Cobb Resources Strikes It Rich

George Lotspeich has a lot of tenacity and a nose for finding uranium. That's catapulted his mining company to the top of the INC. 100.

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Cobb Resources is not a typical small company -- not with growth of 366,567% during the past five years. That spectacular gain gave Cobb the top spot on the recent INC. 100, this magazine's ranking of the fastest-growing publicly held companies in the United States (INC., May 1981).

Note: This table may be divided, and additional information on a particular entry may appear on more than one screen.

COBB RESOURCES: 366,567% GROWTH DURING THE PAST FIVE YEARS

Years ended December 31

Key factors 1976 1977 1978

Revenues $2,993 $1,394 $3,371,723

Uranium 3,340,793

Oil & gas

Earnings (40,404) (172,382) 452,281

Production

Uranium (lbs.) 89,930

Oil (barrels)

Gas (Mcf)

Six

months Year

ended June 30 ended June 30 *

Key factors 1979 1980

Revenues $2,067,060 $11,041,501

Uranium 2,036,286 10,451,684

Oil & gas 563,934

Earnings 11,132 1,190,849

Production

Uranium (lbs.) 54,140 260,950

Oil (barrels) 6,046

Gas (Mcf) 81,214

* Reflects merger with Chase

Cobb's performance is an example of the occasional big wins of companies that gamble in the high-stakes game of mining for minerals, oil, and gas. During its first 10 years, while developing its mining properties, the company made virtually no money. But in 1978, its first year of volume production, Cobb registered $3 million, and by 1980 sales hit $11 million.

Even $11 million is petty cash to most firms in Cobb's major business, uranium mining. Survival in the uranium business is a harsh test of a company's ability to deal with extremes in every phase of its operation. Start-up costs are staggering: Cobb's largest mine took almost two years and over $4 million before it began to produce. Half a dozen state and federal regulatory agencies can claim jurisdiction over a single mine; a permit to begin operation may take two years to obtain. Good miners, when they're to be found, can earn $50,000 to $80,000 a year. Ore prices can drop sharply without warning: Most recently, the Three Mile Island nuclear accident led to a decline of about 45% between December 1979 and December 1980.

As a result, about 90% of the estimated $1 billion in U.S. uranium sales last year went to only a dozen or so companies. All are giants; more and more are multinational oil companies -- Exxon and Atlantic Richfield, for example -- that can tolerate the extremes of the uranium business because it represents a small portion of their revenues.

Those were the odds facing George Lotspeich in 1968 when, at the age of 41, he started Hydro Nuclear -- what is today Cobb Resources -- in Albuquerque, N.Mex. Lotspeich had earned a geology degree from the University of New Mexico, served in the Air Force during World War II, prospected in the jungles of South America, and roamed the Southwest as a geologist, miner, and mining engineer. In the process, he had developed what the old-timers call a "miner's eye" for spotting and analyzing ore the way an ace sleuth might spot clues in the pages of a detective thriller. Says his former banker, Ed Pace: "George had developed an amazing sixth sense. He simply knows more about minerals in this part of the country than anyone I've ever seen."

Uranium was the focus of Lotspeich's sixth sense back in 1968. From its beginnings in the late '40s until the mid-'60s, the uranium business was a captive of the Atomic Energy Commission, which bought ore for its weapons systems. Then, in the early '60s, the government announced its intention to gradually phase out as a major buyer and allow private purchase of uranium. Prices started dropping, and so did most of the smaller operators in the business. But then a few surviving larger companies began to nurture commercial uses of uranium as fuel. By the late 1960s, prices stabilized at about six dollars a pound, based on forecasts that uranium was once again an up-and-coming business.

Given that hint of future glory, George Lotspeich began to think about the potential of the nuclear power industry. But he didn't want to be simply one more of hundreds of exploration firms that prospect for ore, then sell the right to the mine. He knew that the good long-term money -- and the higher risks -- came from being a producer, mining the ore. Lotspeich set out to build a production company.

Getting into mining as a small independent producer is an agonizingly slow process. It means years of combing the geological records, exploring mine sites, and hunting down landowners as large as the Navajo nation or as small as a Denver retiree. It means weeks of negotiating deals at the "right price," based on a best guess of how costly the ore will be to mine and how much it will fetch when it's finally on the market several years later. It means betting on deal after deal, searching for the one in 10 or 20 years that will put you solidly in business.

From 1968 to 1977, George Lotspeich did the legwork, set up the deals, and earned a reputation for having, as one friend puts it, "a ton of tenacity." He certainly wasn't earning much else. But, along the way, he came across a deal at an estate auction that would eventually make him $15 million.

The estate had belonged to a near-legendary figure in New Mexico, Miss Stella Dysart. Dysart had come to Albuquerque in the 1920s with what was then viewed as a revolutionary plan: selling the oil and gas interests on small, one-to-three-acre tracts to individuals, promising them riches when the wells gushed in. Buyers flocked to Dysart, who then purchased thousands of acres northwest of Albuquerque in a region known as Ambrosia Lake. Dysart never struck oil, however. Only later did her lands prove to contain one of the richest reserves of uranium in the United States. Her reward was a permanent place in the miners' lexicon for "dysartized" tracts -- small, individually owned plots broken out of a larger property.

In 1971, George Lotspeich spent $400,000 to acquire an option to purchase all the Ambrosia Lake properties owned by the Dysart estate, plus an option to repurchase adjoining lands that Dysart had sold in the early '60s to a joint uranium venture of two major mining companies, United Nuclear and Homestake Mining Co. Shrewd until the last, Dysart had written into her original sales agreement with the two companies a provision that gave her the right to reacquire her lands after 10 years. The United Nuclear-Homestake Partners didn't balk, certain that they would have the properties mined out before the time elapsed.

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