Ross Beaty is a geologist and resource entrepreneur with over 45 years of experience in the international minerals and renewable energy industries. He is an internationally recognized leader in both non-renewable and renewable resource development, having founded and divested several companies. In addition to Pan American Silver, he is the Chairman of Equinox Gold Corp., a mid-tier gold producer.
Mr. Beaty has received many awards and honours for his business and philanthropic achievements, including the Canadian Mining Hall of Fame (2018), the Order of Canada (2017) and Doctor of Laws honoris causa, University of British Columbia (2018).
Hi Ross, thank you for joining us today. To start off, over the course of your career, what would you say were some of the more remarkable investments you made as an investor?
I’ve typically been more of a developer, so I’ve had my own companies and I’ve always made the most money that way. My first company was Equinox in 1985, which I sold in 1994. I then started two new companies. One was a silver company, started from scratch, which is now the world’s preeminent silver mining company, Pan-American Silver (TSX: PAAS). I also started a junior exploration company in Bolivia that I sold, then another one in Brazil, that I also sold. Then we had a string of six copper companies, we sold all of those.
Those were the exploration companies where you add value and then find a big company that wants to buy it from you. Most of the activities in my career have been starting something from scratch, building it into something big and either keeping it as an operating business or selling it as an exploration company.
I did invest in the period between 2002 and 2014 when I had six copper companies. After the financial crisis in 2008 -2009, I had a fair bit of cash, so I was able to invest in other companies. I did fairly well as an investor, but it wasn’t as satisfying. For me, what I love doing is building things, building companies, putting teams together, adding value, growing, exploring, developing. That’s the stuff that I do really well.
When you invest, you’re investing in someone else’s dream. Basically, just writing a check, giving them some money or buying a stock in the open market and letting them run it. You don’t have that kind of identity of helping to build something, as you can sell at any moment. Whereas when you’re locked into a company, when you start it and you bring other investors in as shareholders and co-investors with you, it’s a very different thing.
Right, by the sounds of it, you mostly went into precious metals, but what took you to copper and other metals?
Well, I’ve had all kinds of metals in my career. I’ve been involved in uranium, nickel, copper, and rare earth elements. That’s the
life of a geologist. However, gold is the easiest to build a company around from scratch. There’s gold in all kinds of geological environments, all over the world, and there’s lots of little deposits. Small companies can develop them, and some of them turn out to be big deposits. Silver is much more difficult. It took us a long time to build a company that was focused on silver. But it’s now the world’s preeminent silver company, which was our focus from the start.
I like gold and silver, but I also like copper. From time to time I’ve liked uranium, and from time to time, there are other metals that have also been good. Nickel was good for a period of time, then it wasn’t. Zinc was good for a while, then it wasn’t. Now it’s sort of in the middle.
In the same theme of building companies or investing in your own companies, what were some things that you wish had maybe gone better in your career?
Oh boy, I’ve made more mistakes than anybody. I mean, you can’t help make mistakes when you’re an entrepreneur with no training and no mentor. You just go and it’s the school of hard knocks, really. One of the mistakes that I’ve made is to do with scale. It’s really important in looking for a commodity or project that is big and focused on size. If you have a commodity or project that is going to make people billions instead of millions, even if you get it wrong, it’s still going to be something that’s going to command an opportunity to give people 10 times their money instead of 10 or 20%. This business is not about 10 and 20%. It’s far too risky. You want to offer investors multiples of their investment in order to attract capital. And if you focus on low returns, you’re just not going to give them that.
Another thing is people. I’ve been very, very lucky in my career. I’ve had some outstanding partners and people that have helped me build my companies. I certainly didn’t do it by myself. All of these projects and companies have involved a huge number of people. From time to time, I’ve got a senior member in my company who’s just not a good fit with my personality. But if I had advice for anyone, or if I was to do it again, I’d say as soon as you realize that there’s not a good chemistry between people, chop, move on and find a better person, because it’s just painful having to deal with that.
One more thing is location. You can’t be too choosy where you work. I’ve worked in all kinds of crazy places. I’ve worked all over the world, really. Most of it’s been successful, but I did spend three years of my life in Russia, in the mid-nineties, where I had a wonderful silver project. Eventually though, we got attacked by a corrupt Russian company who stole the project from us. I wasted three years of my life and we spent about $40 million on the project. We got our money back, but we wasted all that time. I’d probably do it again though. I knew at the time we could get blown up. We did, but we might not have. I mean, I just embrace risk. When you have high risk, very often you have high reward potential. And that’s where things balance. And so, I would say, don’t run away from location. Don’t run away from stage of project.
When building your companies, what have the main factors been that have allowed you to succeed?
Well, very often, success begets success in the sense that, this is a high-risk business. So when you take people’s money, generally speaking, when I’ve taken it, I’ve tried to treat it like my own, and I’ve tried to be very thrifty and very frugal, I truly treated it like my own, and investors really like that.
But the real trick is you have to make people money. And if you can make people money, they’re going to roll the dice with you again. I was very lucky in my first company, that I made a success of it. Then I started a new company and my investors, they went out of the old one and right into the new one.
I had that good fortune of having a share price that went up quite a bit, long before we back filled it with assets. I was lucky in that I was able to sell without too much dilution, protect my own investment and see what I could do with the money. We did well with the investment money, built a fairly good size company, and sold a couple other ones along the way. And people kept investing in me.
From Equinox to Equinox, if I can say that, from your first company to your last company, what are some of the observations that you have made about how the industry’s changed?
The business of public companies has definitely changed. The first is, it’s much more expensive to get into the game. When I started my first company in 1985, I literally invested $3,250. And with that, I bought a block of stock that was enough to get me motivated to build the company. We raised $145,000 in our IPO, of which we netted $110,000. You could never do that today. Today you can’t start a company unless you put over a million dollars into legal and accounting and all that red tape – you’ve got to follow the rules and regulations that are out there. So, it’s a lot more difficult, a lot more complicated and all this stuff about securities regulation and investor productions, it really does cost money.
The second thing is the nature of investors is different. There are the algorithmic traders that just don’t really care about what the value proposition is. For exploration companies, these investors can’t figure them out, and they generally don’t buy them. So, there’re way fewer buyers today for small companies than there were 10 to 30 years ago.
On the operational side there are also lots of differences. Where you go and find mines, how you find them, how much money you have to raise to de-risk projects. It’s not so easy. It’s much more suited to professional management than it used to be. There used to be all kinds of crazy people out there who were great promoters, but didn’t have a clue about the business, and all they tended to be were paper hangers. They just sold stock, and usually people were buying their own stock that they were selling. I mean, it was a real Wild West in the early days. Got a terrible reputation, but it’s a much more professional business now. More capital is needed, but the right management will attract that.
Another thing that’s changed is that it probably takes 15 or 20 years now to build a mine from when you first discover it to actual operation, because there’s so much more social license you need. Environmental protection, community management, governments are slower to permit things, etc…There’s just so many more impediments to actually getting things going now than there used to be.
“If you take a dollar and spend it on something other than what you said you were going to spend it on, you’ll never get it again. So, stay focused, be honest, be transparent and work hard.”
And what’s stayed the same?
Well, the bottom line of the business is it’s like a casino. I mean, the exploration business, looking for minerals, it’s all very risky. All the way from mine development to actual mining.
And talking about new entrants, if you were giving advice to young geologists and investors that want to get involved, what is the parting wisdom you would give?
Well, the first thing I’d say is look at yourself in the mirror and find out if you’re really suited to be an entrepreneur. If you want to get out there and start your own company and build your own teams and go out and bang rocks and look for gold, that’s great. There’s a need for that, and there will always be a need for that. But if you’re more of a team member where you’re more suited to doing the work and being part of a company where someone else is doing that promotion, you’re probably not going to be very successful if you try to be an entrepreneur starting up yourself. So, look at yourself in the mirror, I would say, and try to figure out what you are good at, and then focus on doing that. Otherwise, you’re likely to be quite frustrated and your company won’t be too successful.
Beyond that, there’s no real formula… Well, the formula to me is hard work, tremendous determination, motivation, not getting frustrated and not being afraid to lose everything. You just pick yourself up, dust yourself off, keep going. This is a business that is highly risky, and you need to make sure you have investors who understand the risks. And if you do lose them all their money, if you’ve done the right thing, and if you’ve done what you told them you were going to do, a lot of investors are very, very forgiving, and they’ll give you more money again if you spend it on what you say you’re going to.
If you take a dollar and spend it on something other than what you said you were going to spend it on, you’ll never get it again. So, stay focused, be honest, be transparent and work hard. Don’t wait for the phone to ring, pick it up and make the phone calls. That’s what I think makes the good entrepreneurs and successful people, and I can name a half a dozen people I really admire, who are just serially successful. Lukas Lundin, Robert Friedland, those kinds of guys, they just constantly succeed with almost whatever they’re working on.
What are your comments about where gold and silver are at today? And if you had maybe another 20 years in mining, would you jump into something else at this point in time?
Right now, the market for gold and silver is the most bullish that I’ve seen in my entire career. Right now it’s just the perfect storm for gold and COVID is playing right into that.
The fundamentals are fabulous for gold and silver. That’s why I like it right now. At some point the cycle will end, and gold will go up to a point that’s toppy and it’ll bounce around a little bit, then it’ll crater and it’ll go out for four or five years.
Copper is different. The market now is probably okay for copper, but it’s not so good for coal, zinc, lead, nickel or any of those kinds of metals.
But now it’s a much more picky market. This COVID crisis in the world economic picture is very confused. I’d say nobody really knows what’s going to happen after the COVID crisis is over. Is it going to be stagflation? Is it going to be deflation? Is it going to be inflation? Is going to be growth? Is it no growth? I mean, there’s just so many opinions from every economist. I don’t know what’s going to happen, but I just know it’s really good for gold right now.
I’m also curious about how you view Canadian mining in 2020. How do you think Canadian companies are faring?
Well, mining in Canada is a core strength. I mean, it’s one of the things we do well, we always have. It’s a resource country. We have great universities that produce great geologists. Great geologists make great discoveries and build great companies. What is now different and has evolved over the years is that Canada is more like an amoeba where money comes into Canada from all over the world, principally through the Toronto Stock Exchange and flows into these public companies of which there’s a legion of Canadian junior exploration and larger mining companies.
Money comes in from all over the world, from Hong Kong, from Singapore, from Australia… I mean everywhere, South America and certainly Europe and North America, and then it gets spent all over the world. Canadian companies used to be mainly in Canada, to some degree in the US but now they’re absolutely everywhere. I mean, most of the mines in Mexico are owned by Canadian companies, Chile, Peru, Argentina, same thing. All over Africa, Canadian companies are just everywhere.
It’s a business that we’re good at. We have, you could say, an ecosystem which supports these public companies in Canada. We have good mining accountants, good mining lawyers, securities regulation that favors the business, and makes it quite easy to raise capital here. We have a lot of analysts, a lot of investors who understand the game and a lot of institutional investors who understand it. There’s a lot of capital that goes into it in Canada.
What’s it going to take for Canadian mining companies to continue to compete with Australian companies over the next 10-20 years?
Well, we can’t really compete with Australian companies in Australia and they can’t compete very well in Canada. We have pretty good knowledge of our own backyard and so do they. There are some Canadian companies that have done very well in Australia and vice versa, but Canada’s strength is really Latin America, North America, parts of Africa…I mean, Canadian miners can virtually go everywhere. They can go to China, Russia, you name it. Australian companies are also able to do the same, but Australia is a much smaller capital market. It’s a lot farther away, however there are a lot of good companies based in Australia. Great money, people, engineers, and geologists from Australia. It’s a real mining friendly country, too.
To end off, you’ve stated that Equinox is your last company before ostensibly you would retire. I’m curious, what are your future plans? You’ve been in it a long time. If you leave Equinox, would you still be around in the industry?
I would say I don’t really have them. I have a lot of stuff I want to do right now, particularly with Equinox. Pan-American itself is a big company. It’s a $8-9 billion company with 12,000 employees and 12 mines. So, it’s kind of running itself. I’ve got a couple of juniors in Ecuador. I’d like to see those things bought by somebody eventually. And I’ve got a few other little deals that I’d like to see through to conclusion. And Equinox Gold, I want to see it to become a really big, sustainable mining company. And that’s really what I’ve got my head focused on right now. We’re almost there. Equinox Gold has six mines, 6,000 employees, and it’s got about a $3 billion market cap now. So, it’s done pretty well in two years, but we’re not quite there. Once it’s time to go, then I’ll go, and then I’ll tell you what I’m going to do. I actually have some thoughts, but the first thing I’ve got to do is get to that point and basically say that I’ve achieved what I set out to achieve with Equinox and I’m not quite there yet.