Understanding how junior mining companies raise capital and how you can participate in private placement financings.
A private placement is a method of raising capital by selling securities directly to a select group of investors rather than through a public offering on a stock exchange. In Canada, private placements are exempt from the full prospectus requirements that apply to public offerings. For junior mining companies, private placements are the primary method of raising capital to fund exploration, development, and operations. These offerings allow companies to raise money quickly and with less regulatory burden than public offerings, while providing investors the opportunity to acquire securities at favorable terms.
The company issues a press release announcing the private placement, including the type of securities offered, price, and intended use of proceeds.
Investors must qualify under an exemption (typically as accredited investors) to participate in the offering.
Qualified investors complete subscription agreements and submit payment according to the offering terms.
The company files required documents with securities regulators (e.g., Form 45-106F1 in Canada).
Once minimum subscription requirements are met, the offering closes and securities are issued to investors.
Investors receive their securities subject to a statutory hold period (typically 4 months in Canada) during which they cannot resell.
Basic equity ownership in the company with voting rights and potential for capital appreciation.
A combination of common shares and warrants bundled together at a single price.
Shares that allow the company to transfer tax deductions from exploration expenses to investors.
Debt instruments that can be converted into equity at a predetermined price.
Private placements in Canada rely on exemptions from the prospectus requirement under National Instrument 45-106. The most common exemptions include:
The most widely used exemption, allowing sales to individuals and entities meeting specific financial thresholds.
Net financial assets >$1M, income >$200K, or net assets >$5M
Allows anyone to invest a minimum of $150,000 in a single transaction.
Minimum $150,000 investment per transaction
Permits sales to close personal connections of company directors or officers.
Must have close personal relationship with director/officer
Allows sales to any investor who receives an offering memorandum, with investment limits for non-accredited investors.
Requires detailed offering memorandum document
Private placement pricing in junior mining is typically set relative to the current market price of the company's publicly traded shares:
Junior mining companies raise capital through private placements to fund various activities. Companies must disclose the intended use of proceeds:
Drilling programs, geological surveys, geophysical studies, and assay testing
Acquiring new mineral claims or properties, option payments
Operating expenses, salaries, professional fees, and corporate overhead
Pre-feasibility studies, permitting, environmental assessments (for advanced projects)
Securities are subject to a 4-month hold period and may have limited trading volume after
Private placements increase shares outstanding, diluting existing shareholders ownership percentage
Junior mining is highly speculative with most exploration projects failing to become mines
Share price may fall below your purchase price before the hold period expires
Warrants expire worthless if the share price never exceeds the strike price
Junior miners may run out of cash, be unable to raise more capital, or fail entirely
Before investing in any private placement, consider reviewing:
Private placements in Canada are governed by provincial securities legislation and national instruments:
Complete your accredited investor qualification to access active financing opportunities.