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Raising capital: Australia’s mining sector could turn to crowdfunding

The well has run dry for mining companies when it comes to raising capital—especially Australias junior exploration sector. "The lack of equ...

|Nov 4|magazine7 min read

The well has run dry for mining companies when it comes to raising capital—especially Australia’s junior exploration sector.

"The lack of equity finance continues to be the most significant business constraint for mineral exploration and mining companies," said Simon Bennison, chief executive of the Association of Mining and Exploration companies, representing many of Australia's smaller miners.

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However, that could be changing in coming months as the growing phenomenon of crowd-funding -- soliciting small amounts of money from a large number of people in order to fund a project or venture -- could very soon become a viable option for companies in Australia.

“The mining industry is really prehistoric in the way we do business,” said George Salamis, chairman of Integra Gold Corp, which launched its own crowdsourcing initiative earlier this year.

A pair of mining executives, Cameron McLean and Joe Treacy, are planning to introduce crowdfunding in the mining sector, launching their own website Mineral Intelligence in order to assist junior exploration companies source seed capital. The site will allow anyone to list their for-sale mining projects free of charge in the hope of connecting with subscriber companies that will pay $5000 per year to access the database.

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"Traditionally, this has been the domain of a select few industry insiders, geologists, mining entrepreneurs and prospectors with the knowledge and industry connections required to get in the ground floor of new mining ventures," Market Intelligence's Managing Director Cameron McLean said.

“With crowd-funding, if someone has got $500 and wants to get in at the ground floor of a mining asset, they can,” he said.

“Typically, it’s only been open to people who with a nod and a wink and a handshake who knew that an asset had IPO potential and could get in at 7c or 8c in the knowledge it would IPO at 20c. Crowd-funding can open up the market completely.”

Crowd-funding is worth about $5 billion worldwide but the practice to raise equity is currently prohibited in Australia under the nation’s Corporations Act, however, McLean is hopeful that those restrictions will ease under the Turnbull government.

Time will only tell.

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