Greenfield exploration has to increase, says Van Eck's Foster

Mining Journal article
15 September 2021

Greenfield exploration has to increase, says Van Eck's Foster - Mining Journal (

The 2021 Gold Forum Americas saw leading gold miners opine on the state of the market and talk of what they are doing to attract and maintain investors. Mining Journal spoke with Joe Foster, gold portfolio manager at Van Eck, one of the leading investors in the gold space, to get his thoughts.

Mining Journal: What are some of the things you've heard companies say that you've liked or have not liked?

Joe Foster: These conferences are chances to get caught up with them. When we follow all of these companies and we keep up with the news there are rarely any surprises. Having said that, the industry has gone through a transformation over the last five years or so. They've transformed their business to become more profitable than they have in the past, generating better returns to shareholders and there's a discipline in the industry towards operating and ESG which is excellent and reassuring to see. With all that transformation there's been the question of is this temporary? Is there really substance to it? I'm convinced it's for real, that this transformation is permanent.

MJ: I imagine you are very happy with the fact that companies are prioritising returns to shareholders with increasing dividends and share buybacks. However, very few companies are replenishing their depletion. Are we approaching a time when you would like to see miners move to invest in growth again?

JF: I'm not sure we will ever see growth across the entire industry. Sure, some companies will grow while others not so much. Industry-wide growth is probably a thing of the past as it has gotten so much harder to find gold. The best the industry can do is maintain current growth levels in the long term and to do that, they are going to have to turn to exploration. They've been doing this transformation that I talked about. They're finding value on existing properties by expanding reserves and resources and may be expanding production a bit, but that won't last forever. Eventually they will deplete these deposits and will have to go out and find something new. I think at some point they will have to start spending a lot more money on greenfield exploration and they're going to have to show some success with it.

MJ: It seems like you're really trying to identify the companies that will still be around in five or ten years' time?

JF: It's those that will be here beyond ten years. That sounds a way out but when you look at how long it takes to discover, permit and build a mine it is not that long. It can take five to 10 ears, or even longer to develop a property.

MJ: Barrick Gold president and CEO Mark Bristow said that in his view, the consolidation in the sector that he kicked off a couple years ago stalled. Does there need to be more consolidation?

JF: Consolidation to create a critical mass is necessary as with that comes financial power, technical expertise and the ability to sustain yourself in the longer term. There are a lot of one or two or three-mine companies, and a lot of developers out there that cannot survive in the longer term unless they consolidate, but it is hard to find management that is willing to consolidate and take that next step. When you consolidate, people lose their jobs.

MJ: There are many companies making nice margins and build cash. Is there a danger that all the cash sloshing around is making people a little too comfortable?

JF: The cash enhances the reluctance of management to engage in M&A because they're earning enough money to sustain themselves in the near term. But when the production on the property they're mining starts to go down, they have nothing to replace it with.

MJ: Does that put the onus on you, as an institutional investor, to be more vocal in expressing what you would like to see companies do?

JF: I've been pretty vocal on this a lot lately so I think everybody knows my views on that. It is incumbent on investors to keep after these companies to do the right thing, which is create value. These are public companies, not private companies.

MJ: Pretty much everybody said they are leading in the ESG field and on CO2 reduction. By definition, not everybody can be the best. Do you feel there is a lack of concrete information to guide your decision-making information?

JF: In my view, it's a work-in-progress. The whole ESG movement has come on very suddenly. Five years ago, we weren't really talking much about ESG. Companies were doing it, but it wasn't like it is today and nobody thought of comparing the greenhouse gas emissions. I think companies are still formulating their reporting methods and standards. The industry as a whole is trying to figure out how to report these standards. I think over the next couple of years you'll see a lot of information becoming available to shareholders and you will be able to compare companies.

MJ: Will this become a more important factor in investment decision making for you?

JF: It is not about whether this company is generating more greenhouse gas emissions than that company. It is are these companies improving? In water consumption, greenhouse gas emissions and safety record records we want to see a track record of improvement. I don't care about the starting point, what I want to see are improvements.