Geology 101 An Investor’s Handbook: Part I

Over the coming weeks, I thought we’d spend some time upskilling our geological knowledge.

But bear with me, I’m not going to dive too deeply into the geological weeds here!

I’ll keep these updates brief and concise.

And try to distil WHAT really matters for investors.

We’ll leave things like… interpretating isotopic signatures in mid–ocean ridge basalts… for the academics!

Our focus is zeroing in on the ‘practical side’ of geology and how it can bolster our investment decision-making.

Recognising what matters

Now, you may have heard geologists speak in the past, whether that’s in interviews, company presentations or podcasts.

And they probably came off sounding like technical whizzes!

However, the truth is that most geos are terrible investors.

They’ll be able to tell you the difference between a migmatitic gneiss and a mafic hornfel (both being types of rocks), but that doesn’t necessarily help with finding a genuine investment opportunity.

From my time in industry, a lot of geologists are stuck in what I’d call an academic head-spin, focussing too much on details that don’t matter!

The true art in this field is being able to break down what actually matters.

And when it comes to selecting junior mining stocks and applying geological knowledge, it’s as much art as it is science.

So, with that, let’s kick start our special series on the ‘geology’ aspect of investing by looking at the most crucial piece of all:

The drill hole results.

If you don’t look at drill assays regularly, it can be hard to distinguish good data from background fluff.

And if you’re relying on the company’s report for your assessment, then everything would be exceptional!

To navigate the spin, you need to have some understanding of the geological weeds.

There are thousands of listed junior mining stocks in Australia and worldwide. The options for investors are limitless.

So, how do you know whether you’re buying a company with REAL prospects?

A stock capable of turning ounces in the ground into a cash-generating business?

First, you need to familiarise
yourself with the drill results.

One way to do that is by signing up for company alerts; numerous platforms offer this service.

When that drill hole announcement hits your inbox, read it.

To start with, it might not make a lot of sense. However, over time, you will become familiar with the types of results that can move the market.

Use it as your barometer.

You might not have a handle on the exact geological details in these reports, particularly the fine print and footnotes.

But, as an investor, you can observe the market’s reaction in the days following a drill hole result.

That will give you a sense of what grades and intervals move the dial in the exploration market.

I’ll detail what drill results actually are and how to interpret things like grade, width and depth in a future edition.

But for now, let’s keep things simple and practical: start by looking at the drill results for one commodity; copper or gold is a good place to start.

Jot down the intervals and grades that resulted in significant market moves, and then use these as your future benchmarks.

Then, over time, you will get a sense of what moves the dial in exploration.

And once you become familiar with that, expand into the more nuanced metals, like lithium, nickel, and eventually, you might be able to tackle the most complex of all, rare earth elements!

Putting Knowledge into Action

As promised, I’ll keep these insights concise and give you time to digest the information in short, bite-sized pieces.

I’ll provide real-life examples for you to examine in future updates as we delve into topics like geochemistry and geophysics.

We’ll take data from company announcements and break them down, digging into what matters, and provide you with my interpretation.

Much more to follow!

So, what’s the rationale for doing this?

Well, now more than ever, I think it’s essential to upskill your geological knowledge.

That’s because the commodity cycle is turning. I believe we have entered a bullish phase.

And as previous cycles have demonstrated that means the opportunity will shift from large mining stocks to the junior end of the market, including explorers.

But once you move down the mining development cycle, financial balance sheets matter less… And geological interpretation matters more!

That’s because it’s the rocks in the ground that are the primary asset for junior miners.

This was all part of our SIXTH HOUR SUMMIT, a special event that went live yesterday.

Which is exploring the emerging opportunity in junior mining stocks.

To access a complete recording and see how you can leverage geology in this market, you can access the full recording of our event here.

Enjoy!