From Sprott's Thoughts -

Making money and adding value in mineral exploration is a function of answering a series of unanswered questions. Management must have first established sufficient credibility that we care about their answers. They must identify and defend their thesis based on the evidence at hand. 90% of the management teams you interview will be unable to present a reasoned argument for pursuing their project and to justify the approach they are using.”

“So let’s examine the questions one by one.”

“Is the process by which an exploration team proposes to pursue their target valid or optimal? Does it in fact address the most essential questions that will determine whether the project is a success?”

“Does the management team possess the requisite skill sets to conduct the process and efficiently answer these questions?”

“Does the management have a reasonable estimate as to how much time will be required to answer these questions? How was the estimate established?”

“Does the management know how much money will be required to answer these questions? How much will it cost to run the company during that time? If there are capital shortfalls, how, when, and from whom will the shortfall be addressed?”

“How would the management quickly ascertain that the project was unsuccessful – meaning that the target is not of sufficient value to justify further exploration? This is a very inconvenient situation for management, which may result in a reduction in their equity and options values. They may construe disappointing exploration results as threatening to their salaries. In most exploration projects, we expect that exploration will be unsuccessful at establishing a resource, but the ramifications of this outcome are rarely discussed be management.”

“What valuation range will we have if exploration does result in the discovery of a resource? Too often, exploration teams pursue targets where even ‘success’ will produce a paltry reward relative to the risks. Small mines have as many problems as big mines, but they cannot make you big money.”

“Finally, is management’s estimate of the potential economic value of a project well-reasoned?”

Rick believes these questions are essential to ascertaining with confidence that your team is competent, knowledgeable, and will efficiently deploy their shareholder capital.