Mining Sector Needs To Shrink 90% Before We Can 'Smell the Money'
(Kitco News) - The mining industry needs to significantly downsize if the sector is going to attract the attention of retail investors again, this according to one financing executive.
On the sidelines of the Xplore 2017, the Québec Mining Exploration Association’s annual conference, Chad Williams, president of Red Cloud Klondike Strike, told Kitco News that 90% of listed mining companies are not big enough to be viable and could be hurting the sector, taking coveted capital away from viable companies and projects.
“Do we really need 2,000 mining companies,” he said. “Does any other sector have this many listed companies.”
Williams said the issue he has with a lot of junior mining companies is that their projects are too small to justify either building a mine or attracting the interest of a major producer. He added that most majors are looking for projects with reserves of at least 250,000 ounces, with the potential for further exploration.
Having so many junior mining companies creates a lot of noise and confusion in the marketplace, Williams said. He added that investment capital given to these companies is just lost with investors never seeing a return on their investment, which is something the sector is in desperate need of.
“The mining sector just hasn’t seen the returns that investors are getting in the general market,” he said. “Most investors are staying away from the mining sector because they don’t smell the money. Why should they invest in mining when they are making money in the general market?”
The solution to the issue, Williams said, is for some of these smaller companies to merge their projects together, “creating a critical mass in the sector.”
While Williams is critical of many projects, he still sees potential for the sector. He said that so far, the 10% of companies with feasible projects are finding the funding they need.
“We are seeing some incredible projects and some of the best opportunities in years,” he said. “The reality is that if you have a good project then there is money available for you.”
In 2015, Red Cloud created what could be the first regulated equity crowdfunding platform for the sector. Williams added that through the new investment platform they are hoping to attract the millennial crowd. He added that this will be the biggest source of investment capital in the futures. The added that millennials have the power to transform the global economy the same way baby boomers did.