Hi Flex,

First off I do not think you are bashing. I think that your posts are skeptical but a healthy skepticism with respect to many of these junior mining stocks is good. There are indeed many things that happen behind the scenes with many of these companies that are only notorious schemes designed to separate investors from their money.

PEM is not one of those situations.

You ask what are we doing and it is a good question. There are historically basically only a few ways to build value for this company or any similarly situated company as you are likely well aware. 

1) Raise money by selling equity and put the money to work drilling out a resource which you then either sell outright or JV to either a well funded major or another hopefully well funded junior.

2) If you have been successful drilling you could then as an alternative put the property into production on your own with equity and/or debt financing.

3) If you do not have the skill set or the financing to do #2 you could continue to advance the company by finding another property and repeating #1.

4) If you have chosen path #3 then you could repeat #1 and/or #2 for the new property.

I submit that if you watch this junior mining market there is very little variance from the paths above. At some points of time a company or companies succeed along the way creating very large percentage returns and that encourages investors and sustains confidence and the market, so that all of this continues unabated.

Thus, all of the above assume that there are functional equity and debt markets that will support these activities. Right now that is not the case. 

In my opinion the crash of 2008 killed the above model and it is not likely to return very soon. How is that? In the years from about 1995 to 2008 I raised substantial capital from smallish hedge funds on Wall Street for various companies including Western Goldfields (which is now part of New Gold), High Plains Uranium, US Silver among others. Much of that capital came through Wall Street.

With no disrepect intended to Toronto or London, there is more investable capital controlled in the rectangular area between 42nd street and 59th street, and between 3rd avenue and 8th avenue then in all the other financial centers combined.

During the years prior to the 2008 market crash a small fraction (but that is still a large dollar amount) of that money found its way into the junior mining market through the following path. Small hedge funds would raise money from larger hedge funds, buy a portfolio of marginable big cap securities, and then leverage those securites and buy specualtive micro cap stocks including a large amount of junior mining stocks.

After the crash, most of those small hedge funds folded and they have not returned. The rules (both governmental and self-imposed) now would prohibit a good bit of that type of activity. It is no coincedence that the micro cap market in the USA is also very much dead despite record highs on Wall Street. The general lack of liquidity on TSX-V stocks during the crash of 2008 was apparent to Wall Street and as a result, they have not and are likely not to return. 

Post- crash the mistake that was made by the junior mining investment banks and promoters who create these companies and float them on the TSX is that capital would follow riding prices for gold and silver into the junior mining market. That did not happen post the 2008 crash and so by the summer of 2011 the follow through performance that was expected to happen with the juniors did not materialize and the market crashed and has not came back. 

My thesis is this - it does not really matter what the metal prices are doing - until you attract a large source of investable capital back into the junior market - meaning - until Wall Street returns back to this market, it will be a very difficult time. Sure there are exceptions - there always are. There is selective capital available for limited properties and limited only to highly proven management teams with known track records. There is selective capital perhaps available for special situations such as has happened recently in Canadian uranium.

But we are talking very limited capital and there is not enough out there to support the market caps of all these explorers and developers that have been created. In other words - this junior mining market has to shrink a lot though consolidation and through companies going out of business. 

I believe your expectations (and the expectations of many similarly situated investors) are founded upon a junior mining life cycle model which is now broken and likely not to be repaired in our lifetime. The junior resource company needs to find a new path to growth. 

Unfortunately, I have not yet found that path. I am looking for it and that is what I am doing. In the meantime, Mr. Baughman, our geologist, has been busily putting all the data sets and materials on the company in good order so that we can make intelligent presentations to prospective partners/investors. With only a few partners/investors out there even looking, if the data is not perfect they don't have the patience to wait while you fix it.

Best regards,

John Ryan