Vancouver is home to more than 700 mining companies scattered among high-rises framed against the stunning North Shore mountains. They’re often small, employing a handful of people who then hire auditors, engineers or helicopter pilots to reach remote sites. Many are struggling to survive. The median Vancouver mine exploration company has $325,000, enough to last less than five months, according to data compiled by Bloomberg.
Jeff Sundar, 38, cut his monthly salary by more than half, to C$5,000, last year to stretch the cash of his Vancouver explorer, Entourage Metals Ltd. Its stock has dropped 81 percent to 9.5 Canadian cents since it raised C$5.35 million in a February 2011 initial public offering. The firm had four full- time geologists at the time; now it has one.
Financing Challenge
“Entertainment, dinners, clothing, expensive trips -- all that’s been shut down,” said Sundar, who has much of his own wealth tied up in a bet on a renewed rally. “It’s just challenging to raise money.”
In April, Toronto brokerage Fraser Mackenzie Ltd. shut, saying investor interest in early-stage mining had “considerably diminished” and shareholders voted to conserve capital “while we still have it.” The firm had employed as many as 80 people.
There were rows of empty seats at a Vancouver mining conference in May. Half as many exhibitors as a year before came, said conference organizer Joe Martin. “No Soliciting” signs were posted on tables to discourage salespeople who hadn’t paid from showing up anyway. In one hall, David Hodge, president of Zimtu Capital Corp., bellowed about an early-stage exploration company like a carnival barker.
“Yes, I am a stock promoter,” he said, his voice rising. “But that’s what you want in the beginning.”
ETF Panic
Stock in Zimtu, a Vancouver-based natural resources investment company, traded Aug. 12 at 37 Canadian cents, less than a fifth of the C$2.19 price in February 2011.
The ease of buying gold through exchange-traded funds backfired on some investors. One couple who put more than half of their assets into gold ETFs approached Rinehart Wealth Management in a panic in April, said Daniele Donahoe, president of the Charlotte, North Carolina-based firm, whose clients generally have more than $1 million. She said she sold many of the funds for the couple.