Submitted by Sarah Harris as part of our contributors program.
Valor Gold (OTC: VGLD) is a practical example of the importance of management to any exploration-stage gold company. When evaluating any company in an early stage of development, one of the first things investors should do is investigate the background of the executive team. Exploring for gold is a risky and costly process, but when the process is managed in a cost-effective manner, there can be significant rewards for early shareholders. Because of its young age and undistracted focus on gold exploration, Valor Gold is a perfect case study.
Valor Gold started trading as an independent company earlier this year following the spinoff of two exploration properties from Pershing Gold (OTC: PGLC): Red Rock and North Battle Mountain. Since the summer, Valor Gold has acquired one more adjacent property from Paramount Gold (NYSE MKT: PZG): Reese River. Following the sale, Paramount has the option to nominate a director to Valor Gold’s board of directors. A potential nomination from this larger company will add to Valor Gold’s board as discussed below.
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Valor Gold’s Board of Directors
The three key individuals on Valor Gold’s board of directors are Arthur Leger, Oliver Lindsay and David Rector. CEO Arthur Leger is at the helm, an executive with proven Nevada gold exploration experience. Mr. Leger has spent over 35 years in the natural resource area and his efforts have contributed to discoveries totaling tens of millions of ounces of gold in Nevada, Mexico, 14 other states and two provinces in Canada. Prior to joining the gold mining industry, Leger was a staff engineer with Nevada’s Bureau of Water Pollution Control. More recently, Leger was engaged with the following gold exploration companies:
* Pershing Gold – Geologist, September 2011 through February 2012
* Arttor Gold – Director of Field Operations
* Nevada Gold Holdings – Geologist, 2010-2011
* Allied Nevada Gold – Geologist, 2007-2010
* Gold Banks Ventures – Geologist, 2007-2008
During his 35 year career, Leger has also held senior exploratory and management positions at Cameco Gold (currently Centerra Gold, TSX: CG), Cyprus Metals Exploration, Gold Fields Mining (NYSE: GFI) and Hecla Mining (NYSE: HL).
Leger’s geological experience in Nevada is important because Valor Gold has properties on major, physical gold trends. The Red Rock project is at the intersection of the Battle-Mountain-Eureka, Rabbit Creek (part of Twin Creek), and Caetano-Caldera gold trends. These three trends contain over 120 million known ounces of gold. Valor Gold’s recently acquired Reese River project adds 3,000 acres and 148 unpatented lode mining claims adjacent to its Red Rock project.
Valor Gold’s property has past drilling in the Red Rock and Reese River areas, according to the latest Nevada Mineral Industry report prepared by the Nevada Bureau of Mines and Geology. In addition, according to the same report, major gold producers are currently mining over 100,000 of ounces of gold per year from these gold trends at existing mines.
Another board member, David Rector, also serves as President at Pershing Gold. He has served in senior level positions at a number of exploratory companies including Nevada Gold Holdings, Standard Drilling, Universal Gold Mining and California Gold Corp. He also brings years of experience of serving as a director of public companies.
Oliver-Barret Lindsay is the third member of Valor Gold’s board of directors. Lindsay brings business and capital markets experience as a founder of a number of companies, including Lindsay Capital (investor relations), Respect Your Universe (clothing), and Transmission Holdings (film production). He has attracted the interest of many institutional investors in prior companies.
Investigating the management at Valor Gold reveals skill sets that seem to be favorable to an exploration-stage gold company. Moreover, their compensation is aligned with shareholder interests. Every member of the board receives minimal compensation and the bulk of their reward comes in the form of stock options. The majority of these stock options will vest only if the company finds significant gold reserves (in excess of 500,000 ounces). This is a sign that directors’ interests are closely aligned with the interests of shareholders.
Another important note in analyzing management is Paramount Gold. This company is an 8% shareholder in Valor Gold and has the right to nominate one board director. In addition to a substantial stake in Valor Gold, Paramount Gold’s directors have quality experience such that, if one of them is nominated to Valor Gold, the nominee will likely bring value in the mining area.
With this analysis of management, most shareholders would hereafter dive deeper into the company’s financials, property package and other indicators of success for the company. They would also carefully evaluate their ability to take on the risks of an early-stage company. The first step, however, is to conclude that management interests and experiences are aligned with delivering value to shareholders. This seems to be the case with Valor Gold.