Mining Journal, by Chris Cann, 3 Oct 2019

Abridged article, read the full article here

Raising capital or dealing with a contemporary capital-raising landscape has become a fixture on the lists of industry headaches published each year since commodity prices turned down in 2013. From a Mining Journal perspective, our research arm has seen access to capital or a derivative thereof featuring as a top-five risk in two separate surveys over three consecutive years. The World Risk Report, due to be published next month, will place  access to capital second to only Regulation in the hierarchy of business risks rated by industry.

By Mining Journal’s estimations, around 90% of the listed market is comprised of junior equities. At a time when there is little competition from public equity or commercial banks for access to mature, world-class assets, alternative investors have no need to trawl through the thousands of juniors for the diamonds in the rough. There has been no ‘white knight’ for them. But as mining continues to test itself with innovation – digitisation, remote operating centres, automation, highly-sophisticated CSR programmes – some of that thinking may be starting to spill over into resources finance and could mean at least a partial solution for the dearth of capital in the junior space.

We started looking at crowd funding a few years back when it was first thrown up as a solution to the junior finance conundrum. On the face of it, it was a good fit: small resources companies unfit for public life are often forced into initial public offers too early because of the steep capital demands of exploration.

Meanwhile, regulators were increasingly tying the hands of financial advisors in supporting such speculative ventures. Staying private and casting around for the US$1 million-$2 million needed in a crowdfunding exercise perhaps made more sense. But the lack of regulation was a sticking point. Exploration and development require technical understanding to evaluate an investment and there are, sadly, too many unscrupulous operators alongside the genuine articles who are happy to fleece investors. There has, therefore, been little to show for the brief hype around crowdfunding to date, but the concept has not altogether vanished.

A finance ‘platform’ has raised its head above the parapet this year, run by a firm called Minexia, a group of technically proficient mining professionals with finance backgrounds. Its NR Private Market vehicle is the first platform-based finance solution dedicated to the mining
sector.

The concept is essentially a hybrid of crowdfunding and regulated financing, which is based on the now well recognised technology used by global success stories such as Uber. Minexia chief executive Richard Lloyd told Mining Journal the disruption of the feehungry broking profession was a logical step for resources finance and was simply part of a “platform revolution” already well underway. “The world has evolved to a point where brokers are being forced to pull their socks up – and that’s not just equity brokers, but insurance brokers, mortgage brokers or travel agents,” he said. “That’s not to say broking won’t have its place, but it has to offer more – they’re asking to be paid for a service that can be supplied by a platform.

“These platforms are bringing investors together with issuers; a user or subscriber with a provider. It’s the same service as a travel agent or broker, but without the overheads, which is cheaper for the issuers and fairer for the investor – the fees for financing on a platform can be around 4% compared to up to 6-7% plus a warrant at the same rate currently in Toronto; while people who only want to invest $10,000 in a deal are welcome on a platform, but would be squeezed out by a broker.”

Practically, Minexia has the technology to digitally host, market and close transactions. It has a self-accreditation system for investors who want to join the platform that explains the risks and includes the standard anti money laundering and ‘Know Your Customer’ (KYC) checks. It is a similar situation for juniors looking to place deals on the platform. Company directors do the same KYC and laundering checks then, while not recommending any deals, the Minexia team assesses the proposed transaction based on its four-C criteria: commodity, country, corporate (management/governance) and concession. Those that have merit proceed to the platform to be assessed by the investor
community.

Minexia is covered by FCA regulation as an ‘appointed representative’, similar to a broker, and so the laissez faire nature of crowdfunding is bypassed while maintaining the open access and efficiency of transaction. “One way to think of it is sophisticated crowdfunding,” Lloyd said. “Yes, we’re regulated and that is necessary and important for any financing business that is potentially dealing with people’s savings and pensions, but, for us, our assessment process and the quality of the deals we present to our investors will also dictate whether or not we grow the platform.”

Around one in 10 deals assessed by the Minexia team makes it onto the platform. “At the moment, we’re working on deals in the $1 million-$5 million space,” he said. “There are bigger ones we’re looking at, but that’s generally our bread and butter. And investors are looking to put in $10,000, $25,000 or $50,000.” Since the June quarter, Minexia has participated in raisings worth around $7 million across three deals for Canadian-listed juniors, including an oversubscribed $4.73 million placement for Mongolia-focused explorer Kincora Copper in June. A London listing for an Australia-focused coppergold junior looks set to close shortly and the firm is in the midst of its own modest
raising.

Read the full article here

For more information, contact: nr@minexia.com