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New technology has helped Energold Mining successfully make the
transformation into a drilling company
Metals/Mining
Contract Drilling/Exploration
(EGD-TSXV)
Energold Mining Ltd.
Suite 900, 543 Granville Street
Vancouver B.C. V6C 1X8
Phone: 604-681-9501
Frederick W. Davidson
President and CEO
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
June 30, 2005
BIO:
Fred Davidson, President, CEO, CFO and Director has helped finance public and private
mining companies for 25 years. He has an MBA from the University of British Columbia, and
became a chartered accountant with Price Waterhouse in 1972. He lectured at UBC for two
years, then spent 10 years as Chief Financial Officer of Erickson Gold Mines Ltd. and Mt.
Skukum. The Erickson team took the mine from grassroots exploration to production.
From 1984-1993 Mr. Davidson was VP and Chief Financial Officer of TOTAL Energold Corp., an
energy and gold producer with more than $250 million in assets. In 1993 Mr. Davidson
helped engineer the sale of TOTAL's assets, and then became president of a private mineral
investment group. He currently sits on the board of several public and private mining
companies as well as being the President of IMPACT Minerals International Inc. (IPT:
TSX.V)
Company Profile:
Energold Mining Ltd. (EGD: TSX.V) is an environmentally and socially sensitive contract
diamond drilling company that services the mining industry worldwide.
CEOCFO: Mr.Davidson, how
has Energold developed profitably and how will you continue?
Mr. Davidson: “A number of years ago, Energold elected
to get into the contract exploration business, primarily focusing on drilling. The
drilling at that time, had not taken in the changes of technology nor the changes in
social and environmental issues. We focused on new technology, developing new types of
rigs that could explore with minimal environmental impact and a maximum benefit flowing
down to the local community. The result is that we are a growing niche company in an
expanding market for exploration. We have been fortunate. We were growing at a healthy
rate of 25-35% a year up to last year where we grew an excess of 100%. I think that with
the way we are seeing the market grow right now, we will continue to see continual
improvements in earnings and in revenues.”
CEOCFO: How big a part
of Energold is the contract drilling?
Mr. Davidson: “There was a stage when we were using the
contract drilling to finance exploration. However, about a year ago, we spun off our
exploration assets in Mexico into an affiliated company called IMPACT Minerals
International Inc. (IPT: TSX.V). There, we are doing exploration on a property called
Zacualpan, which is the second oldest silver district in Mexico. We have been very
successful with exploration there and as a result, IMPACT is going forward. This has
allowed us to focus less on exploration within Energold, so we are rapidly becoming a 100%
drilling focused contractor.”
CEOCFO: In simple terms,
what does environmentally and socially sensitive drill services mean for Energold?
Mr. Davidson: “People pay lip service to this all the
time. For example, if you want to drill a target that is approximately a mile off a road,
to do that in the traditional way, you would need to have taken a six ton drill, dragged
it with a bulldozer through fields, farms, and forests to the drill site. You would have
created a drill site that would have been approximately 50 or 60 ft. by 50 or 60 ft, along
with a fifteen-foot swath, a mile long to create one drill hole. We created a drill that
can be disassembled, moved manually or by small vehicles. We assemble on-site in 45
minutes and accomplish the same thing. It means we do not create that trail, we do not
create the 50-60 ft. pad; ours is more like 12-15 ft. We have minimized the environmental
impact of us having gone in there to explore the target. By using the locals to help us
move the rig in and out, in third-world countries especially, we are immediately providing
benefits to the local community through paid work. Rather than oppose our activities for
the environmental and social impact disruption we are creating, they become our allies in
the exploration program. This has worked effectively for us in a number of countries.”
CEOCFO: Is it more
costly to use your method?
Mr. Davidson: “It is more cost effective. First, we do
not have to build access roads, secondly, our drills are simple hydraulically run drills,
and are less expensive to operate. We have the best margins in the industry and yet we are
still providing the most cost-effective drilling to our clients.”
CEOCFO: It is a win-win
situation!
Mr. Davidson: “It certainly is, and we have demonstrated
it year-after-year, and fortunately our competitors have not caught on.”
CEOCFO: Who is using
your services?
Mr. Davidson: “We can be broadly used in mineral
exploration. It tends to be the earlier stage exploration companies, but once they see how
efficient these rigs are, we have gone on to drill entire ore bodies. Our clientele runs
the full gamut including large international companies; we have drilled for the top five
gold producers in the world. For the smaller companies that have minimum budgets and
needs, it is the most cost-effective drilling that they can possibly get.”
CEOCFO: Do you focus on
a particular geographic area?
Mr. Davidson: “We have to do that in the sense that
although we have drilled everywhere from Yemen to Viet Nam, I would say that 80% of our
drilling has been in Latin America primarily because that is where the work has been and
secondly there are social issues in Latin America.”
CEOCFO: How many drills
do you have and will you be adding more?
Mr. Davidson: “We are working on more. We currently have
nineteen drills and we have budgeted for an additional four drills. The company itself
operates through a couple subsidiaries. We have a joint venture relationship in a number
of the countries in which we work, where we may only have a 50% interest, and in other
countries we have up to a 100% interest. Drill count is not necessarily accurate but we
operate and control nineteen drills at the moment. We are anticipating another three to
four before the end of the year.”
CEOCFO: Are your drills
fully utilized?
Mr. Davidson: “There is a shortage of drills in the
industry right now. The only time our drills are not busy is going between jobs or when
located in an area where we are waiting for a permit approval. Permit issues slow things
up because of these very same social and environmental issues. We see that as an
inconvenience in the sense that we have a drill sitting and waiting, but we see it as a
marketing advantage because it means that our drills will get the nod before others.”
CEOCFO: How do you
market your services?
Mr. Davidson: “The industry is a small industry; it is a
personal situation. We are located in Vancouver primarily because there are approximately
900 small to medium size exploration companies working out of Vancouver. We see our
clientele daily. We go to conferences where the industry meets to try to educate the
population of our drills and our approach. We will directly market ourselves to
individuals within larger corporations, to educate them that these drills, although small,
are highly effective and can accomplish much of what they need to accomplish, but still
minimize that environmental impact, which is becoming so critical in the industry today.”
CEOCFO: Do you prefer to
work for the larger corporations?
Mr. Davidson: “The larger corporation checks do not
bounce. You become very much involved in the smaller corporations successes and celebrate
them quite readily. We have had a degree of success with a number of our smaller clients.
It is exciting when someone is betting the farm on a project and they have a win. In a
large corporation it disappears in the overall scheme of things. There is a financial
reward for working for the large company and a moral reward for working for the small
company.”
CEOCFO: What is ahead
for Energold?
Mr. Davidson: “Energold is intent upon continuing the
expansion of what it does. That means its earnings are probably disproportionately high
for the size of the company. We will be expanding to complimentary services. When we
develop long-term relationships with a client, we like to provide as many of the services
that are related to exploration as possible. We intend to continue to develop our
technology, and at the same time educate the population that exploration can be done with
a small footprint and a gentle hand.”
CEOCFO: Can you license
your technology?
Mr. Davidson: “Although it is proprietary, it really
cannot be licensed. The technology is split 50/50 between the physical technology and the
abilities of the team that you have working. It’s one thing to have a drill that is
environmentally sensitive, it is another thing to ensure that crews make sure there are no
discharges and that the site is kept clean and they respect the local community. All of
that is integral to what we do.”
CEOCFO: In closing, why
should investors be interested? What should they know that they might not realize at
first glance?
Mr. Davidson: “We will have to brand and change our name
from Energold Mining to Energold Drilling and tell people what we do. In the market we are
facing now, the fact is that the demand for commodities has driven the exploration
industry upwards dramatically. That means that although we are in a traditional industry,
we are in one that is in a brand new cycle. We have brought new technology to that
industry and the end result is that there will be a significant appreciation in earnings
which should be reflected in the share value of the company.”
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