How safe is investing in small new gold mining exploration in PNG? I have a friend currently raising investment capital for a new venture, who is planning a trip to PNG to set up, supposedly with local authority assistance, a gold mine in a new area. They have not visited PNG before and have very limited travel experience in general. We are concerned for their safety
Gold mining in PNG investment: scam?
LTiffany57 on 16/10/2016 - 09:57
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I agree with mskeggs, I wrote a reply and then re-read your post and somewhat confused as to what you are actually asking. It seems you are asking whether your friend is being scammed, but it appears they won't be the one losing their money. I doubt you will change your friends mind, feel more worried about anyone who puts money into it.
Certainly plenty of gold mines listed on the ASX operating/exploring in PNG. Whether your friend has the experience or knowledge to do this on his own -> I assume he does and isn't himself being scammed, and in which case if he has the credentials I wouldn't think you are being scammed. Its certainly a high risk investment and something you couldn't be surprised if you lost 100% of your investment.
High risk, high reward.
Thank you, yes, my concerns are two-fold.
Firstly, that my friend is involved in ,unwittingly, setting-up what is essentially a Ponzi Scheme. He has announced that he is the director of a registered company within PNG. From what I can glean, initially, he was asked by a mate's dad to oversee the business side of a new gold mining venture. The mate's dad ( now living in Australia) has lived 'among local tribes' and worked in mining in PNG for 'many years'. I've been told, he has been granted a license to explore gold mining opportunities in a specific remote undisclosed area. My friend is promoting the business and trying to get investors, but I don't know if there are any on-board at this stage.
My second concern, is that he is planning to go to this remote location in PNG alone, on a self funded trip to set up the business. He has been informed he will need to pay for security guards to accompany him on the journey. Personally, I think he is taking a big risk, both in his involvement as Director of what could be a fraudulent investment scheme, and with his own safety travelling in a remote area alone.
How can I found out, firstly, if the venture is legitimate?
And secondly, dissuade him from going to PNG?
I know a few ex-pats that lived and worked in PNG. What you are describing sounds like the usual way they do business, including the guards. It is high risk, and comparatively lawless with graft, bribes and kick-backs part of the day to day, along with scams and sharks, but with the potential for substantial gains.
If your friend is experienced/qualified to do the business admin stuff this sounds ok. I would only be concerned if your friend is clearly a poor choice for that, indicating the mate's Dad isn't genuine.
Note that for more than a handful of investors he will need to jump through some sizeable regulatory hoops from ASIC designed to make sure the whole setup is legitimate. This includes identifying all directors and major investors, gaining sign-off from auditors and providing evidence of arrangements. If he is looking for less than a dozen investors, he can skip this, and this is where a lot of scams operate. If you are concerned, I would ask to meet with the other principals to understand if they are trustworthy. Like a lot of things, ultimately a decision comes down to personal trust.
Ultimately, a legitimate investment in this kind of field is shaky and with poor transparency compared to something like buying bank shares on the ASX, but the payback can be very high making these risks worthwhile for some investors. And even ASIC oversight doesn't prevent fraud, I personally lost some money in Bre-X years ago (https://en.wikipedia.org/wiki/Bre-X)These are set up to fall under the threshold where ASIC regulation kicks in - not hard for smallish operations.
Thanks @mskeggs
To answer your question, it is possible that your friend is being put in a position where the "mate's dad" can direct where money goes out (because he appears to have the mining knowledge) while staying arms length from any liability from regulators or the investors. It could be sold to to your friend being the only Director, he has full control of the money and decisions, but with little knowledge, he won't have any clue what he should be paying out. It appears from your post that he is to be the sole director.
I doubt you are going to talk your friend out of it as he sees it as his opportunity to make it big, but, its always easy to spend someone else's money and smart people don't invest their own money into these sorts of things, they give themselves rights if it actually starts to show a profit. They make their money getting paid along the way in one form or the other.
To be completely honest, your friend's biggest concern is how he goes about "promoting" the opportunity in Australia for investors and AFSL issues arising from that.
I wouldn't have thought capital raising in this case would have required an AFSL?
investing in mineral exploration is basically paying for hotel rooms and plane tickets that other people enjoy.
We'll, that is how gold mines get started, so it isn't necessarily a scam.
You haven't really given any information to be able to form an opinion.
Are you concerned they are being scammed, or are operating a scam?