crowdfunding metals and mining: how family offices and angels are investing

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Crowdfunding Metals and Mining: How Family Offices and Angels are Investing by DAVID DRAKE Natural resources like minerals and metals are used in all major sectors of a country’s economy. Based on statistics released by the International Council of Mining and Metals (ICCM), an increase in the demand for minerals is witnessed when a country’s urbanization gets to 30 percent and the per capita income is between 5,000 and 10,000 dollars per annum. Countries such as India, Brazil and China have already reached these levels which explain the rising demand for minerals over the last few decades across the globe. The mining sector has experienced substantial growth. Between 2000 and 2010, the industry grew from US$ 214 billion to US$ 644 billion. These trends have evoked interest among investors in natural resources. Though it may be hard to quantify, there is rising interest in precious metals such as gold and silver among institutional investors which include family offices, angel

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Natural resources like minerals and metals are used in all major sectors of a country’s economy. Based on statistics released by the International Council of Mining and Metals (ICCM), an increase in the demand for minerals is witnessed when a country’s urbanization gets to 30 percent and the per capita income is between 5,000 and 10,000 dollars per annum. Countries such as India, Brazil and China have already reached these levels which explain the rising demand for minerals over the last few decades across the globe. The mining sector has experienced substantial growth. Between 2000 and 2010, the industry grew from US$ 214 billion to US$ 644 billion.

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Page 1: Crowdfunding Metals and Mining: How Family Offices and Angels are Investing

Crowdfunding Metals and Mining: How Family Offices and Angels are Investing

by DAVID DRAKE

Natural resources like minerals and metals are used in all major sectors of a country’s economy.

Based on statistics released by the International Council of Mining and Metals (ICCM), an increase

in the demand for minerals is witnessed when a country’s urbanization gets to 30 percent and the

per capita income is between 5,000 and 10,000 dollars per annum. Countries such as India, Brazil

and China have already reached these levels which explain the rising demand for minerals over the

last few decades across the globe. The mining sector has experienced substantial growth. Between

2000 and 2010, the industry grew from US$ 214 billion to US$ 644 billion.

These trends have evoked interest among investors in natural resources. Though it may be hard to

quantify, there is rising interest in precious metals such as gold and silver among institutional

investors which include family offices, angel investors and pensions. Every person wants to know

where the bull market went and whether they are late to invest in gold. Statistics indicate that gold

is not featured in portfolios of most institutional investors. There is huge opportunity out there for

investors to venture into this market. Gold is among the top three metals mined in 2011 along with

Page 2: Crowdfunding Metals and Mining: How Family Offices and Angels are Investing

copper and iron ore, accounting for 68 percent of the value of minerals extracted globally during

that year. Other minerals were rock, phosphate, diamonds and other metals.

Recently, crowdfunding has become an option for companies seeking funds for their mining

projects and for angel investors desiring to invest in the industry.

ExplorationFunder is one of the crowdfunding platform founded in 2013 to connect new mining

companies with accredited investors. Its co-founder and CEO hopes the platform will gain

popularity among companies dealing in natural resources.

The first equity crowdfunding website, KlondikeStrike of Canada, set to launch this 2014, will be

linking mining firms to accredited investors. According to its promoters, the distinctive mining

project is to cost between 500 and 10 million dollars.

Some companies have succeeded in raising funds within 20 days in 2013. A mining firm called

Planetary Resources crowdfunded $1 million through Kickstarter. The firm will use the funds to

launch a space telescope in order to identify possible asteroids ideal for mining.

Family Offices, Angel Investors and other institutional investors that invest in physical gold bullions

should not do it for speculative purposes. Rather, it should be for its holding value. Physical gold

bullion is the perfect way to own gold and the best way to maintain money value because the

currency values fluctuate and even fall.

For instance, Universal Services Inc is an international multi-family office that deals with fund

administration, real estate, financial services, and precious metals. From the initial days of its

operations, partners acknowledged gold as an important component of balancing the family

office’s portfolio through the bear and bull market cycles. The family office established Universal

Gold Limited in 1990 as an offshore platform for conferring equity ownership of hard bullion gold.

Diamond Investment Group is another company that focuses on precious metals including gold,

silver, platinum and diamonds. The group provides investor services related to Venture Capital,

Family Office and Angel Investing.

 

Angels and Family Offices Invest in Precious Metals

Today, major investments in precious metals are in gold and silver in the form of coins and

bullions. Angels and Family Offices should consider investing in precious metals and other minerals

because the value of money will most likely decrease quickly against the value of precious metals

such as gold and silver. Such decline is occasioned by government deficits and the need to print

more money in order to fund those deficits.

In times of financial instability, precious metals are the best way to preserve value of wealth. For

more than 5000 years, gold served as money and exceeded the life of any paper currency in

Page 3: Crowdfunding Metals and Mining: How Family Offices and Angels are Investing

history. This makes it an asset that loses no value in actual terms. Even so, it is hard to find

consistency in physical gold bullion since banks push-off indexes on gold and not on the bullion

itself. However, on the global platform the purchase of Chinese gold picked significantly at the

beginning of 2014 even as demand for physical goldremained strong, closing at a peak price of

$1,245.70 per ounce. This was the strongest level experienced since 17th December, 2013.

For an investor, owning collectible bullion that is accessible and outside of the banking system is

the best approach to wealth protection. More so when an investor’s return on investment faces risk

due to fragility of a banking system. Ideally, the percentage that is held up in precious metals

should be between 15 and 25 percent, and this varies from one investor to another.

For Family Offices managing generational wealth, there is a need to invest in gold and other

precious metals to retain and grow the assets for coming generations. Due to currency printing,

investment tools such as property and stocks have increased over the years creating a

considerable amount of private wealth. However, the delicate state of world economy today makes

it hard to preserve wealth in this format because the value of stock and property declined by 75

percent over the last 13 years as a result of credit and inflation. These changes call for a shift

towards more secure and long-term wealth preservation strategies.

 

 

Note: This article appeared The SohoLoft with this link http://thesoholoft.com/crowdfunding-metals-

and-mining-how-family-offices-and-angels-are-investing-by-david-drake// on Dec 18, 2014 

Photo credit to 3.bp.blogspot.com

David Drake is the Chairman of LDJ Capital, private equity advisory; Victoria Partners, a 110 family

office network; Drake Hospitality Group; and The Soho Loft Media

Group with divisionsVictoria Global Communications, Times Impact

Publications, and The Soho Loft Conferences. Reach him directly at

[email protected].