VanEck Natural Resources Conference 2017: Speaker Interviews
SHAWN REYNOLDS: We're here at the annual VanEck Natural Resources Conference in Denver, and we're very happy that we've got a number of companies from the mining and energy sector, all talking about the industries, what are the challenges they're facing, and really, at the end of the day, what are the key drivers to the value creation that they're trying to deliver to their shareholders. We were also very fortunate to sit down with the senior executives and have them describe both how they have reshaped their companies given the tough market conditions of the last few years, and to discuss their key strategic imperatives in today's market environment.
TOM BUTCHER: How has your company successfully reshaped itself? And looking at your narrative, what would you say was the single most important part that you would like participants at the conference to take away with them?
AMMAR AL-JOUNDI: As a gold company, we're a simple company. We have a low-risk business, high-quality business, and we're continuing the strategy that we've had for the past sixty years that has allowed us to outperform. And that strategy is simply this: we go to the best gold regions in the world. We don't chase mines everywhere in the world, we go to the best regions in the world. We go to the regions where we know we can operate for decades, because we think you need to be able to do that to get good at what you do. And then in those regions, we try to create tangible, easily explainable competitive advantages so that we can really be the best miners in those regions.
WARD POLZIN: We can't continue to be as focused as we are on the Permian -- meaning we need to find other basins to bring more production in. And, yes, it's the best place to be right now, no question about it. But we need to anticipate four or five years from now. And I still think it will be the best place to be four or five years from now, but it won't be the only -- I think we're going to have some other -- maybe not quite so "best," but very good places we need to be beyond that. Otherwise, I just don't believe long-term the Permian can keep delivering the growth, or expectation of growth, that appears to be in the market today.
CLIVE NEWALL: First Quantum is known as a growth company. We have some unique capabilities to develop projects and mines at costs well below the industry norm, and we leverage off that to build projects and build mines. When the global financial crisis happened, we had about $5 billion invested in projects, which were under construction or just completed construction, but were not yet generating cash. So we had quite a bit of balance sheet fixing to do. So by next year we'll be generating very strong free cash flow and there'll be a natural deleveraging at that point. We are currently -- this year, we'll produce about 570,000 tons of copper, but we're going to be close to a million tons within two or three years. We've got to focus on maintaining a strong balance sheet. We've got to recognize that our shareholders have not had any sort of returns dividend returns for some time, or just nominal dividends, so we need to return some cash to shareholders. But also, we need to keep growing, because all of our big shareholders own us because of that growth.
TODD BECKER: You know, we're a young company. We're under ten years old. We've grown from a couple hundred million in revenue per quarter to over a billion in revenue per quarter, and our enterprise value has growth accordingly as well. So we're continually growing this company. We continue to make acquisitions. We made about a billion dollars of acquisitions as well in the last nine years. And it's all really along our value chain. So our story really hasn't changed very much. It's all where we can really disintermediate anybody in our value chain. So it's -- whether somebody's making money off of one of our flows of our commodities, we want to go after that business. So we bought vinegar company to do that, that uses food-grade alcohol. We make animal feed, so we bought a cattle-feeding business. We have seventeen ethanol plants across the United States that do all these different things that people don't really realize.
SCOTT REASONER: It was probably seven or eight years ago that we started looking at natural gas, and we were a 90-percent-plus natural gas company, and started seeing, I think, this market get saturated with gas. And so we made a strategic decision, truly, to shift out of natural gas and into a liquids-based environment with -- seeing there being more potential for higher prices in the oil market. Happened over a series of transactions. We were in the Wattenberg at the time, and we decided that was an asset that we could keep, and we actually expanded our position in it as we divested of gas plays. So it was a concerted effort, and it was something that, you know, when you step back in time, you hope it's a successful effort. And we feel like it is at this point. The best rock wins in this environment, and I think that's a great point that we spoke to. And then I think the other thing is, the continuous improvement that we've seen, and I think we're going to continue to see, will continue to make us as a company more competitive, and I think the industry more competitive with what's going on around the world. And for me, those two things are really important for the investing community, particularly as they think about where to be.
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