Is There Really Gold In Those Hills?

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This article was interesting and helpful.
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This article was boring.
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I've considered investing in a mining operation.
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I've think a fraudster is trying to get me to invest in a scam mining operation.
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I believe there's Nazi gold buried behind my house.
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Total votes: 13

Rat River Trapper

Is There Really Gold In Those Hills?

Post by Rat River Trapper »

The high price of gold and other precious metals has sparked a renewed interest in mining, and is sure to bring on a new crop of fraudulent mining investment schemes. These were quite common in the mid-1980's, and generally fell out of favor with the fraudsters, who found easier and more lucrative methods of fleecing the gullible. After all, fraud IS time consuming, and mining schemes require quite a bit of physical effort on the fraudsters' part - time and effort which I'm sure they would much rather spend at the poolside bar, or in an air conditioned room, instead of some out of the way dusty piece of real estate acting the part of the lowly miner.

Characteristics of Mining Fraud Schemes and Red Flags:

They always involve real estate. I've yet to encounter a fraudster who is hawking a mining operation located at sea. Sometimes the fraudster refuses to disclose the location of the property until the victim decides to invest, but in many instances glowing descriptions of the property will be provided. On more than one occasion, I've seen fraudsters offer interests in gold mines in areas where gold does not naturally occur, or mines containing gold and diamonds in the same earth. (Gold and diamonds do not naturally occur together in significant quantities.) A simple phone call to a local geologist will confirm whether or not the area of the supposed mine is likely to contain the precious metals claimed.

They usually involve some "new, secret, proprietary process" that claims to be able to extract commercial quantities of precious metals from the raw material at hand. Mining equipment and methods have improved over the years, and new technology has brought some old mines new life, but the fraudsters will make outlandish claims for their process and methods, often without an accurate knowledge of the science involved. Again, any legitimate geologist would be able to recognize a valid extraction process.

Outlandish claims concerning the amount of precious metals in the raw material. You have to move a lot of raw material to extract gold and other precious metals. Claims of miles of gold veins, or clusters of diamonds coating the walls of a mineshaft are simply not true.

Ownership of mining claims. In the United States, most mining claims must be registered, particularly those on federal lands. Environmental damage caused by mining is a huge concern, and the regulations governing the industry are quite stringent. If someone is, indeed, running a legitimate mining operation, there will be paperwork filed at the appropriate government regulatory offices. State Mining Officers, or county clerks are the usual custodians of mining records. For mining claims on Federal lands, the claim (and it's status) are quite easy to research using the Internet. Online searches by claim name, number, and principals involved may be performed using the free public access offered by the U.S. Bureau of Land Management's LR2000 system. See: http://www.blm.gov/lr2000/

Equipment and methods. Fraudsters often ask investors for startup funds to purchase equipment. More often than not, the equipment is never purchased. And again, the fraudsters may display a lack of knowledge concerning mining methods and the specific types of equipment. For example, equipment normally used in desert mining is often unsuited to mining such as placer mining in or near streams.

Securities offerings. Most often, fraudsters offer "shares" in the operation. Whether simple mining interests, or actual shares of stock, the offering will require registration, at least at the state level, and the person(s) offering the securities will need to have the appropriate securities salesperson licenses. Local securities regulators will be able to verify that that the property registrations and licenses are in effect.

In conclusion, investing in mining operations is all common sense. If the promoter can't answer simple questions, or provide documentation, don't give them a cent. A few phone calls and internet searches as part of the due diligence process may save you from losing an investment.

And stay away from World War II Philippine "gold bars" and treasure caves, lost ruby mines in Borneo and Malaysia, or hidden Austrian bunkers filled with Nazi gold...... (more on those in another post.)
Number Six
Hereditary Margrave of Mooloosia
Posts: 1229
Joined: Fri Aug 29, 2008 6:35 pm
Location: Connecticut, "The Constitution State"

Re: Is There Really Gold In Those Hills?

Post by Number Six »

The level of potential fraud goes up substantially with gold mining penny stocks (of course, this also goes for other exploration companies and energy companies that play on either investor greed or desire for environmental purity like solar stocks, or both.)

I recently got this solicitation from "Wall Street Penny Stock Advisors":

http://visitor.benchmarkemail.com/c/v?e ... d=32169A02

How do you research this promotion? You could start here: http://newsletter.hotstocked.com/stocks/view/lstg

Or this blog where you can ask questions: http://investorshub.advfn.com/boards/bo ... d_id=21992

Will this have a similar trajectory as Supatcha Resources? A stock that went from pennies to over 80 cents and then to sub-penny in a short period of time as it became clear that the precious metals company in Russia was a mind-boggling fake?
'There are two kinds of injustice: the first is found in those who do an injury, the second in those who fail to protect another from injury when they can.' (Roman. Cicero, De Off. I. vii)

'Choose loss rather than shameful gains.' (Chilon Fr. 10. Diels)
LaVidaRoja
Basileus Quatlooseus
Posts: 841
Joined: Mon Sep 01, 2008 12:19 am
Location: The Land of Enchantment

Re: Is There Really Gold In Those Hills?

Post by LaVidaRoja »

That version of "salting" has been around for at least 100 years. It's amazing that people still fall for it.
Little boys who tell lies grow up to be weathermen.
notorial dissent
A Balthazar of Quatloosian Truth
Posts: 13806
Joined: Mon Jul 04, 2005 7:17 pm

Re: Is There Really Gold In Those Hills?

Post by notorial dissent »

Greed, unfortunately, wins out over common sense almost every time. Which is of course what they are counting on.
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.