This is a revised version of an article I published on another site about three months ago. As Goldspot Discoveries is rapidly developing and evolving (including the recent acquisition of DigiGeoData), I have updated my prior article to keep up with the changes and developments.
This article attempts to answer two recurring questions: (1) What is it that Goldspot actually does? (2) What do the acquisitions of CEO.CA and DigiGeoData tell us about Goldspot’s long-term objectives?
While questions like these two are normally asked as a critique, these are valid and reasonable questions. They are also the key to understanding and appreciating the true future value and potential of Goldspot. For me, the best way to conceptualize Goldspot’s path forward is to look at it as a three-phase process. Goldspot has been fairly open about their long-term ambitions. They are seeking to revolutionize and modernize an antiquated and Luddite junior mining exploration industry. I am convinced that Goldspot is the only company that is even attempting to solve the full scope of problems that plague the industry as a whole. I remain as convinced as ever both in the direction and destination that Goldspot is heading.
In the three-phase development model I propose here, Version 1.0 (Goldspot 1.0) is the initial business model that Goldspot developed starting in 2016. During that time, Goldspot evolved from a fledgling tech start-up into a profitable public company in just over 3 years. Most companies fail to get this far, but Goldspot accomplished it quickly and with remarkable ease. In the last year, Goldspot has now embarked on executing Version 2.0 of the three-phase development model. As outlined below, Goldspot 2.0 involves the technological integration of all the geoscience services associated with mining exploration into a single suite of tools and services (i.e. one-stop shopping for junior mining exploration companies). I view the acquisitions of Ridgeline Exploration and Geotic as two of the capstones of ongoing development of Goldspot 2.0.
Goldspot’s acquisition of CEO.CA came as such a surprise to many, myself included. It is a stage of business evolvement that few had envisioned. Now that we have had the opportunity to sit back and analyze the move, it is clear that Goldspot is setting the stage for the roll-out of the ambitious next stage of its development process. While this stage is still in its infancy, the acquisition of CEO.CA laid the groundwork for the bigger vision of Goldspot 3.0. The acquisition of DigiGeoData confirms that Goldspot 3.0 concept is reasonably accurate. This development phase is ambitious because it attempts to solve the single biggest problem that plagues the junior mining exploration industry - How to adequately capitalize solid and sound exploration projects while avoiding needlessly throwing financial resources at questionable or marginal projects? It is my belief that too many players and investors within the industry have come to accept the industry status quo (and its associated ills) as a necessary evil that we must simply tolerate. I greatly admire the moxie of Goldspot in even attempting to seriously tackle what I term “The Capitalization Problem.” I describe the problem (and the potential solution being developed by Goldspot) in the Goldspot 3.0 section below.
I hope that the articulation of these phases provides current and future shareholders with an effective lens through which to view Goldspot’s direction and potential.
Goldspot 1.0 - Establish Goldspot’s Niche (2016-2020/21) (Proof of Concept/Integrating AI & Machine Learning into Mining Exploration/Development of Investment Model)
- The Goldspot 1.0 phase of development had four major objectives/accomplishments all of which have been accomplished or are effectively completed:
- Be the first (or among the very first) to conclusively demonstrate that AI/Machine Learning can be successfully applied to existing geological work and programs.
- Demonstrated adequate market demand for Goldspot’s services sufficient to support strong growth of the niche moving into the future.
- Demonstrate that Goldspot’s management team is capable of raising adequate capital to fund the future growth and development of the business.
- Roll out a successful early iteration of its investment model that takes payments in equity from traditionally underfunded junior mining exploration companies in exchange for Goldspot products and services. Further demonstrate that the portfolio developed by Goldspot has the potential to bring long-term shareholder value.
Goldspot 2.0 - Development of Full Services Suite to Modernize the Mineral Exploration Sector (2020-Current) (Goldspot’s Integration of the Products and Services Required in Mining Exploration into a Single Package Offering/Rollout of New R&D and Technology Tools Into Exploration Processes)
- Goldspot 2.0 involves the expansion of its services beyond the domain of AI/Machine Learning. Goldspot does this through both acquisition and internally developed R&D including the following major milestones:
- Acquisition of Ridgeline Exploration Services that enables Goldspot to move beyond assembling/analyzing existing data into the realm of acquiring and developing customer data so that it can then be assembled/analyzed through Goldspot’s AI/ML tools.
- Acquisition of Geotic provides an effective interface through which Goldspot can collect, process, and distribute its work for its clients. Geotic is a key aspect in Goldspot’s effective packaging of its products, data, and services.
- With the acquisition of Geotic, Goldspot also now has the means and platform to effectively roll out its internally-developed products like Litholens, MinusOne, GeoFez and so on.
- Initiate key partnerships with research institutes and developing technology companies in order to be an early adopter of emergent technologies with the potential to advance the industry.
- Upon completion of this phase, Goldspot’s service and product offerings should cover most, if not all, pre-development aspects of mining exploration by junior miners whether that is field work, data collection and analysis, geologic modeling, and so on.
Goldspot 3.0 - Solving “The Capitalization Problem”
- The Real Problem: Here is an unfortunate reality - Junior mining exploration companies as an overall group are simply bad investments. 98+% of junior mining companies on the TSX.V end up failing over the long haul. No other industry has such a consistent track record of repeated and tragic failures by such a large percentage of market participants. Of the few companies that succeed, many do have ridiculously lucrative returns. Junior mining exploration investment for the average retail investor is more akin to a casino than a standard stock exchange. Like a casino where the house always wins in the long run, it is the appeal of the big winner that keeps people wagering their money. Overall, junior mining has had major difficulties developing a new class of investors (particularly among retail) and most of the new money that has entered the broader market in the last decade has gone to other investment vehicles other than mining exploration. Here are a few of the specific ills plague the industry:
- The established junior mining investment community is a den of vipers (a characterization that may be offensive to most vipers) and has far too many bad actors operating within it that mercilessly take advantage of new investors with misleading PR/IR material. After running one pump and dump into the ground, these bad actors are not run off or ostracized, rather they jump to the next big mining opportunity. Rinse and repeat. This means that most unsuspecting first time investors into a junior mining company almost always get burned as part of their first experience and unsurprisingly, few are willing to touch the hot stove a second or third time.
- Most retail investors simply don’t have the tools, data or knowledge necessary to differentiate between projects worthy of development and projects that are smoke and mirrors. I have been around the industry for several years and believe I have a better than average understanding, but I have to admit that it is often very difficult to distinguish the good from the bad apples among exploration companies without doing several hours of serious research. First-time or casual investors simply don't stand a chance in that environment.
- The business model of junior mining (i.e. development of claims in order to sell off to production companies) is confusing to many investors. This also causes casual investors to obscenely overvalue mining projects often by calculating spot market price (not in-the-ground price) of resources as well as not factoring in costs of excavation and extraction into their valuations.
- Casual investors normally have horribly distorted timelines for how long it takes to move through the exploration, permitting, and development process. Most investors are thinking of a long-game of 12-24 months tops for a promising mining exploration project to go into production, when in reality, the process is more like 5-10+ years. Such a large delta between expectations and reality leads to many investors feeling jilted by the companies they invest in.
- Junior mining projects are subject to the whims of current commodity price changes that have very little to do with what the commodity price will be when a project is actually scheduled to go into production. What difference does a short-term 3 or 5% change in the price of gold make on a project that won't be going into production for 5 or 10 years? But the reality is that these commodity fluctuations can result in massive swings in share price for exploration projects.
- Differences in land packages, jurisdictions, subtle geologic changes, commodity pricing and so on result in massive variations of overall company performance and investment outcomes in junior mining exploration.
- How to Fund Worthwhile Exploration Companies: There is a massive future need for new mineral exploration and discovery. But the need cannot be sufficiently met until the exploration community comes to terms with its Capitalization Problem. Some exploration projects absolutely need to be funded and are excellent vehicles for investments. Other exploration projects need to be tossed by the wayside. They involve good money chasing bad opportunities with most of the winners being those that are unscrupulous operators. Solving the Capitalization Problem requires new ideas, new approaches, new tools, and above-all innovative thinking. An effective solution is one that helps pull new investment dollars into good exploration projects while preventing those dollars from floating into bad and highly questionable projects as well as pump-and-dump schemes.
- The Goldspot Solution: The acquisitions of CEO.CA and DigiGeoData show the way that Goldspot can radically transform the entire junior mining environment in a way that can finally begin to effectively tackle the capitalization problem.
- Goldspot has the tools and experience to analyze various projects to determine which ones merit continued exploration and development vs. projects that have little probability of long-term success.
- Goldspot can utilize the tools and capacity of CEO.CA to drive capital to the projects that have merit so that they can move forward in the development of the claims.
- The recent acquisition of DigiGeoData shows how Goldspot can be a catalyst for collecting, assembling and presenting a higher level of data and information to potential investors. As DigiGeoData is fully integrated into CEO.CA, Goldspot will not only possess crucial data that can inform sound investment decisions, but will have the portal from which that data can be easily accessed by any investor. CEO.CA established itself primarily on the virtues of providing a high quality Level II data product to the public - a democratization of data typically only accessible to a select few. DigiGeoData is the next stage, providing the various tools (maps, claim locations, prior drill results, historical mining data, mineral occurrences, etc.) that were previously unavailable except to a select few that had acquired expensive software licenses. Markets function optimally with transparency and informed actors. Accessible and usable exploration data makes for a better informed investor (institutional and retail) and helps pull investment dollars to their highest and best uses among exploration companies.
- Because of Goldspot’s deep involvement with its clients throughout the full scope of the exploration process, it is able to assure that money raised is applied to the right places and not just used to enrich management/insiders. Even good projects can be ruined by disreputable and incompetent management that don’t use financial resources where they are most needed to advance a project. Goldspot's breadth and pervasiveness allow it to be an impetus pushing those dollars that are raised by good projects into the places where they can do the most good.
- Once Goldspot has made its analysis of a project, it will be able to use CEO.CA to inform and educate the market with relevant, useful and timely information to allow investors to make better long-term investment decisions. Access to the data available through CEO.CA will make for a more astute, informed, and competent investor. Over time, the results will speak for themselves and that will drive even more investors to the community.
- CEO.CA also becomes the go-to tool for exploration companies to disburse information into the market. Through its ownership of CEO.CA, Goldspot is able to exercise some reasonable control over those bad actors that are seeking to profit on publishing misleading material (most likely by adding ratings and useful evaluation tools in conjunction with the material published by these companies to verify their material). CEO.CA can also provide direct channels of communication between retail investors and exploration company management.
- By building and deploying the tools so that investors can consistently make long-term returns on junior mining exploration investments, this also allows Goldspot’s clients, and other worthy projects, to gain access to necessary funding needed to bring their projects all the way through the development cycle. It may not solve the entire Capitalization Problem, but at a minimum, I believe that it will be a major step into making the Capitalization Problem solvable. I look forward to watching this process rollout over the next several years. Goldspot has the right team and the right solution trying to solve the right problem. Put on your seatbelts, this is going to be a fun ride.
** As a final note, the information and model that I have developed and laid out in this article constitute my own opinions and conclusions. I believe that the three-phase model presented here is well-supported factually by the information publicly available. I am not privy to any inside information or otherwise confidential material in developing the opinions or conclusions expressed herein. I have not and do not anticipate receiving any remuneration for developing or publishing this material. I just like Goldspot...