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Ross Beaty: No Love Lost
Source: The Gold Report (10/16/09)
His passion these days has turned to the geothermal energy arena, where he's busy putting his Midas Touch on Magma Energy Corp., but mining magnate Ross J. Beaty has not lost his love for silver, copper and gold. An entrepreneur extraordinaire, Ross still serves as Chairman of Pan American Silver. In this exclusive Gold Report interview, Ross talks about how Pan American's business model inspired that of his new enterprise, Magma Energy Corp., and what he sees as common ground in the geothermal and mining sectors.
The Gold Report: You come from a mining background, primarily gold, silver and copper now you've moved to geothermal. What motivated you to jump into the geothermal arena?
Ross Beaty: After having built a number of public mining companies for 23 years, I retired from my silver company in 2007 and sold my copper companies by early 2008. I was looking around for something else to do and I wanted to build a green company. I've always been a closet environmentalist and thought this was a good thing to do with the next part of my life. The more I looked at geothermal, the more I liked it. It's is very much like mining.
TGR: In what respects?
RB: You're dealing with a subsurface resource. To develop it successfully, you need to move it through early stage exploration, advanced exploration, feasibility, permitting, financing, construction and then operation. You deal in the same geological environment that you look for gold and silver deposits in and you largely deal in the same countries that I've dealt with in most of my career—North and South America, Pacific Rim and so forth.
So it's an area I am very comfortable with. I understand the science. And as with mining, you need a lot of capital in this business, so public markets are very appropriate. The big difference is that you sell electricity instead of metals.
TGR: One difference between geothermal and metals seems to be that geothermal relies on serving a smaller, somewhat restricted geographical area. But Magma Energy Corp. (TSX:MXY) seems to have an international geographic strategy.
RB: Like mining, geothermal energy is a global business. And as with mining, certain countries are better for geothermal operations than others. When I say better, I mean not only better in terms of resources but more enjoyable places to work—better politically, socially and environmentally. So—again, this is exactly like mining—we screen for all of those things when we look at a potential acquisition.
TGR: How does Magma's business plan differ from those of your previous companies?
RB: The main difference between geothermal power and the metals business is that geothermal is based on long-term power purchase agreements that are locked in with utilities, whereas with metals you deal with cyclical world markets. So with geothermal you have a long-term sustainable cash flow. Banks love that.
TGR: Another big difference between geothermal and mining—and apparently one of the environmental pluses that drew you to geothermal in the first place—is with mining it's typically a depleting resource. With the recycling of water into geothermal reservoirs, in contrast, you'd have a sustainable resource that theoretically could go on forever.
RB: That's a huge difference. All mines ultimately are non-renewable. Geothermal is inherently renewable. This is a form of power that can go on for literally thousands and thousands of years.
TGR: Tell us about a few companies outside the geothermal arena that you're still keeping an eye on.
RB: Well, 95% of my time is really on building Magma right now. It’s the focus in my life. But I’m still a large investor in the Lumina Group, a tremendous management team that worked with me to successfully acquire and divest our four copper companies in 2006–2008. We've put money into Anfield Nickel Corp. (TSX-V:ANF), which has 21 nickel exploration licenses and is developing Mayaniquel, which has 21 nickel exploration licenses and is developing Mayaniquel, a nickel property that surrounds Lake Izabal in Guatemala. It's done quite well so far. I think it's got a lot of upside.
We also invested in a Ventana Gold Corp. (TSX:VEN), one of the top performing companies this year in Canada. So that's doing well, too. Ventana holds rights to 4,573 hectares of exploration property in Colombia's California-Vetas mining district, northeast of Bogota.
And I've personally invested in a number of copper companies because I happen to like the future of copper.
TGR: So you still like copper.
RB: Yes. Actually, copper is an energy metal as much as geothermal is an energy source. And copper has a great future because it's the second most conductive metal, with incredible applications in energy transmission and generation because, of course, it's used in motors and generators. What's mostly driving copper right now is the build-out of China's energy infrastructure.
TGR: What are some of the copper companies you like?
RB: I've invested in a number of them, including Amerigo Resources Ltd. (TSX:ARG), Augusta Resource Corporation (NYSE/AMEX:AZC) , Lumina Copper Corp. (TSX-V:LCC) , and Western Copper Corporation (TSX:WRN).
Amerigo operates a large Chilean copper mine, Augusta is working on a large copper project in Arizona, Lumina—a spin-out of a company I started a few years ago—has a big copper project in Argentina. I've just stepped off the board of Western Copper, which owns four Canadian properties, including the Carmacks Copper Project and the Casino Project in the Yukon. But I do remain a shareholder.
So those are some investments I'm taking in the copper space. Of course, Of course, I also love silver and am still chairman of Pan American Silver Corp. (TSX:PAA; NASDAQ:PAAS), as well.
TGR: That's a terrific story, described earlier this year as one of the best success stories to come out of Vancouver in the past 30 years. You took a buyout offer in 1994 from Hecla Mining Company (NYSE:HL), on your first company, Equinox, and went on to found Pan American that same year. (Equinox Resources Ltd. traded under the symbol EQX on the Toronto Stock Exchange.)
RB: Pan American is now the world's second-largest primary silver mining company. It's had a wonderful history, increasing production for 14 consecutive years, and I think has a great future. Before becoming non-executive chairman in mid 2007, I ran Pan American and built it up from an idea to a substantial, world-class silver mining company with a tremendous balance sheet, 8,000 employees and eight operating silver mines in Mexico, Peru, Argentina and Bolivia.
Really, the model for what I'm doing in Magma is Pan American's. It's a great model for me to use in Magma's growth.
TGR: Any parting comments, Ross?
RB: As I said, Magma is the focus of my life, but I love copper. I love silver, I love gold. Gold has wonderful fundamentals. The likely devaluation of the U.S. dollar and the desire of investors to hold gold and silver as money will fuel higher prices for both these metals. The other metals you have to be quite choosy about. And on the whole, I'm very bullish about most commodities. The world is still growing very actively and the consumption of commodities is growing very significantly. We are in a long-term commodity bull market that will stay with us for quite a few years.
TGR: Our readers will appreciate your insights and we look forward to watching another one of your dreams come true.
RB: It's all about creating shareholder wealth and part of that is making sure people understand what you're doing and where you're going. So I sure appreciate your interest, this will help in getting us there.
DISCLOSURE: Ross Beaty
I personally own all of the companies mentioned in this interview.
Ross J. Beaty is a geologist and eminent entrepreneur who currently serves as Chairman and CEO of Magma Energy Corp. and Chairman of pure-play silver giant Pan American Silver Corp. He founded Magma in 2008 and Pan American in 1994. He also founded and divested a number of other public mineral resource companies—including Da Capo Resources Ltd., a gold exploration company with properties in Bolivia, and Altoro Gold Corp., a gold and platinum exploration company with projects in Bolivia and Brazil. All of them left their mark on the industry and created substantial stockholder wealth. While still actively running Pan American, copper captured Ross' attention. In 2002, when copper prices were on the upswing for the first time in several years, he started acquiring properties through Lumina Copper Corp. and watched copper climb from 80 cents to $4 per pound. In 2005, Lumina split into four publicly traded companies, Regalito Copper, Northern Peru Copper, Continental Copper and Lumina Resources. Bottom line: parlaying an $80 million investment into a $1.2 billion profit.
Born in Vancouver, Ross has degrees from the Royal School of Mines, University of London, (M.Sc., Distinction in Mineral Exploration, 1975), the University of British Columbia (LL.B. [Law] 1979 and B.Sc. [Honors Geology] 1974). Working in 50-plus different countries during the course of 37-plus years in the international minerals industry, he speaks English, French, and Spanish, as well as some Russian, German, and Italian.
He is a past president of the Silver Institute in Washington, D.C., a fellow of the Geological Association of Canada and the Canadian Institute of Mining, recipient of the Institute's Past President's Memorial Medal, and a founder of the Pacific Mineral Museum in British Columbia. Ross received the Association of Mineral Exploration of B.C.'s Colin Spence Award for excellence in global mineral exploration in 2007 and in 2008 the Mining Person of the Year award from the Mining Association of B.C. and the Ernst & Young, Natural Resources Entrepreneur of the Year award. He served as honorary chairman of the Silver Summit 2009.
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