I have not done a Stack for a week simply because there is nothing very interesting going on in the junior market…except there is.
In my day job at motherlodetv.net I spend a fair bit of time talking to CEOs. Over time, and several drinks, some of those CEOs have become friends. There are a mixed bunch with old guys like my pal Graeme O’Neill (BHS.V) and whippersnappers like Peter Bell (KLM.V). And they all have at least one thing in common: they know a lot more than they can disclose.
The rules are pretty strict. As insiders, CEOs are not allowed to talk about material facts which have not been disclosed to the public. Lawyers have a great time debating what is and is not material, CEOs don’t have that luxury, they just have to stay well away from anything which is even vaguely material. Anything which might impact the share price of their company.
Which can lead to some unintentionally funny, if fraught, situations. Years ago I was at a lunch where a geo/Chair gave a presentation which, while entirely normal course, inadvertently disclosed results from three, none too spectacular, drill holes which had not been released. Panic ensued and, before the Chair had finished his remarks, the Blackberries were out, a press release was dictated, run by the Board in a conference call, and released. Perp walk avoided.
With these sorts of restrictions, it is reasonable to ask, why interview CEOs at all? They can only discuss what is in the public domain so there, by definition, can’t be any “news” value to such an interview.
Or can there? The fact is that a CEO worth his or her salt knows what the company has disclosed better than anyone else. Sure, there are the press releases - which, in many cases - no one reads closely. But there is a wealth of other information beginning with the quarterly financials and the usually intriguing “Management Discussion and Analysis” which accompany them. My first stop when looking at investing in a company is the most recent MD&A. Where press releases put the best possible spin on a company’s results, the MD&A will often put those results into the broader context of a company’s progress (or lack thereof). Having a chat with a CEO armed with the MD&A can be very enlightening.
The same is true of the company’s “Corporate Presentation”. This is a document the CEO knows by heart because it is the basis for his or her discussions with potential investors and, in slide deck form, the core of every conference presentation the CEO does.
In a good interview, the CEO can walk through the publically available information pointing out the highlights which may have been missed. However, the CEO can also interpret and draw inferences from the bare facts disclosed to the public.
To take a simple example: four drill holes 100 meters apart which all hit decently graded material from the 10 meter to the 20 meter mark will be reported as each having an interval of 10 meters of “x” gpt gold. But they may imply a continuity of geological structure. Was that expected? That is a question a CEO can answer without crossing any bright lines and it tells an investor a lot about the robustness of a company’s geological model.
The other aspect of a CEO interview is the mood or demeanour of the CEO. To a greater or lesser degree, one of a CEO’s main functions is to “sell” the company. I expect every interview to have something of a sales pitch, the question is how is that pitch delivered?
CEOs are human. They get frustrated with markets which fail to respond at all to good news. They get even more frustrated when the market takes good news as a liquidity event. They are annoyed with drilling delays, driven to distraction by slow lab results and furious at having to raise money with a low market cap. And that is just a normal day.
Good CEOs are almost always stoics. They are optimistic but they are only too aware of how actually difficult making a buck in the junior resource space actually is. While I interview a lot of CEOs, I am only tempted to invest in companies whose CEO understands the difficulties and drives on anyway.