Junior Exploration: the MD/CEO perspective

A couple of recent articles on junior exploration companies has provoked a large number of responses from a wide variety of people in the sector. Over the next couple of months, we’ll be presenting their feedback.?Specifically, we’ll be concentrating on the MD/CEOs, brokers, investors, analysts and the Chairpeople.

First cab off the rank are the MD/CEOs.?What do Managing Directors/ Chief Executive Officers think of the current state of play of the junior exploration sector??

Thanks to all of the people who have kindly contributed.?Enjoy "the Casino"?at the bottom of the list

·???????If another broker asks me when the results are due, I’m going to strangle them

·???????You stand in front of these people, tell your story and their only concern is “when can I sell?”

·???????So many conferences, so few real investors

·???????Struggling to see the value of promotion at conferences

·???????The “hangers on” are taking over – there seems to more IR/promoters & service providers than explorers

·???????Would love to spend more money in the ground but we’re lumbered with a corporate office in Perth/Sydney/Brisbane/Melbourne

·???????Can’t get staff.?When you can, they want big cash and have no interest (understanding?) in risk based salary component

·????????

·???????Great value in regional bases/offices, small teams close to projects, not near promoters

·???????Don’t overdo the promotion/multiple IR groups at early exploration stage

·???????Cloud/communication technologies now enable remote working

·???????Small boards work better than big ones

·???????The discussion also skirts around the elephant in the room - private vs listed.?I’d go a well funded private group any day.?List following the initial discovery.

·????????Is a junior exploration company selling a dream? If it’s the latter, then why structure it like Ford?

·????????Did the 19th century prospectors in Kalgoorlie/Ballarat/California pay themselves a healthy salary when they didn’t find gold?

·????????Does your MD/CEO need to be full time?

·????????Are their more appropriate success driven ways to reward staff – options, performance shares, bonuses, etc.

·????????Can you half the salary & “double” the success component?

·????????Do you need your own office? Can you share office space or maybe not have an office at all?

·????????Do you know what the real costs of exploration are? For

·????????If your exploration programs are campaigns or seasonal do you need full time staff?

·????????Do you want your company to be different or the same as the pack?

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The Casino

The Loss of Patient Capital and the mismatch of the Exploration Process with the daily churn of the ASX – leaving aside the 5 to 10 companies doing well due to discovery at any one time.

The House - ASX - Investment Banks - Brokers - IR PR Advisors?(Cash Fee Takers)

Dealers - MDs of ASX Resource Companies (Cash Fee Payers)

Investors - Punters - (Cash Fee providers)

Being a CEO or MD these days on the 860 company ASX Resources sector is akin to being a Dealer at a blackjack table - you know what you are doing but sometimes bad cards are dealt in terms of results.

The Investors walk from your table after imparting abuse, normally the ones who have made their money in the free market era of the last 12 years since the GFC, when I was first appointed a MD role.

No-one wants really to be a Dealer anymore, most MDs you meet would do something else if they could and are slowly draining away when possible.?Active MDs are normally in receipt of alternative MD roles as most talent now on the reviewing side of the table (analysts for banks etc), not the doing.

A Dealer at a table loses the folks at the table (Investors) not just by moderate results which are most of the time, but also but reverse attrition with more and more tables being added, which is the business model of the House i.e. ASX. Soon Dealers weary of it and walk away to happy retirement ignoring requests in a boom OR bust to join other tables and repeat the process.

In my view since the 1880s (Mt Lyell, Gympie) , listed companies are not suited to the speculative venture that is exploration, of course the utility of listing to access capital is an innovation, but patient capital is no longer present since about 2007, since the onset of the GFC when rapid shedding and minimal fees for buying and selling encouraged ephemeral holdings. This applies to companies such as ASX 200 as well, not just speculative stocks.

The empty University Faculties of geologists and Engineers has been a long term trend. The successful mining folk generally encourage their kids not to study geology (as was my case, thank fully the kids are where the money is). Government STEM programs are futile with the financialization of our society rendering these pursuits non competitive for the best students.