Risk not a factor in this offer
Maybe having a former investment banker running a company is the best way to ensure investors are protected in the event that things don't work out properly.
Or maybe the same level of protection can be achieved by having a chief executive decide the risk should be borne by the company -- and not by the investors.
Whatever the source, investors in a US$80-million private placement done for Centenario Copper Corp., were protected in the event the issuer didn't receive the necessary permits. Centenario was formed in 2004 and operates in Chile.
"I didn't want us getting caught in the position where we were seen to be bagging investors," said Richard Colterjohn, chief executive of Centenario and a former investment banker with UBS Securities.
In July, Centenario raised US$80-million by selling 16 million special warrants at US$5 per warrant. The capital was raised after the company completed a bankable feasibility study. "I am very interested in speed of execution. So rather than waiting around to do a prospectus and then do a traditional IPO structure, we did a special warrant financing to accredited investors and gave an undertaking that we would become publicly listed within 120 days," added Colterjohn in a phone conversation from Chile last week.
(Canadian law allows this, sadly to the detriment of the host countries: 10 Things Canada Does Best - What Canada doesn't do best is hold domestic mining companies accountable for the damage they do abroad. , Canadian Government Urged to Rein in Mining Sector , Mining Misery: Guatemala is one of many countries that has attracted the investment of Canadian Mining Companies – but at what cost to its people? )
But releasing the proceeds from that financing was made conditional on getting a final Environmental Impact Statement approved, said Colterjohn, noting that despite giving the investors an out in the event that the permit wasn't received, he remained confident it would be.
"As far as I am concerned, Chile is the best mining jurisdiction in the world and we were highly confident we would get it. In fact, we did get it before we closed the financing."
(Mining is so good in Chile that the National Intelligence Agency (ANI) monitors all environmental NGOs that oppose mining: ANI or DINA? Environmental organizations protest espionage and infiltration by Chilean Intelligence Agency , Legislators angered by Chile Intelligence Agency monitoring of environmental organizations - investigation demanded , Chile Intelligence Agency Monitors Environmental NGOs )
Colterjohn, whose company's shares have been trading since mid-October following the receipt of a prospectus to clear the private placement, said that approach was adopted because he "was completely prepared to eat that risk in order to minimize that dilution. And I got better pricing for doing it," he said. The reason: with permitting risk not a factor, investors could focus on the merits of the company's copper project, knowing that in the event the permit wasn't received, they would get their money back--plus a tad more.
"It was a decision that [the permitting] risk belonged with us rather than with the investor and, thereby, we gave them greater comfort," he said.
Colterjohn was asked about the lack of a similar out in a $200-million financing done in March for Gabriel Resources, a company with a gold project in Romania -- but no permit. "It's an incredible geological potential, but you have a bunch of locals who don't want you. Mining has to go where it's wanted, and I am where I am wanted," he said.
(Read more about Gabriel Resources and Romania here: Canadian gold mining corporation, Gabriel Resources Ltd. halts Romanian project as support sours - NGO's influence cited , Battle over gold mine plan that would create giant cyanide lake. , Mine Your Own Business - The Darkside of the Environmental Movement? - watch the groundbreaking video trailer below )
He was asked what he would have done had he been running Gabriel and decided to raise $200-million. "The reality is that there is permitting risk. From the company's perspective, it was more important to get the funds in and to continue to drive the project forward and to continue to develop support. Mining people by nature are optimistic and believe that sooner or later they will get there. But it's a judgment call," he said.
Colterjohn was asked about permit risk in Canada. He replied, "Canada is not a jurisdiction where I would like to develop a mine."
(Naturally, countries with weak governments and environmental laws attract miners: Chile's Government fines itself for polluting the environment . Compare that to what recently happened to a number of US paper companies : US Environmental Protection Agency forces paper companies to begin $400 million clean-up project to deal with PCBs in the Fox River . )
Here is the full article.
Monday, December 17, 2007
"Chile is the best mining jurisdiction in the world... Canada is not a jurisdiction where I would like to develop a mine." says Centenario Copper CEO
Risk not a factor in this offer