#TMS2013: ‘Financing on my Mind’, addressing the Challenge of Raising Capital in Today’s Markets
Securing the necessary funds and financing is one of the biggest challenges faced by the mining sector in general. The 2008-2009 financial crisis dealt a blow to the mining industry, forcing the prices of most metals and minerals. There was a rebound, marked by the rise of rare earths and graphite prices but favorable momentum could not be sustained as 2012 proved to be a difficult year. The slowdown in Chinese growth has contributed to the European debt crisis in Europe while both large and junior miners have delivered either lower than expected gains or outright losses – among the worse in over a decade.
There is little doubt that in this complex climate, marked by a reticence to lending from the major banks and worldwide economic uncertainty, the main problem is securing the necessary capital for growth. This phenomenon is all the more true for the juniors, which need funds for exploration and identification of new deposits. Lenders are all the more reluctant to lend to juniors, given the uncertainty of their results, the difficulties of brining projects to completion and the growing costs and difficulties of setting up the relevant processing facilities. Established mining companies, fully engaged in production, can at least rely and use their earnings to invest in growth or in new projects.
Companies such as Lynas Corp (ASX: LYC | OTCQX: LYSDY) have shown, moreover, that even when the exploration risks have been fully addressed, there are a number of social, political and environmental concerns that slow the pace of development, hampering performance. Even companies sitting on proven properties such as Molycorp (NYSE: MCP) are forced to confront investors’ risk aversion. Governments have tried to improve the lending climate by offering additional assurances, but in western democracies, where public opinion eventually always catches with the ballot box; there are few original solutions that governments can use to stimulate investment in view of tougher environmental rules and public opinion.
In Canada, for instance, local native communities have been demanding a greater share of the profits, or greater access to jobs, lengthening the approval processes and further discouraging traditional providers of finance. These issues have reached the halls of power, which have not been very keen to speed up the easing of regulation or adoption of new laws for the mining sector. To this effect, the government of Quebec, one of the friendliest mining jurisdictions in the world, has been struggling to deliver a promised new mining law after three years of debate. The last draft would have municipal governments exercising more power over mining companies – which also means the addition of obstacles or outright prevention of development.
Mining companies involved in many emerging markets, characterized in some cases by governments which are trying to confront corruption or coming to terms with the rules of democracy, are also ‘undermined’ in their quest for capital. Surely, the experience of board members and the executive management can offer some assurances in raising funds; however, in a world of rising energy and labor costs combined and more obstacles along the path from exploration to production, the level of financing required often ends up exceeding the most realistic of projections. The world still offers great mining opportunities and a new technological revolution (the very theme of #TMS2013) is taking shape that will require the development of new resources. Mining techniques and processes have also been evolving in order to address the growing challenges and there is still a great of exploration to be done. Nobody has doubted the mining industry’s relevance in the present or in the future; this suggests that some form of financing can still be secured and this Panel will discuss some of the available tools. Mining companies can find some solace in the fact that when the rules and conditions for investment and financing become too arcane or discouraging, governments are the first to reverse course and stimulate the sector. To this end, the government of Mongolia, where new laws caused investment to fall sharply, has offered mining investors additional assurances for the safety of their money, easing financiers’ risks as well.
#TMS2013 Panel G: Today’s Capital Market: Raises, Project Financings for Production – the real challenges, real solutions promises to be offer one of the more exciting discussions of the Summit, addressing one of the biggest questions faced by mining executives and mining investors alike. The speakers include mining sector CEO’s who have had a great deal of direct experience in raising capital as well as executives at the forefront of resource sector finance.
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Tracy Weslosky will moderate the panel. Tracy Weslosky is the Publisher of ProEdgeWire, an investor intelligence site for the resource sector that attracts over a half a million readers a month. Founder (2001) and CEO for ProEdgeMedia Corp. Tracy is also the Managing Director of REE Stocks Company Ltd., a proprietor of the REE Leaders Index (REEL) and REE Shariah Index (REES) maintained and calculated by FTSE. A professional writer and speaker, she has 20+ years of experience – which includes extensive involvement in the natural resource, oil and gas, energy, technology and entertainment industry. An entrepreneur who owned her own boutique investment banking firm for 7 years that was the basis for a business reality television series called, DealFlow. DealFlow aired for 3.5 years on CNBC World and was broadcast on CNBC, CNBC affiliates, WealthTV, and many other television networks around the world -Tracy is uniquely suited to lead a discussion on financing issues and solutions.
The speakers include:
Michael Berry, Ph.D., Discovery Investing: Dr. Michael Berry is a pioneer in the emerging field of “discovery investing”. He researches and writes on companies that focus on discovery in natural resources, high technology and biotech. Previously, he successfully managed small and mid cap value funds for Heartland Advisors and Kemper Scudder. While at the Darden School, University of Virginia, he was a professor of investments and has held the Wheat First Endowed Chair at James Madison University. His research in the study of behavioral strategies for investing has been published in numerous academic and practitioner journals. He publishes Morning Notes by Michael A. Berry, Ph.D. The notes discuss geopolitics and their effect on capital markets.
Ian Gandel, LLB, BEc, FCPA, FAICD, Non-Executive Director Alkane Resources Ltd. Ian is a Melbourne businessman with extensive experience in retail management and retail property. He has had an involvement in the construction and leasing of Gandel shopping centers and has been a director of Gandel Retail Trust. He has previously been involved in the Priceline retail chain and the CEO chain of serviced offices. Ian has been an investor in the mining industry since 1994, and is currently a substantial shareholder of a number of publicly listed Australian companies and holds and explores tenements in his own right in Victoria, New South Wales and Western Australia.
Sasha Jacob, MBA, President and CEO Jacob Securities Inc. Mr. Jacob is President and CEO of Jacob Securities Inc. an independent investment bank focused on the renewable power, cleantech and energy sectors with operations in Toronto, New York, London, and Beijing. Mr. Jacob brings more than 15 years of experience in the power sector, including founding and leading the power sector practice at a leading Canadian investment bank, as well as several years in senior political positions as Special Assistant to the Ontario Minister of Energy. He has managed over 40 transactions in the renewable sector in the last five years, and has participated in renewable financings valued at more than $3 billion. Mr. Jacob was recognized by Institutional Investor as one of the “5 Most Influential Emerging Players in Renewable Energy”.
Blair Jordan, Capital Markets – Euro Pacific Canada: Blair is a Managing Director, Investment Banking with Euro Pacific Canada Inc., based in the Vancouver office. Mr. Jordan specializes in working with senior management teams, providing high-quality advice, including financing, mergers & acquisitions and strategic advisory services. Mr. Jordan has been involved in finance and investment banking since the late 1990s. Prior to joining Euro Pacific Canada, he was co-founder of a boutique corporate finance advisory firm that specialized in working with strategic investors from Japan and South Korea. He also spent nine years with Credit Suisse Securities in London, New York and Tokyo, and most recently Director of Convertible Bond trading in Tokyo.
Anthony Marchese, MBA, Director, Texas Rare Earth Resources Corp., Managing Director for Capital Markets, TriPoint Global Equities, LLC. Anthony Marchese has served as a director of Texas Rare Earth Resources Corp. since December 2009. Since May 2011, he has served as a Senior Vice-President with Axiom Capital Management, Inc., a New York City based FINRA member broker/dealer. Mr. Marchese also serves as the general partner and chief investment officer of the Insiders Trend Fund, LP, an investment partnership whose mandate is to invest in those public companies whose officers and/or directors have been active acquirers of their own stock.
Chris Tonkin, MBA, CEO & Director Arafura Resources Ltd. Chris has been appointed CEO to assist the company through a transitional period and is providing his management services on a consulting basis through a related company. He has over 25 years experience as a senior business executive with a broad industry background in business generation, management and strategy development. He has a substantial track record in structuring and arranging complex financings for companies and projects, in Australia and internationally, across all major industry sectors and particularly the resources, power and telecommunications sectors. Chris’s most recent role prior to joining Arafura was as Head of Natural Resources, Project and Structured Finance. Chris is a Graduate of the Australian Institute of Company Directors and a member of the Finance and Treasury Association.