The development and expansion of companies has always depended on the acquisition of capital, either through private funding, or through distribution of equity through capital markets. Recently, the issue of volatility in the price of raw materials has forced much of the mining industry into collapse amid falling gold and silver prices. Recently we were visited by Sauder alumni Nolan Watson, whose company Sandstorm, has seen it’s stock plummeted to a 52 week low of $2.45 as of Nov.4th. Being a public company, Sandstorm has relatively easy access to capital in order to fund ventures and expand, however they also must be transparent in releasing their financial information and remain accountable to shareholders and the public. This unfortunate example of falling share prices highlights the sensitivity of the market to changes in external factors, as the US economy begins to recover and interest rates increase, we have seen gold prices drop so dramatically that they have forced many junior mining companies out of the market. However, Mr. Watson has positioned his company to capitalize on the struggling market, as Sandstorm has consolidated considerable cash in order to purchase undervalued assets in preparation for the eventual resurgence of gold. The focus on accumulating cash also functions to provide Sandstorm a safety net on which it can rely on to sustain operations throughout the downturn without having to sustain debt in order to function. The capital markets are a complex place with a great degree of uncertainty, however it proves fundamental to economic growth and expansion.
Sources:
http://www.vancouversun.com/business/story.html?id=10151471
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