Investors are LaymenThis is a key point the SLX point need to digest going forward:
Over the last seven years, the precious metals juniors have not by and large attracted the interest of retail investors. Institutional investors, insiders and professional speculators have made up the vast majority of shareholders in the gold and silver juniors (and probably seniors).
That is now changing in a big way. We are at the point of recognition where the general public, slowly at first, and in due course tipping into a mania, are getting involved in investing in precious metals mining shares.
The share price fortunes of the miners going forward - particularly the juniors and developers where valuations are more subjective than they are with the behemoths - are going to depend on how keenly their boards recognise the need to tailor their public communications to the layman rather than exclusively towards geologically-informed institutional specialists.
I am not a geologist and while I have a corporate/legal background I am not what you would call an investment professional. I am a layman who has learnt little by little over the course of seven years of investing in precious metal equities.
This is why I am so passionate about what Arian Silver has been doing in commissioning reports from Edison and XCap and in its press release strategy. It may not be the traditional white-gloved approach of mining industry bluebloods, but it works; IT'S THE RIGHT STRATEGY for this point in the bull market. It is becoming vital for the pm juniors and mid-caps to communicate their potential in a simplified format, allowing the trickle of retail investors to read independent bite-sized analyses which clearly quantify what will happen to the share price of the company should it grow its resource by W, should it be revalued from explorer to producer, should the price of silver go to X, Y, Z.
That trickle is going to turn into a flood quite soon. They don't invest based on complex geological charts or numbers, they invest based on newsletter hucksters saying "Gold Hole Inc is so hot right now" or on bulletin board leaders quoting independent research report target prices. That is what is going to make the difference to the share prices of these companies over the coming months and years. You can be as snobbish or as virtuous as you like as a mining industry executive assuring yourself that the market rewards good boys who run mines nicely, but the companies who are really rewarded by the market will be the ones that bother to connect with the unwashed, desperate masses, and with the intermediary hordes of lay journalists, tipsters and bulletin board warriors.
What Arian Silver is doing is in actual fact not just intelligent but ethical; they are providing the retail layman market with substantive information accessibly presented, so that the chances are that the (many) people who choose to invest in Arian are doing so with a great deal more justification than those who invest in another company based on pin-sticking or recommendations.
Every mining company has a corporate presentation on its website. Silvermex is no exception. The clue is in the name: corporate. These presentations are designed for the institutional investor milkround; they are also designed to make the directors feel good about how sophisticated and professional their product is. Well, despite having worked in corporate finance myself, I have a keen sense for how the layman thinks and what they look for; and I would say that 95% of what goes into a corporate presentation, however simplified, is unintelligible and uninteresting to the retail investor. The retail layman wants to know only one thing: how high is it justified to presume that the share price will go? If he is slightly less than reckless, he might also wish to stomach a little information on why the share price might reach such heights: "Ok, so, like, they have a hundred million ounces and the vein is, like, good enough to expand that to three hundred million".
I appreciate that such simplistic thinking may not be edifying to management who may prefer dealing with silken-tied silver tongued institutional investors who give them trays of cress sandwiches, but woe betide any mining junior or developer that is incapable of identifying and catering to the customer base for its shares. Apart from the AIM listing, where Arian Silver is stealing a march on all its competitors at the moment is that it is engaged not only in corporate marketing using corporate presentations (and this has evidently worked since Sprott owns 20%); Arian is also involved in retail marketing, using Edison and XCap to generate what are effectively retail presentations. Arian's Edison and XCap reports are not insubstantial by any means; they merely take the salient information from the corporate presentations and analyse it in a way that is compatible with the interests and expectations of the retail sector.
So my question is this: When will the Silvermex board devote energy to generating retail marketing alongside corporate marketing? It's a readily soluable problem. Pick up the phone to Edison and XCap tomorrow. It's that simple.
If you look at the iii bulletin boards, the Edison report in particular is now treated as gospel as an indication of where Arian may go, and how all these companies should be perceived and valued as the price of the underlying metal rises. The chatter on these boards changes sentiment. They move the share price. It's self-fulfilling. And with silver primed to explode to the upside, it's justifiable. I've seen it on repeated occasions. The more knowledgeable posters state a clear view, and immediately thereafter there is a 5-15% pop in the price.
The thing to bear in mind is that however inordinately bullish companies like Edison might be, whether through accident or luck they are more likely to be proven accurate than the supposed sober perspectives of the bank reports. It's been pretty abysmal over the last seven years watching the institutions bring out their silver and gold price forecasts to great fanfare, only for their stated figures to follow the following formula like clockwork: current market price plus or minus 10%. Quite simply, for a major bull market like the mania that lies ahead of us, relying on bank analyses and reports is not an effective way to market to the retail investor, because they will continually make forecasts that are inappropriately conservative. Arian has identified that Edison can forecast whatever the hell it likes; it is not Arian's liability whether the share price hits Edison's target. But in reality, since we are on the verge of Doug Casey's "Niagara Falls through a hosepipe" mania, Edison's forecasts are in fact likely to come true; and are more likely to come true quicker for the companies that bother to identify and address the category of investors who are currently moving in to drive this bull market.
When will SLX list on AIM, and when will SLX begin marketing with the retail sector in mind? Hopefully soon.