8 Ugly Truths About Junior Mining Stocks by Neil Adshead

Summary

• Junior Mining Challenges: The podcast discusses the inherent risks and challenges in the junior mining sector, highlighting issues such as oversized marketing budgets, warrant overhangs, and management teams prioritizing salaries over discoveries.
• Investment Strategy: Neil Adshead emphasizes the importance of investing in quality teams and projects, suggesting that successful investments often come from backing good people with sound business plans rather than focusing solely on geological prospects.
• Market Dynamics: The conversation touches on the cyclical nature of the mining market, with current conditions described as a bull market, leading to increased financings and opportunities for significant returns.
• Financing Practices: Adshead criticizes the use of warrants in Canadian financings, arguing that they can create market overhangs and distort stock prices, advocating for financing strategies that align more closely with long-term company success.
• Exploration Funding: The podcast explores the role of major mining companies in funding junior explorers, with a focus on strategic investments that can lead to future acquisitions and resource development.
• Risk Management: Adshead advises investors to minimize losses by avoiding overexposure to high-risk projects and emphasizes the importance of reacting to positive drill results rather than attempting to predict discoveries.
• Marketing and Disclosure: The discussion highlights the need for transparency in marketing and disclosure practices, with Adshead advocating for full disclosure of drilling results to provide investors with a complete picture of a project's potential.
• Investment Philosophy: Adshead shares his investment philosophy, focusing on making informed decisions based on thorough research and experience, while cautioning against the emotional pitfalls of investing in high-risk sectors like junior mining.

Transcript

Junior mining loves selling beautiful dreams, but there really are more ugly truths than success stories in the space. And today, Neil Lazad is here to walk me through a few of them and uh help me figure out how to start fixing the industry potentially. Neil is not your typical guest. He's an English PhD geologist who swapped field boots for fund management at one point, then became Rick Ro's right hand at Sprott and now oversees uh multi-million dollar junior mining investment program at Centa Gold. So, he's written the checks, he's seen the waste, he's made some money, he's lost some money, and then he's made some more money hopefully that he'll tell me about and he's now still putting real money on the line. For the next hour or so though, he's going to be unchained hopefully. No soft questions, no safe answers. We're going straight at the things that juniors don't want to talk about. So, oversized marketing budgets, warrant overhangs, we geology dressed up as prospectivity and management uh management teams that are more interested in salaries than discoveries. And by the end of it, I'm really hoping we'll have a blueprint for how this industry could finally deserve my money. Or maybe we'll prove it never will. Either way, time for me to shut up and uh for Neil to do the talking. Neil, thank you so much for your time today. >> No problem. Thank you. Good to be here. It sound like an interesting uh range of topics we're going to cover there. >> Definitely an interesting suite of topics. Hopefully we get to talk about everything. Uh just briefly for people watching or listening. If you want a summary of this conversation and all the other interviews that we do on resource talks, go to resourcealks.com. There's a free newsletter. It goes out once a week with a bullet point summary of all the conversations from the week. Before Neil though, I uh really am looking forward to this conversation because lately I've been getting a bit philosophical, which isn't an easy feat when you only have two brain cells. But so I've been wondering about how or why the world of publicly listed junior mining companies even exists in the first place given that again failure is the norm should be the expectation. Uh and that's resulted in in the sector as a whole burning more people than it's ever created returns for. So how can why does a sector exist in the first place? Um I mean it's really a it's really a risk uh it's kind of a risk game you know and another way to think about that is it is it is a form of gambling investing in junior mining stocks you you have this great desire you know to to discover I mean when you think about discovery if you go back to human nature I mean it's pushed humans to explore all around the world you know they they've kind of you know what's over the next hill etc etc so it's humans have always got this desire to explore uh you know in its many forms. So, I think people just love that, love that kind of thrill of the hunt, you know, and every now and then you come across this amazing story, you know, you can throw some recent examples out, maybe your great bears and snow lines and groups like that that have gone from a, you know, a 10, 20 cent, 30 cent stock to being a a $10, $20 stock and they're making, you know, thousands of percent returns over short periods of time. And just people love that. You know, people are driven by greed, people are driven by discovery. But when when you fundamentally look look at the mathematics just basic stats really of the odds of being successful they are actually quite poor. Um now that doesn't stop people going to the casino even though you know when you go to the casino if you play the casino or the odds long enough you're actually going to lose money but you actually enjoy that thrill of the hunt the thrill of the gamble. So, I think that there's there's like a core human desire to explore and discover and u yeah have a bit of fun along the way. Now, putting all your money in junior mining stocks, I wouldn't recommend that as a as a long-term investment strategy. Uh you know, we we go through these moments that that we're in right now, which is a we are in a bull market at the moment. Um and we're seeing big financings and we're seeing big moves. You know, you just need to be in it at the moment to be making money. So, it's kind of you do go through these these windows of, you know, great optimism and bullishness and and we're we're in one right now. You know, we're seeing we're seeing great returns on equities. You just had to have bought a basket of them 12 months ago and you'd be sitting on a 50 to 100% gain right now. So, it's kind of a So, it exists for that reason. I think people do still appreciate having a having a bit of fun, having a gamble, hoping they're going to back the next discovery. Is it the most efficient way to finance the mining space as a whole though? Because that's often times the the argument that I get in return is is yeah that there it's I mean it it's broken in many ways but it's the most efficient way to to finance mining just because of how how risky it is. >> You mean finance exploration or you mean finance? >> I think financing finance mining is is yeah exploration is part of that mining mining process. Right. So, so essentially the only way to get the metals out of the ground is to finance these risky uh early stage exploration companies because they got to find it first and and to finance that you know one in one in 200 chances that's what you need. >> I mean somebody has to find it you know and it is an interesting dilemma and I I posted something on LinkedIn a few days ago and I'm going to post something else probably later today. I I essentially went through the top I think it was 30 gold companies because they've all basically published their halfyear results now and I compared how much money they're returning to shareholders at the moment during during a period you know of high gold prices and high margins and how much they're actually spending on expiration. Now I I I did that with no real no real um you know aim no no real mandate. I wasn't trying to prove anything. I didn't really know what the answer was going to be, but I I found essentially that the major gold miners at the moment are spend are giving six times as much money back to shareholders than what they are spending on exploration. And I kind of think, you know, I was thinking is that does that feel right? Should should that be what's happening right now? But interestingly, when you looked at the top 10 gold companies in terms of market cap, they were giving back eight times as much money to shareholders than what they were spending on expiration. Now, some people will say, "Oh, they should be spending more on expiration." But expiration, you know, because their minds are finite finite. But expiration is a risk business. You can spend $100 million in 6 months and you don't know what you're going to find. Highly likely you're not going to find anything. Now maybe the best approach for the big boys and the big boys are maybe morphing into this. They think well either fund the juniors or let the market fund the high-risisk juniors and when they find something we will compete to to buy that asset that we will develop then into a mine because we are better at miners than what we are at explorers. So, so I suppose what I'm where I'm going with that is that mining is a very different business to exploration even though exploration is required you know exploration success is required by miners to develop you know to find and advance the projects which become mines it so so it's almost like they are clearly symbiotic but they don't need to be done by the same company so my role at Santa and you know it's a part-time role with the company and I'm not promoting the company in any way here. It's just they they and other mining companies are realizing maybe the best way to fund some of their exploration is to give money to highquality juniors, you know, plant some seeds around the market and hope that through their activities because you're backing good people with good land positions. They may, you know, make that uh amazing discovery that comes along once every two, five, 10 years or so, and you're you're in the game because you own shares in that junior. So it's an interesting way of funding exploration. You know, we are seeing quite a few uh major mining companies do that right now and it some of it is resulting in in in success. You know, B2's been backing Snow Line, for example, for quite a while. Uh Kin Ross was backing Great Bear and then ended up buying Great Bear. So, it's it's just a different way of looking at how expiration has been financed. But right now, shareholders of the gold mining companies are doing pretty well cuz they're they're they're getting pretty high returns. But at some point, these gold majors are going to have to replace these reserves that they're mining right now, either through their own self-funded exploration or through funding other juniors or through buying juniors that have made successes funded by the by the equity market. I like that answer because it it opens many different ways that we could go from here and and those truths that I was talking about at the beginning that I was hoping you can talk to me about. Um but but ultimately I want to drive from here to how do I survive and and potentially thrive in a space where where depending on on whose numbers you want to look at there's only one in 200 companies that that amounts to anything meaningful over you know a meaningful period of time. So, how how do I do it as a, you know, small time speculator essentially? And I know it's broad, but it's we're going to narrow it down from here on out, but how do you how do you spot that one out of 200? What what are you looking for? >> One thing I want to see and and again, I suppose you have to go back to the Lison curve and it would be good to see, you know, a graphic of of the Lasson curve on the on the screen here. You know, you have that period at the start there where you have this speculative period and you really want to see growth uh in value per share in the early days of an expiration company. And it's really driven by I suppos the the the sort of warmth in the market, but that tends to take you know all stocks up at at different rates. It's driven by the effectiveness of the marketing of of the company. You know, some companies are very good very good marketers, but it's driven by, you know, positive results that come from essentially from prospecting uh that then turn into sort of soil anomalies, geohysical anomalies that then get funded uh you know, in terms of drill programs and it's when you start to see those great drill results come out is when you have the maximum lift. Now, trying to predict that is very difficult. Even you know even the best geologists in the world haven't got X-ray glasses and can't see into the ground. Now you know geologists have the experience and the education of understanding or deposit models but you know so you could argue they do have an edge and I would argue we do have an edge geologists but we still can't really you know we still can't really predict which one of the 10 interesting looking so anomalies is going to result in that great drill interval which is going to add you know 50 100 200% to the to the share price overnight. Now that's kind of the stuff you dream about. Um, in my experience, I've backed more losers than winners when I think I'm trying to play that game. Uh, but in a way, I I would argue that people who've given me money to invest on their behalf, they want me to take those shots. Even though when you look at the probability of them being successful, despite all you your great geological insight, it is still a pretty high-risisk game, but it is kind of a fun game. And people want exposure to that to that fun and that gamble and that potential lift. And you know they they kind of love the bragging rights that they love to go down the pub and say you know I own 10,000 shares in this it went up 50% yesterday and they're bragging to their mates who are also doing junior mining and there's there's actually an element of that too. So it is very difficult to actually predict what is going to be in a drill hole. Um, the way I would try and do it in my fund when I was managing a fund on the spot platform was react to the drill interval. So, a junior would put a hole out. You'd see the headline at, you know, 6:00 in the morning on the West Coast. You'd think, "Oh my god, have a look at that." You know, say, I mean, I remember when Rbert drilled the first hole that he carry, you know, I saw that hole. I looked at the press release within about 10 minutes. I told the trader, you know, buy half a million shares at a certain price. you know, straight out of the gate. That that was the game I tried to play. So, I was I was being reactive to discoveries, uh, not trying to actually predict the discovery. So, it's kind of kind of a different way of doing it. And I the way I played that game and the way I marketed myself and my fund was I said well because I'm a geologist I can I can see the I can read the press releases and I can react to positive news ideally better than you know the average guy in the street who just sees a grade and a thickness headline but maybe doesn't really understand you know can't really put that immediately into context. How do I look at it if I'm not a geologist is a question that I have here on my list and so I'll ask it towards the latter part of the conversation but um and I'm assuming while you were at at Spratu you ended up the fund grew under you right you essentially ended up making money while you were there right >> yeah yeah it's kind of a long story um you know I I went back to spra in I was actually at SPR from 20 I think it was 2012 to about 2017 had a bit of a break and I was working with Rick for those five years had a break for about 18 months or So then got invited to go back to sport to create a fund. And I thought, well, let's let's create a fund where I'm trying to react to discovery. So I called it drill driven alpha. I was trying to react to alpha events that were driven by drill intervals. Um can't can't remember exactly how much they raised out of the gate. I think it was about 20 million. Uh but it ended up growing. You know, it waxed and waned as the market went up and down and we had success. At one point it was the fund was about 80 million. Um I think it ended about 50 to 60 million. I I left in uh about mid 2023 for for various reasons. Um and the fund ended up positive which which even though you know it was up and down a fair bit. I was I was kind volatile and but people's I I didn't get any complaints from LPs so they they kind of could could stomach the volatility uh you know and they were paying me to try and jump on these discoveries and some of them we jumped on and you know some discoveries just keep going and some discoveries just fade out even after a great drill hole. >> Yeah. So that that was a it was a great experience. I'm really glad I did it. It it was kind of gave me a few sleepless nights as well. It was a bit of a you know a real roller coaster. Well, you know, it's not so bad when when you're losing your own money, you know, but but I took it very seriously when I was losing someone else's money, including my own. I I was the fourth biggest investor in in the fund. So, I was a significant investor. Um, yeah, but it was a great experience. I'm glad I did it. I learned a lot. Does that make me a better investor after going through it? I would say I would say it does. I I would say I probably I probably pick less losers, if if that's a a better way of saying it. or um I know when something's not working. So, I know I will take a 20% loss rather than writing it all the way down and taking a 70% loss. >> I think it did save you some money in case you wanted to paint your your hair white. It actually already did it for you. So, you didn't have to buy the D. >> It really did. Yeah. I I used to have a big curly head of uh of ginger hair and yeah, after after being a fund manager, yeah, it very quickly went gray and mostly fell out. I have a little bit of experience with having orange hair myself, so I can tell you what you have there is as a trade-up. Um, what where I was going with this, Neil, is that I was wondering the money that you've you've made or the value that you've generated in your career, was it mostly due to the market giving sort of a lift or did you create it through that geological alpha there? >> I would argue most money is made in the market due to beta. And by that I mean the the the tide coming in, the tide going out. You know, sometimes you just got to be in the game. You know, if you would have bought a load of stocks to one to two years ago and you'd be sitting on a basket right now, for example, just look at GDXJ for example, you know, or any of those indices. But, you know, so over time, I think if you measure over time, that's probably the biggest uh determinant of whether you make money or not. Um but over the short term, yeah, if you play if you play a if you play a stock right, you know, and you make a 500% return, you know, a 500% return will cover a lot of losses. >> Uh you know, a lot of 20 to 50% losers o over time. So again, I the the whole the whole argument of the drill driven alpha concept was that you'd make money in in any market and and you can make money in any market. If you're in the worst bare market, if you're in 2015 or, you know, one one of the absolute desperate years, you know, 2013, 144, 15 when it was really grim, you'd still have stocks that went up a,000%. M >> you just had to you just had to be very very picky on on getting into those stocks as soon as possible, recognizing the discovery from the press releases, you know, digging in as much as you can, making sure you understood everything about the capital structure, etc., etc., and and hanging on. You know, a challenge in this business sometimes that I I find this challenge myself is you back a winner and then you get a bit nervous because you've had 10 losers on the trot. you know, you're up 50% 100% on the stock and you you think, "Oh, I'm going to check out here because I've got a win." And then then your 100% winner becomes a thousand% winner and you're just like, "All I needed to do was do nothing." And that is that is actually a challenge for some people. And I I found that to be a challenge. I found that to be a challenge to hang on. And you know, sometimes the worst thing you can do is look at the look at the market every day. And that's a I would say that's a challenge. That's a problem people have. They they're constantly looking at their screen. Now you have stocks on your phone. you you're glancing at your stock prices 20 times a day and it it serves no purpose. It just wastes it's a waste of time. It's a waste of your emotional bandwidth. You better go in and like dig in the garden or something and just don't even look at it. Don't look at it every day. It just it sucks up a lot of emotional bandwidth. And I would recommend if there's one thing to take away from this is look at your stock screen a lot less. >> You're making me want to delete Twitter off my phone as well now that you're talking about sucking up emotional bandwidth there. Uh, and it's I think it's a bit of the nature of the beast. I mean, if if if you would be attracted to this place to to the sector in the first place, maybe you are someone who likes to move around more like I find it more much more difficult to do nothing than do a lot of things at once uh myself as well. So, I think that's it's kind of nature of the beast. Um, you what what you do right now though, Neil, is not reactive as much as it's proactive, right? Like you seek out um essentially long-term investments uh with with Sincer that is, right? >> Yeah. the the role with Santara is essentially, you know, Santara the way I the way I see it is that they're trying to expand their exposure to exploration risk. >> So, so, so they have their own internal team which is doing, you know, option optioning projects and, you know, drilling around their their operating mines and spending, you know, several tens of millions of dollars a year on on that aspect. My my role there is like a little sort of almost like a separate little silo. I I've been given a a pool of capital and they want me to invest in good technical teams operating in jurisdictions where they're where they want to operate and basically planting some seeds long-term strategy. May maybe one of these juniors finds something which Centa can then acquire that becomes a mine in 10 years time. >> Mhm. >> That's that's really it. But the aim is not to make money out of the shares. And and I have to keep stressing this to people. It's not I I am I am what they call an internal fund manager and I think we're going to see more of this going forward because you know the the majors are making so much money at the moment and at some point they're going to say you know can we are we really getting rewarded for these shareholder returns that are eight times the expiration budget whereas maybe we should be spending a bit more on expiration but what's the best way of doing it probably is backing the higher quality juniors so so I think we are going to see the majors put more money into uh in you know into the juniors. So again I'm not trying to make money out of the shares. So I I really had to retool my brain as to how I'm thinking about these companies. You know I started my career as an exploration geologist uh seeking capital and then allocating capital in the field. Then I was a 20 years basically allocating capital to o to other people uh but with the aim of not it wasn't really to make a discovery. The aim was to make money out of the shares. you know, that that's the fundamental role of a of an analyst and and and their and their fund manager. Whereas now, I've gone back to being essentially I see myself almost as like an exploration manager inside a major mining company, but with a budget that I'm not determining soil sampling programs or drill budgets. I'm actually outsourcing that to quality teams and allowing them to do exploration and hopefully make a discovery. And through that relationship and that capital allocation that results in hopefully Santara being competitive on acquiring a discovery from one of these juniors at some point in the future. >> How much money is that? That's something Cent discloses. >> Uh it's not been disclosed. I don't I don't think it's secret. Um at the moment they've invested the total investment is 20 million Canadian dollars. Uh that there is more. uh the value of that book is worth over $30 million Canadians. So, you know, internally, so internally that the investments has had a plus $10 million Canadian return uh on the balance sheet for Santara, which is is it's immaterial for the size of Santara. Uh but there's been five juniors that have been invested. Santara owns 9.9% in five of these juniors. Have a I'd like to say we've got a very good relationship with all of the juniors. I talk to them regularly. Uh, one of the juniors has optioned projects to Santara. Santara is now spending money on the ground on some very interesting looking geochemical projects in Ontario. Um, they're talking to other juniors about optioning other projects. Um, so it's created a very good symbiotic relationship. It it has expanded Santara's um, good risk, you know, good exploration risk. It's it's expanded their exposure. Um, and the, you know, $10 million Canadian gain is just a bonus. It's it's just it's just the way it worked out, you know, partly due to the company's uh being high quality and partly due to just the tide rising in the market. So, a little bit of alpha, probably the majority of the gain is beta, >> you know, just just the market lifting. But yeah, I mean I mean it makes me look pretty good s sitting on this plus 50% gain over 18 months and bringing in good exploration opportunities for the for the for the company. And I think I think other gold majors are doing this at the moment and probably base metal companies too. And I think if you do it properly, if you have the right person managing it internally and that I think is key, you know, maybe somebody with good capital markets experience who does have a technical background and knows who's who in the juniors. I think we're going to see more of this inside inside the majors >> and I think it's a good it's a good source of additional source of future capital for the uh for the junior exploration sector. >> Yeah, I wouldn't be too mad at you if you made me 10 million bucks either. So, I do understand where Centur is coming from. How do you how do you how do you spot good good teams or good companies though? And I suppose it it might be easier if if we flip that around and talk about how do you spot red flags quickly and efficiently when you start looking at something because I can imagine a bunch of things cross your desk. How do you and it's actually now that with with social media and everything and and newsletter writers, retail investors also have a lot of stuff crossing their desk on a daily basis. So how do I quickly flip through that and and be like nope discard this, discard that? >> That's very difficult. That's very difficult for a say say a retail investor comes in you know some somebody like yourself somebody youngs somebody who enjoys the sector you know likes the thrill of it how can you know who the people are behind these whatever it is 200 3,000 listed and private junior expiration companies it's impossible now you can do your own sort of poking around the internet I suppose uh you know myself I'm just about to pass 58 you know I've been a geologist I was in in the field for essentially so I did a PhD and then a I worked as geologist for 10 years. I then had 20 years on the buy side and I I forced myself I suppose is one way to say it to basically take every single meeting you know I lived in Vancouver for 25 years. Vancouver is kind of like the you know the sort of Silicon Valley of junior mining. There's hundreds of companies there all sorts of promoters. So I must have had 10,000 you know 15,000 meetings. I must have been to 500 site visits. I go to as many conferences as I can. I absolutely pack pack the day. So I've met I've met thousands and thousands of people. And by the by the end of I I often would say to myself, I think I might be sufficiently competent to manage someone else's money when I'm 50 just basically due to experience of the sector and and a bit of a who's who. So, I've built up this contacts database over 25 years that's got I've got 9,000 entries in it. So, I've got 9,000 vcards in my in my and I I I work on it daily. It gets updated daily. >> Am I in there? >> You're in there? I'm starting here. >> Probably everybody we met in Yukon on the recent trip will be in there and probably some of them would have been in there for 20 years. You know, guys like Mike Berky who I've met multiple times, etc., etc., you know, so but that's that's a that's basically my IP, you know, that's and and in in it is is opinions of the people. So, you know, have they done good things in the past? Have they done bad things? You know, and there's various I suppose we could get into what what you know, what I think are bad things. But when I was a years ago, 20 years ago, when I was first started on the buy side, I was hired as a geologist and and I still market myself as a geologist. I I don't really do financial model. That's not it's not really what I do. I I look at the rocks, but I also have to assess the people because at the end of the day, I I used to be sort of, you know, I was like this on the geology. Oh, it's all about the geology. It's all about the geology. But it's not. It's it's primarily that the geology is very important. I agree. But for me, it's about the people and the business plan. So I I will get center pitched and the first thing I do, I don't really look at the rocks. I don't look at the geological scenario. I look at the people and if the people if I don't get past that people hurdle it's just an immediate fail. I just hit delete and I'm not going to back those people. Now that has hurt me a couple of times in the past cuz you know people who don't have the greatest reputations can go on and make discoveries sometimes because you just can't predict sometimes people drilling holes what they're going to deliver. But I think over time that served me well because one thing I never really wanted to be, especially as a fund manager with the other people's money. I never wanted to be embarrassed by an investment. I never wanted to say, "Oh my god, I own 5% of this junior." It, you know, I backed it cuz they were chasing uranium in Saskatchewan and all of a sudden they're chasing, you know, gallium in Mongolia, you know, and they embarrassed me cuz they just chased whatever ambulance was, you know, making the most noise at the time. and then I, you know, I'm stuck in it. I can't get out. They basically embarrass me. So that that was really something I I would really try and avoid. So to go back to your question, how does the retail person assess that? I don't really know what the answer is apart from learning as much as you can. You know, the internet today is an amazing thing. There's a lot of information on the internet that you can um you know, you can dig into lots of things. the the British the BCSC, the British Columbia Securities Commission, you know, has a list of people who've done bad things in the past. That, you know, that's one source of googling people's names, but there's all sorts of other things, too. But for me, it was like a it's basically a pattern of behavior. There's certain things I don't like people doing. um you know for example um every junior has to market but I don't like it when I see juniors do excessive amounts of marketing whereas some juniors basically market that they do mineral expiration more than they do mineral expiration that they're essentially marketing companies and you know those stocks can go up very fast very you know very strong but it tends to be ephemeral it tends to just be a little blip blip and if you're in it then I would be selling into that blip because that as soon as they turn the market and tap you know spigot off they will decline very very quickly. So, you know, we we we could talk about that all day and I'm not going to provide any examples, but for me, the the people have to be genuine. How they're spending the money has to be like a credible business plan. And at the end of it, you know, financing, I I always look at what the use of proceeds is going to be. And a year later, two years later, when they come back to the market, I want to see that how they spent their money was how they said they were going to spend their money. And if they can do that and and they fail, that's okay. failure failure. You You almost expect failure in this business. Um I just don't want to I'm okay backing failures. I don't want to back mistakes. I I really don't want to have a portfolio of mistakes. People who I said that they said they're going to do something and they end up going doing something completely different and I just don't want to be part of that. >> See what you're going to do and then do as you said you were going to do is essentially the concept that it comes down to. And I'm writing it down because we're going to be back to it for sure. But you just said you want to back good people. What's that? What makes a good CEO or a good what are the people pointing the rigs I think are important as well. I mean they always have 150 years of collective experience and they're the smartest people in the room. If you read the presentation and uh so I find technical teams hard to evaluate um CEOs a little bit easier because because they have a reputation that's you know you look at the stock price of companies they were involved with that's already part of the research. But >> yeah, how do you do it? How do you evaluate people? >> That's difficult. The CEO is the person you're going to evaluate the most primarily cuz that's generally the person telling the story. You know, not not being too rude to investor relations people, but I don't really want to hear the story of an investor relations person. Even though some of them are super talented and, you know, ultimately they they they become CEOs. I I want to hear it from the CEO, you know, and I I want that CEO to, you know, present a vision, you know, to to come across as a leader, you know, that and the CEO hires their executive team. So, you hope, you know, the quality of the CEO quite often reflects the quality of the people they hire. You know, the quality people will be attracted to a quality CEO. that CEO, a key part of a CEO for a junior mining company is telling the story and being able to raise money. You know, I've met some I've met some great geologists, people I've I've been in the field with, they're superstars, they understand the rocks, you know, they understand the concepts of exploration for whatever reason. They then become a CEO, they go to Bay Street, they come to House Street, they go to London, they can't raise money, which makes them a poor CEO. I'm sorry to say it. If I if I see you if I if I see experience that you can't raise money, you're a poor CEO. Sorry. I I I personally would probably be quite a poor CEO. I don't think I'm very I'm very salesy. I don't think I'd be very good at raising money. Um so I'm not going to try it. So that's a key part of being a CEO. Some of the great CEOs I've met are technically very good, but they realize that in as as a CEO, their job is not to do the technical anymore. But because they're technically competent, they can hire good technical people who are the people you said who are the guys on the ground or the girls on the ground designing where the drill hole should be because it's it's that drill hole that's going to make the discovery. So if you and quite often you only you have to trust the CEO's ability to hire those people. But that's why site visits and we can talk about site visits how how important they are. You know, not many of us get get to go on them and basically get invited on them. But to actually go in the field, spend a few hours or, you know, a day or two, whatever you need with the technical team and just to get a sense of their competence and their ability and their their experience. That is so crucial here. I I I would come away from a site of visit just saying, you know, I've met I've met a great team here. Maybe they're not on the right part of the project right now. I don't really know that, but I don't feel like they're going to drill a discovery hole in the next 6 months. It's almost like I don't care. I'm going to back these guys. is I'm going to give them money for the next 5 years. I'm going to participate in every financing. I think this is a top quality team and eventually that they they hopefully are going to pick up the piece of ground that's got that discovery on it that's going to take the stock price to the moon. >> I'm a little disappointed that we're not going to be getting an Ed Bell Copper and Gold Explorations Inc. with you as a CEO. Uh >> no, I don't I don't think you'll see me as CEO. No. And you know, I've got the greatest respect for CEOs. I'm I'm chairman of a a junior right now and I I interact with the CEO a lot and he's working super hard and he's not there's not enough hours in the day so he he's learning you know he's coming up a steep learning curve on uh what it's like about being a CEO and I'm trying to and he he he understands you know he's a smart guy >> he's he's he's he's having to learn where to let go and hire the right people to do the jobs that he can no longer do. So even though he's got a he's got a PhD in economic geology himself, he's realizing his primary job today, he's kind of marketing, selling the story, raising money, being a boss, and he's got to hire the superstars that are going to drill the hole in the right place. Yeah. So, and interestingly, go going off on a little tangent here, I think he's he's inexperienced as a CEO. So through my through my travels I've met many geologists who've become CEOs. um you know and they've had some have had amazing success, some have had amazing success that then had you know certain failures and some have just had failures but they've all got amazing experience and we interestingly we're actually going through a series right now whereby we are interviewing these CEOs like a one-on-one and and and we've had three so far and I've got a list of about 25. So over the next year or two as part of a mentoring program, myself, the CEO of the of the junior and these experienced geologists who've been CEOs uh were basically going through these fascinating interviews right now. It's a shame in a way in a shame in a way we can't actually record them. >> Uh but they the I mean I I'm learning a huge amount from these two, but it's helping sharpen the focus of the CEO uh of the junior where I'm the chairman. So I I think this this sort of mentoring is crucial. Um but again going back to can how easy is it for retail to identify a good quality CEO. It's quite difficult. It's quite difficult and I can I can only do it to my level today through 20 years of experience on the buy side. you know, allocating hundreds of millions of dollars into dozens and dozens of deals and following those deal those deals through the ups and downs of the cycle and the ups and downs of, you know, discoveries or or or non-discoveries. I've met Curtis, uh, who you're talking about here as well, and I was impressed by by his ability to pitch, uh, which is not something that you see a lot in in geologist turn CEOs, right? Uh, they're a private company, unfortunately. So, I guess we can we can judge them better by the by the state of the share price if they ever go public or if you guys ever go public. >> Um, is is ultimately the team more important than the rocks though? Can can can you know a very good team turn a mediocre asset into, you know, into into success or is that the first thing you look at? >> Uh, yeah. I the I have to pass I have to pass the people test. Yeah. if the people don't if they don't come up to what I'm looking for if I if I feel like, you know, can I trust them with with other people's money? I suppose trust trust is the word. Yeah. Um yeah, I I just won't I won't play >> even though they might have a great drill hole and I've missed a couple of I missed I won't mention any names. I've missed a couple where maybe I won't bat the people, but they end up going on and making a discovery. The stock goes to the moon. I'm like great, you know, well done. round of applause. You know, give the guys a gong, but the people weren't for me. So, I I do I do want to see the the people side is crucial. The people side and also the business plan. I see I see some groups who, you know, I'll just throw an example out here where, you know, they they say they're going to find a pfery in Chile, you know, at 4,000 m, you know, and it's a,000 it's a it's a million dollars a hole, you know, for example. and and then they say they're trying to raise $3 million. So So the business plan, the actual capitalization of the company doesn't match what they're trying to do and that is almost an immediate fail. That that is not going to work. So I I will I will pass on that. If they say they're going to raise $20 million and they can do it, then that's a bit different. But when when they're so to me under capitalization is a big is a big no no for me. I I want to see and going back to Santara, nearly all the juniors that Santara that I recommended they invest in, they were already actually pretty well capitalized. And several of them were saying, "Well, why why do we need your money?" I said, "Well, you don't need our money, but every junior when you're offered money, you should generally take it, you know." So, I I want even though you've got 10 million in the bank, I want you to have 15 because then if you've got 15, all of a sudden, you can kind of relax a little bit. you can instead of keep looking at the share price and thinking about raising where's the next dollop of money coming from you can now focus for the next two years on making a discovery and that's what I so it's almost like I'm I'm trying to be a a stress reliever for for the CEOs with with the centa money so going back to the original point there the capitalization of the junior is very important so try and match make sure the capitalization of the company matches the uh business plan >> with with your $3 million example there And following your presentation at the at the gold forum, that company might as well go and put it all on the roulette table. They have better chances of hitting. >> Yeah, you would. Yeah. Yeah. >> Yeah. >> Yeah. That's true. You know, so yeah, capitalization is crucial. I I want to see juniors who are doing big exploration programs have a lot of money and or have access to a lot of money. You know, some people will say, "Oh, you know, the the the London juniors that, you know, the they have this amazing success rate." Now a bit and same with Robert Freedelland and and his his companies. Now a reason why they have a higher success rate is that they have a lower cost of capital and they've always got this huge pool of capital that they've got that they can access at any time. So a big success big factor for success in expiration obviously you need good people and good ground but you need money. The more money you've got with good people and good ground, the greater your odds of success. >> Well, good ground is the other part of that, right? We talk about good people and uh we'll talk about financing as well because I think a lot of things are can be done way better in junior mining and I I still want to talk to you about uh warrants and four month holds and stuff like that that I know you're very passionate about. But in uh I I heard you talk about it in a presentation as well about recycled projects if I remember correctly. So, you know, assets that flipped three or four times, changed hands, went through a couple of cycles, never really got developed or sold, no success. >> What what's what's really a recycled project? Like, when is a project recycled enough that it no longer interests you? >> That's complicated because, you know, recycled projects can actually become mines. >> You know, 25 years ago, the gold price was, you know, $400 an ounce. you know, now it's uh $3,000 plus US dollars an ounce. So, what was not a mine, you know, back in back when I was young, you know, one gram deposit wasn't really worth anything, whereas now one gram deposits are quite often turned into big mines like we're seeing several in several in Canada. So, that's kind of a that's kind of a casebyase basis. Yeah, you can depends how many drill holes are in it, you know, depends where it is. is you can quite often look at a project that's got a 100 holes in it and it looks like they found the edges of it. You know, it's not getting any bigger and a new junior will come along and just drill two holes in the middle of the old high grade zone cuz it's just like a market play. >> Mhm. >> Maybe they've rebranded the asset, you know, maybe it's not been drilled for 30 years and everyone's forgotten about it. So, so you you do see that now you can make you can make money on those stocks if you're a retail investor. If you get in at the right price and ride it up and jump out at the right price, you know, you're making money. That's kind of more of a trading game rather than investing game. As a fund manager, when you're putting, you know, 1 2 3 4 million in these things, you can't do that because you can't really get out because you don't really have the liquidity. >> So, so I wouldn't really play those games, but, you know, retail investors can play those games. >> Yeah. So that that's kind of a tough one with a recycled project because I have seen I have seen projects, you know, for there's a good example in Australia there's there's a big zinc deposit called Century, you know, and it's called Century because it was discovered a century before they basically, you know, turned it into a mine. Um, so these things come and go and some projects can have 100 holes in them. If I'm not mistaken, SK Creek was like hole 107 was it? Which was actually the discovery hole, something like that. So it just you just don't know. You just, you know, if if the if the prospectivity is there, but maybe they drilled in the wrong place. You know, geohysical technology improves all the time. The actual ability to detect anomalies. Somebody comes along with a new geohysical tool and runs it over a 50-y old project and finds a, you know, a hot blob off to one side that's never been drilled. All of a sudden, the the old retread be, you know, can become a new mine. It's just um it's is kind of a complex topic that one. What what I find, you know, my my unprompted opinion here, but from from talking to mining CEOs or junior mining CEOs is that at least I want to see some kind of a decent explanation and and a decent plan of action for it. Like people have failed. Fair enough. Let's not bury that. Of course, obviously the direct red flag they're trying to bury it or promote it is a new thing. People have failed. Why do you think you're sort of the the chosen one? and and and the way people answer that question and their plan of action is even more important than than what they say in it type of thing. That's kind of how I think about it. >> Yeah. No, no, no. That's a good way to think about it. Yeah. or basically what are you going to do differently you know that that that the groups before you didn't do and and quite often these projects when you when you look at the history of projects they quite often fail because they basically it's what what I was saying before about under capitalization that they essentially run out of money and then they then they hit a wall in a bare market >> and all of a sudden nobody can raise money for almost nobody can raise money for almost anything and these things just fade away even though they've had 10 or$20 million spent on them they they they've got a $2 million market cap and nobody gives a you know nobody gives a crap about giving them any more money. So quite often you'll see these things just you know bare markets will just almost like somebody flushes the chain. You know 90% of juniors all of a sudden just can't raise any money. Some juniors still can raise money but most most can't and that's often what stops these projects advancing. I think it does give you an edge and and a big edge being a geologist and and a PhD geologist in in your case, but for someone like me, geology is still very much a struggle, although I find it incredibly important and interesting. What are sort of the basic checks, if you will, that you run when you first hear about a project? You said great thickness, that's kind of the obvious thing, or >> orientation and metallergy and what is, but what what is it that you're looking for kind of on your first pass look at it? Well, obviously you look at the grade. Um, now in a headline you'll see a mean grade. You know, you'll say, "Oh, it's 5 g over 20 m." Now, the first thing you look at is is that so that's 100 g meters. Now, is that is that 100 grams all in 50, you know, one meter? So, basically, how how smeared is it? Is it is it continuous grade over over over the interval or is it badly smeared? So going back to that RER example and this this was crucial for me when I looked at that press release the the IARI discovery and I'm looking at this 20 minutes before the market opens. The grade distribution down that hole and I can't remember the exact interval. It was basically tens of meters at four or five or six g. Now the grade distribution down hole was amazingly continuous. So similar to snow line and when you see so grade is important but grade continuity is very important as well. So you really don't want it all in one little one little zone and then badly smeared in in the headline. You kind of want to see gray continuity. So that's crucial in the discovery hole. So gold is, you know, famously nuggy. You generally don't see the same degree of nuggetiness in in lithium or uh copper for example. So yeah, great continuity is something I really look at. An obvious one is depth. you know, somebody's claiming, oh, we've got 500 m at 1 g. And you go, okay, that's okay if it starts close to surface. If it starts 600 m downhole, you've got a bit of a problem. Now, it's not necessarily a problem immediately. It's a problem eventually cuz, you know, it's going to have to be a a bulk tonnage, you know, underground mine. Now a challenge for me from an expiration perspective uh in in in let's call it a normal market so not a bull market not a bare market is that to drill off a resource at 600 m depth is going to cost you a lot of money. So that's that's important to me is um basically how deep is it? But also where is it? Is this is this 5,000 meters up a mountain in you know in Argentina or in in outback Alaska or is this sort of just off the highway just outside Reno you know and it and it's near surface you know so a one gram interval in the in the geological sorry in in the depth and the geographic context is is very important as well. I've also heard you talk about the way companies news related developments like this like like drill results for example and uh you talked about selective drill results or selective uh more like selective disclosure really but so highlighting intervals without providing that full context to >> uh people who are maybe non- geologists or people who actually read it. So can you expand on that? What is it that you're looking for? What selective disclosure? What do you not want to see in there? Well, I mean I I mean it is selective disclosure when you think about it. I I'm I'm not sure if there's rules on what you can put in a headline from a news release when you think about it. Um I mean this this is a separate complex topic too. Now I you'll see a junior report I don't know 20 m at 5 g gold in a news release. Now that might be from 30 drill holes. You know, if you if you open the news release, you might go, "Okay, that's our best drill hole." And you can you understand why the junior puts their best drill hole in the in the news release headline because it's like it's like a newspaper. It's like clickbait. You know, that that that really is what most people only look at is the headline. So, you're trying to you're trying to attract people. But you could also say, well, that is selective disclosure because what about the other 29 drill holes that have got nothing in it? you know, no, nobody's going to say, you know, we drilled 200 meters and we basically got no significant assays. You know, they're not you're never going to see that in a headline. Um, so so there is selective disclosure there from that perspective. Now, a personal bug bear I've had, and this this has been going on for quite a long time. And I know people who've um lobbyed the stock exchange to change this is that myself as a as a shareholder and everyone else your yourself and all your readers, you've your listeners, sorry. You've essentially paid for those drill holes. >> Yeah. >> You've paid you've paid a teeny weeny portion of this company that's drilled 30 holes. You should have the right to see the assays for every one of those holes. So a junior is only showing you the data it wants to show you. It's not showing you all the data. So, what I would like to see with every press release that includes drilling is a a simple spreadsheet that's got all the assay data in it because you've paid for it. So, why is that junior only showing you what it wants to show you rather than showing you all the data, you know, and really that data should be available in in, you know, with three-dimensional coordinates so that anybody these days you can download. I mean, it's quite easy to understand how to use these bits of software, but you can get these 3D viewers and you can import the data into the 3D viewers. You can twe it around and you can see how those drill holes occur in threedimensional space. And that's really what a geologist does, but it's not it's not actually that difficult. So, that's that's that's the problem I have with with the disclosure for drill holes, especially that I feel like, hang on, I've given you millions of dollars to drill these holes. Why are you not showing me all the data? I have an easy filter for that that kind of works with sort of my 75 IQ thinking here is but I look at the number of drill holes. So they're like drill hole whatever AG 2025 1 and then if the next hole is AG 2025 12 what happened to the you know 10 11 holes in between. It's kind of what I look out for. >> No I I I do exactly the same thing. And you know we can discuss I mean visuals is another one. you know, should companies sort of rush to announce they've got, you know, a speck of gold, you know, 500 meters down some drill hole in the middle of nowhere, you know, again, I I get why they're doing it. It's almost like it sounds like I'm complaining about the junior. I'm not really. It's just is it that important? Not really. You know, really, just just wait for the assays. But I I understand the junior's desire to feed the market. You know, it feels like people want news all the time. You know, the average investor's um ex attention span these days is is quite short and it's shrinking all the time. So, they feel like they've got to sort of constantly feed news. But unfortunately, quite quite a lot of news a news release is supposed to contain material information. But unfortunately, quite a lot of news releases don't contain material information or they actually don't include material information, which to me, a whole load of zeros in a drill hole is just as material as a drill hole with mineralization in it. >> It tells you, yeah, actually that's a a very good way of of putting it. That's not something I've I've thought about. Um but it's it the way the way I again thinking about how I do it uh not understanding everything is when I've when I'm done reading the news release and and that's step one like you got to read the news release from not only the headline or the highlights uh but when you're done reading the news release do you feel like you understood it and if you didn't is it sort of your mistake is there's jargon or whatever something that you don't understand geologically or was there just not enough information in there that that's also a quick filter that I use. Um yeah, ultimately though it's it's a lot of these issues that that that there are in our space that they have the roots in money like visual assets. What do people do and they want to get their stock price up >> uh so that maybe they can raise capital before the assays and they can keep drilling or something like that. So, I think financings and the way they're done is is something that can actually um it can serve you well as a speculator to recognize a financing that will ultimately kill the company and and you can get out while everyone is maybe rushing it or something like that. So, I know you think about that as well. How do you recognize a a a bad financing that's telling you to get out or run the other way? >> Um a bad financing. Um, well that's quite a complicated one. It depends if I'm in it or not. You know, you're saying as an existing shareholder or so, you know, as an existing shareholder, I I don't like a financing. If I'm an existing shareholder of of size, say I'm an institutional shareholder managing a fund, you kind of want to be offered it. You know, sometimes a financing might happen and you're not offered it even though you're an existing shareholder. you know, you don't see Canadians for whatever reason, and I believe it's a stock exchange reason, they don't tend to do rights issues. >> Yeah. Whereas in Australia, you get lots more rights issues. And I think a rights issue is very fair. So, it feels like if a CEO is doing a financing, I'm in it. I'm not being offered it. You know, the terms are too too sweet. And by that I mean the discount to market is too is too high. You know, there's a there's a warrant on it or whatever and it's like very sweet terms only offered to select people. That that that would certainly annoy me, especially if I was an existing shareholder and and I and I wasn't offered it, you know, somebody who supported the company in the past. So that that's one example. um you know sometimes raising as you said raising money where there's visuals and it's like you're waiting for the assays but then they do a financing in that window. Now you can argue should they do a financing? Can they do a financing because they've got material information they've not published. Um I would argue they shouldn't do a financing. I'm not exactly sure. I'm not exactly sure on the rules, but I'm sure I've seen financings where clearly they've drilled holes. Clearly, they've looked at the drill core, but then they do a financing before they put the assays out. That that to me doesn't feel right. You kind of almost want to I think in Australia they they basically call it something like cleansing the market. You know, you know, you have to have every every piece of potentially material information has to be in the market before you can do a financing. So again, I don't know if we're going to compare TSX to ASX, but I find the Aussie market a bit more Yeah. a bit more I don't know what the right word is, transparent or I don't know, accountable sometimes. >> Yeah. >> I I I did an episode about that on um with with Mark Bennett. I don't know if you if >> Oh, yeah. Yeah. kind of um >> a geologist uh turned, you know, CEO who's actually done things well a couple of times. And we talked about differences between the Aussie and the and the Canadian markets. There certainly are. There warrants is is one part of it. Um because and I do want to talk about warrants because I believe that bringing attention to them and and how how they're being used in Canada, how they hurt our market really is one of the few real attempts to actually save Canadian mining. Um you've got them corrupting the market before. So why uh how does that keep happening? like what what is that? Why has the Canadian market killed them off? Is it incompetence? Is it collusion between brokers and promoters? Is it a necessary evil or you know? Yeah. What what do you think about about that? >> It's not it's not a necessary evil. It's it's it's definitely cultural. >> I think it's something that brokers like uh because they feel it's easier to makes it easier to sell the unit. You know, they can say, "Look, you're buying this stock for 10 cents. you know, we'll give you a warrant for 2 years for for 15. You know, you're basically getting this warrant for free. If these guys are successful, the stock goes to 50, you know, as well as making your your 5x on the stock, you're making a you know, whatever a 3x on the on the warrant. So, you're you know, you're basically souping souping your gains. Now, I feel like it it it changes depending on where we are in the cycle. Uh right now we're probably getting more financings done without warrants. Uh juniors don't need to provide warrants at the moment. You know, they don't need to provide that sweetener. There's there's a lot of capital out there right now looking for investments. So I I kind of cringe a bit when I see a junior I saw one recently. I won't mention the name even though even though I quite like the company. They basically did did a big discount to the market on the financing but then put a full warrant on it. I think it was for 3 years. And I was just like why are you doing that? And one thing you got to look at with the warrant is the what I call the warrant premium. So what is the you know sometimes the premiums are very low as in the warrant price is only 25% higher than the share price. Now if if you're going to do a warrant and I don't really like them anytime you kind of want it like a 100% premium. You really want the share price to you know to reach high for that for that warrant to be in the money. Um, otherwise sometimes just just a a mispriced warrant. You don't you don't even know what a mispriced warrant is at the time they're issued. By a mispriced warrant, I mean you can sit there with a stock that's got like a 30 million warrant position on it at 50 cents, for example, and the stock's at 35. And every time the stock tries to get through that 50 cents, it just gets hit by selling because people go, "Well, I'm going to sell the shares andor I'm exercising the warrant." you just end up with what's called a warrant overhang and it just it just warps the market. It does kind of corrupt the market. I I don't like that. Like if those warrants weren't there, the stock would probably keep drifting higher as people want to buy it. So some newsletter writers promote, you know, the whole warrant stripping concept whereby you buy the you buy the shares, you get the warrant, you know, you sell the shares as soon as you can and you just ride the warrant, rinse and repeat. And it so it kind of forces people just to play this short-term trading game, you know, trying to trying to clip a penny here and there. And I just I just don't like that. I maybe I'm oldfashioned and I prefer people to invest in good people and good companies, you know, and maybe you're writing several checks, maybe you're buying more shares in the market because you believe in you believe in the team, not having not having a warrant overhang that kind of keeps warping the, you know, it keeps crushing the share price every time it tries to rise. I I I just don't like it. >> Wor clipping. I I I jokingly call it Canadian Canadian communism. I know some people call it Canadian capitalism, but it's really sounds to me more like it's Canadian communism. But uh so my main problem with Warren is that they they ultimately hurt the company in the long run and we're supposed to be investing in in the future of that company. The the real incentive for speculating in Junior Mining should be, you know, the upside in the shares themselves. That's why we do it. That's what we talked about at the beginning. like if if an investor only shows up for the warrant, you know, if someone says, "Oh, due to financing, but only if it's got a warrant on it." Maybe as a CEO, that's not someone I'd even want on my register in the first place. And I even think that in the long run, I don't think warrants even deliver the extra return that they promise because the stock is, again, as you said, slowed down by the overhang. So, whatever the warrant gives you, it it's offset by what you've lost in the share price and by repelling other people who would not participate in financings with warrants. And Australia figured this out years ago. Again, it's cultural. They didn't ban warrants outright. Like, you can do warrants in Australia, but very few do do them. I know they cap the um the issuance, so the illusion is kind of controlled off the bat, and you got to ask for permission on the AGM and stuff like that. But again, Australian juniors hardly ever use warrants. So, do you think it's >> do you think that's ever going to change? Like, will are we going to grow up in North America and move away from warrants entirely, or do you still have hope? Um, not sure. There's there's still enough people that want them. Um, I every financing I' I've led with Santara, I've said to them, no warrants. You know, I I will basically do a VWAP financing as in the volume weighted average price. I'll say, you know, what was your VWAP for the last 20 days? It was this uh you know, it's 50 cents. Okay, we'll do the financing at market. I'm not looking for a I'm not trying to screw you guys here. You know, perversely, as as I say to them, perversely, I want to give you more money. You know, I'm not trying to screw you. I I'm trying to give you as much money as I can, >> cuz I feel like the more money you have, the more chance you're going to be of being successful, obviously, as long as you spend that money wisely. Now, now going back to warrants a little bit, warrants occasionally have a positive side. I I've seen big financings. I remember Cisco did one years ago, maybe going back 15, 20 years, and they did this huge financing, join a bull market, and they had a warrant on it. Now, as the warrants were about to expire, the stock sometimes, if the company's doing very well, can just smash through that warrant ceiling. It can just go straight through it. It can be 50% higher, 100% higher, and then then the warrant overhang's gone. Then the warrants, there's two ways to look at the warrants. Then the warrants are actually dilutive to the company because they're having to issue shares at 50 cents when the stock's at a dollar. On the positive side of those warrants, they're actually a they're actually a feefree stress-free financing. I seem to remember the Cisco financing. It brought in tens of millions of dollars at a time when they needed the money. So Cisco didn't need to go market. It was basically fee free money but it was dilutive because the share price was a lot higher. So if those warrants didn't exist they would have been doing a financing at a dollar not issuing more shares at 50. So they were actually it was good that they raised money through the warrants but it was bad because it was dilutive and they could have raised money at a higher price. Now culturally I I just think there's too many you know the Canadian brokers have got used to issuing warrants. When you think about it, if you're a broker, the more attractive you can make the product you're trying to sell, and you make it attractive by one, making it as cheap as possible. So, you're you're forcing the CEO to take a bigger discount to market and provide that warrant sweetener and and as a future sweetener for it. Um, the more you can, you know, screw the CEO down, again, depends where you are in the market, in a bare market, the brokers hold the cards. In a bull market, you like to think the CEOs hold the cards because it's very competitive. So, I think as long as the brokers keep the power and the influence, I think you find most CEOs don't do not want warrants. I think if you if you were to poll 100 junior company CEOs, they'd all say actually I'd rather do a warrant free financing because it it creates a mess, a bit of a a bit of a landmine in the market for them in the future. But you'll probably find every broker in Canada want wants to have the warrants because it makes the products easier for them to sell. The easier it is to sell, the more they can upsize it, the more fees they get paid. >> Yeah. And it's ultimately that sort of a us versus them mentality as well when when you're providing capital to the company. You shouldn't be looking to get the most advantage of it now as you're providing capital. You should be looking to get the most advantage for the company so that you can profit from the company doing better later down the road. It's kind of like a, you know, natural logical thing that a lot of brokers seem to to do it the other way. You know, they want a seven and seven fee structure. You know, 7% cash, 7% in warrants, and then they want a discount to VWAP and otherwise they're not doing the financing. Um, which strange. >> No, it's it's cultural. Yeah, it's cultural. Now, now, now the whole seven and seven rule, I think you might find that's been reduced to some degree. Maybe it's six and six, maybe it's five and five. Um I always had a problem that okay say I'm getting a warrant in a financing you know my my warrant shareholder warrant was at a 50% premium to the to the unit price the broker warrants are at the unit price. >> Yeah. >> So the brokers the brokers are are getting a sweetener here. You you talk to an Aussie broker or or an Aussie issuer or a London broker they they they laugh at the Canadians at the fees they get. that they laugh at this six and six, seven and seven. I have seen 10 and 10, you know, occasionally in a particularly poor quality junior generally. So I mean that that in a way is is a bit of an indirect way to assess a junior is is the fee at which they're paying the broker. You know, if if this is a high demand company and the CEO is smart and a good negotiator, he can get a fee down of three. >> You know, he he might get three and three or four and four or or no broker warrants or something like that. Now, when you see that in the press release, and I often I nearly always look at the the fee structure, if you can see that that they're getting a a low fee financing, you know, that financing was very very competitive. A lot of brokers want in. There's a lot of demand for it. If you're seeing like an eight and eight or a seven and seven, you know that CEO didn't really hold many cards in the negotiation and they're forced to take that money uh because that's the only option they've got. >> There is. >> So, it is actually valuable. Sorry, I'm just saying it is there's a good takeaway there. It is valuable to look at the fee structure in the financing and sometimes you might not even see that in the news release. You you know quite often you you don't have access to the term sheet but if you can find out what the fee is the the fee structure of the financing that tells you the the sort of strength of demand for the financing. >> Yeah, that's a very very good point. There is there's information there's data in there. >> Yeah. >> About the whole company in in that financing news release which I I think a lot of people just ignore it. I used to ignore them until a lot recently actually. But it can tell you what do you think it tells you more about? Does it tell you the most about the financing capabilities of the CEO? Does it tell you about the state of the market? Because maybe sometimes, you know, a good finance is in a tough market and they have to give warranty in order to keep moving forward. What is it what is it telling you? Well, I think you know where we are in the state of the market at any particular time. >> Yeah. >> You know, you you know, right now, you know, you're in a bull market because you're seeing multiple financings every day. You know, multiple financings are getting upsized. You know, juniors who couldn't raise 3 million two years ago are raising 20 million today. You know, you're in a you're in a strong market right now. Um, I suppose one way to look at that is you'd maybe build up a database in your head as you read these press releases on the financing just to get an idea, right? Okay, we're in a bull market. You know, if somebody's getting five and five or two and, you know, three and three or something in this sort of market without a warrant, you know that that CEO and that company's in high demand. >> Yeah. >> I mean, nobody Sorry. I mean, some some brokers are probably going to call me up today and say, you know, why why are you beating up on us? But, you know, nobody should really be paying seven and seven with a with with a discount, a big discount to market and a warrant on it in this kind of environment. >> You shouldn't you shouldn't be paying that right now. Now is the time. CEOs should be holding the cards right now. CEOs should be raising money, I would say, on their terms because there's a lot of money that wants to come in right now. It's a lot. We're seeing big financings every day. >> How much how much dilution is too much dilution though in this case? Because you you are right like companies that couldn't raise a couple of million a couple of months ago can now raise double digit millions. So in Australia it's cap at 15%, you can opt for you know special uh a special situation where you you can raise up to 25% of your of your shares outstanding of your market cap there. But but how much is is too much dilution? Is that something you pay attention to? like how it is there too big of a financing? >> Um, one thing I always look at with the financing is use of proceeds. What are you going to do with the money? If somebody's if somebody's just going, you know, if someone's got a $10 million market cap and they're raising 10 million and they haven't really got a very good use of proceeds, I' I'd be very nervous by that. I'd be nervous about that for for for several reasons. You know, one which we might talk about is the four-month hold. >> Mhm. you kind of go what happens to that stock after four months you know you got this four month hold ceiling how much of that stock is going to get smashed out after four months so yes I agree that too much that that there can be too much but I do believe there are rules on the TSX as to how much you can issue over a certain period of time I similar to the ASX um I I think you see it more in the ASX because basically in every proxy that you're allowed to vote on it whereas in Canada I I do believe there is a an a cap on how much you can issue. It might change per stock exchange. So, I'm not sure how the cse compares to the TSXV compares to the NEO compared to the TSX. I'd have to go I'd have to go and look at the rules there. Um, I agree. If somebody's issuing 100% of their equity, you know, with all sorts of ugly warrants and discounts to market and high broker fees, I I'd be I would probably avoid the financing. >> Yeah. probably avoid the company as well. Yeah. >> Well, that's it. Yeah. Moral of the story is is look at look at how the financing is is structured and then avoid typically bad financings will will correlate with bad companies and therefore bad outcomes. You bring up a good point that's also a good way good segue into the way companies spend that money. Like when I interview company CEOs, I often open the video with an overview of their financials and also a focus on on two ratios there. One of it I call the exploration to administration ratio and then the second one is the drilling to marketing ratio where again essentially you want to see more money going into the ground than into the executives or the service providers's pockets. >> What's your take on the latter though because you brought it up earlier as well again marketing we we we have to do marketing as an industry but I see marketing contracts announced daily even more so now that we're in a bull market of course and most of them I deem vastly inefficient. So, how do you look at marketing for juniors and and how do you spot, I guess, red flags again in comp in how companies market themselves? >> I mean, a good initiative in Canada, and I don't know when it came in, but it's relatively recent, is that Canadian issuers, especially on the the smaller exchanges, now have to publish uh their marketing contracts. >> So, that's that's positive. That that didn't used to be a thing. They used to sort of hide, you know, find them hidden back in their financial statements, which most people don't look at anyway. Um, so that's that's something I always look at. A bad aspect of that, and we touched on this before, is that quite often a junior will hide their marketing contract at the bottom of a news release with no reference to it in the headline. >> Mhm. >> Now, that to me is wrong. That's the the the the junior will say we disclosed it, but you disclosed it in a news release about, you know, 17 drill holes and you hid it on page five and it's a separate little paragraph. They'll argue they disclosed it. I would argue maybe it should be in a separate news release with a headline saying that that always says investor relations contract. You know, they have to have those words in the headline. So, there is a disclosure issue with that. Now, I I always look at marketing contract press releases because I'm intrigued one to see um how much those contracts are and who is getting the money. Now, some marketing groups are better than others. I suppose that's kind of an obvious statement. If I see certain marketing groups mentioned, I I know it's going to be a not not a pump and dump, but it's going to be a shortterm fluffing. you know that the share price is going to shoot up and then the share price is going to shoot back down. Um I've seen some absolute shockers. I saw one last week. It was a $1.6 million US contract. >> Mhm. >> Single contract. 1.6 million. Like say that to yourself a few times and going Christ, you know, such a crazy crazy amount of money to spend on marketing. Which then just tells me this company is marketing mineral expiration. They're not actually doing mineral expiration. >> Yeah. I think and it was at one point uh and it's it's also interesting when it's one group because in that example you bring up it was one group getting that. So what what are you getting out of that? No explanation about that in the news release whatsoever. >> Well, what I always do is then go down a rabbit hole and go who is this group? So I I chase the group down. I had a look at it. Um and it's not a got nothing to do with Genie Mining. got this this individual seems to have a have a flock, you know, a certain has a certain MO, nothing to do with mining. He just probably has a lot of people who follow him. And this person probably at some point just says to his flock, buy this stock, you know, and 5,000 people rush on on their Charles Schwab account and buy it all at the same time and the stock goes up, you know, and I'm just going, "Oh, really?" You know, is that is that is that what you want? you know, so I would I'm not saying I'd black ball that company, but I'd certainly downgrade that company in my in my view and the individuals involved who probably made that decision. Uh, you know, I I did see a press release a couple of years ago that had 17 marketing contracts in one press release, which was kind of shocking. And there was another one, again, I'm I'm not going to mention any of these names. You can you can find them if you poke around. I I do generally look at marketing contracts every day. And there was another one that had several market contracts and they had spent over $3 million Canadian dollars on these marketing contracts. And you went down the list, I'm like, "Oh my god, there's like eight of them." And when you went when you went and looked at each of the groups, they were all in Vancouver. They're probably all mates. And I I've seen some I've seen some quite shocking marketing contracts generally in very small juniors. And it looks to me borderline I I don't want to say illegal, but it looks almost like it's a way of getting the money out of the company, which you know, which essentially goes to a friend. I then see zero marketing in the next 12 months, and I go, "Well, where's that money gone?" You know, and it's essentially the majority of a of a half a million dollar equity financing. Uh I saw, you know, without mentioning any names, this group raised $560,000 Canadians. 10 minutes later, and I'm not joking, it was like two days later, a press release came out. They spent 400,000 of that of that money on a no-name BC numbered company with a residential address in out of Vancouver that has nothing to do with market. And I'm going, well, hang on, where's that money gone? A shareholders not paying attention to this. And I I couldn't believe it. Uh so it's so it's almost like these marketing contracts are a way for let's call them the less reputable people in certain cities to extract money off junior mining company balance sheets rather than spending the money on expiration. >> Is there a range for that money? Like what what's too much what's too little marketing because you do want the company that you're in to be to be telling that story effectively and efficiently. So yeah, what's what are those ranges? >> The best form of marketing for me, I'm not sure there's a range on the dollar amount. the best form of marketing, the CEO should be should be the the primary marketing person, you know, assisted by the IR or the communications person. And I've met some I've met some great IR people, very smart, very dedicated. Now the best sort of marketing expenditure for me is somebody who you give them the money and they open the door for the CEO into the you know the the pools of capital in Geneva or the pools of capital in Miami or the pools of capital in Toronto or St. or London, you know, wherever that that form of, let's call it a finders fee, a a facilitation fee, call it whatever you want, that sort of marketing is good. When I when I see these contracts that go to, and I won't mention any names of the marketers, primarily within the United States, actually, you know, just just like an online blingy website, uh, person's promised all these amazing returns. Um, all of a sudden they've taken half a million dollars off a off of Vancouver Junior for three months marketing. They they they pimp the story. You know, the stock goes up, they turn the pimping off, the stock goes down. I'm like, well, that that stuff's terrible. That that stuff doesn't do any good. Now, somebody could say in that pimping period, my cost of capital's less, you know, I can raise some money, but it just feels like it feels like somebody's being fleeced here al along the way. It's it's not sustainable. So to me a good marketing contracts are let's call them introduc introductory contracts you know so somebody say there's somebody in Belgium who can get access to a dozen funds dozen family offices in Brussels you know they get paid €20,000 for that that's a pretty good contract and then it's up to the CEO who then walks through the door to sell the company to those juniors now you kind of want that also the people who the CEO is pitching to understand the story before they walk through the door. They understand it's a junior mining stock. It's $50 million market cap. It's a liquid. We're exploring for, you know, Rubidium in Marley or something rather than, you know, there's nothing worse than you fly all the way to Brussels. You walk through the door and these are like, you know, $50 billion family offices that only invest in, you know, $5 billion companies. You kind of have to make sure the marketer is matching you with the right sort of investor. There's nothing worse than you fly all the way to Brussels period. Like you could have entered the sentence there of Brussels a couple of times at least. Uh and I can say that it's fair. But um you you don't like bull markets, do you? >> Um I find bull the problem I have with a bull market. Bull markets are great for selling. >> Um bull markets uh one of the problems with bull markets is it's peak capital misallocation. It's almost like everybody can raise money. Uh, a lot of people, a lot of external PE capital that wants to come in, you know, they they want to jump in it. They've not really done junior mining before. Unfortunately, they jump in near the top. They don't sell. They write it all the way down. Then they hate junior mining for the rest of their life and never come back. >> Yeah. >> So, that's I mean, I love bull markets for a place to sell some stocks. Um, you know, you can still make you make good money in a bull market. It's pretty hard to jump out near the top. Everybody, you know, every that sort of greed kicks in. But really the the the challenge I have with bull market is is is the capital misallocation. There's a lot of money raised. There's a lot of money spent on poor quality projects that ultimately we wear that in the next bare market. You know, as Rick Rule will often say, you know, bull markets beget bare markets bull markets. And it's kind of true. It's almost like we had this great bull market in sort of that ended really in 2011 and then we basically wore that for the next five 6 7 8 years. You know, it was a we had a big long bare market on the back of that bull market. Now, you could argue because we had quite a a grim long bare market, maybe this bull market is going to be good. And it's the problem with calling a bull market is people think soon as you say bull market, they think, "Oh, it must be a top. It's time to get out." It's like, no, no, no. You know, a bull market can run for several years. We could just be in the early innings here of this warm market. You know, the metal prices are good. The world's changed in the last few years. Globalization's kind of, you know, faded from its peak, so to speak. A lot of countries looking for their own supply of minerals, and that would is going to push prices up. It's, you know, just due to the asymmetry of geology around the world. So, we're in a we're in a good period right now to be involved in in mining because there's a lot of money being raised. Yeah. You just got to you got to you got to trade wisely and understand where you're most comfortable to be in, you know, where you want to be. Unfortunately, a lot of people will will keep riding them up and they'll end up sitting on millions of dollars worth of paper and they'll unfortunately ride them all the way down. >> I've seen a few people do that. >> Do you still deploy your your own capital like your personal money? Is it is that into your mining as well? cuz your whole career and your life and and and your your wife's life essentially depends on on mining as a whole. So is your capital in mining as well? >> Uh some capital is I I I call it my risk capital. You know, my my family capital is not my my core family capital is in bricks and mortar you know you have to live somewhere and I kind of like real estate. Um, I have some of it is in sort of boring old, you know, interest paying, low interest paying, uh, currency, I suppose you'd call it, that's not it's not earning a huge amount, but at the end of every year, it's still there. You know, I have I have no kids, so, you know, if anything, I'm going to be planning to spend the majority of that money myself uh between now and the end of my life. I but I do do I do have risk capital in the in, you know, a bit of fun money. Uh, I tend to take bigger bets on fewer names rather than spreading it around. I find it easier to follow fewer names. Um, yeah, and I'd say more than that, that is more and the way I invest. I was having this chat with somebody the other day. I don't I don't try and force investments. And by that I mean I'm not sitting there every day, what can I buy today? And a lot of people do this. They try and force it. What What can I buy today? I must buy something today. I've got to buy something this week. you know, oh, I've got 50 grand in my in my pocket. I I hate it. I've got to put it in the market. It's like, no, you don't. I I prefer to wait. I prefer to wait for something to come along. I'm either at a conference, something lands in my inbox, I I hear some chatter down the pub in Vancouver about a financing, you know, someone I know and trust is doing a deal, and then I'll write a sizable check for that. >> Yeah. I feel that's what I prefer to do. Yeah. >> I feel completely seen. That's what I do. I said I'm I'm the guy sitting there every day and thinking like, "Oh, I should buy something." Definitely when I've sold something and if I've sold something successfully and I've made some money, I'm like, "Oh, I should, you know, definitely." It's kind of like a you play you play blackjack, you get a blackjack, and then the next time you're like, "Oh, I should probably bet double." That's actually the worst time >> because you feel better. You you you've had a win. You feel good. You know, you feel like you, you know, you you you're going to be successful again. You've got a hot hand. I mean I mean that's all sort of all these gambling is it basically comes down to gambling. If you read about the psychology of gambling >> and there's there's a very good book by Annie Juke. I don't know if you know you know who Annie Juke is. >> I don't >> Google Annie Juke. Yeah. She she was a professional poker player and she's written several books about her psychology and what she learned playing professional poker and I think it's a very good it it taught me a lot about decision- making and just sometimes you just got to like take a deep breath, you know, go for a walk. Don't feel like you need to force a trade. If you start forcing yourself to invest, you will make mistakes. >> I see it right here. I recognize the the book uh the front page of the book Thinking in Bets. >> Thinking in bets. So, it's very it's a very good and as well as maybe making you a better gambler for one of a better word, I think it just it just improves it improved my decision- making just in in everyday life as well. So, it's a very it's a very interesting book to read. I think I've read it three or four times and I have it on the shelf behind me and I'm probably going to go and open it again and I think it's time to read it again. >> The other one feels almost personal. It says quit. That's just the whole title and and maybe that's personal advice for me right there. >> I uh why I asked you Neil if you if you invest your own money because it's something I've been thinking about is position sizing. H how do you even begin thinking about it given that going back to what you said at the beginning the Lan curve is often where you start. So, do you go larger positions the more you go to the right of the Lan curve and the smaller the more you're to the left or like how do you think about position sizing? >> I probably don't really think about it that much as a personal investor as a as a professional investor institutional investor when I was when I was the fund manager position sizing is crucial. It's crucial for I suppose two big reasons. Um the obvious one is liquidity. a as a fund manager, you might be investing in a $50 million junior and you own, you know, you own two or three or $5 million of the junior and you just can't get out. You know, you're basically stuck in it. And if if you own too many of them, then all of a sudden your LPs want their money back, you have a problem. And that's why some fund managers obviously can't touch the uh the smaller caps. Now, personally, I from a sizing point of view, um I don't really have any particular rules there. Yeah, I used to I used to just have a it's almost like a daft rule. I would just invest if I was going to do an investment like a private placement, I'd just put 20 or 25,000 Canadian in it. Now, some people might say that's not a lot of money. Some people say that's a huge amount of money. Um but I would just almost have a fixed size. And it's and it was almost like why don't I do that? And it was because I didn't know which ones were going to work. You know, it's like trying to trying to think this one's this one's the amazing one. You know, say you've got $100,000 and you go, "This one's the amazing one. I'm going to put 50 grand in it." You know, it's like it's like being down the race track and you know, you have a favorite and you're absolutely certain it's going to win and you you put the majority of your of your wager on it and it it doesn't win. and you feel absolutely terrible and then you just have like a speculative bet on one that comes in at 50 to one, you know, and you only put you only put $5 on it. >> So, it's kind of sometimes you just don't know. So, I try to almost take the sizing out of it by just writing the same check each time. >> And and here I'm talking about similar sort of early stage speculative juniors whereby it's probably somebody I know they're doing an early stage financing. Yeah. So, you know, I mean, going off on a little tangent there, it depends on the financing. Sometimes it being in Vancouver, you can quite often get exposure to early stage deals. People, you know, you've got a good relationship with them. They will offer you some, to use the Vancouver phrase, they'll offer you some cheap paper. They'll offer you some of the 5- cent stock. And, you know, usually, generally, especially in this kind of market, you don't turn that down. >> Yeah. Uh, it goes back depending on on the rest of the financing. I suppose it goes back to what we talked about previously. When when do you sell that paper though? What's Do you wait for 3x or 5x? Do you wait for something company related? You wait for the CEO to piss you off? What do you do? >> That's a good question. I would say it's case by case. Yeah. You know, you you follow the business plan. It's very hard. I find it very hard. It's very hard to hang on to a wi a big winner. And that that might sound a bit perverse to some people. It's like, oh, you know, some people have a rule. Oh, I'll sell 50% when I'm up 100, you know, when I'm up 1x or sorry, 2x. So, you're basically taking all your stake out and and you'll just ride the rest. Wherever it goes is where it goes. Now, that's actually emotionally that's relatively easy to do. But to actually say say you bought great bear at 50 cents and you just watch it keep going up, you keep going up. You're sitting there at $10. You know, you're up 20x. It's very hard to hold on and not sell any. Now, it's easy in hindsight to say we should have held on and went all the way to 30. I think I read a Charlie Munger quote the other day that said, you know, the the hardest part of investing is not the buying and selling. The hardest part is the waiting. And it is very I find it very difficult. And that's maybe that says psychologically I don't have the right, you know, I don't have the alpha brain for being a super successful investor. I don't have that ice in my veins. You know, I think some of the best investors I've ever met are almost like bloody psychopaths. >> You know, they have no emotion. They just they just ride these things. Occasionally, they ride one of them up and it's like, you know, 20x. I'm not sure I could do that. I think I'd be I think I'd be dribbling it out all the way up. Um I It's a difficult one. I don't want to say it depends what emotional state I'm in at the time, too, you know, and also it depends what's going on in my life. It's like if I something happens, it's like, "Oh crap, I need the money." You know, I might think, "Okay, I need the money. I've had a big win here. I I'll take it out." So, it's a it's a I don't have I suppose a long way of saying I don't have a hard and fast rule. >> It's actually a real answer. And I and I appreciate because life is is messy that way. And uh you're right. I also don't have that uh you know, bang on the table with a black loafer type of blood in my veins where some of the more successful speculators might have had in our space. But, uh, Neil, I think I've been I've not been respectful of your time just looking at the clock. It's actually been about an hour and a half, so I'm I'm going to I've got more questions, but let's maybe leave it for part two. >> What is, uh, >> what's the what's the most fair criticism you get of your strategy or or or your uh, I don't know, of your work or something like that? >> Oh, well, I mean, people quite a few people jokingly call me Dr. No. One, cuz I've got a PhD so I I can officially call myself doctor, but two because I turn most financings down. >> Yeah. >> Now, you should turn most financings down. >> Yeah. You know, in in the in the leadup to a bull market, you could argue maybe should just be buying everything, but then you end up with a big book which you can't really manage, you know, and how how can you keep track of them? Um but you know certainly my time I've in invested hundreds of millions of dollars and done you know sufficiently well that people still pay me today to um to um keep doing it. Yeah. So I wouldn't say I've got an amazing track record but I've certainly got maybe a slightly above average track record. And uh I think a friend of mine used to work with Frank Guster at Yorkton as an analyst and he said Frank apparently said to him as long as you write 55% of the time you'll do pretty well. That's that's that's that is kind of the odds in this game we're in. You know, you almost have to expect expect you're going to have losers. And one of the big learnings I took away from being a fund manager is the best fund managers are the ones who minimize their losses, not maximize their winners. I mean, maximizing your winners, you know, riding your winners all the way to the top is great, but it's difficult to do, but it's it's easier to minimize your losers. You know, some people have stop losses is one way to do it. Some people say, "When I'm when I'm down 20%, I'm out." You know, the worst thing you can do is be down 20% and say to yourself, "Oh, I just want to get back to to par. I just want to get back to being flat and then I'll get out." And before you know it, blink of an eye, you're down 70% and then the money's gone and then you're screwed. So, I'm I'm not sure that answered your question, but >> No, that's it's been a it's been a very good conversation. I think uh I think I've been through most of the stuff that I want to ask. What do you What do you want to leave us with? Where do people go if they want to read more about you? What are you What are you selling? I don't know if you're selling anything, but uh >> No, I'm not really selling anything. I have um I have various I don't have a full-time job at the moment. I'm more than happy to if anybody wants to connect with me through LinkedIn, then that's probably the best way to do it. I occasionally post on LinkedIn. I posted something last week. I'll post something again uh probably later today or tomorrow just on how majors are spending money on expiration compared to shareholder returns. Um yeah, I'm working with Centa kind of managing a little internal fund there part-time. I'm working with a couple of funds including one in the Netherlands, the Commodity Discovery Fund. It's more of a more of a passive role. So they basically ask me what do I think of this story which they may own or thinking of owning. Uh yeah, I consult to other funds in the US. Uh, and I'm chairman of a of a private journey called Scout Discoveries as as we mentioned before. So, you know, you add all them up and it keeps me u keeps me fairly busy. Yeah, >> I really do appreciate your time. Thank you so much for doing this. >> No problem. My pleasure.