The Gold Report: Not so long ago, mining promoters—larger-than-life personalities who revved up retail investors about stocks—were an essential part of the junior mining business. But the NI 43-101 limits how much company presidents and CEOs can tout their stocks. Do promoters still have a role or have they disappeared from the scene?

James West: Promoters have not disappeared from the scene. Yes, the NI 43-101 puts a filter on how public companies communicate with the market, but promoters are essential to the life cycle of public companies.

There was a time when promoters were infiltrated by a larcenous element that would create and promote deals that could at best be described as very optimistic. Back then, these misleading statements could be distributed almost clandestinely. Thanks to the Internet and the NI 43-101, that larcenous element has largely been unable to operate as freely. People hear "promoter" and they immediately think "con artist," which is wrong-headed and a throwback to the pre-Internet era. Promoters now are legally responsible for the statements they make on behalf of a company. As a result, promotion is a lot more respectable.

Today, because the level of sophistication has gone up with the proliferation of chat rooms and discussion groups, information considered "overly promotional" is discounted by the audience. People are a lot more savvy about promoters and promotional language than they used to be.

Promoters are still there, they are just more transparent. Today, promoters are part of the management team. They go to the meetings, presentations and trade shows. Excellent promoters attract capital and investors. A company without a good promoter on the management team is a company with few investors, that nobody has heard about and that can't raise money.

TGR: Given the transparency and availability of information, would investors be better off if the NI 43-101 rules regarding resource disclosure were relaxed to allow greater promotion?

JW: No. It is thanks to the NI 43-101 that the Toronto Stock Exchange (TSX) and the Toronto Venture Exchange (TSX.V) are the No. 1 destination exchanges for resource stocks. Those rules create a level of investor trust such that investors expect that any legitimate resource-oriented public company raising money must have an exit strategy that involves the TSX or TSX.V.

However, I believe NI 43-101 enforcement should be undertaken more carefully. For example, look at what happened to Orbite Aluminae Inc. (ORT:TSX) last year. Orbite extrapolated a rare earth estimate between holes two kilometers apart. The geologist at the Ontario Securities Commission took exception to that and halted the stock. Later, the Autorité des Marchés Financiers in Québec did the same thing on the same grounds. Additional NI 43-101 reports were ordered by both agencies. Eventually, 11 independent geologists concluded that Orbite's approach to the assumption was sound and that the estimate was accurate. While it was halted, the stock built up a short position of 11 million (M) shares. When it was finally unhalted, it got hammered, and is now trading at nowhere near where it should be trading.

TGR: Do the recent poor performances of resource equities and the difficulties companies have raising money make a good promoter more valuable?

JW: Absolutely. Some promoters are raising millions of dollars. That is the result of a combination of good projects and good management, which includes a good promoter.

TGR: What makes a good stock promoter?

JW: A great stock promoter can credibly and convincingly convey the technical aspects of a project and the merits of the management team, and can honestly indicate who the other investors are and what the exit strategy is to as broad an audience as possible. He also needs a great Rolodex.

TGR: How do today's promoters differ from your dad's junior mining promoters?

JW: They do not drink or smoke nearly as much, and they probably do not make as much money. Back in the day, you could promote 10 or 15 deals. If just one took off, you would be off to the races financially.

Today, if you are on more than one management team, your attention is assumed to be divided and your effectiveness is perceived to be limited as a result. Promoters cannot have as many balls in the air as they used to. Promoters are a visible part of management and are accountable.

TGR: Who would you consider to be a good, or even great, promoter active today?

JW: A great promoter, without saying too much, gets you so excited about the deal that you buy stock in the market or you participate in a private placement. Without being promotional, he paints the picture and leaves you to read between the lines if it's a truly remarkable project.

I would put Richard Whittall from Newstrike Capital Inc. (NES:TSX.V) in that category. He does not shout from the rooftops. He diligently goes about the business of credibly articulating the structure and financial condition of the company and the deposit. The fact that Newstrike's share price is holding where it is in this market is testimony both to the quality of the deposit and to Whittall's effectiveness as a president and promoter.

TGR: Some might consider you a stock promoter. How do you straddle the line between being a promoter and remaining credible?

JW: Arguably, anybody who speaks positively about a public company is promoting it. In our newsletter, we are happy to promote the stocks we invest in because we own them in our fund, and we think they have value. When we write about these companies, we try to articulate a company's merits in terms of structure, financing, projects and management without being too promotional. The idea is to say, "This company is good enough for me to invest in it, and here's why I like it." It is third-party endorsement in its most sincere form.

TGR: But you also try to create a story and use language that people can easily understand and relate to.

JW: The role of a newsletter writer in mining is to convey complex technical concepts in simple terms that a layperson can understand and use to decide whether an investment is appropriate for them. We aid in the function of promoting the stock, but we are not promoters.

Increasingly, I have been invited into deals as a founding shareholder. In that instance, I do become more a part of the promoting function, and in most of those cases, I'm proud to be a promoter because I believe in the deal, the project and the team. But you rarely see a newsletter writer on a management team or a board of directors.

There are exceptions, like John Lee, who was a fund manager and newsletter writer with Prophecy Coal Corp. (PCY:TSX; PRPCF:OTCQX; 1P2:FSE) and Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE); Victor Goncalves, who stopped writing to become president of Threegold Resources Inc. (THG:TSX.V); and Jim Sinclair, who has a huge audience and is the president of Tanzanian Royalty Exploration Corp. (TRX:NYSE.A).

TGR: Institutional investors and investment banks are quite active in the junior mining space today. Do you think the space will be reclaimed by retail investors?

JW: First, the sheer size of the investment banks gives them an advantage over individual investors. Second, because the investment bank's business model relies on transaction volume, they are only in it for the structure, not the story.

So, yes, retail investors are reluctant to participate, especially in this kind of market and because of the mercenary nature of the investment-banking model. That being said, the earliest stage of the public company lifecycle is exclusively the domain of retail investors.

TGR: The best times to get into an equity position are at the seed capital stage and at an IPO. But many of our readers do not have those opportunities. What is the next best time in a company's life cycle to invest?

JW: I will start by saying that for the average investor whose portfolio is less than $100,000, the high-risk portion is the only portion that should be allocated to investing in junior mining.