Success driven
Many of the worldÔÇÖs gold-rich locations have long-since been found and mined but thereÔÇÖs still rewards to be had for entrepreneurs who are willing to take chances, as Alan Swaby learns.
Cluff Gold chairman Algy Cluff is a colourful figure in the best boysÔÇÖ own tradition. After all, heÔÇÖs spent a lifetime taking risks and proving that fortunes can be made in the most challenging of situations.
But luck alone isnÔÇÖt sufficient to create four successful businesses. Cluff is not a university-trained engineer nor geologist but along the way he has gained the knowledge neededÔÇöfirst in the early years of North Sea oil and gas exploration and then in West AfricaÔÇöto make money from mineral exploration.
Ignoring the more conventional university route to a career, the luck Cluff did have was to be posted to Malaysia during his stint in the army. There, he spotted a weakness in the way share prices were valued and invested his own money, along with his fatherÔÇÖs, in palm oil and rubber. Needless to say, when he left Malaysia, it was as a very rich man. And nothing much has changed.
In the late 1960s, when the British government called for the first round of bids for exploration licenses, Cluff was amazed by the lack of entrepreneurial spirit. ÔÇ£I fully expected BP or Shell trained engineers to dominate proceedings,ÔÇØ he says, ÔÇ£but it just didnÔÇÖt happen. In the expectation of getting one licence, I applied for twelve and was astounded to get them all.ÔÇØ
The consortium Cluff put together eventually discovered the Buchan Field, one of the largest in the North Sea, but the place proved too grey for Cluff, who prefers more colourful localities. So it wasnÔÇÖt long before he turned his attention to Africa and the search for gold.
Cluff Gold, his present operation, is barely four years old but itÔÇÖs the third such enterprise heÔÇÖs created in thirty years of exploration. One of the seven mines he has discovered was in the Geita district in Tanzania, which has the distinction of being the richest gold source in Tanzania.
ÔÇ£Exploration funds go much further when searching for gold rather than offshore oil,ÔÇØ Cluff says.┬á ÔÇ£But itÔÇÖs still a highly speculative business, with perhaps one in fifteen concessions actually turning into a producing mine.ÔÇØ
Cluff leaves the in-depth geological or engineering expertise to the experienced team he has assembled, instead spending his time with investors and members of the administration in the various host countries where Cluff Gold has, or would like, a presence. Even though he is now in his late sixties, Cluff makes the trip to Africa at least every second month.
With the most promising geological areas long-since found and explored, the worldÔÇÖs attention is now on the best of the rest. Cluff GoldÔÇÖs policy is to focus on acquiring sites in West Africa that are amenable to open-pit mining and low-cost production techniques. With gold densities at just a few grams per ton, it becomes a huge earth moving exercise to create a viable operation.
As such, Cluff has assembled a portfolio of full or partial mineral interests at various stages of development in C├┤te dÔÇÖIvoire, Burkina Faso, Sierra Leone and┬áMali. Last year, two of the sites were developed as fully functioning mines and the first gold was poured. ÔÇ£It was quite an achievement,ÔÇØ says Cluff, ÔÇ£to bring these facilities on-stream in countries that had no established infrastructure for gold production. So far, these two are producing around 100,000 ounces per year but that could be surpassed easily if resources in Sierra Leone live up to expectation.ÔÇØ
In 2008 Cluff Gold acquired the rights to explore in Sierra Leone and indications are said to be good for finding commercial deposits. There will be an announcement next month regarding the latest round of test drills but indications suggest that another 200,000 ounces a year of poured gold are possible.
ÔÇ£Volumes of 300,000 ounces a year would make this company a significant producer,ÔÇØ says Cluff, ÔÇ£but itÔÇÖs always advisable to stay on the cautious side. Any of a dozen different factors might shift the balance and even when all the data stacks up and the financial projections are positive, host governments can affect the bottom line by tweaking taxation or lifting royalties.ÔÇØ
Working in Africa is never going to be truly predictable but Cluff is highly complimentary of the professionalism of todayÔÇÖs civil servants. Nor does he believe that Africa deserves its reputation for corruption. ÔÇ£I can say that with one exception itÔÇÖs never been suggested to me that our affairs might go smoother if we made a contribution to some offshore account or other,ÔÇØ he says. ÔÇ£Nevertheless, itÔÇÖs still possible for politicians to want to claw in ever-increasing amounts of taxation by altering direct and indirect charges.ÔÇØ
In its corporate announcement, the board of Cluff Gold, which has considerable experience developing mining operations across Africa, believes that West Africa is one of the most exciting regions for gold exploration and production┬átoday. ItÔÇÖs a region which combines the right kind of prospective geology and sound mining investment codes which vouchsafe the desire for these African countries to not only attract foreign investment but to retain it.
Since floating on the AIM board at the end of 2004, Cluff Gold has attracted significant investments year by year, much of it from North American sources which seem to have a better idea of the ups and downs that mineral explorers go through. However, their faith seems to have been rewarded, as Cluff Gold has successfully made the transition from explorer to producer while still expanding the project portfolio.
