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I have been asked by several people now about how to evaluate the management team for a project and what to look for and what to avoid. This thread hopefully will provide some good pointers.
I have been asked by several people now about how to evaluate the management team for a project and what to look for and what to avoid. This thread hopefully will provide some good pointers.
Truth Number One:
A mediocre project with good management is a better investment than a great project with mediocre management.
A mediocre project with good management is a better investment than a great project with mediocre management.
Truth Number Two:
There is no such thing as a bad project with good management: good people just don't get involved with bad projects.
There is no such thing as a bad project with good management: good people just don't get involved with bad projects.
Truth Number Three:
The vast majority (>95%) of junior mining companies are either bad projects or come with bad or inexperienced management.
The vast majority (>95%) of junior mining companies are either bad projects or come with bad or inexperienced management.
Unless you are qualified to technically analyse everything about a project and company (geology, metallurgy, politics, logistics, financial etc etc) then the best way to skew the odds in your favour when investing is to review the management team.
The best junior companies change mgmt and Board as they progress through discovery to resource definition, financing, construction and production. Different skills are required at each stage.
Questions you should ask:
1. How much of the company does the mgmt team and board own? (The more the better.)
If this is not a significant part of their own personal wealth then why would you trust them with your money?
1. How much of the company does the mgmt team and board own? (The more the better.)
If this is not a significant part of their own personal wealth then why would you trust them with your money?
2. What experience does the mgmt team have in this commodity, jurisdiction, geological setting, potential mine type (open-cast or underground) etc.
To be a World Class geologist is at best one third about intelligence, but at least two thirds about experience.
To be a World Class geologist is at best one third about intelligence, but at least two thirds about experience.
3. Who is on the Board? How much of the company do they own? Are they paid in stock or cash? Are the interests of directors aligned with shareholders? Is the Board cosmetic or adding real value? Who is promoting the stock?
4. What is the shareholder base?
All junior companies run out of money and need a sugar daddy otherwise ruinously dilutive stock issuance is a problem. If a couple of funds or institutions are +10% shareholders then this risk is greatly diminished. It also means they have done DD
All junior companies run out of money and need a sugar daddy otherwise ruinously dilutive stock issuance is a problem. If a couple of funds or institutions are +10% shareholders then this risk is greatly diminished. It also means they have done DD
5. Have I googled the background of each of the directors and mgmt team? Do they have a record of success technically and financially?
Who are the company's professional advisors / brokers / bankers / lawyers? Are these tier one or shysters?
Who are the company's professional advisors / brokers / bankers / lawyers? Are these tier one or shysters?
Conclusion: Management is the single most important factor in skewing investment returns in your favour. Do your own research before investing. One single red-flag is good enough reason not to invest. Never fall in love with an asset - backing mgmt is a better strategy.
