IOS Services Geoscientifiques inc

IOS

Services Geoscientifiques, Inc

HOW TO BE THE LEADING FIRM

IOS Services Geoscientifiques, Inc. is known

employees, clients, and the company itself.

as the leader in mineral exploration services in QuĂŠbec, the most favorable juridiction in Canada

In 1992 CEO RĂŠjean Girard and five other

for mining. How comes a

firm established

master and Ph.D. students started IOS Services

outside the prolific Abitibi area or the big financial

GĂŠoscientifiques. Being located in the frenchmost

centres can establish itself as such? Simply

part of Quebec, they initially focused on that

by broadening its offering and by capitalizing

relatively small market by offering a wider variety

on its most precious asset: its talented human

of services, rather than specialising and tackling

resources! Easy to say, in fact everybody say

the large North-American market. The strategy

so! But the challenge is to maintain your talent

paid off. Specialized firms are very severely hurt

through the whirlpool of an industry driven

by recession, when their specialty get out of

by disruptive burst and bust cycles. And they

fashion.

do so by preparing ahead for these inevitable cycles of

the mining industry, even through

economic downturns. This preparation creates a stable, sustainable environment that benefits

IOS is now the largest and most diversified business of its kind, both in Quebec and in Canada. Even in the midst of the worst recession

in 40 years, it still employs 40 full time staff, 70%

magic trick as well as the challenge! Pooling a

of whom are scientists by training. While most

community of employee with a broad spectrum

of its business is domestic (80%), it now lure the

of talents and expertise enable cross-breeding

national market. The company has carried out

of the knowhow which benefits to all levels the

1,350 projects so far, for hundreds of clients,

services. Field expertise on various mineral

both juniors companies, multinational firms and

deposit is transmitted to the petrographer, which

governments. And strategy remained the same

benefits the geochemist, etc. Being exposed

through the years, the broad spectrum of services

to a vast array of projects, with any imaginable

enable the firm to reach a very diverse clientele,

commodities such as gold or iron or graphite or

and once in the while one of these clients comes

even limestone, opens the minds of the geologists

with the big mandate.

and enable them to think out of the boxes where other stay in their ruts.

The capability to offers a wide spectrum of services, from thin section manufacturing to full scale resource definition drilling, is the

Booms and

Busts

Mining is a boom-and-burst driven industry at an unimaginable scale. The biggest challenge a service company like IOS faces is learning to navigate economic cycles. And these economic cycles are now even shorter than the time required to develop a mine. Furthermore, most mine life are now barely longer than these economic cycles. Mining is driven by speculation on commodities, which is short-term in nature. This brings periods of follies and severe drought. And when the doldrums knock at the doors, most mine managers panic and slash into exploration expenditure, assuming they will be capable to simply buy-out the resources they need at the appropriate time. So when the ore runs out everyone is exploring at once without having the properly trained staff. This is what creates the main boom cycle in the mineral exploration industry. And the first to suffer these cycles are the people working in mineral exploration. These cycles create an exodus of the talent, and everything needs to be rebuilt at each cycle. However, it takes years and years to train a geoscientist... And this is where is hidden our secret recipe... Maintaining our skilled workforce ready at any cost for the next boom. Because the money made in boom time overwhelmingly compensate for the losses of the doldrums.

With experience, we can fairly predict upcoming boom cycles by watching industries that use the metals. For example, as the renewable industry picks up, the need for copper wire grows. A hybrid car uses 200 pounds of copper, as compared with 40 pounds used by the average car. Utilities also use copper wire. So the copper industry will boom as more and more countries swing toward green infrastructure and green products. Same with all the exotic metals used by the battery industry such as lithium, vanadium or graphite.

Meanwhile, RĂŠjean says, the entire mining industry is in a deep recession - worse than the last 45 years and he sees indications that the recession is artificial. Exploration expenditures outside of mine site are horrible, at 8% of what

it was four years ago. And in paradox, prices

makes profits and there are investors capable to

of metals are correct considering they are prized

bank big money on gold.

in overinflated US dollars. For example, at US$1,060 per ounce of gold (C$1,600), when the

One of the problem of the exploration industry

price of oil collapsed and when labor, electricity

is access to capitals. These companies raise

and other cost are in Canadian dollars, it do not

their money on the stock market, where the

affected the mining industry that much. Yes the

small capitalization companies are devaluated.

metal price collapsed, but from a ballooned price

Why investing in a small cap penny stock if blue

down to a sustainable price!. Yet the miners

chips stocks provide 20% per year return on

6

investment? Because the Dow Jones is out of balance with the profits of the big corporations, and because the mining juniors are so devaluated that any market wrinkle will boast them! Things could change quickly, according to Réjean. The

whole situation is volatile and unpredictable.

Just be ready!

During troubled times like this, a proactive government can help prop up the industry. In

May 2011 the government of Quebec passed “Plan Nord” to develop the scarcely populated area of Northern Quebec. The plan encourages mining and provides numerous incentives to resource companies. The government also helps reduce costs by offering substantial income tax credits for mineral exploration. So, even the government consider its time to invest in our resources...

Accordingly, in 2015 a third of IOS’s revenue came from research projects for the government’s Department of Natural Resources. In addition, IOS actively networks with many of the leading geoscientists in the province’s universities and national laboratories. This type of work represents one of the company’s survival strategies and a cornerstone for innovation.

IOS Sustainability

Strategies

IOS is the only service company in Quebec that effectively carries out the entire mineral exploration process. This is a big difference from what we see in the rest of Canada. Québec is a small market, isolated by its language and culture. You cannot built companies on specialized services in Québec, the market is simply too small. So we need to fill-in every niches. In doing such, we can touch a very broad base of client. As the mining industry grows, IOS identifies new niches and jumps in to fill them first, thereby keeping its lead over competitors.

And through time, we can capitalize on our reputation and establish ourselves with a few highly specialized services which can be

exported to the rest of the country despite our language handicap. An example is out new “ARTGold” process, which enable to recover micron-size gold particle from sediments, a technique broadly used in the gold exploration.

However, our process enable recovering gold grains an order of magnitude smaller than the leading competition, which enable to client to reduce sample size and thus overall costs.

It’s a million dollar R&D investment, but it will pay back soon. Another example is the partnership we developed with BearingPoint, a leading business management firm, in regard

currently one of the only firm in the world with this capability. A third example, talking green, we developed a modular heating system for isolated camp based on heat exchanging from lakes. It just creates 80% saving on fuel, the third largest expense on exploration program! In brief, a company could be built on a single of these innovations, and we are piling them!

Such innovation-driven approach also brings to us a pipeline of innovative exploration projects. As example is the vanadium deposit we work with VanadiumCorp Resources.

Vanadium can be used as a very efficient electrolyte for fuel cells. And when we say fuel cells, we talk about electrical grid stabilizer, megawatts-hours batteries! We bullishly work with our client on this green project since years, convinced this is one of the solution to the energy crisis. This technology should trigger a huge boom in the ever-growing renewable industry and a subsequent boom in vanadium production.

of applying artificial intelligence to mineral exploration. We adapted their “Hypercube” rare event prediction software to GIS based system, and you would be surprised on how powerful are its predictive capacity! We are

Surfing the

cycles

Boom and burst cycles are hard on the industry, but more even so on personnel. Most worker

cannot cope with such, they have family to feed and need stable incomes. And this is where we have to innovate in our managerial approach.

Simply carry off-cycle R&D. Doing such, and since our staff has scientific training, we launch research and development project when the work load diminishes. This enable us to keep talented staff at work, stimulate their creativity, preparing the offering for the next boom and maintaining the skill ahead of competition.

When the boom comes back, they are ready with exclusive and updated skills. As example, we set money aside within the local university fundation, which we use to support our professional going back for graduate studies!

Summer/winter cycles creates similar short-

scale mini-boom/bust. Consequently, most service providers to exploration companies hire temporary workers to collect samples in the summer, and lay them out during winter. Inversely, laboratory have to process during winter time the huge loads of samples collected in summer. So IOS trains its staff to handle both. This strategy provides year round work for staff and increases their skills - allowing the field geologist to understand the entire exploration process and improve the quality of their decisions. It also helps stabilise the company and retain staff, enabling the company to constantly adjust.

As a result, RĂŠjean says, “We have the highest seniority in the industry in Quebec . . . even

better than multinationals. This speaks by itself! “ During boom times IOS works feverishly to complete as much work as possible. These are times where income more than repays the expenses of down times. During down times the company prepares for booms by developing new niches and enhancing the skills of its specialists. During the summer, staff primarily conducts field work (e.g. gathering samples). During the winter they do lab work (e.g. analysing samples and making predictions). And overall, the whole thing balance and the worker have stable jobs!

Results of

Strategies Keeping skilled staff results in a company being able to flesh out ideas that competition is not able to. And these benefits are transmitted to the client and the whole community. It create an efficient work environment! For example, IOS realised that using helicopters to serve remote areas was not always financially smart. A single helicopter can burn about 500 drums of fuel in a sole program. This is four big lorries of drum, just to fly around the mining camps.

Réjean declared, “We can do much better than that.” and we started working with a local machine shop, ALL Technologie Inc., who developed a revolutionary trackmounted, rough-terrain vehicle that floats, enabling it wander with ease without footprint in the Canadian barrens. The vehicle, called KASKOO, uses only 10 litres of fuel per hour, as compared with one drum of fuel per hour for a helicopter. This is 90% fuel saving on

a per kilometre basis! And it can replace the helicopter in about 30% of the projects.

This vehicle is now on the market. Ecology shall meet economy!

Another example, by bridging exploration geologist, geochemist, mineralogist and biologist, we developed a geochemical method capable to “see” though thick overburden, such as the Northern Abitibi clay belt. It took us more than 15 years to come to a workable solution, but now we have it and we are the only ones! Each of these geochemistry projects require to put at work a team including field geoscientists, logisitic guys, laboratory technicians and artificial intelligence specialists! Its an ecosystem, from trucker to Ph.D. On the community side, sustainability has to be interwoven with day to day practice.

It’s a state of mind we have to create, and the cornerstone is education. Therefore, IOS is working to improve the overall skills of workers in the industry, to transmit its knowhow. They have several programs that help senior professionals pass on their practical knowledge to younger workers: • Paying tuition fees, about $2,000, to university students they’ve hired during the summer (more than 200 so far).

• Sponsoring graduate students to do precompetitive research and development, then subsidising them to continue their studies and hiring them afterward.

• Collaborating to a professional masters degree program consisting of short courses presented by industry professionals with

vast experience including Réjean himself.

• Presenting abundant technical talks in conventions and discussion groups. Because ideas spawns from discussion.

Expecting even more difficult years ahead?

Yes! And Réjean is determined to keep the company’s key employees within an innovative business culture. They are, in his words, “the biggest asset we have. They’re not just dollar sign on the balance sheet. That’s the people who do the work.”And will the competition try to copy us? So what, we will innovate again! “

Corporate / General Offices: 1319, Saint-Paul boul., Chicoutimi (Quebec) G7J 3Y2 : 418 698-4498 Phone Fax : 418 698-4262 Toll-free in Canada : 1 800 307-4498 http://www.iosgeo.com

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