Is Mark Creasy on the money? 'Too many lawyers & accountants on mining boards...'
50 years of prospecting: Sirius co-founder Mark Creasy. Source: News Limited
Mark Creasy is a professional prospector, some would argue a living legend, having made high profile discoveries both personally, or by providing financial and technical support to others. An interview with him published in the “The Australian” newspaper on June 4th 2015, quoted: “I notice an awful lot of mining companies and exploration companies run by accountants and lawyers.” “I don’t have anything against accountants and lawyers ... but you’ll notice the Independence board is dominated by mining engineers and geologists. They are industry experts ... the direction of an exploration and mining company should have a preponderance of people who are qualified in those professions.” Now I DO acknowledge Mark didn’t say “all”, but rather “a preponderance” however, this did cause me to consider my own views on what I think is a critically important issue. My general thinking is that adopting an overly ‘set’ approach to putting together boards and executive teams can cause other problems and that the specific nature of the challenge should always be considered. I wrote on a related subject some time back and said…. “The ore body rules – everything – including the types of people you should employ”. The article; “The mining game – a wild ride – and the best thing CEO’s and Boards can do..” can be found here. I don’t believe there should ever be a “one size fits all” approach to board or executive team construction. It should never be “black or white” but always include a sensible discussion about the “grey”. Check out the heads of these successful Australian companies.
I’ve met all these people and know some of them well. They all strike me as intelligent but I sense they also all figured out that they don’t know what they don’t know and many also have either 2nd degrees, or post graduate qualifications which further broaden their knowledge base. Of more interest though is the construction of their boards. The links to their web sites indicate they’re incredibly diverse and are a real insight. So rather than “one size fits all”, here is a small selection of those critically important “grey” questions worth debating as opposed to ignoring the often obvious elephant in the room:
- Is the company predominantly an explorer or a producer?
This seems obvious, but I’ve seen exploration company boards with two mining engineers, one lawyer and one accountant. Go figure!
- Is the company well funded for the medium term or longer, or is it likely to have to return regularly to the capital markets?
I’m a trained mining engineer (ultimately experienced OP’s Manager and in recent years Not For Profit and Public Co. director) and comfortable saying that the majority of technical people I know, even if they are good salespeople, are not always across all the commercial and legal imperatives required to demonstrate to providers of finance, that a project IS worth backing.
- If a producer, is the company a.) in robust financial health with fat margins, or b.) teetering on the brink of unprofitability?
Well I guess if the answer is b.) the first question should be, “How did we get here in the 1st place?” That aside, a solid producer with robust margins, probably needs less small business lawyers and accountants, but economist types that can see long play trends that helps the business take advantage of the big opportunities and mitigate the big risks.
- And a BIGGIE - what about the changes over time?
A common issue I observe is ignoring the changes that are inevitably required, to transition from startup/explorer to developer/producer.
Exploration companies find an orebody, need to find more money or a partner, then convince markets, then design and build something efficiently, then optimise it, then put it to sleep and quietly make it churn out cash (to repay the faithful backers) all the while meeting statutory obligations, as well as, operationally innovating so as not to embed inefficient practises and cost creep. Keep the core of the team the same, assuming there is adequate breadth of experience to provide oversight and the long termers have the passion to keep flying the flag, however keep in mind that in the same way that people grow up, successful mining companies do too, all the while changing the fundamental mix of skills required. Be willing to refresh teams gradually and bring in new people with skills and experiences that add value at different stages of a business’s development…and if you feel you don’t have all the answers, there are some great management consultants around to help with this process. So if all this seems obvious, why does it continue not to happen? In my world, usually two words sum it up..
Ego and Protectionsism!
The best leaders often demonstrate some of each, but also know themselves well enough to keep them both in check. Anyway sadly and all of the above aside, if global exploration activity continues as it is for much longer, it is going to be a long time before we need to take companies from explorer to producer! In that regard we simply need more people with the money and bloody minded will, to keep spending. I don’t know Mark Creasy but having followed his career for some time I guess we need more people like him and so despite my views above, good on you Mark!Steve HeatherManaging Director & Principal Executive Search