“Did you know you were getting the better end of that deal with Kinross?” I asked Lukas Lundin in his Vancouver office earlier this week.
“No, No, No,” he told me, “we thought it was worth more. You always love your own stuff.” Lukas laughed infectiously. Soon I was laughing along with him.
The Lundin organization’s $9.2 billion sale of Red Back Mining to Kinross Gold in 2010 knighted the Sweden-born magnate into the Resource Hall Of Fame. For this was a deal that led to billions in writedowns for Kinross and the early retirement of Kinross CEO Tye Burt. Some say the sale was a sign of the times, perfectly encapsulating the excess that characterized the past decade’s resource bull market.
For the Lundins, it was a demonstration of impeccable timing. For their shareholders, incredible value was created — in all, they saw a 1041% return (total investment minus cash flows vs. final consideration).
The Lundins control exploration, development and production interests covering virtually every commodity around the world. For over 40 years, they’ve been one of the sharpest organizations in the sector, identifying exceptional resource projects, unlocking their value, and earning tens of billions for investors.
Family patriarch Adolf Lundin, who succumbed to leukemia in 2006, devoted the better part of his life to wildcatting, taking spectacular risks that eventually paid off.
In one of his first forays into the business in 1972, Adolf famously bet a Qatari Sheikh a million dollars it would rain the following day in the deserts of Qatar. The Sheikh accepted the bet and won. Shortly thereafter, Lundin was granted the licenses that led to the discovery of one the world’s largest gas/condensate fields.
With no guts, no glory as their family motto, the Lundins are just as comfortable in the jungles and deserts of Congo and Kurdistan as they are in boardrooms in Vancouver and Geneva. In 1992, with sons Lukas and Ian on board, the family invested $12 million in an Argentinian copper asset, Bajo de la Alumbrera. In 1995, it sold for $500 million. Today, the Lundin Organization controls mining and energy interests worth over $13 billion.
Success in the resource business takes three things, Lukas told me. “First — risk taking. Second — you have to be a giant optimist. Third — you have to be willing to go out there and do it. It’s easy to sit on a couch and talk about it, but then you have to actually fly to some crazy place and pick up the concessions and develop them.”
Some of Lundin’s views are not as conventional as you might expect of a corporate titan. For example, Lukas argues that demand for commodities is still strong, and the situation in Europe overblown. Most interesting is his forecast for America: “I think the US is on a complete tear. The next 10 years will bring the biggest economic boom you’ll see in your lifetime, because of free energy, a very flexible and productive workforce, and automation. You don’t need to send it to Japan and China anymore — you can do it at home.”
Investors will again see staggering returns in the resource business, Lundin predicted, but without a discovery, it doesn’t work. “Very few oil and gas and mining professionals — only a handful of people in the world — actually find deposits. It’s a mixture of art and geology.”