As with any start up company, we tend to look for certain characteristics that might lend success. For a start up tech company, an investor might consider the company’s potential to disrupt an existing market, like Uber. For a biotech company, an investor would try to determine likelihood that a drug can cure a disease and survive the FDA trial process.  For a junior miner, we have to consider the prospects of making a discovery, expanding the known resource, securing permitting and financing to construction, and, eventually, building a mine. 

Every sector will face a different set of challenges in its respective markets, but if we look at successful start ups across the spectrum, the vast majority of them have one thing in common: 

 A quality management team. 

The mining industry is no exception to this rule.  In fact, it may be even more important when it comes to junior miners. 

A venture capital investor at one of the top tier firms once told me, “We fear the entrepreneur who’s had one successful company. He thinks he knows it all. We love the team who’s had one successful company… and one terrific flop. They get it.” 

While it is not to say that a first-timer can’t successfully navigate his or her company through to the finish line, it is important to recognize the facts: nine out of ten startup companies in the U.S. fail before their fifth birthday.  

For mining companies, this statistic can be even more dire.  By some estimates only one in 5,000 mineral anomalies become economic deposits. 

When assessing junior mining companies, it is certainly vital to assess the logistics of the business. We want to know the geology of the area, the proximity to infrastructure, the head grade, the bi-products and so on. But first and foremost, we should look at the track record of the team. 

Running a company is like any other exercise. It requires practice and experience. It also requires a network of industry experts, and an ability to hold a team together.  Building a mine is an exceptionally complicated process, and there is no rulebook for executives to follow. 

And in a challenging financing environment (lending to mining companies has decreased 15% from 2013 to 2014; the entire industry raised 30% less capital from 2010 to 2014 as estimated by Ernst and Young), the first-time team fresh out of the gate is less likely to raise development capital than the team that’s already made several discoveries, permitted a few mines, and successfully managed the development process. 

As Rick Rule said in a recent interview “One of the beauties of the bear market is you can buy the best people in the industry for the same price as you can buy the worst.” 

Best yet, this is probably the easiest due diligence a potential investor can do.  All it requires is a little bit of time on Google. It won’t take you too long to find the teams which have truly delivered for their investors. David Strang, Bob Quartermain, Robert Friedland, Owen Hegarty, Donald Lindsay… you get the picture. 

So when considering a junior miner, before you start trying to learn the mining laws in British Columbia, before you start trying to calculate the viable mining methods, before you start figuring out the debt structure, do yourself a favor. Check if the team has ever managed a mine.  Then, see if they made money.


Join Rick Rule on the Money, Metals, & Mining Cruise, July 10-17, 2016, to learn from top money experts on this unique voyage. From its breathtaking glaciers and impressive wildlife to its rich Tlingit heritage and fascinating gold-rush lore, explore a land that enchants everyone who visits. This is a larger-than-life landscape—a feast for the senses. And it´s all yours to experience in six-star luxury aboard the Crystal Serenity.

This information is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination by Sprott Global Resource Investments Ltd. that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon, and their particular needs. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. The products discussed herein are not insured by the FDIC or any other governmental agency, are subject to risks, including a possible loss of the principal amount invested. Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and nowadays also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment.  Because of significant volatility,  large dealer spreads and very limited market liquidity, typically you will  not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally  associated with  domestic markets, such as political,  currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.

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