Joe Mazumdar: Exploration-stage Gold Plays are the Place to Be

Mazumdar runs Exploration Insights with Brent Cook, and in this interview he also mentions a commodity that they currently have no interest in.


Brent Cook and Joe Mazumdar are the minds behind Exploration Insights, and in their talks at this year’s Prospectors and Developers Association of Canada (PDAC) conference they focused on a few key ideas:

  • Major miners’ gold reserves are declining;
  • Due to cost cutting, most of these gold producers are not doing much exploration;
  • As a result, they don’t have the means to replace their gold reserves themselves and are instead funding or acquiring juniors to ensure that they have access to new sources of gold.

For those reasons, Cook and Mazumdar currently believe that exploration-stage gold plays are the place to be — as long as you choose companies that are likely to be appealing to major miners.
“Everything is very specific to the suitor,” Mazumdar explains in the interview above. “If it’s really near their operation, maybe the hurdle rate’s much lower. But if it’s a grassroots, greenfields project they might need a higher production level,” he said.
That said, “in the end they want to make a double-digit return at a $1,250 gold price, so if the asset can offer them that, then that should be a better chance that they will get acquired.”
Listen to the interview above to learn more of Mazumdar’s thoughts on the gold space, and to hear what commodity he and Cook are not currently not interested in. You can also read the transcript below.

INN: I watched your presentation the other day, and you spoke a lot about gold reserves, and majors and juniors. One thing you said was that major miners’ gold reserves are declining. You touched briefly on the idea of peak production. Is that really a possibility?

JM: Yes, at this gold price level, if it stays around $1,250. The reason we have the decline in reserves is in part related to a drop in the gold price that they used to base their reserves on. And going forward, what we see is that there’s not a lot of assets that make sense at that gold price. And so right now, at these prices, gold production is basically forecast to decline.

INN: Falling gold reserves are good for juniors because it means they may be picked up by major producers. At what stage are juniors typically acquired?

JM: Right now, we’re not seeing the acquisition of a lot of the developers. I mean, we did have Kaminak Gold last year, but it’s been few and far between in the developers. What we’re seeing a lot more of … is placements in grassroots explorers because [major miners are] not doing grassroots exploration. Most of their exploration budget is around brownfields, where they can see a return quickly. They’re not doing the grassroots exploration, so their proxy for doing it is funding the juniors to do it for them.

INN: If there is [another] Kaminak that’s going to be acquired, what are some things … that might be an indication that they’re going to be an acquisition target?

JM: In terms of an acquisition target, what we’d be looking for is a project that makes sense to that major. Everything is very specific to the suitor, so if it’s really near their operation, maybe their hurdle rate’s much lower. But if it’s a grassroots, greenfields project, they might need a higher production level.

In the end, they want to make a double-digit return at a $1,250 gold price. So if the asset can offer them that, then that should be a better chance that it could get acquired rather than a project that has no IRR at $1,250, which would be more of a levered play.

INN: That makes sense. What happens if major miners decide that they want to jump back into exploration themselves? Do you see that as entirely unlikely? What do you think?

JM: When the gold prices were down, they weren’t making a lot of free cash flow. They cut back on their G&A, and unfortunately they consider exploration part of their G&A — an easy thing to cut that they can’t see the benefit of even though it might have built up their reserves.

So their idea of exploration is more like G&A. And if it continues to be that way, I don’t see them coming back to grassroots exploration. Some companies have a fundamental comparative advantage in continuing to do grassroots exploration, they have a philosophy of doing it and they’ll never cut it. Others come in and then they come out. It’ll go in waves.

INN: You mentioned that you like gold. You also have an interest in copper and zinc. I’m interested in hearing commodities that you aren’t looking at. What would be a no-go for you, and why?

JM: Right now, maybe in the near term, a no-go for us … would probably be uranium. Some people might want to play uranium because of the long-term potential demand from China. The issue that we have is that the market appears to be balanced, and it looks like it’s going to be balanced for a while. There’s still a lot of inventory to go through, so we don’t see how the price is going to pick up right now in the near to medium term. That’s one sector we’re not buying.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Related reading:
PDAC 2017, Day 1: Notes from the Floor
PDAC 2017, Day 2: Notes from the Floor
PDAC 2017, Day 3: Notes from the Floor

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cannabis plant layered with German flag graphic
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Catch up on some of the biggest news of the week for the cannabis investment world.

Three political parties have formed a coalition in Germany, leading to a new government, and it has promised cannabis reform in the European nation.

Meanwhile, a popular cannabis retailer confirmed consumers will now find its products available for delivery on the Uber Eats mobile application in Ontario.

Keep reading to find out more cannabis highlights from the past five days.


Coalition of parties promises forward-looking cannabis policy

Germany, a country with comprehensive and elaborate medicinal rules for cannabis, is in a time of transition as a new government is set to begin to take over after 16 years of Angela Merkel.

Olaf Scholz, the proposed next chancellor of Germany, leads a three party coalition that will become the country's governing body. As part of its promises, talk of adult-use cannabis regulation has now gained even more momentum. A report from MJBizDaily quotes a German policy document that shows the coalition's stance:

"We are introducing the controlled distribution of cannabis to adults for consumption purposes in licensed shops. This controls the quality, prevents the transfer of contaminated substances and guarantees the protection of minors."

However, despite the promise and excitement, it remains to be seen how these ideas will be applied since no formal regulations have been drafted or approved yet.

Canadian cannabis retailer partners with popular delivery app

Tokyo Smoke, a cannabis retail operator in Canada owned by Canopy Growth (NASDAQ:CGC,TSX:WEED), announced a collaboration agreement with Uber Canada (NYSE:UBER) whereby cannabis consumers will be able to use the Uber Eats app to order products before they visit stores.

While the app won't let consumers get cannabis delivered to them, this new method opens the doors to more dynamic ways of buying cannabis.

"As a market leader in innovation and a platform used by so many Canadians, we believe this is the ideal next offering that can be done safely and conveniently on the Uber Eats app," Mark Hillard, vice president of operations with Tokyo Smoke, said in a press release.

A report from the Canadian Press indicates Ontario is considering allowing dispensaries to have delivery and pickup options made available to consumers permanently. The province allowed some of these purchasing options at the outset of the COVID-19 pandemic, but then removed them.

Lola Kassim, general manager of Uber Eats Canada, said this new end-to-end experience will provide consumers with responsible access to legal cannabis products.

Cannabis company news

  • Organigram Holdings (NASDAQ:OGI,TSX:OGI) issued financial results for its Q4 2021 period. In its report, the company notes a net loss of C$26 million despite a 22 percent uptick in net revenue to C$24.9 million. Beena Goldenberg, the newly appointed CEO of the firm, is encouraged by the market share position earned by the company, which said it became the fourth biggest producer in Canada during the reporting period.
  • Halo Collective (NEO:HALO,OTCQB:HCANF) confirmed the decision for Akanda, its spinoff company focused on international cannabis opportunities, to begin trading on a US exchange. "The number of shares to be offered and the price range for the proposed offering have not yet been determined," the company told investors in a press release.
  • High Tide (NASDAQ:HITI,TSXV:HITI) announced the acquisition of 80 percent of NuLeaf Naturals, a CBD product wellness developer, for an estimated US$31.24 million. The deal includes a three year option clause for High Tide to complete a total acquisition. "As international markets open up and as export regulations evolve, NuLeaf's cGMP-certified facility positions us to take advantage of the global CBD business opportunity," Raj Grover, president and CEO of High Tide, said.
  • Humble & Fume (CSE:HMBL,OTC Pink:HUMBF) released the financial report for its first 2022 fiscal quarter to shareholders and the market. "As the legal cannabis market in North America continues to mature, Humble remains agile and focused on providing a leading solution for brands to scale quickly and retailers to focus on their customers," Joel Toguri, CEO of Humble, said.

Don't forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Commercially viable scandium deposits are rare, making widespread use of the metal tricky. However, there is indeed opportunity in the space.

Scandium is a critical metal that is as strong as titanium, as light as aluminum and as hard as ceramic.

While it is more abundant than lead, mercury and all the precious metals, there are no pure scandium-producing mines. The rare earth element is often a by-product, produced from refining other metals, including uranium.

Pure scandium metal rarely concentrates at higher grades alongside other metals, making commercially usable scandium deposits very rare. What's more, even when scandium is found at elevated levels, processing it can be difficult, leading to very few stable sources of this critical metal.


Not surprisingly, that means there has been very little adoption of scandium in commercial applications. However, as John Kaiser of Kaiser Research has pointed out several times in the past few years, as well as more recently, that doesn't mean there hasn't been research into how scandium could be used in the future.

"Hundreds of applications (have been) filed, many of them related to alloys with aluminum," he said in an interview with the Investing News Network. "This obscure metal is going to go ballistic in the next few years."

Kaiser made that statement a few years back, and scandium has yet to go ballistic. But he still has hope for the metal, and it could yet have its day in the sun.

Below is an overview of the scandium market. Topics covered include current production, newcomers to the space and the metal's potentially bright future.

Current scandium production

The first known large-scale scandium production was associated with Russian military programs. Details are lost to history, but Russians reportedly alloyed the metal with aluminum to make lightweight MIG fighter parts. Mining at these historic Russian production sites has ceased, but stockpiles of scandium oxide and scandium master alloy remain in Russia. These stockpiles are rumored to be dwindling, but continue to be offered for sale on the market.

Today, most scandium is produced as a by-product during the processing of other ores, such as uranium or rare earths, or recovered from previously processed tailings. As a result, scandium supply can be affected by the supply and demand dynamics of the metals it is produced with. That can make the metal's already tough-to-follow market dynamics even more difficult to understand.

According to the US Geological Survey, scandium-producing countries include China, where it is a by-product of iron ore, rare earths, titanium and zirconium; and the Philippines, where it is a by-product of nickel. Scandium is also produced as a by-product of uranium in Russia, Ukraine and Kazakhstan.

More US production could be on the horizon as well after a push in legislation that encourages the Department of Defense to look into the potential uses of the metal. Environmental and construction permits have been approved for NioCorp's (TSX:NB,OTCQX:NIOBF) polymetallic Elk Creek project with probable reserves estimated to be 36 million tonnes containing 65.7 parts per million scandium.

Scandium resources have been identified in minerals-rich regions across the world, most notably in Australia, where a number of junior mining companies are working to develop scandium deposits in New South Wales. These include Scandium International Mining (TSX:SCY), which controls the Nyngan project; Clean TeQ Holdings (ASX:CLQ,OTCQX:CTEQF), which holds the Sunrise project; and Platina Resources (ASX:PGM,OTC Pink:PTNUF), which is working on the Owendale project.

Scandium price and trading

The US Geological Survey states that the global scandium market is "small relative to most other metals." This is exemplified by global production and consumption, which is only an estimated 15 to 20 metric tons annually.

The US Department of Commerce and the International Trade Commission do not have specific data on trading for the metal. Furthermore, there is no formal buy/sell market today — scandium is not traded on an exchange and there are no terminal or futures markets.

Instead, the metal is traded between private parties, mostly at undisclosed prices and in undisclosed amounts. Therefore, understanding the precise volume of production and cost of scandium is difficult, and independent estimations are more relevant.

Production estimates are based on levels of trader activity and interest, as well as the knowledge that some traders deal in the critical metal from very small operations.

The estimates also include consumers believed to be sourcing their own scandium through small, controlled recovery operations, but don't consider amounts of the metal contained in the master alloy currently being sold from Russian stockpiles.

The scandium opportunity

Analysts expect the global scandium market to grow at a compound annual growth rate of above 11 percent between 2020 and 2025. "The major factors driving the growth of the market studied are the accelerating usage in solid oxide fuel cells, and the rising demand for aluminum-scandium alloys," notes ReportLinker.

Despite the lack of known, stable supply, scientists and engineers have been working hard to develop new products incorporating the metal. Scandium's potential in high-tech applications is well documented. Highlights of the metal's properties include:

  • It can be used in the creation of stronger, corrosion-resistant, heat-tolerant and weldable aluminum alloys for lightweight aircraft and automobiles.
  • Its outstanding electrical properties and heat resistance are valuable for solid oxide fuel cells.
  • It has unique optical properties for high-intensity lamps.

A recent Kaiser Research report on scandium details the wide variety of end uses for scandium now and into the future, as well as where potential supply to meet that demand may originate.

potential scandium oxide supply and demand

Potential scandium oxide supply and demand.

Kaiser Research

As Kaiser has explained, "There's an enormous latent demand for scandium if it ever became available on a primary, scalable basis."

In other words, the only barrier to accessing demand from a new family of high-performance aluminum materials and energy/lighting products is the lack of commercially viable larger-scale scandium production. Interestingly, Kaiser's work highlights two important scandium market events that may "have the potential to launch scandium demand growth over the next decade towards a 1,000 (tonne per annum) market worth US$2 billion."

For one, Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) announced in 2020 that it has developed a route to recovery for scandium at its Sorel-Tracy facility in Quebec, where it produces titanium slag from the Lac Tio iron-titanium deposit. In mid-2021, Rio Tinto began commercial-scale operations at its new scandium oxide production facility.

"The Rio Tinto development is a game changer for the scandium sector," said Kaiser, who believes the increase in scandium production could help boost the sector.

Secondly, Scandium International Mining filed an application in late 2019 for a patent protecting a method for recovering scandium and other metals from the waste streams of copper oxide leaching operations. In mid-2020, the company announced that copper raffinate tests showed its patent-pending process could recover enough scandium to match the supply being added to the market by Rio Tinto.

"Conditions are finally right for scandium to become the ideal lightweighting solution for aluminum," Kaiser said in his note to investors.

This is an updated version of an article originally published by the Investing News Network in 2014.

Don't forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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