President of Lara Exploration, Andre Gauthier at the World Resource Investment Conference in Vancouver

Recently, we caught up with the president of Lara Exploration, Andre Gauthier.  Mr. Gauthier gave us a quick overview of Lara’s exploration strategy, and then he talked a little bit the company and its stock.

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“In the countries where we operate, we have very experienced teams and all the tools we need to generate our own projects,” Gauthier explained.  The company’s leadership has very deep experience in South America.

Miles Thompson, Chairman and CEO, has been involved in mineral exploration in Brazil and South America for over twenty years as a project generator, consultant, and manager for companies both large and small.  In his prior role as Manager of Business Development for Gold Fields, he initiated the acquisitions of the Cerro Corona copper-gold deposit in Peru and the Bolivar gold assets in Venezuela (now with Rusuro). 

Michael Bennell, Vice President of Exploration, is also a geologist with more than 20 years’ experience in the South American mining industry.  Bennell also led exploration efforts for his former employer, BHP, that resulted in the discovery of five gold deposits in West Africa.  He also made the initial discovery of the Boa Vista nickel deposit in Goiás, Brazil.

Gauthier himself has an impressive reputation as an international explorationist.  Gauthier headed Cambior’s operations in the Andes and Peru for 18 years, where he participated in the discovery of the “La Arena” gold deposit, as well as several other finds in Peru, Mexico and Chile.  Previously, at Falconbridge, Inc., he was involved in the Lac Short gold mine discovery in northwest Quebec and the discovery of Rio Alto in Peru.  Gauthier also has 7 years’ experience in China.

“We believe in grass-roots exploration, we believe in early stage, high-quality projects, and we believe in the power of the database,” said Gauthier.  “First, we are trying to build a solid database of these countries in which we operate.  Then, with our own experience… we know we can come up with a good, solid exploration plan to look for world-class deposits.”

Asked about the character of the deposits Lara is exploring, Gauthier told us that the company prefers to look for multi-elements, not focus on one specific metal.  “Because we believe when you generate, you go with the opportunities,” he explained.  Lara also believes in diversifying their risk at the project level.  In Brazil, they are involved in base metals, precious metals, and fertilizer. In Peru, they are involved in gold and base metals, principally copper.  And in China, they are involved in gold and base metals.

The company’s approach to exploration heavily leverages joint ventures to spread project risk and minimize funding requirements by the Company, leaving only upside potential for equity holders, leaving an opportunity of high returns with limited downside as the funding (money spent) of the projects is done by the JV Partner.  This also allows the equity holders free, unbiased, and scrutinized due-diligence as the JV Partner isn’t collecting a fee for their due diligence, the due-diligence is done trained geologists with access to advanced geological technical equipment, and at the end of the process the people doing the due-diligence usually agree to terms to invest their Company’s Capital – the best form of due-diligence on a project, putting money into the project.  At present, the company has more than ten joint ventures with drill programs scheduled for 2011, and Gauthier projects that before year’s end they could have as many as 15 active joint ventures.  “We’re negotiating on a constant basis,” he commented.  The company’s investor presentation indicates that they have seven projects ready for JV.  This says a lot about a Management’s ability to find good generative projects and find qualified partners to JV them.

Lara’s strategy is to perform the geology and geophysics effort for each project, bringing a property nearly to drilling stage before entering a joint venture.  This allows them to identify the ideal partner to fit the opportunity and to appropriately share the risk for the next phase.

Gauthier was bullish about prospects at the company’s current properties, many of which he believes have world-class potential.  He referred with particular optimism to the Sumaq-Sami, Picha, Chocos, and Corina projects, all of which are near drilling stage in Peru.

We talked a bit with Gauthier about the company’s stock.  Lara has approximately 26 million shares issued and outstanding.  Management owns approximately 10% of the stock.  Gauthier explained that the company’s goal is to maximize the value to shareholders through appreciation of stock value, and to protect shareholders equity by not constantly coming to the market and diluting the shareholders; it was also noted that this Company hasn’t raised money in the public domain since 2006 other than to do strategic private placements for Sprott Resource Corp. and the Lundin family..   They are also very proud of their low burn rate.  When asked why investors should consider their stock, Gauthier was quick to respond. “First, you can expose yourself to jurisdictions with a very high potential for world-class ore deposits – “upside potential”,” he said.  He was favorable about investors’ opportunity to be involved from the very beginning with these discoveries.  In addition, he pointed out, Lara’s investors spread their capital risk among various commodities and partners – “protecting equityholders”.  The company’s investor presentation also reveals a strong M & A element.  Lara sold a phosphate deposit in 2008 and acquired Maxy Gold Corp. via friendly takeover in 2009. 

Gauthier concluded our interview enthusiastically, “We really take care to grow shareholder value and protect the shareholder interest – as we are also significant shareholders; all that with a very low burn rate.”

This is a prospect generator whose strategies for diversification, shared risk, and reducing their burn rate make them an interesting investment possibility.  As Gauthier told us, “It’s more or less like intellectual property, right?  We’re selling expertise and creativity.”  If the game really is about expertise and creativity, Lara Exploration seems bound to excel with Gauthier and his associates at the helm.

Summary