| TORONTO, March 5
TORONTO, March 5 Mining investment is
about betting on the team behind a project as much as on the
project itself, according to the head of a boutique investment
bank that has backed some of Canada's biggest mining firms.
Mike White, chief executive at investment bank IBK Capital,
says due diligence is the key, and IBK offers a list of success
stories to prove his point.
"I always get very upset when people call investing in
junior exploration akin to buying a lottery ticket because that
couldn't be further from the truth," said White, whose
Toronto-based company is a major sponsor of the annual
Prospectors and Developers Association of Canada conference.
"You are buying into a management team, you're buying into a
number of projects whose merit is based on the work that's been
done in the past and on the work that a management team is
Bankers expect aggressive deal-making at this year's PDAC as
junior explorers seek to take advantage of new optimism in
equity markets after a near-drought in the second half of 2011.
A small player in the world of multibillion-dollar mine
finance, IBK is one of the more successful independent financing
firms in Toronto. Created by a group of investment bankers from
Merrill Lynch in 1989, it has helped raise early-stage
development capital for some of Canada's largest mining
Top of the list of successes is Goldcorp Inc, now
Canada's No. 2 gold miner, which grew from humble roots as a
closed-end fund to its current market cap of some C$40 billion.
A wall of plaques in IBK's Toronto offices commemorates
other companies IBK has helped turn into full-blown miners,
including Western Goldfields, Capital Gold, US Gold and Detour
The original investors in Detour Gold bought into the
company, then called Pelangio, in a 2000 private placement at 10
cents a share, meaning they would have made a 270-fold profit on
their investments at today's stock price of about C$27 a share.
Shareholders who got in at the 2007 IPO price of C$3 a share
would be up nine-fold on their original investment.
"If you are dealing with a good management team, they'll
stick with it, they'll figure it out," said White, who took over
IBK from his father in October 2010. At age 40, he is one of the
youngest CEOs among Bay Street's mining industry bankers.
Among the teams IBK is betting on these days is the one at
RX Exploration, a Toronto venture exchange-listed
company that owns the Drumlummon Mine in Montana.
Once owned by the Rothschild family but abandoned by them
amid a legal dispute a century ago, the gold mine was mostly
forgotten until a group of miners started pulling the leases
back together in recent years.
"They came to us just after they had accumulated all the
claims," said White, who also invests in the companies he raises
RX plans to use Drumlummon to build a much larger mining
company, with production of 300,000 oz of gold a year by 2015.
"Will they achieve that? Well they are a great team to make
that happen," said White. "Let's give them time. I'll give them
time. And I'll buy when I think the stock is cheap, and maybe
I'll sell a little bit when it runs."