March 29, 2013 | By Tekoa Da Silva
I had the opportunity this week to connect with Don Mosher of B&D Capital Partners in Vancouver. For decades Don has helped finance the junior resource exploration market, and has been a key player in raising over $120 million in venture funds over the years.
It was an interesting conversation as Don has recently co-founded an organization representing Canada’s venture industry, called the Venture Funding Crisis Committee (VFCC), with the aim of “improving the ability of venture companies to finance their activities.”
According to Don, the ability to efficiently raise capital is becoming harder and harder in Canada due to excessive regulations. The ultimate destination he explained, may be an environment of horrifically higher commodity prices and potential shortages.
Starting with the evolution of Canadian resource exploration, Don explained that, ”Over the last 150 years…we’ve become globally acclaimed for resource exploration. Originally [exploration stocks] started out [trading] as a curb exchange, where businessmen were trading certificates and trying to convince each other to buy into start up exploration companies. [But] over the last 150 years it’s transformed into the most heavily regulated market in the world, with some of the most severe penalties of any market in the world.”
With respect to the importance of exploration finance, Don said, “Last year, over 70% of all money raised for exploration expenditures on a global basis was raised in Toronto…[and] on the venture exchange there was $6B raised. Of the $6B raised, $4B was raised with non-brokered financing’s…There is close to 1,300 companies on the exchange, [and about] 150k jobs in the exploration business. If those companies can’t get funding, the potential is to see 150k people lose their jobs, but in addition to that, the supporting cast of about another seven jobs supported by [each] exploration [job], will also be impacted. So we’re talking about hundreds of thousands of jobs at potential risk here.”
An environment of tightening regulation, Don added, simply leads to industries moving overseas.“To mention a famous mine explorer, Robert Friedland, he thinks that the entire venture market is going to move to Hong Kong. What he’s pointing at is what happened to U.S. manufacturing. U.S. manufacturing went to a jurisdiction with less regulation, less costs, making it easier for them to do business…[so] the impact on Canada is going to be horrific. The seven jobs created by that one [exploration] job, are going to be transported overseas to Asia—as opposed to [staying in] Canada”.
When asked about the long-term impacts of the tight regulations on commodity prices, Don concluded by saying, “I think that the impact on commodity prices will be horrific…It might be a ten year transition in terms of the venture exchange slowly choking to death and the Hong Kong market getting up to speed. In the meantime, deposits are…dropping [in] grades, getting deeper…[and located in] more hostile jurisdictions…The impact on a global basis therefore if this market [is] shutdown, has global repercussions—potential commodity shortages.”
This was a powerful interview, providing a rare look at the insides of the mineral exploration space. Trends set in this arena have long-term impacts on global commodity supply, and all serious market students and investors should watch these developments closely.
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To learn more about the Venture Funding Crisis Committee, visit: VentureCrisis.org
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Tekoa Da Silva
Bull Market Thinking