Crowd-Financed Exploration: Striking

Gold!

By David Drake
Natural resources, whether we are referring to metals, minerals, oil or gas, is the cornerstone of
the global economy and of our way of life. The industrial revolution started with coal mining and
with the energy produced from burning of the coal.
According to the statistics provided by the International Council on Mining and Metals, the demand
for minerals grows once a country reaches the 30% urbanization mark and when per capita
income reaches $5000 $10 000 per year. Large countries (Brazil, China, India) have reached
those benchmarks, thus, during the last couple of decades, the demand for minerals grew
exponentially worldwide. The increased demand for metals and the increased value of most metals
have resulted in a significant development of the mining industry, from US $214 billion in 2000 to
US $644 billion in 2010.

Figure 1 shows the value of global production by metal in 2011. The top 3 metals mined are iron
ore, gold and copper. Together, they account for 68 percent of the total value mined (US$ 854
billion) produced globally in 2011. The remaining 32 percent comprised nickel, phosphate rock,
zinc, PGMs, diamonds and other metals. They may not be economically important, but they are
strategically important in our daily living. Nickel is vital component in stainless steel production
while manganese, chromite and other alloying elements provide strength and hardness to steel.
PGMs, on the other hand, are used in catalytic converters to reduce car emissions.
Figure 1. Value of global production by metal in 2011.
The demand for rare minerals on the global market is driven by technological advances. Products
like microprocessors, sophisticated medical devices, aircraft engines, and all sorts of electric and
electronic equipment depend on the extraction of such minerals.
Mining was (and in many ways it still is) a tough industry from all points of view: risky and
expensive for investors, hazardous for the workers and last, but not least, with a bad reputation
among the ecologists. Work conditions improved drastically in the last decades, as well as
environment protection standards, but the industry still has a rather bad public reputation.
However, companies specialized in natural resources exploitation (mining for minerals included)
are ready to change the face of this industry through crowdfunding. This type of public financing

ensures easier access to the money, transparency, full disclosure of financial interests,
technological advances and better protection for the environment.
Crowdfunding recently became an option for companies that are trying to finance their miningrelated projects and for accredited investors interested in this industry.
A U.S. based tech startup, ExplorationFunder, launched in 2013 the worlds first crowdfunding
platform that intends to connect accredited investors with junior mining firms. On a market
adverse to risk, early stage exploration and development mining companies are having an
increasingly hard time finding investors and this is where ExplorationFunder intervenes. Robert
Leclerc, CEO and co-founder of ExplorationFunder, declared that he hopes the platform will become
The Facebook for natural resources companies.
KlondikeStrike Canada is the worlds first equity crowdfunding platform for mining investing, soon
to be launched in 2014. Mining companies will be able to list their projects on the platform.
Accredited investors have the opportunity to select the ones they are interested in. Not all
companies that apply will be accepted and listed on the platform. KlondikeStrike Canada has
advisers that will select only viable, trustworthy projects. The final approval for each project will
come from investors. The crowdfunding platforms promoters declared that the typical mining
project will be between $500 and $10 million.
Some companies managed to gather funds in record amount of time, for projects that are truly
sci-fi. Planetary Resources, a mining company that intends to mine near-Earth asteroids, raised $1
million dollars on Kickstarter in just 20 days, in June 2013. The money will be used to send a
telescope into space to search for potential asteroids suitable for mining. Although the days of
mining on asteroids might be a little further down the road, the very fact that a startup company
got so much public support for a project so ambitious says a lot about the huge opportunity
provided by crowdfunding. A cutting-edge project such as the one proposed by Planetary
Resources would have been nearly impossible to finance through conventional channels.
Case study: how crowdfunding could make a difference
Rosia Montana is a small town located in Transylvania, in the middle of Romania, in an area very
rich in gold and other mineral resources. Gold and other metals were extracted here since Roman
times or before. During the last decade, the small town of Rosia Montana became the scene of a
battle that involved a mining company, corrupt officials, unemployed miners and very active and
vocal environmental activists.

Gabriel Resources LTD, a Canadian TSX listed company, tried to push for the development of a
controversial mining project that would have become Europes largest open-pit gold mine. The
extraction process would have been based on cyanides, and 8 million ounces of goldand other rare
metals would have been extracted over a period of 25 years.
The project raised public suspicions right from the start: the company had no previous mining
experience and was founded in Channel Island of Jersey, a well-known tax haven. The company
obtained a very generous mining license from the Romanian government for that area, and the
vast majority of the citizens suspect that the officials were corrupted by the company.
The biggest concerns, however, were raised by the immense pond of cyanide infested sludge that
would result from the mining project and the estimated 214 million tons of dust particles.
While some of the locals, unemployed miners, were militating for the project, the vast majority of
people living in that area were firmly against the project. In 2013 after some of the largest public
manifestations seen by Romania in the last 25 years, and after more than 10 years of court battles
between the company and the local communities, the project was halted. Miners in Rosia Montana
are still unemployed and the company is suing the Romanian government for compensations.
This is actually the perfect example to illustrate how crowdfunding is a better option for many
projects in mining industry. The source of the funds and their destination is public: no more
suspicions about corrupt officials or shady investors. A project gets through several channels of
approval (first, the crowdfunding platform then the investors) and gets funded only if its viable
from all points of view. Also, crowdfunding could potentially allow local communities to be part of
these mining projects, which would give them a sense of control and empowerment.
A new approach to mining, supported by crowdfunding
Large corporations active in natural resources exploitation dont have the best public reputation,
and mostly for good reasons. In a very large organization, direct responsibility and an ethic
approach toward the mining project, toward the local communities, the miners and the
environment tend to dissipate.
In todays world, as more and more people become preoccupied with environment protection and a
judicious exploitation and use of natural resources, traditional mining projects, involving large,
financially potent corporations, are under a lot of scrutiny. Crowdfunding, on the other hand, offers
the transparency that satisfies all the curiosities of the public.
Although statistics about crowdfunding in natural resources industry are not available yet, since its
a very new activity (first website launched merely a few months ago), the signs are more than

encouraging. Planetary Resources reached its $1 million milestone in 20 days, and another $500
000 during the following 10 days. Also, ExplorationFunder already listed several mining project
located all over the world that are waiting for accredited investors.
Crowdfunding offers a chance to startup mining companies to develop smaller-scale, but safer and
more technologically-advanced projects. Crowdfunding could just be the instrument that will turn
mining into a more ethical, more responsible industry.
If you are part of this industry please reach out to us and share your stories. We keep track of how
crowdfunding is being explored for the natural resources industry at the June 19 Newport
Beach conference.
Photo Credit to wallgood.com
Note: This article appeared on The SohoLoft with this link http://thesoholoft.com/crowd-financedexploration-striking-gold-by-david-drake/ on June 25, 2014.

David Drake is an early-stage equity expert and the founder and chairman of LDJ Capital, a New
York City-based family office, and The Soho Loft Group Impact Investing Media a global
financial

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Conferences. You can reach him directly at David@LDJCapital.com.

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