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Presented
at the AEMA Conference
Funding
and Accessing Capital for Mining and Exploration Session
Spokane,
Washington December 6, 2018
Contact@MercenaryGeologist.com
We dumb field
geologists, and I proudly count myself in that category, are a rather odd
lot. We’re not your regular eight to five white collar types and we are way
too educated to be real blue collar guys. Notice I say “guys” because we
outnumber the fair sex in our business by about 9:1.
We have a minimum of
four, often five years of college education (most of us couldn’t graduate in
four years; some of the less industrious were on the nine-year plan). If you
got a real B.Sc. and not some watered down B.A. degree, it was steeped in
calculus, chemistry, physics, and computer science for the first two years
and included 35-40 hours of geology mostly as an upperclassman.
Sooner or later, most of
us went to graduate school for a few more semesters (or years in my case),
took courses in the esoteric specialties of the science, and the ones who
stuck it out wrote a book (called a thesis or dissertation) that gathers dust
in the university library stacks and has been read by a score, or at best, a
few hundred other geologists.
During the summers, we
loaded up an overstuffed duffel bag and a rucksack with our essentials and
relocated for three months to an oilfield in some redneck burg in Texas, an
offshore drill rig in the Gulf of Mexico, a series of flea-bag motels in
bum-f*** Nevada, a high altitude camp in the Rockies or the Andes, or a
bug-infested bog in the boreal forest of northern Canada where the sun never
set and the work day never ended.
We serviced oilfield
equipment or roughnecked on big oil rigs. Others sat small drill rigs,
collected and logged core or cuttings, and yelled at drillers when they
repeatedly ignored our instructions. Sometimes we hiked around every day,
broke rocks or dug dirt, put them in little bags and carried them on our
strong broad backs to the truck, helicopter, float plane, boat, mule, or wall
tent. As we gained more experience, we got to carry around a masonite board
affixed with a topographical map covered by mylar and drew lines on it and
filled in the spaces with pretty pastel-colored pencils.
Every three or four
weeks, we would all rendezvous and go to “town” or maybe even “the big city”,
or whatever a spot of civilizationmight amount to, for a little R & R
which usually consisted of blowing lots of money on benders in bars and brief
bouts of female companionship.
At the end of summer, we
went back to college with just enough money to survive as poor students until
the next seasonal job came along. That annual trek back to a meager student
lifestyle after summers of high wages and expense accounts was enough to
convince us that this schoolboy routine had to end sooner than later.
The smart ones soon
realized financial opportunities in the mineral exploration business could
lead to an adventurous and nomadic lifestyle for those so inclined or a comfortable
upper middle class living for the more staid. Either way, an early semi-retirement
was always in the cards if we could strike it rich with the right project,
the right promoter, and the right company.
Finally, at some point
they threw us out of the university and we found good paying jobs in the real
world of mineral exploration. Most of us, though well-prepared in rock
collecting, pulling IP cable, claim staking, sitting drill rigs, map making,
and melding geological, geochemical, and geophysical data into drill targets,
were ill-prepared for the corporate world.
We had become book
geologists in college and rock jocks in the field but entered the real job
market with few if any business or communication skills. These requisites had
to be learned from experience on the job.
For my generation, it’s
now four decades later. Though most of my peers and compatriots have years of
field and office experience in big and small companies, I find that many are
still ill-equipped and ill-prepared to succeed in the world of business. And
that folks, is the trouble with geologists.
So why is that?
Geologists are caught in
a nether world, part blue collar workers and part white collar businessmen.
We are outdoorsmen at
heart. We like to drive around on bad roads in big trucks, fly around in
small planes and helicopters, and hike up, down, and around huge mountains.
We wander around in the deserts, woods, swamps, and jungles, live in camps
with no electricity or running water, go days without bathing or shaving, and
supplement daily rations with fish caught and game slayed.
Some of us haggle over
the price of gold nuggets with illegal miners, chase loose women, drink beers
and shooters in the bar after work, and hang around with drillers, cat
skinners, miners, and local laborers. Our language is true blue collar,
interspersed with four letter expletives when women aren’t around and
sometimes even if they are.
It’s just about the best
life there is for single guys of any age, though not always for married
(i.e., soon to be divorced) men.
We go to work in the
great out-of-doors almost every day. Much of what we do is manual labor but
we are not typical blue collar guys. We tend to be lone wolves and are
fiercely independent. Can you imagine a geologists’ union? …that would
be like trying to herd cats!
Hells Bells, I’ve had
mild disagreements over what kind of beer to drink lead to vehement arguments
and degrade to highly personal insults. Once that confab is settled with a
fresh Bud in a bottle versus a flat, smelly IPA on draft, we scribble away on
bar napkins trying to show our equally inebriated geo-mates why the next
drill hole is guaranteed to discover the Mother Lode of all gold
deposits.
Many geologists would
prefer that their professional duties be restricted to these roles. But the
junior exploration and mining business is entrepreneurial and driven by
Type-A personalities. It runs on high risk venture capital and the best
geologists are the ones that can span the bridge between a bush camp and the
corporate boardroom.
That said, many of my ilk
are not as comfortable in a suit and tie 100 days a year as they are in
hiking boots and a rock hammer 150 days a year. But it takes both to be
successful in this business.
Whether they are
prospectors, mappers, speculators, managers, promoters, Chief Geos, VPs, or
CEOs, the geologists that understand the field and business become the
successful men. These are the economic geologists: those that turn
rocks into money.
The trouble with
geologists is
many have little knowledge of economics or business and sadly, they do not
care to learn.
The problem begins with
our college educations. We are trained as scientists in the university
geology department and take math, science, computers, and geology and not
much else. If you choose the liberal arts route, you don’t get enough science
to be a good geologist. But with two degrees in geology, I never took a
single course in communications, economics, English, or technical writing.
Yet my profession is geologist and I read, write, and speak on economics
nearly every day. I learned these disciplines from personal motivation and
experience.
Lots of field geologists
are only interested in pounding on rocks, that red and white outcrop
plastered on the side of a mountain, what’s on the back of the hill,
venturing into old decrepit mines, and moving the rig to the next location.
They like to invent a new geological model after their last three ideas were
tested by the drill and failed. They may never question if the project they
are working on has a snowball’s chance in hell of making a mine.
I have found that the
average exploration geologist lacks connection to the real world of
economics, equities, marketing, finance, ore bodies, mines, IRR, and NPV.
Many of my peers have never seriously considered what makes a good flagship
property let alone what constitutes an ore deposit.
Folks, I submit that
lithium brines in Nevada, graphite showings in Madagascar, metallic nickel
plays in central B.C., rare earth element-bearing dikes in New Mexico, and
narrow cobalt veins in Ontario (and Nevada) are not mines in the making.
They were not mines in
the past, they are not mines now, and they will not be mines in your lifetime
or mine. They might be interesting research topics to your professor at the
university but they don’t make ore bodies.
Yeah, these guys may be
geologists but they are not economic geologists.
In resource exploration,
we are always faced with very slim odds of success. Note I said that in an
optimistic way. A pessimist might say “overwhelming odds of failure”. One of
every ten thousand prospects, one of every thousand drill targets, one of
every hundred resources, and one of every five deposits with a positive
feasibility study will make a profitable mine.
By a profitable mine, I
mean one that pays back capital in five years or less, returns dividends or
earnings per share to its initial investors consistently from year to year,
and is reclaimed at a fraction of the profits delivered during its productive
life. Mines that go bankrupt and are acquired by other companies, have their
capital costs written down, or end up with massive environmental liabilities
borne by shareholders are not profitable mines in my book.
Four of every ten mines
will fail; another four of ten simply trade dollars, and two out of ten will
generate windfall profits.
And don’t ever forget
this: For every failed mine, there was a positive feasibility study.
That means that only one
of five mines put in production is an ore body, i.e., it is mined at
a profit. Exploration and mining is a capital-consuming business with
much more money put into the ground than ever is taken out, let alone
returned to the average shareholder. And these sobering statistics begin with
the trouble with geologists.
Because geologists are
faced with such overwhelming odds, we often develop unrealistic optimism for
a favorite prospect.
With failure lurking at
every turn of the drill, our mindsets project a positive spin: The next big
mine is sure to be found in this newly discovered outcrop, those old
prospects, or over that huge mountain and into the valley below. Bonanza will
be struck in our next drill hole beneath the gravel cover, or with our
re-interpreted cross-sections and new conceptual target, or our novel
geological model developed from a similar deposit in another far-flung part
of the world.
And that folks is also the
trouble with geologists. Most of us are legally blind, eternal optimists.
Employing
overly-optimistic viewpoints, geologists easily convince non-technical
speculators, promoters, and scam artists who finance startup investment
vehicles to acquire parcels of ground and make them flagship projects for
public companies. Marginal prospects are spun into elephantine opportunities,
commodities and deposits that have no future become a speculative bubble, and
projects that are way too big or way too small for a junior company remain on
the books after negative results. It’s goddam hard for a geologist to admit
when his company should walk if not run away.
Many a junior fails
because the merit of its flagship project is merely a figment of the top
geo’s (often the CEO’s) imagination. He may not understand what constitutes a
good flagship project, he does not savvy when it’s time to fish or cut bait,
and/or he has a vested interest, i.e., skin in the game, both
financially and intellectually. Simply put, the geologist is biased.
In a typical scenario,
the unholy trinity of an overzealous geologist, a slick promoter (or “con”ologist)
and a sophisticated financier, ex-broker, or fund manager raise a million or
two dollars with a private placement for a new project. They are the one cent
per share founders and then place all their “friends and family” in the cheap
seed rounds.
A few months later the
drill turns to the right, and a few, selected, gaudy drill intercepts generate
a speculative market run. All the brokers jump in with their retail clients.
And the retail lay investor, who has a penchant for gambling and greed and an
even bigger fear of missing out on the next big thing, belatedly
throws his money at the offer on the uptick. The wily insiders and their
buddies take their profits, the bids dry up, trading volume drops, and the
stock plummets when the next set of drill holes come in.
Such is the state of
affairs and until more field geologists become real economic geologists,
this flawed business model remains doomed to a wash, rinse, and repeat
failure.
With my writings,
interviews, and presentations, I hope to change this paradigm. But it begins
with you, the geologists in this audience; you would not be here unless you
were interested in the money end of this business. I hope and trust you will
take my rant to heart and perhaps choose to give back and mentor some young
geologists to become economic geologists.
Folks, this is a great
and wonderful profession. You get to do a job you love; where you go to bed
at night, look at the clock, and think: “How many hours do I have to sleep
before I get to get up and go to work again?”
How can we be so lucky?
Think about it; who else do you know who gets to:
- See
the world;
- Prospect
and explore;
- Develop
and mine;
- Create
wealth;
- And
make Earth a better place to live?
Respectfully submitted,
Mickey Fulp
Mercenary Geologist
The Mercenary Geologist
Michael S. “Mickey” Fulp is a Certified Professional Geologist with a
B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc.
Geology from the University of New Mexico. Mickey has 35 years experience as
an exploration geologist and analyst searching for economic deposits of base
and precious metals, industrial minerals, uranium, coal, oil and gas, and
water in North and South America, Europe, and Asia.
Mickey worked
for junior explorers, major mining companies, private companies, and
investors as a consulting economic geologist for over 20 years, specializing
in geological mapping, property evaluation, and business development.In
addition to Mickey’s professional credentials and experience, he is
high-altitude proficient, and is bilingual in English and Spanish. From 2003
to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and
British Columbia.
Mickey is
well-known and highly respected throughout the mining and exploration
community due to his ongoing work as an analyst, writer, and speaker.
Contact: Contact@MercenaryGeologist.com
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