Metals & Mining Corporate Development and Investor Relations: Measured and Indicated Exit Opportunities?
What would you do to own your own gold mine?
Would you be willing to start out in a call center at a bank?
Or commute 2 hours each way to a remote branch of the bank, just to get better work?
What about hustling your way into the mining industry, even after you’ve had solid full-time finance experience?
The answer to all those better be “yes,” because our interviewee today – Jerry Huang – had to do all of that and more when he first broke into the industry.
I’m not sure if he owns a gold mine yet, but just give it a few hours…
Natural resources is always a “different” sector, and in this comprehensive interview he breaks down metals & mining corporate development and investor relations, including:
- The windy path he took to break into metals & mining in Canada.
- How recruiting differs in natural resources, especially at smaller companies.
- What an average day in the corporate finance team of a natural resources company is like.
- How JV and asset-level deals differ from acquisitions of entire companies, and how you think about each of them differently.
Let’s get the shovels out and start digging:
From Call Center to Corporate Development: Mining for Gold
Q: Why don’t you start by explaining how you broke in and the “path” you followed?
A: Sure. In undergrad I took a bunch of business, finance, and marketing classes, and planned to get into any finance role I could find.
I started out at a Canadian bank, working at a call center part-time and doing credit analysis and sales the rest of the time (yeah, not quite i-banking).
I knew I had to find something better as soon as possible, so I took the initiative and started taking my CFP course right away, eventually winning a wealth management role after about 20-30 internal interviews.
Just one problem: it was at a remote branch that required a 2-hour drive each way.
But I was willing to do literally anything to get the role, so I persisted.
The branch manager eventually realized my commitment, so he called in a favor to rotate me into a more central branch in Vancouver, which is where I first got exposed to the mining industry.
I did quite well and built up a solid roster of white collar clients, and within 2 years I became one of the top revenue generators in the district.
At the time, commodities were having a phenomenal run and it was fairly easy to raise $5-10 million based on hope and dreams; I also saw entrepreneurs exiting their businesses for tens or hundreds of millions and said, “I need to get in!”
I did a ton of informational interviews and networking, and eventually won a corporate development role at a gold and copper-focused exploration company.
Since then, I’ve worked at a number of different mining groups doing investor relations and corporate development; currently I’m at Energold, which is a global specialty drilling services group for the mining and energy sectors with clients in 24 countries.
Q: So what was different about the recruiting process at the first mining company you joined?
A: It was much less structured than what you see at banks. These companies are more likely to use their networks to find candidates rather than posting online.
They also look for different candidates depending on the company’s phase: pre-resource companies want candidates who are great at fundraising, whereas more mature companies are looking for candidates with IR, JV, and acquisition experience.
Typical questions and case study topics might be:
- How would you convince institutional investors to invest in your firm, even though mining is out of favor right now?
- How would you put together a roadshow for a fundraising effort, and how would you narrow down 4,000+ contacts into a roadshow with only 15-20 potential investors?
- How would you think about the market and the types of companies we should approach with JV deals or acquisition offers? What valuation metrics would you use for specific companies?
So it is very “task-based” and the questions are less theoretical than those in IB interviews.
Q: What types of candidates get in?
A: It varies by the industry cycle and the company’s needs.
Generally, though, you have to have a strong network and “people” element to have a good shot because of the focus on fundraising and sourcing deals – it’s less quantitative than pure finance roles.
For IR roles, we always look for people with a sales and marketing background who also have an understanding of finance.
IR reps might spend the entire day just prospecting buy-side contacts and setting up meetings for more senior managers, so you need to be comfortable with that type of work.
If there’s a downturn in the mining industry, you’ll also see lots of research analysts, sell-side bankers, and even buy-siders going for these roles since normal companies are perceived to be “more stable.”
A Day in the Life at Your Own Gold Mine
Q: So what’s an average day in your life like?
A: My current role is unique because it’s a mix of investor relations and corporate development work.
I might start the day at around 7-7:30 AM (since the market opens at 9:30 AM in Toronto, which is 6:30 AM here) and begin by looking at overnight news, mineral / metal prices, and any other important news for the day.
Up until market close at 1:30 PM PT, I’m busy taking calls from investors and brokers and answering their questions.
I also have to spend a lot of time revisiting past conversations and reviewing each investor’s background, average price, and holding horizon so I can properly frame my responses and pitches.
After market close, I hold meetings that aren’t as time-sensitive: for example, I might speak with JV partners, bankers, PE funds, and research analysts.
A big part of this job is attending major conferences and road shows, so if anything is coming up I’ll spend a lot of time figuring out who to speak with and the message we need to convey.
Despite all the technology today, there’s no beating face-to-face contact in this business. A convincing 5-minute pitch in a lobby to a PM is sometimes better than a complex email or online analysis, and might lead to a detailed due diligence call with his analyst.
Non-deal roadshows are especially important – we might be able to get our message across on conference calls, but nothing beats meeting with a PM face-to-face and asking him/her to trust his/her money with us.
These generally happen quarterly and involve the CEO and CFO.
Quarterly earnings calls take a lot of time to prepare for, and everyone on the team needs to be ready with solid answers to questions.
I also coordinate the marketing materials between 3 different divisions, and make sure everyone has consistent answers for common questions.
I spend my “downtime” networking and getting referrals to potential new investors (e.g., smaller family offices that haven’t heard of us before); I also go to quite a few capital markets and industry events in the evenings to get our name out there.
Q: Great. So let’s say you’re speaking with an institutional investor that just called to ask about the company.
What might he ask about, and how would you answer the questions?
A: Since everyone has access to the same numbers and multiples, they are always looking for an “edge,” without using actual inside information, of course – so they try to assess which commodities/metals might be the next “hot” area and the current trends across each segment.
They’ll often ask questions such as:
- “Are you hearing about deals being done?”
- “What are your drilling rig utilization rates or wait times like?”
- “What’s your typical contract size?”
My job is to give helpful information that lets them understand us, but also to represent the company accurately and transparently.
So I might speak in general terms about trends for some of those metrics, but I would not give specific details such as the exact utilization rates across the entire company. The same applies to forward-looking statements about the prospects and potential.
Many institutional investors underestimate the time and risk it takes to bring a mine into production.
They have relied too much on NI 43-101 disclosures and PFS reports, both of which have led to huge losses – billions of dollars in some cases.
They should focus more on grade, since grade tends to trump everything and gives the mine a margin of safety even as prices fall.
Geopolitical risks and resource nationalism are very real, but they’re something that better margins and faster payback can ideally compensate for.
Mining for Gold in JV Land
Q: And then on the corporate development side, what’s it like working on joint venture and partnership deals, as opposed to M&A deals involving entire companies or entire assets?
A: For us, a joint venture (JV) is often the first step toward a 100% acquisition, so they are not necessarily that different.
In the drilling services sector, for example, we often start out with an 80/20 or a 70/30 JV to minimize risk – we bring in equipment and capital, and smaller, local partners bring in their knowledge, network, and brand.
If things turn out well, then we might take over the entire entity.
It’s an appealing setup for all the small, junior mining companies out there because getting a JV with a major, like Goldcorp, instantly legitimizes their project.
At the moment, acquisitions of entire companies are rare because of the slump in commodity prices, so few companies are making aggressive bets and these JVs are much more common.
The actual analysis we do is similar for both M&A deals and joint ventures – we look at the market, the relationship, the brand value of the business, the number of utilized rigs they have, and so on.
The main difference is that we have more data to go on in M&A deals because we’ve almost always worked with the company as a JV partner before.
Q: Thanks for explaining that.
What about differences in asset acquisitions vs. acquisitions of entire companies?
A: For that one, it really depends on which segment of the business you’re in.
In mining exploration, for example, asset deals are more common because specific properties and the resources within are always worth something – and companies may be less inclined to acquire other companies when commodity prices are trending downward.
In our space (drilling services), it’s actually more common to see acquisitions of entire companies because much of the business value lies in the logistics and the people – we could always purchase rigs, but an idle rig without a customer contract isn’t worth much.
You may look at some of the same metrics regardless of whether it’s an entire company or just an asset, but standard “corporate finance” metrics like EBITDA obviously don’t apply to individual mines – so you would focus more on the price per ounce, ton, etc. and other “per units” metrics for resources there.
When acquiring entire companies, we look at metrics such as the customer contracts, the # of rigs, the staff count, the historical results, and so on, but the big questions are whether or not we want to be in the market in question, and how we can add value afterward.
We look at recent deal comparables to figure out an appropriate price per ounce (or other resource unit), as well as the stage of the resources and the cost of add-on logistics; we’ll always use some type of DCF analysis to value the company.
Other factors include how long the team has been working there, if there are any legacy costs, and if there’s any intangible value from the efficiencies created over the years.
Future Learnings and Future Plans
Q: I’ve always had a tough time finding good resources for learning more about mining.
A: There’s a pretty good course in Canada called Mining for Non-Mining Professionals that outlines geology, the engineering side, what mining finance professionals need to know, and so on.
There are probably local equivalents if you’re in another region.
The biggest thing, though, is that you need to be on the ground to understand these assets.
In other words, go out and speak with mine engineers rather than burying yourself in spreadsheets.
Tons of deals look great in Excel but then fail in real life due to cost overruns, incorrect resource estimates, and more.
If you’ve never actually visited a mine in-person and seen what goes on there, it would be impossible to predict any of that.
Q: And what about your own future plans?
What do people in IR / corporate development roles in your industry typically do?
A: Since natural resources is so specialized, people tend to stay in the industry and move around internally.
You see a lot of people “jumping” to move up a level or two at different companies; one VP I knew moved to another mining company to become interim CFO, and might actually become the company’s long-term CFO.
I’ve also seen team members move to sell-side or buy-side roles and even family offices before.
One advantage is that you actually have time to build your own Rolodex here, whereas you’d never get that type of exposure and “networking time” in traditional IB roles.
I plan to stay here for the long-term and advance up the ranks.
To me, it’s the most fascinating industry in the world, and a great way to combine my love of travel with finance, marketing, and networking, all while working in an area that will never go away.
I always want to be involved with deals and fundraising, so even if I eventually become a CFO I would aim to make it more of a deal-making role.
Q: Awesome. Thanks for your time!
A: My pleasure.
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