Chester Millar is the founder of several multi-billion-dollar gold producers including Glamis Gold (bought by Goldcorp), Alamos Gold and Eldorado Gold. He was inducted into the Canadian Mining Hall of Fame in 2008. The 88 year old mine developer credits luck, experience and a simple strategy for his success.
Millar let me in on his strategy during a recent interview: “You should be in the gold mining business [not exploration], you should be earning a profit, and you gotta show growth.”
Millar was born in Powell River, British Columbia in 1927 and graduated from the University of B.C. in 1950 with a degree in geological engineering. He soon started a drilling contracting company. When Millar wasn’t drilling for others, he staked and optioned exploration properties and drilled wild-cat holes himself. “If you don’t buy a sweepstakes ticket, you’ll never win,” Millar says.
In the early 1970s, Millar staked the Afton property in B.C. and later drilled the discovery hole of the Afton copper-gold deposit, which Teck Resources acquired and put into production. After Teck gave Millar the boot, he sold his stake in the mine for $9.7 million and was set for life “seventeen times over,” he says.
When Millar received the windfall he was wildcatting in California and Arizona. There he pioneered the heap-leach method for mining gold, and switched his focus from exploration to production.
Millar took his time building Glamis Gold, founded in 1977. He deliberately operated Picacho, Glamis’s foundational mine, for only eight hours a day and made the property last 20 years. “If I had been influenced by the stock market I could have mined it out in five years. It gave us the ability to chose among many opportunities that came by to make intelligent acquisitions.” In 2006, Glamis was acquired by Goldcorp for US$8.6 billion.
He created and was chairman of Glamis, Eldorado, Alamos, and Castle Gold, and all of them are making money in the gold mining business today. "I can build a company but I can’t run them. When things get down to being tedious, I lose interest. I get my jollies by finding things and starting them up. Once they start up, I move on.”
Millar reiterated his simple strategy. “Be in the gold mining business, earn profit, and show growth.”
“I like to make little mistakes. I like to start small and then expand once we are on firm ground with our technology and our machinery and the methods we are using.”
“My way of doing things is generally speaking not acceptable by the Toronto Stock Exchange." For example, Millar's crew does their own not-independent drilling, assaying and metallurgical testing to save money. “I have enough experience, and I don’t want to pay somebody $500 a day to tell me what I already know,” said Miller.
Most mining startups are focused on expensive exploration programs and feasibility studies in the hopes of de-risking a project and selling out to a larger company. Millar prefers to skip drilling and start mining. “My Feasibility Study is done by doing things. I will actually mine and produce gold. That to me is better than any Feasibility Study because it isn’t a study, it’s proven fact.”
“I don’t care what the assay is -- and that’s what the Toronto Stock Exchange wants. I only care what the recovery is.”
“I don’t want to know what the tonnage is because I don’t want to spend a lot of money when money is hard to come by, when stock is cheap, finding something that’s maybe ten years away in time. Nobody knows what the price of gold is going to be ten years from now.”
“The type of business I’m in is a cheapo-quick business and that’s what attracted me to it and I’ve done very well at it.”
“Heap leaching is very cheap because you can use contractor’s machinery. You don’t have to build mills or do expensive capital investment. You just have to put a piece of plastic on the ground, and start putting crushed rock on it, and have a couple of pumps with water and a little bit of cyanide going around. A dollar goes a long way in this type of operation.”
On mining stocks
“The way to make money is to make money in the stock market, but you need a profitable mine to do that. The stock market will give you that extra kick.”
“My experience is the stock market goes up on mystery and comes down on history. The minute you drill a series of holes and find everything there is in an orebody, you’ve ruined it. Now everybody knows what’s there and what to expect. But if you don’t do this drilling, you leave a mystery in there. In my mind, it’s better to do that, to leave something on the table for the future.”
Millar says mining company shareholders and management teams are too focused on the short term. “I have no time for greedy people that are stock flippers.”
“Because I start mines and let them pay for themselves, there is time involved. You can’t get too far in less than five years unless you sell to somebody else.”
Millar thinks insurance companies with a profit motive, not governments, should handle the permitting of mining projects. Elected officials don’t know enough about the industry they are tasked to regulate, Millar says.
On Corex Gold
Millar privately operates a small gold mine in Jalisco, Mexico, which he says is running out of ore. “I wanted to find something for my men and machinery elsewhere in Mexico.”
A colleague suggested he look at junior explorer Corex Gold’s Santana property in Sonora. Millar visited Santana and saw a potentially cheap start-up. There are several gold zones on the property and one of them, El Nicho, was sticking out of the ground. He thought it looked easy to mine and leach. Millar made a deal with Corex in 2014 to invest in the company with the condition Corex would spend Millar’s money under his direction.
Corex, under Millar’s guidance, drilled 19 holes at El Nicho last year. Satisfied with these results, as well as additional metallurgical and development work, Corex applied for and has just received a permit for a pilot test mining operation. Millar thinks Corex will be able to start producing gold and earning revenues as soon as September 2016.
“My game plan [with Corex] is to put a mine into production in a small way and make it grow, and show a profit. It will grow or we will create something that’s attractive to some other mining company that we could flip for a nice capital gain.”
“El Nicho is a small satellite to a much bigger target,” said Doug Ramshaw, Corex Gold’s Vice-President of Corporate Development. “It’s the hors d'oeuvre to the main course that’s to come,” he quipped.
“There’s always the chance the sky will fall somewhere,” Millar says. “I don’t know where it’s going to come from, everything is a green light as far as I’m concerned. I think the costs will be average. There’s nothing unusual. It’s not a high-grade deposit or a low-grade deposit but I think it’s a profitable grade.”
Corex is currently raising $1 million (5-cent units with a half two-year warrant at 15 cents) and Millar is the lead order, taking about $500,000. He will own close to 20% of the company following the financing and anticipates having board representation soon. “I’ll continue the transition of making the company a little more in my way of doing things.”
Millar’s start-small methodology complicates Corex’s communication to the market. The company can’t comment on recent drill results and potential production under current regulations. Investors have to wait for the company’s financial statements to understand the story. “What Corex needs is history, not promotion,” Millar says.
I asked Millar for his time-horizon on the Corex deal. He responded, “I’ll be lucky if I’m alive for three more years. I have no time at all, but I have people that have worked for me for a long time that are well -able to continue with the development of the mine if I'm gone tomorrow."
“I am set for life seventeen times and I’m not doing this for the money. I do it because it’s a mental challenge and I like it. Some people play golf, and I start mines.”
Corex Gold Corp (CGE-V)
http://www.corexgold.com/s/Presentations.asp
Shares outstanding: 75,161,640
Fully diluted: 85,576,640
Recent price: 13.5 cents
Market cap: ~$10 million
Cash: Negative $353,360 at Sept. 31, 2015 due to rising accounts payable. Currently raising $1 million.
Nothing contained in this article shall be considered a recommendation, solicitation, or offer to buy or sell a security to any person in any jurisdiction. Author is participating in Corex’s private placement for speculative purposes. He has no business relationship with the company.
