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.
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Mapped: The 10 Largest Gold Mines in the World, by Production
Gold mining companies produced over 3,500 tonnes of gold in 2021. Where in the world are the largest gold mines?
The 10 Largest Gold Mines in the World, by Production
Gold mining is a global business, with hundreds of mining companies digging for the precious metal in dozens of countries.
But where exactly are the largest gold mines in the world?
The above infographic uses data compiled from S&P Global Market Intelligence and company reports to map the top 10 gold-producing mines in 2021.
Editor’s Note: The article uses publicly available global production data from the World Gold Council to calculate the production share of each mine. The percentages slightly differ from those calculated by S&P.
The Top Gold Mines in 2021
The 10 largest gold mines are located across nine different countries in North America, Oceania, Africa, and Asia.
Together, they accounted for around 13 million ounces or 12% of global gold production in 2021.
|Rank||Mine||Location||Production (ounces)||% of global production|
|#1||Nevada Gold Mines||🇺🇸 U.S.||3,311,000||2.9%|
|#5||Pueblo Viejo||🇩🇴 Dominican Republic||814,000||0.7%|
|#6||Kibali||🇨🇩 Democratic Republic of the Congo||812,000||0.7%|
|#8||Lihir||🇵🇬 Papua New Guinea||737,082||0.6%|
|#9||Canadian Malartic||🇨🇦 Canada||714,784||0.6%|
Share of global gold production is based on 3,561 tonnes (114.5 million troy ounces) of 2021 production as per the World Gold Council.
In 2019, the world’s two largest gold miners—Barrick Gold and Newmont Corporation—announced a historic joint venture combining their operations in Nevada. The resulting joint corporation, Nevada Gold Mines, is now the world’s largest gold mining complex with six mines churning out over 3.3 million ounces annually.
Uzbekistan’s state-owned Muruntau mine, one of the world’s deepest open-pit operations, produced just under 3 million ounces, making it the second-largest gold mine. Muruntau represents over 80% of Uzbekistan’s overall gold production.
Only two other mines—Grasberg and Olimpiada—produced more than 1 million ounces of gold in 2021. Grasberg is not only the third-largest gold mine but also one of the largest copper mines in the world. Olimpiada, owned by Russian gold mining giant Polyus, holds around 26 million ounces of gold reserves.
Polyus was also recently crowned the biggest miner in terms of gold reserves globally, holding over 104 million ounces of proven and probable gold between all deposits.
How Profitable is Gold Mining?
The price of gold is up by around 50% since 2016, and it’s hovering near the all-time high of $2,000/oz.
That’s good news for gold miners, who achieved record-high profit margins in 2020. For every ounce of gold produced in 2020, gold miners pocketed $828 on average, significantly higher than the previous high of $666/oz set in 2011.
With inflation rates hitting decade-highs in several countries, gold mining could be a sector to watch, especially given gold’s status as a traditional inflation hedge.
The 50 Minerals Critical to U.S. Security
This graphic lists all minerals that are deemed critical to both the economic and national security of the United States.
The 50 Minerals Critical to U.S. Security
The U.S. aims to cut its greenhouse gas emissions in half by 2030 as part of its commitment to tackling climate change, but might be lacking the critical minerals needed to achieve its goals.
The American green economy will rely on renewable sources of energy like wind and solar, along with the electrification of transportation. However, local production of the raw materials necessary to produce these technologies, including solar panels, wind turbines, and electric vehicles, is lacking. Understandably, this has raised concerns in Washington.
In this graphic, based on data from the U.S. Geological Survey, we list all of the minerals that the government has deemed critical to both the economic and national security of the United States.
What are Critical Minerals?
A critical mineral is defined as a non-fuel material considered vital for the economic well-being of the world’s major and emerging economies, whose supply may be at risk. This can be due to geological scarcity, geopolitical issues, trade policy, or other factors.
In 2018, the U.S. Department of the Interior released a list of 35 critical minerals. The new list, released in February 2022, contains 15 more commodities.
Much of the increase in the new list is the result of splitting the rare earth elements and platinum group elements into individual entries rather than including them as “mineral groups.” In addition, the 2022 list of critical minerals adds nickel and zinc to the list while removing helium, potash, rhenium, and strontium.
|Mineral||Example Uses||Net Import Reliance|
|Beryllium||Alloying agent in aerospace, defense industries||11%|
|Aluminum||Power lines, construction, electronics||13%|
|Zirconium||High-temparature ceramics production||25%|
|Germanium||Fiber optics, night vision applications||50%|
|Nickel||Stainless steel, rechargeable batteries||50%|
|Tin||Coatings, alloys for steel||75%|
|Cobalt||Rechargeable batteries, superalloys||76%|
|Antimony||Lead-acid batteries, flame retardants||81%|
|Zinc||Metallurgy to produce galvanized steel||83%|
|Titanium||White pigment, metal alloys||88%|
|Bismuth||Medical, atomic research||94%|
|Tellurium||Solar cells, thermoelectric devices||95%|
|Vanadium||Alloying agent for iron and steel||96%|
|Arsenic||Semi-conductors, lumber preservatives, pesticides||100%|
|Cerium||Catalytic converters, ceramics, glass, metallurgy||100%|
|Dysprosium||Data storage devices, lasers||100%|
|Erbium||Fiber optics, optical amplifiers, lasers||100%|
|Europium||Phosphors, nuclear control rods||100%|
|Fluorspar||Manufacture of aluminum, cement, steel, gasoline||100%|
|Gadolinium||Medical imaging, steelmaking||100%|
|Gallium||Integrated circuits, LEDs||100%|
|Holmium||Permanent magnets, nuclear control rods||100%|
|Indium||Liquid crystal display screens||100%|
|Lanthanum||Catalysts, ceramics, glass, polishing compounds||100%|
|Lutetium||Scintillators for medical imaging, cancer therapies||100%|
|Neodymium||Rubber catalysts, medical, industrial lasers||100%|
|Praseodymium||Permanent magnets, batteries, aerospace alloys||100%|
|Rubidium||Research, development in electronics||100%|
|Samarium||Cancer treatment, absorber in nuclear reactors||100%|
|Scandium||Alloys, ceramics, fuel cells||100%|
|Tantalum||Electronic components, superalloys||100%|
|Terbium||Permanent magnets, fiber optics, lasers||100%|
|Thulium||Metal alloys, lasers||100%|
|Ytterbium||Catalysts, scintillometers, lasers, metallurgy||100%|
|Yttrium||Ceramic, catalysts, lasers, metallurgy, phosphors||100%|
|Iridium||Coating of anodes for electrochemical processes||No data available|
|Rhodium||Catalytic converters, electrical components||No data available|
|Ruthenium||Electrical contacts, chip resistors in computers||No data available|
|Hafnium||Nuclear control rods, alloys||Net exporter|
The challenge for the U.S. is that the local production of these raw materials is extremely limited.
For instance, in 2021 there was only one operating nickel mine in the country, the Eagle mine in Michigan. The facility ships its concentrates abroad for refining and is scheduled to close in 2025. Likewise, the country only hosted one lithium mine, the Silver Peak Mine in Nevada.
At the same time, most of the country’s supply of critical minerals depends on countries that have historically competed with America.
China’s Dominance in Minerals
Perhaps unsurprisingly, China is the single largest supply source of mineral commodities for the United States.
Cesium, a critical metal used in a wide range of manufacturing, is one example. There are only three pegmatite mines in the world that can produce cesium, and all were controlled by Chinese companies in 2021.
Furthermore, China refines nearly 90% of the world’s rare earths. Despite the name, these elements are abundant on the Earth’s crust and make up the majority of listed critical minerals. They are essential for a variety of products like EVs, advanced ceramics, computers, smartphones, wind turbines, monitors, and fiber optics.
After China, the next largest source of mineral commodities to the United States has been Canada, which provided the United States with 16 different elements in 2021.
The Rising Demand for Critical Minerals
As the world’s clean energy transitions gather pace, demand for critical minerals is expected to grow quickly.
According to the International Energy Association, the rise of low-carbon power generation is projected to triple mineral demand from this sector by 2040.
The shift to a sustainable economy is important, and consequently, securing the critical minerals necessary for it is just as vital.
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