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Aurum Exploration: When The Going Gets Tough, The Tough Get Digging

Gold prices are down over 25 per cent from their peak; copper is crunching; commodities are cascading down the hill – on paper it sounds like a tough time to be in the exploration business but there are still opportunities out there if businesses are ready for action.

Aurum Exploration Services has seen it all before. The company started in a cyclical downturn: the big one from 1999-2002.

It also survived the 2009-2010 dip, so it knows know how to navigate through the shoals and avoid the wreckage.

Dr. Karel Maley of Aurum Exploration.

“In 2013 we are facing tough times again,” said Wilson Robb, Chairman of Aurum.

But gold is at US$1,300 an ounce – not all that long ago, such a price would have been regarded as very high. What has happened to change perceptions?

Mineral exploration is a cyclical activity, funded by the stock markets; a lack of market confidence has several knock-on effects.

The main one in the resource sector is that junior companies are unable to get to money to keep themselves clearly and visibly active, they cannot explore, leading to no results and so they run the risk of completely losing an already shaky investor confidence and off we go again – it’s a vicious circle.

“People only tend to see the short term – that the price has fallen from highs of over US$1,600,” said Robb.

“When things get difficult, the company bean-counters generally look to batten down the hatches…tight. They follow the crowd, retrench and cut their exploration costs down to zero, or as close to it as they can get away with.

“The reality is that they need to be imaginative and creative and get out and work their projects but they cannot afford to maintain all the staff and resources that they actually need to progress things and stay in the investment shop window. That is where we come in.”

Robb maintains the Aurum low-cost, on-off contract service model is exactly what companies need in tough times. The company puts at their clients disposal a complete complement of qualified and experienced geological and technical support staff under one roof; covering all manner of management and field exploration activities including: geochemical and geophysical sampling; geological mapping; logging; drill management and core sampling.

It remains fully equipped for all field- and office-based geological surveying, sampling and data acquisition and manipulation. It stands ready to develop or assess client-specific exploration portfolios and conceptual precious and base-metal exploration targets across the world, using a combination of its own existing and client or government databases.

“We can help with the generation of ideas and with making funding contacts,” added Robb.

“We help people to identify targets and to get work done, in an affordable way. We have the staff needed here, which means that our clients do not have to go through the process and incur the expense of locating, sourcing and hiring personnel, and paying the on-going overheads involved.”

But in times like these why bother? Outside observers raise a question that is to them, obvious. Why not just put the shutters up when things get difficult? Why is it important to keep turning over activity, rather than wait for things to improve, as most businesses would?

“These companies need to keep the news about their activities flowing,” Robb said.

“Positive results and advancing a project is important in supporting their share prices and this is in turn tied into maintaining access to funding. They need to be seen to be active, confident and showing success. Rather than throwing the baby out with the bathwater we suggest that we can provide a cost-effective means to help them through the bad patches.”

The reality is that tough times lead to shake-outs and some companies will go to the wall. Robb believes those that are in a position to get into market action quickly when things pick up will be the ones to prosper – and in exploration, things can pick up very quickly and with little or no notice, sometimes only for short periods.

How to survive the exploration downturn

How to survive the exploration downturn

 

Right place, right time – ready for action

“There are lots of projects around and they are not all good projects, but unfortunately all projects appear to be getting treated the same – sorry, no funding available,” said Robb.

“The people with a good project and in possession of a combination of vision, access to money-men and the correct skillsets will be able to take advantage to get the work done and move forward with the market upswing.”

Robb believes there is no doubt that things will improve – the world population is seven billion and it’s not getting any smaller.

“People still want stuff, from cars to cellphones, and things generally need metals to make them,” he said.

“The current correction in metals prices is inevitable after what was a 10-year boom and it’s true that some chickens are coming home to roost – a lot of money has gone into a lot of companies and many have not delivered – but this is not some market disaster; generally, things are actually quite buoyant.”

One commentator has pointed out that metal prices now seem to have stabilised at levels that are significantly higher than where they started, and, of course, non-exploration business generally has remained reasonably resilient.

“This is going to be survival of the fittest and smartest – there are some sources saying they will not fund exploration companies till the shakeout is complete. But if you have a project you believe in then you should work on it, keep the news flowing and produce results,” said Robb.

“If you are not doing anything for six months or a year, you will not have anything to say to be looked upon favourably by the smart opportunistic money, let alone the general risk money when it’s turned on again – it’s the squeaky wheel that gets oiled.”

If anything, the indication is that investors are taking a more hard-headed (some would say, realistic) approach. They are looking for profit and loss, free cash flow, ability to operate – in short, despite the potential for upsides in the several-thousand percentage point levels, they want a clearer idea that their investment is going to be repaid.

They want more than a wing and a promise: they want solid evidence, of progress, of realistic expectations and of effective operations and management.

“That is where our value for money, contract exploration service model can help – we provide the resources the exploration companies need, quickly and for only as long as they are needed,” said Robb.

“We help to keep that essential newsfeed flowing, that vital visibility maintained and – most important – the project moving forwards to give returns to the client.”

Find out how Aurum can help you get what you need done cost-effectively – request more information

 

Article published on MINESITE, 31/7/2013

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