Bob Moriarty from the Gold Report :

TGR: Let's shift to some more solid ground—gold. In our last interview, when you were talking about juniors, you said, "The more projects I go to, the more cynical I tend to get. I don't believe for a minute that every scam artist in the world is in Washington or New York City. There are tons of them in Toronto and in Vancouver, too. The basic business model of most juniors is flawed." Can you explain what about it is flawed?

BM: The most common business model is to raise a lot of money, spend it, raise a lot more money, spend it, raise a lot more money and spend it. If you don't run out of people willing to invest, eventually you'll have 1 Moz., 2 Moz. or 50 Moz. of gold and sell out to a major.

TGR: Doesn't sound so bad

BM: The problem is that 2,000 juniors believe they're going to do this; there have been maybe 15 or 20 deals in the last five years. Mathematically, the odds are about 100-to-1. If the business model is to develop a resource, raise money to put it into production and put it into production at a profit, that's a business model that works.

But 60% or 70% of these companies exist for the benefit of management. People with no experience whatsoever go in raise a bunch of money and have a good time with it. They have no intention or ability to actually produce anything at a profit. There is so much demand for resources, and the price for resources is so high it's created the illusion that a lot of these guys who have no sense, no cents and no experience in running companies can succeed. They only succeed in running these companies right into the ground.

An ideal environment would be a company that pays its president or CEO say, $100,000 a year with a boatload of options—not a quarter million dollars a year plus unlimited expense accounts plus a boatload of options, where they make out no matter how much money they destroy for others.

TGR: So when you invest in juniors, you choose from among the 40% that have decent people trying to do something effective.

BM: Here's the deal. The mistake most people make, myself included, is focusing on the projects. It's easy to do, because you can see good ones, so-so ones and bad ones. The most money you'll lose is on the very best projects because you start to believe that nobody could screw up such a great project. But they can and they do.

TGR: So you say investors need to focus more on management.

BM: 100%. That's the only thing I've learned in the last 10 years. You have to go in and ask, "Is there any chance whatsoever that these guys actually will succeed?"