Brent Cook Talks Junior Mining Stocks

Brent Cook Talks Junior Mining StocksThe Canadian Investor Conference in Vancouver this past weekend was smaller than in recent years, but conference attendees still packed in to hear a presentation from Brent Cook of Exploration Insights.

One theme that's important for Cook is the lack of new discoveries in the mining sector, and he went over that point on Sunday. To start, he drew attention to a lack of funding in the sector, but also to the growing gap between production levels and new mine development.

Lack of discovery

"To keep up, to find another 90 million ounces every year, just to replace production, we need to find one Carlin Trend a year," he said. That's a tall order, and as Cook explained, that isn't what's happening. "Production's dropping off because we're not finding new deposits," he said.

Cook added a few more points to that argument:
  • 20 years — Cook stated that on average, it takes roughly 20 years for a new discovery to become a mine. "And that's not going to get any better," he said, "because what we're finding ... it's deeper, it's usually more metallurgically complex, you've got higher strip ratios, you've got more political issues."
  • Lower grades — "Average mining grades are declining, yet demand is increasing," Cook said. "Tonnes mined have to be increased substantially just to meet that, particularly since we're mining lower and lower grades."
  • Sustaining costs, not business — "The cost reductions that major mining companies are making now, they're making them by high grading their deposits, which means pulling out the best stuff," said Cook, explaining that high grading can affect the rest of the deposit. "They're cutting their all-in sustaining costs," he said. "They're sustaining costs — they're not sustaining their businesses."
  • Not knowing when to quit — "We spend so much money and time drilling out marginal to not-economic deposits," said Cook. "That's why it costs, right now, $150 million per 100,000-ounce discovery. That just can't work, and the problem is, we don't know when to quit."

Cook suggested that within the next year or two majors will start investing in filling the gap between production and discovery. In the meantime, he's looking for "the very few deposits that make money that are going to fill the gap." Cook stated that he tries to find a "fatal flaw" in projects "as quickly as possible" so he can move on to checking out the next project.