KETCHIKAN, Alaska — Heatherdale Resources, the company exploring for copper, gold, zinc and silver at the Niblack Project site on Prince of Wales Island, has reached a $3 million financing deal with a fund representing Chinese investors.
The Sino-Canada Natural Resources Fund will provide a $3 million investment with a two-year term and an annual interest rate of 8 percent. The investment also can be converted into common shares in Heatherdale Resources, according to Thursday's announcement about the agreement.
The funding will be used to continue Heatherdale's exploration and development work at its two Alaska project sites.
In addition to the Niblack Project, Heatherdale also owns 60 percent of the Delta Project that's exploring for copper, lead, zinc, silver and gold south of Tok.
"We believe Heatherdale's projects and management team are world class and fit within our strategic vision to support the growth of high potential resources assets," said Thomas Lau, managing partner of Sino-Canada. "We believe our capital will support Heatherdale's future work with positive results and look forward to helping Heatherdale reach new milestones."
The agreement allows Sino-Canada to nominate one person to Heatherdale's technical advisory committee, according to Thursday's announcement. When Sino-Canada attains "certain share ownership or voting conditions," it will be able to nominate one person for appointment as a Heatherdale director.
"We welcome the experience of Sino-Canada Fund to Heatherdale's technical advisory committee and look forward to developing a positive working relationship to help advance our projects to the next stage," said Heatherdale CEO Patrick Smith in the prepared statement.
Heatherdale Resources, which is associated with the global Hunter Dickinson Inc. mining group, is a Vancouver, British Columbia-based public company listed on Canada's TSX Venture Exchange.
Heatherdale is in a class of mineral exploration companies known as "juniors" that work to bring projects closer to actual production.
According to Natural Resources Canada, junior companies don't produce minerals or receive a large part of their income from production or other businesses. And, their principal source of exploration funding is through issuing shares.
Heatherdale's deal with Sino-Canada comes at a time when Canada-based junior mineral exploration companies are facing difficult capital markets while Chinese entities remain keenly interested in investing in natural resources such as oil, natural gas, and a variety of minerals.
Heatherdale has invested about $28 million on the Niblack Project site since becoming involved there in 2009.
On Thursday, Heatherdale's stock price of about 14 cents (Canadian) per share was down sharply from its May 2010 peak of $1.81, and its 2012 high of 49 cents in February.
Heatherdale isn't alone.
In November, the Canadian Press reported that a "gloomy" global economic outlook was knocking down market values of junior mining companies listed on the TSX Venture Exchange, making raising cash more difficult.
Sean Thompson of Heatherdale Resources' investor relations department noted economic conditions in describing the share-price hits that he said most Canadian juniors exploration companies are taking.
"It's just because of the global macro picture," Thompson told the Daily News. "You've got problems in Europe; the U.S. fiscal cliff; and the threat of (China's economy) slowing -and China is a major, major demand source for metals and commodities.
"Investors just haven't been taking the risk," Thompson continued. "Therefore, the risk capital to move projects forward to drill and expand has just not been there. It's been really challenging for juniors."
Despite the global economic slowdown, Chinese entities continue to seek investment opportunities in mineral resources.
The South China Morning Post reported in October that mainland Chinese firms had spent about $6 billion buying into Canadian mining companies since 2008.
According to Thursday's announcement, Sino-Canada Natural Resources Fund I is a private equity fund that's registered in the Cayman Islands. Managed in Hong Kong for private investors from China, Sino-Canada is focused on "Canadian listed and private companies that develop and operate natural resource projects (mining, oil & gas, forestry) worldwide."
Thompson said Heatherdale is "fortunate that we're able to get this money and move our project, the Niblack Project, forward and add value."
Rick Rogers, executive director of the Resource Development Council of Alaska, said Thursday that an influx of outside capital is good for the state.
"There's a lot of efforts by the Alaska Department of Commerce and Economic Development to encourage investment in our state, whether it's from the Lower 48 or other countries," Rogers said. "It helps grow our economy and employ Alaskans."
Rogers added that outside capital is involved in mining, fisheries and other industries across the state, and Alaska wouldn't be where it is today without outside investment.
He said that he and other Resource Development Council members had the chance to visit the Niblack Project site earlier this year.
"It's really an exciting project," said Rodgers, adding that it takes a lot of capital to move a project like Niblack to an "actual permitted and operating mine that can employ a lot of folks from Ketchikan and elsewhere.
"It's good to see them moving forward, and having the capital to keep making progress on that," he said.
Information from: Ketchikan (Alaska) Daily News, http://www.ketchikandailynews.com