Fool's Gold

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INVESTOR AWARENESS BULLETIN

A Guide to Mining Investments

The exact location of the mine site is often not disclosed in many mining investment scams, yet surprisingly people continue to invest in these programs without knowing where the actual mining is to take place.
Press the people who are offering the investment to you (the
offerors) for the exact legal descriptions of the site—do not accept a lay description such as “the proposed mine site is located approximately twenty-five miles northwest of Flagstaff, Arizona.” That type of description tells you nothing at all about the true location of the site. If the offerors cannot or will not provide you with the exact location of the mine, DO NOT INVEST!!

HAVE ANY ASSAYS BEEN PERFORMED
ON THE ORE?

Usually, offering materials do provide what the offerors
claim to be assays, but beware. Assays are only meaningful
if they are based upon a systematic and scientific program of
ore sampling. An assay based upon one or two ore samples is
essentially meaningless—it takes literally hundreds or
thousands of separate ore samplings to properly evaluate the
true potential of a mine site. Also be aware that even an
accurate assay only tells you the amount of certain precious
metals in a specific ore sample, not the amount of precious
metals that can be economically extracted from that minesite
or even that sample. No mining or refining technique can
economically extract all of the precious metals present in an
ore body.

In reading assay reports, certain “red flags” signal that
perhaps you are not receiving accurate information:


Reports indicating the presence of ½ ounce or more of
gold per ton or ore. A mine site with ore values
consistently this high would represent one of the richest
finds of the century!

Reports of precious metals not normally found together
in the same ore. For example, while gold and silver are
commonly found together, gold and platinum group
metals are not.

Reports that traditional “fire assay” methods will not
give an accurate reading of the precious metals content
of the ore, while the offerors’ “secret” or “revolutionary”
methods will. A fire assay performed in a correct
manner will give an accurate reading of the precious
metals content of any ore sample.

Assayers who meet certain qualifications are registered
with the Arizona Board of Technical Registration; call
the Board (602-364-4930) to see if the assayer is
registered, and if there is any information available
concerning public actions against the assayer.

If mining is currently going on at the site, be sure to get
copies of all production reports.
Once you are satisfied that the ore at the mine site has
commercial value, you are ready to ask the next question:

WHAT IS THE PRIOR MINING OR REFINING
EXPERIENCE OF THOSE WHO WILL BE IN
CHARGE OF THE MINING OPERATION?
Do not trust your money with people who have no prior
experience in the mining industry. Mining is a highly skilled
and technical profession, a field that cannot be profitably
pursued by amateurs. If possible, check out ALL of the
mining and business references provided by the offerors. If
they have not provided you with any references, require
them. If they have no references they can give you, or if their
references are so vague that you cannot check on them, then
the operators may not have any mining or refining
experience.

You should next ask …

WHAT IS THE FINANCIAL CONDITION OF THE
PEOPLE WHO WANT MY MONEY?

Are the people to whom you will be giving your money
financially solvent? Are they a newly created company with
little or no assets? Do they personally have any financial
stake in the venture, or are they merely a group of people
who want to enter a high risk venture using other people’s
money? You don’t know the answer to these questions until
you see balance sheets, profit and loss statements, and other
financial documents. Audited. Once again, if these types of
financial statements are not provided to you, require them.
Remember that the most meaningful financial statements are
those that have been prepared by an independent certified
public accountant.

Your next question is …

HAVE ANY OF THE PERSONS ASSOCIATED WITH
THE OFFERING BEEN THE SUBJECT OF PAST
ACTION TAKEN BY A GOVERNMENTAL AGENCY
OR PRIVATE PARTY?

Obviously, you want to know whether the people to whom
you will be giving your hard-earned money have a history of
law violations, civil lawsuits, or bankruptcies. Just as
obviously, if the people who want your money do have such
histories, they will naturally be reluctant to reveal their prior
legal problems to you.

Contact the Securities Division for information about federal
or state securities law actions. Also, contact the mining
department, any other appropriate state agencies, and the
Better Business Bureau. If the mine site
is located on public land, contact the
state’s land department, or federal
agencies such as the Bureau of Land
Management or the Forest Service.
Review civil and bankruptcy court
records. (Important numbers are listed
on the last page of this bulletin.)
Having satisfied yourself that the people to whom you may
be giving your money do not have a history of law violations,
you should next ask …

WHAT ARE THE COSTS AND OBLIGATIONS
INVOLVED IN INVESTING IN THE PROGRAM?
How much is the investment going to cost you? What are
you to receive for your money? A certain tonnage of ore? A
certain number of ounces of precious metals? Stock? A pure
cash return on your investment?

How is your investment to be made? In a lump sum, or in the
form of periodic payments? Could you be required to
provide additional money at some time in the future?

Under the terms of the offering, must you meet any
obligations or perform any duties other than making the
investment?
Once you understand the costs and obligations involved in
investing in the program ask …

WHAT ARE THE RISKS INVOLVED IN INVESTING
IN THE PROGRAM?

All investments have some amount of risk involved in them,
and the general rule is this: the greater the potential profit,
the greater the potential risk.

What assurance do you have that the offerors will not
simply take your money and run? Is your investment
secured by real property or equipment? (NOTE: It is a
“red flag” if the promoters are guaranteeing that you will
not lose money, whether they are offering your money
back on demand or guaranteeing that a certain amount of
gold is available.)

If the price of gold drops suddenly, would it still be
feasible to mine? Does the mining program depend upon
a continuous stream of investment capital in order to
operate the mine? If it does, what if the stream of money
decreases or is cut off? It can take millions to begin a
viable mining operation.

Do the mine operators have any conflicts of interest that
could cause them to devote less than their best
efforts to the mining project?

Mining is inherently dangerous. If a worker gets injured
at the mine site, could you be held financially
responsible? If an injured worker sues the mine, is there
enough liability insurance to cover the worker’s claims?

If you are satisfied that you completely understand the risks
involved in investing in the program, your next question is …

EXACTLY HOW ARE THE OFFERORS GOING TO
USE INVESTOR PROCEEDS?
You need to know just where your money will be going.
Would some of your investment funds be used to pay sales
commissions to the offerors or others? Towards salaries,
legal fees, or other administrative expenses? How much of
your investment money is actually going directly into the
mining or refining of ore? What types of fees are going to be
paid to the offerors? For what services? Arizona securities
law requires that full disclosure be made to investors of the
exact uses of proceeds in the venture.


http://www.asmi.state.az.us/userfiles/file/Inspections/guide%20to%20mining%20investments.pdf