Penny Gold Miners

[Montanore]

After the AUMY debacle stripped many of funds, I wrote this. A list of considerations before buying any penny gold stock:


Characteristics of penny gold mining scams:

1. They continually say their property is adjacent to some past producer. Nearly every scam I've encountered says this. Sometimes they're right next door and in other cases they're many miles away. Doesn't matter--it's a big red flag.

2. The company was formerly in a completely different business. They change their name to sound golden (in this case 'Auric' from "Goldfinger." Auric Goldfinger was a criminal gold scammer).

3. Reverse split history followed by company printing--for themselves--to pay debt.

4. Little or no cash in the bank, but plenty of debt on the books.

5. Dilution, dilution and more dilution.

6. Outrageous, fantastic $$$ promises of resources and production....always unverifiable.

7. Claims that they will be 'bought out' by majors. All explorers heavily tout this.

8. Claims of ridiculously huge financing packages that are not verifiable.

9. Claims of unusual and proprietary methods of finding gold. Yeah. Right. Some podunk pink has a new technology or approach to find gold that the majors haven't figured out.

10. Laying down a grid and doing a grab sample. The cheapest way to collect material for assays. They're almost always a bust, but heavily PRd. Real miners drill. They don't just pick up surface rocks.

11. Drilling, but drilling is slow and stretched out over many months or even years. String investors along and keep them waiting while they dump shares. Real miners use many drills and make 100s of holes for the assay report. They're on the case if they have gold.

12. JVs with other loser mining companies with similar low balance sheets and heavy debt. Always heavily touted with fluff PR, these relationships go nowhere.

13. Frequent LOIs and claims of acquisitions that go nowhere. Skipping from lease to lease.

14. Leasing a small amount of worthless moose pasture many miles from roads or electricity and then touting it as having endless possibilities. Just because the property is hard to get to doesn't mean it's more valuable. It means it's less valuable because it's more expensive to develop!

15. No QP on staff and, in fact, many times the CEO has little or no mining experience. They depend on contractors...usually paid for by stock that gets promptly dumped.

16. Gimmicks such as stock dividends--because they want to 'reward' loyal bag, er..stockholders. Nothing is ever free and these crooks are there to steal YOUR money--not give you theirs. There is no such thing as a free lunch.

17. Using touts of world events such as 'central banks are buying gold,' or gold prices will continue to rise exponentially! None of this matters since these companies have little or no gold in the ground and will never produce a single ounce. They sometimes name big institutions or organizations to trump themselves up even though they have nothing to do with them. (Name dropping).

18. Including other precious metals into the mix--especially the platinum group metals. These metals are very rare and if a pink mentions they have them with gold...be very suspicious. This goes for diamonds as well.

19. Gold miners that claim massive 'rivers of gold,' but continually run into problems getting it. I'm talking about placer gold here. Lode gold requires a lot more equipment and is vastly more expensive.

20. Cheap-looking, generic websites with stock photography showing lode mining, miners with helmets, giant trucks, strip mining, crushers, flotation, concentrators, etc--even though the company is exploring and not mining. They are counting those who know nothing about gold to buy their freshly-printed shares.

21. Taking advantage of gold fever and economic headlines: Claims their stock will rise as gold rises--scaring you with inflation and economic meltdown while also hinting that their stock will rise faster because it's cheap. Again, many of these pink sheets won't rise at all because they're printing and not mining.

22. Any penny gold miner in an obscure location on the other side of the word should be given extra-careful consideration. Especially those in Africa. They can make any sort of BS up and it's even more difficult to verify. Any property in Canada should be carefully considered. The land mass is huge and there are endless claims--and a lot of the gold on those claims is weak.

23. Penny gold miners are known to be the most prolific in terms of scams because the crooks know people are easily dazzled by the yellow metal. Gold appeals to investors' greed more than any other commodity or industry. This is why scams are most prevalent with penny gold miners.

24. Penny touts or stock gurus pushing the stock. These people aren't doing you a favor by sending you an exciting email with exclamation points and ALL CAPS. They're not your friends and you aren't getting some sort of 'privileged' information. Whether paid or unpaid by the company, these outfits are ALWAYS and I do mean ALWAYS wanting people to buy so they can sell. That money is for THEM. They want YOU to cough it up to them.

25. "Management" consists of the CEO. Often with no photo or little information about it. Instead you get copious talk about the 'team' or qualified people or backers that go unnamed. RUN when you see this on websites. They don't want to be named because they know it's a scam.

26. Using padding such as unnecessary glossaries on the site--showing mining terms and definitions. This filler is designed to make themselves sound like they're actually doing what the glossary lists. Nope--just another red flag.

27. History of broken deals, unexplained losses of property and dead ends. They swing from PR vine to vine and leave shareholders hanging from them.

28. HUGE OS/AS that is ignored while a 'low float' is touted. Those low floats NEVER stay low for long!

29. Touters who want you to have 'strong hands' and buy 'cheapies' as the company dilutes. They always get cheaper as the share price often plummets to no bid/.0001. The best thing you can do is get out right away if the stock behaves suspiciously.

30. Persistent claims that the company would do great if it weren't attacked by shorts--naked and otherwise. Also, if you read about an impending 'short squeeze,' it's almost always a red flag.

31. Charts show a story of pump and dumps.

32. Property is on untenable land that can't be developed due to environmental concerns and red tape.

33. Salting. This is criminal and geologists will rarely do it, but it happened in the BRE-X case.

34. Buying an old, worn-out mine and touting that it will spring to life with higher prices. Wrong. It often takes countless millions to bring such a mine up to MISHA and EPA standards. The mines were abandoned because the cupboards were bare. These mines are often flooded. They were abandoned for good reasons besides low gold prices.

35. Cheap spectrographic machinery and magnetic flyovers and other such gimmicks. The only way to really determine if an ore body there is drilling and assaying.

36. No reply with email or phone call. The home office might be a PO Box or some home residence...or generic office shared by other scams.

I'll add to this list later because I know there are more!