Q&A WITH RICK YEATES

Rick Yeates (RY) is Managing Director of Middle Island Resources, an Australian-listed gold exploration company with projects in Niger, Burkina Faso and Liberia. Rick’s 30-year mining career includes co-founding consulting firm RSG Global, which was successfully sold to Australian-listed consulting group Coffey International.

AAMEG: TELL ME ABOUT THE HISTORY OF MIDDLE ISLAND AND ITS EVOLUTION.

RY: Middle Island was a concept that evolved over a 10-15 year period during my years as a consultant in Africa. Middle Island was listed in December 2010 and enabled me to put into practice, some of the advice I’d been giving others over the past 23 years – to put my money where my mouth is – so to speak.

In building towards an IPO, our primary focus was to identify quality gold tenements in West Africa with strong exploration potential. We had the objective of pulling together a gold resource with a minimum of 1.1 – 1.2 M ounces, which broadly translates into an open pit reserve of around 700,000 ounces, providing a seven year mine life at approximately 100,000 ounces per annum production.

AAMEG: YOUR ASSET PORTFOLIO SPANS NIGER, BURKINA AND LIBERIA – HOW HAVE YOU FOUND DOING BUSINESS IN THESE LOCATIONS?

RY: Burkina Faso has the best mineral legislation in West Africa, particularly from an exploration perspective – it’s a great place to do business. While Niger is a country that a lot of people have shunned due to past political turmoil, I felt differently about it. The exploration legislation is not significantly different to Burkina, and while the mining regime is not as good, I felt confident enough to be able to proceed.

There are always vagaries in any jurisdiction, which can take a bit of getting used to. We recognise that political circles and legislative regimes can change, but having good quality assets spread across three separate jurisdictions, means that if one country goes downhill for any reason, we’ve still got quality assets in two others. From a strategic perspective, I think its very important not to put all your eggs in one basket.

AAMEG: YOU’RE A FOUNDING BOARD MEMBER OF AAMEG, WHY DO YOU FEEL THIS INDUSTRY BODY IS CRITICAL FOR JUNIORS LIKE YOURSELF?

RY: AAMEG was established in early 2010 at the request of the Federal Government to facilitate Australia’s re-engagement with Africa.

AAMEG enables the collective sharing of knowledge on doing business in Africa, providing an avenue through which processes and procedures can be put in place and an opportunity to learn from the experience of others. At Middle Island, we have found AAMEG’s GAP Analysis Tool a fantastic resource in terms of upgrading our policies and procedures and identifying appropriate international protocols that we choose to comply with. We’ve also received support to access additional funding to extend the reach and impact of our existing CSR programs.

AAMEG is a much needed lobby group, be it between industry and Australian Governments or African Governments – it can really work for members when they get into political issues or crises. A good example is the Sundance plane crash, where AAMEG very quickly tapped into the political network and the Australian Federal Police to aid search and recovery efforts. AAMEG members tend to be in a strong position to communicate with diplomatic representatives, which can work in a company’s favour in the case of a crisis.

AAMEG: MIDDLE ISLAND CONTRIBUTES A GENEROUS SUM OF UP TO 5% OF ITS EXPLORATION BUDGET EACH YEAR ON SOCIAL DEVELOPMENT INITIATIVES. WHY DO YOU DO THIS?

RY: Traditionally, CSR has been the domain of producers. Many companies tend only to consider social investment when they are starting to develop a project or operate a mine, however that’s too late, especially when you consider exploration may take years.

At Middle Island, we believe the sooner you become part of the community, the easier it will become – we are hosted by our local communities and governments, and need to be responsible. An effective CSR framework builds political and social capital, and also minimises the opportunity for any legacy issues to arise.

AAMEG: WHAT HAS BEEN THE RESPONSE FROM SHAREHOLDERS?

RY: While it is relatively unusual for a junior explorer to have an allocated spend for CSR, anyone who invested in Middle Island’s initial public offering had the knowledge that this was going to be our policy from the outset. The response has been generally neutral to positive from individual shareholders – some get it and some don’t – others understand that it’s about building political and social capital. We’ve had an overwhelmingly positive response from institutional shareholders, even attracting the attention of the IFC as a shareholder.

We think it’s worth the risk as part of your exploration – you’ve got to enter a community with the assumption that you will actually end up developing a mining project there.

AAMEG: HOW DO YOU PRIORITISE THE WAY IN WHICH SOCIAL INVESTMENTS ARE MADE?

RY: We have tiered criteria that a community project must meet. Overarching our CSR strategy is the UN Millennium Development Goals, out of which AusAID has selected five aspects that it feels Australia can best contribute. Middle Island’s projects need to be consistent with AusAID’s objectives, and thirdly comply with our own corporate strategy.

In addition, social projects are always prioritised and owned by the local community, who must contribute at least 5% of the project’s value, be it in cash or in kind (e.g. mud bricks, labour, sand). This creates a feeling of ownership, therefore improving a program’s potential to outlive our tenure in an area and provide a mechanism for greater sustainability.

AAMEG: WHAT ADVICE WOULD YOU GIVE OTHER JUNIOR EXPLORERS IN REGARDS TO ATTAINING AND MANAGING A SOCIAL LICENCE TO OPERATE?

RY: A social licence to operate is your first line of security – it secures your camp, infrastructure corridors and principle prospects. If you’ve got a good relationship with the local community, they will watch your back.

Social projects need to be managed – which means planned, implemented and monitored. At Middle Island we employ a Community Relations Manager and a quality NGO to run our social projects. This has enabled us to enhance our training and procurement procedures, as well as implement sustainable projects with measureable outcomes.

Employing a Community Relations Manager provides an important link between your company, the NGO and the community – there’s no point just having the NGO – someone must represent you on the ground.

More than the community projects themselves, it’s about communication and managing expectations – keeping communities informed of what you are doing and why you are doing it is key. Having a good grievance mechanism in place will give you an opportunity to rectify an issue before it becomes a problem.

AAMEG: HOW DO YOU MANAGE BUSINESS RISK AND ISSUES OF TRANSPARENCY AT MIDDLE ISLAND?

RY: There’s no question that Africa can be very challenging, and you certainly can’t afford to have an absence of policies or awareness in this regard. AAMEG has recently been very vocal in the facilitation payments area, which highlights the need to develop effective anti-corruption compliance programs and strong ethical corporate cultures. We find AAMEG’s gap analysis tool useful to identify gaps in our policy, however this area is never going to be completely fool proof, Africa doesn’t operate like that.

AAMEG: WHERE DO YOU DO YOUR BEST THINKING?

RY: My best ideas come from others experience, be they good bad or indifferent – I like learning from the mistakes and successes of others and endeavouring to build those into our strategies and business plans.

I like to congitate on things, sleep on it and think it through from all angles, rather than making ill-considered decisions.

AAMEG: WHERE’S YOUR FAVOURITE PLACE IN THE WORLD?

RY: Because I travel overseas so much, I like to stay in Australia when get the chance. I’ve got two hideaways I like to frequent – one is a farm in northern NSW where I can just chill out, commune with my cows and enjoy the pristine environment. The other haunt is a little fishing shack in a place called Peaceful Bay located on the south coast of WA. Here I can spend my days surfing, diving and fishing – without thinking of rocks.

If you are a producer or explorer and are interested in learning more about becoming an AAMEG member, please join us over breakfast on 22 October at the Celtic Club for an informative discussion hosted by Bill Turner, Chairman – AAMEG and John Borshoff, Managing Director of Paladin Energy.