National Mineral Policy 2006 - Department of Mines

7.3 Considering the high-risk nature of investment in prospecting a new type of investorhas emerged in different parts of the world. For prospectors to access funds from thoseinterested in investing in such ventures a unique window is required for lenders andborrowers in the financial market place. The Australian and Canadian bourses traditionallypermit prospecting companies to list on their exchanges and offer equity to such risk-orientedinvestors. With appropriate exit routes in place it is possible for prospecting companies to bebought over or acquired [in different forms of mergers and acquisitions (M&A)] by miningmajors. Once a find is announced and verifiable data is offered for sale with or without a MLand the market cap of the junior rises, such transfers are the next step. This provides thespectacular capital gains that risk funds need to cover for the lack of returns from investmentsin prospecting projects that do not result in recoverable finds.7.4 This arrangement is a special feature of the Toronto Stock Exchange (TSX) andLondon Stock Exchanges, which have set up a separate sub-segment on the Stock Exchangesto deal with early stage companies. Notable among these are the Toronto Venture Exchange(TVE) in Canada and the Alternative Investment Market (AIM) of the London StockExchange in the UK. The logic for setting up these sub-segments is the understanding that theearly stage companies cannot afford the stricter listing guidelines that are applicable to theexisting large companies, and applying the same guidelines to them will restrict their abilityto raise capital and stunt their growth. Therefore, the London Stock Exchange and TSX havefloated different segments in their markets (AIM and TVE, respectively), which focus onearly stage companies only. The listing norms for these markets are different to the mainmarket segments.7.5 Table 7.1 shows the differences in admission criteria between the London MainMarket and AIM.136