Some time ago, while commiserating with Trevor, a broker in Vancouver (it's surprising how many Canadian brokers have names like Trevor, Aleistaire, Ian or Graham), about a deal that had gone sideways, I remarked that we had no one to blame but ourselves, since we'd failed to observe the Six Ps: Proper Planning Prevents P*** Poor Performance. He laughed and agreed, but said those weren't the Six Ps he was thinking of. He then named six Phundamentals that are, each one, critical to the success of any mining investment. Anyone who's been around the block in this business knows them, but I find it helpful to have them succinctly stated in a mnemonic.

The fact of the matter is that every time I've made a bad recommendation, or lost money (which almost always amounts to the same thing, since I eat my own cooking) it was because I failed to adequately apply these six points.

Don't even think of investing in a company unless they're all answered in detail.

1. People - It's the most important rule there is: Good people make for good business, and bad people make for bad business. Before putting money into a company, find our exactly who's running it, and what they've been doing with their lives. Are they well regarded, or does everyone decry them? Have their past deals rewarded the shareholder, or have they just staggered on from one lame promotion to the other? If you're looking at a serious investment, consider hiring a private investigator. A $500 fee could save you many thousands.

   If the people are honest, competent, well-liked, and hard-working, they will get the property, phinancing, promotion, and the rest.

   If the people are no good, forget the rest of it. Bad people are capable of magically transforming lemonade back into a lemon.

2. Property - There are lots of little public companies left over from the last movie that are trying to make a go of some property with a narrow vein underground deposit. They're living in the past, for lots of reasons I've covered here. Leave those deals to the Treasure of Sierra Madre crowd, guys that will spend the rest of their lives sitting around reminiscing about how they'd all be millionaires if only the mule hadn't died.

   You want a company that either now has, or has an excellent prospect of developing, large (million ounce plus) open-pittable deposits. You want something that can get the attention of a major, not just a hobby for some weekend rock hounds.

3. Phinancing - Mining is a capital intensive business. It takes cash to pay geologists' salaries, fly aeromag surveys, establish camps, bring in drill rigs, have the core assayed, and a thousand other technical things. That's in addition to paying home office expenses, legal bills, airfare, listing costs, promotional cost, property payments, taxes, and you-name-it. If a company has less than seven figures in the bank, it's one of the walking wounded. k And why should anyone tie their money up in an illiquid stock to fund them unless they have something really big cooking?

   You only want to town companies with at least C$3-$10 million of cash, and the type of property and people that give you confidence they can raise more - at higher prices.

4. Paper - This is a critical factor, and one that most overlook. There are a number of sub points to be made here.
   a) What is the paper's value, as opposed to its price? Any idiot can quote a stock's price, but its value is different question altogether. Look at the market capitalization (number of shares times price) to get an idea of value. If the company is trading for a $10 million market cap, ask yourself if you'd actually write a check for that much to buy the business. If not, then why write a smaller check for a minority position in its shares?

   b) Where is the paper? Management should have a big position, so they think of themselves as shareholders, not employees. Is the float widely distributed (which likely indicates a stable market), or in just a few speculative hands (who could lose interest, or be forced to unload at an importune moment)?

   c) How long are big blocks of paper tied up? If the company sold a million shares nine months ago at C$3, and the stock is now at C$6, is this a good time to buy? Everything else being equal (which it may not be) I doubt it, because most of that $3 paper is likely to hit the street as soon as it comes free.

   The ideal is a company with a relatively low number of shares outstanding, no big private placements waiting to come free, widely disseminated shareholder base, but with a strong control block in the hands of management.

5. Promotion - What makes a stock go up is more buyers than sellers, and promotion is, at least at first blush, what keeps new buyers coming in, and old holders from selling. The value buyers will always buy a cheaply priced stock; they take care of themselves. You want a management that can not only create a dollar's worth of value, but can also convince the public to pay two dollars for it now, because it's going to be with $10 tomorrow. Of course, this is a double-edged sword; you want to be the beneficiary of promotion to come, not a casualty of current promotion.

   That being said, if the company doesn't have a management that can tell the story, you may be able to buy at bargain prices, but you'll also have to sell at bargain prices.

6. Politics - This is a macroeconomics factor. It's basically a question of whether the company is investing in the wrong country at the wrong time. You may be a better judge of that than the management, if only because they may be too close to the situation to see the big picture.

   I suggest you make a photocopy of this little list, and keep it where it's readily accessible in times of need - like next to your phone, for use when you're talking to a broker. Or next to the chair you read research from. Check how what you hear and see stack up.