Red Cloud Klondike Strike thinks so. See how the Canadian company is harnessing the power of crowdfunding to leverage financing for the mining industry.
For decades, mining has endured its share of ups and downs. This level of volatility created financing issues for both current and potential operations, often making it difficult for companies to plan ahead and invest as conditions fluctuated.
The newest investment trend has emerged as a direct result of the need for flexible, fast results. Crowdfunding has long been popular with tech startups but has only recently found a niche as a funding source for mining organizations.
Venture capital has become increasingly difficult to come by in the mining industry, with fewer large lenders willing to take on the risks associated with mining enterprises.
To fill the venture capital void, Chad Williams, President and CEO of Red Cloud Klondike Strike, Inc., decided to explore crowdfunding as a source of capital for mining, bypassing typical funders and allowing individual investors to take advantage of the opportunities afforded by involvement in mining operations.
Starting in Canada
There are a few reasons why Canada is the perfect environment to launch this crowdfunding venture. There are several major mining organizations located in Canada. Canadian investors also tend to be less risk-averse.
Investors with available resources are viewed as being willing to see beyond the issues cited by traditional lenders as drawbacks and, instead, pay more attention to growth potential.
The Challenges to Crowdfunding
Groundbreaking ventures always face some challenges. Simply convincing investors of the viability of mining as an investment vehicle can be problematic.
Crowdfunding, as a rule, has few regulations protecting anyone investing. That means Red Cloud Klondike Strike must convince investors their money is going where it should, and the investment is as safe as can reasonably be expected.
“Canadian investors can access financing deals offered by mining and resource companies. Unlike unregulated crowdfunding websites, investors would receive shares in the company,” shared Neils Christensen of Kitco News. This information should give investors a little security regarding their investment decisions.
While that will allay the fears of many investors, it may still take some time for Red Cloud Klondike Strike to convince those more accustomed to traditional investments that the opportunity is real and well worth the risks involved.
The Benefits for Investors
Perhaps most importantly, investors will now have an opportunity they did not have available in the past. Crowdfunding is relatively easy for investors to take advantage of and, if this financing option is structured correctly, would allow a relatively easy method of redistribution or withdrawal of funds. However, it’s always important to understand all the obligations when making any investment.
“This is a revolutionary event and opens the door for almost any Canadian to invest directly in a mining project,” Christensen continued.
Red Cloud Klondike Strike spent roughly 14 months gaining regulatory approval from the Canadian government to make sure interested party’s investments were as protected as possible. Red Cloud is now allowed to accept money from investors anywhere in the world, barring the United States.
The Marketplace
The potential market is quite large. Mining is a huge industry, and mining organizations are always exploring ways to acquire the capital needed to operate. Crowdfunding is the new kid on the block, but the odds are it will quickly be adopted by companies.
Red Cloud has about 45 companies in the pipeline, but will select only about 5 percent of them, or even fewer, to go onto the platform. Those figures suggest Red Cloud is serious about carefully vetting mining organizations to ensure investors’ money is safe, and that fiscally irresponsible companies don’t tarnish Red Cloud’s reputation.
While it’s certainly not possible at this point to say whether or not crowdfunding for the mining industry is going to see substantial growth, there is a high potential for the sector to expand as its value is recognized.
It’s possible that traditional financiers may feel threatened by Red Cloud. But the market is changing, and these financiers must learn to adapt to this new way of business.
That’s true in virtually every industry as new business models appear, and crowdfunding, led by Red Cloud, has a real chance to affect dramatic changes in how mining operations are financed in the future.
