New Found Gold Corp V.NFG

Snidley on CEO

[likeike]

• The Real Problem:  Here is an unfortunate reality - Junior mining exploration companies as an overall group are simply bad investments. 98+% of junior mining companies on the TSX.V end up failing over the long haul. No other industry has such a consistent track record of repeated and tragic failures by such a large percentage of market participants. Of the few companies that succeed, many do have ridiculously lucrative returns. Junior mining exploration investment for the average retail investor is more akin to a casino than a standard stock exchange. Like a casino where the house always wins in the long run, it is the appeal of the big winner that keeps people wagering their money. Overall, junior mining has had major difficulties developing a new class of investors (particularly among retail) and most of the new money that has entered the broader market in the last decade has gone to other investment vehicles other than mining exploration. Here are a few of the specific ills plague the industry:
  • The established junior mining investment community is a den of vipers (a characterization that may be offensive to most vipers) and has far too many bad actors operating within it that mercilessly take advantage of new investors with misleading PR/IR material. After running one pump and dump into the ground, these bad actors are not run off or ostracized, rather they jump to the next big mining opportunity. Rinse and repeat. This means that most unsuspecting first time investors into a junior mining company almost always get burned as part of their first experience and unsurprisingly, few are willing to touch the hot stove a second or third time.
  • Most retail investors simply don’t have the tools, data or knowledge necessary to differentiate between projects worthy of development and projects that are smoke and mirrors. I have been around the industry for several years and believe I have a better than average understanding, but I have to admit that it is often very difficult to distinguish the good from the bad apples among exploration companies without doing several hours of serious research. First-time or casual investors simply don't stand a chance in that environment.
  • The business model of junior mining (i.e. development of claims in order to sell off to production companies) is confusing to many investors. This also causes casual investors to obscenely overvalue mining projects often by calculating spot market price (not in-the-ground price) of resources as well as not factoring in costs of excavation and extraction into their valuations.
  • Casual investors normally have horribly distorted timelines for how long it takes to move through the exploration, permitting, and development process. Most investors are thinking of a long-game of 12-24 months tops for a promising mining exploration project to go into production, when in reality, the process is more like 5-10+ years. Such a large delta between expectations and reality leads to many investors feeling jilted by the companies they invest in.
  • Junior mining projects are subject to the whims of current commodity price changes that have very little to do with what the commodity price will be when a project is actually scheduled to go into production.  What difference does a short-term 3 or 5% change in the price of gold make on a project that won't be going into production for 5 or 10 years?  But the reality is that these commodity fluctuations can result in massive swings in share price for exploration projects.
  • Differences in land packages, jurisdictions, subtle geologic changes, commodity pricing and so on result in massive variations of overall company performance and investment outcomes in junior mining exploration.
• How to Fund Worthwhile Exploration Companies: There is a massive future need for new mineral exploration and discovery. But the need cannot be sufficiently met until the exploration community comes to terms with its Capitalization Problem. Some exploration projects absolutely need to be funded and are excellent vehicles for investments. Other exploration projects need to be tossed by the wayside. They involve good money chasing bad opportunities with most of the winners being those that are unscrupulous operators. Solving the Capitalization Problem requires new ideas, new approaches, new tools, and above-all innovative thinking. An effective solution is one that helps pull new investment dollars into good exploration projects while preventing those dollars from floating into bad and highly questionable projects as well as pump-and-dump schemes.