Michael Kott sees better days ahead but warns juniors to expand their investor base
by Greg Klein
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Canadian juniors explore the world for resources. But they might not be looking far enough for investors. European and Asian capital can offer additional support during difficult times, says Michael Kott. While meeting with exploration companies in Vancouver on February 25, the CEO and founder of Munich-based CM-Equity took time to speak with ResourceClips.
His capital market company links Canadian and Australian resource companies with European institutional and private investors, helping companies with initial public offerings, private placements and dual listings. With plans to increase CM-Equity’s activities in Asia, Kott believes a diversified shareholder base has become increasingly necessary for the juniors.
Although he’ll abjure this year’s PDAC for “too much partying,” he’s been known to mix business with pleasure himself. But his company is better known for its own resource conferences in Germany, which will soon spread to Asia. “We’re a very international company, always have been,” he says.
The markets are now at a valuation that is completely ridiculous. I expect 2013 will be the big turnaround year and a couple of better years are ahead of us.—CM-Equity CEO Michael Kott
So how much international interest do the juniors have? “Investors are always interested in companies that have growth potential,” Kott says. “They’re interested in companies that can show they have growth in their resources, revenues, cash flows or dividends—any kind of growth companies. This is not limited to one industry. Generally investors don’t care if it’s natural resources or technology. They’re going where they can find growth and a good investment case.”
He adds, “There’s an appetite in Europe for good quality companies but the junior sector has not really had the best reputation over the last couple of years. Lots of stocks went south, companies had trouble with financings and ran low on money. By definition the exploration sector is made up of cash-burners. The industry is interesting, but when there’s a long way to get into production and generate cash flow, there’s a problem. People want to invest in real assets. Cash flow is the key and therefore I think it’s a very tough marketing problem for the juniors. But having said that, the markets are now at a valuation that is completely ridiculous. I expect 2013 will be the big turnaround year and a couple of better years are ahead of us.”
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