While watching a recent interview on investment in junior miners, the conversation moved into the importance of good management when evaluating prospective investments.
Some prominent folks in the space say that good management is the key to being successful in junior mining investment. Their position is that betting on good horses is how you win a lot of money. There is some validity to their position. Historically, there are leaders in the sector that are regularly attached to successful and profitable exploration projects. So the idea from this school of thought is that what is most important is figuring out who these "winners" are and placing your bets on their latest project.
The contrasting argument is that good geology is what is of paramount importance. To these folks, if you have "good dirt", that is ultimately what is going to drive future valuation and success, management be damned. This side of the argument has the benefit of being able to point to empirical values (i.e. amount of gold in the ground, defined resource, drill results, etc.) instead of relying on a subjective determination of whether a certain individual in a company is "strong" or not. Another valid point of this school of thought is that because "everyone loves a winner"... those folks who have had prior success will be in high demand which means that their prior success will bake in some extra cost into subsequent projects.
Ultimately at the end of the day, the question ends up being similar to asking, "What is more important, having a good salesperson or a good product?"
I think a better framework for these contrasting views can be summed up in two axiomatic truths:
1.) Good geology cannot compensate for bad management.
2.) Good management cannot compensate for bad geology.
Even if you are dealing with a great land package, there is always some way that an incompetent or unethical buffoon leading a company can find a way to screw it up. Any potential investor that is so enamored with the resource numbers or drill results that they think a project is somehow immune from being sabotaged by bad management will be in for a rude awakening. There are numerous examples of great pieces of ground that were squandered by incompetent or unethical leaders in an organization. There are very few pieces of virgin ground left to explore today. That means that most of the big discoveries today involve properties previously explored or drilled by another company that simply couldn't get the project to the finish line or rather than focusing their company on their projects that had strong potential, wasted part of their limited financial resources on their other projects that were third rate at best. There is no question that good ground is very important, but it is simply a bad strategy to ignore the ability of incompetent management to screw things up.
At the same time, no manager is so skilled that they can make a profitable operation out of barren or poorly mineralized ground. On top of that, you have to pay a premium for the prior success that cuts into your gain potential. Even then, the most accomplished managers in the exploration space still have their share of misses. No one bats 1.000 in mining exploration. While some may suggest that good managers tend to gravitate to good ground, the reality is that in the exploration space, these leaders are brought into a project while there are still a number of unknown variables.
Overall, avoiding being too myopic by over-emphasizing the importance of management or geology to the neglect of considering the other can save a lot of financial losses and regrets down the road.