1. Acquire solid companies
Hunter Dickinson Inc. (HDI) doesn’t own mining assets or engage in mining; it raises capital to buy companies involved in the trade, takes a financial stake in them, and manages them. It’s constantly in the market for acquisitions, CFO Bernard Tan says, and it typically looks for companies that aren’t too big or too small to be managed effectively by HDI’s staff. It also looks for companies that are undervalued so that it can apply its expertise to make them viable.
“We tend to look for assets when everyone else is selling, and sell when everyone else is buying,” Tan says. A good example is the Sisson Tungsten project in New Brunswick, which had been around for a while when HDI, through one of its portfolio companies, entered into a joint venture in 2010 and eventually acquired the development in 2012. “The asset wasn’t on anyone’s radar because no one had been able to make it work, but now we’re moving it into production,” Tan says.
2. Explore opportunities
One thing HDI does well is raise money for its portfolio companies and put management teams in those companies. Currently, it’s focusing on the mining industry, but Tan thinks there’s no reason those skills can’t be applied to other industries. “We’re looking at diversifying our expertise outside of mining,” he says.
3. Expect volatility
Mining is a roller-coaster industry: in the eight years that Tan has been with HDI, he has seen two booms and two busts. “Folks who have invested in mining for the past 30 years say this is as bad as it’s ever been,” he says, explaining that it’s difficult for junior mining-sector companies to raise money and get projects constructed when commodity prices are heading down. “It’s like the real estate sector in 2008 and 2009, when development came to a standstill. People are slashing costs right and left, and there are a lot of layoffs.”
As Tan sees it, however, it’s not a commodity-price issue but a crisis of confidence. “Gold has certainly taken a hit, down to $1,200 per ounce from close to $2,000,” he says. “But when I first joined HDI, it was trading at $600.”
4. Manage companies according to their needs
Currently, HDI operates 10 mining assets, some private and some public, all of them in various stages of development. “Think of a family with a newborn, a toddler, and a teenager, each of whom has different needs, and you’ll understand our challenge,” Tan says. “We provide each of our companies the services they need wherever they are in their development cycle.”
5. Value your people
Tan says prospective investors often ask HDI CEO Ron Thiessen what portfolio company he’d put his own money in, and he always says HDI itself because that’s where the intellectual capital sits. For Tan, that means “our greatest asset is our people,” and he tries to focus on them. “We’ve had attrition, just like other mining companies, but when we do lose people, we try to do it wisely,” he says. “When we do cut costs, we look at what value we’re also cutting because when you cut people, you lose talent.”
6. Deploy resources wisely
HDI constantly evaluates internal processes and systems on a needs-versus-wants basis. Case in point: in 2010, it developed a business-intelligence function to analyze the efficiency of its systems and processes, enabling the staff to shift its focus from processing things to evaluating things. “That was virtually unheard of among junior mining companies, but it cost very little, and it paid major dividends because it’s allowed us to leverage significant efficiencies,” Tan says.
7. Take risks—carefully
When Tan joined HDI, he moved from a large multinational to an entrepreneurial business, and in doing so, he learned the value of taking risks. “When I first joined HDI, one of my colleagues told me that risk and failure are essential components of the mining business in that a lot more mining companies fail than succeed,” he says. “That being said, he also advised me to learn from other people’s risks rather than go through the process myself, and I try to do that.”
THE BOTTOM LINE
Years in the business
Where did you start your career?
Describe yourself in three words
Synergistic, empathic, driven.
Advice to those just starting in finance
Never underestimate the power and currency of goodwill.