Thoroughbred Board Bring Track Record to Yale Resources
By Katherine Young
June 14, 2007
Yale Resources Ltd.’s (TSXV.YLL) president Ian Foreman, P.Geo., thinks that there are two key things to look at when evaluating a mineral exploration company: The merit of its properties and the merit of its management team. Yale Resources, he says, has both: a solid company with great properties and a significant management team.
Since a board of directors is indispensable in running any successful junior exploration company it should, ideally, be made up of only the most experienced, reputable people in the industry. But how do you know if they are what a company claims they are? One way to go, Foreman suggests, is to look at what the individuals in a company are involved in.
“In this industry,” he says, “successful people will continue to be successful and good management will create a successful company. The question will just be then, how long does it take for that company to become successful?”
Foreman says investors should spend time speaking to the management at exploration companies in which they want to invest. “The management of a company, although it is probably the single most important aspect about a company in regards to long term investing, is probably the most difficult thing to truly get a handle on.”
What some investors may not realize is that the boards of directors of Canadian public companies usually represent a web of cross-referenced experts that could require an indexer to keep track of. A president or director of one company often serves on the board of several others. Having board members in common with a successful company is a boon because of expertise they bring of course, but also because of investor perception. Foreman explains, “If Yale were to become very successful, the other companies that the Yale people are associated with will develop a following because of [Yale’s success]. Investors will ask, “What else are these people doing?’”
Yale’s board of directors represents some of the best-known talent on the TSX Venture Exchange, Foreman says. “We’ve got a board of directors that is enviable to companies much larger than us.”
Foreman mentions Richard Hughes, “A very well respected person in the industry who runs numerous other companies under the banner of Hastings Management. Many of his companies lately are really flying. So there’s a wealth of knowledge there about how companies should run and the style of project to bring into a company.”
It is difficult to argue with Hughes’ track record. He is known primarily for his work on past discoveries such as Belmoral Mines in Quebec, which he has said, “started as a dime, but is now $40 [per share]”; and Hemlo Mines, which jumped from $0.25 to $30. Perhaps Hughes’ biggest claim to fame was with Noranda where, Hughes told CEOCFOInterview.com, “the net jumped from around .20 cents to $94.00 on Golden Scepter and about $96.00 on Goliath Gold Mine. The [investors] were very happy because $2000.00 investment was worth just under $1 million at the top of the market.”
Hughes is currently associated with a number of junior exploration companies, and forming a great deal of excitement from the fabled “Hughes Effect”. Many have noted that where Hughes goes, so go the investors and, by extension, the capital.
Hughes serves as a Director for Genco Resources, a silver/gold company trading at $3.94 up from below $1.60 a year ago. He is also the chairperson of the board at Golden Chalice Resources, which trades at $3.75 up from $0.35 just a month ago. At Kootenay Gold, Hughes serves as a director as well. Kootenay stock was stable below $0.65 until December of 2006 when it shot up to the $1.00 mark.
In a sense, with Hughes on a board, the “Hughes Effect” will always lead to a “Chicken and egg” paradox. Such is the confidence that follows Hughes, that speculators ask, “Is the stock trading high because of the grades, the progress, the company… or is it the Hughes Effect?”
Foreman also points to David Hall, “who runs Aurizon Mines. They’ve got a producing gold mine in Quebec, so his guidance as the president of a genuine mining company is priceless.” But Hall will be useful for more than potential future production at any of Yale’s present or future prospects. He has secured important project debt and equity financings for major mining projects, including the Golden Giant Mine, in Hemlo, Ontario and the Sleeping Giant, Beaufor and Casa Berardi mines in Quebec.
Members of a board of directors do not necessarily take a hands on approach, Foreman points out, sometimes they merely open doors – to financings, acquisitions and experience – that otherwise would remain shut.
Rounding out the various fields of expertise needed in the mining industry, Foreman introduces two geologists on the board. Luca Riccio, “who is a PhD geologist, well respected in the industry. He is associated with a lot of companies but was a key figure at Crystallex as its Las Christinas grew to about 13 million ounces of contained gold.”
Finally, Foreman points to Lindsay Bottomer, “who is associated with many companies here in Vancouver, is a Vice President of Entrée Gold really has his finger on the pulse of what the Vancouver industry is doing.”
“Imagine the conversations that I can have using them as a sounding board. I can say, ‘I really like this idea’ and they can say, ‘well you know, how about doing it this way?’ Or if they say ‘yes’ then you know you’re onto something.”
By providing advice and guidance, the board of directors becomes responsible for the success or failure of a company. Foreman explains how the board relates to the company, “they are a sounding board and I can then go to them for advice or opinions. And for that they are issued incentive stock options. The key word that I think many investors aren’t aware of is incentive. And the true word there is incentive. These men are essentially volunteering their time. And what this does is it cuts down on the overhead of the company and it allows the company to have access to a wide range of experience and skill sets.”
The incentive is that if Yale’s stock does well, the director’s stock value increases. However, Foreman is quick to emphasize another kind of incentive. “You want something that you’re putting your name on to be successful.”
In other words, for the Hughes Effect to work, Hughes has to make sure he surrounds himself with the right projects, people and program.
With Richard Hughes, Lindsay Bottomer, David Hall and Luca Riccio putting their names to Yale’s performance, Foreman is confident. “I would put the Yale Resources board of directors up against that of a company many times our size.”
