The same excitement and zest for making mineral discoveries that characterizes the juniors is still shared by Teck’s exploration arm. In the comfortable Vancouver office of John May, president of Teck Explorations, there are no wall maps, geological reports, drill core or rock samples. There is no mention of geological terranes, Archean gold environments or recent mapping programs. But on the credenza behind him is a feasibility study for a new gold mine in northern Quebec, and near one of the visitors’ chairs is a small plaque commemorating the opening of the David Bell gold mine at Hemlo. How does Teck continue to open mines when the head of its exploration company shows little apparent interest in the concerns that drive his peers? John May, a geologist, answers the question before it’s asked: “The single important difference between Teck and other mining companies our size is Teck’ s affinity for junior exploration companies.
Although Teck does carry out its own grass-roots exploration programs, as well as research and development such as that which resulted in the successful dighem airborne em system, the company has never had what one would call a large exploration budget, he says. “Instead, we have relied on our ability to recognize good prospects whether discovered by Teck or other companies.
Often this means agreements with junior companies. We’re interested in them, we share their excitement and concerns. We were a junior ourselves not too long ago, and we haven’t lost that flavor. We’re run by geologists, not by accountants or lawyers, and we make decisions quickly. The result is that juniors like talking with us and we with them.”
In Norman Keevil’s words: “The job of our exploration department — indeed almost its sole purpose — is to provide us with new orebodies for development when we need them, as well as maintain reserves at established mines. Whether this is done from the grassroots or through negotiations is not important. What is important is that it is done.”
Teck’s closeness to junior companies has obvious advantages. On one level, the juniors generate properties and exploration concepts. They then raise money and focus attention on favorable areas. Even if success is elusive, Teck gains a better understanding of the regional geology at little cost to itself. This perspective can enable Teck to respond quickly to future developments.
The energy, vision and entrepreneurial spirit of the Keevils — Norman B. and Norman B., Jr, chairman and president, respectively — have played a vital role in laying the foundations for Teck’s closeness to juniors. Their success in molding geological and corporate potential have undoubtedly provided models for other ambitious juniors.
Teck’s tight-fisted deals, also a factor in the company’s success, are legendary. Says one lawyer familiar with Teck’s approach: “Don’t leave any crumbs on the table. They won’t be there when you come back.” But Teck has a reputation for sticking to its word, working efficiently and making money for shareholders and partners. More than one junior company has actually asked for a “Teck-style deal.”
Keevil Jr laughs at the lawyer’s comment about “crumbs,” saying that’s what lawyers do. “In reality I try to encourage our people to do deals that are fair and occasionally leave a little bit on the table, because we want people to feel good about coming back to us the next time.”
Last year, Keevil Jr, with no apologies, told The Financial Post, “We’re opportunistic. You can’t plan your opportunities, but you can plan to be alert to them when they occur. Our advantage is that we can move quickly.” Not surprisingly, Teck’s managers have been accused of “gunslinger conduct.” May says “what others perceive as `gunslinger conduct’ has evolved from the top, and the Keevils’ background as `great geologists’ and skilled negotiators encourages that spirit throughout Teck.” The epithet “gunslinger” does suggest that Teck has often been in the right place at the right time to shoot.
With Teck’s growth, one might expect a shift in emphasis and priorities for Teck Explorations. May does acknowledge that “short-lived mines are hell. You use a lot of energy getting them up and running, only to have to start all over a few years later.” So Teck’s strategy is now to develop or acquire long-life, low-cost mining operations. “If you’re a long-life, low- cost producer, the commodity and its cycle doesn’t matter. You’ll always be a player in the game.”
This long view, however, hasn’t changed Teck Explorations’ principal focus. It will continue to rely on equity or joint-venture participation with juniors as well as its own programs.
May is quick to point out that “our exploration exposure is much broader than the budget itself would indicate. Because of our associations with junior companies and our knowledge of their needs, we can — and do, quite frankly — take advantage of those relationships, just as they take advantage of what we have to offer. We’re open, frank, fair, honest and tough. As a consequence, we have developed an excellent rapport with juniors.”
Teck encourages these relationships through five exploration offices (four in Canada, the fifth in the U.S.) which also act as listening posts for field activities. Bill Meyer is western Canadian exploration manager and is based at Teck’s head office in Vancouver. Joe Ruetz, in Reno, Nev., is U.S. exploration manager and Wayne Spilsbury, in Vancouver, works on special projects and with Ruetz on American developments. Dr Matthew Blecha, eastern exploration manager, operates out of Toronto and Ken Thorsen, from North Bay. The fifth office is attached to Newfoundland Zinc.
Like forest animals which are aware of everything moving around them, these five men, along with May, form the “hard core” of Teck Explorations. Some are specialists, but all have broad familiarity with exploration, financing, metallurgy and development. Each knows Teck’s style in deals and has authority to negotiate on behalf of the company. They act as the eyes and ears of Teck in the field. Altogether, Teck Explorations employs 35-40 people including support staff.
The concept of exposing Teck to opportunity is a primary function of Teck Explorations. The motivation is an appreciation of probability: the more frequent the involvement with people who achieve success, the greater the likelihood of finding new mines. This approach isn’t new: most companies play this numbers game. But Teck achieves an edge through spreading its bets more widely and getting in early on participation. The more promising exploration projects almost always include back-in provisions for Teck.
Linked to the philosophy of exposure is Teck’s penchant for syndicates and joint ventures. May points out that most of Teck’s mining operations started out as, or evolved into, joint ventures. “We like the idea of different people from different points of view all contributing to a common goal,” he says. “We don’t pretend to have all the answers. We like feedback — that way, we don’t make as many mistakes.” Teck is also willing to spend time discussing plans and objectives: “We’re not comfortable with the idea that `You give us the money, don’t worry, and we’ll spend it wisely.’ We prefer involvement by our partners.”
Teck’s consistent nurturing of juniors, combined with the popularity of flow-through funding, are principal reasons for the company’s emergence in Canadian gold mining. Three years ago, Teck bought a 15% interest in Vancouver promoter Bruce McDonald’s Noramco Capital Corp. McDonald, whom May says has “an amazingly fast and versatile financial mind,” saw a need for organized funding of junior mining companies. The vehicle was flow-through shares. “We didn’t know specifically what he was going to do, but we liked the scale of his vision,” said May. “That relationship has worked well. Noramco received depth from our association and we became a beneficiary of ideas that flowed from that relationship.”
Noramco has now evolved into a “mining finance house.” Since its formation, Noramco has spent $81 million on exploration and development of more than 40 Canadian mining properties. This year Noramco will manage the largest exploration budget in the country — $65 million.
So far, four significant gold deposits have been identified — Golden Knight’s Casa Berardi property in northwestern Quebec, Emerald Lake Resources’ Golden Rose mine in central Ontario and Highland-Crow’s Pickle Crow mine in northwestern Ontario. The Estrades project, east of Casa Berardi, is actually a polymetallic deposit. Teck has various levels of direct and indirect participation in all of these projects.
Ironically Teck’s emergence in gold grew from the last recession. Because of the collapse of commodity prices in 1982, Teck lost money for the first time in 50 years of operation. To help Teck strengthen its balance sheet, Teck Explorations cut expenditures and reviewed its property portfolio to eliminate discretionary spending. The company also prepared itself to trim staff in what May termed “a very painful process.”
Fortunately a strong equity market for junior companies was building at the same time. The company again turned to junior partners to continue field work. Vancouver promoter Murray Pezim became interested in one of the properties Teck wanted to sell. (Teck and Pezim had been working together since 1981 on International Corona Resource’s Hemlo property.) “He agreed to put up the money while we managed all the details such as titles, filing, exploration, reports, etc. He liked what we did — it saved him a lot of headaches — so he bought another property from us, and then another. Eventually we ran out of inventory and wound up staking more property. Soon we were hiring temporary staff and increased our spending, in contrast to other majors then engaged in cutbacks and layoffs.
“In the relationship we have developed with juniors,” observes May, “there are benefits to both partners. It turns out that junior companies find it easier to raise money when our name is attached, and we get many times our investment being applied to interesting situations.
John May imparts a distinctive personal style to Teck Explorations. Tall, trim, open and engaging, he has worked for Teck for more than 22 years and obviously admires the achievements orchestrated by the Keevils. He approaches subjects from a conceptual standpoint and isn’t too inclined to flesh them out with detail. But he has surrounded himself with intense, articulate, detail-oriented geologists. He seems fond of describing relationships in terms of shapes and textures: he speaks of “the fabric of our junior company network (which) is composed of equity interests and people contacts.” With a sensitivity to differences, combined with a strong spatial sense, he is known as a formidable negotiator. He values the financial “leverage” of grassroots participation with junior mining companies, as well as the exploration “exposure” gained by such participation.
He sees his function at Teck Explorations as being a co-ordinator of activities and a spur to keeping communications going among group members. The atmosphere is relaxed but business-like. “There are no stuffed shirts here,” he says. “We all like to have fun and we encourage each other to pursue our individual interests. We work closely together, but we do not closely supervise.”
This joie-de-vivre is evidence of the continuing influence of Vancouver’s mining promoters upon Teck and its people. Even when talking of Teck’s closed mines (eg., the Lamaque gold mine at Val D’Or, Que.), May immediately senses the opportunity to adopt the advantageous position: “The ground surrounding Lamaque is surprisingly unexplored considering the quality of that area.” On the strength of that assessment, Teck has optioned favorable ground to juniors which have successfully raised money to continue exploration.
“One thing we have learned is the need for a flexible attitude. We can prepare for so many things, and yet there are always new pressures and the need to respond to them. And the lesson each time for us has been that you need new tricks in new games.
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