Joe Mazumdar: Good versus bad funding – what to look for when juniors raise money
Fundraising is a big challenge for juniors in today’s markets – and even when companies are able to raise funds, it’s important to remember that not all funding is created equal.
Exploration Insights Editor Joe Mazumdar speaks at the Canadian Prospectors and Developers Association (PDAC) conference and shares his thoughts on how investors can differentiate between good and bad funding.
Aside from warrant-like considerations, he told Investing News Network that before buying shares in an exploration company, it’s a good idea to see when it last went public.
“With Canadian funding — not Australian or anything — they have a four-month lockup period, so these guys can sell after four months,” he explained. “And so if you’re looking for (good times) stop, wait for the four-month lockdown to be released. If they want to sell, let them sell and then come back.”
Majumdar also pointed to the shared structure, saying that even with good assets, it could cause problems.
“The stock structure is very important because we need to take that asset and put into that stock structure,” he said. “And if the stock structure isn’t great, it doesn’t matter what the asset quality is, because if your stock price goes up, you’re probably going to lose because they’re going to underperform.”
In his opinion, juniors who raised extra money in 2021 are now better positioned than those who raised enough for just one season, which companies usually do.
“Some of them have taken two years off and now don’t have to worry about current market volatility like they did in the past,” Mazumdar said. “And so I think if you’re a company with no cash flow, it’s good to have a bias to exaggerate given the volatility of the market.”
Watch the interview above to learn more from Mazumdar about the junior resource sector and copper. Click here for our roundup of PDAC and click here for our full PDAC playlist on YouTube.
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Securities Disclosures: I, Charlotte McLeod, have no direct investment interest in any of the companies mentioned in this article.
Editorial Disclosure: teaInvesting News Network does not guarantee the accuracy or completeness of any information reported in interviews it conducts. The opinions expressed in these interviews do not represent the opinion of Investing News Network and do not constitute investment advice. All readers are encouraged to do their due diligence.
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