11:03 PM
Vinay Singh
I cannot count all the "opportunities" I have been presented with in the mining sector of the diamond business. I was a past Vice President and board member of Sao Luis Mining, a publicly traded mining company out of Brazil. It took us years to lose our money, but in the end, we were successful in doing just that.
All of us in the venture were experienced in diamonds, mining, finance and public offerings. Despite our many talents and skills we were unable to take a property with a large supply of diamonds and make a go of it.
Why we failed is a book in itself. I won't bore you with the details. What I will do, is give you an overview as to what is involved in putting together a mining operation and it will be self evident why there are so few successful mining operations.
We spent years completing our environmental studies, getting our licenses, permits, geological reports, assays, financial feasibility and cost and income reports. It was a never ending cycle of stop and starts, ups and downs; all the while the money is flowing out like the Amazon into the ocean.
The other money eating monster is one that cannot be considered in your projections. It is commonly referred to as the 'X' factor. This is when something goes wrong that no one could have imagined. Except that it happens far more often then even the most pessimistic person could imagine.
Just as an example, the DMS or Dense Media Separation Machine a $600,000 beauty is made in South Africa. When you ship this monster (see picture) you need to tell the truck driver not to go faster than 3-5 miles an hour down your unpaved road or you can destroy the insides. (It will be out of balance) Wait until you see how much fun you can have trying to get it repaired in your remote location. You will roar with laughter when they tell you how long it will take to get the parts and how much this small problem is going to cost you. Good times had by all!
Because you are nearly always working in a third or forth world country, you can expect that everything will take three times as long as projected and will cost two to three times as much as you were told it will cost. Most companies fail because they run out of money before they have a chance to be successful. Other companies fail because the owners just get sick and tired and no longer wish to sit in the bush with the bugs, snakes and local bandits, some of whom wear uniforms, ties and suits.
There are a million reasons why a mining operation will fail. There are few companies who have the knowledge and resources, both human and financial to succeed. To do a mining operation properly, it will take approximately $7-12 million investment and two to three years.
There is an exception to this rule. If you have a concession and you have enough money to buy a pan and some camping equipment and food supplies, you can make a good living going into the mud yourself for a few months at a time. It is not a romantic as having a publicly traded diamond mining company, but you have a better chance of making money.
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