Jamie Strauss | Equipping Investors to Analyze Feasibility Studies
In this interview Jamie Strauss, provides an overview of Digbee, which is a new data and research platform for the mining industry. Digbee matches appropriate experts with mining feasibility studies to create objective, original and concise reports. In May 2019 it was launched as a freely available database of over 3,000 economic studies, displayed on an attractive map, with over 60 data points for each project. In Q4 2019, Digbee will go-live with its Digbee Research Reports. These provide on-demand and completely independent analysis of published feasibility studies. Digbee’s unique, expert network of mining professionals will author these reports to the very highest standards.
In addition to founding Digbee, Jamie Strauss is the founding partner of Strauss Partners Ltd. He has worked as a stockbroker in the City of London for over 30 years specializing for 20 years within the resources industry. He was previously Managing Director of UK Equity product at BMO Capital Markets, prior to which he was a director of Hargreave Hale Ltd where he founded, developed and then sold a mining institutional sales and research department. Jamie started his career in 1986 at Strauss Turnbull (subsequently bought by Société Générale). Jamie has experience in sales, research, transaction structuring, IPO’s and syndication. He is a non-executive director of several mining companies.
TRANSCRIPT:
Bill: Before we talk about Digbee, could you elaborate a little bit more on your background as it relates to investing in mining companies?
Jamie: Sure. I’ve been in the city (in London) for over 30 years in the UK, and really got stuck into mining back in the late ’90s. I had a small practice and then, having discovered the uranium boom back in 2003 when uranium was just $7.00 a pound, BMO came to me and said, did I want to move across there? So, I took the whole team, I sold the team to BMO, became managing director of UK Equity Products in the UK, and set up their UK operation before going alone again back in 2010.
Primarily been really focusing on a number of different areas: raising money, putting a number of different projects into production, but also a being a Non-Executive Director or Independent Director, principally on Altius Minerals, which you may know, in addition to Gold Standard Ventures, Extor, which got taken over by Yamana, and Bacanora Lithium, a developing lithium project in Northern Mexico.
Bill: When you were overseeing mining investments with your firm, because Digbee focuses on those late-stage developmental plays, did your firm focus mostly on investing in feasibility study projects?
Jamie: Yes, I think my background and my preference really is trying to find the money to put something into production. With the simple aim of creating shareholder value, and ultimately getting dividends. I really believe very strongly that the sector can do a lot better in terms of execution. Four out of five mines coming in over budget simply isn’t acceptable and I always felt as though if you pick the right management and you pick the right mines and the right jurisdictions, you can get a good result which ultimately leads to profitable dividends coming to shareholders.
Bill: I like the late-stage development plays, as do many mining investors, because if you do it right, over the next few years you can really see a great share price appreciation as that mine comes into production. But as you say, most of those projects usually cost more than they anticipate and it takes longer than they anticipate. Honestly, as an avid resource investor who is a retail investor, sometimes it’s hard to analyze the NI 43-101 or the feasibility studies.
About a year ago I was talking to a CEO of a development company that has a huge resource in Australia and that’s at the pre-feasibility stage. I went through the presentation and then I downloaded the 400 page PDF of their pre-feasibility study. When I was speaking to the CEO, I said to him, “you know, I understood your presentation but honestly the 400 page PDF is above my head – it’s above my pay grade.” And he said, “don’t worry about it, only 1% of investors that are even interested in my company can understand it.”
What does Digbee do for somebody like me, when I want to understand these projects as part of my due diligence?
Jamie: You just answered everything we do, in one paragraph. You and I are thinking exactly the same, and after 20 years of being involved in the mining industry – having been very lucky and very fortunate with my life in the mining industry, and having also had a lot of fun – it was obvious right from the start that all the way up and through to now, these feasibility studies are being written at huge expense, huge amount of time. For very good reasons, but they’re just not being used. And that’s a bit bizarre when this is one of the most complicated industries in the world, which is not binary in any sense of the word.
At the same time, it’s because a new whole group of sophisticated investors have come in, now taking over 70% of all fundraising: the private equity, the royalty and streaming guys, the strategics, the alternative lenders. All of them do due diligence to a fine degree. And they pay a huge amount of money with all the major consultants.
The major consultants, this is not their core business. This is their secondary business. They’d like to write the underlying reports. So, what Digbee does, is very simply: it takes these feasibility studies, right from PEA and upwards. It separates it into three separate sections – geology, metallurgy, and engineering – and we objectively analyze through the expert network that we have. We objectively analyze these reports, come up with a clear summary, list score based on probability as well as consequence, and end up with a neat package where people can read this in plain language, whether or not you’re a private investor or a private equity group. You can come up with clarity to mitigate risk and hopefully improve your investment pieces.
Bill: Would it be an accurate description, to describe your research platform as a clearing house? Or, if I could use the word, the Uber of feasibility study research?
Jamie: This is a platform. Uber’s a platform, Ebay’s a platform – so to that extent, yes. But I think it’s really important to differentiate what Digbee is trying to do. We’re doing this from a common-sense point of view. We’re not reinventing the wheel.
Marketplaces, platforms, have been around for a long time. Expert networks have been around for a long time. What we’re effectively doing is we’re creating, or we’re facilitating, an opportunity for accredited experts, metallurgists, engineers and geologists initially, of which there are thousands. There are 69, 000 members of geological societies around the world. They’re not all accredited. But we’re facilitating the opportunity to bring these people in from the cold, to speak in plain language, and to analyze and objectively give clear guidance or clear view on what is already a public document.
This is not in the gray area of inside information or anything. This is giving clarity to something in the public document which, in your own words said, is complicated and virtually nobody’s reading. That’s quite different from Uber, obviously, which to all intents and purposes, anybody can go and be a driver. This is a very professional platform. You have to be accredited in order to be able to write anything.
Bill: How would the research reports that Digbee produces for clients be different from traditional research reports?
Jamie: First of all, at the outset, this is not valuation research. This is technical research and this is based on the technical complexities of geology, metallurgy and engineering. These three topics very few people understand all together, and in simplicity we’re not getting involved in valuation research at this stage.
We’re trying to understand, what is being portrayed in the 43-101, a) is that fair, b) is there areas that you can improve, looking both at the positives as well as the negatives – not every geologist is gonna be 100% right all the time – and being very clear on this technical analysis.
I don’t know if that answers your question, but very different from the investment banking type research. In fact, it goes alongside investment banking research very well because I think valuation research has a strong part to play in any investment decision. But without knowing the nuts and bolts of a project such as a mining project, it’s very difficult to come to a conclusion with any certainty or clarity.
Bill: Would you agree that when it comes to mining investments, ultimately it comes down to geological risk? Do you agree with that statement?
Jamie: I think that’s one of the main parts. Not on its own. I’m a director of a couple companies at the moment where metallurgy is absolutely critical and we’ve got a pretty good idea of the geology but it’s the metallurgy which becomes so much more important.
Take lithium for example. The metallurgy of a lithium project is much more important than the geology in many cases. Not in all cases, there are a number of different types of lithium projects. Or even engineering: I read a report that we did recently as a trial run which was an underground mine, and a number of key risk factors came out in this from the engineering side. And there is where you can improve your economics as a result of doing things in a different way.
So, clearly, everything has to have a good geology, yes I’d agree with that, but when it comes to the decision as to what that NPV or IRR is or even just the confidence in building a project, and the risk mitigation. Engineering and metallurgy are really critical to bring in there as well.
Bill: You mentioned that your analysts will do reports regarding companies’ projects that have a preliminary economic assessment. As you know, that can include inferred resources, and the standards for that are lower than a pre-feasibility study or a bankable feasibility study. What are your thoughts on a preliminary economic assessment as a useful tool for an investor?
Jamie: You kind of go back to the industry here. I think a PEA, or a scoping study, is really helpful as a snapshot to the management and also for investors, to gather their thoughts as to where they are that time and to take it on to the next step. I mean, let’s be honest: not every project in the world should become a highly profitable mining project with $1 billion, or $500 million, worth of investment.
We need to have stage approach, as to whether or not this is moving in the right direction. Not every PEA should necessarily be positive. Hopefully management can push out the ones before they spend too much money on completing a PEA. But in some cases, it only comes out in the wash. And I think that’s where a PEA is a really good way for people to take stock of where they are before they go into the next level.
Bill: Does Digbee focus on all commodities that are mined? Or just more the popular commodities?
Jamie: All commodities that are mined. Although, there is no restriction with any of them, it depends on how big and how much scope there is within the expert community. But if you take something difficult like, say, diamonds, there will be a limited number of geologists available for the diamond field.
But that doesn’t stop it. An expert network, effectively, is what it is. You should be able to get hundreds or thousands of people interested in doing this work with lots of people with different specialties, and all of them can add value in many different ways. So, no, this is very much open to all the commodities initially in the hard rock world.
Bill: What would be the cost of a Digbee report?
Jamie: The average cost of a Digbee report is gonna be about two and a half thousand dollars. It will be based on a dynamic pricing model, principally based on experience as an expert. You have to be accredited, which typically takes five years, and we have guidelines for that. Accredited in their own profession. This is not us imposing new rules, we’re just adopting the industry as it is.
It tends to be five years for accreditation, so you get a Digbee Badge at year five, and then be approved to write. That will take you up to year ten, where you get two badges, and at year twenty you get three badges. A two-badge expert will typically charge two and a half thousand dollars a report. And then, obviously, higher as you go into a three-badge and lower as you go down.
Bill: And the independent analyst will get a portion of the money that you charge for the report, I would assume?
Jamie: Correct, they get 50%.
Bill: I’m looking at your website here, TheDigbee.com. Can you talk to us about this website: what can investors and interested parties find right now, and what do you have upcoming on the site?
Jamie: Thanks for that, Bill, that’s really exciting. What we’ve talked about so far is the goal and where we’re trying to get to and what we’re launch in November of this year. What we’ve launched in the last couple of weeks is on TheDigbee.com is a completely free database available to anybody in the world, all they have to do is sign up. If they are an expert, there’s a little bit of a different sign up versus an ordinary member, and that’s just so we can get their background and their criteria and their CV so to speak, so that when we launch in November we can send them the right sort of work to do.
By and large, what this database is, is it covers 3700 economic studies or feasibility studies from PEA upwards, since 2003 globally on what I think is a really quite attractive map. It covers about 65 data points – the typical common data points you would expect on each one. Most projects have more than one study on them, and as I said, completely free. You can have watch lists, you can get industry news feeds, and we will be updating the search criteria over the course of the next 6 to 12 months.
Every single project is bucketed into a type of geology and a type of processing. It’s really novel, but it’s almost bizarre, Bill, that nobody had done this before. People put these lists together but not to such an extent that 1700 different points for each one. You’ll be able to compare and contrast different projects quite easily. It’s really neat. I’m looking here, there’s a contact page on TheDigbee.com, if a listener has a question for you, would the best thing to do be to submit it through the contact page here?
Absolutely. Just feel free, or I have a LinkedIn page, if anybody wants to come through. The best way is just press contact us, and it will come straight through to us and we will happily answer.
Bill: Excellent. Well, Jamie I appreciate your time today. Thanks for the overview and I look forward to catching up with you at some conference in the future.
Jamie: I look forward to it, too, Bill. Thank you very much indeed.
