Resource World Magazine

24 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 8 T he Canadian brokerage industry has seen a number of significant changes over the years with one of the most notable developments being the takeover of some independent brokerage houses by major Canadian banks. As might be deduced, this has had an effect on the junior exploration sector that is mainly head- quartered in Vancouver, British Columbia, followed by Toronto, Ontario. One of the effects has been banks pre- ferring to sell their own securities offerings to its clients as opposed to recommending high-risk junior explorers. Yes, there is more risk to investing in juniors but there can be more reward and there continues to be an important place for junior explorers in the worldwide mining industry that is dominated by Canadian companies. Basically, Mother Nature has provided mineralized outcrops and other clues that warrant further exploration; however, many exploration projects just don't make the grade (pun intended). That's just the way it is. However, people that invest in junior explorers understand this and allo- cate some of their investment funds to this sector. But how has this played out for the juniors that – despite the long odds of success – have traditionally been the foundation of the huge Canadian mining industry since they have been responsible for the majority of mineral discoveries? To find the answers, Resource World interviewed Mark Redcliffe, and Lisa Davis, Partner of PearTree Financial Services Ltd. & CEO at PearTree Securities Inc., PearTree's dealer and investment fund manager arm. Redcliffe is an entre- preneur who has built several companies from the ground up. He has an MBA and a CMA and spent 21 years in the securi- ties industry. He also came up through the surveillance department and investigations division of the old VSE and moved into the predecessor to IIROC ( Investment Industry Regulatory Organization of Canada) and ultimately to Yorkton Securities running compliance in western Canada. He cut his teeth in the natural resources side of the business – primarily exploration and mining and then oil and gas. In 2008, Stewart Vorberg, a broker at independent Mackie Research, and Redcliffe opened Jordan Capital Markets in Vancouver and grew the firm to 67 employees. In 2015, Jordan merged with Mackie Research out of Toronto and he ran British Columbia for them overseeing 80 people. Redcliffe is currently Executive Vice President, Corporate Finance, Gen III Oil Corp. In an interview with Resource World , Redcliffe commented on the slow takeover of independent brokerage companies and those banks preferring to sell their own investment products rather than have their clients invest in high risk mining companies. "This is a very interesting and topical point and I would agree," said Redcliffe. "I've spoken on this in public in the past. After we opened in 2008, I believe there were north of 204 IIROC member firms in Canada. A good portion of those were independent investment advising firms and last I checked, just before I left the brokerage side in February of this year, there were around 180." Redcliffe explained that it had to do with the shakeout due to the 2008 great recession. "In our case, we were spending about 65 cents for every dollar of revenue on compliance which lent itself to a consol- idation of the industry. The swift moving independents merged with each other and the larger mining companies with money survived while others failed. "First off, that removed a lot of trans- actional brokers," explained Redcliffe. "Second, there was a flight to safety of capi- tal by investors who had been harmed by the great recession and third, you had dom- inance over clients' assets by the banks." Redcliffe noted that the banks control the majority of Canadian assets – invest- able assets but also mortgages, car loans, just about everything in everyday life. "I wouldn't suggest it's from banks taking over independents; it's that the banks are risk adverse," said Redcliffe. "If they can create five or six portfolios with varying risk criteria or exposure and they have a Junior miners deserve more respect Junior exploration companies may be responsible for many of the world's great mineral discoveries; however, bank-owned brokerages prefer to sell their clients less risky securities and many investors are currently apathetic, resulting in less liquidity and undervalued company assets. by Ellsworth Dickson INVESTMENT Mark Redcliffe, and Lisa Davis, Partner of PearTree Financial Services Ltd. & CEO at PearTree Securities Inc.

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