As junior mining companies continue to rally and the capital markets remain fiercely competitive, the need to effectively communicate with investors has never been greater. At first glance it seems simple to communicate the milestones of a junior mining company – find a resource, develop it, make money. In reality, along with the potential for high reward, comes the potential for high risk. There are exploration, production, political and social risks. Not to mention, it’s an expensive business to ascertain exactly what is in the ground.
A common misconception of issuers is the belief that if they run their company well, proving up the resource, the financial community will beat a path to their door. In practice, this amounts to only a portion of what needs to be done. Management will benefit from understanding that, from the street’s point of view, information is valuable; it reduces risk. A company must describe in detail the quality of its assets, strategies, goals and future plans to attract interest from investors.
While capital markets value information and encourage companies to tell their story, investor relations (IR) is not promotion. It is not short-term, and not oriented to quick stock appreciation as a measurement of success. IR activities are not a substitute for company fundamentals. Companies should maintain contact throughout the year to explain how their business plan is working — or not working — and outline their strategies going forward. Maintaining open and proactive lines of communication in good times and bad is a crucial part of building trust in the investment community.
In the end, gaining investors’ confidence takes patience as well as hard work. There is no better way for a company to compete successfully in all aspects of the capital markets other than through a well-crafted and skillfully executed investor relations program. Building a consistent communications strategy translates into increased awareness and greater profile, and it drives valuation. Isn’t that what we all want?
Tags: Mining