The Story of Voisey’s Bay: The Auction (Part 2 of 3)
Presented by: Equitas Resources, “Nickel exploration in Labrador”
The hit at diamond drill hole #2 of 33m of massive sulphides turned Voisey’s Bay from caribou pasture to one of the most exciting stories in the mining world. For a full recap of the events leading to this point, check out Part 1 of the Voisey’s Bay story.
In Part 2 of this series, we look at the ensuing bidding war that occurred once it was clear that Voisey’s Bay had all of the action. Again, we have turned to Jacquie McNish’s fabulous book The Big Score, which documents the history of the discovery, biographical elements of Robert Friedland’s life, and the ensuing bidding war between Inco and Falconbridge that led to one of the most spectacular takeovers in mining history. If you like these infographics, then look into buying Jacquie’s book. It was gripping and full of information.
Setting the Stage
The discovery of massive sulphides with Hole #2 brought increased attention to the former diamond play. However, the stock price didn’t really explode until the assays came in: 2.23% nickel, 1.47% copper, and 0.123% cobalt. Diamond Fields now traded in December 1994 at $13.50 per share, up from $4.65 just a month prior.
The company doubled down on drilling, and up until January 1995 they had hit nothing after Hole #2. The price dribbled down to $11.00.
However, it was in February 1995 that the results for Holes #7 and #8 were released, and they were some of the most significant holes for the entire project. The holes were in the Ovoid, which would soon be a famed and ultra-high rich section of the Voisey’s Bay discovery.
Hole #7 was 104m long and had 3.9% nickel, 2.8% copper, and 0.14% cobalt. Hole #8 was 111m long and had 3.7% nickel, 2.78% copper, and 0.13% cobalt. This propelled the stock price to $20.00 in February 1995.
Continued exploration of the Ovoid revealed a bowl-shaped orebody lying just below surface. This deposit had surface dimensions of some 800m by 350m, and extended to depths of about 125m. More nickel from Ovoid came in every month, and the stock price continued to rise.
At this point, Diamond Fields could no longer fly under the radar. Major mining couldn’t stand to watch as one of the world’s greatest base metal deposits blossomed outside of their influence.
Three major mining companies vied to get in on the action. Here’s some history on each of them:
At this time, the Canadian diversified mining company Teck had nine mines in operation and had a reputation as a swift deal maker.
- In 1947, Teck’s founder Norman Keevil Sr. was one of the first to use magnetic survey technology that was first employed by the US Military to find submarines. With this technology, he found one of the richest copper deposits in Canada.
- He once impressed a plane load of investors by flying them over a 150-foot copper vein that was exposed to the air. It shone like a newly minted penny as they passed over, stunning even the most skeptical investors. (He had previously parachuted a crew in to polish the ore in the bush.)
The International Nickel Company was founded in 1902 and for most of the 20th century it remained the dominant player in nickel exploration, production, and marketing.
The company virtually invented the nickel market:
- In 1890, global output of nickel was 3,000 tonnes
- Nickel was mainly used for military purposes but sales dried up at the end of WWI
- The company discovered nickel alloys that were marketed for use in automobiles, pipes, industry, coins, and even kitchen sinks
- By 1951, the world consumed 130,000 tonnes of nickel a year with 90% of it supplied by Inco
By 1995, Inco was still the market leader in nickel, producing 26% of the world’s nickel with $2.3 billion in sales each year.
In 1901, American inventor Thomas Edison found a nickel-copper ore body in the area northeast of Sudbury, Ontario.
However, it wasn’t until 1928 that Thayer Lindsley, the founder of Falconbridge, bought these claims and began to turn it into its first mine.
At the time, Inco had the only technology in North America to refine nickel, so Falconbridge sent its production to Norway where it purchased an operating refinery.
The company was smaller than Inco, but seen as more aggressive and nimble. The company produced 11% of the world’s nickel in 1995.
The Bidding Begins
While Inco, Falconbridge and up to a dozen other global miners spent resources on calculating the value of Voisey’s Bay, Teck was the first to approach with a different strategy.
In less than a day, and despite seeing any core, Teck was able to do a simple deal less than four pages long: $108 million for 10% of the company, or the equivalent of $36 per share. Teck also surrendered their voting rights to Friedland to prevent future hostile takeovers.
That got the market talking. Days later, the stock would trade at over $40 per share with a market capitalization of more than $1 billion.
In May 1995, after much posturing between Inco and Diamond Fields executives, another deal was struck. This time, Inco bought a 25% stake of Voisey’s Bay for US$386.7 million in preferred shares and cash, as well as 8% of Diamond Fields from company co-founder Jean-Raymond Boulle and early investor Robertson Stephens.
By the time the deal closed in June 1995, Diamond Fields’ stock price doubled again to $80.00.
After months of drilling misses outside of the Ovoid, finally in August there were signs of light: 1m of massive sulphides were hit on Hole #166.
In November, drill hole #202 retrieved 40m of massive sulfides, the largest section of sulfides found outside the Ovoid. It was now clear that there was a series of deposits at Voisey’s Bay. The hole assayed 3.36% nickel and became a part of what is known as the Eastern Deeps.
In December, Inco and Falconbridge both began to aggressively pursue Diamond Fields.
First, Inco presented a deal in principle for $3.5 billion, or $31 per share. Then, Falconbridge intercepted with an official offer for $4.0 billion, or $36 per share. This was a risky move for the smaller company, but it limited its downside by adding in $100 million in fees to the agreement in the case the deal were to not be finalized.
Next, the two competitors (Inco and Falconbridge) teamed together through a mutual connection to present an offer in tandem.
It was instantly shot down by Friedland.
Finally on March 26th 1996, Inco announced a takeover bid of its own for $4.5 billion of Diamond Fields – the equivalent of $43.50 per share or $174 pre-split. Inco’s stock price dropped but it held on, making the total value of the deal closer to $4.3 billion. On April 3, the deal was officially signed by all parties.
20 Common Metal Alloys and What They’re Made Of
You can’t find stainless steel, brass, sterling silver, or white gold on the periodic table. Learn about 20 common metal alloys, and what they are made from.
Every day, you’re likely to encounter metals that cannot be found anywhere on the periodic table.
You may play a brass instrument while wearing a white gold necklace – or maybe you cook with a cast iron skillet and store your leftovers in a stainless steel refrigerator.
It’s likely that you know these common metal alloys by name, and you can probably even imagine what they look and feel like. But do you know what base metals these alloys are made of, exactly?
Common Metal Alloys
Today’s infographic comes to us from Alan’s Factory Outlet, and it breaks down metal and non-metal components that go into popular metal alloys.
In total, 20 alloys are highlighted, and they range from household names (i.e. bronze, sterling silver) to lesser-known metals that are crucial for industrial purposes (i.e. solder, gunmetal, magnox).
Humans make metal alloys for various reasons.
Some alloys have long-standing historical significance. For example, electrum is a naturally-occurring alloy of gold and silver (with trace amounts of copper) that was used to make the very first metal coins in ancient history.
However, most of the common metal alloys on the above list are actually human inventions that are used to achieve practical purposes. Some were innovated by brilliant metallurgists, while others were discovered by fluke, but they’ve all had an ongoing impact on our species over time.
Alloys with an Impact
The Bronze Age (3,000 BC – 1,200 BC) is an important historical period that is rightfully named after one game-changing development: the ability to use bronze. This alloy, made from copper and tin, was extremely useful to our ancestors because it is much stronger and harder than its component metals.
Steel is another great example of an alloy that has changed the world. It is one of the most important and widely-used metals today. Without steel, modern civilization (skyscrapers, bridges, etc.) simply wouldn’t be possible.
While nobody knows exactly who invented steel, the alloy has a widely-known cousin that was likely invented in somewhat accidental circumstances.
In 1912, English metallurgist Harry Brearley had been tasked with finding a more erosion-resistant steel for a small arms manufacturer, trying many variations of alloys with none seeming to be suitable. However, in his scrap metal heap – where almost all of the metals he tried were rusting – there was one gun barrel that remained astonishingly untouched.
The metal alloy – now known to the world as stainless steel – was a step forward in creating a corrosion-resistant steel that is now used in many applications ranging from medical uses to heavy industry.
How AI and Big Data Will Unlock the Next Wave of Mineral Discoveries
Mineral exploration produces massive amounts of data. With AI, geologists can produce geological insights from this data to make the next discovery.
How AI and Big Data Will Unlock the Next Mineral Discovery
Emerging technologies such as artificial intelligence (AI) and machine learning are rapidly proving their value across many industries.
Today’s infographic comes from GoldSpot Discoveries, and it shows that when this tech is applied to massive geological data sets, that there is growing potential to unlock the next wave of mineral discoveries.
Mineral Exploration: Fortunes Go to the Few
Discovering new sources of minerals, such as copper, gold, or even cobalt, can be notoriously difficult but also very rewarding. According to Goldspot, the chance of finding a new deposit is around 0.5%, with odds improving to 5% if exploration takes place near a known resource.
On the whole, mineral exploration has not been a winning prospect if you compare the total dollar spend and the actual value of the resulting discoveries.
Measuring Discovery Performance by Region (2005 to 2014)
|Region||Exploration Spend||Estimated Value of Discoveries||Value/Spend ratio|
|Australia||$13 billion||$13 billion||0.97|
|Canada||$25 billion||$19 billion||0.77|
|USA||$10 billion||$5 billion||0.48|
|Latin America||$33 billion||$19 billion||0.57|
|Pacific/SE Asia||$8 billion||$4 billion||0.49|
|Africa||$20 billion||$23 billion||1.19|
|Western Europe||$4 billion||$2 billion||0.42|
|Rest of World||$27 billion||$8 billion||0.32|
|Total||$140 billion||$93 billion||0.57|
Figures in 2014 dollars. (Source: MinEx Consulting, March 2015)
Aside from the geographic insights, on the surface this data reveals that mineral exploration does not pay for itself. That said, there are still significant discoveries worth billions of dollars – it’s just the returns go inordinately to a few small players that make big finds.
Much of the money spent on exploration may not have produced the next great discovery, but you can be sure it created massive volumes of data that could be used for further refining of exploration models.
So, What is the Problem?
Every exploration failure or success produces geological insights. The mineral exploration process is the source of massive amounts of data in the form of soil samples, chip samples, geochemistry, drill results, and assay results. Each drill hole is a tiny snapshot into the processes that form the earth.
A single drill hole can create 200 megabytes of data and when there are many drill holes coupled with other types of information, an exploration project can produce terabytes of data. If you wanted to compare your one project to hundreds of others to find the best insights, the amount of data becomes dizzying.
All these data points are clues that can be used to find new mineral deposits, but to sort through them is too much for even an entire team of capable geologists.
Luckily, using today’s technology, this data can now be used to train computers to spot the areas showing similar patterns to past discoveries.
The true power of AI will be in its ability to empower technically trained professionals to make decisions in an increasingly complex and data-driven world.
Professor Ajay Agrawal, a noted academic in AI and founder of the University of Toronto’s Creative Destruction Lab, categorizes human activities into five categories:
- Data collection
- Information retrieval
He concludes that machines should do the first three and that humans – such as geologists, doctors, lawyers, investment bankers and others – should make the judgment calls and take the actions based on predictive capabilities of AI.
The mineral exploration industry presents a good example of how AI and big data can help technical professionals make discoveries faster, with less money, using a wide variety of data inputs created.
Opportunity Generator and the AI-friendly Future
AI can take the large amounts of data from many different projects in order to spot the right opportunities to further explore, building on decades of geological data from projects around the world.
The right technology can help reduce the risk inherent in exploration and lead to more mineral discoveries on budget, rewarding those that deployed their data most effectively. Companies that are able to harness this power will tip the scales in their favor.
As a result, mineral exploration is no longer so much an art of interpretation – but instead, it becomes closer to a pure science, giving geologists a whole-field perspective of all the data.
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