 | Bio |
Catherine McLeod-Seltzer, a recognized leader in the minerals industry, is the Chairman of Pacific Rim Mining, Bear Creek Mining, and Stornoway Diamonds.
After spending the early years of her career working in mining Corporate Finance, both in North America and internationally, Catherine went on to co-found Arequipa Resources in 1993 with renowned mine finder J. David Lowell. Three years later, having discovered the Pierina gold deposit in Peru, Arequipa was taken over by Barrick for $1.1 billion, one of the most lucrative mining industry buyouts in the last decade. In 2003, Catherine and David joined forces once again to form Peru Copper Inc. to acquire the Toromocho Copper deposit. Three years after taking Peru Copper public, it was acquired by Chinalco for $840 million.
Ms McLeod-Seltzer is well known in mining circles for backing proven mine finders and building successful mineral companies including Arequipa Resources, Francisco Gold, Miramar Mining, Bear Creek Mining, Peru Copper Inc and Stornoway Diamonds. Catherine’s accolades include being named Mining Man of the Year by the Northern Miner in 1999; the “Award for Performance” by the Association of Women in Finance; and a position on Financial Post’s Power 50 since 2002.
Catherine has raised over $350 million in working capital for exploration to date, and been involved in over $4 billion in corporate transactions in the mining industry. Her leadership experience, financial savvy, access to capital, and respect from the exploration and mining community has been an invaluable asset to the companies she is involve in.
In addition to her current Chairman positions, she is a Director for the following companies: Pacific Rim Mining since April 1997; Bear Creek Mining since April 2000; Stornoway Diamonds since November 2001; and Kinross Gold since November 2005.
Her interview in the Explorers’ League tells of her fascinating background and the development of each of these successful companies, along with her insights into gold and investing in the resource industry.
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| Interview |
Ms. McLeod-Seltzer is well known in mining circles for backing proven mine finders and building successful mineral companies, including Arequipa Resources, Francisco Gold, Miramar Mining, Bear Creek Mining, Stornoway Diamonds and Peru Copper Inc. Catherine has raised over $350 million in working capital for exploration to date, and been involved in over $4 billion in corporate transactions in the mining industry. Her leadership experience, financial savvy, access to capital, and respect from the exploration and mining community has been an invaluable asset to the companies she is involved in.
So, please help us welcome our first woman into the Explorers’ League, Catherine McLeod-Seltzer. You’ll find her interview fascinating, as she shares a lot of great history and some enthralling stories, and leaves us with solid investment advice…
Explorers’ League Editor Jeff Clark: First, Catherine, welcome to the league!
Catherine McLeod-Seltzer: Thank you, it’s an honor. I’ve looked at the list of the other Explorers’ League members and it’s quite a contingent of people who’ve been successful in our business. So, thank you for considering me.
XL: You’re a third-generation miner, so let’s start with your grandfather.
CMS: Well, my grandfather, John McLeod, came over from Scotland around the turn of the last century, wound his way through British Columbia and ended up in Stewart. And in that part of the world, you can’t help but be somehow involved in mining. It was a very rich part of the world then. The Premier mine was one of the richest gold mines in the British Empire at the time. He opened up a hotel and a bar and eventually became mayor of the town of Stewart. So he was quite a member of the community up there, which was very much oriented around mining.
XL: Did he mine?
CMS: His involvement in the industry was as an investor, a prospector, and a grubstaker. He knew all the old guys up there that were prospecting, including Tom McQuillan and Tommy McKay, the original owners of the ultra-rich Eskay Creek Claims.
XL: This was when?
CMS: This was the 1920s. Even during the time of the depression, in the 1930s, my father has told me that Stewart was still quite a wealthy town because of the gold mines. Plus, there was no transportation in and out except by boat, so they didn’t get a lot of people coming and going. There wasn’t a lot of unemployment because people worked in the gold mines. As you know, gold was a big performer during the depression, so they didn’t experience the depression then. When they felt the depression in that area was during the war years, when we were shutting down the gold mines to concentrate on base metals for the war effort. And some of the miners, of course, went off to the war.
XL: What about your father?
CMS: My father, Donald McLeod, started working in the summers with the prospectors at about age 14. He loved horses, so he would look after their horses when they went up into the mountains. Then he started working with them and became a jack of all trades – even including a cook in the camps. He can still whip up – no kidding – a breakfast for 40 people with his eyes closed. He eventually worked his way up to supervisor and mine superintendent while only in his twenties. He even helped build the tunnels on the Trans-Canada Highway, in the 1950s. Then he met my mother in Alberta and settled down and had children. So I ended up spending a lot of my youth up in Stewart, and he was managing the Premier mine at the time.
In 1964, we moved to Pine Point in the Northwest Territories and that’s where he made his first big break. He was involved in the discovery of the Pine Point mine, a lead-zinc-silver mine that Cominco operated for several decades. He actually was managing the exploration and development program including the staking that led to the discovery of the Pyramid deposit and that’s where he made his first real money in the industry. So he was a prospector-miner turned entrepreneur. From there we moved to Vancouver and he started his own company, the Northair Group, which still exists today and is run by my brother, Bruce. My father’s company made the Brandywine discovery near Whistler, a gold and silver deposit. And he did everything there, from drilling the first holes to all the development to putting it into production. And it produced for about a decade. Dad was very well regarded on Howe Street, by guys like George Cross and Peter Brown. He was known as a very good operator, a good developer, and a man of his word.
XL: And you have siblings and other family that work in the industry.
CMS: My brother Bruce is a mining engineer and the chairman of Sherwood Copper. He recently put the Minto copper-gold deposit into production in the Yukon. He has been successfully involved with several other companies – he was on the board of Palmarejo, which was just sold to Coeur d’Alene, and runs Tenajon, which has just made a sizeable moly discovery in Eastern Canada. We both followed in the mining footsteps of our father and grandfather, as did our cousin Rob McLeod, a geologist, who I bet any money will end up in the Explorers’ League. He’s the president of Full Metal Minerals, which is focused in Alaska. So, we kind of have the bases covered in this generation.
XL: You certainly do. But what prompted you to enter the mining industry?
CMS: Well, Brandywine went into production when I was about twelve, and I remember being at the opening and watching the first gold bar be poured, which weighed more than I could lift! I had my picture taken with it, which was really exciting. And we talked rocks and stocks around the dinner table. Actually, my mother is the ultimate stock trader – she should have had a newsletter! She would pick these penny stocks that would go to $5 all the time. Unfortunately, she was a better buyer than seller. So I was always more attracted to the stock side of things. Also, I grew up knowing all the characters on Howe Street [Vancouver, B.C.]. At Christmas parties, we had people like Tony Petrina, who was chairman of Placer Dome, and George Tikkanen of Teck and Bob Hallbauer of Cominco. So we grew up surrounded by this. On top of that, my dad would trade stocks in my account for me, which paid for all my university.
XL: You paid for your entire college education from mining stocks?
CMS: Oh, yeah! I remember one in particular, Continental Precious Minerals, which we bought as a 10c private placement and which went to $2 or $3, and I probably had 20,000 or 30,000 shares, and that paid for my university. I also had some Hemlo in my account, a Murray Pezim deal, which also went from pennies to dollars.
XL: You earned a degree in business from Trinity Western University.
CMS: There’s a lot of preparation involved in being lucky. I tried to go a slightly different direction and ended up with a business degree. Then I took my securities and broker courses and worked at the Royal Bank all through my university summers and learned the nuts and bolts of banking. So I was fairly qualified for the job I took as assistant to the branch manager of Yorkton Securities in Vancouver. And that was not really that glamorous of a position. But, at the time, Frank Giustra was just starting up our London operations, which really became legendary as a mining finance house of start-up operations, and was one of the first Canadian/international companies that started financing exploration projects in Latin America.
XL: Approximately when was this?
CMS: This was the mid-‘80s. Frank was just starting out and he had a vision to become one the biggest mining finance houses on the planet. He was operating out of London and I was transferred into that department.
XL: Did you work for Frank Giustra?
CMS: Well, one of the issues they had was a lot of clients and traders here in Canada trading resource stocks, but the trades were bouncing. They weren’t matching and settling properly, which cost money and time. From my banking experience, I went a-ha! I know how to fix this. And we did. All of a sudden they said, well, she knows something. And I also knew mining – I was as knowledgeable as some of their mining analysts. So in 1991, I did a report for one of our clients which looked at every single Canadian company doing exploration work in Latin America. They ranged from Carson Gold in Venezuela to TVX to Bema and a few others. There were about 12-14 companies and I gave that report to our client, and it eventually landed on Frank’s desk. I didn’t know it at the time, but they were going to open an office in Santiago, Chile. And they asked me if I would like to go -- I said “Absolutely!”
I still remember the conversation… Frank said, “Don’t you want to think about it?” And I said, “I just did – I’m going!” The next day I started my Spanish lessons, got my passport in order, and in January 1992 I was sent down to Chile. We had a Chilean partner, who had been involved with mining through Bernie Bernstein and David Lowell. I met David at the opening cocktail party for the Yorkton Office in Chile in March 1992, and we hit it off like a house on fire.
XL: Another Explorers’ League honoree.
CMS: And he deserves to be one. He’s also in the Mining Hall of Fame, and had an oral history written about him by the University of California. He’s really a legend, and he should be for all the deposits he’s found. One quote about him is that he’s found more ore than any other man alive. Another one is that he’s found enough ore to affect the wealth of nations, which would be Chile. But I didn’t know he was a legend at the time.
XL: The two of you ended up starting Arequipa Resources.
CMS: Our partner in Chile really didn’t take a liking to me, so in the fall of ‘92, I got a memo from head office saying, it’s not working out with her, we’d like to recall you back to Canada. And I said “No! We signed a 2-year contract, I want you to pay me out. I’m not going back, I want to stay down here.” There was a little bit of tussle about this, and it actually wasn’t real pretty, but once Frank got involved, he just wrote the check and basically said we’re going to stand up to our promises. And I think David felt sorry for me, because here I was, on my own, fighting with someone who was a lot more powerful and older than I was – I was probably only 30 at the time. So, we started going out for lunches and walks in the park and I would cry my woes to him about what I was going to do. All I knew is that I didn’t want to go backwards. And then one day he said to me in his slow, thoughtful Arizona drawl, “Well, Katie, I’ve got this idea. I’ve got these projects in Peru that I’ve been quietly staking.” And I said, “Hey, I can take that public.”
XL: Had you done that before?
CMS: Never! But I’d seen many people do it, so I told him I thought we could raise him about $5 million. It took me about 5 months of memos going back and forth because he was very reticent about the old Vancouver stock exchange. I assured him that lots of good people raised money on the exchange and lots of ore bodies were discovered with money raised on that exchange. And finally, after 5 months, I’d talked him into it.
So in January 1993 we went to Peru together to look at some of the projects, which were mostly focused on copper at that time. Then in March or April, we went to Vancouver together after he finally agreed to take the project public. And I remember this as clearly as it were yesterday… I took him in to see some big financiers on Howe Street, with Peter Brown, Chan Buckland, Ron Brimacombe from Calgary Yorkton, and Mark Jones, and they were all sitting across a huge boardroom table from us, with just David and me on the other side. I had never done this before and David had never done this before. He’s very confident in the world of rocks, but less so in the boardroom. So I told David beforehand, “We’re not going to say anything, we’re gonna make them talk first.”
So after we sat down, there was this uncomfortable moment of silence, and finally Peter Brown says, “Tell me about this project you’ve got.” And I said, “Well, if you’d backed this man in Chile in the late ‘70s and early ‘80s when he first went there, you would’ve had Escondido, Zaldivar, San Cristobal Cerro Colorado,” and I named off all the projects that were discovered in Chile in the first years after it opened up – literally billions and billions worth of gold and copper. And then there was another moment of silence, and they exchanged glances and finally said, “We’re going to caucus for a moment.” So they left the room and David and I sat there all by ourselves. When they came back in, they said, “Well, we’d like to be your partners. We’ll put up $5million for 50% and you keep 50%. So that was the seeds of Arequipa. We started trading in August 1993, and our IPO was at 25c per share. We issued something like 8 million shares.
XL: And you were president of Arequipa?
CMS: David made me president and CEO of the company. We were very successful in staking huge blocks of land in known mineral belts. And we did old-fashioned exploration – following up stream sentiment samples, looking for anomalous gold and copper. David flew the copper belt in Peru looking for a window into the underlying rocks, the exact same stuff he did so successfully in Chile and Arizona. We ended up doing joint ventures on our properties with Phelps Dodge, Asarco, Newcrest and many other companies, and got them to spend the lion’s share of the money on most of the copper projects. About two years later we pulled our first sample from our regional exploration program from a project called Pierina. The first samples were in the one-gram [per tonne] range, and we ended up with something like an area of 1,000 by 500 meters where every sample was anomalous in gold. We tightened that up – David was concerned there might be surface enrichment – so we dug 3-meter-deep pits, and those averaged something like 5 grams. So the actual grade was getting richer at depth. It was a high-sulfidation epithermal system, very classic.
XL: And what were you doing at that time?
CMS: I was raising the money. We raised about $25-28 million, and I raised every penny of that. So I was spending a lot of time in New York, Boston, Toronto – I remember going to see Fidelity at least three times before they bought a share. David and I also went to London.
XL: David Lowell helped with the fundraising?
CMS: Yes, but reluctantly so. Only when absolutely necessary did he get dragged on a road show. One of my favorite stories about David is when we were in London, when we were invited to one of the head offices of Anglo Gold [now Anglo-Ashanti Gold]. Sir Harry Oppenheimer, a legendary name in South African mining, who is such a gentleman and so lovely and charming, hosted us for lunch. And then you have David Lowell, a rancher from Arizona, who eats his meat very well done and really doesn’t eat lamb at all. Well, here comes this butler with the white gloves and a silver tray of rare lamb dripping with blood. But this isn’t the kind of place you say “No thank you.” So he had to scarf down that blood-red lamb! Later, Sir Harry took us down to the diamond sorting area where he had a beautiful private diamond room full of diamonds from all over the world. He had the largest, flawless diamond ever taken out of a DeBeers mine, over 100 carats, the size of an egg, so clear it looked fake. I got to hold it, and I also got to run my fingers through piles of diamonds, which was very cool!
XL: And then Arequipa had its big discovery.
CMS: It was super exciting. As we did more detailed sampling, there were multiple grams on surface, from 5 to 10 grams, and consistently so. But this is very early days in Peru, just after they embraced free-market principles and a new mining code, so there wasn’t a lot of infrastructure. We had to build a road, and while we were building the road, David decided we should start to do some tunnels because the prospect lay on the side of a hill. We did several hundred meters of sampling underground.
XL: Doug Casey asked how Barrick decided to buy it for over a billion dollars when you were only nine holes into it.
CMS: Well, we had several hundred meters of underground samples already done and the lowest grade we got in the tunnel was 2 g/t gold. Meanwhile, we had embraced a very open exploration program, which was unusual at the time, especially for some of the international companies. I mean, you just don’t show your wares, right? We signed probably 30 confidentiality agreements and had all sorts of companies on the projects, and so people knew it was for real. But, this was all pre-Bre-X, pre-43-101, and board member Tony Petrina asked me after the first samples came in how we knew the samples were for real. I told him that was a great question, and so we had our VP of exploration, Pat Hilliard, take his own samples and fly with them to Toronto, and they never left his side. He took them to a completely different lab and had them submitted under his own name. And here came the assay results back and they were exactly the same. So we had chain of custody and we knew the sample results were right.
So, we built the road and got the drill up there. Meanwhile, 30 major companies had also been there and taken their own samples and been able to walk in the hundreds of meters of underground workings we had put in. We drilled that first hole and, talk about the excitement of a discovery hole, the air was electric. That first hole had 88 meters of 8 grams from top to bottom. Then all our step-outs were 150 meters out, so we weren’t just drilling beside the old hole. The next hole was 44 meters of 14 grams. And this is all at surface, very leachable. Barrick had been there many times and I think they were impressed because first of all, it was David Lowell at the helm, who had a reputation that preceded him. On top of that, the board had Tony Petrina and Chet Idziszek, outstanding men of great reputation. And then the fact that they’d been on the ground and taken samples and seen the underground samples made them highly confident. Barrick actually had a model already and the nine holes confirmed their model.
XL: So they launched a bid?
CMS: It’s kind of a funny story… this was mid-‘96 when we were in a boom market for our industry. Bre-X was still the darling, trading at $200 per share on a pre-split basis, and several other companies were making real discoveries. It was the heyday after the fall of the Wall [in East Germany], with many countries opening up for foreign explorers to come in – Indonesia, Eastern Europe, Africa, South America. And many stocks were trading up in the $10 range. Our stock price went from pennies to about $11/share based just on our surface samples. We kept putting out surface and tunnel results and by April it was trading at $22. And then it hit $30 with the first drill hole. But when we released the second drill hole of only 44 meters, the stock plunged to $16 within a couple days. Well, Fidelity had always thought the stock was too expensive, and they stepped in at that point and bought a million or so shares. They had heard the story many times, they were confident with management, but that really takes guts to step in front of that kind of falling knife!
Meanwhile, David couldn’t understand this at all. He said, “What’s going on here? We went to $30 on one drill hole and now we have an ore body and it’s going down?” But we went back on the road and the stock was starting to move up again, so I thought we were doing a pretty good job. We came back to Toronto and in fact, Ray Threlkeld, who’s now with Western Goldfields, was at the restaurant that night and came over and congratulated us. He was one of the top guys at Barrick, and we didn’t know it at the time but he was the champion of them acquiring Purina. Well, the next morning I get a call at 6:30 am from Alan Hill, who’s now at Gabriel, and he was the right-hand man to Bob Smith and Peter Monk. He sounded nervous on the phone and said he wanted to get together with us right away. Now this isn’t anything unusual – we’d met with them many times and they knew we were in town. I looked at my schedule and said I could meet him at 2:30 that day. But he said, “No, I need to see you earlier than that.” So I told him I could cut my breakfast meeting short and we could meet him in the lobby.
XL: Did you have an inkling at that point?
CMS: Absolutely not. Again, this wasn’t unusual to meet with major companies. But what did give me the inkling was that there wasn’t one of them in the lobby, but five of them. I looked at David and thought, okay, this is a bit odd. And then I think it was Alan that handed me a news release on Barrick letterhead, and before I could read it he said, “We’ve asked the Toronto Stock Exchange to halt trading in your stock.” And my heart just dropped – I thought, oh my god, there’s a flaw in our title somewhere, they’re gonna scoop the project. I must have turned pale white. But the very next thing he said was, “We’re making a bid for all the shares of your company at $27 a share.”
XL: Wow!
CMS: Talk about a roller coaster! I looked at David and he looks at me, and we just said “Oookaaay…. that’s interesting… we’re going to have to caucus and get back to you.” David and I are going up the elevator and saying, “Oh my god, oh my god.” I think the first call was to Loewen Ondaatje, who was bringing us around on this road show, and we said we had to cancel our road trip. They asked why and I said, “We can’t really tell you, but we’ve got to cancel.”
XL: That must have got the radio waves buzzing.
CMS: Yes. I mean, our stock’s halted, our road show’s shut down, and now we have to meet with advisors we didn’t have. That was our first task, to hire advisors, as this was a hostile bid by one of the world’s largest gold producers and we were a very small company! So we spent the next 60 days adding drills, drilling holes, and we went from 9 holes to 54 by the time we were taken over. And we added another $100 million or so to the acquisition price through negotiations with Barrick, and got $30 a share. We closed Labor Day weekend 1996, almost three years to the day from our 25c IPO.
XL: That’s a great story.
CMS: It was fantastic.
XL: You have a similar story with Francisco Gold.
CMS: To step back a bit, I had hooked up with Randy Reifel, who had just sold Carson Gold to Robert Friedland, and he had a shell company and wanted to hook up with David Lowell to acquire the Peruvian project before we went public. I really liked Randy and thought he was a successful mining person. I wanted to start something else and I had met a couple guys who had projects in Mexico, so I introduced them to Randy and for that I got a finders fee and a board position on the shell company, which was renamed Francisco Gold. We subsequently hooked up with Allan Charest, who is a fantastic prospector and mine finder, and a couple years later we started pulling samples from El Sausal, which was very reminiscent of Pierina. And that company did extremely well as part of that boom in the mid-‘90s – it traded up to $30 a share. Then probably six months after the sale of Arequipa, the Bre-X fraud hit and Francisco was caught up in that. Not only that, the gold price was plummeting, and then the high-tech boom was stealing all the money. So there was absolutely no money for the industry, and people were leaving the industry in droves.
XL: So, how did you proceed in that kind of environment?
CMS: Well, it was pretty tough – I call it the nuclear winter of our industry, the late ‘90s into about 2001. Francisco, which had been $30 a share, went to low single digits. But during those dark days, Randy stepped up to the plate and not only continued working on El Sausal, but we made an acquisition in Guatemala, which had a project on it called Marlin. As head of the special committee I hired Carl Herring, an ex-Placer Dome geologist who was a very good exploration geologist, and he said there’s at least half a million ounces sticking out of the ground there, which probably has 5 million ounces now. This was in 2001 or so. We were advancing El Sausal, and we were drilling and discovering at Marlin, and then--
XL: Along came Glamis.
CMS: Yes. I think this was truly one of the deals of the decade, a true win-win deal. Our stock, and the gold price, was starting to recover by now. We were trading at about $8 a share and Glamis was trading around $12, so the bid was at $12, a 50% premium. They got two mines, both of which are in production now, both low-cost, high-grade deposits. That allowed them to eventually gobble up Goldcorp and then Western Silver. They’re now one of the preeminent gold companies on the planet. Plus, Francisco shareholders got the spinout of Chesapeake, which Randy ran, which is doing really well today. I think the stock got over $50 from that $12 takeover. So it was a huge win for both Glamis and Francisco shareholders.
XL: And before we leave the ‘90s, there’s Pacific Rim Mining.
CMS: I teamed up through Carl Herring again, and he introduced me to Tom Shrake, who is a mine finder. There’s actually very few mine finders on the planet; the same guys seem to find mines over and over again. He had been involved with some very good discoveries in Chile, which had made the company he was working for, Gibraltar, a takeover target. That deposit is now one of the lowest-cost heap-leachable copper deposits on the planet. So we hooked up but unfortunately ran right smack into that nuclear winter of the gold mining industry again. But that led to an opportunity: we still had a fairly good-sized treasury for the time, and we decided to focus on low-cost, high-grade deposits, which tend to be epithermal vein systems. So we were sleuthing around, looking for that kind of system, not knowing if $250 gold was going to $150, and found a gold system in El Salvador that fit the bill. It was huge – 20 km long and 10 km wide, I mean literally kilometers of veins with gold in them sticking out of the ground. They had a resource of about 300,000 ounces of a half-ounce per ton or so, and wide open. But they had hit a wall.
XL: How did you acquire the property?
CMS: We tried to buy the deposit from them, but their board didn’t want to do that. So we issued about $10 million of Pacific Rim paper at about 30c, and for that we acquired cash flow from Denton Rawhide. So we’ve had cash flow alone that far exceeded our acquisition cost. On top of that, we got a hidden asset there – the pit – which we’ll turn into a municipal waste dump that will bring us about $100 million in additional cash flow. And we got El Dorado for free. We’ve since made some other discoveries there, and we have a vision for it to be +2 million ounces. It’s very high grade, and that’s just scratching the surface of this system. So we think we’ll be in the 100,000 to 150,000-ounce-per-year production range.
XL: When does the new resource calculation come out?
CMS: It should be out early this year. Then we’ll be focusing on the feasibility study, which we expect by mid-year. Our biggest roadblocks have been getting the permits from the El Salvadorian government. They’re very supportive, all the way up to the president, for mining under the right criteria, which we call green mining, which we’re very supportive of as well. In fact, we’ve taken a belts-and-suspenders point of view on it: we’re rendering cyanide inert with the Inco-process; we’re double lining the tailings pond, which in the U.S. you’d only have to single line; and we’re putting a water treatment plant on the back end.
XL: Is there still a political risk in El Salvador?
CMS: Yes, there’s risk. There always is with mining. As an industry, we unfortunately don’t have the best reputation in the world. People talk about the religious right -- well, the religious left have taken on anti-mining as a stance and really spread a lot of bunk, frankly, about mining. And there is an active anti-mining lobby in Central America. There is a new mining law on the agenda in El Salvador for this month and we’re expecting it will get passed this month, but it will pave the way for us to get our mining permits. And once we have that, we’ll start construction of the underground ramp and we’ll be on our way to producing gold within a couple years.
XL: What, specifically, is the proposed law?
CMS: The new law does a couple things. First, it has higher environmental standards, which we’re completely fine with. It creates an environmental agency to oversee mining, which they did not have before. And to do that, they will increase their royalty from 2% to 3%, and a portion of that increase will fund the environmental agency.
XL: Is that increase onerous for you?
CMS: No, no. The 25% corporate tax and a 3% royalty are very much within a reasonable range. The El Salvador government actually sees mining as something that can be the biggest taxpayer in the country. They are taking it seriously – they went to Chile, Peru, Canada and the U.S. and hired experts to go over their mining codes. They want a mining code that promotes mining, but promotes the right kind of mining. One that creates jobs and brings all the good things that mining can bring.
XL: So this shouldn’t slow PMU down.
CMS: Under their existing mining law, we meet all the criteria to get all our permits. The new mining law is just much clearer. El Salvador doesn’t have much of a history of mining, so there were a lot of flaws in their mining code as far as practicality was concerned. So the new law addresses all of those. It’s going to be win-win for El Salvador and Pacific Rim and PMU shareholders, because we are focused on building a mine that has a very low impact on the environment – it’s underground, there’s no big open pit, and all the chemicals are destroyed before they’re put in the tailing pond. And then you replant the pond, and since it’s jungle there, things grow back very quickly. All mines are depleting assets, so at some point it will close down and I think three years later you won’t even know it was there. But in the meantime, I think this is a mine that will be around for decades.
XL: What do you make of the proposed revision to the U.S. Mining Act?
CMS: That seems too onerous to me. Mining in the U.S. is really concentrated in a few areas, and there’s no broad impact on the nation. And in Nevada, it’s a major source for employment. When you look at the numbers they’re talking about, they’d probably kill mining in many of those areas.
XL: Agreed. Okay, next up is Peru Copper.
CMS: Ah-ha. Another picture-perfect timing by David Lowell. He was first into Peru when they changed the mining code in the early ‘90s, and his timing was perfect into Chile. He’s also proved his timing on commodity prices. It was about 2002 when copper was in the low 60s and he phoned me up and said, “Katie, copper’s not going to stay down forever. I’ve seen too many cycles. I think we should go out there and look at some known copper deposits in the Andes and acquire a couple of them.” So he went into his extensive database and came out with a list of 14 deposits, which included ones in Peru, Chile and Argentina. And he wanted to focus on chalcocite, a well-known form of copper that was not readily leachable 20 or 30 years ago. But there’s since been a lot of technical advances in the recovery of chalcocite. Well, many of the deposits didn’t meet the criteria – too high arsenic, poor infrastructure, a few with surface rights issues. But Toromocho kept looking better and better.
By now David’s in his late 70s and is going up to 5,000 meters elevation! He’s looking at core that, in some cases, has been hanging around for 40 or 50 years. He came back and said, “Katie, these holes were only drilled to 400 meters and every one of them ends in ore… the grades get better at depth… the metallurgy was done improperly – they just didn’t have the kind of methodology we have today – and I think we should acquire it.” There was a group of us called Peru Copper Syndicate, which included David, myself, Geoff Loudon, Lucho Baertl, and we brought in Dave DeWitt a little later. I remember very clearly the day we got the property from the Peruvian government – I was in the hospital giving birth to my son four hours earlier!
XL: So this was when?
CMS: That would have been May 8, 2003. David and Lucho phoned me from a bar in Lima, after obviously having had a few piscos to celebrate. And if you look at a chart of the price of copper, it’s never looked back. So we probably spent a couple million dollars of our own money and, by the following spring of 2004, we’d raised about $12 million dollars privately through Nesbit with institutional investors. By the following fall, we took it public, with a valuation of somewhere around a hundred million dollars. So that would have been in ‘04. We sold it to Chinalco, the aluminum company of China, for almost $900 million. It’ll produce 300 tons of copper or so a year.
XL: Another success. Then we have Stornoway Diamonds.
CMS: Eira Thomas and I met many years ago. Her father and my father used to do exploration together in the ‘60s up in the Arctic, in the Northwest Territories. She is probably the only woman in the world to wear diamonds from a mine that she discovered herself! When she was in her mid-twenties, she discovered the Aber deposit, which is one of the richest diamond deposits on the planet – something like 5 carats per ton. And each carat is worth more than $100 on average, so it’s got a huge margin. Aber decided to focus solely on the development of this deposit, so they severed their entire exploration group.
We teamed up and formed Stornoway in about 2001. And by 2003, we had diamonds -- now we literally have close to 100 kimberlites with diamonds in them. We launched a very acrimonious hostile takeover of Ashton Diamonds just over a year ago. And we ended up being a victor in that. We’re now developing the Renard deposit in Quebec, which will be Quebec’s first diamond mine. The other day I was in our lab holding about 50 carats in one hand - that was 50 carats in only three diamonds – these are big stones! The diamontaire who’s been working with us out of Antwerp and Israel said to me, “These are very good stones… they’re Tiffany goods!” We’re very excited about that development. And we’ve got many other diamond projects that are looking very good up in Aviat and other projects we have up in Nunavut. In the very far north, diamond exploration has an extremely long timeline and is very expensive, but the rewards are huge. Diamonds are probably one of the highest-margin businesses in mining.
XL: What’s your specific role with the company?
CMS: I’m chairman of the board. I wouldn’t know how to find a diamond or an ounce of gold or a pound copper. But my philosophy has always been to team up with people like Eira Thomas and David Lowell and Andy Swarthout, who are mine finders, and provide them with my market expertise in raising the money and getting the story out, so that they can stay in the field and do what they do best, which is find mines.
XL: Which brings us to Bear Creek Mining.
CMS: Andy Swarthout is the CEO. With that company, we have found what will probably be two new silver mines. First, there’s Corani, on which we’re about to put out a preliminary economic assessment. There’s 320 million ounces of silver there, and billions of pounds of lead and zinc. It’s a fantastic, huge deposit. Then, we also found the Santa Ana silver deposit, which is a very unique beast. It’s lower grade than Corani, but it’s basically pure silver. The silver, based on the testing we’ve done so far, looks like it’s going to be very nicely leachable, which is going to make it a very low-cost, low-capital deposit. And both those deposits are in Peru.
XL: How would you assess the political risk in Peru?
CMS: These countries ebb and flow, but so far it looks pretty good. They seem to have not bought into the Chavez revolution, if you want to call it that. In fact, when Chavez injected himself in the Peruvian elections a couple years ago, it completely backfired. The leftist candidate probably lost because Chavez tried to influence the election. It’s a mining country and it will always be a mining country. Something like 60% of GDP -- probably more with the higher metal prices these days. The government has a very pro-mining philosophy. In fact, the president talks about the 20 projects he wants to see developed, which includes Tomocho and I think Corani was recently added to that list as well. These are projects that create jobs. Peru is a very mountainous country, with a big chunk of the Andes. It’s highly difficult to get good infrastructure in there, and it’s highly difficult for agriculture in many parts of the country. Mining is the one thing that brings jobs and wealth. So, I think we’re comfortable with the politics in Peru right now.
XL: South American politics differ between countries and even between provinces.
CMS: Latin America seems to be divided into two camps. You have the free-market, outward-looking, trade-oriented side, which includes Chile, Brazil, and Peru. And then there’s the Chavez left side, which is trying to wield influence with money, and frankly, he has a lot of money with $100 oil prices. He’s tried to influence elections in Bolivia and Ecuador and places like that.
XL: You’re on the board of some other companies as well.
CMS: I was on the board of Miramar up until about a week ago, and they were taken over by Newmont for $1.5 million. That’s a board I sat on for about six years. And it’s a group of people who had a real asset they were developing, and John Wakeford, the VP of exploration, has really cracked the code on that deposit. And since he’s been at the helm of exploration, they’ve added about a million to a million and a half ounces every year. A great exploration group, a great development group. And now it’s in the hands of one of the biggest gold companies in the world – which, at 10 million-plus ounces, it should be.
XL: And Kinross Gold.
CMS: I’m on the board of Kinross, and that’s an interesting position for me because I’ve always been on the acquiree side, not the acquirer side. It’s very interesting to see it from the other point of view. I joined that board. The CEO, Tye Burt, and I go back a long way. In fact, he was our advisor on the Arequipa takeover when he was head of mining for Nesbit. We’ve known each other since the mid-‘90s. He’s had a vision for Kinross since he took it over a few years ago that has entirely come to pass. He sold off a lot of the non-operating entities. In the case of the Porcupine JV, he traded for 100% of La Coipa plus cash, and unitized 100% of Paracatu, which is finishing a half-billion-dollar expansion – a huge deposit in Brazil that will be around for decades. And we did the big deal last year that was the acquisition of Bema, which consolidated the Maricunga district, so we now own 100% of that deposit. That gave us Kupol, which is one of the best gold deposits on the planet – very high grade, hence very low cost. It’s a low-sulfidation epithermal vein system, with a lot more exploration to be done there. This is a very high-quality group of people. It’s one of the youngest management teams in mining – very focused, very hard-working. They’ve got a vision that they’ve been following through on with flying colors. And of course, in all of these cases it doesn’t hurt to have the wind at your back with higher metal prices.
XL: Absolutely. And last is Animas Resources.
CMS: I’m on the advisory board, not the board of directors. But it’s the same type of philosophy. When you sit on the advisory board, it’s not as full-on as sitting on the board. You’re there as a resource for the CEO to maybe make introductions or talk strategy. At Animas, Greg McKelvey has put together a district, which is a very well-known district but has never really been consolidated under one company with a focus on finding not only the surface ores that outcrop but the deeper ores which could be Carlin-like. According to Greg, there’s gold in every single rock type on that project, so it’s going to be a very, very exciting exploration program.
XL: Your expertise is very focused.
CMS: I’ve got a very narrow area of expertise, but it’s a very important area, which is raising money in the market and getting the story out. A lot of people in exploration kind of get tree-focused and not forest-focused. My role is really to get people focused on the end game, the big forest! When I look back – and I’ve had a pretty successful career, a very fun career – the focus has been on the people. I work with great people who know how to find ore deposits, and that makes my job easy. The hardest part is finding ore deposits. And sometimes the market gets too impatient with results and the CEOs get too focused on the market and my job is really to say to these mine-finders, “You go out and find the mine. That’s where you add the most value. I’ll look after the market.” And then there’s the strategy of dealing with major companies, the strategy of dealing with investors, and the strategy of dealing with investment bankers.
XL: For your part, you’ve obviously been very successful. We saw you were voted Mining Man of the Year… we got a chuckle out of that.
CMS: (laughs) I think I might have been one of the first women and they asked me if I wanted to change it. I said, “No way! It’s been Mining Man of the Year for over 100 years. I’m not gonna change it! I love that!”
XL: What did you get the award for?
CMS: For Arequipa. Actually, David Lowell and I were co-inductees that year.
XL: And then you got the “Award for Performance” by the Association of Women in Finance. You’ve also held a position on Financial Post’s Power 50 since 2002. So, is there a Catherine McLeod-Seltzer secret?
CMS: (laughs) The secret really is backing the right people, backing those mine finders. If I’ve had any luck in my career, it’s really been the ability to recognize those people.
XL: You’ve worked in an industry that’s mostly dominated by men. That has obviously not held you back, but have there been times where it’s been more difficult for you?
CMS: I don’t think so. Not in a lot of years. I haven’t really focused on that. What is all this talk about women as victims? I mean, that’s crazy talk. That’s not the way it is. Anyone who sees themselves as a victim is going to be a victim, man or woman. I don’t want to talk about that. I don’t think that’s right.
XL: Anything you’re particularly proud of?
CMS: One of the things I’m most proud of is when you look at the people we work with. For instance, there was a huge earthquake last year in Peru, and the government was in a little bit of paralysis of what to do. People from Bear Creek, for instance, went down there to the epicenter and took time off their jobs. They were out there helping people, rescuing people, feeding people. They really stepped up to the plate. Then you look at places like El Salvador, and Pacific Rim has been very well established there for quite some time, helping with education and health issues. Then you look north to Canada’s Arctic where some of the elders of the communities are saying, “We want jobs. We want jobs for our kids. We don’t want them to go to the cities and vacate the land.” We’ve got to give them opportunities, and I’m really proud to see that mining is doing that.
There’s a lot of negativity hanging over mining, but I think this generation is really doing something to change that. I think the perception is changing – look at people like Frank Giustra, who was really my mentor and gave me my first break in the industry. You look at his foundation and what they’re doing. I think mining, if anything, has been remiss at getting a positive message out about what they can do. I’m very proud of the people I work with and their “can do” attitude. Many of us went through the nuclear winter together and stayed focused; it was really, really tough. Bear Creek was down to less than $1 million and none of the projects we took public turned out to be anything interesting. But the team stayed focused, and lo and behold, the next thing you know, we’re drilling ore holes at Corani. The positive attitude of the people in this industry makes it a great industry to work in.
XL: Will there be a fourth generation coming behind you?
CMS: I wouldn’t be surprised! My brother and I both have young children. My son said to me once, “Mommy, I’m gonna find diamonds for you! Just like Aunty Eira, I’m going to find diamonds… and gold, too!” The industry is very international. My son speaks fluent Spanish. We have a housekeeper from Guatemala who’s been with us for years and she only speaks Spanish to him. He could work in Argentina or Russia or anywhere on the planet, which is so exciting.
XL: Gold has broken out recently… where do you think we are in the cycle? Do you see a mania phase coming?
CMS: There will be a mania phase because there always is a mania phase. But I don’t see it yet. People say copper is the metal with the Ph.D. in economics – well, gold is the psychic. It sees ahead, and you won’t know it until in retrospect what it was seeing. Obviously, it sees something that it’s nervous about. When you look at the chart, it’s picture perfect. It’s been moving up steadily since 2001. There is no mania in the chart right now. But I would say it’s going to come in this cycle, absolutely. It always does. The mania phase is where it puts on the most. It could double from wherever it starts, and in probably a relatively short period of time. If it’s at $900, it will go to $1,800 in the mania phase. Or if it starts at $2,000, it could go to $4,000. But I think we’re a long way from it.
XL: Why do you think gold has been rising?
CMS: Gold is obviously being accumulated by people who are nervous about something – be it inflation, be it international issues. I’m not sure what they’re seeing, but it will become clear to us after it’s all said and done. There’s also a lot of money in countries and in societies that have been historical accumulators and believers in gold, like China, India, the Arab nations. And really, the gold world is a very, very small world – talk about the trillions of dollars that slosh around the world every day – gold is nothing. So, the mania phase will come.
XL: What about gold stocks?
CMS: From my point of view, the real wealth is created by recognizing a discovery early on, or recognizing a good discovery group early on, and accumulating a position and being patient and being believers in it. That’s how I’ve made all my money. I trade for fun, but to make real money, it’s all about accumulating a meaningful position in the real people of our industry. There are a lot of people you see in the industry whom you roll your eyes at, who jump from sector to sector and gold is just the latest fad to them. It’s the people who are the dedicated toilers and the strivers in our industry who know how to create real fundamental wealth.
XL: Like those in the Explorers’ League. Any other advice you’d give to an investor interested in the resource industry?
CMS: Don’t follow the crowds. We all make mistakes in our investing… I remember through the whole Bre-X mania, I bought some private placement stock around $2 or $3 a share, and it went to $9 during the hold period. But before the hold period expired, it dropped to 25c a share! Even people in our industry can get caught up in it. So don’t follow the crowd and buy that private placement in that hot new issue. Do your own research and be patient. People lose interest and they become impatient. In almost all instances, it takes about three years to make a real discovery or to find an ore body, and the market doesn’t have that kind of patience.
XL: But you really have to hang on that long to see the benefit.
CMS: Absolutely. And those are the buying opportunities that you really want to take advantage of.
XL: Before we let you go, Catherine, who else do you feel deserves consideration for the Explorers’ League?
CMS: My cousin, Robert McLeod, has got to be on your up-and-comer watch list. I’m not sure if he’s found anything yet that has become a mine, which is one of your criteria, but he’s only in his 30s. One guy I would say for sure deserves a look is Dave Fennell. Very storied background. He’s a geologist, but he was also the chairman of Miramar, and also involved in Palmarejo and Sherwood Copper and founder of Golden Star. He’s a rainmaker for sure – and a very interesting guy. His nickname was “Dr. Death” when he played professional football, and he’s a legend in our business. A very colorful character! Andy Swarthout of Bear Creek also needs to be looked at. The previous discoveries he was involved in were all with major companies, but in the four years he has headed up Bear Creek, it has made two significant new silver discoveries.
XL: Thank you for your time, Catherine. It’s easy to see why you deserve to be in the Explorers’ League. We look forward to following you and your companies.
CMS: Thanks, Jeff. As you have probably seen in this interview, I have a real passion for this industry and its people, and it’s been a pleasure sharing some of my experiences with you and your subscribers!
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