Analyzing A Mining Company

By Alexander B. Korelin           December 22, 2006 www.kereport.com

Featured on the Korelin Economics Report: “Analyzing a Mining Company with David Morgan, Dr. Peter Megaw, Laurence Raulston, Brent Cook, Paul van Eeden and Sean Rakhimov”

Recently, at San Francisco's annual Hard Assets Investment Conference, we hosted two panel discussions where we had the opportunity to chat with Dr. Peter Megaw, David Morgan, Brent Cook, Laurence Raulston, Paul van Eeden and Sean Rakhimov all experts in the field of mining. We asked each of them if they had any advice to offer a first time investor looking to put some money into mining stocks.

Peter, David and Brent comprised the first panel. Here is part of what they had to say.

Geologist Peter Megaw recommended that beginning investors learn as much about the industry as they can before starting to invest because much of the information that companies showcase is highly technical.  If an investor isn’t entirely sure how to interpret all of the technical information that is available, he said that the sheer amount of that information could also be a decent indicator of an exploration company's chances for success. Peter said that a surplus of information, for example, could indicate that a company has a valuable deposit on their hands, whereas a lack of information could indicate exactly the opposite. 

Exploration stage companies almost always make readily available the information that they have collected from their initial work in an area: surface signature, geophysics, structural data, geochemistry and the like.  Peter, David and Brent all agreed that this initial information could be a good indicator of the degree of success a company could realize with its project.

Newsletter writer and analyst David Morgan added that focusing on the history of the drilling crew, their track records and qualifications, could also provide insight.  He went on to say that looking beyond the current information and examining the area itself, how many times it has been explored by different companies, previous geological reports on the evolution of that land, studying the way it has formed, etc., could also be good indication of an area's potential output.

Brent Cook, who is a sought-after consulting geologist, emphasized that the work that both he and Peter do is highly technical in nature and so new investors not familiar with the terms need to work with an advisor who is an expert in the field. Many stockbrokers who specialize in mining stocks have this expertise. We personally wholeheartedly agree with Brent and can refer you to a number of experts in this field.

In our second panel, Laurence, Sean and Paul shared their thoughts with the audience and Brent, and Peter joined them again.

Among other things, newsletter writer, Laurence Raulston brought out the fact that the geopolitical climate surrounding the land in question is extremely important.  As most of us are aware, parts of South America, for example, contain profitable deposits but current political conditions in some of these areas are certainly not conducive for secure investing and folks would do well to stay away until conditions change.

Sean elaborated by saying that one of the few untapped areas of the world in terms of mining potential is Russia and that no foreign company has yet succeeded there.

Paul and Laurence both stressed that basic key factors certainly include people. Is the management technically competent? Do they have the ability to raise capital? What is their experience in the area? If the answers to all of these questions are yes, things can be promising.

Paul went on to say that it is critical to be able to “gauge the level of risk in the investment”. If that cannot be accomplished with some degree of certainty, an investor should stay away.

To listen to everything that these experts had to say on these and other issues simply go to our website, www.kereport.com, click on videos and then click on panels. Segments one, two and three comprise the first panel and segment four, which is much longer, comprises the second.  Enjoy!

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Alexander Korelin is the co-host of The Korelin Economics Report along with Paul Warren. This program is syndicated nationally on Talkstar and can also be listened to on the Internet by going to www.kereport.com and clicking on "recent programs". Guests pay no fees to appear on the program and neither Mr. Korelin nor Mr. Warren own any stock in the companies discussed unless it is fully disclosed.