Here’s a small section of The IKN Weekly IKN382, out last night. It’s about Ivanhoe Mines (IVN.to) and the way its boss, Robert Friedland, runs rings around the average mining CEO when it comes to selling a story.
Mines (IVN.to): As stated on a handful of occasions this year, the reason I included
the larger-sized IVN.to in this year’s list was interest (perhaps mere
curiosity) in watching more closely how Robert Friedland goes about
positioning, promoting and marketing his companies to the wider world. I’ve
been impressed on several occasions in 2016 with what I’ve seen and the
impressive share price performance is due at least in part to his abilities.
But last week saw a genius stroke move, a pièce de résistance, meisterwerk
level and I really have to take my hat off to Robert Friedland’s marketing
prowess because the stunt he pulled (I choose my substantives carefully) should
go down as a case-study for every single junior mining company CEO. Let’s first
consider what normally happens to juniors when they’re approached by a larger
They talk informally and then normally (but not always)
sign a Confidentiality Agreement (CA) which offers the larger access to the
smaller’s data room.
The larger will then rootle around, perhaps do a site visit
or two. Sometimes its interest in the smaller company is aimed at a potential
buyout and that process may continue, but there are plenty of other reasons for
a CA to happen that don’t involve active interest in a potential buyout.
However, if a buyout has been mooted by the big company and
they like what they see at this stage, it’s typical for the two sides to
advance the process and move into new rounds of talks and negotiations. This is
when management and board members will meet, potential advantages and problems
of a fusion discussed, all sorts of other and then if things really move
forward, dollar prices get a mention.
A buyout deal eventually happens or does not happen.
For sure it’s not as straightforward
as that, but that’s a reasonable framework and it gives an idea of the stages
any given junior exploreco has to go through in order to nail down its most
coveted exit, that of the juicy premium buyout. But the basic point is that a
junior being approached by a larger company is normal, it’s nothing strange, it
happens all the time and it’s typical for any junior to have several CAs open
at the same time. And they won’t talk about that unless asked and when a nosy
guy like me says “So…got any CAs running?”, they will offer up the number
they have open (“Oh, we have four/seven/three/eight”) but that’s all, as CAs by
their very nature mean that they can’t talk about the details.
However, normal rules do not apply
to Robert Friedland.
IVN is approached by a larger company or companies.
IVN tells the world that it has been approached in a news
release that subsequently gets picked up by wires such as Reuters and Bloomberg
(and half a dozen other places, check Google for more) who write their own
stories on the NR.
IVN shares pop higher.
That’s what we saw from IVN in its
NR last Monday (5) and with the ensuing media coverage (examples (6) (7)) and
as Bloomie put it…
“Shares in the Vancouver-based company rose as much as 16
percent and was up 14 percent at 11:50 a.m. in Toronto, pushing up its a
market value to C$1.5 billion ($1.1 billion).”
…because the whole pitch was “hey
everybody, we’re getting bought out!” when the only substantives were nothing
more than 1) we’ve signed CAs and 2) we’ve decided to eventually pay for third
party advice on any eventual deal offer. And that last piece is the key, it
sounds great and potentially too expensive for small-end junior, but notice
that no money has changed hands. That’s all about having a board of directors
100% in line with the management and marketing of a company and that’s what
happens when you have one man running the show with a keen nose for
The point: Any junior mining
company can use the same strategy as Friedland did last week. However, it also
needs the things that Friedland has and those are also part of his genius.
Assets and properties that are truly interesting to larger
mining companies. The reason explorecos usually keep quiet about CAs is that
they don’t want to annoy or scare away majors by running up your share price on
a promo by simply using their interest as a marketing tool. If your properties
are mediocre and you start shouting they’ll stay away. But if you really have
something top drawer and you know the majors are serious about buying you (and
yeah, I’m looking at you John Black of Regulus Resources) you can shout and
scream and get the share price moving, you won’t scare them away.
Brass neck. Most junior CEOs don’t have the marketing chops
to do what Friedland does but I’d contend that it’s already part of the
skillset they need and that it’s going to be even more important as the years
roll by. Having a timid geologist in love with rocks as the company top dog
works in early stages, but it can become a veritable hindrance as your junior
mining company grows. And listen, selling skills aren’t brain surgery, sales
gurus are made not born.
A board of directors that works with the company officers,
not against them. And by my own experience of watching juniors from the outside
I can tell you hand on heart, ladies and gentlemen readers of The IKN Weekly,
that situation is far less common than you’d imagine.
Friedland may be world class at
this but it’s not some magical gift exclusive to him, either. This is a formula
and more juniors should take note of what he does and the way he does it, from
company structure all the way up. It gets results like this: