Gold sector veteran Peter Marrone eyes emerging nations in big venture

Breadcrumb Trail Links Mining Commodities Shift to non-traditional mining locations…

Shift to non-traditional mining locations required to give investors the high returns they expect, he says

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After selling Yamana Gold Inc. in March, a company Peter Marrone founded two decades ago, some expected the 63-year-old mining executive to take up fishing since he had never played golf, or, at the very least, take some time off before his next business venture.

But barely weeks after selling Yamana for US$4.8 billion to Canadian mining rivals Agnico Eagle Mines Ltd. and Pan American Silver Corp. in March, Marrone jumped at the opportunity to head a mining company with gold-producing assets in Mali, Ivory Coast and Ethiopia.

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“I know that people talk about the therapeutic effects of fishing and all of these things,” he said. “I am not sure this is for me at this stage of my life.”

In some ways, Marrone’s new company, Allied Gold Corp., is in a similar situation as Yamana in its early days in 2003. Like Yamana, Allied also has gold-producing assets as opposed to projects in development. Both were also private companies looking to go public. Allied Gold just began trading on the Toronto Stock Exchange earlier this week.

The big difference, though, is that Marrone has shifted his focus away from the Americas and towards “emerging economies,” as he puts it, or non-traditional mining locations. It’s a decision, he said, that’s required to give investors the high returns they expect these days.

A gold mine worker in Mali.
A gold mine worker in Mali. Photo by Simon Dawson/Bloomberg

Some emerging countries Marrone is dealing with now may be described as “unstable” by mining analysts due to political troubles, but the executive said there’s a tendency for people to make “rash judgments” when it comes to these situations.

He said the high grades and shorter time periods required to get mining permits in emerging nations could outweigh the dangers of unstable governments and provide more benefits to investors when compared to mining projects in Canada and the United States.

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In developed economies, the permitting process as well as reviews of environmental, tailings, and health and safety issues can take as long as eight to 10 years, Marrone said, while it could take as little as two years in emerging markets.

“If the return is better, and significantly better, and the ability to develop a project takes significantly less time, then the stability of politics is just a factor to be taken into account not the exclusive factor,” he said. “I have to take into account that I can get it into production much more quickly.”

Marrone isn’t the only miner who has supported the idea of expanding mining into emerging countries. Toronto-based Barrick Gold Corp., the world’s second-largest gold producer, is investing in countries such as Pakistan and Saudi Arabia to boost its copper and gold assets.

“Our permitting is no different in Zambia than it is in Nevada when it comes to substance, but it’s the bureaucracy that slows down Nevada and we don’t have the same challenge in Zambia or Pakistan or anywhere else in Africa or South America, because those countries need these developments and, again, we adhere to all the international best practices,” Barrick’s chief executive Mark Bristow said in a webinar on Sept. 12.

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The permitting aspect is one issue that Marrone feels authorities in North America need to address, especially since countries like Canada and the U.S. are looking to become a key source of critical minerals such as lithium and copper amid the rising call to transition away from fossil fuels. The process takes so long that it becomes “troublesome to deliver value,” he said.

Rising prices and low-grade gold deposits are compelling gold companies to consolidate and look farther afield.
Rising prices and low-grade gold deposits are compelling gold companies to consolidate and look farther afield. Photo by Chris Ratcliffe/Bloomberg

Patricia Mohr, an economist and former vice-president at Bank of Nova Scotia, said that while Canadians “dominate” the international mining industry, new mine development in Canada has been limited due to a “complicated and slow regulatory” system.

“The No. 1 issue currently in Canada is the slow and uncertain permitting environment,” she said. “Canada must quicken the pace of government review and approval for new mine development if it is to take advantage of the huge business opportunities opening up in critical minerals.”

Aside from the permitting troubles, there’s also trouble finding gold deposits that have high grades and provide more profit. Marrone and others in the gold industry believe that rising prices and low-grade gold deposits are compelling gold companies to consolidate and look farther afield.

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“We have to go to places where grades are better,” said Marrone.

We have to go to places where grades are better

Peter Marrone

The other aspect that Marrone believes should be looked at is climate change. With Canada in the midst of its worst-ever wildfire season, several miners had to unexpectedly reduce their production rates or even temporarily suspend operations.

“Not enough of these risks are taken into account in some parts of the world where people have considered it safe for mining,” he said.

For now, Marrone’s new company annually produces about 375,000 ounces of gold, but he hopes to take that up to at least 700,000 ounces soon through expansion. While his plate is filled with gold at the moment, he is also open to exploring other metals such as copper.

In his mid-60s, the longtime mining executive believes he can create something big yet again, and he links this “drive” to constantly grow to his personal life as a Canadian immigrant.

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“My drive was perhaps shaped by the fact that my parents moved to this country because they said they wanted a better life for their children,” Marrone said. “And we are trying to follow through with what they desired.”

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