Posts Tagged ‘Potential Investment’

 

The following is a modified article that I wrote for, and was featured in, Resource World Magazine. For magazine enquiries please visit : http://www.resourceworld.com/ 

 

 

Conference Season

 

Conference season is now upon us and resource companies are investing time, energy and precious cash to meet with current and potential investors. Most companies will send available senior management to the premier investment conferences, but don’t expect them to be hanging around their tradeshow booth for the entire show. Many will be giving presentations, holding private meetings attending industry events and networking. Most will spend a limited amount of time each day at their booth, leaving the hard lifting to the investor relations team. If you are fortunate enough to catch the CEO, President or Geologist, ask them the burning questions you have about their company, but also make sure you take the time to say hello to the Investor Relations Officer, or IRO. This is the individual you will want to build a relationship with because, after the show is over, unless you are a major shareholder, it’s the IRO that responds to the majority of investor inquiries. 

 

Be Prepared

 

If you are going to attend an investment conference, make sure you are well prepared for the lengthy walks, line ups, cafeteria food, huge crowds, and complete sensory overload. I recommend spending time to read the speaker schedule, the map of the investors’ exchange and the schedule of networking and ticketed events. Scan the list of companies attending the conference, review the floor map and highlight the companies you want to meet with and make sure you take notes, you will be glad you did. I find that without a solid game plan I can walk in circles all day and may miss the speakers and the company’s booth I had planned to visit. 

 

Face to Face with the IRO, what now?

 

Once you have navigated your way into the investor’s exchange, and are face to face with an IRO, what should you ask? When I am in the IRO role, I like when people introduce themselves to me and let me know their interest in the company. Are you a current shareholder or a potential investor? Do you know much about the company, or are you just curious about the project/operation, management or region in which we have our assets? Once the conversation is flowing, ask the questions you have prepared. Good IROs will be able to answer questions on a variety of topics so I urge you to find out as much as you can about each company you have an interest in.

 

When I look at a company as an investment or as a potential client for Steel Rose Communications here’s where I start: 

 

Who is on the management team? 

 

Who are the key players? What recent successes have they had? Are they respectable or do they have a coloured past? Have their successes been in areas of the current project? How many other companies are they running? How many shares do they own in the company? Are they compensated fairly? 

 

What is the share structure? 

 

How many shares are outstanding and does this match with the level of development of the company? How many warrants and options are outstanding and at what price? What types of shares are outstanding?

 

How is the stock doing? 

 

What exchange does it trade on? Does it have good liquidity or does it trade by appointment? What kind of trading volume is there? Is the share price at a 52-week high or low? What is the trend for the past few years and the reasons why (i.e. if it is at a low is it due to macro/micro factors)? Where is the stock price going? (trick question – If they tell you it’s going up quickly and to buy in now, it’s time to run.)

 

What is the financial picture? 

 

How much money does the company have? Will they need to finance again soon and will they be able to raise funds? What’s their monthly burn rate and how much debt are they carrying?

 

Who are the shareholders? 

 

Who are their major shareholders? Are there any key industry players? Has the company attracted any legitimate mining analysts, brokers or institutions? Are any of the management key shareholders? What percent of the shares does management hold?

 

What are the IR plans? 

 

Does the company have a good IR team in place? How do they plan to market the company this year? What are the key expenses that drive the budget? What have they done in the past that has been successful? What are they trying for the first time? 

 

How do you communicate with shareholders? 

 

What communications plans are in place to reach stakeholders? Are they active in social media? Do they have a strong website? Do they have site visits or investor days? Do they respond to phone calls in a timely fashion? Do they produce marketing materials and can they be found online? 

 

 

TELL ME ABOUT THE PROJECT/OPERATION

 

What is the commodity? 

 

(Precious metals, base metals, diamonds, specialty metals, industrial metals) Is the commodity selling at favourable price? What is the forecast for this sector? Is this commodity the flavour of the month? Lithium, Graphite, what is it this year?

 

Where is the project? 

 

Are they local? Are they in a war zone or a politically stable country? Are they in an area play? Are they in a mining friendly jurisdiction? Are they close to any national parks or is there a risk one might be declared on their project? (This actually happened to one of my previous clients.)

 

What stage is the project? 

 

Grassroots, exploration, development or production? What work has been done on the project? How much has the company spent, what have they done? How much is left to spend to get it into production? Is there a reserve or resource estimate, or a scoping study, pre-feasibility study, bankable feasibility study? What’s the tonnage and grade like? Can they tell me about recent drill results? 

How is your operation doing? What is the mine life? How is production trending, tonnage, and grade? Do they see expansion potential? What is their planned capex? What do they expect to see for cash costs, drivers behind any increases or decreases? What challenges do they see to meet their production targets?

 

Is there infrastructure? 

 

Are there roads, power, rail, electricity, labour, water, exploration camp? Is there a community close by? 

 

What are other potential issues? 

 

Are there archeological or environmental challenges or negative relationships with First Nation communities due to previous mining activities?

 

Is this a potential area play? 

 

Is this project near a current producing mine, near a recent discovery? Can they leverage the resources such as management, or infrastructure if it is near a current mine? Located near a major mining camp or mineral trend? Was this a past producing mine?

After exhausting the IRO with extensive questioning, I like to thank them for their time. If I find the IRO has been knowledgeable and helpful, I leave a business card and let them know I will be following up at a later time. If the IRO is a novice and can’t answer all of my questions, I try to pick up a business card of one of the senior executives and let them know they could have prepared their IRO better.

If you are selling something or looking for a job, do the IRO a favour and let them know up front. Don’t pretend to be interested in the company just so you can give your pitch. Conferences are an important part of the marketing mix that require a great deal of time, energy and financial resources. Understand this, respect this and you will be on track to develop a strong rapport with each IRO that you meet. 

 

Jon Bey is the President /CEO of Steel Rose Communications in Vancouver, B.C. SRC is a boutique IR firm that specializes in Investor Relations services for publically listed Jr. Resource companies. Jon is a Board member of the BC Chapter of CIRI and is Professionally Certified in Investor Relations. Information on SRC can be found on their website at www.steelrosecommunications.com

 

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Thanks for reading, hope it was helpful! Want to know more about what makes a great IRO? Feel free to contact me.

:-)

Jon Bey

 

 

Happy Halloween everyone! At this time of year, with the ghouls and goblins on the prowl, I thought I would point out the Top 6 Scariest Investor Relations Practices I see on a regular basis.  As an investor, when I begin to research a company, I have a process I go through when vetting all potential deals. When it comes to the Investor Relations component, I am still shocked at how many companies make horrifying mistakes. Here are the Investor Relations Practices that scare me away from a potential investment:

6. The Shadowy, Uneducated IR Professional

It still shocks me that there are individuals representing companies in an IR role that have no idea of what they are doing. Don’t get me wrong, I know everyone starts out ‘green’, and most people learn on the job, but I encounter some individuals that have been in the industry for a few years, and have yet to make the effort to educate themselves. Time to take a course, read a book, and join your local NIRI or CIRI chapter.

5. Ghastly Websites

The corporate website is the most important marketing piece a company controls, but yet I still see alarming websites every week. I shake my head, and move my attention to the next company immediately. If a company still does not understand how valuable their website can be, and the damage it can cause if it is outdated, then they don’t deserve my time or money.

4. Hair-raising, Over-Promotional IR Types

When I talk to a CEO, or an IRO, I fully expect to see their passion, and hear how great their project is. What turns me off a project is when the IRO goes beyond the investment opportunity and turns into the wicked, used car salesman. Give me the facts, save the hard sell, and don’t tell me if I don’t get in on the deal today, I will miss the stock jump coming this week.

3. Haunted Social Media Deniers

Social Media and Social Networking is growing rapidly, and I hope to see the companies I am looking at least taking steps to monitor what is being said about their company. If the senior executives are burying their heads and ignoring the potential opportunity, I question their commitment to Investor Relations. If the IROs are doing this as well, then I move on to the next deal. The IRO may be having trouble convincing the C-Suite, but they need to be trying, and there are several things they could be doing on their own with little time commitment, and for little money.

2. Vampiric Social Media Companies

On the other hand, things get really creepy when I see a Social Media Company running a campaign for a public company that has no understanding of security commission regulations, or exchange rules. If you are going to hire an outside firm to help you with your Social Media campaign, and there are a lot of good ones, make sure they understand your company, industry, and the proper rules of your stock exchange. The last thing your company needs is to get flagged by the regulators for being perilous with your tweets, and comments made in the social media space.

1. Ghostlike, No Investor Relations at All

Yes it is true; there are still public companies that don’t understand the value that an educated Investor Relations professional can bring to their company. Some tell me the IR is handled by the CFO or another executive, and others don’t believe the value add is worth the expense. Some have had a bad experience with a poor IRO, and don’t know where to find a qualified professional. I always advise them to give it another shot, and to search for a qualified IRO through their local CIRI or NIRI branch. CIRI has just graduated their first class of Professionally Certified Investor Relations Professionals through the IVEY School of Business, take a look here for a qualified professional.

I wish you a spooky Halloween wherever you may be, and please add to our list, What IR Practices Horrify You?

 

All the best,

Jon