READ TIME: 6 MINUTES
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This conversation dissected the psychology, pitfalls, and decision-making frameworks behind speculating in early-stage discovery stocks, using the rise and fall of New Found Gold as a case study. Luc ten Have and I explored why retail investors chase hype, how to identify overvaluation, when to sell, and how to separate real geological promise from promotional noise. We covered valuation metrics, drill result interpretation, the role of marketing, insider signals, and the importance of metallurgical data, all aimed at answering a brutal but necessary question: how not to be the exit liquidity in a speculative market.
TL;DR
- 1. Most of a discovery stock’s upside is typically gone once the company reaches a billion-dollar valuation without a clear path to production.
- 2. Effective derisking includes selling partial positions early, even if the story appears strong, because failure is the norm and should be the expectation in mineral exploration.
- 3. High-grade drill results alone are not sufficient. Continuity, geometry, and recovery are equally critical to long-term value.
- 4. Marketing is necessary but should be weighed against technical disclosure and the credibility of who is delivering the message.
- 5. Retail investors need a clear strategy, emotional discipline, and at least a basic understanding of geology, metallurgy, and financials to lower their chances of losing money.
Why Do We Like Chasing Discovery Stocks?
The allure of a discovery story is hard to resist. For some, it’s about the dream of backing the next Great Bear or Filo. For others, it’s the adrenaline hit of watching a stock double on a headline drill intercept. But as Luc ten Have said, the journey from surface samples to billion-dollar valuations is more often a cautionary tale than a Cinderella story.
Luc admits he’s never been one to jump on hype. If anything, he spent his early investing days looking for value in places the market had already given up on. But he understands the psychological draw. A price move, especially one with volume, signals external validation. It feels like something is happening. And if you need that signal to convince yourself, Luc argues, you probably don’t understand the story well enough in the first place.
“If you need the volume or the price spike to confirm something to you, then you’re not certain enough about your own analysis.”
How Do You Know You’ve Missed the Top?
The hard truth is that most of the upside is gone by the time a company reaches a billion-dollar valuation without a resource or path to production. Luc pointed to Great Bear as a rare exception that justified its lofty valuation because it was that good. But most companies are not going to pull off a Great Bear, and $1 billion is already too high.
“If you’ve seen it at 30 cents, $5, $10, $15, and didn’t buy, why pull the trigger at $25?”
When Should You Sell?
Selling is harder than buying, but Luc is clear: he takes money off the table early. No need to exit completely, but recognize that risk compounds with time. Even winners like Patriot Battery Metals and Reunion Gold saw drawdowns of 50% or more.
“I take profits every now and then. Not sell everything on one day, but take some money off the table.”
How Can a Stock Drop With Great Drill Results?
Continuity. Geometry. Pit constraints. Metallurgy. Luc underscored that most investors simply don’t have the tools to evaluate a dataset with hundreds of holes. The company geos do. You don’t.
“Most people cannot really evaluate… how can an average investor, not even having all the data, have a better view of the deposit than people inside the company?”
What Are the Signs That It’s Time to Sell?
- – No major investors or strategic partners stepping in
- – Massive drilling without proportional resource growth
- – Lack of confirmation from people with skin in the game
- – Overly promotional marketing campaigns
- – Overly bloated share structure
- – Probably a dozen other things
He cited Predictive Discovery as an example of a derisked story: $80 million from the Lundins. That meant something.
Do Billionaires Validate the Story?
Not necessarily. While having someone like Eric Sprott in the registry is a positive signal, Luc cautioned against treating it as a “follow blindly” signal.
“Eric being involved is a good thing. But it wouldn’t be the only reason. With the Lundines or someone like Pierre Lassonde, it’s different.”
Can You Spot Promotional Red Flags?
Yes, and you should. Screaming headlines with weak detail, frequent promotional appearances by IR instead of the technical team, and companies issuing fluff news to keep their name in the feed are all signs.
Luc made a point: decent marketing is necessary, but when the focus shifts from discovery to distribution, caution is warranted.
“No problem with promotion as long as it’s factual. But if it’s 100 videos in a month, you should ask why.”
Is There a Formula to Estimate Resource Size?
Volume x Grade x Density x Discount Factor? Sure, but Luc doesn’t rely on it. He uses quick ‘mental math’ to estimate order-of-magnitude potential but leans more on structure, team, and strategy.
“You want to understand: is this a new discovery? Is it surprising? Who are the people involved?”
Should Retail Be in This Game at All?
The space isn’t for everyone. Failure is the norm and should be the expectation. Experience matters. So does discipline. And if the volatility of 30% weekly drawdowns is intolerable, you shouldn’t be speculating in discovery-stage stories.
“No crying in the casino. If it hurts too much, you took too much risk.”
What Do You Need to Compete in This Space?
- – Basic geology and metallurgy
- – Ability to read financials and news releases critically
- – Understanding management’s motivations
- – Emotional discipline
- – A strategy
- – The ability to enjoy pain (most of the times)
If that list sounds boring or too complicated, you shouldn’t be here.
When Should a Company Be Doing Metallurgy?
Early. If they’re drilling for years without testing recovery, that’s a red flag. If they’re talking about alternative processing flowsheets, pay attention. If it’s refractory, that’s not a dealbreaker, but it is a hurdle.
Should You Bet on the People or the Rock?
Luc favors the former. If the project is complex or historic, he’ll only touch it if the team has a track record. In new discoveries, he’ll act quickly, but only if the right names are involved.
“A good team reduces risk more than trying to understand the project better than anyone else.”
Final Takeaway: When in Doubt, Derisk
Luc doesn’t claim to have perfect timing. But he survives by taking chips off the table before the music stops.
“Not just live by hopes and dreams. Be realistic. Most companies will find a top and come down. The list of ones that don’t is very short.”
That’s the lesson. Discovery investing is not about catching tops. It’s about surviving long enough to catch a few bottoms.
Down 90%! Lessons From a Failed Billion-Dollar Bet
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