Signs of a Junior Mining Stock Scam
Some danger signals are obvious. The old saying that if some thing sounds too good to be true, it probably is, will likely be reliable until the end of time. There are other signs that a play is more promotion than prospect, and some are listed below. Doubtless other red flags will be identified by future generations, for con artists can be very original.
- Any claim that samples require a proprietary analytical method: this is nonsense.
- Unusual emphasis on sample security or chain of custody before analysis: the management does protest too much.
- Any failure to split core and retain half for independent checks: the destruction of evidence.
- Verifications by independent consultants that are no verification at all: for example, when a consultant acknowledges that samples contain precious metals, but does not verify actual grades.
- Reserve or resource estimates based on surface sampling or trenches, with little or no evidence from drill holes at depth: no responsible geologist would suggest it is possible to do that.
- Reserve or resource estimates based on very widely spaced drill holes or limited drill information: nature reserves the right to spring a surprise on anyone who digs a large hole in the ground.
- Suggestions that a deposit is so large that entering into production could substantially affect the market for that metal or “put the big producers out of business:” that is invariably pure hype.
- Dark mutterings of a “conspiracy’ to prevent technological progress or to keep the project out of production; similarly, mentions of a “conspiracy” by short-sellers in the market: conspiracy theories are standard among pseudo-scientists.
- Large cash payments made to buy the property, often from management itself: other people’s money, paid up front, on a speculative venture.
- Poorly documented land tenure: if the company takes poor care of its property holdings, the property itself cannot mean much to management.
Finally, when in doubt, ask for an outside opinion. Rather than learn these and other lessons the hard way with your hard-earned money, seek the advice of mining professionals and respected mining analysts, or government geologists and mining organizations. Learn to do your own due diligence.
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