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FINDING FUNDING 42 E&MJ; • JULY 2017 www.e-mj.com the "financial sector topography." The in- vestor expectation, he said, "has become realistic and thus this is a positive for business entry and expansion." Any consequence of that will fall on underperforming companies, he said. "In our experience, there is always more de- mand for quality producing assets than for non-producing quality assets," Gupta said. "As a result, the monetization of non-producing assets has suffered more." This is to say that risk is out and conser- vatism is hip in the investment community. The EGME strategy reflects this. "We re- main focused on creating a quality produc- ing-asset, which will ensure that once the cycle turns around, the expansionary valua- tion will be a game changer," Gupta said. Ensure Your Reputation In a bear cycle, the big fish fund only the most appealing smaller ones. Call it sur- vival of the fittest or simple consolidation, what it means is a company seeking to source funds should be able to market itself, should have done its homework, should be prepared to explore a range of options, and may ultimately have to surrender more autonomy than desired, said Robert Carbonaro, managing partner, head of investment banking, Gravitas Se- curities Inc. "To survive, some companies have had to submit to very expensive and encumbering royalty and metal streaming arrangements with private equity firms," he said. "It's disturbing to see junior min- ers having to resort to often usurious deal terms, which provide relief in the short term but jeopardize sustainability and growth in the long term." Cash-rich mining groups like Osis- ko Royalties (and Osisko Mining), Eric Sprott, Agnico Eagle and Goldcorp have taken minor but strategic positions in many prospective juniors. These invest- ments are not usually sufficient to bring projects to commercial production, but, Carbonaro said, are key to attracting more capital and advancing projects. "The price of these investments to juniors is that they are essentially 'owned' and have sacri- ficed a portion of their exploration upside leverage," he said. These deals attract a lot of attention and are a good alternative in a luke-warm financing environment and when juniors can no longer postpone spending on mineral assets of merit." Within the last four years, the Gravitas flow through mining fund has contribut- ed to the financing of 15-20 companies. The idea, Carbonaro said, is to reward "due diligence fundamentals." Gravitas, he said, likes to see drill-ready projects and "are reluctant to get involved with companies that haven't done all they can in preparation for drilling so to give them the best chance of success." By prepa- ration, he means adequate exploration, sampling, mapping and modeling. Investors, generally speaking, are most interested in companies that are in the process of mobilizing diamond drilling programs. Miners know this, and priori- tize sampling over sufficient exploration to quickly garner funds, Carbonaro said. "Companies are caught in a tough place because to raise financing they need to give the prospect of immediate results, which is best determined through the drill bit," he said. "Therefore, companies that follow best industry practices may not be the ones which close funding since geo- logical reconnaissance programs are not received with the same investor enthu- siasm." This can lead to problems down the road, which is why "we believe the best practice is to demonstrate to the financial community that you have done your homework and that the drill program has been well planned and would stand- up to peer review," he said. Carbonaro said juniors should focus on protecting their reputation through the peaks and troughs of the cycle. "With- out a good reputation, both ethically and technically, your chances of survival and success in the exploration industry are slim and rightfully so." The current uptrend in mining may, un- fortunately, amount to a bull run in a bear market, Carbonaro said. "I believe that generally the industry needs more time to work off stockpiles for most base metal and bulk commodity prices to appreciate to a level that brings greed back to the market," he said. The long-term impact of the bear will be a shortage of qualified workers when it ends. "This past down- turn has been very hard on new graduates in geology and mining engineering who were mesmerized by all of the super-cycle hype but ended up jobless on graduation and were forced to change disciplines," Carbonaro said. "Therefore, Canada has lost a generation of professionals, which will certainly be a big problem when commodities are again in short supply as mines won't have experienced profession- als to build and operate the mines and the whole boom and bust cycle could be even more volatile than past cycles." Of the 63-m core, above, the three target potash bear- ing members of the formation aggregated approxi- mately 41 m. The core was transported to Saskatoon to be logged. (Photo: EGME) Gensource Potash Corp. announced in December completion of the first well, above, and retrieval of a 63-m core from the Prarie Evaporite at its Vanguard project in Saskatchewan. (Photo: EGME)