With commodities sitting at a six-year low, Master Investor looks at mining companies who are warehousing assets for cents in the dollar. In the first in a four-part series, Kaizen Discovery’s CEO Matthew Hornor says playing the contrarian is not always easy…
Running into a building when others are running out is always a tough call, says Matthew Hornor, chief executive of Kaizen Discovery.
“These are just cycles,” he says from Vancouver, ahead of a recent trip to the Arctic, which he spent in tents and a local inn, showing Japanese investors around the company’s largest copper project. “But when you play the contrarian, it doesn’t feel great all the time. And if it did feel great, you’re not being a true contrarian.”
Backed by HPX TechCo, a geophysical surveying company owned by mining billionaire Robert Friedland, Toronto-listed Kaizen has been warehousing copper assets for nearly two years, snapping-up proven discoveries for a fraction of their sunk cost.
It has pocketed the Tanzilla and Aspen Grove copper discoveries in British Columbia and 4,000 square kilometres of high-grade copper acreage in Canada’s far north, known as the Coppermine project. In July, it also swallowed Pinaya, a 32m tonne copper resource in Peru, which Kaizen bought out of arbitration for C$4.5m in cash and stock.
“Things couldn’t be worse in the commodity sector,” says Hornor, a key Friedland lieutenant and a former corporate lawyer in Tokyo, “so this is the prime time to be doing what we’re doing.”
Tanzilla is being funded by a joint-venture with copper titan Freeport and Hornor has brought Japanese trading giant Itochu into Aspen Grove. He is now working to close joint-ventures over Coppermine in the Arctic and Pinaya in Peru, funding Kaizen’s four largest projects.
“If you’re going out alone in this market, to say it’s challenging is a profound understatement,” he says. “If you have somebody with real staying power like our partners in Japan, they need natural resources and we’re giving them access to projects that are not within their normal mandates.”
Kaizen has transacted aggressively, closing seven deals in 18 months, but Hornor is planning to shunt news flow from deals to drill results, a rarity in the current market, which has seen exploration budgets plundered as commodity prices have fallen. He sees each new stretch of acreage falling under Kaizen’s control as another “opportunity for a win”, but warns against over-acquiring.
“There’s a hazard that companies who are on the acquisition bent face in growing too fast,” he says. “If something incredible comes along that we can’t miss, we’ll obviously look at it, but we definitely have our hands full right now.”
“We know it’s a long-term game, it’s not a three-month or even a year process, it’s going to take time. But so long as you have a strong platform and the wherewithal to stick to your business model, the potential gains you get playing this side of the market, it’s huge.”
Co-published by Global Mining Observer