I’m going to let you in on a little secret that too many investors don’t know…
You are probably the last kind of person that junior mining companies want to deal with.
The pecking order goes something like this:
- Management and other insiders
- Joint Venture/ Business partners
- Industry insiders
- Private investors
- The public
If you aren’t in one of the first four categories, you’re probably getting the scraps.
It’s nothing personal. If a company doesn’t need your money, you’re not going to hear from the company. It’s that simple.
This can be a huge advantage. Just don’t expect it to be easy.
The More You Hear, The More They Need You
The reason I put that list in that specific order is that it is how information normally flows out of a company.
If the first four don’t see a compelling reason to invest more in a company based on new information, then that just leaves one option: drumming up public interest.
Hiring Investor Relations specialists and firms to drum up public interest in company shares is painfully expensive, especially for junior miners.
They’re masters of the soft sell and paid placements, with constant outreach to analysts, institutional investors, and news services.
(Full disclosure: the Outsider Club does not accept money to reprint or publish anything from companies or IR firms. We’re only beholden to the best interests of our readers to survive and thrive.)
A little bit of IR work, paid in cash or done in-house, is a good thing. Good news should be shared, after all.
But a lot of it can be a major red flag. IR firms often demand cheap shares at huge discounts to current prices if companies don’t want to pay cash upfront.
Everyone on the pecking order above, except the general public, knows it. A big IR push is a good sign that they can get in on some cheap shares too, and they’ll have no qualms demanding them.
As always, someone ends up holding the hot potato in the end. Guess who?
It is almost always the public that the IR firms have been hyping up that see large losses when the company needs to dilute shares to cover the cheap paper that’s been issued.
They may not like burning anyone, but sacrificing faceless retail investors is far faster, easier, and cheaper than burning business partners with contracts and fellow industry insiders on speed dial.
The Less You Hear, The More You Need Them
Keeping this in mind, and looking for companies that purposely aren’t making a bunch of noise, can be a great way to figure out which companies are firing on all cylinders, and are on the cusp of handing a windfall to current shareholders.
Companies that are in this kind of position will quietly put out drilling results and announcements to shareholders and on their websites and let the results speak for themselves.
They don’t need to do anything else. That’s all it takes for them to stay funded, limit outstanding shares and cheap paper, and set up a world-class mine.
Insiders, business partners, and industry specialists quietly keep investing more, and soaking up as many shares as they can. As long as share prices stay reasonable, they pay less and gain more.
Gerardo Del Real just introduced one of these kinds of sleeper stocks to his readers. It is sitting on a billion dollars worth of copper, yet its market cap is just under $30 million.
Several years ago, a major international mining company worth $14 billion stepped in and guaranteed funding for its flagship project.
The partner dropped nearly $60 million into the project in 2014, the same in 2015, and tens of millions since. And with the reserves in the ground and the terms of the deal, the $30 million company that owns the property is worth at least 10 times current prices.
The full results from its 2014 drilling operations haven’t even been made public, though its partner certainly knew about them when it poured in about $120 million over the following years.
With this virtually bottomless funding, this small company has only gone ahead with a couple small private placements in recent years.
This is exactly the kind of radio silence and funding glut that hints at a phenomenal opportunity. And quite frankly, I wouldn’t have even heard about it if it weren’t for Gerardo and his years of industry expertise.
