The Story of Voisey’s Bay: The Auction (Part 2 of 3)
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.
Visualizing the Uranium Mining Industry in 3 Charts
These visuals highlight the uranium mining industry and its output, as well as the trajectory of nuclear energy from 1960 to today.
When uranium was discovered in 1789 by Martin Heinrich Klaproth, it’s likely the German chemist didn’t know how important the element would become to human life.
Used minimally in glazing and ceramics, uranium was originally mined as a byproduct of producing radium until the late 1930s. However, the discovery of nuclear fission, and the potential promise of nuclear power, changed everything.
What’s the current state of the uranium mining industry? This series of charts from Truman Du highlights production and the use of uranium using 2021 data from the World Nuclear Association (WNA) and Our World in Data.
Who are the Biggest Uranium Miners in the World?
Most of the world’s biggest uranium suppliers are based in countries with the largest uranium deposits, like Australia, Kazakhstan, and Canada.
The largest of these companies is Kazatomprom, a Kazakhstani state-owned company that produced 25% of the world’s new uranium supply in 2021.
As seen in the above chart, 94% of the roughly 48,000 tonnes of uranium mined globally in 2021 came from just 13 companies.
|Rank||Company||2021 Uranium Production (tonnes)||Percent of Total|
|3||🇷🇺 Uranium One||4,514||9%|
|6||🇺🇿 Navoi Mining||3,500||7%|
|9||🇦🇺 General Atomics/Quasar||2,241||5%|
|11||🇬🇧 Energy Asia||900||2%|
France’s Orano, another state-owned company, was the world’s second largest producer of uranium at 4,541 tonnes.
Companies rounding out the top five all had similar uranium production numbers to Orano, each contributing around 9% of the global total. Those include Uranium One from Russia, Cameco from Canada, and CGN in China.
Where are the Largest Uranium Mines Found?
The majority of uranium deposits around the world are found in 16 countries with Australia, Kazakhstan, and Canada accounting for for nearly 40% of recoverable uranium reserves.
But having large reserves doesn’t necessarily translate to uranium production numbers. For example, though Australia has the biggest single deposit of uranium (Olympic Dam) and the largest reserves overall, the country ranks fourth in uranium supplied, coming in at 9%.
Here are the top 10 uranium mines in the world, accounting for 53% of the world’s supply.
Of the largest mines in the world, four are found in Kazakhstan. Altogether, uranium mined in Kazakhstan accounted for 45% of the world’s uranium supply in 2021.
|Uranium Mine||Country||Main Owner||2021 Production|
|Cigar Lake||🇨🇦 Canada||Cameco/Orano||4,693t|
|Inkai 1-3||🇰🇿 Kazakhstan||Kazaktomprom/Cameco||3,449t|
|Husab||🇳🇦 Namibia||Swakop Uranium (CGN)||3,309t|
|Karatau (Budenovskoye 2)||🇰🇿 Kazakhstan||Uranium One/Kazatomprom||2,561t|
|Four Mile||🇦🇺 Australia||Quasar||2,241t|
|Olympic Dam||🇦🇺 Australia||BHP Billiton||1,922t|
|Central Mynkuduk||🇰🇿 Kazakhstan||Ortalyk||1,579t|
|Kharasan 1||🇰🇿 Kazakhstan||Kazatomprom/Uranium One||1,579t|
Namibia, which has two of the five largest uranium mines in operation, is the second largest supplier of uranium by country, at 12%, followed by Canada at 10%.
Interestingly, the owners of these mines are not necessarily local. For example, France’s Orano operates mines in Canada and Niger. Russia’s Uranium One operates mines in Kazakhstan, the U.S., and Tanzania. China’s CGN owns mines in Namibia.
And despite the African continent holding a sizable amount of uranium reserves, no African company placed in the top 10 biggest companies by production. Sopamin from Niger was the highest ranked at #12 with 809 tonnes mined.
Uranium Mining and Nuclear Energy
Uranium mining has changed drastically since the first few nuclear power plants came online in the 1950s.
For 30 years, uranium production grew steadily due to both increasing demand for nuclear energy and expanding nuclear arsenals, eventually peaking at 69,692 tonnes mined in 1980 at the height of the Cold War.
Nuclear energy production (measured in terawatt-hours) also rose consistently until the 21st century, peaking in 2001 when it contributed nearly 7% to the world’s energy supply. But in the years following, it started to drop and flatline.
By 2021, nuclear energy had fallen to 4.3% of global energy production. Several nuclear accidents—Chernobyl, Three Mile Island, and Fukushima—contributed to turning sentiment against nuclear energy.
|% of Total Energy|
More recently, a return to nuclear energy has gained some support as countries push for transitions to cleaner energy, since nuclear power generates no direct carbon emissions.
What’s Next for Nuclear Energy?
Nuclear remains one of the least harmful sources of energy, and some countries are pursuing advancements in nuclear tech to fight climate change.
Small, modular nuclear reactors are one of the current proposed solutions to both bring down costs and reduce construction time of nuclear power plants. The benefits include smaller capital investments and location flexibility by trading off energy generation capacity.
With countries having to deal with aging nuclear reactors and climate change at the same time, replacements need to be considered. Will they come in the form of new nuclear power and uranium mining, or alternative sources of energy?
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