The Real Truth About Exploration Stocks
At the bottom of the mineral food chain are exploration stocks looking to establish a significant resource by drilling.
They finance that search and keep the lights on primarily by issuing shares.
What's the Real Story Here?
1) Occasionally, they will promote that search by announcing a great drilling interval of "high grade" material. The rest of the drilling results in that announcement will be less than stellar. These announcements will go on year after year without a PEA/PFS/BFS, future timeline or plan.
Comment: That's false hype and hope promotion.
2) Frequently, they will point out they have a "district scale" land package with only 10% explored. No where do they tell you how many shares or $$ will be needed to fully explore it.
Before the district scale has been fully explored, they will then buy 2 other properties 200 miles away that have "similar geology" to their so-called flagship property. Then they add all three resources together so it looks like value is being created and they are not a one-trick pony.
Comment: Talk about dilution of value not to mention how much additional money will be required to establish a resource! Only flagship M&I resources are valued in the marketplace, not other properties.
3) If in a well recognized mining area, they will heavily promote the fact that 18 mil oz of gold have been mined from this general area in the past.
Comment: This means they don't have squat yet.
4) They will then compare their results with a group of carefully "selected peers" and claim to be undervalued in that context.
Comment: How do you compare garbage cans with other garbage cans?
5) Buried somewhere in their presentation will be that management only has a small 2% stake.
Comment: No conviction on the company prospects they lead but they want you to buy more shares? How does that align with your interests?
Bottom Line
The game is exclusively to "look good" so some other sucker will buy you out and make management's stock and options valuable. Count on it.
Statistics show only 1 in 10 exploration types will ever actually become a mine. Buyer beware.
TOP's Recommendation
On gold and silver stocks, buy only stocks with a minimum 2/mil M&I or P&P resource on their primary flagship property. This is the bare minimum for those with deeper pockets to buy you out.
9/16/24
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