Spotting Red Flags: A Guide to Mining Sector Exploration

What are the investor red flags?

During the "Exploration Panel" at the 2026 Rule Symposium, Exploration Insights Analyst Joe Mazumdar suggested companies may try to move too quickly.

“Sometimes the problem is that they drill too fast without interpreting the results from the last drill hole, and they’re almost like grid drilling when they try to get a resource when they should still be interpreting,” he said.

He explained that the impetus behind moving with this kind of speed, comes from investors who want results faster.

“Sometimes it doesn’t make any sense to have five rigs without understanding what you’re drilling,” Mazumdar added.

Companies moving too fast was also flagged by Brent Cook, founder of Exploration Insights.

Cook explained that too often he sees a company coming into an asset and raising money on a theory without having the data to back up their claims. Instead, he suggests that explorers should slow down and take the time to figure out the geology, and if it doesn't meet expectations, “get the hell out and go somewhere else.”

Another challenge outlined by the panel is the consistency of a resource.

Novo Resources (TSX:NVO,OTCQB:NSRPF,OTCQB:NSRPF) CEO Quentin Hennigh used “nuggety gold” as an example. He explained that it’s a function of how gold can occur in the rock, but he noted that nuggety gold isn’t usually evenly distributed in the rock.

These kinds of deposits tend to have more visible gold in drill cores, but don’t have the same continuity and even distribution.

“Those deposits are a big challenge. They take a lot of capital to advance. Sometimes they don’t quite work as you expect,” he said.

Hennigh suggested that miners tend to gravitate toward more “well-behaved” deposits because they can be mined in bulk more easily.

Mazumdar also emphasized a more cautious approach when a company reports nuggety deposits. For him, nuggety gold is less predictable, meaning more drilling.

“Sometimes that drill spacing could be five meters. Which for a junior, nobody’s going to drill that. That’s potentially just to get an inferred resource,” he said.

All panelists agreed that a thorough understanding of a property’s underlying mineralization is critical to assessing project risk.

A poorly understood resource may deliver promising early results but still carry significant uncertainty.

Even when the resource is well understood, inconsistent mineralization can increase capital costs and add to the risk for investors.

Other challenges

One of the key questions facing the mining industry over the past 20 years has been whether the world’s major deposits have already been discovered.

While the easiest-to-access projects may have been found, the consensus is that significant discoveries remain to be made.

Hennigh believes some regions have been extensively explored, but significant potential remains even in mature jurisdictions. In areas such as Nevada, however, explorers need to take a more targeted and sophisticated approach.
He sees particularly strong potential in less-explored regions, where large discoveries may still be waiting to be found.

“Now, where is the real potential? In my view, it’s in countries that have seen very little of any exploration in modern history. I love Bolivia. I’m absolutely in love with the place; we’ve had exceptional luck discovering multiple new deposits. I think that places like Bolivia and probably many Central Asian countries and some other jurisdictions that most people don’t even think of are going to be that next frontier,” Hennigh said.

Part of the perception that all the big discoveries have been made is largely due to the lack of new deposits found over the last couple of decades. Steve Enders, Professor of Practice Emeritus in Mining Engineering at the Colorado School of Mines, pushed back on this notion that they don’t exist.

“The cost of doing exploration is much higher than it used to be. We’re spending less money as a percent of total exploration expenditures on generative and greenfield exploration, and all of that leads to the fact that there appears to be a dearth of new discoveries, and I think it’s a myth that it’s become harder. We’re just not putting as much effort into it,” he said.

The other major challenge facing the industry is downstream capacity. Once the ore is mined, it needs to be refined and processed into usable metals. However, at least in North America, much of the refining and smelting capacity has been lost.

So if not greenfield projects, where are the metals coming from as supply shortages loom for materials like copper?

There are numerous brownfield projects in development throughout the Americas. Many were shut down decades ago because the grades fell too low for the technology being used, but that’s been less of a problem now.

Likewise, there’s also been a lot more research into extracting minerals from mining waste, tailings and even materials from production operations that wouldn’t have been possible just a few years ago.

“We’re now talking stuff that is not a co-product, which has equal value to the primary one, say copper and molybdenum, or is a byproduct like having uranium in molybdenum. Now we’re talking about all these other things that come out,” Enders said.

He used the example of Rio Tinto's (ASX:RIO,NYSE:RIO,LSE:RIO) smelting operation at Kennecott, where work is being done to recover small amounts of nine different metals. However, Enders was quick to caution that there is still not enough data from these sites to effectively determine how much of these metals exist at these sites.

What investors should know

It’s important to conduct due diligence and get a handle on how assays are reported and the scope and scale of a resource being explored.

One drill hole could indicate that an excellent resource is present, but without follow-up data, it could just reflect selection bias.

Investors should be aware of how the data presented fits within their risk tolerance, whether it raises red flags or whether exploration activities are being rushed, without proper analysis or understanding of the mineralized systems.