Risk Capital: Financing Junior Mining Companies

In the good old days of the folklore of the mining industry, grizzled prospectors obtained a few loose dollars from friends and neighbours then wandered off to eventually return with the great discovery which became the core of the new corporate empires. Alternatively, merchant banking barons obtained exclusive rights to just about anything of future value over hugh nation-size territories. Some of this probably still goes on, likely with about the same ineffectiveness and waste of effort and money as in the past. CURRENT CONCERNS IN MINING In today's difficult climate in the mining industry, for that matter in all industry, effectiveness is the vital consideration. Cost effectiveness -- more bang for the buck -- is especially important in such an area of high risk as mineral exploration. And there are other factors to consider. Since minerals are depleting resources, the mining inddustry is constantly confronted with the reality that those resources extracted today must be immediately replaced if a resource enterprise is to continue. And if growth is to be achieved, even more resources must be found to support future expansion. The current and immediately foreseeable climate internationally for the mining industry creates a special need and urgency for aggressive and successful exploration, certainly in Canada, if not also in the United States. Depressed world markets and prices have turned yesterday's economic reserves into today's waste, hopefully to be converted into economic ore again in some distant time. One way of replenishing reserves and maintaining a viable mining industry is to find and develop mines which are economic under short-term depressed price and market conditions. This probably means higher grades. A new copper discovery with the right combination of characteristics to be an attractive investment even at today's pices for copper would still merit development into production. Exploration is the only way to find such mines for the difficult short-term conditions. Another important consideration is that normally many years stretch from the first thought of conducting exploration to production -- in those rare instances where an economic discovery is made. If discoveries are not made today, then there will not be any projects to develop when business conditions are more attrative. This industry and the vast number of skilled professionals who are part of mining, are faced with two key problems that underlie the need for a junior exploration segment. One consideration is how to maintain exploration during those years, indeed eras, of recession and depression. We are in such a time now. Throughout the world, major companies have sharply cut back, if not eliminated completely, exploration expenditures other than what is vitally necessary and easily and inexpensively done at the known and producing deposits. And related to that consideration, even more important today than during happier times, is how to finance such necessary ongoing exploration if major companies and governments back away because of financial stringency. CANADIAN SUCCESS In Canada, such problems are being tackled with a success which is capturing worldwide attention. The ability of mineral explorers to obtain willing, eager, high-risk capital is achieving even more outstanding results than in the past. These results are reflected in the widespread continuing exploration ativity in Canada which even spreads into the United States, with some outstanding discovery successes. The most notable exploration success from junior mining activity is the discovery of the Hemlo gold camp in northwestern Ontario, a source of gold which promises to rank with the South