I do note these regularities, bad practices so common they are normal, for potential investments. If there's a worm or two in an apple I might cut it off and decide the apple is still worth eating, but if the whole apple is full of worms I throw it out.
Managers Working At Multiple Companies
I can't count the number of times I've looked at a junior mining execs compensation and thought it was reasonable, only to do a little googling and find out he also is getting paid a salary from 3 other public junior mining companies, and from some private ones where the compensation isn't even disclosed. Add them all up and the guy is getting paid like he is running Apple instead of working at a handful of $10m market cap lifestyle companies.
Managers Paid Salary and Consulting Fees
It's often the case that a CEO might get a salary and options, but also own a consulting company that gets paid consulting fees by the company they are the CEO of. This double dipping is really common.
It's also really hard to tell if the CEO getting paid consulting fees is good or not. Maybe the CEO owns a drilling company and only charges his own company at cost, way below what he charges other clients. Or maybe he charges his own company double what he charges other clients and considers the extra profit part of his CEO compensation. As a shareholder you rarely know.
Options Repricing & Extending
Managers or Investors (who are often friends with the managers or sometimes the managers themselves) are often issued warrants or options with a strike price above the current market price and an expiration date. They make money when shareholders make money and everyone wins. Except often the options/warrants have their expiration extended if they are still out of the money near expiration. Or if the stock price goes down they might have their strike price adjusted to a new lower number. This is how management can make money on their options while the shareholders are losing money.
Sometimes this does get so egregious I do write it down, but usually I just sigh and move on.
I'll save you the trouble of reading analysts reports, they are all positive. It's like the things the company would say about themselves if there weren't laws against them saying those things. The analysts writing the reports aren't technically paid by the companies to write them, but the companies they work for get all kinds of fees for other services like finders fees for arranging financing. It's not a pump if it comes from a bank right?
I've seen disclosures of $100,000 for twelve months of marketing or $9,000 for six months of marketing from site that will write positive articles about your company. Rates vary widely and seem to be inversely correlated with quality. These articles then get promoted on Twitter or ceo.ca and hopefully drive up stock price. Companies often exert editorial control, though the paycheck ensures only positive things will be said.
What are the odds that the father is CEO and that his offspring are the most qualified people to be executives in the company? Given how often I see it in the industry it is apparently pretty high.
You may be buying your shares at $5.00, but often the early employees in the company bought their shares for fractions of a penny. They are always in the money, so if the share price drops from $5 to $4 you lost 20% of your investment and they went from 50,000% gain to 40,000% gain.
In a check swap both companies give eachother money and it looks like more business activity, but if you net the checks out against eachother it isn't really. Often one or both checks aren't individually disclosed.
Maybe the company pays their marketing team $500,000 with the understanding that the marketing company will then turn around and invest that $500,000 in a private offering of company shares. Now it looks like they got more investment, when really they just got their own money back and the marketing company kind of got paid in shares.
Or maybe the marketing company invests $500,000 first with the understanding they'll then be awarded a $250,000 marketing contract, they figure they can sell the shares and come out ahead, and their marketing contract essentially gets paid with their own cash.
Technically companies are required to report assays on all drillholes, even if just to say that there wasn't material mineralization. Well, companies still seem to number their drillholes in order, and often press releases will go ABC02-01, ABC02-02, ABC02-04, ABC02-07. And you are like, wait a minute. I learned to count to ten in kindergarden and I know there's supposed to be a 3 and a 5 and a 6 in there somewhere. If you never see those missing numbers it's because they were bad.
Bad Assays Delayed
They say bad news travels fast, well in junior mining it's the opposite. Good assays are rushed out the door probably within seconds of being received. Bad assays need to be studied for interpretation for months and months and then released with good assays.
Bad News Friday
It's Friday afternoon, you and the family are halway down the road to that airbnb you rented for the weekend on the beach. This is the time junior miners release bad news. It's ideal if it's a 3 day weekend holiday ina Canada/Australia/US as well, if the holiday is on a Friday instead of a Monday you can release Thursday night. By the time you are in the office again this news is in with a bunch of other news and you are sleeping off a hangover from drinking too much wine.
You know what competent marketing person releases good news on a Friday afternoon? Nobody.
Infill Headline Numbers
Exploration is hard. Sometimes you are exploring and you are drilling new targets and you are drillling step outs to figure out how big your discovery is and sometimes those aren't good. But if you already have a hole or two somewhere on your property that were good you can drill between them and know pretty well what you'll get and put those numbers in your headline.
Of course you can aruge infill drilling is necessary to increase confidence. You could instead drill near a historic hole and not disclose the historic drilling in the press release, this twinning of historic holes is often said to be done to confirm their accuracy, but more often its done to have some nice results for a press release.
Maybe you want to go a step beyond twinning a historic hole or infill drilling between two good holes, what do you do? Aim your drill to cross really close to the best parts of several different holes. Your ore body might be 4m wide, but if it's 20m long you can get a 20m intersection in a drill core.
So, what should those paid marketing people write that a company legally cannot? How about speculating on the size of an ore body based on very few holes, often a single hole. Here's how it works.
Step 1, drill a hole. Intsersect say 100m of 1.2g/t Au. Hole can be at any angle, say 45 degrees.
Step 2, paid marketing estimates that the 100m intersection is vertical (it isn't) so the ore body has 100m depth.
Step 3, paid marketing estimates that if the ore body has 100m depth that it must have 100m width and 100m length. We now have a 1,000,000m^3 ore body.
Step 4, paid marketing estimates 2 t/m3 rock and 1.2g/t in the intersection yields 2.4g/m3
Step 5, paid marketing now estimates you have 2.4 million ounces of gold! Why at $500/oz your company should be worth $1.2 billion!
In the field it's common to use portable x-ray flourescence guns to log core. Some of that data can be useful to get early understanding before assays or later to correlate new core to old core that has already been assayed. What it isn't is accurate.
But if you are a company that needs good news you can't wait for an assay lab turnaround. A portable XRF gun said it estimated 2.5% copper, well, the world should know. So you do a press release. The only thing you know at that point is there is some level of copper, and that level isn't 2.5%.
This list is far from complete. I'm also sure companies will think up new things faster than I could write them down. I hope that investors will stop accepting bad behavior from junior miners, and maybe then they'll stop doing some of this stuff.