david morgan on how to research a junior silver mining company:

Mr. Martin: But the geologist basically is the person I tend to like to hang out with as well to get the truth about what is going on in the ground. Unless they are promoters, they are pretty much going to be truthful with you, especially if they have a great reputation. Do you speak with a lot of geologists in your travels?

Mr. Morgan: Oh absolutely. I always speak with the geologist on the project, especially if I’m doing a mining tour or the analyst tour. What I’m interested in is a geologist who is independent; I talk to two or three of them and ask them about the district or whatever. Most geologists are there to find something—that’s why they’re on the project—and they have to use some imagination on what kind of a deposit could be under the ground. They drill holes they try to make a model and when they model these things, they normally do it on a best-efforts basis, but they are looking at an optimistic perspective most of the time, and you’ve got to remember that when you’re thinking this through.

If you have enough good drill results to get to a feasibility study, you’re going to have to have drilled that thing like Swiss cheese in some cases and then you’re going to have to get a bank to look it over with their analysts and say, “You know what? This thing does make sense, let’s put in a bunch more money and let a mining engineer figure out what’s economic here and what isn’t.” In other words, a lot of money goes into holes in the ground before that thing ever becomes a producing mine. And even doing that, sometimes they fail. That’s rare but it does happen. So it’s a tough, tough business as well as a very exciting business. There are very few “investments” that you can make (and I used quotation marks because really they’re speculations) where you can put in a few dollars and come out making a lot of dollars. The problem is you have so many to choose from. There are more than 4,000 of them and most of them never materialize. The odds are probably 2,000 to 1 that something you buy actually becomes a mining project. So a tough game, an exciting game, one in which I teach to “bet a little to win a lot.” These are situations where you know you want to put in a small amount of money and if it hits it’s going to make you a significant amount of money. But you don’t want to put a significant amount of money into a junior mining company, in my opinion anyway.

You should never spend any money that you are going to need. So that’s a warning and a very sincere one for you and anyone else. If you do have some risk capital, is now a good time to get into the junior mining sector? I’d say yes but have a long-term perspective, because I think we’re going to be in a wide trading range through the summer. You want to really do your research carefully and you want to buy a select handful of junior mining prospects.

http://www.resourceinvestor.com/News/2009/8/Pages/David-Morgan-on-junior-silver-mining-companies.aspx