Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.
Two weeks ago I did a weekend report that understandably hit a nerve with a lot of investors:
TSX Venture a Zombie Wasteland
https://stockhouse.com/opinion/ticker-trax/march/tsx-venture-a-zombie-wasteland--stockhouse-tickert
If you would like to keep that discussion open, you may be interested in a Facebook group I opened today. I have been trying to avoid Facebook because I don’t have time for the “social” side of Social Media.
However, it has become a necessary evil for business and I am finding it useful for the stock market. It also may be useful for today’s topic (discussed below) concerning this NW Exemption Petition (a subject that affects both small public companies and retail investors.
Facebook Group
TSX Stocks No Spam
https://www.facebook.com/groups/TSXStocks/
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Red flags for investors in the Dominican Republic
For junior exploration companies in the Dominican like previous high flyer GoldQuest (TSX: V.GQC, Stock Forum; 41 cents) this is not a huge problem (at the moment) – but it is a VERY noteworthy country risk. Anytime you see a government taking this type of aggressive action against a foreign mining company, it is an issue.
Many penny stock gold exploration companies jumped on the Dominican bandwagon to piggy back on the success of GQC’s initially discovery hole. That rally started May 2012 near 8 cents and peaked near $2 only three months later – an incredible run of 2400%!
It is a different story now and the company continues to struggle in this market but regardless of the exploration potential, investors in GoldQuest and other small companies in the Dominican, need to be cautious. Money managers may start questioning the inherent risks of this country.
Apparently Barrick’s gold shipment has now been released, but it doesn’t change the fact that this should not have happened in the first place.
March 14th
Barrick Gold Corp. (ABX), announces that a gold shipment was detained by customs authorities in the Dominican Republic.
February 27th
“The Dominican Republic’s existing contract for the development of a $4 billion mine by Barrick Gold Corp. (ABX) and Goldcorp Inc. (G) is unacceptable and must be changed,” President Danilo Medina said.
“The government’s contract with the two Canadian companies at the Pueblo Viejo mine needs to be revised to provide more benefit to the Dominican Republic,” Medina said in his Independence Day speech to Congress today. “If the contract can’t be modified, the government will back legislation to increase taxes on expected export earnings of mineral companies,” he said.
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NW Exemption - Petition
I am the first to admit I have heard about this, but I have paid no attention to it. I really thought it didn’t concern us and was an issue for the public companies to sort out.
However, this morning I received an email from a good friend who runs a junior exploration company on the TSX Venture Exchange. He is a veteran geologist with over three decades of public company experience. He encouraged me to read the petition.
Because I am not familiar enough with this subject, I have received approval from him to confidentially share his email to me. You may want to share it with others and give this careful consideration.
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Danny, I just signed the petition "British Columbia Securities Commission:
This is important to both companies and investors. Revoking the exemption would limit access to capital for both reporting and non-reporting companies in Canada at a time when access to capital is the worst I have seen it in more than 30 years I have been involved in the junior resource sector. Revoking this may cause an exodus of start-ups and venture listed companies to more friendly jurisdictions.
https://www.change.org/en-CA/petitions/british-columbia-securities-commission-review-the-proposal-to-revoke-the-nw-exemption-2
My understanding, which I am sure is quite imperfect, is that the NW Exemption provides relief from Canadian registration for individuals who "find" qualified investors in other countries to invest in Canadian companies.
In other words, a Canadian company, public or private, will not be able to pay an individual a finder’s fee for introducing qualified investors to the Company unless the "finder" has previously registered with the BCSC, which will essentially dry up access for start up companies to U.S. investors.
It also allows companies, primarily junior companies, to raise money through announced private placements without having to go through the tremendous cost of issuing a new prospectus each time new capital is raised.
There is a lot more to it, but in his letter opposing the BCSC's plan to revoke the NW Exemption, John McCoach indicates that 66% of the funds raised by junior companies in 2012 were raised under the NW Exemption.
I would suggest you follow the link to John McCoach's letter to the BCSC.
https://venturecrisis.org/
Small companies on the TSX and TSX.V have been struggling since 2011 and this past year was one of the worst many of us have seen in decades. Just imagine what it would have been like if there was 66% less money available?!
If you want a sad (but oddly funny) example of how bad – we were an exhibitor at PDAC. As a group of us were shutting down our exhibit booths, we watched one exhibitor roll up his booth, walk over to a garbage container, and dump the entire thing into the trash! It was like watching someone dispose of a corpse! He simply walked away and we all went back to our business. Contrary to what the crowds of people had outsiders thinking, this summed up PDAC quite well for many.
My understanding of the implications associated with revoking the NW Exemption:
It would not only apply to reporting (public) companies but would also limit fund raising for private companies. Access to capital is critical to all companies regardless of size. If a jurisdiction severely limits or eliminates access to capital, the companies, entrepreneurs and intellectual capital will go to where they have that access and in the current global market, there are a lot of other jurisdictions competing with Canada.
Somehow the BCSC seems to think that by putting a bag over the head of start up companies and sealing tight they are protecting investors. Overly restrictive regulation will hurt current and future investors as well as the companies.
In our case, had the NW Exemption not been in place, it is highly unlikely the Company would have ever been launched. Since our IPO more than half of our subsequent private placements have come from offshore investors who may not have been accessible without the NW Exemption.
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Disclosure: Not applicable in this report.
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In addition to this weekend column and the bottom fishing research sent to paid Ticker Trax subscribers on Monday, I also provide free MicroCap alerts throughout the week. These are based upon News or Abnormal Price/Volume Activity on the several hundred stocks we track from our own research, brokerage analysts, or third-party newsletter writers.
https://stockhouse.com/Groups/GroupInfo.aspx?g=50540
https://twitter.com/TSXAlerts
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