Avoid Mining Stock Mistakes and Investor Misconceptions Corrected - Wisdom from MSE Guest Experts

0:00[Music]

0:02you are listening to Mining stock

0:05education I'm Bill Powers thanks for

0:07tuning in to Mining stock education and

0:09Today's Show is a compilation episode

0:12dealing with investor misperceptions and

0:16common investor mistakes to avoid you're

0:19going to hear from guests dating back to

0:212018 you'll hear from CEOs geologists

0:25newsletter writers mining entrepreneurs

0:28stock Brokers and investors like myself

0:31first you're going to hear from Steve

0:33Lewin he's the retired IM amold CEO and

0:36he talks about investor schizophrenia

0:40let's listen to Steve considering you're

0:41now retired as the CEO of imold perhaps

0:44you have a little can be a little more

0:46candid at answering this question but

0:48what perhaps frustrated you the most or

0:50what misconceptions did you see with

0:53investors regarding their expectations

0:55of you as a CEO of a gold producer

1:00uh schizophrenia would be a word that I

1:03would use and I again not being

1:05hopefully overly critical

1:08um when I joined the company there was a

1:12I when I joined the company there was a

1:14big emphasis on what I call Long cycle

1:17economics so Capital was king um they

1:22the the concern was

1:25reserves um exploration uh programs that

1:29were fairly robust Etc so gold prices

1:32are moving up at an exponential rate uh

1:36every discussion I had uh at the various

1:39conferences tied to Long cycle economics

1:43as soon as the gold price started to

1:45move down uh that was thrown out the

1:48window so I'll give you a quick example

1:51we sold a deposit tar demain in uh West

1:56Africa in uh DRC and we sold it to

2:00goldfields and we netted uh 667 million

2:04after tax on this sale and it was a

2:08phenomenal deal for inold shareholders

2:11good deal for Nick colland at uh at uh

2:16goldfields at the time but I got

2:19massacred by investors who said what are

2:23you doing selling ounces we had an 18%

2:26interest cost structure was going to go

2:28through the roof Reserves were

2:30challenged and this was like a 37% IR

2:35not joking and they were angry with me

2:39they said you should not be selling

2:41ounces two years later they said that

2:45was the best deal of the of your

2:49career and it was by the way so they

2:53they moved from long cycle economics to

2:56short cycle economics what do I mean by

2:58short cycle economics something that's

3:00going to throw off cash flow fairly

3:02quickly less than a three-year payback

3:05on investment and they wanted wanted to

3:08see a self-funding model where you're

3:10not coming to the investor for Equity uh

3:14to build projects you're going to use

3:16your ca excess cash flow to keep the

3:19business sustained or grow the business

3:21so they move from please come to the

3:24market $8 billion worth of equity

3:26financing in

3:282011 to 2 billion of equity financing on

3:32a good day in

3:342016 so you saw this transition from gby

3:39the long cycle to short cycle and you

3:43may see people go back a little bit to

3:45Long cycle here simply because they can

3:48see the fact that Capital has been uh

3:51really scarce and reduced in terms of

3:54reinvesting you see that in the oil and

3:56gas space as well so they may come back

3:59a little bit but think they're going to

4:00stay in the short cycle frame of mind

4:02for for some time here now you will hear

4:05from Brian Christie he's a director at

4:07wallbridge mining he's also the chairman

4:09of Fury gold mines he used to work as a

4:12geologist he was also an equity uh

4:15mining analyst and Brian in a previous

4:18show talks about how investors can get

4:22shortsighted and lose the long-term

4:24perspective that they need at times

4:26listen to Brian talk about what

4:28investors get wrong with when you were

4:30at um egn EO leading investor relations

4:33from your Vantage Point what did you

4:35feel like investors misperceived or got

4:38wrong the most probably the timing in

4:41the cycle as I said they often tend to

4:44buy when prices are ramping and that's

4:47often difficult because you never know

4:49when the prices going to roll over uh I

4:52also think now uh there's too much

4:55short-term focus on you know earnings

4:58quarterly earnings a lot of that is

5:00generated by the hedge fund Community

5:04those guys have become some of the

5:05dominant institutional investors with a

5:08lot of the big brokerages whether it's

5:10in the United States or Canada there's

5:12kind of a a list of maybe about 80 of

5:15them and they're the guys that are doing

5:17the trading they're the guys that are

5:18shorting going long and everything's

5:20this short-term focus and I I think as

5:23an investor you need to take a longer

5:26term Focus like a company every so often

5:30on a quarter is good at Miss earnings

5:32but if they miss earnings by a penny is

5:34is that a big deal no because then the

5:37next quarter they're going to beat by

5:38two or three cents so that kind of thing

5:41you kind of got to that's kind of noise

5:44you know as I said always look to see if

5:47there's a fatal flaw somewhere then

5:49that's a different story but you know

5:52you can't really focus on the short-term

5:54trading and you probably have some

5:55clients that do short-term trade uh but

5:58again as I would say say if a stock if

6:01you buy it in the the right time at the

6:03right point when it's not you know

6:06running up to the Moon that I think you

6:09got the ability to trade take some money

6:11and you know just uh be smart about it

6:14next you're going to hear from Rick rule

6:16from my first in-person interview with

6:18Rick at pdac in March of 2018 Rick talks

6:22about the most important thing that

6:24speculators need to analyze and that's

6:27what he says is between your left ear in

6:29your right ear he also talks about time

6:32Horizons and how investors also get that

6:35wrong often times and he talks about how

6:37every investor when you speculate needs

6:39to come up with a probabilistic risk

6:42reward for that investment let's listen

6:45to Rick the Speculator needs to look to

6:47the uh right of their left ear and to

6:49the left of the right ear and analyze

6:52themselves as a Speculator before they

6:53determine the type of speculation that

6:55they go into because the way that the

6:57investor approaches speculation

7:00the Speculator time

7:01frame uh the Speculator skill at trading

7:05or lack of skill in

7:06trading uh the speculators uh reward

7:12expectations all go into the

7:15outcome um there was a point in time

7:19when what worked for speculators was

7:21optionality you buy very very very large

7:23gold deposits that weren't going to make

7:25any money at $700 but could make a lot

7:28at $1,500 those stocks you know went up

7:325 or 600% that was a good deal at that

7:36place in time there are other

7:39speculators who many speculators who

7:42think that their time preference matters

7:45that's a mistake but you have to

7:46acknowledge the mistakes that you're

7:48willing to make many speculators seem to

7:51have stock have trouble holding stock

7:53over a long weekend and I think that's a

7:56function of the fact that they don't

7:57know the companies that they've

7:58speculated in very well they have no

8:00confidence in their

8:02judgment um for

8:04myself uh everything with me is about

8:11probabilistic risk adjusted

8:14rewards and when I look at

8:18Mineral speculation even development

8:20stage spec speculation my expectation is

8:24failure in other words I expect that in

8:2710 decisions I'm going to lose money on

8:29or six do okay on a couple and I

8:32hopefully I'm going to whack the ball

8:33out of the park once or twice I also

8:37prefer personally to ask questions where

8:40the answer begins with when not if so if

8:44I'm speculating on something where

8:45there's a probability that I'm going to

8:47be right but it might happen 3 years

8:48from now or four years from now I'm

8:50inclined to do that most speculators

8:53don't have a time preference that

8:55extends past months into years and I

8:57would say if you look at my record over

8:5935 5 years My Success has come uh from

9:02two things it's come from backing very

9:04good people and many other people don't

9:06discriminate as well as it as well as I

9:07do but it's also because of my

9:10preference for the when issue not the if

9:14issue and the willingness to be patient

9:17when I knew that the answer began with

9:19when in this next clip you're going to

9:21hear from mining entrepreneur Ross

9:23Speedy from an interview I conducted in

9:252021 Ross is going to talk about how

9:27investors need to have a long

9:29perspective not only with their mining

9:31Investments but with how they view

9:33mining

9:34jurisdictions let's listen you touched

9:37on cyclicality there where you mentioned

9:39you can kill the mining industry for 30

9:40years it takes 30 Years to jump back you

9:43went into Ecuador when Ecuador was out

9:45of favor with investors because you saw

9:47the geological potential and so you

9:49developed projects uh and then now the

9:52situation is more favorable can you talk

9:54to the average Speculator that's

9:56listening to us about the cyclicality of

9:58how these J jurisdictions can go from

10:00favorable to mining to unfavorable back

10:03to favorable and hitting that coinciding

10:06with the commodity bull market in this

10:08case gold silver copper that we're

10:10talking about sure I I think that the

10:13bottom line there is that mining is a

10:15long-term gate you know from Discovery

10:17to Productions maybe 20 years and then

10:19you get into production for in many

10:21cases many decades so it's a longterm

10:23game politics is a short-term game and

10:27if you're trying to build a mining

10:30company or mining business in a country

10:32you just have to have your eye on the

10:33long term and everywhere you get these

10:35cyclicality you get this real these

10:37cycles of political uh change you have

10:40you know let's just say a left leaning

10:43government for a while then there's a

10:45right leaning government for a while and

10:47that beguet change they all they all

10:49change around and typically the the the

10:50Cycles are much shorter than sort of

10:52mining Cycles so um I don't actually do

10:57too much you know Naval gazing in terms

11:00of where to go um because I found that

11:06you know mineral projects last a lot

11:08longer than governments and you know you

11:11can't be too clever about trying to

11:12predict a future there's only one guy

11:14who really knows what's going on in the

11:15future and that definitely is not me so

11:18you have to have a strategy I think of

11:21holding your nose if things are not so

11:23good and hoping they'll change but in

11:25the meantime keeping on exploring

11:26keeping on developing because it's a

11:28long-term game and you know to some

11:31degree uh you've got to be Diversified

11:33is so that if change happens in one

11:35place you know it's maybe going to be

11:37better in one and maybe not as good in

11:38another but if you're in Diversified

11:40locations you're not going to be hurt

11:41too badly so diversifications work well

11:44with me I'll come back to Peru as an

11:46example you know we went into Peru in

11:501995 uh Peru had just come out of of 10

11:53years of you know triple digit inflation

11:57tremendous political strife uh terrorism

12:01was just everywhere you couldn't get

12:03power was was was failing all the time I

12:05mean the country was just a mess it was

12:06a fail country all of a sudden a new

12:08government came in that guy guy Alberto

12:10fujimi he sort of took a big broom to

12:13everything cleaned it up got investment

12:14running again and literally it's been

12:16going now for 50 years sucess sorry 30

12:19years successfully so uh if you had made

12:22your investment decision then on what

12:24had happened in the last 10 years you

12:26never would have invested but if you

12:28realize that yes was happening and it

12:30needed to happen you know it's been it's

12:32been a home run for many companies

12:33including including mine so uh you just

12:37can't be too too clever and and analyze

12:39things too closely you've got to think

12:41long term and get out of the noise and

12:42look at the big picture many mining CEOs

12:45and management teams pay themselves too

12:47much and can be incentivized by a change

12:49of control fee so they sell their

12:51company while investors lose money yet

12:55they cash in millions in a chagy control

12:57fee this rightly upsets investors

13:00however I interviewed haodan formerly of

13:02osino resources about 6 years ago and he

13:05talks about how you have to pay the

13:08right mining executive enough money in

13:10order to keep and retain them but also

13:13how a change of control fee the way it's

13:16set up it's supposed to positively

13:18incentivize management to do the right

13:20thing and give up their salary at the

13:22right time hayan talks about how this

13:25change of control fee was one of the

13:27things that incentivized him to do do an

13:29m&a deal earlier in his career you and

13:32your co-founders have put a lot of your

13:34own money investment dollars into

13:36launching this company so you're not

13:38just employees but you're you own a

13:40large share of the company what about

13:42mining execs that maybe they were an

13:44employee for most of their career and

13:46they don't have the capital that maybe

13:48you had when you launched this company

13:51what would be reasonable compensation

13:53for them considering they may not have

13:55as much in terms of investment dollars

13:57when they launch their first solo

13:59project look I mean if you're hiring

14:01somebody who's not a f of the company

14:04then um you're going to have to pay them

14:06because if you pay peanuts you get

14:07peanuts but I think the issue that I

14:09have is that quite often um in the

14:13especially in the junior space it's

14:15difficult well it's very very difficult

14:16to find good people but the best

14:19situation you could be in is if you find

14:21people that are truly aligned IE that

14:22are invested that are not just hired

14:24guns but that are part of the formation

14:27or the or the the

14:29uh you know the start of the company the

14:31growth of the company like in my case I

14:32in my case I've been in the industry for

14:3425 years um if I had stayed at Anglo or

14:37one of the other Blue Chip mining

14:39companies that I worked for um from a

14:41cash perspective I'd be earning a lot

14:43more than than I do now and I have to

14:45ask myself that question sometimes am I

14:46doing the right thing there's a

14:48significant opportunity cost involved

14:50but I do this because um you know I like

14:53the entrepreneurship etc etc ultimately

14:55I have to be comp compensated for that

14:57opportunity cost though um and like in

15:00Oso's case we do that through um Equity

15:03insurances and so forth I know I'm not

15:06answering your question maybe you must

15:07just try and nail me down more directly

15:09but that's that's that's how we do it

15:12and finally Haya uh what is your

15:14perspective on change of control fees uh

15:16this is something that many investors

15:18that I've talked to are frustrated with

15:20with especially when the management

15:22tanks the share price over two years by

15:2450% and then they make millions when

15:26they sell it in a merger or an

15:28acquisition what's your perspective on

15:29change of control fees well I have

15:31strong feelings I I do think they are

15:33necessary because I'm not you know it's

15:35it it change of control fees are there

15:37to deal with the agency problem I'm not

15:39an economist but I mean in PR in in

15:42simple terms agency problem is as as as

15:44a manager you you're there you have a

15:46good job but in order to look after the

15:48uh best interests of the shareholders

15:50you must be incentivized to support

15:53deals if they are good and if they are

15:56um accretive or or you know if they

15:58represent value to shareholders and

16:00that's that's conceptually where these

16:01change of control payments come from and

16:04and therefore I must be in favor of it

16:06in fact I've been in the situation

16:07myself with the last company we sold for

16:09$200 million at the time we had $40

16:11million cash in the bank we knew we had

16:13a great project it was in 2012 we were

16:15living the dream there was no reason for

16:17me to support the B2 Gold Transaction at

16:19the time we had a three times change of

16:21control payment and in today's terms I

16:24guess that would have would be seen to

16:26be excessive in our case we we accepted

16:29the deal with B gold and part of the

16:31reason we accepted it was because of the

16:34change of control payment um and in the

16:37end retrospectively speaking it was the

16:39right thing we did the right thing at

16:40the time so there in that situation the

16:43change of control payment um did what it

16:45was supposed to do but I guess the the

16:47difficulty that you that we have

16:49nowadays and what you're referring to is

16:51that in the last few years there's been

16:52a lot of value destruction in the

16:54industry where management teams have

16:56gotten paid quite High sums of money

17:00regardless of the value destruction and

17:01that's obviously wrong uh but that's a

17:04problem with the structure of the

17:05compensation package not with a change

17:07of control payment or or cash

17:09compensation as such in this next clip

17:12you're going to hear from Rick rule

17:13again and Rick in an interview I

17:15conducted many years ago with him talks

17:17about how nobody can bottom tick and top

17:19tick a market that is an investor

17:21fallacy and misconception if you think

17:23you can do that and he talks about how

17:26many don't have the stomach or the

17:28understanding of what they to endure the

17:30volatility in the junior mining sector

17:32on the way to a 10

17:35bagger when I look back at my real long

17:37ball home runs the 10 Baggers the 20

17:41Baggers there are very few of those that

17:45didn't fall in price 40 or 50% during

17:49the time I held them uh I look at

17:52panamerican Silver you know we did the

17:54first financing there at 50 cents pretty

17:57good Market uh a few few good Market

17:59commentators in those days liked it the

18:01stock went to a buck and a half then it

18:03went to two and a quarter you know from

18:0550 cents the stock goes to two and a

18:06quarter you're feel you're pretty smart

18:08you know then it falls from Two and a

18:11quarter to a buck and a

18:12quarter and you're feeling less

18:15smart the fact that it fell from Two and

18:17a quarter to a buck and a quarter didn't

18:19mean that the silver assets went away or

18:22Ross Bey lost brain cells or that silver

18:25wasn't a good place to be you know then

18:28the stock goes from from a buck and a

18:29quarter to $4 and you're feeling pretty

18:31smart again you know you know then it

18:33falls from $4 to $2 and you're doubting

18:36yourself could it go to a160 I mean I

18:38know $2 is cheap but could it go to A1

18:4060 who

18:42cares you know who cares the upshot of

18:46all that is the stock goes from 50 cents

18:48to

18:48$45 and probably four or five times in

18:52the journey the journey only took six

18:53years which is not an eternity although

18:56it is to many speculators the the stock

18:58price probably fell by half four or five

19:01times uh the idea that I could have

19:03bottom ticked it and top ticked it along

19:05the way isn't even a fantasy the thought

19:08of stupidity and it doesn't matter in

19:11this next segment you're going to hear

19:12from Brian Lenny of junior stock

19:14review.com and Brian's going to talk

19:17about why you must before investing know

19:19what you own and why you own it and you

19:21need to write down write out your

19:23investment thesis and your price Target

19:26so that you have some Target in mind of

19:28when to so listen to Brian now type or

19:31handw write a one-page summary outlining

19:33exactly why you're investing in a

19:34company you're going to want to write

19:36how much you think it's worth what

19:38catalysts are going to propel it higher

19:40in valuation and of course what price

19:42you're going to sell it at you know for

19:44me as a newsl writer I continually write

19:46all my thoughts down you know including

19:48the recommendation articles on our new

19:49pick and I'll tell you it's 100% a major

19:54factor in why You' been is successful

19:57more consistently um over the last you

20:00know seven years since I've been doing

20:02this full-time it makes you crystallize

20:05the investment thesis you know you go

20:07through in a logical manner you go

20:09through that base value calculation it's

20:11quantitative there is definitely some

20:13qualitative especially if you're in the

20:14expiration companies to try to sort that

20:17out how you're going to place value on a

20:19company that essentially has nothing um

20:21but it forces you to do it and then once

20:24you have that Baseline value established

20:26you need to sit there and think okay why

20:29is the share price going to go up why is

20:31the market subtly going to take

20:32recognition besides the middle price

20:34going up which is definitely one of the

20:35factors but remember there's a plethora

20:38of other things that can happen to make

20:39a share price go up so you need to sort

20:41that out and you need to sort it out

20:43over a certain timeline so you write all

20:44this out and in a very concise and

20:47compact format and then finally and

20:50arguably the most important point that

20:52it gets most overlooked is what price

20:54you're going to sell at Price targeting

20:57is something that that you're not just

20:59going to pull out of your head you have

21:00to say Okay this is the base value this

21:03is what the company's going to do uh in

21:05the next year and this is what the share

21:07price should be after they've added all

21:09that value once they've done all that

21:11right for most people that's going to be

21:13the time to sell and of course it's

21:15Market dependent da da but this is these

21:19are the steps I think that most

21:20investors are going to have to take um

21:22and it'll solidify not only why you're

21:24investing in the company but it'll also

21:26catch you if you've got too much Motion

21:29in the decision you're trying to make um

21:31or you're getting out of your comp asy

21:33level next listen to stock broker and

21:37investment adviser Sam broom from sprot

21:40Sam talks about three things that

21:44investors often get wrong when it comes

21:46to your natural resource investing

21:48approach what are the biggest investor

21:50mistakes that there is to avoid sure

21:53yeah um I mean it's a bit of a mindfield

21:55out there for you know for for newbies

21:57in particular

21:59um I think one of the key things you

22:01need void and if I look back to my early

22:03career in this in the sector is falling

22:05in love with the stock how many times

22:07you meet people that they just can't let

22:09go of something it's not working out

22:11they'll they'll rationalize why it's not

22:13working out um when the best thing to do

22:15was probably to sell when when the

22:17fundamentals or or whatever changed um

22:21so I would say number one avoid falling

22:23in love with stocks um and try and keep

22:26uh as objective as you can on the

22:28positions in your

22:30portfolio um the second thing I would

22:33suggest um you want to avoid is trusting

22:36hype so you know whether you're on the

22:39message boards or reading newsletters or

22:42whatever you're doing chances are the

22:44things you're going to hear the most

22:45about are the hypest you know the the

22:47most promoted uh stuff so unless you're

22:51in those things really early probably

22:53before you hear the hype um your chances

22:55are getting burnt uh particularly if

22:58you're not in a Raging Bull Market where

23:00everything's going up um is pretty high

23:03um so if you if you're hearing about

23:04something and the Stock's already up two

23:06three

23:07400% um just be very very cautious uh

23:10cuz you know chances are you're you're

23:13hearing it last and you're going to get

23:14burnt so the last thing um the biggest

23:18mistake to avoid I would say is not to

23:20have any risk management in place so

23:23depending on where within the natural

23:25resource space you're investing that

23:27will you know the risk management

23:30measures you can employ will differ if

23:32all you do is invest in the junior space

23:36it's it's hard to use things like stop

23:37losses because the liquidity in these

23:39positions is so poor that you can't be

23:41sure of you know your stop loss measures

23:44working and things like that so your

23:46real your real weapon is position sizing

23:49you don't want to have too much no

23:51matter what you conviction is of your

23:54entire portfolio in a single Junior name

23:56that's just lesson number one

23:59um if you're in slightly more liquid

24:01names so your larger sort of single

24:03asset development stage companies

24:05through to your midcap producers and

24:07Majors where you there decent trading

24:09volumes you can be a little bit more

24:12secure and using things like stop losses

24:15the real key is to have some idea of the

24:19level or or something some sort of

24:21trigger whether it's a price point

24:23whether it's a uh fundamental event or

24:26something like that where you're willing

24:28to get out of a trade and and admit

24:31defeat and say Yep this one didn't work

24:32out cu too many people buy into things

24:35um and and either the story changes or

24:38they didn't fully understand the story

24:40when they got into a position and they

24:43you know they fall in love and they

24:44don't get out so you need to have some

24:46kind of risk management uh with your

24:49investing and your trading next let's

24:52listen to Tyron bronach he's currently a

24:55junior mining CEO but he also in his

24:57past career has served as an analyst and

25:00a geologist and is well-versed in the

25:03junior mining industry he talks about

25:06how as investors you got to be careful

25:08that you're not Charmed by Executives or

25:10promoters to where you make the wrong

25:12investment decision and he also talks

25:15about how you could miss current

25:17opportunities because you're taking a

25:19past negative experience and filtering

25:22the current opportunity through that

25:24negative experience let's listen what

25:27are some key mistakes that you you've

25:28seen professional investors make you've

25:30mentioned some of them but any more you

25:31can share yeah there's h two more uh I

25:34would share uh the first one is um

25:37people on the S side can be very

25:38Charming okay and and sometimes

25:42investors end up doing things because

25:44they like spending time with someone

25:46right and I think I think if someone's

25:47managing my money I want they on the

25:49ball like I don't want them I don't want

25:51them rubbing shoulders with a guy

25:53because he you know makes you feel good

25:55um uh the second thing is is we all have

25:58history and I fall into this trap as

25:59well right where where you've had a bad

26:03trade you've been burned by an or body

26:05and then you won't see the next one

26:06coming like I I missed Great Bear but I

26:09did not like it when I first met the

26:10company uh and I eventually came came

26:13around but I just seen so many Red Lake

26:16discoveries fizzle because there's a

26:18saying that you know you can throw a

26:20rock in the woods in Red Lake and hit a

26:21high grade gold V doesn't mean it's

26:22going to be a mine right and so so I

26:25think a lot of investors you know you'd

26:27show them something and they would have

26:28had a similar experience or they they

26:30had owned the company in a PRI iteration

26:32and they wouldn't touch it and think a

26:33good example is rubikon and battle Los

26:34right like like if you got wiped out on

26:37on on on Rubicon it's tough to go back

26:39to batt a lot but I understand that

26:41right because because you

26:44know some of these mental humps are just

26:48too big to to to get over uh but I

26:51always admired the investors who could

26:53pivot when a story changed um and just

26:55be very very openminded in this next

26:57clip with with Rick rule you're going to

26:59hear Rick talk about when and why he

27:02sold a Ross Bey company often times as

27:06investors if we're not careful we could

27:08get emotionally attached to a leader or

27:11we could like somebody who's in charge

27:13of a certain company that's going the

27:15right way and therefore not sell so we

27:17need to be able to separate our emotions

27:19from our intellect and our pocketbook

27:22and Rick talks about how even though he

27:24invests with and supports Ross Bey as a

27:26mining entrepreneur there was one point

27:28with one company when Rick was invested

27:31in Ross's company where the probability

27:33of success shifted to the probability of

27:37likely non-success and so Rick sold even

27:41though he was good friends with Ross

27:43listen to Rick share wisdom in this clip

27:45you invest with Robert friedin Bob

27:47quarter Ross speedy and these people you

27:49said my one thing I would have done

27:51differently you've told me in the past

27:52is invest with them more often and not

27:54take a risk on more unknown entities to

27:57me now how true when you invest with

28:00these Superstars these these now

28:02billionaires that have made you a lot of

28:03money how long do you give them with a

28:06certain issuer they're in charge of be

28:09and it's not working out or they're not

28:11making you money do you call them up and

28:12say hey remember I'm a shareholder or do

28:14you view their current efforts through

28:16all the money they made you in the past

28:19when does the darling status wear off I

28:21call them all the

28:22time uh not because I'm second guessing

28:25them but rather uh because a press

28:29release even a quarterly filing

28:31statement

28:32is uh insufficient

28:35knowledge for me uh I want the Nuance in

28:39terms of how much time I give them uh I

28:42give them enough time until they

28:44have until the probabilities are such

28:48that I need to

28:50sell uh Ross Bey did a deal that

28:53actually ended up working uh but not

28:55particularly well deapo years ago

28:59uh and uh over time it became clear to

29:02me that what he was attempting to do he

29:03couldn't do and he was going to Embark

29:05in a salvage operation now that's very

29:09admirable uh and I've admired him for it

29:11ever since but I wasn't going to

29:13victimize myself uh with his

29:15three-year-long effort to salvage

29:18something uh that was going to have a

29:21subpar

29:22outcome

29:24uh no knock on Ross you know he didn't

29:27let it go to zero he worked it out he

29:29got it sold uh he got it sold on

29:31reasonable terms but that would have

29:33been dead money for three years and dead

29:34money that was certainly dead money in

29:36other words the probabilities went from

29:39he's probably going to succeed to he's

29:41probably not going to

29:44succeed so from my viewpoint uh that's

29:47the circumstance in this final clip

29:49you're going to hear from yours truly

29:51regarding Discerning mining promoter

29:54claims often times as investors when

29:57we're frustrated ated we lose money we

29:59can put blame where it doesn't deserve

30:02to be and not put blame I.E on ourselves

30:06when perhaps it should be there in this

30:08clip I help you think through when what

30:11you should hold promoters accountable

30:12for and what you should not hold

30:14promoters accountable for so that you

30:16can grow as an investor all right so the

30:19promoter makes statements you buy into

30:22it you buy the stock now what are some

30:24examples of what you can hold a promoter

30:28accountable for you can hold them

30:30accountable for forming reasonable

30:32forward-looking claims of what is

30:34possible Based on data so again you have

30:39to size up this person are they

30:43qualified are they competent is their

30:45team confident and is what they're

30:47selling reasonable now I've seen third

30:52parties make some quite unreasonable

30:56forward-looking claims you know you you

30:58you could hear a promoter say we're

31:00looking for we're hoping to find a 2

31:01million ounce gold deposit you know they

31:04they probably won't be successful but

31:07that's not such a ridiculous claim but

31:10then when I've heard know we're trying

31:12to find a 100 million ounce

31:15deposit you know when you hear something

31:17like that that's just too over the top

31:21and I've seen going back to

31:2420178 and the whole craze around Novo

31:28resources I remember at the time that

31:30there were third parties not people who

31:32work for the companies talking about the

31:34potential that this deposit could find

31:38billions with a B ounces of gold and I I

31:44mean I was a newer mining investor at

31:45that time and I was like wait a second

31:47here what's the average I looked you

31:49know you could just do simple things I

31:50looked and say what's the average gold

31:52deposit size even now looked found out I

31:56went to some gold companies they like

31:57okay they have 3 million here they have

31:59a half million ounces here they have 2

32:00million ounces and this person is

32:02talking about it could be billion of

32:04ounces of gold that is an unreasonable

32:08quite frankly ridiculous uh estimation

32:12of what could be again the lead promoter

32:14didn't make it but but a third party did

32:17you can hold a promoter accountable for

32:19false and intentionally misleading

32:21information I'm not saying the person

32:23that made that multi-billion dollar

32:24potential claim I'm not at all saying

32:27that they were trying to be

32:28intentionally misleading I'm just saying

32:30that I didn't think the data warranted

32:32such an outlandish claim but there are

32:34people that make false and intentionally

32:37misleading information they're called

32:39liars and here's the thing though

32:42usually like I've hired people running

32:44small businesses and two things you

32:46don't know fully about them you can try

32:48to size them up in a job interview you

32:50can call their references if they give

32:52you those but you really don't know if

32:55they're truthful and if they work hard

32:58until they're put to the test and then

33:01the real person over time begins to come

33:03out so I think you can do the best you

33:06can do but then it's like over time

33:08through observation and observing what

33:11they did or didn't do that's when you

33:12can really learn about a person and so

33:14you can hold a promoter accountable for

33:17their work ethic and effort and I can

33:19tell you some people work harder than

33:22others Murphy's Law again if things

33:25could go wrong they go wrong in this

33:26sector what is that promoter going to do

33:28when things go wrong are they going to

33:30work every Avenue to try to move this

33:33difficult situation forward or are they

33:36going to fold something you can hold

33:38them accountable for is timely

33:40communication of material information

33:43and I've been a shareholder of companies

33:45that have had significant material

33:49information including an event that

33:52would then basically cause the drr

33:54destruction of the company and it was

33:56not communicated to the market in a

33:59timely way and that is not how you run a

34:02company and that is unfair to everybody

34:06including your shareholders because when

34:07a certain group has information that

34:09they can act on before everybody else

34:11that gives them an unfair and illegal

34:14Advantage because management is the

34:16steward of the company and if there's

34:19material information that's going to ex

34:21affect the value of the company and its

34:24potential success or failure you need to

34:26get that out to the market as soon as

34:29possible you can hold a promoter

34:31accountable for publishing promised

34:32drill results and in a timely manner I

34:36think it's horrible when a promoter

34:38sells an exploration story and they do

34:41it to raise money and they get people

34:44excited who buy the

34:46stock and they're buying because of the

34:48value that could be created of course by

34:50successful drill hole and then they hit

34:54dusters and they don't even report the

34:56holes I don't even know how some can get

34:58away with this but it does happen and or

35:01they just bury it

35:03somewhere rather than saying these are

35:05the results and I know we promoted the

35:09Blue Sky up to 80,000 fet well it's none

35:12of that it's a bunch of dirt is what we

35:14found they got to be forthright you got

35:16to tell the market that and you got to

35:17tell the market that in a timely manner

35:19if you know you hit dusters give

35:20investors that information because they

35:22bought your stock with the antici

35:24anticipation of get getting a positive

35:26result you didn't get the positive

35:27result tell the market and do it in a

35:29timely manner you can hold them

35:30accountable for making promises that

35:33they don't keep and not providing a

35:36reasonable explanation things go wrong

35:39there's things out of their control when

35:42that happens they need to be able to Pro

35:44provide a reasonable explanation of how

35:46they're going to handle it but also when

35:47they make promises and if it's not kept

35:50for a certain reason if I'm a

35:51shareholder I just call them and say you

35:53know you said that this was going to

35:55occur why hasn't it you he said we would

35:58be drilling in May it's now October why

36:02have I wouldn't wait that long if I was

36:04invested I would call them earlier but I

36:06I would say why haven't you had the

36:08drill rig out there and if it's not a

36:10reasonable exp explanation then that is

36:13your reason to sell and so they need to

36:15be able to provide reasonable

36:18explanations for failure and missed

36:21timelines and I I know a bunch of CEOs

36:25and I actually have sympathy for ones

36:27that I think are good because of the

36:29difficulties that they are faced and the

36:31timelines that they are Miss it's their

36:33job to try to put out a reasonable

36:35timeline but sometimes the financing

36:37doesn't come through on time or the

36:39permit is delayed or the drill raid

36:41contractor has a mechanical issue that

36:44sets them back a month there's reasons

36:47for failure and you should be able to be

36:49provided a reasonable explanation for

36:52the failure or the missed timelines you

36:54should be able to determine whether

36:55their compensation is appropriate and by

36:58the way what I've seen is sometimes

37:00after a failed mining

37:02speculation and an investor is like they

37:05just hate management and they're just

37:07tearing them up online in the chat room

37:10whatever then they're like and this guy

37:12paid himself

37:13$450,000 a year you know to lose me my

37:1620 grand or whatever you invested they

37:19didn't know that this guy was being paid

37:21$450,000 a year to run this $8 million

37:23market cap Explorer code when they

37:25bought the stock but now they're upset

37:27about about it well you should know that

37:29going in because that's data that you

37:31can access before you buy the stock so I

37:34understand that you're looking for

37:35reasons to be mad with the guy or gal

37:38after it fails and you lose money but

37:40hold yourself accountable you should

37:42have figured out his compensation or her

37:44compensation beforehand and determine

37:46whether it's reasonable and if you don't

37:48think it's reasonable then don't buy the

37:49stock there's certain stocks where I

37:52know that the lead promoter is paid over

37:56half a million dollars uh for for for a

37:59pre-revenue company and he's get he gets

38:00paid a half million dollars and above

38:03for multiple companies I won't buy his

38:05companies just because I think he pays

38:07himself way too much from multiple

38:10companies that aren't cash flowing and

38:12so I don't agree with the compensation

38:14and I'm not going to buy the stock just

38:16for that reason alone sometimes an

38:19executive sells the promoter sells right

38:21you bought into the stock because of the

38:23Blue Sky the what could be that they

38:25sold you and then you see in Saidi that

38:28they're selling their stock you can call

38:31them this is what I do and I ask for an

38:32explanation of why did you sell the

38:34stock you know you buy a stock for one

38:36reason because you believe it's going up

38:37you could sell for a variety of reasons

38:40I kind of felt embarrassed asking a

38:42question recently of one position I own

38:45because there was a disposition of stock

38:47at a time when I wouldn't think that the

38:49lead executive would be selling I asked

38:51for the explanation and it was given to

38:53me in fact to his credit he emailed me I

38:56didn't even ask for it he emailed me he

38:57said said he said bill I had to dispose

39:00of some stock here's why it's part of a

39:03divorce settlement with my ex-wife it

39:05was pre-arranged upon this Catalyst for

39:08the company like this was determined a

39:11while ago has nothing to do with what I

39:14think the prospects of the company are

39:15right now that's a reasonable

39:17explanation it also made me pity and not

39:20want to be a CEO of a public company to

39:22have all of your personal business you

39:24know out there because you need to tell

39:25the market why you sold but it is

39:28reasonable to have a reasonable

39:30explanation for why are you selling

39:31stock when you're trying to get other

39:33people to buy your stock okay examples

39:36of what you cannot hold a promoter

39:38accountable for you cannot hold them

39:40accountable for the macro situation

39:43which causes a selloff of your tiny

39:45Junior Mining stock if the the market is

39:48in liquidity mode everybody's rushing to

39:51liquidity they're selling Everything

39:55indiscriminately Gold is very liquid so

39:57they sell gold which causes the Gold

39:59stocks to go down and the general funds

40:02that had tiny exposure to mining stocks

40:04sell those stocks indiscriminately and

40:07the whole Market goes down or copper hit

40:10$5 and then it pulls back and it runs

40:13back down to $3 well of course if the

40:15copper price comes off 40% your little

40:18copper stock is probably going to come

40:19off 70% so that doesn't affect the

40:23fundamentals of what the executive can

40:25actually control you need to be a judge

40:27of the macro situation you need to know

40:29which way the winds are blowing is it in

40:32the sale of this time tiny junor Mining

40:34stock or is it a headwind blowing

40:36against it so you can't hold the the

40:38promoter accountable for that you can't

40:41hold them accountable for unfair

40:42government or local community actions

40:44which derail a project or a mine one of

40:47my sponsors Trilogy medals went through

40:49a 5-year consultation in Alaska for this

40:53road that they needed to build to the

40:56the copper region that developing and

40:57their assets to connect to the Dalton

41:00Highway which goes down to the ports uh

41:02via which they would be able to

41:04transport the the copper out of there

41:07and so they went through a five-year

41:09consultation process a 1,500 page

41:12document I believe everybody seemed to

41:14be on board and they get their Road

41:17permit issued and that was under the

41:19Trump Administration and then under the

41:21Biden Administration a government

41:23bureaucrat unilaterally decides I'm

41:26going to take that permit

41:27for which you work for five years to get

41:31and years of consultation and we're

41:33going to take that back and look at this

41:35whole thing spend years looking at this

41:38all again that is one of the clearest

41:40examples in my opinion of unfair

41:43government actions that totally can

41:47derail a project or a mine and of course

41:50the trilogy market cap and share price

41:52is going to Tumble because of unfair

41:54government actions and I'm not speaking

41:56for the company these are my own

41:58opinions as I'm sharing this but this is

42:00an example how you can't hold management

42:01accountable for that they successfully

42:03worked for five years to get the permit

42:05and then a different Administration

42:06comes in and takes it from them you

42:08can't hold management accountable for

42:10black swans such as uh the virus in

42:132019 and the effects of it in February

42:16and March of 2020 I know that there were

42:18financings and I really pied a lot of

42:21Junior Executives there were financings

42:24that were in place and soon to be closed

42:26during that per perod of time and then

42:28when the market crashed in March of 2020

42:32those financing those deals were dead

42:34because share prices dropped by 40% in

42:37two weeks and then the people that

42:40subscribed to the financing said well

42:41I'm not going to buy your shares at

42:43whatever a dollar if that's what it was

42:44being offered at when your Shares are

42:45now at 60 cents and it totally destroyed

42:49those companies ability to finance they

42:51had a Finance in the future after the

42:53share price had responded but it sets

42:56them back you know a year of activities

42:59and because you need money to advance

43:00the project so it sets them back that's

43:02a nobody could have predicted that it

43:04wasn't Management's faults they had the

43:06the financing to subscribe to until the

43:08virus came in and the government

43:10response to it and it just destroyed the

43:13share price you cannot hold a promoter

43:15accountable for poor drill results if

43:18they were given to the market in good

43:19faith based on data with a thesis that

43:24was considered reasonable here's one

43:26that I see happen so often you can't

43:28hold a promoter accountable for your

43:31unrealistic time Horizon your

43:33unrealistic time frame to produce the

43:36desired results so if a promoter is

43:39selling the blue sky for I'm just going

43:41to make up something we're doing 20,000

43:44M over a period of 2 years it's going to

43:47take us two and a half or 3 years to get

43:50all the results all the assay lab

43:52results in and to analyze it and at the

43:54end of it we're hoping to grow the

43:56resource by a million and a half ounces

43:59okay so the first batch of like say four

44:01batches of drill results comes in

44:04they're not good the share price goes

44:05down and then maybe the macro situation

44:07turns over and terms of bearish for the

44:09company so the stock price is down 45%

44:12from where you bought it well you sell

44:15and you say I'm done with them you

44:17didn't even give the promoter the time

44:19frame to accomplish what he or she said

44:22they needed to accomplish they so they

44:25lifted up the blue sky this amount of

44:27resource growth but I'm going to need 2

44:30and 1/2 years to get it done and you

44:32sold after 6 to 8 months because the

44:34first round was bad and then the macro

44:36situation turned over and the share

44:38price went down okay so your time frame

44:41was not even a lot in line with what

44:43they publicly said they needed to try to

44:45produce the desired results you cannot

44:47hold a promoter accountable for your

44:49position sizing don't bet more than you

44:51can afford to lose remember those risk

44:54assessment acknowledgements that I went

44:55through that you have to sign to be an

44:57accredited investor and by the way th

44:59those what I shared with you those risk

45:01assessment acknowledgement forms that I

45:03have to sign as an accredited investor

45:04those are from an actual subscription

45:06that I filled out maybe it was like six

45:08months ago for a little base medal

45:11Junior when I did my due diligence I was

45:13buying shares in that placement at half

45:16of the average cost basement cost basis

45:18that management got their shares for

45:21well guess what because of the market

45:23condition six months later the stock

45:25price is 50% below what I bought my

45:28shares for that's how it goes sometimes

45:30and there's no liquidity all we need is

45:32a couple buyers a couple buyers come

45:34into the stock I have I have no question

45:36that the Stock's gonna gon to Rebound in

45:38the right market and they still have

45:39cash I'm not worried about it but such

45:41is the nature nature of Junior mining

45:44stocks all right here's a note being a

45:46promoter of a junior Mining Company it

45:48can be quite challenging in a tough

45:50market for example many CEOs are

45:53currently faced with the decision do I

45:55spend my remaining Capital to drill and

45:57try to produce a catalyst because even

45:59if I am successful the market is not

46:01going to reward me with an increasing

46:04share price so I can raise more money at

46:05a higher price but if I don't spend the

46:07money and move the project forward I'm

46:09not giving investors a reason to hold my

46:12stock and I don't even know if I'm going

46:13to be able to effectively raise money

46:15without giving away the company at these

46:17prices so being be between this rock in

46:21a hard place is where many honest

46:24hardworking qualified compet mining

46:27promoters find themselves and I know

46:30that not just from observation but from

46:33talking to them and I've been told you

46:35know we're in capital preservation mode

46:37because if I'm successful I'm not going

46:38to get rewarded anyway and the main

46:41thing I'm waiting for is a turn in the

46:43macro situation as it relates to the

46:45commodity we are exploring for and when

46:48you get that from a promoter then it's

46:50your job to assess do I want to keep my

46:52money here

46:58[Music]