How Family Offices and Angels Invest in Metals and Mining Crowdfunding

Gold ingots
Gold ingots

Natural resources like minerals and metals are used in all major sectors of a country’s economy. Based on statistics released by the International Council of Mining and Metals (ICCM), an increase in the demand for minerals is witnessed when a country’s urbanization gets to 30 percent and the per capita income is between 5,000 and 10,000 dollars per annum. Countries such as India, Brazil and China have already reached these levels which explain the rising demand for minerals over the last few decades across the globe. The mining sector has experienced substantial growth. Between 2000 and 2010, the industry grew from US$ 214 billion to US$ 644 billion.

These trends have evoked interest among investors in natural resources. Though it may be hard to quantify, there is rising interest in precious metals such as gold and silver among institutional investors which include family offices, angel investors and pensions. Every person wants to know where the bull market went and whether they are late to invest in gold. Statistics indicate that gold is not featured in portfolios of most institutional investors. There is huge opportunity out there for investors to venture into this market. Gold is among the top three metals mined in 2011 along with copper and iron ore, accounting for 68 percent of the value of minerals extracted globally during that year. Other minerals were rock, phosphate, diamonds and other metals.

Recently, crowdfunding has become an option for companies seeking funds for their mining projects and for angel investors desiring to invest in the industry.

ExplorationFunder is one of the crowdfunding platform founded in 2013 to connect new mining companies with accredited investors. Its co-founder and CEO hopes the platform will gain popularity among companies dealing in natural resources. 


The first equity crowdfunding website, KlondikeStrike of Canada, set to launch this 2014, will be linking mining firms to accredited investors. According to its promoters, the distinctive mining project is to cost between 500 and 10 million dollars.

Some companies have succeeded in raising funds within 20 days in 2013. A mining firm called Planetary Resources crowdfunded $1 million through Kickstarter. The firm will use the funds to launch a space telescope in order to identify possible asteroids ideal for mining.

Family Offices, Angel Investors and other institutional investors that invest in physical gold bullions should not do it for speculative purposes. Rather, it should be for its holding value. Physical gold bullion is the perfect way to own gold and the best way to maintain money value because the currency values fluctuate and even fall.

For instance, Universal Services Inc is an international multi-family office that deals with fund administration, real estate, financial services, and precious metals. From the initial days of its operations, partners acknowledged gold as an important component of balancing the family office’s portfolio through the bear and bull market cycles. The family office established Universal Gold Limited in 1990 as an offshore platform for conferring equity ownership of hard bullion gold. Diamond Investment Group is another company that focuses on precious metals including gold, silver, platinum and diamonds. The group provides investor services related to Venture Capital, Family Office and Angel Investing.


Angels and Family Offices Invest in Precious Metals



Today, major investments in precious metals are in gold and silver in the form of coins and bullions. Angels and Family Offices should consider investing in precious metals and other minerals because the value of money will most likely decrease quickly against the value of precious metals such as gold and silver. Such decline is occasioned by government deficits and the need to print more money in order to fund those deficits.

In times of financial instability, precious metals are the best way to preserve value of wealth. For more than 5000 years, gold served as money and exceeded the life of any paper currency in history. This makes it an asset that loses no value in actual terms. Even so, it is hard to find consistency in physical gold bullion since banks push-off indexes on gold and not on the bullion itself. However, on the global platform the purchase of Chinese gold picked significantly at the beginning of 2014 even as demand for physical goldremained strong, closing at a peak price of $1,245.70 per ounce. This was the strongest level experienced since 17th December, 2013.

For an investor, owning collectible bullion that is accessible and outside of the banking system is the best approach to wealth protection. More so when an investor’s return on investment faces risk due to fragility of a banking system. Ideally, the percentage that is held up in precious metals should be between 15 and 25 percent, and this varies from one investor to another.

For Family Offices managing generational wealth, there is a need to invest in gold and other precious metals to retain and grow the assets for coming generations. Due to currency printing, investment tools such as property and stocks have increased over the years creating a considerable amount of private wealth. However, the delicate state of world economy today makes it hard to preserve wealth in this format because the value of stock and property declined by 75 percent over the last 13 years as a result of credit and inflation. These changes call for a shift towards more secure and long-term wealth preservation strategies.



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