Promotion a necessary part of attracting investors’ interest

Creating public interest in a junior firm hinges on keeping speculators and potential investors informed about a company’s activities, especially property work in progress or planned.

There are a number of different types of promotional news used by junior mining companies to generate investor interest. Promotional news can include the circulation of a company’s prospectus, or announcements about an underwriting or public financing. Option deals made with a senior company can also stimulate interest in a junior issue.

On the exploration and development side of a company’s business, promotional news can include anomaly finds on a property, drilling programs planned or in progress, or the release of assay results. Other major sources of interest are announcements about ore reserves outlined or increased by exploration work on a property.

Few would disagree that promotion has played a prominent role on the junior mining scene in Canada. Without it, many of the country’s mines might not have been found or developed.

The correct communication of a company’s story is as essential to the investor looking for new opportunities as it is to maximizing financial return to the existing shareholders.

The timing of news releases often follows a pattern. Companies will usually follow seasonal bull and bear market periods, especially when making promotional news announcements.

One of the most active times of the year for promotional news is mid-December to late-February. Another bull market period is late- August to mid-November. Promotional news increases immediately after the new year and continues to mid-March. Bear market periods often occur during April to mid- May, when promotional news can reach a low point.

Beyond these seasonal bull and bear markets are the longer-term economic cycles and metal price fluctuations, which also influence promotional activity.

Ore reserve announcements are one of the most common types of promotional news. The proper evaluation of ore reserves, for any mining property, is based on field work conducted by professional geologists, mining engineers, drilling crews, and certified assay reports on grades of mineralization encountered.

However, it is not uncommon for promoters to give out unqualified or incomplete reports on ore reserves for the property they are promoting. Confusion often results from the use of non standard terminology and technical jargon in discussing ore reserves. Terms like “mineral resource inventory” or “ounces of gold in the ground,” are vague and usually leave unanswered questions.

Companies often release “selected exploration results” and do not reveal the full geological details necessary to understand the significance of results.

Simply put, rock is not ore unless it can be mined at a profit. Technically, ore reserves fall into four main categories, “proven, probable, possible, and indicated.” Although there are variations depending on th e type of deposit considered, proven ore is that which has been blocked out in three dimensions during active mining or detailed drilling on closely spaced centres (usually 25 ft). A proven ore reserve is considered to be accurate with practically no risk of failure of continuity.

Ore reserve terminology is a perennial problem, and the truth is, nobody really knows what is underground until active mining begins or is in progress.

Anomaly finds are sometimes used for promotional purposes and these are generally of two types, geochemical or geophysical. The results of geophysical or geochemical surveys can be important indicators of a property’s over-all potential, but they are often preliminary and require detailed follow-up work to be assessed fully.

Property deal announcements can also have a significant effect on a company’s share price and the investor should ask if the whole story is being told when a property deal is announced. Have other interests in the property been revealed, such as owner royalties and finder interests? Has the full story been told regarding potential dilution to the common shares such as from options granted to the vendors, or is such information known only to insiders?

Finally, the way a company deals with bad news can be even more important than how it deals with good news. Is the bad news communicated or does the investor have to find out such information from the rumor mill? In most cases, investors will more readily forgive a company’s management for an unsuccessful project when communication has been good.

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