Other signs of scam mining companies include the following:Īny company that boasts of new “proprietary” methods, steer clear. However, in the unsavory, dishonest situations, soil samples are doctored along with the scientific information they are sent out with to "prove" the fantastic results.
The final piece involves more press releases advertising the fantastic results achieved through drilling. Once mining claims or rights have been acquired, press releases are sent out announcing recent purchases and linking them to genuine operations close by.Įxperimentation permits and drilling programs then ensue. Some specialists even go so far as to recommend sticking to coins or bullion if you wish to add precious metals to your portfolio.Īfter a company has been created, capital is raised through the stock markets, and then the company is situated near a proven successful area such as California, Nevada, or South America. Investors need to take the time to comb through the minutia of the technical reports, financial statements, annual information forms, and any other important documentation to look for anything out of the ordinary. The evidence won’t be staring you in the face, so monitoring corporate behavior could mean the difference between win and lose.Īnything that seems too good to be true usually is, like Bre-X’s Busang gold project in Indonesia’s metallurgical gold recoveries coming in 93%, an incredibly high number for a primary gold deposit. The important thing to learn from these cases that you must look for red flags if you want to invest in this caliber of company.įraudulent companies do unusual things in order to cover their tracks. Southwestern’s former CFO, John Paterson, pleaded guilty to four counts of fraud in 2012 for distributing hundreds of fake assay results in order to hike share prices. The class-action lawsuits called forth the now-bankrupt estate for former Bre-X President David Walsh, who died in 1998, and former Bre-X geologist John Felderhof and his ex-wife.Īll denied any wrongdoing, and those who were truly behind the scam were never caught. Ontario Superior Court Justice Paul Perrell agreed with a motion set in place by attorney Paul Pape to discontinue two lawsuits that alleged Calgary-based Bre-X Minerals participated in “stock fraud.” Investors involved in a similar and more recent pump-and-dump scandal perpetrated by Southwestern Resources have also received no relief. Litigants were expecting substantial cash compensation, but there was nothing left. The Bre-X Minerals scandal lasted for nearly 20 years and drained everything out of the "shell" company’s estate. One of the biggest scams ever seen resulted in over $6 billion in losses in investor money, the biggest ever in the history of Canadian stock markets. That’s another reason they make such dangerous and flighty investments. It doesn’t take much capital flowing in or out for these companies to move violently in either direction. Once getting past the startup phase, they require substantial capital to get off the ground or they’re bought out by larger mining companies.īecause they have such small market caps, they are subject to extreme volatility. Junior mining companies are responsible for 5% of the world’s gold production, collectively. They find the properties, prove the resources, stake the raw material, and bring mines into production. They are, in essence, the future of the mining industry. These companies are designed to scavenge target properties that are believed to have significant mineral deposits. There are ways to enter this sector without falling victim, but it requires momentous due diligence.Ī junior mining company is an exploratory endeavor that looks for new deposits of gold, silver, uranium, or other precious metals. Oftentimes junior companies, especially junior mining companies, make perfect fronts for scams that prey on even the most experienced of investors. There’s money to be made and, more importantly, danger to be had here. However, this was the first time they had ever invested in a junior company. They are veteran investors who have had much success in the past with their other endeavors. A few years ago, a few family members of mine lost TENS of thousands of dollars in an exploratory natural gas investment that had gone horribly awry.
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