Flags of Convenience? Ouch!

The following is the English translation of an article in Spanish that was published by Agencia EFE, S.A, founded in 1939. EFE is a Spanish international news agency, the major multimedia news agency in the Spanish language, and the world’s fourth-largest wire service after the Associated Press, Reuters, and Agence France-Presse.

The draft was originally aimed at one “zombie” operating in Spain but morphed into a critical look at mineral exploration companies listed on the TSXV.

In the past two months, the Spanish version has been published by at least these sites: clarin.com; diariolibre.com; efe.com; elbuencomerjerez.es; eldiario.es; embajadadepanama.com.co; es.finance.yahoo.com; es.sports.yahoo.com; es-us.finanzas.yahoo.com; es.vida-estilo.yahoo.com; granjaeltioisidro.es; holanews.com; infobae.com; laconexionusa.com; lajornada.ca; luznoticias.mx; magazinelatino.com; miningwatch.ca; mobilnews.mx; msn.com/dinero/noticias; noticias.alianzanews.com; noticiasextra.com; paopin.cl; petrol.news.net; portalpolitico.tv; pulsoslp.com.mx; quiosco.com.do; raleigh.quepapanoticias.com; remamx.org; restaurantathletic.es; santotomasdeaquino.es; solealpantheoncollection.it; theworldnews.net; vision2020noticias.com; ye-music.fr;
34 and counting…

Toronto (Canada), Oct 13, 2020 (EFE)
Canada has become a “flag of convenience” for mining exploration companies around the world, the equivalent of Panama or Liberia in the world of shipping companies, to the point that hundreds, many operating in Latin America and Spain, are “zombie” companies with no real activities, according to experts consulted by EFE.
The latest data from the TSX Venture Exchange (TSXV), the main Canadian venture capital exchange for emerging companies, indicates that almost a thousand mining exploration companies are listed in this market, whose headquarters are in the Canadian city of Calgary and which carries out all its operations in electronic format.
Mining exploration companies on the TSXV have a market capitalization of C $35.87 billion (US$ 27.08 billion), according to figures released in August 2020 by the TSXV.
But according to experts consulted by EFE, hundreds of these mining exploration companies are companies that do not meet TSXV’s own requirements to be listed on the market and that in many cases only serve for their executives to maintain a “high lifestyle.”
Tony Simon, co-founder of the Venture Capital Markets Association and president of Seguro Projects, a company that options mining properties and mineral rights, told EFE that the problem is rampant in the Canadian mining sector.
Simon is the one who popularized the use of the term “zombie” company in the sector in 2015 when he found that hundreds of mineral exploration companies listed on the TSXV did not comply with the rules of the exchange regarding the requirements for working capital.
“When I did my first study of the exploration companies registered on the TSXV but with negative working capital, there were more than 600 companies that did not qualify according to the TSXV’s own Corporate Manual. Specifically, Policy 2.5”, he explained.
And since then, the number has continued to rise.
“I called companies with negative working capital zombies because they are dead but they are still running,” he told EFE.
Mickey Fulp, known in the industry as “the mercenary geologist” (www.mercenarygeologist.com), agrees with Simon on the problem posed by “zombie” companies in the Canadian mining exploration industry.
“A ‘zombie’ company is a lifestyle company that pays its executives and directors but has significant negative working capital and has not carried out much or any exploration for years,” Fulp told EFE.
“At the same time, they raise funds when they can to pay salaries, general and administrative expenses, accounting, registration costs, lawyers, auditors, office rentals, etc. It’s what I call ‘mining the stock market,'” Fulp added. Fulp is a geologist with more than 40 years of experience as an economic geologist who has worked in America, Europe, and Asia.
“And there are many of these companies on the TSXV,” he concluded.
As Simon and Fulp explained, one of the TSXV standards that these companies violate is the requirement of “adequate working capital or financial resources greater than $50,000 and an amount required to maintain operations and cover general and administrative expenses for a period of 6 months.”
The permissiveness of the TSXV towards mining exploration companies that do not comply with the regulations is proof of the scant interest of the Canadian authorities to rein in a sector that operates mostly outside of Canada and that has been denounced on numerous occasions by human rights organizations and environment.
Jamie Kneen, the spokesperson for Miningwatch, an NGO that acts as a watchdog of operations in the Canadian mining exploration sector, explained to EFE that the problem of “zombie” companies in the sector is a consequence of the fact that Canada is “a flag of convenience” in the sector.
“It’s like Liberia or Panama for shipping companies. Canada provides the flag of convenience but we do not require them to follow precautionary measures. That is why mining companies from other countries come to register in Canada,” Kneen said.
The experts consulted by EFE pointed out the little interest of the Ontario Securities Commission (OSC), where the TMX, the company that owns the TSX Venture Exchange (TSXV) is located, in acting against these “zombie” companies.

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