I still own all of the shares from my first ever private placement. It was 1994, and I was working for Lac Minerals at the Red Mountain project, which I now manage for IDM Mining Ltd. (IDM.v). A few kilometers to the east of us, my Uncle Don McLeod had the Willoughby gold project in Camnor Resources. At the time, I was paid $115 per day, and I remember doing the math of how many days in the rain, snow and muck I’d have to work to fund my $5,000 investment; I also was dreaming about the new truck I’d buy with all of my winnings! After two roll-backs, the Company is now Stornoway diamonds, and my $56 worth of shares sits in my RRSP without the potential benefit of a capital loss. It’s meant to serve as a reminder of knowing when to sell…looking at my portfolio during this last crushing down cycle, this reminder didn’t work very well!
As an exploration geologist, I certainly have abit of a competitive advantage in picking junior mining stocks, but it can also be a massive obstacle to making big money! I have missed the various specialty commodity bubbles that have occurred over the past decade or so…rare earths, uranium, lithium, potash, graphite, uranium etc . Though a few of these juniors had legitimate prospects and some have worked out to be long-term market successes, with my basic geologic knowledge of their respective mineralizing systems, I knew that most of them were dogs and the potential for economic deposits was essentially nill. I’d watch on the sidelines as they’d go for big runs in the market and investors making big money! When the bubbles burst and most of these juniors went to zero, I was ultimately correct, but missed out on making money! Fortunately I didn’t lose any either.
One of my biggest wins early in my investing career was based on investing in what I thought was highly prospective geology. In 1995, I was working for INCO in Alaska; as a junior geologist, I discovered a breccia containing large clasts of massive and net-textured sulphides that carried high-grade nickel, copper and PGM’s. This was near the base of the large Fish Lake ultramafic complex, the right host rocks of magmatic nickel-copper orebodies. I was convinced (and still am) that there was a deposit somewhere in the 30 mile long intrusive system, with the breccia transporting the sulphides from a deeper layer. When INCO closed their Alaska office in the late 1990’s the Company was sold to my old boss’ Terry MacGibbon’s new junior, Fort Knox Mining. I bought shares, convinced that they would make a discovery at Fish Lake. The discovery didn’t happen, but Terry purchased a series of mines and deposits at Sudbury, and the Company grew into FNX Mining. The stock exploded during the nickel price surge in the early 2000’s and I made good money. This win wasn’t based on my vision as an exploration geologist, it was a win based on betting on the right people!
I have had great investment wins based on geological calls, usually where I had a good knowledge on the geology of the prospect. One example is Kaminak Gold. In 2008, prior to our discovery drill holes at White Gold with Underworld Resources, prospector Shawn Ryan presented the Coffee project to me and my partner Adrian Fleming. It was located across the Yukon river from us, and exhibited similar gold and arsenic geochemistry to our Arc zone prospect at White Gold. Though we liked it, Underworld had little cash in the bank, and more anomalies than we knew what to do with so we turned it down. Shawn did the deal with Rob Carpenter at Kaminak, under strong encouragement from Vancouver financier Cal Everett. After our big discovery holes at the Golden Saddle deposit in 2009, a massive claim staking rush and area play took off. When we were promoting the Underworld story, the usual question was what other juniors did I like in the area play…my answer was always that Kaminak had the best ground. I ended up buying a lot of stock based on their gold-in soil results and their highly competent technical team lead by Rob. My call was correct, and Kaminak has ended up discovering more gold at Coffee than was drilled at White Gold, and will certainly become a producing mine before White Gold.
Upon reflection of my junior mining wins and losses, it inevitably comes down to the management. Great explorers will acquire projects with great geology. Another one of my big wins was Grayd Resources. From about 2005 to their 2011 sale to Agnico Eagle, Grayd was my default ‘top pick’ junior miner whenever asked by individual investors or investment show panels, often at prices as low as $0.10. Grayd always had excellent properties, but mostly I was betting on my friends and old colleagues from Red Mountain during the Lac Minerals era: Marc Prefontaine and Hans Smit. Two top tier explorers and even better people. You give a chance to creative and driven geologists to make a discovery, and I believe that their success, and a big investment win, is inevitable.
Despite Stornoway Diamond’s success in financing and constructing the Renard diamond mine in Quebec, I highly doubt I’ll get my money back on my original private placement. Camnor had a good run and drilled some hot holes at Willoughby, but I never took my money off of the table early in my investing career. Hopefully I’ve learned to be a smarter investor, but the biggest lesson I’ve learned is to put my money behind the eager and ambitious technical teams. The driven explorers such as MacGibbon, Prefontaine, Smit and Carpenter paid off. Who is next, you ask? I like Millrock Resource’s team of my old boss Greg Beischer with proven explorer Phil St. George, as well as the technical team formerly at West Cirque Resources, now Kaizen Discovery.
Rob McLeod is the President and CEO of IDM Mining Ltd. The company was the subject of a recent CEO.ca interview.
Always do your own due diligence.