Saturday 10th December 2016

Resource Clips


Posts tagged ‘American Vanadium Corp (AVC)’

What’s the juniors’ problem?

October 17th, 2013

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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‘Crisis’ at the TSX Venture

September 16th, 2013

The Venture Capital Markets Association argues the juniors’ case for regulatory reform

by Ted Niles

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The Venture Capital Markets Association argues the juniors’ case for regulatory reform

Panellists Ron MacDonald, Don Mosher, Frank Holmes and Joe Martin discuss the juniors’ plight
at the Toronto Resource Investment Conference 2013.

 

These are indeed bad times for the junior resource sector. But can anything be done? The newly formed Venture Capital Markets Association believes part of the problem can be solved and it’s embarking on a plan of action.

There’s little doubt that some combination of macroeconomic forces and regulatory inefficiency has caused one of the worst downturns in memory. Few question the view that bear markets have the nasty habit of following bull markets. To the extent that the bears inevitably give way to the bulls again—leaner and meaner bulls, moreover, culled of those who preferred romancing cows to pulling ploughs—this is generally considered good.

There’s some dispute, however, regarding regulatory inefficiencies. One side believes that while the burden of regulation on venture capital companies can be onerous, it is necessary and manageable. But, the other side argues, what was manageable (if only just) at the height of the market is not so much slowing down a cyclical upturn as preventing one.

Speaking September 12 at Cambridge House International’s Toronto Resource Investment Conference 2013, the event’s founder and chairperson Joe Martin says: “For over 100 years Canada has been a world leader in providing venture capital for speculative investing and mineral exploration, mining, technology, life sciences and energy. Today, zealous over-regulation by a multitude of governing organizations is rapidly bringing venture funding to a halt. We’re not talking here about the regulation of trade, we’re talking about the regulation of money. Hundreds of thousands of jobs across Canada and around the world are going to be lost.”

You need two hands to lift [the TSXV’s] book of regulations and policies. It’s absolutely mind-boggling all the things you’re required to do to raise a half-million dollars—which means that half of that half-million will go to lawyers.—Ned Goodman

Two panels at the conference discussed problems specifically facing TSX Venture resource companies. While high-frequency algorithmic trading was touched upon—a particular concern of Kaiser Research Online editor John Kaiser—the priority issues were access to capital and regulatory overkill.

Ned Goodman, president/CEO of Dundee Corp TSX:DC.A, explains, “In raising money you’re always frustrated, but if you’re talking about the Venture exchange it’s more than frustration. I think the Venture exchange has forgotten why stock exchanges were put into existence. They were put into existence to allow people to invest money in ventures that can be built and grown and more money has to be raised. Instead it’s been nothing more than a feeding source for the legal community—and you end up spending legal fees in excess of the amount of money you can raise before you have to start all over again.”

Goodman continues, “You need two hands to lift [the TSXV’s] book of regulations and policies. It’s absolutely mind-boggling all the things you’re required to do to raise a half-million dollars—which means that half of that half-million will go to lawyers. The Vancouver exchange was one where you could raise money and it created an awful lot of nice companies. But the rules and regs [for the TSXV] are unbelievable and they’re not designed for junior companies. In most instances you’re so blocked you can’t even do your financing. Then, once you are on the exchange, the costs of staying there and doing business—you can’t buy something or sell something without having to deal with a bureaucrat [who has] no knowledge of the industry at all.”

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