Amanda Kraus

Hi everyone. Welcome in. We're excited for you to join us in our fireside chat today. My name is Amanda and I'm thrilled to be here with Ross Beaty. Ross certainly needs no introduction for his tremendous career and contributions to the sector, but he is a geologist and entrepreneur and a philanthropist with over 51 years of experience in mineral and renewable energy industries.

He is the founder and chairman Emeritus of Pan American Silver, founder and chair of Equinox Gold Corporation, and many other resource companies. His passion for nature and environmental protection has also been pursued through his work with many environmental, nonprofit organizations and his environmental foundation. In 2018, to top it off, he was inducted into the Canadian Mining Hall of Fame.

So, Ross, thank you for being here today.

Ross Beaty

My pleasure. Fifty-one years, makes me seem old.

Amanda Kraus

Time flies when you're having fun. So great. Our session today is really framed up all around the challenges of declining ore grades and the rising cost pressures. So we're going to explore some innovative value recovery approaches and techniques with you today.

So to get us started, Ross, I'll jump in with our first question to you. So recognizing that rising cost pressure and the declining ore grades, how is Equinox Gold evolving its value recovery strategies? Where are you maybe seeing some of those really innovative techniques deliver the greatest returns?

Ross Beaty

You know, there’s innovation everywhere in mining, as there is in every industry, but I wouldn't say there's anything earth shattering. You know, mining is a repetitive process involving moving rock, crushing rock, you know, milling rock, and if you can do innovations at the margin anywhere in that process, you're going to lower your costs.

It's also about reducing waste. And so, innovation is constantly at work trying to, for example, use less water, produce less waste, produce less environmental footprint, use fewer people, have less impact on communities, have less environmental impact. All of these things build, you know, innovation into them. And it really starts at the beginning of the business of exploration.

There's a lot of innovation happening in exploration. How you can find ore bodies more cheaply, more quickly, with fewer cost inputs. And it really goes right to the end process. It goes to the development process, through the construction process, you know, building mines cheaper and more quickly again, because, of course, time is money. And then, we also try to use our employees to support innovation. At the end of the day, you know, the success of any company is all about its people. And so, we try to encourage our employees to support innovation everywhere they can and provide good ideas and reward them for good ideas.

And you'd be surprised how much this really helps to reduce costs. These employees are working at the face, right. They're working right in the business and they can see places that innovation supports a more efficient process. And of course, the more efficiency you have, the lower your costs. So it's really, I wouldn't say there's anything dramatic, anything like earth shattering.

AI, you know, I don't really know how important it's going to be, quite frankly, in the mining industry at all. It may not be important at all. But all the way through the process, incremental cost reduction is very, very important. And anything that can be done to make moving that rock more efficient is going to be a sought after innovative process in mining.

So it's constant, it's through the whole process. But it's, I would say it's not, as I said, not nothing earth shattering or earth breaking.

Amanda Kraus

Sure. No, thanks for that perspective. And I love how you tied in the human element to that, right. Really there's boots on the ground and the folks in the field each and every day that see those processes up close can lend their insights and incorporate those.

So thanks for that perspective. You did mention a bit around the environmental components, mentioning things like waste and water. Is there anything that you'd like to add around those types of technologies, either through tailings or waste processing, that might be also contributing to the returns?

Ross Beaty

Well, when you think about tailings, for example, which is the waste product of any mine that has a mill, you know, tailings are a big problem.

They're kind of the Achilles heel of the mining industry, because if you have a tailings leakage or a tailings dam break, you know, it can be calamitous and it can be, you know, extraordinarily costly. And yet, despite all the engineering and good intentions, there seems to be, you know, everywhere in the world, you know, once a year there seems to be a tailings dam failure and most of these are avoidable. And so, you've got to really focus on building these as well as you possibly can. The results of building them sloppily are so calamitous that it just, it's just not worth it.

And then there's other techniques today that I think if you think of the total cost of a mining operation, it includes the operate, the construction of the mine, the operation of them, then also the closure of the mine. And when you're operating a mine, you always have to think of what happens when this mine closes. Every single mine is a nonrenewable resource. They all have a beginning and they have an end. You exhaust an ore body, you have to close it. And one of the things you have to close is a tailings dam, for example.

So when you're operating the mine, there's a couple of things you can do to reduce those costs. The first is constant closure and constant environmental remediation of the mine as you go, so that the big job at the end of the mine isn't as big as it might otherwise be. And the second is to think about how you can operate a mine where you're minimizing the cost, for example, of tailings closure.

One of the innovative techniques that really is coming into play more and more is dry stack tailings, where you dry the tailings, you clean them up, then you stack them in a tailings, probably not a pond because they're dry, but in a tailings area, and this is attractive because at the end of the mine life, you don't have to close that tailings, cap it – it's a much smaller footprint. So it has a higher operating cost to do dry stack tailings because you've got to dry the material before you send it to the location where you're going to leave it. But at the end of the day, you have a much, a much cheaper and a much quicker closure plan.

We did this in Mexico, to mine in Mexico, for example, and within like a year, within six months actually, the local people were farming on top of the old tailings, which had been stacked in a dry stack method, completely clean, benign of any toxic chemicals. And that was a very successful thing because it meant we could actually close it, return it to a productive use, and walk away.

So when you're doing these things, or another example would be putting tailings or actually waste, another big problem at a mine, you've got to close waste dumps and often they're not, you know, they generate acid, they have to be continually monitored – putting either waste or tailings into an old pit to backfill the pit.

That's a very smart solution, because then you don't have the pit hole. You can fill it up and then ultimately close it. And often you can do this so well, you hardly even know it was a mine, you know, 5 or 10 years after closure, plus it's a lot cheaper. We're doing this in Brazil, for example. We're using old pits to put tailings in. These are nontoxic tailings, but they still, in Brazil, because it's so flat, you have to build these tailings mounds up and they're extremely expensive to build, particularly in Brazil, where they've had a history of tailings failures by very large companies. And they simply don't want to have that happen again.

So they're very strict on tailings regulations. So to build a tailings dam in Mexico is incredibly expensive. If they can use an existing, closed, open pit, it's a great solution. Lowers costs. It's, again, these aren't rocket science innovations. But if people think of the long term, the continuous cost structure of a mine, it includes reclamation. Anything you can do to reduce that cost, make your reclamation more permanent is going to obviously help with the total cost structure of that operation.

Amanda Kraus

Yeah, I love those really specific examples you gave. It also made me think of circular economy principles, right, where you're designing with the end in mind, straight from day one and the beginning.

And also increasing that social license to operate as well, when you're coming up with these beneficial reuses of the post-mine land use, I think those are phenomenal examples for our audience, and I'm sure that they'll resonate. The fact that you're able to do them all over the world, too, is really important.

Ross Beaty

You know, I was talking about this with one our, with a senior operator in Equinox the other day, and he said, you know, Equinox Gold wants to be at the cutting edge of innovation, not the bleeding edge. So, you know, we'd rather have the big companies spend the money on, you know, determining what works and what doesn't work. And a lot of innovation, of course, doesn't work.

A company like ours, a sort of a mid-tier producer, coming in has aspirations to be a very large producer, but right now we're, you know, we're not we can't afford to do this sort of experiments in innovation. We want to follow and use the good stuff that works and not have to try all the stuff that doesn't work.

Well, let the big guys do that.

Amanda Kraus

Sure, sure. You're a fast follower I think is another good term.

Wonderful. Well, we'd like to take a moment here just to pause and engage with our audience a bit through a quick polling question. So on your screen, you'll be seeing that question come up here and I will read it out loud here for you all.

We’d please like you to share your perspective and how your company is addressing the challenge of declining ore grades and rising costs. So please take a moment here and respond to that polling question.

While the audience is busy with that polling question, Ross, I'll get you started thinking about our next question here if you don't mind. We're interested in understanding what metrics or benchmarks you might use to evaluate your innovation and low grade recovery. And then also, how do you go about communicating that value to your stakeholders?

Ross Beaty

Well, you know, you measure things every second, you measure things at an open pit or an underground operation with your, you know, your amount moved per work hour, per truckload, per mill, feed supply. You measure in the plant every single step of the way, tons per hour through your crushing plant, through your grinding plant, through your high pressure. You know, the whole process, your tons leached, your tons milled, you know, there's just constant measurement. And so, as I said before, you know, this business is all about moving rock or crushed rock or ground up rock and every single incremental thing you can do to save costs at every single step of that is going to drive reduction in costs.

You know, at the end of the day, though, you're also dealing with Mother Nature. Every mine is different. What works in one mine may not work at all in another mine, and so sequencing operations. Having people have constant meetings to discuss how they can make things work better, more quickly, more efficiently, more production per person, person-hour. All of this drives cost reduction. All of this supports making mining more efficient. In some places you can do it easily, sometimes the minerals are really easily extracted and some are really, really difficult and expensive and complicated. And the technology that you might choose may often not work. We had a mine, we had a mine in Brazil that require, that used the very, very modern, novel, almost unique in the world form of processing that doesn't use cyanide.

And it's been, you know, while the lab scale test worked, the demonstration scale stuff worked; at a production scale, it hardly worked at all. We've had just problem after problem after problem. So we've been trying to be innovative in that operation, but it hasn't worked very well. And so in hindsight, you know, I kind of wish we hadn't started that process at all.

It's been expensive and it's been frustrating. And so innovation, it doesn't always work. And when it doesn't work, I think there is a good time to say, okay, let's move on. Move on and admit the system that you had great hopes for just doesn't work. Otherwise, it's, you know, it's getting your employees engaged, getting at all stages of the process thoughtful operation where you can really have all of these metrics achieve lower costs, faster production, less risky operation, certainly safer operation, more environmentally appropriate. Something that builds your workers and your communities together with your operation. All of this stuff, you've got to build it all together. It's the only way you can work these days in modern mining.

Amanda Kraus

So we talked a little bit about those various benchmarks and metrics that you're using, you know, to evaluate the innovation and the process itself; but thinking about externally for your stakeholders, investors, communities, customers, how are you starting to innovate the way that you disclose and report on value to the broader stakeholder community?

Ross Beaty

That's an interesting question, Amanda. Because of course, you will observe out of say 10 public companies, and this is public companies I'm talking about that have to report the results every quarter and any material change in between the quarters, you know, you have a wide variety of communication styles. And that interestingly, by itself creates value, how you communicate. Every so often there are problems in companies with, you know, failures or operating problems or environmental problems and, you know, how you disclose, how you manage those really does also drive value.

And it's been a particular pet peeve of mine when, you know, you have an operation like, for example, we have in one of our operations in Brazil. We're doing everything that we can to mine responsibly. We work under kind of global rules of how we mine, how we store tailings and so forth. But right next door to that mine, there's about 500 or up to a thousand local miners, these are artisanal miners, unregulated mining, just destroying the environment. This is a beautiful rainforest in large part. Just destroying that. Using cyanide, using mercury - no regulation whatsoever.

And it's always been frustrating how we, you know, operate as well as we can, and they don't have any rules to operate under. They're spreading disease into the communities there. It's just separate centers, and yet the local government tends to regulate the larger operators, and they don't touch the unregulated ones. They're doing some work in Brazil, but not enough.

So the problem is that the public tends to tar everyone with the same brush. They look at many of these artisanal mining operations, and they assume that public companies are doing the same thing. So obviously communication of that kind of thing is important. And somehow making a distinction between what you're doing under, you could say, global rules. How do they do things responsibly, is very different than some of these other areas that give the mining industry a very bad name. We also try to encourage local governments to have one set of standards instead of two and sometimes this works, but many, many times it doesn't.

So it's how you communicate. It's how honest you're seen, how transparent you're seen by investors. And not only investors, but, you know, suppliers and, any other stakeholders in the industry. If you are seen as being an honest, transparent company, you're going to have a better relationship with the communities within which you work, your employees obviously also, and all of these, if you have good relations and if you have smooth, a smooth path with these different stakeholder groups, you're actually going to have lower costs.

So it is that kind of, I wouldn't say it's terribly innovative, but it's just good business. It's just good business to communicate well, communicate often, honestly, transparently and be seen to be doing the right thing as well as doing it. And as I said, there's all kinds of different methods of communication. Some companies do it well, some companies don't.

Amanda Kraus

Yeah. Fantastic. No, thanks for breaking that down so clearly. It certainly as an area of measurement, monitoring, continuing to reinvent and understanding, right, when it's time to move on and when it's time to pivot.

Amanda Kraus

Thank you for those real-life examples.

So to close us out here, we want to bring the conversation back to reimagining resiliency and moving into the future. And so, knowing that we all live in this world where our capital is constrained, what do you believe will separate the leaders from the laggards in precious metals, let's say, over the next five years? Give us your line of sight into that, please.

Ross Beaty

Oh, that's a big question. How can you be a leader in this space? You know, it's a very risky business, the mining business, very, very risky, and there's risk at all levels – finance, operation, metal markets, social issues, countries you work in that can pivot, you know, overnight with an election. So it's a really, really tough business, where everything can go well, except that one thing that makes things, you know, look pretty bad.

So I guess the, you know, my analysis is the mining industry today, to be in the business, especially as a public company, because public companies, of course, are under much more scrutiny of the private companies, particular in developing countries. And so, if you're a public company, you know, you've got to understand that any problem at any mine is going to be up on social media somewhere instantaneously if somebody takes a picture of a leak or a problem, you know, it's going to be public immediately. And so you have to have a good communication system to understand what's going on that can respond to this.

Otherwise, just being good at all steps is important. And being thoughtful about, you know, all of these things, you know, they're all important - environmental, social, governance - super important. Trying to get your ore body right, doing good exploration, understanding metal market cycles. Oftentimes, you know, you can mitigate some of that by hedging. Investors don't like it in certain times, but it is a way to reduce risk, either hedging metals or hedging currencies or hedging your inputs like fuel.

You can do all these things to, not so much reduce your costs, but take the noise out of the out of the operation. Otherwise, though, you know, I've been in this business, I have been in this business a long time, and it's very hard to be terribly, you know, firm about any particular solution to reducing that risk, you have to be a diversified I think, you have to understand that risk is real, and there's also great rewards.

If you have a time like we've had this year where, you know, for example, the gold price has gone up 25%. That's kind of free money. That's, I mean that, you know, you hope will always happen and sometimes it does, but more typically, it's a challenge because operating costs just never seem to go down and you have to manage that all the time, be more efficient, be more productive, having smarter employees, having people who understand and use modern techniques, modern innovation, it's a whole package that you've got to think of when you're operating a modern mining company, and I think that's all I can say.

It's a complicated business. To do it well, you've got to be good at all these things. And there are winners and there are losers. There are companies that do it well, and there are companies that don't do it so well. What can I say? I hope we're on the category of companies that do it well.

Amanda Kraus

Well, I certainly hope so too. And know, with you at the helm, that that will come to fruition. So certainly, definitely, interesting space to watch in the next few years. Since we do have a little bit of time left, if you don't mind, Ross, I might throw one question your way. Given your long career here, if you could share some insights, what's just been your personal, personally, your most favorite project to work on?

Perhaps it's a particular country or site, and kind of why was that your favorite?

Ross Beaty

Well, I can tell you what some of my least favorite were. I had a horrible experience working in Russia back in the late 90s. We were, you know, building a big silver mine in eastern Russia in the middle of nowhere in Siberia.

And we got attacked by a, you know, Russian company in Saint Petersburg. And eventually had to walk away, which was terribly painful. But, you know, live and learn. We’ve worked in pretty hairy places otherwise that were terrible when we got in and ended up great.

We work in Bolivia and Peru, which, you know, when we started working there, they were unstable. They were, inflation was going crazy. There was incredible personal danger in places like Peru with a big terrorist group involved. And they just all of a sudden on a dime, they both got better. And, it was just, it's just a joy to work in places like that.

Bolivia has been, it was the most unstable country for its first 150 years, and then it's been one of our best countries to mine in. The most, you know, the least grief with the government, the most stable currency. So you've got to kind of hold your nose when you go to places and hope for the best.

Mexico, I love, love, love working in Mexico, but man, it's been a tough place the last few years. The government's kind of gone upside down. We've had social problems in the one mine that Equinox operates there. Just irrational, but real. And so, yeah, it's just, you know, this is a tough game. It's a fun game for me. It's a game that I've enjoyed being part of. We've created a lot of wealth. We have, right now Equinox has I think 16,000 employees, Pan-American Silver has 26,000, operate in about 11 countries in Latin America, North America, and supporting communities that have literally hundreds of thousands of people who live off the wealth that comes from these mines we operate.

And that's been very satisfying to me, while at the same time feeling that we're doing as good a job as we can from an environmental social governance standpoint. Those are things that are super satisfying. It is a great business when you can take, you know, wealth from the ground and convert it to wealth for humans and for many, many people, for over many generations.

That's what has been super satisfying at the same time, trying to reduce environmental impacts from mining, which are real and have to be looked after very, very closely. And of course, trying to manage the social issues that come with mining.

So it's been a great journey personally, and done right, it is a tremendous supporter of the world economy and many, many communities.

Amanda Kraus

Absolutely. And that's near and dear to my heart. A lot of the work I do here with EY is actually helping companies tell that story, right, beyond the balance sheet and the income statement, what are all the environmental, social governance and sustainability components of the mining life cycle and the journey, and helping measure, monitor, report and disclose on all of that information, too. So it's definitely been an evolving area.

Ross Beaty

For sure, and it's evolving in the right direction. I mean, I think most modern public companies publish sustainability reports. I really recommend investors have a look at those. They're, you know, they're really good. The two that I know best are the Pan American one and the Equinox Gold one, they're really good. And when you read those, you really understand what companies are doing to support, best practices in both environmental management, social management and, of course, operations.

The things that they do beyond simply, you know, digging stuff out of the ground. It's very therapeutic for me to read those every year when they get published. And I really recommend them to, to any observer of the space to understand in detail the many, many ways that mining does support communities. And of course, is done today as well as it can be done.

Amanda Kraus

Wonderful. Well thank you. We are approaching the end of our time here together today. Once again, thank you so much, Ross.

Ross Beaty

You’re welcome.

Amanda Kraus

You certainly have a wealth of experience to share, and I know how much our audience appreciates the insights that you shared with us today. It's been a true pleasure, and we certainly look forward to chatting with you again soon.

Ross Beaty

My pleasure. Thank you very much for the invitation.

Theo Yameogo

This is another great discussion, and thank you to our panelist, for sharing your perspective. Before we wrap up today's forum, here are our final polling question.

Looking ahead, which area will your organization most likely prioritize the strength and resilience and sustainability?

Take a few moments to respond.