Thursday 8th December 2016

Resource Clips


What’s the juniors’ problem?

The BCSC says it’s economic but venture advocates blame over-regulation

by Greg Klein

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Times might be tough for juniors but 155 people (or their companies, anyway) paid $262.50 each to attend an October 17 discussion in Vancouver on that very topic. That, despite admonitions from a rival gathering to save money by attending their $5 event a few hours later.

The earlier shindig was the British Columbia Securities Commission annual Capital Ideas conference, with presentations from the TSX Venture, a TSX-listed miner, an economist, an investment adviser and a representative of the proposed Aequitas Exchange. Three hours later, at the same location, a roughly same-size audience heard the Venture Capital Markets Association tear into the earlier event and Canada’s regulatory regimen.

One problem is obvious to both sides—shrinking capital. What’s less clear is the extent to which a more laissez-faire system might alleviate the suffering. And, if so, what exactly needs to be done to accomplish that?

What’s the juniors’ problem?

This year’s Capital Ideas conference drew its largest crowd ever which, BCSC communications officer Richard Gilhooley told ResourceClips.com, reflects the sector’s strong concern. The event marked the release of a KPMG survey called B.C. Junior Mining at a Crossroads, which absolved regulations as a primary cause of the financing crisis. Some attendees, especially at the second event, questioned whether that conclusion was foregone, given that the study was commissioned by the commission. Nor did the survey’s sample size, all of 15 respondents, escape notice.

Acknowledging the small sample, KPMG director of advisory services practice Paul Levelton emphasized the results are “indicative, but not definitive.” The worst cycle many respondents have encountered in 30 to 40 years is rooted in economics, the malaise of commodity prices, slowing growth and a number of global financial crises, the report states. As one respondent put it, “Fear and greed drive the markets, and fear is currently in control.”

Levelton told the conference, “Virtually all of the companies, individuals we talked to said securities regulation is not a significant factor in the availability of financing. There were, however, some irritants… The companies went on to say that even if we fixed the irritants they might save a little bit of cash here and there but by and large that’s not going to help us find financing.”

Capital Ideas allowed plenty of room for other points of view. Just for example, PI Financial senior VP Bill Whitehead bemoaned the state of independent brokerages and the resulting impact on junior equities. Co-panellist and Mercator Minerals TSX:ML president/CEO Bruce McLeod explained how the complexity of corporate social responsibility places unprecedented demands on mining and exploration. Each of them, from different perspectives, attacked high frequency trading. But the most controversial remarks consisted of KPMG’s conclusion. It came up repeatedly in Levelton’s comments and throughout the report. Financing problems are “due to the cyclical nature of the mining industry and current economic and market conditions. The basic message regarding solutions from the participants is to ‘wait it out—the market will come back.’”

But when it does, over-regulation will continue to stifle the juniors. At least that was the VCMA response, often stated emphatically in the day’s later event. Association co-founder Larry Page, chairperson of Manex Resource Group, suggested many of those attending the BCSC gathering were lawyers and accountants, beneficiaries of the status quo. Besides criticizing the survey’s methodology, he noted that the BCSC panel omitted anyone from the commission other than Paul Bourque. As moderator, Bourque declined to answer questions although he said he’d take them under advisement.

On reading the KPMG report, VCMA founder and Cambridge House International chairperson Joe Martin said, “It’s apparent to me these guys don’t know what the regulations are. There’s no mention of IIROC, there’s no mention of all the trading problems and they don’t have the foggiest.”

Even more stridently, Don Mosher singled out the Investment Industry Regulatory Organization of Canada as the real problem. “I don’t even consider the commissions as the bad guys. As a group, they’re as fragmented as we are…. The issue with us is IIROC.”

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