The Mining Stock Report

The first segment of a series on evaluating junior mining stocks. What is the single largest weighted factor when evaluating a junior mining company? Management.

One of the things that I am constantly asked from subscribers is what is next hot sector or commodity? Where is next hot pick or mover and shaker in the industry? People get psyched about a particular commodity and they begin looking for cheap options in the sector, which in my opinion is a very poor method to follow. When I am looking for value in the junior mining sector, it is not the commodity or the property which hit my radar first, it is management. Hands down, the number on factor which influences my evaluation of a junior mining company is the leadership behind the company.

Junior mining companies are risky investments, there are no two ways about it, and the primary factor in navigating that risk is the leadership of the company. I would much rather put resources behind a good property with a great management team than a great property with a good to mediocre leadership group, it really is that simple. First off, the one thing that quality management brings to the table is the ability to get things done. All too often, an inexperienced management team can burn through resources making little to no headway because they either lack the know-how or skills on how to carry out a project. The ability to get things done is a must for any successful business, but in the mining sector, learning on the job can cost millions of dollars when a drill program or exploration project is not managed properly.

Things to look for from a management team should focus on their experience in the mining industry, and more specifically on making discoveries in the commodity that the company is conducting exploration. While we often see management teams formed with successful individuals, mining is a very specific industry. Next, is the team experienced for the current stage and tasks of the company? Small junior mining companies operate in a different manner than larger, well established producers, which often requires a different skill set.

The ultimate goal of the company can differ from one junior miner to the next, some envision themselves as eventual small producers with long-term ambitions, while others engage in a mining exploration program with the sole focus of being bought out by a major. One think I suggest to everyone who is doing their due diligence is to call the company, and ask them questions so that you can get a feel for what the ultimate goal for management is, and how the entire management teams works as a unit. Too often people hesitate to pick up the phone and call the company, which is perhaps the most effective tool an investor can employ. Be weary of management that is reluctant to answer questions, or vague when being pinned to provide specific answers. A good management team knows the value to addressing their investor base on a personal level, as word of mouth is perhaps the best investor relations method or strategy.

In concluding the initial segment of our series on evaluating junior mining stock, remember to always look at the management team, and place a significant amount of weight on that evaluation. Experience is a key factor, and always remember to not be intimidated and pick up the phone to call the company, it can save you from making a poor investment. We will be presenting the second criteria for evaluation junior mining stocks shorty, and if you have any questions please feel free to contact us directly, we would be happy to answer any questions that we can.

Update: Check out Part II of this series:
Evaluating Junior Mining Stocks Part II: Capital