Red Cloud revitalizes 
mining investment

In early March, Red Cloud Klondike Strike unveiled a regulated investment platform for mining companies to raise financings by accessing a larger pool of investors. So far, the Red Cloud Klondike Strike platform has two issuers, Banyan Gold (TSXV: BYN) and Radisson Mining Resources (TSXV: RDS), with Red Cloud’s CEO Chad Williams noting there are 30 mining companies in the pipeline waiting for approval.

“It is a one-stop platform whereby investors can get information about issuers and also invest on the same platform. That has never been done before,” Williams told The Northern Miner during Red Cloud’s cross-Canada marketing road tour.

Red Cloud, which provides capital market advisory services to mining companies, has followed the crowdfunding concept since meeting in December 2014 with Oscar Jofre — a global thought leader on equity crowdfunding. After this meeting, Williams and his team introduced the concept to the mining industry, where traditional financing methods have become harder to access during the market downturn,  making companies seek alternatives.

Geologist James Thom (left) and soil sampler Gordon Kirk at Banyan Gold’s Hyland gold project in the Yukon. Banyan is using the Red Cloud Klondike Strike platform to raise $750,000.  Credit: Banyan Gold

The Klondike Strike platform allows investors to participate in security offerings previously available to a small circle of investors — particularly accredited investors — or institutions. It connects companies with investors that they could not have reached otherwise, such as tech-savvy millennials that are accustomed to using the Internet. “Through our platform investors will be exposed to the same issuers and issues as everybody else. We call it the democratization of the financing process,” Williams says.

Before a company can list on the platform, Red Cloud’s internal team performs background checks on management and technical reviews of the projects.

“We are an exempt market dealer. We are a regulated entity, regulated by the Ontario Securities Commission (OSC) and other regulators across Canada. As a broker, we are responsible for something called “know your product,” and that entails due diligence,” Williams says. “So investors can gain comfort that there is a team of capital market professionals behind every deal.”

Meanwhile, investors would have to be over 18 years of age and meet the investment criteria of the province or jurisdiction they reside in. An advantage of the Klondike Strike platform is that the process is simple and automated, Williams says. After filling out a questionnaire, or “suitability test,” potential investors fall into different groups, based on factors such as their risk profile and financial resources. “It takes a lot of the headache out of investing,” Williams says.

The platform is free for investors, and mining companies would have to pay a standard broker deal fee. A typical financing will be open from 30 to 60 days for public firms, and a bit longer for private companies. No money will be withdrawn from an investor until the financing reaches its minimum threshold to close, Williams says, adding that all funds are handled by a third party.

The platform targets issuers and investors in Canada, with plans to expand globally. Red Cloud says 26 million investors could qualify to use the platform in Canada alone.

Red Cloud notes that 17 countries have crowdfunding platforms across all sectors, and raised a combined US$660 million in the first quarter of 2015.

“There is no doubt that this is the way mining companies — in fact, all companies in every industry — will raise money in the future,” Williams says.

Similar to how the Internet has revolutionized businesses — from selling event tickets to travel — Williams says the Klondike Strike platform represents a new frontier in mining finance. It is “the world’s first regulated equity platform solely focused on mining,” he says.

Williams estimates mining companies will embrace the Klondike Strike platform as an alternative financing method in the next three to five years. He credits Banyan and Radisson as early adopters, adding that Red Cloud will soon bring in another two private companies.

Banyan is using the platform to raise $750,000 in a brokered private placement, wherein it will issue up to 8.3 million shares at 9¢ apiece. The net proceeds will partly go towards exploring its Hyland gold project in the Yukon.

Radisson intends to raise up to $1 million by offering 6.7 million units priced at 15¢. Each unit consists of a share and a half warrant. The net proceeds will largely fund the completion of a 6,200-metre drill program on its 100% owned O’Brien project and a baseline environmental study. The financing should close in April.

Radisson’s president Mario Bouchard, who joined Red Cloud’s cross-country tour, says the “innovative” platform can “bring more eyes on Radisson’s story and help finance its development.”

“We are proud to be one of the first who participated. With current market conditions for junior mining companies, you have to think outside the box for financing. That is what Chad did … I’m sure he and his team will succeed and Radisson will be part of that success,” Bouchard said in an email.

“There is no doubt that many people are watching us. They are curious. They are waiting to see how successful we are going to be. But over time as the deals close and the success rate increases, we will see a lot more appetite to list on our platform,” Williams says.

There are 30 mining companies with different commodities waiting for approval to use the platform, he adds.

At any given time, Red Cloud expects to have a maximum of five to six companies, looking to complete a variety of financings — such as equity, flow-through, streaming and debt — on the platform.

“We feel strongly that this is revolutionary. It is the democratizing of mining investment. It for the first time presents opportunities to millions of investors in Canada who would never have had the opportunity to invest in some of these mining deals,” Williams says.

For more on crowdfunding take a look at our special, New Frontiers in Mining Finance.