Investors should seek companies whose managers own meaningful stakes and have committed backers able to fund more than one drill program, Digest Publishing co-founder and mining guru Nick Hodge said.
So-called “lifestyle companies” are widespread, Hodge said, citing Rick Rule’s estimate that 80% to 90% of the junior sector has no value. A credible junior starts with management owning 10% to 20%, reports those holdings and invests cash alongside shareholders rather than relying on salaries and options, Hodge told The Northern Miner’s Western Editor, Henry Lazenby, this month at the Rule Symposium on Resource Investing in Boca Raton, Fla.
“I often say they’re [lifestyle companies] mining shareholders but they’re not looking to mine anything in the ground,” Hodge said. “You’ve got to look for real companies doing the real work, raising good capital and actually trying to find and build something.”
Hodge sounds the warning as explorers spend money they raised during the metals rally over the past year and prepare to release drill results over the coming months. The most reliable guide, Hodge said, is to follow aligned insiders and identify patient capital that are often the hallmarks of credible management teams.
Watch the full interview below:
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