Could the constant need to demonstrate production growth to the market lead to the disappearance of some major gold producers? To answer this question, we researched nine representative companies. Fundamentally, most are in dire need of quality projects but lack the necessary grassroots exploration programs to find them.
In the following article, we explain our reality-based methodology for evaluating potential investments in the junior mining sector using our take on the resource revision at Orezone Gold’s (ORE.V) Bombore gold deposit as a practical example.
Our investment thesis for selecting junior mining companies involves identifying the rare quality (economic) projects available today and unmasking any potential fatal flaws (if they exist) early on, rather than chasing metal-price leverage or optionality plays managed by companies with marginal projects.
by Brent Cook, January 2014 — The following compilation summarizes ideas collected from correspondence between myself and a number of accomplished friends in the industry—specifically: Ron Stewart, Managing Director Clarus Securities; Quinton Hennigh, CEO Novo Resources and all around top geologist; and Steve Ristorcelli, President Mine Development Associates.
Although there will undoubtedly be good projects or companies that are screened out by these "rules", in the long run I have found it to be more important to first, avoid a loss and next, concentrate on a gain. Money lost is hard to win back; and losses are especially painful if the writing was already on the wall.