Loading ...Hookers and Blow: The Only Real Metric in the Junior Mining Industry
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Management: there’s one of the best metrics in a junior. Who are they, have they done it before, do they treat shareholders with respect, how transparent is their reporting, have they been able to raise capital on other occasions, how do they react in difficult times, how do they manage risk, is it a balanced team?
The last two items actually fit together into my favourite metric for the juniors, and it’s pretty basic: how does management spend the shareholders’ money? Is it like 2012, blowing it out the doors because it seems like fun, or is every day (even in the good times) like 2016 with a vice and velcro holding the purse strings tight? Does the money go into the ground, with a reasonable amount for overhead and management and marketing, or is there a disproportionate amount being paid out to promoters, investor relations teams, management and directors?
There’s someone in the public markets in Canada infamous for his phrase “hookers and blow”. He helps companies raise a fair bit of capital, but chooses to spend an unreasonable amount of it on illegal marketing involving women of negotiable virtue and illicit drugs. The phrase “hookers and blow” has become shorthand for “management is wasting the shareholders’ money on management”. That is in our opinion the best metric by which to measure the juniors.
How much is management getting paid? Are they continually issuing options to themselves at a discount to the market, and then bid-banging to get the cash to exercise the options? Does management rent its own space to the issuer (which is OK if disclosed) at a premium to the local real estate market (not OK)? Does management have irrational termination fees? Whose family is on payroll? Does the CEO answer shareholder phone calls / emails or do they get pawned off on a paid minion? How much is going to third party promoters for a short term ramp-up in the share price vs long-term investments in the data?
Right now, the cyclic mining market is emerging from hibernation, with the good times on the horizon. If the market were a calendar year, we’d be in March. It’s time to pay attention to Warren Buffet’s quotation and to be highly intelligent with your investing dollars. Invest in the mining assets and the management team – don’t get fooled by the hookers and blow.