The club of entrepreneurs that have demonstrated the Midas touch when it comes to launching and developing successful natural resources companies has a very select membership. But, time and time again, its members have started up companies that have gone on to create substantial returns for their shareholders.
Membership to the club is restricted because a lot can and often does go wrong during the process of taking a resources project from discovery through to production. As a result, many don't make it to completion, at least in their original guise. Fluctuating commodity prices, economic downturns and shifting investor sentiment can all derail projects during the upwards of five years that many take to get into production.
Yet the successful resources entrepreneurs often find serial success. Investors could do a lot worse than to back their latest ventures based on the track record of management alone, without even evaluating the minutiae of the actual projects.
HARRY DOBSON
Harry Dobson is a mining industry veteran who was the chairman and co-founder of American Pacific Mining, which purchased for $15m (£9.3m) and successfully re-opened the El Mochito zinc and silver mine in Honduras. Following restructuring, the mine operated in the lowest third by costs within the industry before the company was sold for more than $100m within three years of its foundation.
Following this, Mr Dobson co-founded Jordex Resources, which acquired the Loma de Hierro nickel deposit in Venezuela. Jordex re-verified the reserves and the overall commercial viability of the project, and sold 85 per cent of the deposit to Anglo American for $65m.
Mr Dobson has served as a director and chairman of Kirkland Lake Gold since 2001 and is also chairman of fellow Alternative Investment Market (Aim) miner Rambler Metals & Mining.
Kirkland Lake's activities are centred on the South Mine Complex in Ontario, which is a large, high-grade deposit. The financial year to April 2012 is expected to be the company's transition year, with production expected to range between 110,000 and 130,000 ounces.
The second phase of expansion is also expected to complete in April 2012. This will more than double production to roughly 180,000 to 200,000 ounces of gold in 2013, then to ultimately 210,000 to 250,000 ounces in 2014. To support the planned production growth, the company is also busy drilling to expand its resource base. It currently has 14 rigs on the property engaged in exploration and pre-production drilling.
Meanwhile, Newfoundland-based Rambler is just starting up and testing the Nugget Pond copper concentrator plant. Once this is operational, it will support the re-opening of the Ming copper-gold mine located just 40km away.
ALGY CLUFF
The name Cluff has been synonymous with natural resources exploration since the 1970s. Algy Cluff may now best be known for his mining exploits, but his first foray into natural resources was in oil and gas. Mr Cluff formed Cluff Charterhall & Partners in the late 1960s to apply for North Sea oil licences. One of these licences evolved into the sizeable Buchan oilfield, and when the business was sold in 1970 for £14m, the sale turned £50,000 of investment into £1m.
Then, in the 1980s, Mr Cluff founded and was chairman of Cluff Resources, an Africa-focused mineral explorer that made several significant discoveries prior to its sale to Ashanti Gold in 1996 for around £100m.
Mr Cluff co-founded Cluff Mining (later renamed Ridge Mining) and floated it on Aim in 2000. He left the company in 2003, at which time it was capitalised at around £100m. Ridge was eventually sold to Aquarius Platinum for some £150m in 2009.
Since 2004, Mr Cluff has focused his attention on Cluff Gold, where drilling at the company's flagship project, Baomahun in Sierra Leone, suggests he may have found another project to enrich shareholders. Over 2m ounces of gold have already been found at Baomahun, which could be mined at the rate of about 157,000 ounces a year, starting in late 2013.
Combined with existing production from Burkina Faso, that would lift Cluff's production substantially above 200,000 ounces a year and elevate the company to mid-tier status as a gold producer.
Even more exciting is the exploration potential of Baomahun, where a survey has identified seven tempting targets north of the planned open pit. These targets extend along a 12km length of mineralisation and correlate closely with soil surveys and existing small-scale mines. Only a short section of this length was drilled to derive the current resource, but Cluff plans to spend up to $22m this year to explore the full extent of the deposit.
Baomahun's economics will be confirmed when Cluff announces the definitive feasibility study, expected before the end of 2011, and Mr Cluff considers it "not imprudent" to reflect that the company could be producing 250,000 ounces of gold a year by 2013.
STEPHEN DATTELS
Another serial entrepreneur whose investment record is difficult to match is Stephen Dattels, a founder director of Barrick Gold, the world's largest gold miner. During his time at Barrick, the company grew from a capital base of $10m to a market capitalisation of $2bn when he left in 1987, and it’s now worth £52bn.
He also founded Oriel Resources, a Kazakh chrome-nickel producer that floated in 2004 valued at £105m and was bought by Russian steelmaker Mechel for £749m in 2008.
Mr Dattels and his mining partner, Jim Mellon, put together uranium miner UraMin, which raised $60m pre-flotation in 2006 and was sold to French nuclear giant Areva for $2.5bn in June 2007. Mr Dattels was also the chairman and founder of Caledon Resources, an Aim-traded Australian coal producer.
Of their current ventures, mining investor Polo Resources recently paid its second special dividend and Emerging Metals is investing in African iron ore.
Unusually for investors in Aim resources companies, Polo's shareholders are getting used to cashing dividend cheques. When the company sold its uranium assets for around £88m in 2010, the gain realised on the sale financed a special dividend of 3p a share. The recent special dividend of 2p a share was financed by the sale of the investment in Caledon Resources.
After paying these dividends, Polo still has the resources to make further investments to grow the business. It is currently carrying out pre-acquisition checks before exercising an option to invest up to $20m in Signet Petroleum, in which Polo already holds a 7 per cent stake. Signet has interests in oil and gas exploration rights in four countries in Africa: Tanzania, Burundi, Benin and Namibia.
Meanwhile, Emerging Metals Limited is focusing on investing in natural resources companies and/or physical resource assets. It currently holds a 37.23 per cent interest in Ferrum Resources, a private company that has constructed a portfolio of iron ore assets in Africa.
Ferrum aims to become a major international mining and exploration group. It holds an interest in six iron ore exploration licences covering an extensive lease area in Cameroon, West Africa. In Sierra Leone, Ferrum has an interest in five iron ore exploration licences.
PHIL EDMONDS
Former England cricketer Phil Edmonds has floated several start-up companies on Aim, most notably Central African Mining & Exploration Company, (Camec) which was sold to Kazakh miner Eurasian Natural Resources Corporation for £584m in 2009. Prior to that, he co-founded African Platinum, which was sold to Impala Platinum for around £297m in 2007.
Working with his partner Andrew Groves, Mr Edmonds is currently chairman of Agriterra, African Medical Investments and the pair's latest resources venture Sable Mining. Sable is focusing primarily on coal and iron ore in sub-Saharan Africa. Coal and iron ore rank among the most preferred commodities of many mining analysts and Sable offers substantial potential in both.
Rietkuil in South Africa is the most advanced coal project and should provide useful earnings as long as Sable can secure access to export infrastructure. However, the coal assets in Zimbabwe could provide an even larger prize, and offer the potential for large, near-surface reserves that can be developed relatively quickly.
Sable's iron ore assets in Liberia are located in the highly prospective West African Shield, where a number of world-class iron ore projects are currently being developed. Crucially for minimising capital costs, Sable's projects lie within easy reach of existing infrastructure.
Following the completion of an airborne geophysical survey, the company has identified 12 highly prospective targets across its Timbo, Bopolu and Kpo iron ore projects. At Timbo, two iron ore targets have a combined length of mineralisation of 22km, while at Bopolu four targets have a combined mineralisation length of 17km. Kpo is more exciting still, and has six targets boasting a combined mineralisation length of 57km. This is huge even by the standards of iron ore, which is often found in long 'strike' lengths of mineralisation.
The company plans to start a 34-hole, 12,000-metre drilling programme in November and is confident that this will confirm another world-class asset.
Messrs Edmonds and Groves are also non-executive directors of African Potash, which floated on Aim this September. Potash is a vital fertiliser, the deficiency of which makes plants less resistant to pests and disease. With the Earth's population passing 7bn, demand for fertilisers such as potash is growing. African Potash is looking to invest primarily in the Republic of Congo and Ethiopia, and chief executive Edward Marlow hopes to be able to announce the company's first deal before the end of the year.
COLIN BIRD
Colin Bird has founded and floated several resources companies and served on the boards of resources companies in the UK, Canada and South Africa. Most notably, he sold Zambia-focused copper-nickel company Kiwara to Canada's First Quantum Minerals for £158m in 2009.
He is chairman of Jubilee Platinum and a director of Africa-focused oil explorer SacOil, and floated his latest venture, Galileo Resources, on Aim in September. Galileo's flagship asset is Glenover Phosphate, which, despite its name, Mr Bird plans to develop into the London market's first primary rare earth elements producer.
Rare earths have extensive applications to make modern technology lighter, stronger, more efficient and easier to use. What makes them strategically important is that China controls over 97 per cent of the global supply and has imposed export quotas to protect its domestic needs. This makes finding and developing new sources of rare earths vital for other countries.
Galileo's great advantage is that it has the potential to bring a new source of rare earths into production much more quickly than conventional projects. The previous extraction of phosphates at Glenover deposited over a million tonnes of rare earths-rich material stockpiled around the mine.
Being already on surface, the stockpiles are easy to process and Mr Bird aims to start production within 18 to 24 months. What's more, the geology in and around the open pit contains carbonatites. These are often found alongside rare earth elements, and their presence suggests significant potential to expand the size of the operation through exploration. Airborne geophysical work has been carried out and Galileo will undertake a two- to three-year drilling programme, funded from mining cash flow, to test the feasibility of mining additional rare earths from the surrounding region.
