In this time of hyper-partisan gridlock, a little-noticed bipartisan bill recently passed by the House of Representatives that has the potential to jump-start American mining projects that have been largely stuck due to a poor financing environment for natural resource firms.
H.R. 2864, the Improving Access to Capital Act, passed by an overwhelming 403-3 vote. It doesn’t get much better than that. Sponsored by Reps. Kyrsten Sinema (D-Ariz.) and Trey Hollingsworth (R-Ind.), the bill would expand the use of Regulation A+ to all SEC-reporting companies. At the present time, Regulation A+, which was created by the JOBS Act of 2012, allows only privately-held firms the ability to raise up to $50 million in an Initial Public Offering. Paradoxically, publicly traded firms, which are already listed and have undergone the scrutiny of the SEC and the investing public, are presently shut out from this form of financing. Such a policy makes absolutely no sense given that publicly traded firms have a demonstrated history of SEC filings, annual audits and a longer history of operations.
Conversely, privately held companies generally lack the history and transparency of operations necessary to instill investor confidence yet are offered the ability to more easily raise capital in a streamlined process. Among other things, Regulation A+ allows both accredited and non-accredited investors the ability to participate in an offering. In other words, most any investor irrespective of financial status may participate. Firms looking to raise capital may post the offering online and advertise the offering in most any medium. Publicly traded natural resource firms, important for national defense needs, desperately need a shot in the arm since Wall Street and the Obama administration have largely ignored the group.
Given the divided nature of Congress, any bill that has such strong bipartisan support should sail through the Senate. And yet congressional infighting over issues such as the debt ceiling, immigration, and tax legislation threatens to put such a bill on the backburner in spite of strong support by both parties. But the fact of the matter is that congressional action isn’t really necessary: The SEC already has the ability to simply expand the use of Regulation A+ to publicly traded firms without Senate approval. It remains to be seen if the Commission will take a cue from Congress and make the necessary changes without having the bill fight its way onto the crowded Senate docket. In light of the commitment by President Trump to put the United States on a path to self-sufficiency, the White House should immediately direct the SEC to review Regulation A+ and act accordingly.
And action is imperative. Natural resource firms provide the building blocks for industry to create products which are essential to our way of life. Over the past twenty years, this country has exported the mining industry overseas and to China in particular. As an example, China currently provides 100 percent of the world’s supply of heavy rare earth minerals. Unfortunately, virtually every product which is currently produced for Department of Defense needs require heavy rare earth minerals. Likewise, every product manufactured by companies like Apple and other consumer goods companies require heavy rare earth minerals. No wonder China isn’t afraid of a potential trade war.
Natural resource firms have largely been shut out of the stock market boom of the last three years. Regardless of the resurgence of many U.S. economic sectors, mining finance is in a depression. Congress and the industries that rely on natural resources have relied on the “free-market” to cure its ills. Which is fine except that countries like China and its state-owned conglomerates don’t abide by the same rules. Expanding Regulation A+ to publicly traded firms would at least allow natural resource companies to utilize a financing tool that has been illogically limited to those firms that have yet to demonstrate a public company track record. It’s hard to see how we will revive a Made in America renaissance without a Mined in America revival. Revising the SEC’s Regulation A+ is the right place to start.
Anthony Marchese is the chairman of Texas Mineral Resources, a publicly traded firm which is developing a heavy rare earth project in Texas as well as reclaiming strategic minerals from coal waste and other environmentally sensitive byproducts.