A call for change in mining: industry needs better decision-making: NAP president.

AuthorKelly, Lindsay
PositionMining

Coming up through the mining industry, a mentor once shared these words of wisdom with Jim Gallagher: "Hope is not a management tool."

That resonated with Gallagher, now the president and CEO of North American Palladium (NAP), who spoke during the kickoff to Sudbury's annual Modern Mining and Technology week on April 22.

To a large extent, he said, the mining industry has no one to blame but itself for failed projects because of the poor management, poor engineering, and poor decisions that have been made when trying to advance mines.

"I want to be proud of this industry, and you've got to stand up when we screw up and say, 'We didn't do enough engineering, we didn't do enough drilling, and it wasn't unexpected,"' he said. "It was unexpected because we went in there with hope."

Some of the most promising mines flounder, Gallagher said, because companies haven't done sufficient legwork to prove up their projects, instead blaming their failures on things like "unexpected geological complexity," a term he dislikes.

Rubicon Metals, for example, halted development at its Phoenix Gold underground mine in Red Lake after it moved too quickly on development, which it had approved based solely on a preliminary economic assessment (PEA) and without pre-feasibility and feasibility work.

Yet even investors bought into the hype, banking on a quick, easy return, including the Canadian Pension Plan, which put in More than $50 million.

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"If you want to gamble, go to Vegas," Gallagher said. "You Know you're going to lose your money in Vegas, but you're going to have a hell of a lot more fun."

Gallagher was clear that North American Palladium isn't free of blame. One of two main palladium producers in the world, the Lac des lies Mine north of Thunder Bay was operating smoothly until 2008, when "they started making some bad decisions, quite frankly," said Gallagher, who joined the company in mid-2013.

A bulging treasury couldn't protect the project from a failed shaft expansion, and by 2013 NAP's gold division went bust and was sold off for a fraction of its purchase price.

That same year, Brookfield Asset Management stepped in to loan NAP $136 million. It now owns 92 per cent of the company.

"That's been a blessing," Gallagher said. "If that didn't happen, the company would not be open and 450 direct jobs wouldn't exist in Northern Ontario."

But other problems have plagued the company. In 2014, an employee was killed while operating a...

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