VANCOUVER (miningweekly.com) – Crowdfunding is an innovation that is slowly catching up with the mining industry.
Some old investors may think it's odd for the sector; some might typically associate it with young people raising funds online for worthy causes or to realise and sell inventions.
However, crowdfunding, or more formally known as crowd-sourced equity funding (CSEF), is now penetrating many, if not all, sectors, as a way of raising venture capital.
Earlier this year, Toronto-based Red Cloud Klondike Strike made waves when it aggressively promoted what could be the first regulated equity crowdfunding platform for the sector, according to Forbes. The website is seen as a game-changer in the coming years for the mining sector, which has been struggling for investment capital.
Together with the first two companies that adopted the crowdfunding platform – Banyan Gold and Radisson Mining Resource – Klondike Strike showed Canadian investors that they could access funding deals from mining and resource companies through them. Investors would also receive shares of the company since it is a regulated crowdfunding website.
“In the future, I think we are going to see that crowdfunding will be a viable way for companies to raise money,” advised Radisson’s financial director Hubert Parent-Bouchard.
Klondike Strike Canada also ensured potential investors that all companies that applied would go through rigorous background checks. They would also have to pass their investment checklist and would therefore be a good fit for the investors on the platform.
“I believe we are the first to create this type of website – and that is a bit daunting – but I believe this is going to be the future of financing, not just in the mining sector but in all sectors,” said president and CEO Chad Williams.
A number of global miners have since taken the crowdfunding path. AIM Exploration is currently running a crowdfunding campaign to raise $100 000 in a small round of investments. The company is a US-based junior mining company focused on global mining, exploration and production. Currently, it has two projects in focus: one in Peru and one in the Philippines. These projects are dedicated to the exploration of feldspar, anthracite coal and silica sand.
Other crowfunding websites for the mining sector have also emerged. Mineral Intelligence (MI) has branded itself "a comprehensive, global mining investment platform that connects owners of current mining projects of all stages with investors”. Just like Klondike Strike, MI promises that each project circulated for the crowdfunders’ consideration has been assessed technically and commercially. The MI platform will put up CSEF opportunities yearly.
Stratum International reported that Cameron McLean and Joe Treacy, who are behind MI, said that their crowdfunding campaign aimed to be a niche platform similar to Klondike Strike. However, MI is catering to junior exploration companies in Australia. The two are also pushing for Australian legislation to accommodate such a system and, in turn, to make investment opportunities in making mining possible to anyone with at least $500.
“The move towards crowdfunding comes at a time when traditional methods of raising capital for early-stage exploration ventures have dried up. There have only been a handful of initial public offerings for new resource on the ASX this year, and the smallest listed explorers are struggling to raise fresh equity to keep their activities going,” The Australian wrote about the initiative, as quoted by Stratum International.