There are lots of additional considerations when it comes to risk, once you get to the point of choosing stocks. My answer was more about how to figure out which part(s) of the market make the most sense for you as an investor. Once you home in on an area or range of stages that appeal to you, then you have to choose stocks. In doing that, a host of additional risk require consideration; jurisdiction is certainly one of them.
As I’ve written many times before in my letter, jurisdiction is an interesting beast. It’s easy and common to assume that farther-flung jurisdictions have higher risk, and that can be true in the most basic of jurisdictional risk worries like asset appropriation. But there is very real jurisdictional risk in developed countries as well, such as incredibly long timelines to have exploration concessions granted (Spain is a good example) or to get drill permits for large drill programs (Chile) to to do basic exploration when lands are under certain previews (Forest Service in the US, for example), and the total unknown of whether a project will get a construction permit (Canada, US, etc).
I say all of that just to underline that jurisdictional risk is a complex issue. Certainly assets in less stable or known jurisdictions will never get the valuation that assets in known and trusted jurisdictions get (Kinross for years traded at a discount to peers because of its Russian exposure). But on the path from discovery and then mine permitting, even known and trusted jurisdictions can’t always be trusted!
In your answer to the question about diversification, would it not have been appropriate to add jurisdictional risk on a third axis?
There are lots of additional considerations when it comes to risk, once you get to the point of choosing stocks. My answer was more about how to figure out which part(s) of the market make the most sense for you as an investor. Once you home in on an area or range of stages that appeal to you, then you have to choose stocks. In doing that, a host of additional risk require consideration; jurisdiction is certainly one of them.
As I’ve written many times before in my letter, jurisdiction is an interesting beast. It’s easy and common to assume that farther-flung jurisdictions have higher risk, and that can be true in the most basic of jurisdictional risk worries like asset appropriation. But there is very real jurisdictional risk in developed countries as well, such as incredibly long timelines to have exploration concessions granted (Spain is a good example) or to get drill permits for large drill programs (Chile) to to do basic exploration when lands are under certain previews (Forest Service in the US, for example), and the total unknown of whether a project will get a construction permit (Canada, US, etc).
I say all of that just to underline that jurisdictional risk is a complex issue. Certainly assets in less stable or known jurisdictions will never get the valuation that assets in known and trusted jurisdictions get (Kinross for years traded at a discount to peers because of its Russian exposure). But on the path from discovery and then mine permitting, even known and trusted jurisdictions can’t always be trusted!