My business partner brought up a great point about how there are so many companies that are heavily diluted stocks that are really lifestyle companies. More concerning is that many investors in the space get fooled by them.
From an industry perspective it takes money that could be going into real explorers that drill. Gold, silver and almost all metals mining need more discoveries. Drilling is how those discoveries are made and lifestyle companies don’t drill or rarely drill.
Here are the characteristics of a lifestyle company. Heavily diluted stock structure, little to no drilling, low insider ownership and high operating costs. Buyers be aware, lifestyle companies are hazardous to investing capital.
Another group of companies that are hazardous for investors are science project companies. These are the ones that geologists running the company and management fall in love with and treat like their baby.
One of my geologist mentors used to say we are in the drill it to kill it or make it live business. Real explorationists are always in a hurry to be drilling, science project companies are in no hurry to drill out of fear they might kill their pet project.
Of course it is also very important to be mindful that you don’t want to just wound the project. Plenty of projects have been drilled or mined in the past and left for dead when they in fact were only wounded and somebody comes in and figures it out and finds a mine.
Keep in mind, after drilling and killing or wounding phases, the most important step in exploration is to get to the making it live phase. That can only happen if you get the truth machine on the ground and drill it.
In the making it live phase, it is always a similar pattern, they follow the science and drilling to lead them to the discovery. The sooner an explorer gets to this phase the better, so they can’t be afraid to drill.
Much like their relative the lifestyle company, the science project companies tend to have a lot of stock out, not much insider ownership, high costs to operate and rare drill programs. Put these ones on your beware list.
Skeena in the News
Skeena Resources had news out on drilling results from their Eskay Creek project in the Golden Triangle of British Columbia. They currently have 6 drills spinning and are moving rapidly ahead with an open pit mine with a very high-grade. Open pits are usually low grade and big tonnage, whereas Eskay Creek has tonnage and high-grade which is an exceptional combination. Today the news had a highlight hole of 25.03 g/t gold equivalent over 35.42 metres. Those kinds of zones will spit out cash like a broken slot machine when open pit mining it. Equally exciting is they have opened up a couple new zones in areas that were not thought of as prospective in the past. Translation, it means they can add a lot more tonnage to the project. They certainly don’t have a cheap valuation, nor should they as they have an exceptional project. More drill results and higher gold prices will be key catalysts to unlock shareholder value and I expect to see both.
There you have it, another edition of news that caught my eye, have a great day.