Mark Kenwright of Wardell Armstrong - Do Your Due Diligence

Interview with Mark Kenwright, Associate Director of Wardell Armstrong - International Mining Consultants.

How do you work out which of your mining companies will make it. And mor eimportantly which ones will lose you money?

Wardell Armstrong has been around since 1837. It is an international consultancy firm that provides engineering, environmental and mining services in the mining & minerals, infrastructure & utilities, and property & development sectors. Kenwright's résumé is mightily impressive: over 24-years' experience as an exploration/geology manager and a fully qualified chartered professional FAusIMM CP(Geo).

Wardell Armstrong provides studies and reports for projects at various stages of development. These reports give certainty to their clients, and they help projects get financed and permitted. Wardell Armstrong will typically be sought out by companies seeking a competent person's report, scoping study, due diligence study, or another similar study, before the company conducts its IPO, or an investor decides to plough money into the said company. The price for such reports can range from £50,000 to £150,000; Wardell Armstrong's expertise and technical proficiency doesn't come cheap! These reports can cost anyway from £50,000 to £150,000. Wardell Armstrong's primary services are due diligence, desktop studies and scoping studies. Essentially, this family office due diligence on steroids. All reports require transparency, and while certain matters can be dealt with more subtly, everything has to be disclosed in the publications. Even if a company requested that Wardell Armstrong withhold something, the company has a legal obligation to disclose within the report exactly why the information was redacted.

COVID-19 has completely changed the landscape for mining companies, with international operational difficulties giving CEOs major headaches. Wardell Armstrong's staff have been working at home for over 3-months now. Luckily, much of the company's work can be carried out digitally, so the lockdown has not had an enormous operational impact. However, there have been commercial difficulties. For junior mining companies, Wardell Armstrong has recommended they go back to basics, getting more in-depth with their geology. The ability to send samples has been maintained because Wardell Armstrong is the only independent company with an independent lab. The lab is fully operational and it actually at maximum capacity because many juniors are using this time to carry out numerous basic tests. Obviously, site visits have also been curtailed, but there are workarounds within the JORC Code 2020: a principle of "if not, why not?" Desktop reports, mineral resources reports and annual reports can still be produced because the data is still accessible digitally.

Mining reports will vary in quality by jurisdiction. This is an incontrovertible fact. While Kenwright is keen not to put down the work of other mining engineers, he insists that is is important for investors to check who wrote the report and where it was produced. If a company is only charging US$20,000 for a report worth more than 10-times that, it might be time to look elsewhere. In fact, in 2013, the Ontario Stock Exchange did a review of 50 random mining reports and 30-40% of them had serious flaws. Even qualified, registered, legitimate bodies can still make mistakes.

What are the 3 most important things for investors to pay attention to when reading a mining report? "Mineral tenure, mineral tenure, mineral tenure." Investors MUST ensure that a company has full mineral rights under their respective legislature, and they will also want to check out how long these rights are valid for, especially in an exploration environment. Metallurgy is a similarly crucial element for consideration: what is the rate of recovery? Investors need to be a jack of all trades, understanding all the crucial elements that create a successful mining company including waste disposal, water access and permits, security, infrastructure, power, operating coats, CAPEX, remuneration, quality of management and track record, EIA situation. It's a complex analysis, but companies like Wardell Armstrong exist to make things a lot easier.

Alarmingly, around 70% of public mining companies are destined for failure, while around 19/20 private mining companies won't make it. Kenwright subscribes to this mode of thought, stating he's previously walked away from companies that were fatally flawed. Investors have to be extremely careful about which companies they choose to sink their money into. A useful strategy that investors can follow successful investors. While imitation is the sincerest form of flattery, it is also the easiest way to follow the money for retail investors to follow the money when they don't have access to the funds or technical knowhow required to perform extremely detailed due diligence.

What did you make of Mark Kenwright and Wardell Armstrong?

Company Website: https://www.wardell-armstrong.com/