A pair of junior mining firms are turning to innovation to try to thrive in a rough bear market. And everyone seems to think it’s about time.

“The mining industry is really prehistoric in the way we do business,” said George Salamis, chairman of Integra Gold Corp.

Indeed. As the junior resource market collapsed over the past several years, many companies have hoarded their cash and done almost nothing to create value for investors. Predictably, stock prices have languished.

But over the last few weeks, a couple of creative ideas have been put into action in this sector. If successful, they will likely inspire more.

Vancouver-based Integra announced a “crowd-sourcing gold rush challenge” this week to try to find gold on its Sigma-Lamaque project in northwest Quebec.

Integra’s management acquired the past-producing mine out of bankruptcy last year. When they went through the old mine office, they found hard drives holding an astounding six terabytes of mining records dating back to 1933. That included data from about 30,000 old drill holes on the property.

Rather than pay consultants millions of dollars to sift through the records, Integra decided to put everything online and invite the public to study it. The company is offering a $1 million prize to whomever offers the best advice on where to make a gold discovery, with the money being raised through sponsorships.

“The whole idea was born out of the notion of using crowdsourcing to solve challenges,” Salamis said.

Traditionally, gold miners have viewed their geologic data as proprietary and kept it to themselves. But in 2000, Goldcorp Inc.’s then-chief executive Rob McEwen launched the “Goldcorp Challenge,” in which he released data from the Red Lake gold camp online and invited the public to help him identify drilling targets. It ended up being a huge success for Goldcorp.

The Goldcorp contest was part of the inspiration for Integra. Salamis said his company was also inspired by the first “XPRIZE” competition, which challenged the public to design a spacecraft for tourists.

The mining industry is really prehistoric in the way we do business

Haywood Securities analyst Kerry Smith expects the contest to attract mining companies, consultants, PhD students, mathematicians, and even people interested in game theory. “The competition should attract a good list of smart, and probably out-of-the-box thinkers,” he said in a note.

Given the success Goldcorp had, Salamis cannot figure out why other miners haven’t tried to replicate it. Integra owns the land, so he sees no benefit in keeping the data secret.

The other creative idea was also inspired by the Goldcorp Challenge. On June 9, Abitibi Royalties Inc. launched an online royalty search platform. The company invited cash-poor junior mining companies to submit data on their projects. If Abitibi thinks a submission has potential, it will pay the claim fees in exchange for a permanent royalty on the project.

In essence, the program allows Abitibi to identify royalty investments without having to go look for them.

“I think we can build a large inventory of them,” president Ian Ball said in a recent interview. Twenty or 30 would be an attractive number.”

For now, these innovative ideas are the exception rather than the rule in junior mining. But Salamis said he expects to see more companies embrace creativity in the years ahead.

“I know why we’re doing it. And I know the benefits it’s going to bring,” he said.

Financial Post

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