TORONTO – Canada’s prospectors convention, set for Sunday-Wednesday, will eclipse a 2010 record of 21,660 attendees.
The PDAC gathering also will bring 1,000-plus exhibiting companies to Toronto. Far more than that will be hanging around, partying and networking. Once again, another high-bar set for exuberance. The official turnout matches record-high prices for gold and recently, copper.
What this all means for investors? Easy: a lot is on the line. If you happen to be in Toronto, as I will be … and you happen to own shares of a prospector, a miner or a developer … you might want to ask some very tough questions of these folks manning their exhibit hall booths.
I believe the melt-up in commodities prices, especially gold, silver, platinum and a few select others, molybdenum and possibly tantalum, will “run and run,” as the Brits say. Still, there will be losers, fraudsters … and even worthy managers who fail because bad luck, poor timing or worthless rock thwarts their intent.
The Prospectors & Developers Association of Canada draws all of them to Toronto in March. Every year. The tradition was that after a long, hard winter of pick-axing, all those geologists and engineers and drillers come home to the fireplace and show investors their nuggets.
These days, the silk suits and cheesy glad-handlers come into town: Promoters, not Prospectors. Instead of showcasing their wares, (and some of them do display valid rock in the PDAC core shed and at their booths), the Promoters Come To Raise More Money.
Nuggets these days are few and far between. Yet equity prices for prospectors and miners are rising steadily and have been since mid-2009. Jumbo equity financings ($20 million and higher) are greasing drill programs for successful companies in Colombia, Mexico, Canada, Nevada, Peru, Nicaragua, Ghana, Mali … you get the idea. Yet vaporware is everywhere: that’s the practice of stuffing IR and PR pipes with paragraphs of prose that translate into absolutely nothing in geological terms.
I am going to list my three or four areas of interest (just below) … if you happen to be in town for this PDAC. But first, try these queries when you corner these mining executives at their cocktail receptions, at their exhibit hall booths or at their RSVP presentations:
- Ask any executive, including investment relations folks and the longitudinal gals and guys handing out pens and baseball caps, exactly WHEN their company expects to produce a metal bar, rod, partly purified doré or carbonate that can be shipped and sold. “The idea of commercial production is something that is fixated in the mindset of investors,” Ferdi Dippenaar, CEO of Great Basin Gold (TSX: T.GBG, Stock Forum), tells me. Mr. Dippenaar has made investors, including me and our Ticker Trax subscribers, very good profits by mostly hitting his timelines on production for Burnstone and the Nevada mine, Hollister. (Photo: Core at Gold Group Mining’s (TSX: T.GGA, Stock Forum) Caballo Blanco project in Veracruz, Mexico.)
- If the company is producing, ask to see the product. Feel it. Also ask if the company arranges site visits for ordinary shareholders. “Did you feel it in your feet?” R. Edward Flood, geologist, asset manager and now CEO of Western Uranium (TSX: V.WUC, Stock Forum), usually queries me after I have visited a property. I know that sounds ethereal. Sometimes, the people on site – Timberline’s (TSX: V.TBR, Stock Forum and TLR) team at Butte Highlands in Montana, for instance; and Gold-Ore Resources (TSX: T.GOZ, Stock Forum) crack unit at Sweden’s Bjorkdal Gold Mine – can fill my head and tweak my toes with confidence. That’s BIG, especially when some on-site “teams” make me cringe.
- Ask, or insist, prospectors that they publish not just simple drill data in their press releases. But that they publish location maps of their concessions, cross sections of drill holes and density ratings for gravity. Insist on this.
- Ask to see photos of channels and trenches done in early exploratory work. Projects that seem to gel, according to my field book and camera, are the ones that dig ‘em early and often. As in hundreds of meters worth of earth moving.
- Especially, ask these folks, first the geologists and engineers and then the bankers (usually the chairperson of the company or the CFO), to explain in layperson terms what the “model” for drilling is. That is, what is the hypothesis for finding “stuff” and how does that fit in with the region’s geology? How does a shear zone help locate the mineralization on this project? In a legacy mine, was there some methodology not available 20 years ago or 120 years ago, such as Great Basin Gold’s long-hole stoping at Burnstone in South Africa, which helps improve recoveries?
- I also advise cornering the execs and ask them for copies of their latest proxies, the ones that show the salary levels for executives. And the consulting arrangements of those executives. And the sometimes tortuous property sales, swaps and vend-ins that can benefit the original property owners more than the shareholders.
- Those are some of the questions that can help make a visit to PDAC’s exhibit floor or private receptions/presentations worth the time.
ON MY SCHEDULE: I intend to visit several prospective projects rooted in the U.S. state of Nevada. One of the Nevadans is NV Gold (TSX: V.NVX, Stock Forum). I hope to have the tiny prospector’s CEO, John Watson of Colorado, explain to me how he will use the proceeds of a $1.5 million money raise announced earlier in March. It interests me that Colorado geologist Quinton Hennigh of Evolving Gold (TSX: T.EVG, Stock Forum) is an NV Gold director. I want to know how widely-respected Dr. Hennigh finds the time to be involved with as many as five companies as a director, an executive, a consultant or an interested party. I do not own shares of NVX or EVG.
I intend to look at an area that I have neglected in my investing and in my reporting: lithium in deep South America. On the silver front, I intend to look at anything that has yet to make a massive move higher. On the presentation front, I intend to listen to Eric Sprott of Sprott Resource Corp. (TSX: T.SCP, Stock Forum) talk about silver and agriculture at a Sprott presentation. I do not own shares of SRC.
Also on the sked: reviewing timelines at companies operating in Colombia, Nicaragua, Panama, Ghana and Mali. Our freshest Ticker Trax theme these days is emerging jurisdictions.
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