Resource World Magazine

26 www.resourceworld.com j u n e / j u l y 2 0 1 5 It has been such a dry spell for junior resource companies trying to raise capi- tal over the past three years. At the same time, many loyal investors for these very companies have been unable to assist by investing in private placements of their favorite so-called penny stocks. Why – because they are not "accred- ited" investors. To be an accredited investor, one must have either net income before taxes of over $200,000 or household income of $300,000 during the past two years, or, liquid financial assets that exceed $1 million after liabilities are deducted. Of course, one does not need that kind of money to participate in a penny stock pri- vate placement. Thanks to a proactive and creative Vancouver-based law firm, loyal shareholders can now invest directly into the treasuries of these juniors using the Existing Shareholder Exemption. Early in 2014, Boughton Law led an advocacy group comprised of almost all independent investment dealers based in British Columbia who engaged in a consul- tative process with the British Columbia Securities Commission and the TSX Venture Exchange (the TSXV) to improve access to capital. This resulted in the introduction of a new financing prospectus exemption – the Existing Shareholder Exemption – that would allow issuers listed on the TSXV to raise money by selling securities to their existing shareholder base. One shareholder who participated in a December financing of Ecuador Gold and Copper Corp. [EGX-TSXV] said this about the opportunity to participate, "Until this type of financing became available it seemed like the only group buying shares was the biggest shareholder. I was pleased to par- ticipate because there was a share purchase warrant included and no commissions paid." The Canadian Securities Administrators announced the implementation of the Existing Shareholder Exemption on March 13, 2014 under Multilateral CSA Notice 45-313. More recently, the Ontario Securities Commission announced its implementation of the exemption effec- tive as of February 11, 2015. The key components of the Existing Shareholder Exemption are: • An offering in reliance on the Existing Shareholder Exemption can only consist of shares listed on the TSXV, TSX or CSE, or units comprised of the listed share and a warrant • The issuer must make the offering avail- able to all existing shareholders that hold the listed shares as of a record date • An investor can only invest a maximum of $15,000 per issuer under the Existing Shareholder Exemption in a 12-month period, unless the investor has obtained suitable advice from a registered invest- ment dealer • The issuer must issue a news release containing prescribed information and comply with other continuous disclosure and stock exchange requirements • An investor must be provided with certain rights of action in the event of a misrepresentation in the issuer's continu- ous disclosure. When so many mining brokers have all but abandoned the junior mining sector, and institutional groups are less and less interested, the program is an inexpensive option for a company that needs to raise capital. Ecuador Gold's CEO, Glenn Laing, com- mented, "In light of how challenging these markets have been I was surprised at how quickly the placement closed – a real vote of confidence from our shareholders." For those of us who have lived through many of the commodity cycles, we know there will be interest in junior resource stories again. In the meantime, it is still necessary to raise funds to stay alive. From our experience, this method is ideal as it provides a more level playing field for all investors – accredited or not. n Cathy Hume is CEO of CHF Investor Relations and CHF Capital Markets, Toronto. Left, Edgar Gordillo, Geologist, and Don McDowell, Co-founder and Consultant, Ecuador Gold and Copper, examine mineralization at the Condor gold and copper project in southern Ecuador. Photo courtesy Ecuador Gold and Copper Corp. iNvESTmENTS Some capital-raising relief for junior issuers by Cathy Hume

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