XL: Thank you again for joining our Explorers’ League, and welcome.

It’s my pleasure to be able to participate.

XL: Let’s start with your background. Where are you from-and what kind of name is “Shklanka”?

I was raised in Saskatchewan, but my family is from Ukraine. I’m told the name is actually Polish, though, and I don’t know how that came about.

XL: So, have you been watching the unfolding events over there in Ukraine? [This interview was conducted during the time when massive protests prevented the 2004 Ukrainian election from being stolen.]

By all means, yes. Although, I have to say, that’s one place I haven’t been to. But it’s certainly a pleasure to see that they may finally get their act together over there.

XL: Yes, if they can join the Estonians and some of the others that have surged forward in the post-communist era, that would be quite something-Europe’s breadbasket back in the saddle again.

I agree.

XL: So, why did you decide to study geology? Were you always interested in mining?

I’m one of those people who started out not knowing where he was going. I grew up in Saskatchewan, in that part where there isn’t one meaningful geological outcrop, and my parents were both teachers, so geology wasn’t in my blood. I tried all sorts of different subjects at university, to see what might catch my interest. I accidentally took a geology class while I was studying at the University of Saskatchewan. That led me to speak to the head of the geology department while I was looking for some extra classes during my last year of undergraduate studies. I ended up going into the field with him over the summer and getting a Masters in geology at the University of Saskatchewan before going on to get my Ph.D. in it at Stanford.

XL: You must have liked going out into the field.

Yes. At that time, there were quite extensive summer breaks from university study and I started going out into the field every summer. By the time I got to Stanford, I had quite a bit of field experience behind me. My thesis at Stanford was a field thesis-I actually studied a gypsum mining camp for my thesis. I left there and started out with the geological survey in Ontario and got into the mineral side very quickly, where I did some detailed studies of two other mining camps. I wrote up the base metal and iron deposits of the province before I actually started my mining career.

XL: So you found yourself attracted to the minerals you were seeing?

That’s right. I completed my doctorate in ’62 and put in about 6 years of service with Ontario. I did detailed studies of those mining camps and got more and more into the mineral side, until I decided the way to go would be to get out there and do it for myself. I was then recruited by the Placer organization in ‘69 to look after their eastern Canada exploration programs. I started as a senior geologist for about six months, and then I was manager for eastern Canada.

XL: If you were manager for eastern Canada, you probably weren’t out in the field kicking rocks, but were working with other geos who were doing that sort of thing?

Both. I’ve always thought you had to get out in the field-but no, my day-to-day work was more in the office. But I’d go out in the field to help start programs, to see how programs were getting along and to terminate programs. That’s what you had to do. I worked as manager for eastern Canada until ’78, then I was transferred to Sydney, Australia, to look after their Southeast Asia exploration. I was in Southeast Asia for about three and a half years, and then I was transferred to Vancouver to the head office to look after exploration in western Canada for a while. I ended up being manager for all of Placer Development’s exploration until the merger; after that I became Vice President for Exploration for Placer Dome.

XL: How many years did you put in with Placer?

I left in ’89, so that would be 20 years.

XL: You must have been involved in a huge number of projects over that time. Can you give us some highlights? What early projects were you involved in that people would recognize?

Well, the one I like to tell about is the Kidston gold mine. It was really the first project I was involved in all the way, from negotiating the deal to seeing it through to feasibility. It became the first mine for Placer in Australia and that part of the world.

XL: How did that come about?

The property had been marketed to about 40 different groups in Australia, including Placer. When I got there, it was one the geologists were still interested in, and it looked like an opportunity-particularly at a time when there was an expectation that gold was going to take off, and we decided to go for it. In retrospect, it was the right move.

XL: What year was that?

It was ’78.

XL: Right before gold went through the roof!

That’s right.

XL: After Kidston in Australia, what was next?

I think that would be the involvement in Papua New Guinea with Porgera and Misima-particularly Misima, because it is one that was questionable. When I came to Australia, they had acquired Porgera, in the interior of Papua New Guinea and had already done some drilling on it. They had also just acquired the Misima property on one of the islands. I oversaw the first work on Misima. But at that time, the company was concerned about the way Papua New Guinea was going-the political risk-so we were told not to spend any more money in the country. The only way to stay in Porgera and Misima was to bring in outside money, so we brought in CRA for Misima, and Gold Fields for Porgera. Misima, from very humble beginnings, in the end turned out to be a 3.5-million-ounce deposit that was put into production. Porgera, as far as I know, is still kicking, still producing gold … I haven’t kept up with its reserve figures, but I think it’s on the order of 17 million ounces.

XL: Did the politics in Papua New Guinea stabilize, then, to allow this to happen?

I think there was some softening in the position of the people who were calling the shots in that area, but I don’t think the politics stabilized. Actually, I suspect you could say that there has been a slightly declining investment environment in New Guinea, ever since it got its independence.

XL: Well, obviously these properties made it into production. Did someone over your head in Placer make a mistake to vend off interest in them?

I’m not really in a position to judge what happened in the head office at the time. I suspect that there was some concern about the way things were going, from the way they had seen it before, and maybe there was an overreaction at the time.

XL: Very diplomatic. What was the next big thing after that?

I came back to western Canada, in 1980. Those were slow years, after prices went down, and there seemed to be an oversupply of most metals. We were more in a survival mode than anything else in those years. But after working in western Canada for a few years, I got into the international scene, and that’s when things started picking up again. I think it’s fair to say that Placer was one of the few companies that pursued the international scene early on; they were in a position to take advantage of the global political changes that occurred when the Soviet Union could no longer support many of the countries they had been supporting around the world and they had to fend for themselves. That really is what opened up the whole world to the exploration game.

XL: We know there was military support for Soviet client states, but did they get a lot of financial support, too?

There was some financial support, and other support as well-and not only from Moscow, but also from Beijing. You had the two philosophies, the socialistic and the capitalistic, and the desire to bring more countries into each fold, respectively.

XL: And it wasn’t just a financial issue-there was ideological opposition to ‘capitalist pigs’ coming from Vancouver to exploit their resources…

You just couldn’t. If you went to those countries, they’d say, “Well, we have to have control.” There was no way you could do business and no way you could fund it-the banks wouldn’t touch it. The socialist philosophy was the operating philosophy and prevailed.

XL: So how did Placer position itself to be ready to move when the Soviets withdrew? Many of us in the West knew they had to collapse, but few people expected it to happen so quickly when it did.

There was no decision made from the top. It was just a matter of some of us going out to these countries that looked like they had mineral potential. A lot of the countries under the Soviet umbrella had seen no modern exploration whatsoever. Their mining industries, because they were taken over by the state, virtually collapsed. It was a matter of opportunity, and moving on it. In my case, I got exposed to the Omai gold mine in Guyana and assessed that the political risk was improving. I liked what I saw there and basically got the company involved. I did the same in Tanzania. In fact I was the first one into Tanzania.

XL: Were Guyana and Tanzania formerly Soviet client states?

They were strongly socialistic and their economies collapsed. They both had to make a decision; if they were going to survive, they were going to have to bring in foreign investment. They made that decision, and fortunately, I was able to pick up on that decision early on, around 1987.

XL: What did they do to attract foreign capital? Did they rewrite their mining laws?

In both cases they had existing legislation for mining that dated way back. Guyana was in the throes of trying to rewrite their mining law, and when I got to Tanzania, I spent two years working with the government. They brought in help from England. We signed a model agreement with them that they ended up using as a basis for future agreements.

XL: Very interesting. Placer is no charity, but here we see the Invisible Hand at work, to the obvious benefit of the people of those countries.

I think that’s a fair comment. For whatever reason, when a socialistic government gets ingrained in a society, the government becomes very protective of natural resources. They see it as foreigners coming in and exploiting their wealth, not realizing that there is no wealth unless it is exploited. As a result, they want to keep the resources to themselves. Unfortunately, there are not many examples where the state has successfully exploited the mineral resources of a country. There are some good examples, but not many.

XL: So, how big were those finds in Guyana and Tanzania?

Well, Bulyanhulu in Tanzania is in excess of 15 million ounces and, as I understand it, is still wide open. Omai was developed by Cambior, after Placer dropped it, and I don’t know the number, but I would guess that 2.5, maybe 3 million ounces came out of there.

XL: Why did Placer drop it?

I don’t want to get into that, because I wasn’t with Placer at the time. I do know that in many cases, in order for projects to succeed, they need someone behind them. So I would just have to say that they dropped it because they didn’t see it meeting the parameters they required at the time.

XL: Can you tell us about your transition out of Placer? How did you transfer Kabanga to Sutton Resources?

I left Placer in January of 1990. I went out on my own and put together a portfolio of three properties-one in Guyana, one in Tanzania, and one I was attempting to get in Thailand-with the idea of taking them public. Maybe the world wasn’t ready for me yet, or for the international scene, or maybe I didn’t have quite the track record yet; I found it very difficult to get the financing. I ended up doing a deal with Sutton Resources. They had the foresight to take on the portfolio. I joined in, that was one of the conditions. So, at that stage, I had the Kabanga nickel deposit and a smaller deposit in Guyana called Marudi Mountain, which is still in the exploration stage. The situation in Thailand did not materialize.

XL: And while you were with Sutton, Placer let Bulyanhulu go, and you said, “We should pick this up…”

That’s right. In fact, we applied for it up the same day they dropped it.

XL: Was that your biggest success at Sutton?

Certainly Bulyanhulu was a major success story. It made the company, and it was financially very rewarding for me as well. When I started, Sutton’s share price was just over a dollar, maybe a dollar and a quarter, dollar fifty. I don’t remember how many shares were out-maybe five million. So, it had a market cap of less than $10 million. Barrick bought it for $525 million.

XL: That’s a pretty good return.

(flatly): Not bad.

XL: Then what?

Barrick took over Sutton, and the key people stayed together. Most of us had consulting contracts, but it wasn’t full time. For three years, we were looking for the next opportunity, and we came up with the play we have now under Canico in Brazil.

XL: If we may be so bold, you seem to be of an age when most people have retired, but you don’t show any signs of slowing down …

Oh, I am. I’m only part time at Canico.

L: But you work with a half-dozen companies …

It’s a good question-well placed. I have to admit that, yes, I am of an age at which many people would be retired. I have to say, though, that I am enjoying what I’m doing. I can pick and choose how I spend my time, for the most part. On the whole, I find it rewarding. I find it challenging and it keeps me alert.

XL: You know, all of the explorers we’ve interviewed, if you’ll forgive the use of a bit of a shopworn word, have a passion for what they are doing. This really isn’t surprising, but there aren’t any of them for whom what they do is just a job. It’s exciting.

(chuckles-very softly) Well, there is that. Initially, I got quite involved in the science of geology, but later I got caught on just the fun of trying to beat the odds and finding something. The challenge of getting there is my main motivation. But it’s not always exciting. As a geologist, when you start out, there’s a lot of footwork to be done. There’s a lot of isolation, at least in my early years and in my environment in Canada, in terms of being away from home and family. So, it’s not all fun and games, but I think I have been fortunate, and to a large extent have been able to minimize the less pleasant aspects of the profession and to take advantage of the more rewarding aspects, getting exposed to interesting people at all levels and countries.

XL: Let’s talk about current things you’re doing. How many companies do you have going right now?

Well, there’s Canico, there’s Barytex, Kobex, Polaris, Pacific Imperial Mines, and I have some involvement in a technology company-that’s my only outside interest.

XL: With that many things going on, you can’t be too heavily involved in the operations of each company, though you are listed as Chairman or Vice Chairman of many of them …

No, I’d say I’m just a Senior Advisor. I like to think that I get involved in the properties and offer some direction. Fortunately, with Canico, I’m associated with a really good group of people. They don’t need me. They can function without me quite well-maybe even better. Barytex, Kobex, and Pacific Imperial Mines are start-up companies.

XL: So, in terms of actually having a project in development, Canico is the one to watch right now?

Yes.

XL: Canico has 100 million tons of 2.1 percent nickel on the Onca-Puma property. That’s huge, but can you tell us a little about the metallurgy there? Aren’t laterites the harder ores to extract nickel from?

No. There’s lateritic nickel and there’s lateritic nickel. There’s the conventional extraction of lateritic nickel, which is tried and true. It’s off the shelf, and that is what we would be using.

XL: What’s the recovery rate on that?

The recovery rates are usually in the 90 percent range. Some laterites, particularly in Australia, require a pressure leach technology … that has a lot of problems.

XL: So, you have 100 million tons of more than two percent of the relatively easy variety to recover?

That’s right. It’s … nice.

XL: And are there any things that might cause the company to be undervalued right now? Distance from infrastructure, etc.?

Well, everyone thinks they are undervalued. We’re in the throes of finalizing a feasibility study-we’re forecasting to have it in the first part of next year [2005]. There was a scoping study done some time ago, and there are no impediments that we are aware of. It’s reasonably well located with regard to infrastructure. And, if you want to be in nickel, it’s a good time to be in nickel.

XL: Yes, there’s apparently a growing shortage.

That’s projected to continue for some while yet.

XL: Looking at StockWatch right now, it says you have 41.3 million shares, at $13.75. That’s a pretty significant market cap-about a half a billion dollars, but you’ve got $20 billion worth of nickel.

Right. There’s a lot of material put out by the brokerage houses on the company. They have their projections on price. I can’t give you a number, but I think that if you look at the numbers that are out there, they are in the $18 to $25 range.

XL: What kind of play is Barytex looking for?

The hope is to find something of significance to develop.

XL: But are they looking for gold, is it energy?

Not energy. Minerals. I’ve always taken the view that you don’t restrict yourself in terms of commodities. Certainly there are some commodities that are easier to sell in the market place than others, but mines are pretty rare animals, and if you put on too many conditions, it’s going to be much harder getting there.

XL: So, it’s just looking for a prospective property, and you’re not trying to predetermine what kind?

Or even where it is. Though, for Barytex, we have been working on finalizing an arrangement on a property in China. We signed an agreement two years ago, to enter into a more detailed agreement on a zinc-tin deposit-in fact, it’s the third largest tin deposit in China, and China is the number one tin producer in the world. So, it’s quite a significant deposit.

XL: And what’s the status of the agreement?

We got it signed, but we’re having trouble getting agreement on the details.

XL: Is that because of the peculiarities of doing business with the various ministries and interests in China?

I think it is, yes.

XL: And is Pacific Imperial also looking to do business in China?

Pacific Imperials’ base is China. It has two properties in Yunnan. The thrust for the company actually came from China: there were some Chinese entrepreneurs, two of whom were educated in North America, who had acquired some property, and they wanted to list on the North American market. They decided to bring in some help from the West to run the company. Their idea was that they are best positioned to acquire properties in China, in as much as they have the contacts and they know the system, and we’re better positioned to run the company.

XL: How did they meet you?

We were introduced by one of the brokerage houses as someone that could probably help them.

XL: How about Kobex, what is it looking for?

It’s the same philosophy, same track as Barytex, just a different management team.

XL: And Polaris Minerals?

They are involved in aggregates. That’s sand and gravel. Crushed rock. The idea there is that San Francisco and Los Angeles are having a harder time getting their hands on aggregate. We’ve identified situations in British Columbia, whereby we can bring in large ships-Panamax-type vessels-to supply the markets from here.

XL: There’s enough of a market for sand in the southwestern United States to make it worth shipping it from British Columbia?

(dryly): That’s right.

XL: That’s amazing-one would think that sand would not be that hard to come by.

Well, believe me, it’s not the easiest.

XL: Is there some technical reason for this? Is it a special kind of sand or crushed rock?

There’s no question that there’s a quality element, but that’s not the issue. The issue is that the cost of bringing sand and gravel into a population center like San Francisco by truck is getting more and more expensive, and there are fewer and fewer places to bring it in from. There are environmental concerns…

XL: Yes-digging up sand and gravel tends to make mountains disappear.

That’s right. The advantage we have here is that we are not held to the same cost for delivery by ship, as you would be internally.

XL: The ship gives you an economy of scale you can’t reach with a truck.

That’s right, and you can bring it right to the center of the city.

XL: Interesting-what a way to make money!

We’re on the forefront here, and we’re quite optimistic that this will take off.

XL: So, what’s the stock symbol, what’s it trading at?

Polaris is a private company, remember?

XL: Oh … right. So … when might it go public?

There’s no guarantee we’ll take it public, but we hope to have our feasibility study completed this coming year. If we were to do an equity financing, that’s probably when we’d do it.

XL: Let’s switch gears here and look forward a bit. How do you see the economic future in the short- to mid-term, and how do you think it will affect the resource sector?

Oh … I’m a geologist.

XL: But you have some thoughts?

I think that any time you see such a rapid increase in prices and demand, it usually brings with it a swing in the other direction, a correction. I think it may have already started. [RS made these comments right before gold corrected from its $456 high, but oil had started sliding.] Where’s it going to end? I’m fairly optimistic that it’s going to go much higher than where it was before. I’ve been to China and seen what is going on there. There is no way you’re going to turn that tap off. It’s in every part of the country, and its big, and it’s going to feed on itself. Places like India and Brazil are starting to pick up. These are big countries with great potential for requiring metals, as is China. China has a long way to go before everyone has the same standard of living, or anywhere near the standard of living as we have in North America. Just look at the automobile industry …

XL: Right. Are you looking at copper properties at all? They say the average car has about 55 pounds of copper in it, and the auto market in China is going to increase ten fold over the next few years.

Yes. We don’t have one right now, but we are looking [for copper]. And so, I think the economy is going to have its ups and downs, but the requirements for metals are going to be there.

XL: The other question we like to ask our explorers is, looking around the resource sector, who else do you see doing it right? Who do you respect?

I’m not sure I want to get into that. Winning in the mining/exploration game is a combination of knowing what you’re doing, and, to some extent, being lucky. It’s people who are in that first part who are the ones you have to look at. People who know what they are doing-and that’s not only technical, it’s also people who can get out on the forefront, who are prepared or who have identified situations that have escaped most other people… for example, in countries that are just opening up. I think these are the sort of things that give you an edge on the competition.

XL: Leaving companies aside then, are there individuals there in Vancouver or elsewhere whom you perceive to embody these kinds of traits?

You’ve got a big list there with the Explorers League.

XL: Yes, but we want to make sure we don’t miss anyone.

(Laughs) No, I’ll leave that one.

XL: All right then … any final words of wisdom?

No, not really. I have enjoyed the opportunity of doing this interview. I have to say, it’s been a rare experience for me.

XL: Well, thank you very much for your time; we greatly appreciate it.