Miners are leaving $65 billion on the table

Published at Nov 11, 2015, in Features

Junior exploration companies trying to raise cash the old fashioned way are ignoring the single largest disruption to funding models in history.

That’s the call from regulated crowdfunding advisor Oscar Jofre, who told an audience at the 2015 International Mining and Resources Conference in Melbourne today that the old fashioned way of raising capital risked leaving 99% of potential investors out of the game.

“You think when you take a deal to a broker, that it’s actually being distributed to everybody. It is not,” Jofre said, who is currently advising Klondike Strike on a potential Australian entry.

“In fact...in the last ten years the mining sector, the private placements that have been done, have only been distributed to the one per cent of those investors qualified to invest.

“The rest just aren’t getting a shot at it.”

He said the regulated equity crowdfunding sector had raised a whopping $65 billion worldwide in the past year, with the average individual purchase $15,000.

Equity crowdfunding works much like a placement or share purchase plan, but to a much wider audience.

“There are more crowdfunding platforms than there are stock exchanges, and that’s the reason why there’s a change occurring right now,” Jofre said.

He pointed to the rise of private funding operations such as Lending Club and Orchard as evidence that crowdfunding was disrupting normal funding paradigms.

While Australia currently only has the one regulated equity crowdfunding platform, the US and Canada recently changed the rules to allow foreign companies to seek capital on these platforms as well.

However, to take advantage of the opportunity, Jofre said, mining companies needed to fundamentally shift the way they communicated to get noticed.

“I don’t have experience in mining, but what I do understand is that when there’s a demand and there’s somebody that needs to deliver it,” Jofre said.

“If you get buried in charts and things I don’t understand and I need to be a geologist to get there...you’ll never get money from the largest group in history – the 25-36 year olds who are eagerly looking to invest.

“Millennials do understand mining, they do. They understand it because they all have a phone, they all want an electric car...they understand it’s a raw product that goes into it.”

He also said mining companies could be set in their ways when it came to communication.

“Mining companies in the last 20-30 years, you go to a broker and you ask for 20 to 30 million dollars to do some exploration and you hire an IR person to help blow up news releases and that’s it,” Jofre said.

“If you want to take advantage of this new era where there is an abundance of capital you need to change the way you articulate your company, your message, and more importantly the way you operate it going forward.”

However, he did note a sound of caution saying that there were regulatory rules around jumping onto equity crowdfunding which companies sometimes took for granted.

He said 90% of companies were turned down from the platform during their first application, as they put very little work into the application.

“All they do is send a powerpoint presentation...nothing ready for due diligence”

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