mining
A giant excavator loads a mining truck at the Fortescue Solomon iron ore mine located in the Sheila Valley, around 400 km south of Port Hedland, in the Pilbara region of Western Australia December 2, 2013. Reuters/David Gray/File photo

Raising funds, especially capital expenditures for new and emerging mining companies, have always been a challenge in the industry. However, crowdfunding — that trailblazing way of sourcing investments from interested parties directly — just might prove to be a faster, less bureaucratic and more effective alternative.

A few platforms that have arisen in countries like Canada and Australia give investors a direct share in the company, bypassing the traditional brokers and other financial institutions which are now turning a critical eye to the revolutionary process. Still, the movement has caught on, and the momentum is far from stopping.

In his interview with Mineweb last year, Mineral Intelligence Managing Director Cameron McLean explains the attraction offered by crowdfunding platforms like his, which is based in Australia. Investors can obtain shares for as low as $500 a share, without having to go through middlemen. This contrasts with the usual process of raising funding during the seed capital stage, where only those who are close to the owners can have access to potential equity. Meanwhile, the mining projects that promote their offerings on Mineral Intelligence are not burdened unnecessarily by too much administrative rules while getting free listings.

Mineral Intelligence does conduct due diligence on every mining company that approaches it before accepting them on the site. At the same time, it makes it clear that it cannot be held liable for any conflict or dispute that arose from the site or any of its content.

The Financial Post notes that a similar platform has accelerated the equity crowdfunding movement into steady acceptance in Canada. The Red Cloud Klondike Strike Inc. website has been designed specifically to allow mining start-ups or junior mining companies to generate funding directly from potential investors.

Entrepreneurs or smaller investors can pay up to US$2,500 (AU$3,300) for a single equity crowdfunding investment, and as much as to US$10,000 (AU$13,300) in one fiscal year. The more moneyed can give as much as US$25,000 per investment and as high as US$50,000 (AU$67,000) in one calendar year.

Equity crowdfunding in the Canadian mining sector was hatched and nurtured into structural maturity by the following factors: volatility in the commodities market; the decline of the financial institutions and brokerages that were the usual sources of financial support by up-and-coming minding companies; and the new rules that have made it easier for Canadian investors to deal directly with companies.

“Obtaining funds has always been tough for mining companies, especially the new ones,” says R. (Bob) Todhunter of AIM Exploration Inc. (OTCQB: AEXE) which mines, refines and develops feldspar, as well as anthracite coal. Its Nevada headquarters has operational offices in the Philippines and operates as a junior mining company focusing on global mining and exploration.

“Traditional sources have been drying up, and funding must always be available especially once the company goes from one phase to another, from research, preparation, infrastructural support, to actual mining. At the same time, there are interested parties out there -- most of whom we call as direct investors -- who have educated themselves on the potential of the mining industry, but may not have the connections to go to the companies, or not the huge amounts that traditional institutions use as a criterion for potential investors. Crowdfunding creates a level playing field, and at the same time revitalises the industry.”

AIM currently has two existing projects, a 40 percent interest in a Feldspar mine located in the Philippines and an Anthracite coal project located in Peru. It partially owns the Paladino Mining and Development Corporation in the Philippines, a subsidiary that is focused on the mining, development and production of feldspar. The feldspar mine is currently producing and is undergoing upgrades for expanded production.

The operation is controlled in a Joint Venture with Paladino Management & Development Corp. The anthracite coal project AIM owns and controls through its wholly owned subsidiary Aim Exploration Inc. is considered to be a high grade anthracite coal mining property in the Alto Chicama basin, in the province of Otuzco in Peru. Aim SA acquired these rights by purchasing these assets from Percana Mining Corp (Percana SA), a Peruvian corporation.

Klondike Strike has two junior mining companies that have signed on its platform, and is expecting a few more, especially as it widens its categories for the minerals and non-minerals that are being mined by new members. While it is focused on the Canadian sector currently, there are plans to make it global in the near future.

In his interview with Forbes, Klondike Strike president and CEO Chad Williams forecasts of equity crowdfunding: “This is going to be the future of financing, not just in the mining sector but in all sectors. In the future, I think we are going to see that crowdfunding will be a viable way for companies to raise money.”