If you’ve never been to a mining conference, it’s kind of like being in a convention center filled with used car salesmen who all want to put you into a car you don’t need at a price you don’t want to pay.
You only have enough money for one car, you need it to be a good one – and they’re all licking their chops…
I should know: I’m currently in Beaver Creek, Colorado at the Precious Metals Summit, meeting with 30+ company managers across the world of small explorers, developers and producers. And I’m not just any guy off the street: I’ve been working as a gold analyst, publishing about these companies for well over a decade at this point.
A kind word or a recommendation in my research is valuable to the small operators I mostly focus on…
I’ve already found some exciting opportunities which I’ll be sharing in the coming days.
But mostly, I’m reminded of the hazards in this industry. I know it might get a little tiresome hearing from a gold analyst how terrible this business can be: but if you’re putting money to work in this space, you need to be knowledgeable about the pitfalls. And there are many in gold investing.
It doesn’t do you or me any good to sugarcoat this industry. It’s a den of vipers that I’d put up against any wretched hive of scum and villainy.
And I love investing in gold stocks. It’s my life’s passion. The reason it’s so hazardous isn’t because gold miners are bad people. It’s because it’s an incredibly difficult business – and even the best people in this business will tell you that it requires a little bit of luck.
Up until the moment when gold is coming out of a mine, there’s uncertainty about every gold deposit. That uncertainty means (at times) you can buy a dollar for a dime, or even a nickel. Sometimes a penny.
But it also means you are taking a risk.
Much of the work done by regulators and governing bodies in the mining space is designed to demystify, de-risk and formalize the process of informing the investment public about the quality and quantity of a gold project.
But it’s still risky, and for most gold companies, it’s a crap shoot. By coming up with all kinds of formal regulations, in many cases, these regulators are enticing the investment public towards risk, instead of away from it.
It takes years of experience to cut through the BS – and to see the real value (or lack thereof) in a gold venture. All of the rules and regulations in the world can not de-risk the uncertainty of a potential gold mine.
It just means that investors have to be even more sophisticated to know about ever-shifting terminology, technology and gamesmanship.
In the simplest terms, I’ll refer to Goodhart’s Law, which states: “When a measure becomes a target, it ceases to be a good measure.”
In the case of gold mine developers, there are many measures they can choose from. Whatever one you might prefer, there’s probably dozens of companies that can deliver a plausibly good data point. I’ll revert back to my used car salesmen metaphor: a decent salesman will highlight whatever metric you want, and squeeze you on the others.
If you’re looking for a low down payment, they’ll make it up on the financing terms. If you want a low sticker price, they’ll add months to the back end to make up the difference. If you don’t know what you want, they’ll squeeze you from every possible angle.
In the very early days of mining, if someone wanted to entice a buyer of their gold mine, they might “salt the claim” – meaning they would sprinkle in some gold to a “sample” for would-be buyers to discover.
Today, the claims are not so easily salted, but the measures are much more sophisticated. Some of the biggest catalysts for pre-production miners come from drill results. Companies tend to want to frame their drill results in the best possible light – even if the news is unwelcome.
The economics of gold mining mean that you need about 1 gram/tonne to have a feasible mine. So that target becomes very important. Companies are required to report accurate drill results, but they will frequently emphasize drill results above 1 grams/tonne – while minimizing the mention of sub-1 gram results…
To see the full picture, you need to look at those monstrously large tables, showing all of the results along the entire drill sample – not just the super rich results listed at the top of the press release.
So that’s what I’m doing this week: talking with mining reps and trying ot figure out who is selling the real deal for a steep discount, and who is trying to take me for a ride.
I’ll keep you posted.
Best,
Garrett Goggin, CFA
Chief Analyst & Founder, Golden Portfolio
P.S. My one goal is to simplify what’s happening in the world of finance to make it obvious for you why all roads now lead to gold. From Central Bank buying to out-of-control spending in Washington… The signs are everywhere that gold is coming back into the monetary system in a big way.
That’s why I’ve created a portfolio of my 30 best picks – including the seven top silver miners with true 100X upside potential. I don’t want to say too much here…
But please make a note to check your inbox on Wednesday, September 17, at 11 a.m. ET. I'll be releasing this special new project and alerting you via email when I do.
This could give you another opportunity at massive gains from the top 30 miners in the world today.