Five years ago, Warwick Grigor was on his own when it came to carting Australian investors to deepest, darkest Africa to help spruik one of his favoured companies, the junior gold explorer Perseus Mining, which then had a market cap of about $50 million.
"You learnt things like not to go to Ghana in November because you can't see anything with the grass being six to eight feet high," says Grigor, who is a principal at the broking firm Canaccord Genuity.
"And you learnt how to make big money, at least for a while," he might have added.
Even before Perseus (ASX code: PRU) had produced an ounce of gold, its share price had rocketed from about 25¢ when Grigor started promoting it, to more than $4 in mid-2011, giving it a market cap of more than $1.3 billion.
Fast-forward to today and it's gone into production, but its shares have plummeted to below 50¢, giving it a market cap of $218 million. Other stocks that Grigor promoted in West Africa have been hit even harder. Perseus is lucky, being a producer.
For those in development that still need funding, the pain has been much worse, with some share prices having fallen an average of 90 per cent in the past nine months. Companies in this category include Ampella Mining (AMX), Gryphon Minerals (GRY), Azumah Resources (AZM) and Papillon Resources (PIR).
This fall from grace prompted Under the Radar to ask Grigor whether it was all a waste of time. His answer came as something of a surprise: "Perseus was one of the few exceptions, going from exploration to development and into production. It is a far more complicated business developing a project than discovering it."
According to Grigor, these "developers" will remain depressed for some time due to the changing tax and royalty policies of African countries, and the difficulties in transforming from an explorer into a producer: "It's much easier for a cavalier punter to go in and say, 'I think there is gold, let's prove it up!' It's easier to control the weight of expenditure and wave your arms around and promote.
"The bottom line is, people want the excitement of exploration." Which brings us to Grigor's "lesson": "It's better for investors to get off the barbecue while it's sizzling, and exploration is the sizzle. Punters want the exploration phase. By the time the development phase comes along, they're all too happy to pass that risk on to the producers, who need production growth." From an exploration perspective you are relying heavily on the abilities of management. Those that have the management and the foothold in West Africa and which could be capable of exploration success, Grigor says, include Rick Yeates at Middle Island Resources (MDI), Phillip Harman and Paul Roberts at Predictive Discovery (PDI), Phil Gallagher at Canyon Resources (CAY) and Jozsef Patarica at Bassari Resources (BSR).
These companies might have top-notch management teams, and good prospects, but they all need more cash, which is the hardest commodity of all to find at the moment.
Richard Hemming edits the fortnightly newsletter Under the Radar Report: Small Caps.