Neil Woodyer: I qualified as a chartered accountant in 1968. After being a boring a chartered accountant for a couple of years, I found myself in the metal trading business in the U.K., which were traders of commodities like tin and copper.
I ended up in New York, running the trading company with about five subsidiary companies in Latin America. I moved from the financial side into the commercial side.
I then was approached and set up a trading company for Lloyds Bank in New York, where we were trading, [working with] the banks, gold book, silver book, also doing a lot of physical trading. Lloyds Bank [eventually] decided to take its business back to the U.K., and I decided I wasn’t going back to the U.K.
I was offered a job with Placer Dome. I transferred myself and my family to Vancouver, but after having worked for 10 years in New York, I succeeded in working a day and a half in Vancouver before I was fired.
The CEO stepped down for various reasons, and I was thrown out with him. I wasn’t quite sure what to do. I didn’t want to go back to New York. I didn’t want to run the trading company, so I started an advisory business for mining companies and Endeavor Financial.
My first client was Clive Johnson at Bema Gold, now B2Gold. I think that proves how small the industry is. After a few years, I teamed up with Frank Giustra and we expanded Endeavour Financial into a merchant banking company where we were investing in our clients and advising them.
We were a public company at the beginning of 2008. We had $300 million under management invested in our clients. By the end of 2008 as the market collapsed, we had $100 million left. It was very difficult to sell to your clients on your positions when you’re their financial advisor.
We decided that wasn’t the greatest business in such circumstances. We had to hand back all the toys and start again. We decided we would start a mining company, as we had been involved in the startup of so many with our clients. That’s when we started Endeavour Mining in 2009.
AP: Was that the first company you’ve started that we could call a mining company?
NW: Yes, and when we started that, none of us were operators. We were a bunch of finance guys playing in the M&A and the bank debt field and trading. I think we bought about 55% of a listed company which had a mine somewhere called ‘Burkina.’ I wasn’t too sure where that was, but I subsequently found out, of course, it was Burkina Faso. So we bought the mine. We didn’t know how to manage it. We put a geo in charge of it.
We looked around for a second transaction, and we found an Australian company with a couple of mines in West Africa, and we did a merger of equals with them. This was a very significant thing for us, because it brought in a management team. It brought in a group of South Africans, who have managed and who are mining engineers.
We were able to put the financial side the old Endeavour had together with that and that team still exists. It worked its way through Endeavour and Leagold, and the three or four members of that team with me as part of the core team. If you can combine people’s strengths into a good team, it’s much better than trying to do it any other way.
AP: The power of good management is sometimes underrated. You’ve stuck with that team the entire time?
NW: They’ve stuck with me that entire time. They’ve put up with me! One of them has worked with me for over 25 years. We do know each other fairly well.
AP: Burkina Faso is a bit of a hot spot these days. What was it like when you started? How have things changed?
NW: It’s more complicated now than it was. It was never simple. I don’t think any of these countries are simple. It’s got more difficult to arrive at agreements. In the countries where we were working, if you came to an agreement, you had an agreement.
It may not have been easy, it may have been bureaucratic, but once you were there with an agreement, you were there and you could move forward. That makes a huge difference, particularly when you’re talking about long-term capital investments. West Africa is a bit more difficult now than it was in 2009.
AP: How did everything resolve over there with Endeavour?
NW: We brought in a strategic investor who sold us a mine putting cash into Endeavour, and became a 30% shareholder. We agreed, after a period of time when we’d stabilized, that his new team would take over.
The company was worth about $2 billion when I left. It’s now worth $6 billion or $7 billion. That was nice to see that company continuing, whereas when we did Leagold, we merged it fairly early in its career into Equinox.
AP: Tell me about how your financial perspective has helped you strategize with these companies.
NW: I think the metal trading side taught me an awful lot about business, managing risks and negotiating with people. We were in various countries trading. That was a tremendous advantage I had in the business I’m running now.
AP: What came after Leagold?
NW: After the Equinox merger, we very quickly started Aris Mining. Frank and I put $10 million in each and we raised about $35 million and then we raised another $50 million by bringing a senior investor in.
We took $85 million and went to Caldas Gold, which was expanding the Marmato mine in Colombia, and they needed about $280 million to do it, and they were short $85 million so we said to them, ‘Here’s the $85 million but you have to give us control of the board, and you have to give us management.’
That’s how we became a public company a third time round. And then we got the licence to expand it and started the expansion.
And then we looked at what else we could do in Colombia, and we could see that Segovia, which is a very high-grade gold mine was essentially a cash cow. But we couldn’t put ourselves forward because we were a little bit too small. We needed to see how we could bulk up the size of the company, because the philosophy we followed is to grow a portfolio of assets, buy and build strategies to build a portfolio that’s attractive to investors, which is exactly what happens at Endeavour.
We were trying to do the same thing in Colombia. And we saw the opportunity at Soto Norte which was owned by Mubadala. We negotiated with them at 20% interest, but the right to manage this project, and it is a project going through the environmental process. We acquired an additional 31% so we now own 51% of that project.
We were able then to go to Gran Colombia Gold and propose a merger. We merged Caldas with Gran Colombia about three years ago, which gave us the Segovia mine. Now we have two mines producing about 25,000 oz. a year, both of which are being expanded, and within a couple of years, we should be at the 450,000 to 500,000 oz. range from the two mines.
AP: Artisanal mining is a big issue. How was your experience been in Colombia and how have you approached the issue?
NW: Colombia has had very little exploration, but the Andes mountains have been mined for years. Local miners have been mining at Marmato for 450 years and for about 300 at Segovia.
Colombia’s gold production is very un-commercialized. It is about 85% informal miners, some of whom are good guys and some who are bad guys. There’s a lot of environmental damage. They’re using mercury. They’re not cleaning the tailings up, (and) they’re being dumped into rivers. They’re moving on when an area has been fouled because of the lack of investment in processing.
I think because of the environmental attitudes of a lot of people in Colombia — it’s a beautiful country — they want to keep it that way also. We now have about 350 small miners at Segovia, which produces just over 200,000 oz. a year. About 100,000 of those come from small miners.
We have contracted with 40 groups of mining partners to formalize, and we help them on health and safety. We sometimes advance money to them. We have an education program with a university where 2,500 small miners are on the web to learn their trade better. They have a lot of skills that we don’t have.
Putting their strengths with our strengths of industrial mining, our processing, our access to capital, our health and safety, our compliance, if you can put those two sides together, you have a very, very strong partnership.
(And the government) wants to formalize mining, so we’ve totally aligned with their objectives. We periodically sit down with the minister of mines. We’ve got support from the seven communities and the mayors and strong support from the governor as well. This has become an integral part of our business in Colombia because the potential is so huge.
But on the other hand, there are no 43-101s. There are no large mining companies. There are about four mines in total producing less than 600,000 ounces. The opportunity is huge on a gradual build-up basis.
AP: What are the mechanics with the artisanal miners? Do they just drop off their ore and it’s weighed?
NW: We have a big receiving centre. It’s sampled and weighed, then we go through the financial reconciliation procedure with them. The purchase formula we use is based upon the grade that they deliver to us and also the gold price. They participate in the gold price movement, so it’s much more of a business for them than just digging all around the ground and dumping it off somewhere.
AP: With Aris, is processing the ore a service you’re providing to the artisanal miners?
NW: Yes. At Segovia, which is producing about 200,000 oz. a year now, we are increasing its production by 50% by the end of this year. Our run rate by the end of the year should be 300,000 ounces. It’s about 50:50, between ourselves and the small mining partners. We’ll do about 150,000 and they’ll do 150,000. We buy their ore and process it.
AP: We see China having a dominant position in the metals industry and it seems to me, it’s because they own the processing, not necessarily because they have all the metals. What’s your take on this?
NW: The Chinese have done a very good job with creative processing facilities and going out and buying long-term contracts of supply. But gold is more profitable to process on site at smaller operations than the very large corporations and then export the gold.
One problem is the environmentalists want to have energy for the transition, but don’t like mining, and you really can’t have one without the other. There’s a lot of compromises that are going to have to be made. The energy transition is certainly not going to be done at the speed that some people want. It’s a much more complicated situation than just ‘let’s have clean energy.’
One problem is mining is extremely capital intensive and has extremely fixed costs. With gold, you have no control over the sales price. And then, it takes a long time, some 15 years from finding something to actually getting it out of the ground. An annoying thing is that the market measures us on a quarterly performance basis when we have a long-term asset and that will have ups and downs.
This interview has been edited for clarity and length.
