Since 1915, the Northern Miner weekly newspaper has chronicled Canada’s globally significant mining sector.
They call themselves “miners in Gucci loafers,” — a suitable moniker for Pierre Lassonde and Seymour Schulich, considering that they make up one of Bay Street’s most financially successful gold mining partnerships. Now they have a new name: The Northern Miner has decided to name the longtime partners its 1997 “Mining Men of the Year,” in recognition of their exemplary performance and solid track record.
The two Toronto-based companies Lassonde and Schulich founded more than a decade ago to acquire gold royalties — Franco-Nevada Mining (FN-T) and Euro-Nevada Mining (EN-T)– have carved a highly profitable industry niche, producing impressive returns for shareholders. But the partners also earned their place in the rough-and-tumble mining world by meeting the challenges associated with finding and developing a new mine.
Earlier this year, Franco and Euro began construction of the Ken Synder mine in Nevada, an operation that promises to be one of the lowest-cost gold producers in the world. At the same time, the companies are keeping their hand in the exploration game by funding work in several of Canada’s foremost gold camps.
Throughout their careers, Lassonde and Schulich have demonstrated a commitment to their industry, and to society, by contributing time, energy and financial resources to many worthwhile causes.
Lassonde, born in Montreal in 1947, began his career as an electrical engineer. He worked for Bechtel, one of the largest engineering firms in the United States, and Canadian major Rio Algom before moving onto Bay Street, where he became president of the gold division of Beutel, Goodman & Co. and manager of the Dynamic Precious Metals Fund. There, he met another Montreal native, Seymour Schulich, who had worked with Shell Oil before moving into the financial industry. Schulich had became known as one of Canada’s most astute gold investors.
Both men shared an enthusiasm for the state of Nevada, where they found the skiing as good as the state’s mineral potential. In the early 1980s, Lassonde and Schulich concluded that untapped mineral wealth still existed in the southwestern United States, as many historic mines had been shut down since the outbreak of the Second World War.
Believing that the outlook for the yellow metal was promising, they started scouting for exploration projects that had potential to become producers.
Their fledgling junior, Franco-Nevada Mining, conceived in 1982, was listed in 1983 with a California gold project as its cornerstone. At the same time, Lassonde and Schulich took a particular interest in exploring Nevada, where the last major lode-type gold discoveries had been made some 80 years prior.
The partners believed that the state was ripe for a mining revival.
While the California gold project went nowhere fast, Franco-Nevada, in April, 1986, acquired a net smelter return (NSR) royalty and net profit interest (NPI) in 3,416 acres of ground in Nevada on which a heap-leaching mine was producing 44,000 oz. gold annually.
The idea to pursue royalties reflected a strategy aimed at obtaining cash flow, thus allowing the company to survive industry downturns. Schulich already was familiar with a number of royalty companies in the oil and gas industry. As Lassonde told The Miner a few years ago, that awareness got the partners looking for a minerals industry counterpart. “To our surprise, we couldn’t identify a single company in the business capitalizing on hard-rock royalties,” he said. “That was our cue. That was the real start of Franco-Nevada.”
The company’s first royalty acquisition in Nevada provided much more than a bit of cash flow to keep the company afloat through tough times — it became the cornerstone for a decade-long period of financial stability and growth.
And it all began with a little luck.
The partners learned of the opportunity from a tiny advertisement placed in a small Nevada newspaper. The vendor wanted to sell his Nevada royalty in order to repay an outstanding bank loan. Lassonde and Schulich believed the asking price was too high, but the financially distressed vendor was adamant; US$2 million or no deal. An agreement was signed and not a moment too soon — another party showed up an hour later, chequebook in hand, hoping to make the same purchase.
The rest, as they say, is mining history. Barrick Gold (then known as American Barrick) bought out the joint venture then operating the small heap-leach mine and began an exploration program, ultimately delineating what has become one of North America’s largest gold deposits. Today, the Goldstrike mine turns out about 2 million oz. gold annually. Franco-Nevada’s royalty share is 4% of the annual gold production, as well as a 5% net profits interest.
The company’s first royalty income was $505,304 in 1987. Ten years on, for the fiscal year ended March 31, 1997, Franco-Nevada reported revenues of $99.5 million and net income of $61 million from a royalty portfolio anchored by Goldstrike.
Today, Franco-Nevada has royalty interests in more than 320 sq. km of Nevada’s Carlin trend, where the rich Goldstrike mine is situated. It also holds royalties in Canada, South Africa, and the Dominican Republic, and has branched into oil and gas royalties.
Euro-Nevada, which celebrated its 10th anniversary this year, has a broadly based portfolio, including royalties in properties on the Carlin trend including the Meikle mine (operated by Barrick and adjacent to Goldstrike), Mouska in Quebec, Eskay Creek in British Columbia and Holt-McDermott in Ontario. Euro also holds royalty interests in three producing mines in Australia, Indonesia’s Mt. Muro mine, and in projects not yet in production in Mexico and French Guiana.
Euro’s royalty revenues, which started at $218,000 in 1989, exceeded $34 million for the year ended March 31, 1997, and had reached $23.6 million halfway through fiscal 1998. Both Franco and Euro also pay substantial dividends to their shareholders.
Early this year, Franco and Euro approved the development of their joint-ventured Ken Snyder mine. The mine, to be operated by contractors, is scheduled to be in commercial production in early 1999 at a rate of 250,000 oz. annually. Cash costs are estimated to be US$78 per oz.
Franco-Nevada is also engaged in two joint ventures in the Kirkland Lake and Harker-Holloway gold camps in northeastern Ontario. With Queenston Mining, Franco-Nevada controls a substantial length of the Kirkland Lake break, and, with Greater Lenora Resources, it is exploring a 27-sq.-km property adjacent to Barrick’s Holt-McDermott mine.
Lassonde and Schulich are, without question, worthy recipients of industry honors. That the partners had the intestinal fortitude to be open skeptics of the Busang “deposit” before it was fashionable adds to their credibility.
Schulich’s skepticism, in particular, was legendary and he often reminded people that “nature does not work in a manner that allows gold reserves to be accumulated very rapidly.” And a good thing, too, for the scarcity, beauty and unique properties of gold are what have made companies such as Franco-Nevada and Euro-Nevada valuable to their many shareholders.
Having obtained remarkable success in their careers, Lassonde and Schulich have made some equally remarkable contributions to society.
Lassonde has been a strong supporter of the University of Toronto, to which he donated $5 million to establish the Lassonde Geological and Mining Engineering Program. He also is a longtime supporter of the Canadian Mining Hall of Fame, which has found a permanent home in the university, largely as a result of Lassonde’s involvement and largesse. “We should never forget,” he said at the time, “that the most important natural resource of our country is not nickel, gold or diamonds, but its people.”
In 1990, Penguin Books published Lassonde’s The Gold Book, which has become a standard reference for gold investors and includes a chapter on gold scams that exposes the bag of tricks used by charlatans and con artists.
Schulich, meanwhile, made a generous donation to the business faculty of York University, where he was a student in the 1960s. Schulich received a $2,000 fellowship while at York, and calculated that paying it back, with interest, meant donating $15 million. York has renamed its business school the Schulich School of Business in his honor.