#20 - Doc Jones, Resource Investor

Notes from a Doc Jones interview. There’s much more to the interview than my notes here. I believe most if not all of his insights can be applied to investing at large.

If you don’t know who Doc Jones is, here’s his website.

Find your edge

It’s very important to assemble a team of people who are a lot smarter than you and have a focus in that particular area that maybe you don’t.

Because as a retail investor you tend to become a jack of all trades where you know enough about each sector to construct an investable thesis and to outperform probably 99% of other retail investors if you’ve done your due diligence. But it’s that other 1% that you rely upon to get that really positive outcome.

Where I do my best work is the explorer-developer model: a company that has a resource already on the books, that I can put a tangible value on, and compare it to the current market cap.

Do your due diligence

Develop your own checklist.

Don’t believe what you read on social media boards. You have to vet every piece of data, positively or negatively. Everyone out there has a motive. Some people are capitalizing on either fear or FOMO. Take emotions out of it and be prepared to be wrong. A thesis can be cut with a press release. You just have to be right big and wrong small.

Company’s website

Corporate presentation: much like a sales brochure, should show the company in the best possible light. If you read it and you see some flaws, you can eliminate it quickly.

Sedar filing

Find out what the assumptions are and the nitty-gritty of it all (grade, metallurgy, depth of the deposit, continuity, how big is the resource, etc.)

You want to find a potential tier-1 deposit, something that a company larger than itself will want to acquire. Example for gold: you want 3 to 5 million ounces at least (that is economically mineable).

Capital structure

Cash-on-hand (relative to the cost of mining), warrants and options -> risk of dilution

Management team

What have they done before (bio, Linkedin)? It doesn’t matter how great the deposit is, bad management will lose money every time. How much are they paying themselves vs the industry average? What kind of economic interest do they have in the company beyond their salary? (use Sedar filings)

If it passes the smell test…

Call up the company and ask if can speak to someone.

Youtube presentations and podcasts

For at least the last 2 years. What promises have they made two years ago, and have they fulfilled those promises? Have they been jumping around to different projects and shifting around from one year to the next? Or have they been advancing whatever project they were working on?

Google search

Management, properties, and deposits. You can find hidden and valuable info.

Bonus

If it looks good, you can also ask to participate in future private placements (and get a half or full warrant to supercharge your returns).

Don’t rush

There’s a lot of crap in the mining sector. There are about 1500 junior mining companies in the world. About 1400 of them are uninvestable. You have to do your homework.

Don’t rush. The market is always gonna be there. If someone says “you gotta buy this now because this is gonna happen and you’re gonna miss 10x”…no. There’s no reason to rush. If that is true, the company will be a good investment today tomorrow next months a few months from now. Great Bear Resources is a great example. There was a 3-year period where you could have bought shares and made a great investment. There’s always time to do due diligence.

Due diligence is not a one-hour process. Because how long does it take you to make 10 or 20 thousand dollars and save it. You should consider that before investing in anything: how much time do you think you should put into investing your money. Especially in junior mining, because the odds are, you’re gonna lose it all.

Focus on the thesis

When do you sell? For the average person, it’s probably a great idea to scale out and de-risk your portfolio by selling some if an investment has doubled or tripled.

But in the end, it should be data-dependent. You had an original investment thesis when you made the investment; has this thesis been proven up?

In your thesis, you must have had an evaluation of what these shares will be worth. HAs that been accomplished or not? Any time new data is released you should be casting it against your thesis. Do you need to change your thesis, has it been proved, is it outperforming or underperforming? That should inform you what to do with your shares.

Final pieces of advice

When an investment is boring, you’re more likely to be right.

It’s always hard being first.

Every now and then you get lucky, and you get to learn something that maybe the market hasn’t recognized already. And then it’s just the waiting game, for more people to understand that fact.

90% of the success is getting the macroeconomic environment right: if we’re going into a recession, and there will be demand destruction, and prices are cratering down…you will lose money.

My favorite quote:

Don’t settle for a second-string player because all the other ones are fairly priced. Just wait and scale in when you can. Sometimes cash is a really good investment.