OTCQX: Helping Canadian Juniors Reach U.S.
Source: Karen Roche of
The Gold Report
Representatives from a few of the Canadian junior resource
companies that are eager to bring more international investors into
their folds took time from their busy schedules to share some of
their views about the OTCQX via this exclusive
roundtable. Participants discussing some of the features of
this "upstart" exchange include Crocodile Gold President and CEO
Mike Hoffman, Rio Alto Mining President and CEO Feisal Somji and
Avalon Rare Metals Investor Relations Manager Ron Malashewski.
The Gold Report:
In 2007, a new marketplace called OTCQX was created to give
international exchange-listed companies an easier entry into the
U.S. capital markets. Known as QX for short, the Q stands for
quality and the X for excellence. In just a few short years, this
venue has grown to more than 150 companies with a combined market
capitalization approaching $1 trillion. It is owned and operated by
Pink OTC Markets Inc., the third largest-equity trading venue in
Many world-class companies have listed on OTCQX, such as the
Paris-based AXA Group, Roche, Adidas, Air France and BASF. This
venue has given Canadian companies LIKE
Avalon Rare Metals Inc. (TSX:AVL; OTCQX:AVARF)
First Majestic Silver Corp. (TSX:FR; OTCQX:FRMSF)
Gold Corporation (TSX.V:SGR)
a convenient and inexpensive way to tap into the vast U.S. retail
market while creating more liquidity on the TSX-which attracts
institutional investors in Canada, as well as the U.S. What factors
contributed to your decision to list on the QX?
We wanted to attract U.S. retail investors to our stock.
Avalon had already attracted a significant number of U.S.
shareholders who were asking us to list in the U.S. to make it
easier for them to trade the shares. The QX was a consideration as
it recognizes established, foreign companies that are already
listed on major exchanges outside of the U.S.
Alto Mining Limited (TSX.V:RIO; BVL:RIO; OTCQX:RIOAF)
, too, decided to list on the QX as a way to open up the U.S.
market to the company. Although many U.S. investors will trade on
the TSX, many others won't or can't. The QX has increased the
number of investors exposed to our company. The major trigger,
however, comes from the new listing requirements and reporting
obligations that the QX provides. A foreign company can now list in
the U.S. by maintaining a listing in their home jurisdiction. This
reduces the exposure, cost and resources required for a traditional
We also appreciated the fact that QX has no
When did you list
Crocodile Gold Corp. (TSX:CRK; OTCQX:CROCF)
on the QX, Mike?
And you, Feisal?
Rio Alto listed in May 2010.
Avalon Rare Metals listed on the QX on August 5, 2009.
Feisal, it's only been about six months since you listed Rio Alto.
What's your experience been like so far?
We've found the people at the OTCQX to be very helpful and very
professional. The listing process was quick and efficient and the
cost was reasonable. The QX staff is quite open to new companies
listing on their exchange.
What has Avalon's experience been with your listing, Ron?
The listing has increased our exposure and recognition by U.S.
investors, particularly with the active participation by the
Principal American Liaison (PALs), which is a party that the
listing company selects to serve as a securities professional
knowledgeable in disclosure requirements of U.S. securities laws
and the most effective investor communications practices. Each
prospective PAL must submit an application to Pink OTC Markets to
show evidence that the firm is qualified to be an OTCQX advisor.
PAL eligibility is limited to a Financial Industry Regulatory
Authority (FINRA) member investment banking firm or American
Depository Receipt (ADR) Bank. The chief role of FINRA-the largest
independent regulator for all securities firms doing business in
the U.S.-is to protect investors by maintaining the fairness of the
U.S. capital markets.)
When you announced your listing, Mike, you said you were looking to
increase your international liquidity as well as expand your
investor base and raise awareness of your company and your progress
around the globe. Have you found your exposure increased as
In the last few months, we have started to trade significant
volumes on the QX, but overall I'd describe Crocodile Gold's
experience with the QX as mixed.
One negative is lack of
access; and, as I suggested, it took a while for volume to pick up.
Slowly it has gotten higher but QX trading is still generally less
than 10% of overall trading.
How would you characterize Avalon's trading volume since this
Trading volume on the QX market has increased significantly when
compared to the basic Pink-Sheet-only listing. (Note: The
marketplace consists of both the issuer-listed OTCQX and
broker-quoted Pink Sheets.)
And what is your sense of how Rio Alto's trading volume has
We believe that the trading we're seeing on the QX is new trading.
By this, I mean that it has not reduced the trading volume from our
other listings. Although the trading volume on the QX is less than
the other exchanges; it's still volume that we wouldn't have been
exposed to before. Of course, the lower trading volume is also a
function of marketing in the U.S., which must be done in
conjunction with the listing.
What can you tell us about how your listing on the QX has affected
access to (and by) U.S. investors?
Although many U.S. investors can and do trade on other exchanges,
we have in the past come across many investors who cannot trade
outside of the U.S. due either to internal policies or just lack of
experience and knowledge on how to trade on the Canadian markets.
We are confident that the QX listing has increased our access to
Many investors and some brokerage firms in the U.S. will not buy,
or are reluctant to buy, foreign companies on foreign exchanges for
a number of reasons. A QX listing provides them with access to
these foreign companies through a local market. The listing
criteria do recognize more transparency and access to information,
because the company already is listed on a major exchange
If you run through the roster of companies in the QX, you'll find
some world-renowned companies-major players, such as Air France,
Adidas, Allianz, AXA, BNP Paribas, BASF, Experian and Roche. And
you'll find them from the four corners of the world-Australia,
Brazil, France, Germany, the Russian Federation, the UK and the
U.S. among them. But of 151 total listings, more than one-third are
based in Canada with average market capitalization in the
neighborhood of $150 million and all but a few in the resources
sector. In fact, it's said that Canada that has become QX's biggest
and most important market. From a single listing in 2007 to nine in
2009, the number of Canadian companies reached 40 in mid-September,
with about a dozen more signing on since then. The majority of
these are small and mid-sized companies. Bottom line, what do you
suppose it is about the QX that is particularly attractive to
small- and mid-cap companies/junior resource companies?
Three things: The access to U.S. retail investors, the ease of
listing and the relatively low cost.
Absolutely. It is a low-cost way to gain access to the large U.S.
markets, particularly those investment firms, retail and
institutional investors that prefer to trade on a local or regional
The main benefit is the piggybacking on your main listing
jurisdiction. As long as we remain in good standing on the TSX and
file all our documents on the QX website, we can maintain our
listing on the QX. This greatly reduces our exposure and our
costs-and these are key factors for small- and mid-cap
As we understand it, companies pay a minimum $5,000 application fee
to establish a listing, and then an annual listing fee of $15,000
plus sponsorship fees. That's chump change by comparison to the
cost of cross listing on the NYSE or NASDAQ, which can top $1
million, particularly given the costs of fulfilling regulatory
As you've suggested, cross listing on the QX an appealing option
in part because it avoids the complex and costly disclosure and
compliance requirements typical of a U.S. stock exchange. Companies
leverage their investment in listing on a qualified exchange, such
as the TSX, by providing the same disclosure documents. Beyond
that, QX requires no SEC Registration, Sarbanes Oxley compliance
and U.S. GAAP reporting.
Thank you for your time and your insights, gentlemen. We look
forward to a follow-up at some point and, in the meantime, happy
Sponsors on the OTCQX
Ron Malashewski, P.Eng., whose professional career spans
three decades, has devoted most of that time to the mining and
minerals sector, racking up experience in a host of arenas
including engineering, project management, strategic planning,
technical and corporate management, investment management and
investor relations. He joined the Avalon Rare Metals team as
investor relations manager in mid-2010, after serving in a
similar capacity with
Great Western Minerals Group Ltd. (TSX.V:GWG; OTCQX:GWMGF)
. Ron's professional and industry memberships include the
Association of Professional Engineers, Geologists and
Geophysicists of Alberta, the Canadian Institute of Mining,
Metallurgy and Petroleum (
) and the Prospectors and Developers Association of Canada
(PDAC). His credentials include bachelor's degrees in physics and
engineering, and an Ontario Prospectors License.
Feisal Somji, CEO and president and of Rio Alto Mining
Limited (formerly Mexican Silver Mines Ltd.) has spent more than
15 years in mineral exploration and development and has been
involved in early stage, late stage and mine development projects
around the world. He also provides expertise in areas of
corporate finance and governance. In addition to his work at Rio
Alto, Faisal is chairman of Prize Mining Corp, as well as a
director, member of the board's Audit Committee and interim chief
financial officer. In addition, he serves Philippine Metals Ltd.
as CEO and director. He has acted as an officer and director of
several other public companies in diamond, gold and platinum
group element assets in Canada, Mexico, Brazil and Africa. He has
also run his own businesses, providing mineral exploration
services to others. Secretary of New Meridian Mining Corp., he
also has been president of Premier Diamond Corp. and Adamas
Management Ltd. and chief financial officer of Diamond Hawk
Mining Corp., as well as a director of Savannah Diamonds Ltd.,
New Meridian Mining Corp., Kitikmeot Geosciences Ltd., Slave Lake
Diamond Corp. and Sola Resource Corp. He earned a Bachelor of
Science degree at University of British Columbia and an MBA at
Queens University. He also holds a diploma in aviation from
University College of Fraser Valley, BC and a commercial pilot's
Michael L. Hoffman, P.Eng., joined Crocodile Gold Corp. in
November 2009 as president and CEO after serving Crowflight
Minerals Inc. Mike is also president and CEO of Kria Resources
Inc. and serves on the boards of Kria Resources, as well as
Castillian Resources Inc., Forbes and Manhattan Coal Corp.,
Aberdeen International Inc. (
, Yamana Gold Inc., Auriga Gold Corp.,
Dacha Capital Inc. (TSX.V:DAC; OTCQX:DCHAF)
Sulliden Gold Corp. (TSX:SUE; OTCQX:SDDDF)
Largo Resources Ltd. (TSX.V:LGO)
. A professional mining engineer with more than 30 years of
experience in mine operations, projects, engineering and
corporate development, Mike also has filled senior executive
positions at Yamana Gold,
Goldcorp Inc. (NYSE:GG; TSX:G)
, Desert Sun Mining Corp., Inc. and Rio Algom. He has worked in
North America, Central America, South America and Africa. He is
an honors graduate of Queens University (B.S. in Mining
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1) Karen Roche of
The Gold Report
conducted this interview. She personally and/or her family own the
following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors
The Gold Report:
Avalon Rare Metals, Crocodile Gold, Rio Alto, Great Western
Minerals, Aberdeen, Sulliden, Largo and Goldcorp.
3) Ron Malashewski, Feisal Somji and Michael Hoffman: From time to
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or members of their families, as well as persons interviewed for
articles on the site, may have a long or short position in
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