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TORONTO — For junior exploration companies, alternative financing options such as crowdfunding are starting to be taken seriously.
The halls of the Prospectors and Developers Association of Canada (PDAC) conference here are littered with companies clinging onto their last dollars and seeing no opportunity to raise money through traditional equity issues.
So it was no surprise that a big focus of the conference on Monday was digging into the alternatives. Some of them, notably crowdfunding, have real potential. But the rules remain uncertain and they raise serious concerns that even the experts acknowledged are not yet understood.
For decades, exploration companies could count on Canadian retail investors to provide capital. Now that institutional investors have almost entirely stopped funding greenfield exploration, they need to tap into retail more than ever. But under the current securities regime, they have failed to do that in recent years. Now they need to win the retail investor back.
“This is the worst bear market in decades and the retail investor has completely left the room,” said junior mining analyst John Kaiser. He added that the sector has become “inaccessible to the retail investor.”
While Mr. Kaiser said he believes the mining industry is at the bottom of a cyclical lull, the bottom could continue for another couple of years and threaten the existence of hundreds of embattled junior companies.
Securities regulators recognize the crisis, and are taking steps to make it much easier to tap the retail investor. Ideas like expanding the prospectus exemption (so that companies can tap into more retail capital without having to file a costly prospectus) and crowdfunding are gaining steam. Different provinces are proposing different models for prospectus exemptions, causing some confusion for investors. And crowdfunding is the most murky area.
For the rest of this article, click here: http://business.financialpost.com/2015/03/03/pdac-2015-junior-miners-dig-into-new-ways-to-tap-retail-investors/