds of yellow busses and reprogramming our ears to understanding the Chilean Spanish.
During my first days in my new office, I called several old friends/contacts to let it be generally known that we were interested in participating in both sound programs in the countries we were working in as well as expanding into other countries. I must have called 25 people over the course of a week. I continued to make a few contacts with new and old friends indicating we are interested in properties, new opportunities, ideas, etc. during my first months in Chile.
I receive a
call from an old friend ?*, unexpectedly, offering the names of two people
consulting in Brazil. Apparently the word had gotten around, and he felt
strongly enough about these people to make an expensive long-distance
international call. Brazil was on our list, but like most other companies, more
for precious metals. Diversification is an important strategy for us and a gold
program sounded somewhat attractive. I did not know either of these two people,
however based on the recommendation and a brief description of their
qualifications, I gave these names to our new Chief Geologist. Among his
mission, to be the long-dog generator of new opportunities, he was trying hard
to learn more about our existing properties, visit new ore deposits, and get to
know new people. Somehow, he found time to call and subsequently ?* hire both of
these consultants as contractors for a gold reconnaissance program in a famous
area of Brazil.
Nothing much comes of the initial gold program however we earn the respect of the Brazilian geologist / consultant and visa versa. By June 1995, we did gain enough confidence in the mineral potential of Brazil to start the necessary applications for a Brazilian company. Our consultant, with considerable experience in Brazil including three major mineral discoveries, ?* suggests other exploration ideas for the company in Brazil. Until our company is incorporated, he agrees to hold mineral concessions in his name. His ideas include gold in sediments, greenstones, and potential partnerships with the Government Company holding the famous Carajas district, which he believes is one of the most richly endowed mineral provinces in the world.
Our company is formed in October of 1995 and certified by the DNPM in December, 1995. We are just the second company to be incorporated under the new laws allowing for 100 % foreign ownership and permitting the repatriation of capital. A really quick move to take advantage of the changing legal and fiscal conditions in Brazil. The Brazilian consultant accepts our offer for full time employment in February.
Back on the other side of the Andes, our team leader for our Candelaria exploration program is not making much progress in improving our understanding of the deposit or in discovering good quality targets. We put our chief geologist in charge ?* to bring in outside perspectives, stimulate the group, and advance the program ahead of the already stiff competition. In the process, he learns and develops a better understanding and exploration technique for these types of deposits.
We are invited, at the last minute, to bid on a government held gold property in Brazil largely because of managers connections. Not initially on their list, he pointed out that we did have listed gold reserves in our annual report. Our team visit ?* the gold property on February 26, 1996 and see geologic similarities in the core with that of our ?* new mine in Chile.
We immediately open discussions to build confidence that we know these types of systems and would be a good and active partner. Using the database supplied on a computer disk, we prepare a complex bid ?* in April, 1996. At the last minute, when an error in the metal resource calculations is discovered, we do not present the bid. Our Chief Geologist takes full responsibility and offers his resignation. The resignation is not accepted and he is encouraged to proceed with the bid because, while the calculations are in error, the rocks still contained the same indications ?* for large and high-grade ore deposits. We work together to review our bid and negotiate a one-week extension for submitting a new bid.
The bid late is accepted as we convince our management that the geologic similarities ?* to our Chile deposits is worth the bid. This turns out to be the single largest bid ever made by the company and reflects the confidence of management in the South American team ?*. The local staff does not take no for an answer. About the same time, a second prospect is opened for Joint Venture..
Negotiations for the shareholders agreement for Liberdade open our team visits the second prospect on June 4, 1996 and see copper in outcrop where the gold prospectors are winning gold altered volcanic rocks. They do not spend much time on the property, only two hours, and do not need much sampling to support their observations ?* that to has significant potential. The extent of the system would be known later. Other gold companies saw the copper as a liability to property being a quality gold target.
PD submits a bid for the second property with an attractive ?* royalty. During negotiations for of the first property we suggest both be included to insure logistical, personal, and technical synergies.
We win the bid for the second property based on the synergy between the professionals, and the quality of the negotiation process for the two property ?*. The contracts for both projects were signed September 10, 1996.
Drilling starts in March, 1997 six month after the contract is signed and during the middle of the raining season. The first hole sited to test the extent of the high-grade surface samples encounters good ore and wee earn in to JV by March 98 after completing sufficient drilling to document a potential geologic resource 13 months ahead of the bid schedule.
Many of these fragile threads, if they were somehow broken, might well have prevented us from continuing in the project. In my experience, these broken opportunities may not be obvious until much later, if at all.
Some connections, however, when broken are not necessarily severe enough to stop a project. These, for sure, can be serious enough to cause delays, add costs, or make the process more difficult. After privatization of the Brazilian company, they reduced their administrative burden and moved their offices during a critical filing time for one of the exploration concessions. we came close to loosing the rights to the land. Discovered the day after the filing date to obtain a possible extension of our exploration time, we were forced to complete a more comprehensive report detailing that the exploration has discovered a potentially viable deposit. This potential obstacle quickly became a successful joint effort between the partners. Later, during the negotiations to form the new company, the discussions, obtaining critical approvals, and some legal delays lengthened the process considerably. This lack of a legal structure might well have deterred or slowed down the project. These difficulties did make it awkward at times. One company was spending money on behalf of the other without controls and approvals. It did work out, and the process of learning to work together as equal partners moved forward. Some thread, when broken may have cost Phelps Dodge some credibility, while others just made the job a little more challenging.
The examples of events that did not impede the process, however made it more of a challenge include some people unable to enter Brazil for critical meetings because of an expired visa, when one of the critical team lost a relative, and the inevitable intra-company bickering that sometimes diverted the efforts away from the critical path. Non the less, the process, however hampered, moved forward.
In summary,
some of the critical and most fragile threads were not broken because of the
personal contacts and trust build with CVRD. These connections fostered
continued quality communications including strengthening the business bonds at
several levels between the companies. While we list some of our strengths:
Reasonable autonomy to work in new areas
Learning the new deposit model quickly and applying to other environments.
Delegating the authority down
Believe in our people and judgment
Quickly recognizing key features and taking rapid actions
Team structure based on geologic environments
Multidisciplinary team working in the field, less time in office.
Being in the right place at the right time.
Believing in our peoples judgment
Positive problem solving environment for creativity - a Can do place to work
Our people not taking no for an answer on issues they believe in - a Champion
Quickly building an excellent team with spirit / talent
Earned respect by doing well
Access to drills and equipment in Brazil when the availability was poor
Negotiation of low cost contracts
Building a camp and maintaining a low-cost field oriented program.
Working through the rainy season
Doing what works and not using a cook book approach
It is important that we do not forget that it is the bonds between these strengths that cement our people, resources, and enthusiasm into being a strong, aggressive, successful program.
G.E.
McKelvey
GEM Press
9485 E. Conquistadores Dr.
Scottsdale, Arizona
85255-4345
gempress@USWEST.net
480 473-9320
Fax 480 473-8599