Duluth Metals Ltd DULMF

RE:RE:RE:Management 2012 over optimistic views...

[materialsgirl]

Petj80
You are quite correct that management track record is a good place to look.  However, successful mining is made possible by the geology.  Many men have made a reputation based on one great gold or copper discovery and after that all their ventures fail.  Being good at raising money or motivating people cannot compensate for lousy geology.

The key practice is to filter filter filter.  Cross check everything.  Look for a fatal flaw in the property; ownership, grade, permitting risk, political risk, infrastructure, jiont venture conditions, capex risk.  I am not suggesting that all promoters are liars.  They usually tell the truth but they do not tell you the whole truth.   Look for aspects of the asset or assets that are skipped over by the press releases.  Check as many analyst reports as possible because they have more in-depth access to info than we do.   If you see 4 reports it is likely that one of them will unearth hidden bad stuff.

Annual reports and press releases are treated as pure promotional materials.  They reveal as little as possible while complying with legal requirements.  A loss of $500m can be presented as great news because it is better than the $600m loss last year.   A loss of $6b can be presented as great news because operationally they earned $1b but the accountants forced them to write down the value of the assets by $7b.  They will tell you that this loss is non-cash which is basically a lie.  They paid cash a year earlier for an overpriced mine and now they are writing it down or off.   No cash goes out the window now but real cash was thrown away a year earlier.   They will tell you that it is a one time deal.  Barrick has done that for several years and then comes back a year later with different assets to write down and then repeat repeat repeat.

Just be sceptical of what they say.   bad stuff usually requires reading between the lines because the lines that they print are selective.

They twist everything to make it look good.  if costs are sky high they do many calculations and choose the ideal one.  Cash cost is high.  Then use cash cost after by product credits.   Or show costs as if there was no royalty if the BFS was done prior to the royalty agreement.  Or call it C1 cash costs which are lower because they omit some items.  Be guided by the reality that they know no shame.

There are 1,000 ways to try to mislead the investors and each and every one is tried out regularly.  If you do not believe all soap advertisements then do not believe advertisements sent out to investors.

Comments are generic and apply to the whole TSX mix but the points are particularly true of mining companies.

mat