Drew Hasselback: The wisdom of crowds at PDAC

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Financial Post | | March 5, 2014

MiningThere were about 25,000 people at the Prospectors and Developers Association of Canada convention in Toronto this week.

Some actually do come to one of the world’s largest annual mining conventions to look at the drill samples in the “core-shack,” but the geology geeks are easily outnumbered by those who come to the show looking for money. On that score, there was a lot of chatter at the convention about the latest investo-fad, equity crowd funding.

Equity crowd funding — that is, the use of the Internet to offer investors small equity stakes in businesses — has landed in Canada. In December, Saskatchewan became the first province to allow crowd funding. Small businesses in Saskatchewan can raise up to $150,000, with individual contributions capped at $1,500 per investor. The Ontario Securities Commission, Canada’s largest securities regulator, is expected to announce its own policy by the end of this month. An OSC consultation paper last year discussed allowing companies to collect up to $1.5-million in crowd funding per year, with contributions from individual investors capped.

Related:  Equity Crowdfunding Approved in Saskatchewan

Wherever there’s talk of money, one usually finds lawyers. PDAC is no exception. As with recent years, most of the big Canadian business law firms were at the show, hosting social events, conducting seminars on legal trends, distributing literature, and laying claim to professional expertise in mining. Yet there was also a relatively new phenomenon. There were a number of U.S. lawyers at the show chatting up recent U.S. securities law developments that might facilitate cross-border investing.

Guy Lander, an attorney with Carter Ledyard & Milburn LLP in New York, discussed the U.S. Securities and Exchange Commission’s new crowd funding rules at a session on financial markets. Crowd funding, he said, has serious drawbacks that make it ill-suited for mining companies. For example, the SEC will permit U.S.-based issuers to use crowd funding for up to US$1-million in a 12-month period. That’s not a lot of money, given the capital demands of modern mineral exploration. “Once you have a proposal go through the meat grinder called the SEC, you come up with these type of requirements.”

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