Financial Post Article ...
Your stock is trading at pennies, commodity prices are at
rock bottom, and time is running out.
What's a poor mining company to do?
Why not try something completely different?
In recent weeks, at least four Canadian junior mining companies
obtained new leases on life by announcing they were going to mine
the information superhighway, not rocks.
American Gem Corp. of Toronto, which operates a sapphire mine in
Montana, was trading on the TSE at about 3 cents a share in the
first quarter. A news release in mid-March, announcing it planned to
transform itself into an Internet company, pushed its stock to as
high as $1.
..
Dejour Mines Ltd., of Vancouver, saw its share price climb from 10
cents to $1.07 upon announcing in April it was purchasing up to a
maximum 50% stake in a Dallas-based Internet courier service. The
stock is also now trading at about 50 cents. It was the same story
for Rux Resources, a subsidiary of Williams Resources of Toronto.
Its stock soared 2,100%, from 1 cents to 21 cents, after a press
release in early April said the troubled holder of gold mine
properties in Russia would be repositioned as a technology company.
Sikaman Gold Resources Ltd., of Port Perry, Ont., was asked by the
TSE to explain why its moribund stock was suddenly seeing action.
What's going on? The Internet, or more specifically, plans to focus
on high-tech and Internet opportunities.
On one level, such an extreme change in direction makes sense. The
struggling juniors are in a sector that's out of favour -- making
the lure of the high-flying Internet industry hard to resist.
Vic Alboini, formerly chairman of American Gem, gives other
reasons. He says the Internet is just reaching its stride in
commercial opportunities. He cites studies reporting online
..
investing will grow at rates of 34
And, while Canada currently ranks as
the number four country in Internet use, with 4.3 million users, he
says that will triple in the next few years. ''That's the business
case.''
A former securities lawyer and mergers and acquisitions specialist,
Mr. Alboini took the reins of the struggling gem company in November
1998. To market the company's 300,000 carats of cut sapphires, he
turned to the Internet. The company has since purchased Northern
Securities, a small Toronto brokerage firm, as the next step in an
ambitious plan to become an electronic commerce firm. In addition to
selling sapphires and jewellery over the Internet, the company plans
on doing securities trading, public offerings, and mergers and
acquisitions online.
''We're not a mining company any more. We are an Internet
company,'' Mr. Alboini says. American Gem has appointed two top
executives from PSINet Inc. -- Nadir Desai and Wesley Roitman -- to
manage the company. Mr. Alboini will remain on as executive vice
president and chief financial officer.
..
To most, the worlds of mining and the Internet couldn't be further
apart. Mining is a capital- and labour-intensive business; an
Internet company's main asset is knowledge. Mining is as old as the
hills, the Internet is the future. That raises the question: What
does a mining company know about the Internet business?
But Simon Learmouth, at Dejour Mines, doesn't see things that way.
The investor relations executive says Dejour bought into
InstantDocuments.com, which has developed a secure system for
transmitting documents over the Internet, for the simple reason they
saw a winner.
''The goal is to make money and increase shareholder value. This
was just a business opportunity presented to us that made sense.''
Dejour has, however, installed Dr. Mitchell Eggers, a founder of the
Internet company, on its board of directors to help Dejour manage
its Internet foray.
''All we're doing is catching up
the times,'' says Stan
Bharti, chief executive at Rux Resources. The mining engineer and
former consultant to mining companies says Rux will draw upon its
expertise in mining and technology to create an online
..
business-to-business meeting place for the resource sector. Rux has
signed a licensing agreement with Business Web Inc. of Dallas, which
hosts Internet trade shows. Rux is also hiring a president from the
high-tech field to run the new company.
Wendel Zarb, a mining analyst with Pacific International Securities
in Vancouver, says he's not surprised by the recent rash of juniors
leaping into the Internet world. ''It's a sign of the times. The
mining sector is not robust, especially for junior exploration
companies. So, they're looking for other ideas.''
He recalls a time not long ago when non-mining companies were
leaping into the hot mining sector. He cites Cartaway Resources as
one example.
As Mr. Zarb points out, those making such a switch are typically
not your hard-core miners. ''They're entrepreneurs or promoters
looking for the flavour of the month.''
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