New #TSX Venture Exchange policies on Share consolidations, pricing of private placements #MiningStocks

New policies for TSX-V issuers:

- share consolidations 10:1 shareholder approval no longer needed

- pricing of units below 5cents will lapse on Aug. 31, 2013

TSX Venture Exchange Daily Bulletins

VANCOUVER, Aug. 7, 2013 /CNW/ -

TSX VENTURE COMPANIES:

BULLETIN TYPE: Notice to Issuers
BULLETIN DATE: August 7, 2013

Re:  1.  Private Placements - Lapsing of Temporary Relief from Certain Pricing Requirements
        2.  Advance Notice of Policy Amendments:
            (a)  Amendment of Minimum Pricing Rules for Convertible Securities
            (b)  Amendment of Minimum Pricing Rules for Initial Public Offerings
            (c)  Amendment of Shareholder Approval Requirement for Share Consolidations
        3.  Rescission of Deal Structure and Founder Shares Guidelines

TSX Venture Exchange ("TSXV" or the "Exchange") is providing notice of the following policy matters principally related to facilitating both financing and listing transactions.  As set out in this Notice to Issuers, the Exchange will allow the previously instituted temporary relief to certain private placement pricing requirements to lapse on August 31, 2013, but intends to formally implement specific policy amendments that will have the effect of liberalizing certain existing policy requirements and restrictions pertaining to the Exchange's minimum pricing rules and capital structure matters.

I.     Private Placements - Lapsing of Temporary Relief from Certain Pricing Requirements

By way of Bulletin/Notice to Issuers dated August 17, 2012, the Exchange implemented, on a temporary basis, relief from certain existing pricing requirements related to Private Placement financings. The three temporary measures (the "Relief Measures") are as follows:

1. Allowing a share/unit offering with an offering price below $0.05 (the "Offering Price Relief  Measure").
   
2. Allowing a debenture offering with a debenture conversion price below $0.10 (the "Conversion  Price Relief Measure").
   
3. Allowing offerings involving a warrant with an exercise price below $0.10 (the "Exercise Price  Relief Measure").

The Relief Measures are set to expire on August 31, 2013.  The Exchange hereby notifies Issuers that the Relief Measures will not be extended and will therefore lapse on August 31, 2013.

Per the April 12, 2013 Bulletin/Notice to Issuers related to the Relief Measures, any Private Placement conducted in reliance upon the Relief Measures must be completed on or before August 31, 2013.  The Exchange, however, will permit any such Private Placement that has been conditionally accepted by the Exchange on or before August 31, 2013 to be completed within 30 days following the date of conditional acceptance.

II.     Advance Notice of Policy Amendments

The Exchange has received regulatory approval for policy amendments that will have the following effect:

1. Minimum Price for Warrants and Options:  The minimum allowable exercise price for share purchase warrants and incentive stock options will be reduced from $0.10 to $0.05 per share.  This will apply to the full term of the warrant or option.
   
2. Minimum Price for Convertible Debentures:  The minimum allowable conversion price for debentures will be reduced from $0.10 to $0.05 per share for the first year of the term of the debenture.  It will remain at $0.10 per share for the balance of the term of the debenture.
   
3. Minimum Price for Initial Public Offerings:  The minimum allowable offering price for a non-Capital Pool Company initial public offering will be reduced from $0.15 to $0.10 per security.
   
4. Shareholder Approval for Share Consolidations:  The Exchange will only require shareholder approval for a share consolidation which, when combined with any other share consolidation conducted by the Issuer within the previous 24 months that was not approved by the Issuer's shareholders, would result in a cumulative consolidation of greater than 10 to 1 over such 24 month period.  It should be noted that an Issuer may still be subject to shareholder approval requirements under applicable corporate laws.

The foregoing is a summary only and should not be construed as the formal implementation of the applicable policy amendments.  The Exchange intends to formally publish and implement the policy amendments that will give effect to the foregoing by mid-August 2013.  The Exchange will issue a separate Bulletin/Notice to Issuers confirming the formal implementation of the policy amendments and setting out applicable transitional provisions, if any.  The full specifics of the policy amendments will not be available until such time.

Although these policy amendments are not currently in force and will not be until such time as the specific policy amendments are formally implemented, the Exchange will, in the interim, consider allowing Issuers to rely upon the intended changes to the existing policy requirements.

It should be noted that the Exchange will not, contemporaneous with the lapsing of the Offering Price Relief Measure, be implementing any policy amendments that would continue to permit shares/units to be offered at a price below $0.05 per share or unit.

III.     Rescission of Deal Structure and Founder Shares Guidelines

Effective immediately, the Exchange is rescinding its Bulletins/Notices to Issuers dated December 11, 2007 and October 20, 2008 related to Deal Structure and Founder Shares Guidelines (collectively, the "Capital Structure Guidelines").  Rescinding the Capital Structure Guidelines will have the principal effect of removing the existing 15% limit on "Founder Shares" prescribed by the Capital Structure Guidelines in respect of any New Listing.

It should be noted that although the Exchange is rescinding the Capital Structure Guidelines, it is not rescinding or otherwise amending section 4.7 of Policy 2.1 - Initial Listing Requirements.  The Exchange will retain its general discretion under section 4.7 of Policy 2.1 to refuse a listing on the basis that an Issuer's capital structure is excessively dilutive or otherwise imbalanced. The Exchange will apply this discretion on a case by case basis with a view to the facts specific to each listing. If, over time, the Exchange establishes new general guidelines for the exercise of this discretion, the Exchange will consider publishing a new Bulletin/Notice to Issuers setting out applicable guidance in respect of any such general guidelines.

If you have any questions about this bulletin, please contact:

Zafar Khan - Policy Counsel, 604-602-6982

TSX Venture Exchange | TSX Venture Exchange Daily Bulletins

The Cost of Political Blitzes on #Miners: Steve Todoruk #Sprott

We saw it in #Mali over the last year, have seen it in the #DRC, #Venezuela, #Bolivia, etc.

The Cost of Political Blitzes on Miners: Steve Todoruk

By Henry Bonner (hbonner@sprottglobal.com)

Sprott Global Resource Investments Ltd.

Steve Todoruk joined Sprott Global Resource Investments Ltd. as a Senior Investment Executive in 2003. His views have appeared frequently in Sprott’s Thoughts. His insights into the mining industry – where he worked for nearly two decades before joining Sprott – are useful to anyone new to investing in the sector. He recently spoke with me about rising risk from political authorities.

Political risk can be an especially unpredictable component in the analysis of a stock, but one that is ignored at an investor’s peril.

As a mining project advances, we can make projections about how certain engineering or construction delays or cost over runs might affect that project.

We cannot, however, calculate the impact of political risk events. And that is a major problem for investors when it comes to investing in the junior mining exploration stocks.

As metals prices have risen over the past 12 years, human greed has reared its ugly head.

A common potential scenario is as follows:

A potentially lucrative gold deposit is discovered in a revenue seeking country. The mining company that owns the project promotes its value to shareholders and mining analysts.  This has the effect of attracting the attention of governments, citizens and NGOs (Non-Governmental Organizations) – all wanting a piece of the pie.

One recent example of this pattern is Lydian International, a well-known junior company claiming to have a very high-grade and sizeable gold deposit in Armenia. The government of Armenia recently halted construction at the Amulsar gold deposit pending review of its building permits.

A hold like this has a serious impact, especially this late in a project when the bulk of the capital has already been deployed. The market suspects that the government will use this fact as a bargaining chip to force more taxes and royalties to be paid by the company.

This also deters further investment in the country – if they’ve played these games once, there is a good chance they will try to do so again.

The damage to this project has been done and will be long-lasting. Unfortunately, in these poorer countries, the government doesn’t think their actions through. An apparently short-sighted decision can seriously detract international investment that would help grow their economies.

I recently talked about Kinross Gold Corp.’s decision to walk away from and write off their coveted, world class Fruta del Norte gold deposit in Ecuador. That country’s government fervently demanded unrealistically high windfall taxes on the mine Kinross wanted to build. Although the mine will likely be taken over by Codelco or a Chinese group, Ecuador has killed any hope that North American or Western mining companies will invest there significantly in the future. 

Back in 2003[1], a well-known Canadian junior named Nevsun Resources made a fabulous new gold, copper and zinc discovery in Eritrea. The stock was flying high from the early days of their discovery and the first couple years of this project. The project advanced and everyone -- including the Eritrean government -- could see how valuable this deposit was becoming.  Once the company had grown the value of the deposit through exploration, the Eritrean government ordered Nevsun to cease all further work on their project pending clarification of some permits and misunderstandings.

Nevsun went on to build the deposit into a mine. But they had to do so the hard way, on their own. No bigger mining company would take over Nevsun for fear that the Eritrean government would change its terms or place further holds on the property. A company such as Nevsun will trade at a lower premium than it would if it were located in a safer jurisdiction -- even if they never have any more problems.

I believe that Lydian ran into a similar fate. This company was a top takeover target for a big gold mining company. As with Nevsun, their chances of being taken over have been slashed. This means that the little company could end up having to build and operate the mine on its own, which is not the optimal outcome for its shareholders.

In my opinion, the jurisdictions currently with the most “mining-friendly” political and social environments are Canada, Nevada, Mexico, parts of Australia, West Africa (Burkino Faso and Ghana) and some of South America.

Note that being “rich” does not make a country pro-mining. “Developing” countries often rely more heavily on mining revenue. As a result, it is often easier to obtain permitting and start a mine than in places where mining is of little historic importance and has relatively little social awareness.

If you are going to invest in politically riskier (from an extractive industry perspective) jurisdictions – places such as the Congo, or California, for example – be aware that political risk is a very real threat to mining companies and their share prices.

 Steve Todoruk worked as a field geologist for major and junior mining exploration companies after he graduated with a B. Sc. in Geology from the University of British Columbia, in 1985. Steve joined Sprott Global Resource Investments Ltd. in 2003 as a Senior Investment Executive. To contact Steve, e-mail him at stodoruk@sprottglobal.com or call him at 1.800.477.7853.

See the article online on the Sprott Golbal website:1
The Cost of Political Blitzes on Miners: Steve Todoruk Sprott

Top 10 #gold #miners: cash cost reporting comes home to roost

Top 10 gold miners: cash cost reporting comes home to roost

GOLD ANALYSIS

The fall in the gold price has really emphasised how cash cost reporting can so easily be misunderstood and why it is being gradually overtaken as a metric by all-in sustaining costs.

Author: Lawrence Williams
Posted: Thursday , 01 Aug 2013 LONDON (Mineweb) -
The full absurdity of cash cost reporting for gold miners is really coming to the fore with the latest batch of quarterly and half yearly reports from the world’s leading gold mining companies.  On a cash costs basis virtually all the world’s significant gold miners would appear to be profitable – most highly so, yet as we foreshadowed ahead of them on Mineweb the latest quarterly and half yearly profit figures coming out of the gold mining sector are, virtually without exception, dire.
See also: Top 10 gold miners face 2013 earnings nightmare
One might have been forgiven from asking in the past why reported earnings have invariably worked out as being way below the optimistic estimates suggested by cash cost reporting, and this quarter the figures are really making the point that at current gold prices even the best of the world’s gold miners are either making losses, or are only at best marginally profitable.  That’s a sobering fact for gold stock investors who may well have misunderstood the actual profit implications of the cash cost figures promulgated by most mining companies in their quarterly and annual reports in the past.
There is a case for reporting cash costs though, but only in context.  They do signify how an individual mine can fare in a given gold price environment.  What they do not take into account is the myriad of other costs, royalties, taxes and overheads a mining company can face in trying to sustain production across a group of operations – and this is why many miners are beginning to report what are now described as all-in sustaining costs – which in many cases are actually around double the cash cost figures or even more.  This has been put forward as a sensible way of reporting by the World Gold Council. And by and large the major miners at least are falling into line on this.
See also: New WGC gold cost guide should have investors dancing in the streets
What this new metric will also do will surely help to focus the minds of senior executives in guiding companies forward in terms of cost controls.  The biggest difference between cash costs and reality is usually the capital costs incurred as necessary to keep the company operating at the production levels of the past, or to expand – something institutional investors have always been keen to promote among the companies in which they hold stock.
Gold mines are depletng assets.  They have finite lives, and often as mining progresses ore grades fall as well leading to diminishing metal output unless capital is spent on plant expansions, exploration or the building of completely new mines to come on stream as production falls away at the older mines.  Because this expenditure is usually capitalised in the accounts, it doesn’t necessarily impact on reported mine operating profits, but it still does have a significant impact on a company’s overall earnings and its ability to pay dividends, either because of loan repayments and interest, or through financing capital out of earnings.  Indeed it has been noted that some gold majors had been forced to borrow money, or sell off properties, in order to have sufficient cash in the bank to pay their regular dividends.
Former Mineweb colleague, Barry Sergeant, campaigned strongly in these pages with regard to mining companies publishing some form of all-in costs figures (free cash flow as he called it), which made him decidedly unpopular with some of the mining companies at the time, although some others, notably South Africa’s Gold Fields were already reporting in this manner.
In truth Sergeant noted that, at that time, for most of the big gold miners his ‘free cash flow’ figures were indeed negative, often substantially so, although most were actually reporting book net profits and paying dividends accordingly.  To an extent this works out fine in a rising gold price scenario, but when the price falls, the reporting anomalies become much more apparent.
While the gold price was rising gold mining company executives became rather lax in their controls – this is hardly unique in the annals of the mining industry.  The same happened with copper miners in the 1960s and 70s when previously high metal prices fell dramatically.
Like the current gold price falls this led to some smaller companies going out of business altogether and much consolidation in the industry.  The biggest copper names of the time, Asarco, Kennecott, Phelps Dodge to name but three, were all eventually swallowed up - by Grupo Mexico, Rio Tinto and Freeport McMoran respectively - yet arguably, at the time those three copper miners were among the world’s largest mining companies of any kind.  Could the same fate perhaps fall on some of the top global gold miners as the fallout runs its course?  Some are looking very vulnerable indeed.
Whatever occurs though on the corporate front the fallout will mean the eventual development of a much leaner and meaner gold mining sector, although this will indeed take time for the kinds of capital and operating costs controls to filter through to the bottom line.  This flight from profligacy will likely continue for a few years, but these controls could well fall away again if the gold price increases significantly and real profits start to multiply.  What goes around comes around.

Top 10 gold miners: cash cost reporting comes home to roost - GOLD ANALYSIS - Mineweb.com Mineweb