In a wide-ranging interview, we talked with Eclipse Gold Mining (TSX-V: EGLD) Chair and Pathway Capital Co-founder Marcel de Groot about his first big win, the essential ingredient for any successful company in the mining space, building the right reputation with investors, and the launch of Eclipse’s flagship Hercules gold project. Pathway, founded in 2004, is a Vancouver based privately held venture capital firm focused on value creation. To date, companies supported by Pathway have raised over $2 billion in equity financing and have been involved in several billion dollars in M&A transaction.
Q: You’ve been a part of a long series of successful mining ventures in board roles or other leadership capacities. What first got you fully emotionally vested in the mining space?
Marcel: The people, pace and potential to create real, meaningful value all aligned for me. Soon after getting my chartered accountant designation in 1999 I joined up with current Eclipse advisory board member and my Pathway co-founder David De Witt on the venture capital side. I immediately loved how dynamic the mining space was, the fast pace and the opportunity to collaborate with a very high-quality group of people possessing differing skill sets. I especially gravitated to the strategy sessions in trying to make quick informed decisions to optimize outcomes. I found it a really fun, competitive playing field, and especially rewarding when you crossed the goal line. Before I joined David, he had been on the board of Arequipa Resources when the company and its Pierina gold deposit in Peru were acquired by Barrick in 1996 for $1.1 billion. Dave had a broad network that included Mining Hall of Famer Dave Lowell, who founded Arequipa and literally wrote the book on copper deposits. I became an early investor in a new company co-founded by Lowell and De Witt called Peru Copper. In 2003, the company acquired the Toromocho copper project. The company then went public in 2004 and was acquired by Chinalco for $869 million in 2007 – a very, very short runway for value creation. Ironically, we were the only bidder on Toromocho: Lowell saw something that others didn’t recognize, which is not unique in this industry and touches on similar circumstances as Eclipse’s purchase and assembly of the Hercules gold property. At Toromocho, we only needed four holes to prove Lowell’s theory. Our initial investment saw a return multiple of 150x. Taking a project from grass roots to feasibility to ultimately its sale and current status as one of the largest copper mines in Peru had me fully emotionally invested in the space from that point forward.
You have a track record of working with good growth companies. You were part of the leadership that built Equinox Gold (TSX: EQX) into what it is now, a premier Americas gold producer, and you remain an advisor to well-regarded Sandstorm Gold Royalties (TSX: SSL/NYSE: SAND). What are the essential ingredients in creating a growth company in the mining space?
Marcel: I think the key thing is it’s not a matter of me working with good growth companies, it’s working with good people. For us, it really starts with talent who have the right mindset. We look to work with high-quality people who not only have had repeat successes in this industry, but recognize it takes a team approach to accomplish goals. You really need a number of different skillsets to compete effectively in this industry and have everyone recognize and respect the talent of the others. If you have the right team, you can make decisions quickly which is paramount if you want to optimize your growth path. Of course, you also need a quality asset but that again rests with people. If you walk through our office, we have many teams made up of people like Mike Allen, Eclipse President & CEO, with wins under their belt. As CEO of Northern Empire, Michael sold the company’s flagship Sterling project in Nevada’s Walker Lane Trend to Coeur Mining for $117 million in 2018. The number of winning track records we have walking under one roof in our office generates a huge pipeline of information and deal flow. We have some very talented individuals that can sort through technical information and identify the best projects that stand out that others might have missed.
Then it’s just a matter incorporating the appropriate structure, bringing capital to the table and the real work begins.