Louis is absolutely right, I would imagine most speculative explorers don't make there shareholders money or if they do you have to be very patient and possibly invest more cash in capital raisings.
however there are enormous rewards on offer with the high risk, my own view and how I am structuring my portfolio is to find miners with
1- Good management and heavily invested, it won't guarantee success but if I lose they will lose more and there incentives aren't necessarily big pay but share price returns, Mike Elliott has invested a substantial amount of money and i feel confident that with that much money on the like he will do all he can to ensure success and i don't think that any of his shares were bonuses but bought on market and in capital raisings
2- Reserves be it gold, graphite or oil, it gives a base valuation especially if you can't companies that will low cost producers like WKT if prices collapse and your a low cost producer you will hang in longer. Remember the seeds of the bust are born in the last boom when extra supply comes on market depressing prices and the best solution to low prices are low prices as suppliers get of the market and companies delay bringing on new supply.
3- the most important, portfolio limits, I have invested in 5 speculative companies, that aren't profitable, only 1 has revenue. Naturally when I invested in these companies I thought they were brilliant companies that will make me lots of money..... alas 1 of the companies I invested in is in serious trouble having being suspended from trading for 2 years before being delisted BSR a gold miner. Through there is still a chance I can recoup some of my money because they have gold reserves and there mining license was recently extended unfortunately the previous management weren't very good they would over promise and under delivery however if they are a flop and i lose all my investment I will still be ok because of portfolio limits. I love a narrative as much as the next investor and to avoid my emotions getting the better of me have limits as to what I will invest so if I screw up I will be ok.
4- Portfolio approach, as much as I like my 5 speculative shares I knew that not all would work out I figure if even 1 or 2 work out I will make good money. I don't expect to have a 100% success rate especially with speculative non profitable companies. So far all my 4 of my 5 investments are doing well and even BSR I hold out hope I will at least get some capital back.
5- Risk, risk is ever changing. WKT is high risk business, due to location, it's a small explorer, an uncommon product, it's taken on debt. There is also the project specific risk getting the plant up and running such as weather, Government regulation, the supply of specialist equipment both in terms of quality we don't want it breaking down but also programme if equipment is late it could cause a delay to competition. Plus there will be other risks however as we progress the risks are reduced and in some cases eliminated
The solution is not to invest but to keep to portfolio limits and as the risks are reduced increase the portfolio limit. For example the amount of reserves may be increased, financing achieved etc for example 1 of my holdings has had good results increasing reserves but that hasn't being reflected in the share price yet. And so, I actually found that the risk/ rewards were more favourable at twice the share price because of the good business updates and i felt more comfortable with investment
The solution is not to avoid investing but be comfortable with risks, follow portfolio limits and adjust both as the news changes not be completely against a business no matter how much good news comes out
I struggle to understand some people's strong critsism of WKT while there are hurdles to overcome there has being steady progress to date. I myself if I found a business that I wasnt comfortable with I would drop it and move on, not spend endless time commenting about various problems
End of rant, have a good week all
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