Mark O’Dea has to be the envy of every of nearly every junior mining CEO in the country.
As the executive chairman of True Gold Mining Inc., Mr. O’Dea has signed off on deals to raise $33.5-million of fresh capital since the start of May. That equates to more than half of True’s $60-million market value.
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It is an enormous amount of money for a junior gold miner to raise at this point in time. Juniors are suffering through some of the worst market conditions seen in decades, as risk capital has fled the sector and equity financing opportunities have dried up due to lack of demand. The recent drop in gold prices only made matters worse.
Mr. O’Dea, a well-known mining entrepreneur, said he recognized the equity markets were a non-starter for raising capital. That caused him to take a different approach and look for strategic investors. His success demonstrates that money is available for quality junior companies, but they have to work a little harder for it than they used to.
“We’ve really tried to target a different style of niche investor, and different pools of capital from the traditional resource sector funds which have been really beat up,” the 45-year-old said in an interview.
Many juniors like to talk about how they are courting various “strategic” investors (particularly in Asia) but almost none are able to raise substantial amounts of money that way.
True Gold, however, was able to tap two different sources. Back in May, the Vancouver-based miner raised $10-million through a private placement with Canadian giant Teck Resources Ltd. And on Thursday, the company announced it is receiving a $23.5-million investment from Liberty Metals & Mining Holding LLC, a subsidiary of Liberty Mutual Insurance and a very long-term investor in the resource space.
True Gold was helped by the fact that Mr. O’Dea has a strong track record. He was the CEO of Fronteer Gold Inc., which made a discovery in Nevada and was sold to Newmont Mining Corp. for $2.3-billion in 2011. He also has a relationship with Teck that dates back to his days at Fronteer.
But on its own, that would probably not be enough to raise significant funds in this market.
Mr. O’Dea said the key was to match the project he wanted to build with the right kind of long-term investors. He said that Liberty was interested in True Gold’s Karma project in Burkina Faso because it has low capital intensity, with a construction cost of less than $150-million. That is a must in a market where capital is so scarce, and provides a useful lesson for juniors trying to tackle more ambitious projects.
“As the market began to turn, we recognized that projects with low capital costs, that can get into production relatively quickly, and can withstand downward pressure on the gold price are the projects you want to be in,” he said.