Hunter Dickinson Inc.

Source: Exec Digital Canada

Date :8/7/2007 2:52:02 PM

Hunter Dickinson serves as a kind of venture capitalist to junior mining companies, helping them increase yields and minimize risk

Written and produced by Andrea Orr & Michael Townsend

In a world where people drive in their cars down freeways to high-rise office buildings, sit in front of computers and communicate over the Internet, it can be easy to forget that most of the tools of their lives — aluminum, concrete and copper telephone cables — came from under the ground.

“Everything above ground comes from below,” says Ron Thiessen, president and CEO of Hunter Dickinson, a privately-held Vancouver business that provides services to companies engaged in a range of activities from exploration to mining, and specializing in everything from copper and nickel to diamonds and gold.

Thiessen says mining is a necessity to modern life, and copper in particular is seeing a surge in demand, resulting from the explosive growth of telecommunications networks and the move toward more fuel efficient cars.

A hybrid car, he says, requires approximately 100 kilos of copper, or approximately 10 times more than the cars made 40 years ago.

Along with being an essential business, mining is a high stakes game.

Since not even the most advanced computerized modeling programs or remote sensing techniques available today can say with accuracy where mineral resources are located — it takes on the ground prospecting and extensive exploratory drilling that is costly and my not result in the discovery of a economic deposit.

In addition, from the moment that a company starts exploratory drilling it must consider the best way to do it environmentally, and also discuss its activities with local communities.

As the project advances, the company program must include costly environmental studies of the local plants, animals, air and water in order to provide baseline data for mine planning.

Even when significant mineral resources are found, they are often too sparse to justify the expense of developing a mine. A sudden drop in commodity prices, moreover, can deem a promising project uneconomic overnight.

You have to spend a lot before you even have the chance of making money in mining.

“It is not unusual to spend $10 million to $25 million on exploration and not have a mine,” says Thiessen. “I don’t know of a mining project today where you would have spent any less than $50 million before you made the application for a mine permit.”

Hunter Dickinson, founded in 1985, functions as a mining services company that works to minimize the expenses of young mining businesses just getting off the ground. It provides all the services that a mining business needs - from accounting and public relations to geological engineering, environmental and socioeconomic advisory services, and financing. Usually the companies employ their own operating staff once mining begins.

“We are a captive service company, set up so we can provide expertise to other mining businesses,” Thiessen explains, saying that Hunter Dickinson does for mining what venture capitalists do for high-tech startups. “We take the company from infancy through to maturity.”

This business model of centralized services offers multiple benefits that are especially valuable in the mining industry, where upfront costs are massive, and so many projects fail. The company can offer its services to multiple mining businesses at cost, providing them the expertise to help improve the odds that the exploration will be successful, and the mining will be done in a way that is respectful to the environment.

Over 20 years of work to develop new mines, Hunter Dickinson has fine-tuned a set of best practices that encompasses their approach to exploration work, environmental and socio-economic assessments, and financing, a model that lends itself to high yields, says Thiessen.

As a rule of thumb, Hunter Dickinson aims for projects that have already had some exploration work done on them. Its affiliate companies tend to be the seventh entity to drill on a site. Mineral rights can be transferred several times before large quantities of minerals are found.

“Hunter Dickinson is known for looking at projects and finding things that other people didn’t see,” says Thiessen.

For example, the company became actively involved with gold mining companies during the 1980s when gold prices were falling and mines were being abandoned.

“We said, we think the cycle will change and gold will go to a much higher price,” Thiessen recalls. “Our Detour Gold project went from being low value to potentially generating a hundred million dollars a year.”

Providing a centralized set of services for a distinct group of mining companies also helps make these companies more appealing to investors, who tend to want to invest in a specific commodity such as gold or diamonds or copper, rather than a mining conglomerate.

The partners of Hunter Dickinson also profit by retaining significant stakes in the companies they foster and keeping the costs of those companies low.

Hunter Dickinson’s market capitalization has surged from $100 million in 2000 to about $4.5 billion today, Thiessen says.

Because the aggressive pace of development in a large part of the world is fueling so much demand for minerals, Thiessen is optimistic about the future of mining. The biggest challenge he sees, is improving the image of the mining industry to attract more talent.

“Today a lot of mines are declining in productivity and we don’t have a lot of skilled people,” he says. “Young engineers tend to be hard to come by and a lot of urban people do not connect what they use to where it came from.”

To help correct that, Hunter Dickinson companies are using some of their profits to fund programs to educate people about mines, and get young people intrigued about mining technology.

“I tell young children who like Game Boys that we have the biggest Game Boy in the world,” he says, describing computer-operated shovels that are manned remotely.

“You can dig up 25 to 50 tons of earth in each shovel,” he says.