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The challenges of raising exploration capital
Dean Cunningham
Posted: Mon, 05 May 2008
[miningmx.com] -- RAISING capital for early stage exploration has become extraordinarily challenging.
This is a global trend and a clear indication that it’s here to stay is evident in the AIM market’s move away from listing companies with early stage exploration opportunities, in favour of more near stage and in-production companies.
This swing away from investing in early stage projects has happened because the market has become a lot larger and there are many more opportunities to invest in near-stage projects than in the past. The market has also matured significantly and today, investors around the globe are looking for lower risk type scenarios.
Fuelling this trend is the ongoing lending and credit crisis in the subprime industry that has seen a lot of liquid capital dry up, particularly in the US and UK markets. As a result, the early players are finding it very
hard raise the seed capital and conceptualisation capital they need from traditional investment sources.
Yet another factor affecting investment decisions is a global decoupling of the US from the rest of the world. On one hand people say the imminent US slowdown will bring about a global reduction in demand for commodities and resources — and on the other hand, they’re predicting an increased demand for commodities out of Asia.
This is the side of the coin I believe in, because we continue to see selective commodity prices increases and remain higher than 12 months ago.
An alternative focus for raising capital is therefore presented in the Asian market. But the downside here includes issues such as language barriers and different styles of doing business, which can slow down the process just at the moment when the capital is most needed.
So where does this leave the early exploration players? Battling to raise capital and looking for
alternatives. And now we see that these circumstances have created a rather interesting and exciting trend of their own — new opportunities to raise funds in unconventional areas of the market and to move their projects along by trading equity for skills.
TWP Finance, a wholly owned subsidiary of TWP Holdings Ltd, was created to take advantage of these very opportunities increasingly presenting themselves in the global resources and commodity industry, in the wake of the trend I’ve outlined.
Our focus is not commodity or resource specific and we’re unrestricted by geographic boundaries. With a small team of financial and mining experts we rapidly evaluate the potential of early stage projects and exchange engineering, market intelligence and commodity analysis skills and capabilities — our intellectual property — for sweat equity or mineral rights.
It’s all about innovative financial engineering. The world needs these new projects to supply the current
commodity and resources boom. We’ve found a strategic and responsible way for these projects to see the light — and so far our shareholders are smiling.
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