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Vena Resources has
built one of the best teams in Peru with local expertise managed by Peruvians that were
also successful in North America
Exploration
Metals/Mining
(VEM-TSXV)
Vena Resources Inc.
130 Adelaide Street West, Suite 2700
Toronto, ON M5H 3P5
Phone: 416-364-7739 / Fax: 416-364-5400
Info:
info@venaresources.com
Juan Vegarra
Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published February 15, 2007
BIO:
Juan Vegarra, Chairman & CEO
Juan Vegarra is a native of Peru and continues to foster his significant base of contacts
both within the Peruvian government and in the mining industry. Prior to his appointments
as Chairman and CEO of Vena Resources in 2003, Mr. Vegarra enjoyed a successful career as
a Microsoft executive. He currently manages a venture capital firm focused on the mining
sector in addition to his duties with Vena Resources.
Company Profile:
Vena Resources Inc. is a Canadian mining company focused on the exploration and
development of Peru’s mineral potential. The Company currently has four significant
projects and a uranium initiative underway in Peru, covering approximately 50,000 hectares
and has access to many additional opportunities. Through its board of directors, Vena
Resources possesses a unique quality of skills and experience in management, mining and
finance relating to Peru and Canada.
CEOCFO:
Mr. Vegarra, what was your vision with Vena Resources when you began with the company, and
where are you today?
Mr. Vegarra: “I worked for Microsoft
Corporation for almost nine years in the 1990’s. After I left Microsoft, I decided to
invest in markets quite different from the high-tech world with the goal to diversify my
portfolio, such as the commodities market. I invited some friends, almost four years ago,
to build a company focused on mining, bring it to the public stage, make money in a
socially responsible way and invest those gains back in Peru. So far the company has gone
from a dream four years ago to a company that is worth about $50 million in market
capitalization, with tremendous upside based on the foundation we have built. I expect the
company to continue to enhance its diversified portfolio and continue to develop assets
with the goal to produce material news every couple of months.”
CEOCFO:
Tell us about mining in Peru.
Mr. Vegarra: “Overall mining is Peru’s
biggest industry. About 54% of the exports are related to mining and about one-third of Peru’s
GDP is tied to mining. Virtually everyone in Peru has a friend or relative that has
something to do with the mining industry. As such, I expect the mining industry to
continue to grow based on the current trend in the commodities market and I expect the
Peruvian society to benefit tremendously from it.”
CEOCFO:
Tell me about your projects and why you have chosen those particular projects.
Mr. Vegarra: “We have 29 properties and
we strongly believe in cash flow. I came from the school that if you have a cash flow
machine, you can fund your exploration budget without having to dilute your shareholders
too aggressively. The main property, Azulcocha, is an old zinc mine that we are reopening.
Currently, we are going through the process of drilling the mine to confirm the
historical resources and to commence mining operations after this month. In fact, we
expect this property to generate a significant source of revenue over the next few years
and from there to continue to build out other divisions of the company. Azulcocha is the
main driver and it should generate about $20 million in free cash flow by late 2007 and
twice as much in 2008. With those parameters, we can expect the Vena’s market cap to
go up. All the cash that we will earn from the Azulcocha sales will fund exploration
project expenditures that we have in copper, gold, silver and uranium properties. The
second most important asset that we have in the company is our 15,500 hectares of uranium
targets. These 78 targets were identified by the Peruvian government 20 years ago. We are
in the process of doing some drilling and expanding our geological knowledge of the four
regions in Peru. We are doing very well in Peru and satisfied to tell the world that we
have found uranium in Peru and we are going through the steps to figure out if it is
economic to process and if so, how big and what kind of effect it will have on our share
price. We are spending a lot of time and effort on those 15,000+ hectares across 78
targets and over time, we will be able to quantify our uranium to the market via a 43-101
compliant report. There is a tremendous amount of work going on throughout the company. We
have 78 people working for us right now and another 20 people in the pipeline to continue
to develop the other assets of the company. By the time of the PDAC, which is the world’s
largest mining conference held in Toronto, we should have over 100 people working for the
company in Peru.”
CEOCFO:
Tell me about your recent agreement with Cameco.
Mr. Vegarra: “Certainly, on January
26th, Vena signed a Letter of Intent with Cameco Corporation to establish a jointly-owned
company to explore and develop Vena’s Uranium assets. The new company will begin by
initially exploring and developing the numerous Uranium targets in the four regions in
southern Peru where Vena’s Uranium properties are. Under the agreement, CAMECO has
the option to invest $10 million over the next four years in two stages and for that it
will obtain a 50% ownership. After that, CAMECO can increase their stake to 60% by
completing a feasibility study and then a further 10% when mine development commences.
Given the fact that CAMECO is the largest Uranium company in the world, we’re
extremely pleased to be working with them – they bring a wealth of experience,
engineering support and production knowledge – we couldn’t have a better
partner.”
CEOCFO: You are a native of Peru; what are
the advantages to exploring in Peru?
Mr. Vegarra: “Exploring in Peru makes a
significant difference on Vena’s profit and loss and it goes back to the cost of
leveraging an operation in Canada or the US, verses Peru. A well paid senior engineer with
20 years of experience earns between $8 and $15,000 per month in North America, but in Peru,
the same caliber person makes between $4 and $6,000 per month. Therefore, your cost
structure is almost half of what it is in Canada and every dollar that I raise in Canada
can benefit me twice as much in Peru than if I were to use those funds to work in Canada.
In addition, the expertise in Peru is very sound. Peruvians has been mining for hundreds
of years since before the Incas. Hence, you have a plethora of skill set in Peru from
people that understand how to exploit an underground mine, to metallurgical experts to
financiers that provide the financial instruments to scale an existing operation. There is
a large group of geology graduates in Peru, so the resources on the ground are significant
and we will train people as well. Just from a cost perspective, doing business in Peru
makes sense because you can explore more aggressively than you could in North America, Europe
or any other country. Also, another benefit is that we can apply our local knowledge for
the long-term so that communities essentially become stakeholders in the operation. To me,
there is an incentive that the government provides to us to continue to invest in remote
areas of Peru where we can provide significant value, instead of focusing our resources in
places like Lima. In addition to the foregoing, Peru also makes sense to me because it has
the Lima Stock Exchange. We are proud to be the first junior to be listed on the Lima
Stock Exchange. We trade more shares in Peru than we do in Canada on a daily basis, which
says to me that the Peruvian institutional investors and high net worth individuals are
looking at Vena Resources as a potential major discovery in their portfolio for the
long-term. That is great incentive for me to continue to work in Peru. We are
demonstrating that we have the resources on the ground in Peru, to become a significant
mining group.”
CEOCFO:
What do look for in properties?
Mr. Vegarra: “Last December I purchased
a property, so I will give you the logic in how I went about selecting that particular
property called Pucara. We look at properties that have near-term production capabilities
and by near-term I mean within the next 12 to 18 months. We no longer look at properties
that are considered early-stage. We are turning over the portfolio at Vena and dropping
the signing of deals with third parties to pick up the early stage assets that we have in
the right locations in northern Peru and we are putting in our portfolio new assets that
are much more advanced. My philosophy is to explore through drilling programs with the
goal to increase the potential tonnage that we have in the potential ore body, while at
the same time to look for early-stage mining capabilities. For example, Pucara has two
systems, a poly metallic vein system and a disseminated copper gold system. We will drill
out the disseminated system while exploiting the underground vein. We are turning the page
on how investors look at Vena. Vena is much more advanced now with a cash flow machine,
the Azulcocha mine, and a good reputation in Peru as corporate citizens. We are able to
hire more competent people with a more significant knowledge base than in the past and
that is helping us go after projects that in the past we could not go after, so we are now
competing with major companies. That gives us a degree of credibility that is very rare in
Peru. We are running the company as a business, not as a geological dream. This company is
run by business people more than anything else and we complement those skill sets with a
strong engineering team in Peru. I think over time people will see the benefits of having
a diversified portfolio with multiple commodities, but country focused.”
CEOCFO:
Will you give us your thoughts on the volatility of the commodities prices and where we
are in the cycle?
Mr. Vegarra: “I am not an analyst but I
hear a lot from them. Everybody I talk to in Toronto tells me the base metals space still
has room to run. Gold is challenging because gold does have a tendency to be tied to
currencies and inflation. Therefore, it is hard to estimate where gold is going.
However, I believe that base metals like copper and zinc specifically are going to
continue to go up based on worldwide supply-demand dynamics. For Vena, not only are copper
and zinc a major potential upside, but uranium as well. We expect that if we develop our
uranium assets, people will wake up to what we are trying to do and there will be an
explosion of volume in Vena shares as we prove up resources, and take the company to the
next level.”
CEOCFO:
Do you do much outreach to the investment community?
Mr. Vegarra: “In many ways yes and no.
Vena has many shareholders in Canada, Germany and Peru; they are our biggest markets. I
expect to do the same thing in the US as soon as Vena complies with the requirements for
the AMEX. Once there we will be doing a lot of work in the US to reach the financial
institutions in New York, San Francisco etc. It is important to understand that many firms
in New York or San Francisco already have the capability of buying Vena Resources shares
in Toronto. Not being listed on AMEX is not an impediment, but when we are listed, it will
be easier for individual US shareholders that want to build up a position on a base metal
company or a precious metal company, so they can buy directly from the AMEX here in the
United States. We spend between 4 and 6% of our budget in marketing, going to conferences,
on tours, talking to the media and going back and forth to Peru to talk to the different
stakeholders in the community. There are significant stakeholders throughout the world and
all of them need to be kept abreast so we spend a lot of time ensuring our shareholders
are informed of what the Company is doing and its plans going forward. It is important for
people to understand what Vena is trying to do and that requires a significant investment
on our part. Of course, this ultimately relies heavily on results -- if we drill and find
something positive, we are proud of it and make sure the world knows about it. We are
trying our best to reach the financial institutions. Next time we do a placement, it will
probably be done through a syndicate of brokers. The reason for that is because we want
coverage by analysts and higher distribution. In the past, we have been able to raise
money on non-broker led private placements. We tap into a network of friends and
institutions that we have throughout the world and they have been funding Vena until now.
However, I think you will see us moving to the next level, which is getting a syndicate of
brokers that will raise a significant amount of money for Vena and generate independent
research reports that we can lever.”
CEOCFO:
This is a turning point for the company!
Mr. Vegarra: “I believe so. We spent
the last year and a half building the foundation for the company. We had a major hiccup
during the election process. For a while, people thought Peru was turning leftist just
like it had in Bolivia, Ecuador and other countries and because of this there was a major
correction in the valuation of the company. We went from about a dollar to almost 47 cents
in less than two weeks and it had nothing to do with our performance. Now that the
political risk is out of the way, Vena has corrected back to its proper level and I
believe the investment community is now waiting for significant results that we hope to
continue to release, and the market will probably respond properly and will take us to the
next level.”
CEOCFO:
Why should investors look at Vena now and what should they know about Vena that does not
jump off the page?
Mr. Vegarra: “Vena Resources is a
company with a highly diversified portfolio. Just like you and I, we manage the assets of
the company the same way you and I manage our personal funds. We do not have our entire
portfolio on gold, copper or zinc. We have a little bit of everything, the same way you
probably have a little tech, a little mutual funds, some large-cap companies, and some
small caps. By having a diversified portfolio, we mitigate the risk of being tied to a
single commodity, because if that commodity were to drop, then we run a huge risk. By
having multiple properties, if one of the properties were to fail, we still have 28
properties that can still give us significant results. Therefore, a highly diversified
portfolio and multiple commodities with cash flow coming from internal operations is a
business model that makes us unique. We also trade on the Lima Stock Exchange, which is a
very compelling scenario for Peruvian institutions. Finally, we have the foundation for
delivering exciting news every couple of months. Because we have such a highly diversified
portfolio, the company should be able to announce material news either from gold, copper,
zinc, or uranium every few months and that is the livelihood of a junior -- to create
awareness. We spent most of 2006 building a foundation and for the rest of the next two
years; we expect to be providing significant results that will give us a different market
cap.”
CEOCFO:
Any final thoughts for our readers?
Mr. Vegarra: “Vena Resources has built
one of the best teams in Peru with local expertise managed by Peruvians that were also
successful in North America. We also have a powerful board of directors and a strong
advisory board. These elements together make Vena very unique and that is why we believe
the company will receive its proper evaluation in the short term. We will be monetizing
many of the assets we have over the next two years to provide significant upside for
investors that want to invest now. Of course, we have to deliver on that and we have a
major plan for the next few years to get to that goal. Hopefully, we will be talking every
few months and I will keep you abreast to what we are doing.”
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