OTC Markets Newsletter September 2013

How an ADR Works and Why They’re Valuable to Companies and Investors

American Depositary Receipts (ADRs), ownership interests in international securities that are issued by a U.S. depositary bank, enable U.S. investors, ranging from high net worth individuals to institutions, to globally diversify their portfolios in a seamless manner. Traded in U.S. dollars, during U.S. trading hours, through a U.S. broker-dealer, ADRs reduce complexity for investors, who can rely on the depositary bank to manage all custody, currency and local taxes issues. The flow of a company’s information from the home market to the U.S. market provides greater visibility and access to the deep pool of U.S. investors.

How an ADR Works

The below diagram demonstrates how cross-border convertibility between home market shares and ADRs creates efficient U.S. prices and helps to drive liquidity in a company’s home market.



To view our recent webinar on How To Improve Your U.S. IR Strategy Using an ADR and OTCQX, click here.

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Get to Know Your Community: Interview with Paul Huet, President and CEO of Klondex Mines Ltd.

This month, we talk with Paul Huet, President and CEO of Klondex Mines Ltd (OTCQX: KLNDF), about the Canadian gold mining company’s IR strategy and development since joining OTCQX in April. He discusses building the company’s management team, achieving a five-fold increase in average daily share volume, and reaching investors through OTCQX as the company expands its operations.

OTC Markets Group: Tell us about Klondex Mines.

Paul Huet: Klondex Mines is the newest, near-production underground gold mine in Nevada with the potential for long-term sustainable cash flows.  Our main asset is the Fire Creek project in the heart of Nevada gold country, near Elko.  We have a straightforward gold deposit in a mining-friendly jurisdiction with significant onsite infrastructure in place and a strong leadership team with a proven track record leading the charge.  We are currently testing metallurgy of Fire Creek’s mineralized material at a nearby Newmont facility, and expect to begin ramping up to full production in 2015 once the final mining permit is received.

Fire Creek’s current land package is over 93% unexplored and recent discoveries are within close proximity to its underground workings.

Click to read more.

OTCM: Klondex Mines has transformed its business since joining the OTCQX in April last year. Tell us about that.

PH: You’re right we have transformed the business since joining OTCQX in April, both at the corporate level and operationally; we’re a new company now. Shortly after joining OTCQX, the Board of Directors was replaced at the AGM and subsequently set out to build a new management team of seasoned professionals that could advance Fire Creek rapidly and efficiently.

Given my experience operating two profitable mines in the same geological trend of Nevada, Newmont’s Midas Mine and the Hollister mine, I was recruited by the board to serve as Klondex’s President and CEO. I started in September 2012. We have since built a talented team of mining professionals, many of who worked with me in the past.

Initially, we finalized a plan to take Fire Creek into small scale production by way of bulk sample, and that included a financing of $30mm in equity and debt to initiate the program. With the revised plan and clear goals set in place, we raised the capital, and have been successful executing along the path. Our latest milestones include connecting Fire Creek to the NV Energy electrical grid and starting our shipments of mineralized material from our underground exploration program to Newmont.

OTCM: Klondex has achieved an average daily share volume of 47,000 over the past three months compared to 8,900 in the three months prior. What do you think accounts for the recent significant liquidity gains?

PH: Simply, we are achieving the goals we set for ourselves and the market is taking note. We continue to de-risk Fire Creek and have high-grade gold underground. Klondex is going through the process of being re-rated from an exploration company to a near-term producer, with cash flows.

On the market side, our Investor Relations program is more active than it was a year ago. We’ve marketed the company to old, new and potential shareholders in the U.S., Canada and Europe. In addition, three analysts initiated coverage on us since May, expanding the Klondex reach.

Achievements from the operations team in the past nine months include:

  • Two high-grade veins identified
  • Two new zones discovered:
    • West Zone discovered while drilling a geotechnical hole for the vent-raise access
    • South-Main Zone confirmed with a significant gold intercept, previously unlogged
  • Signed toll-milling agreements with Veris Gold and Newmont
  • Grid electric power brought to the site
  • Water management solution has been developed; temporary discharge permit received
  • Escape raise required for bulk sampling is in progress
  • Updated resource estimate is in progress
  • Over 3,000 tons of mineralization for processing into gold & silver shipped

OTCM: How important is the U.S. market to your overall investor relations program?

PH: Clearly the U.S. market offers tremendous potential for our IR program, not only because of its size but because our assets are located in Nevada and the bulk of our personnel are here as well. It makes perfect sense to focus much of our IR effort on developing a U.S. following. This is a process that is only just beginning.

OTCM: How has joining OTCQX helped you achieve your capital market and IR goals at Klondex?

PH: The OTCQX marketplace, as a credible source of information and oversight for potential investors, provides Klondex access to the U.S. It also offers a U.S. marketplace without committing Klondex to the substantial ongoing costs of becoming a U.S. reporting company. That money is better spent on further exploration and development of Fire Creek.

While the TSX remains our dominant exchange, there is no question that the liquidity and demand coming out of OTCQX has been beneficial to Klondex over the past year. And frankly, we expect the importance of OTCQX to grow as we make further progress on our plans to bring Fire Creek into full production by mid-2015.

OTCM: What else do you want U.S. investors to know about Klondex?

PH: I think the most important thing for investors to know is that we are just getting started. This is a pivotal year as we evolve from an exploration and development company to production via bulk sampling, realizing cash flows. The past year has been about regrouping and executing on some key initiatives that were needed to set up Fire Creek for the long-term.

With the first shipment of mineralized material delivered to Newmont in August, it changes our financial requirements. We are focused on completing the NEPA documentation required to begin full production and expect a final permit to be in hand in early 2015. Following receipt of the final permit, we will ramp up operations. Fire Creek is proving to host some of the highest grades we’ve seen in Nevada and, as a result, they will allow us flexibility with regards to the price of gold.

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Newsletter Sponsor CEO Clips

Monthly Trade Summary — August 2013

Marketplace Designations # Securities* Monthly Dollar Volume Monthly Dollar Volume
per Security
Aggregate Market Capitalization
(in Millions)*
OTCQX® 380 $2,332,321,127 $6,137,687 $1,352,225
OTCQB® 3,137 $4,818,062,600 $1,535,882 $300,233
OTC Pink® Current Information 2,830 $6,095,013,984 $2,153,715 $11,513,237
OTC Pink Limited Information 633 $96,133,619 $151,870 $14,766
OTC Pink No Information 3,057 $688,154,897 $225,108 $65,301
Totals 10,037 $14,029,686,228 $1,397,797 $13,245,762
* Selected data as of August 31, 2013.

Events & Sponsorships

OTC Markets Group has attended or will attend the following events to educate investors, broker-dealers, and OTCQX, OTCQB and OTC Pink companies about our marketplaces.

Angel Capital Association’s 2013 Leadership Workshop (October 17-18, 2013)

STA 80th Annual Market Structure Conference (October 2-5, 2013)

Euro Pacific Capital Global Investment Conference (September 10, 2013)

Data Transparency 2013 (September 10, 2013)

Liolios Group 2nd Annual Gateway Conference (September 10, 2013)

The Southern California Investor Conference (August 8, 2013)

Contact us if you are interested in meeting us at one of these events.

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Interview with Cromwell Coulson at OneMedForum

Check out other OTCM Videos on our New YouTube Channel —
OTC Markets TV

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News

Community Bank's Shares Pulled from SecondMarket - CFO.com (August 27, 2013)

Brazil's Minerva to Switch ADRs to OTCQX Market - The Wall Street Journal online (August 13, 2013)

Letter to the editor: OTC Markets Group helps investors, regulators discern treasure from 'trash' - The Northern Miner (August 21, 2013) (subscription required) - Direct link to PDF here.

OTC Markets Group Congratulates Tiptree Financial on NASDAQ Listing - press release (August 15, 2013)

OTC Markets Group Announces Second Quarter 2013 Financial Results - press release (August 7, 2013)

OTC Markets Group Approves Sanders Ortoli Vaughn-Flam Rosenstadt LLP as DAD/PAL for OTCQX Companies - press release (August 2, 2013)

Product Updates

OTC Disclosure & News Service Enhancements

OTC Disclosure & News Service is a Corporate Service that enables companies to widely distribute their news, financials, and investor relations materials to their U.S. investors.  This month, OTC Markets Group will implement the following enhancements to the OTC Disclosure & News Service.

•  

Now Available: Publish Video & Investor Presentations

Companies can now upload video and investor presentations, which are displayed on a company’s quote page and are also distributed through OTCM’s RSS feeds and the homepage of www.otcmarkets.com.

•  

SEC Reporting Companies Can Now File 8Ks/6Ks

Companies will be able to file press releases with the SEC as a Form 8-K/6-K through PR Newswire’s EDGAR filings service — Vintage Filings. Companies may upload filings via www.otciq.com providing a convenient way to comply with SEC disclosure requirements.

•  

International News Distribution Available

Companies can choose to distribute English-language press releases through PR Newswire’s international news distribution service to news and online outlets in the U.K., Singapore, and Canada, available at a discounted rate.

•  

Marketwired Press Releases Redistributed

Companies that use Marketwired to distribute news and press releases are no longer required to upload their press releases separately through www.otciq.com. Marketwired press releases will automatically be displayed on the News Section of a company’s quote page on www.otcmarkets.com, eliminating duplication and ensuring wider dissemination to traders, analysts, investors and the media.

•  

Publish Offering Announcements Under Regulation D and 144A

Companies qualified for exemption from SEC registration under Regulation D or 144A for the sale of shares will now be able to advertise Offering Announcements and Prospectuses to investors on their quote page on www.otcmarkets.com. (SEC Removal of Ban on General Solicitation and Advertising of Regulation D and 144A offerings effective September 23rd).

www.otciq.com is a market intelligence and investor relations portal that provides access to a suite of Corporate Services for companies to effectively share information with investors and monitor market activity. To learn more about OTC Disclosure & News Service and our other Corporate Services, contact Issuer Services at 212.896.4420 or issuers@otcmarkets.com or visit www.otciq.com.

Market Data Updates

•   MSN Money now displays our delayed Level 1 quote data (price and size) and marketplaces for 10,000 OTCQX, OTCQB and OTC Pink securities.

•   QuoteMedia now displays our delayed Level 1 quote data (price and size) and marketplaces for 10,000 OTCQX, OTCQB and OTC Pink securities.

•   The OTC Markets Multicast Data Feed (version 3.0) has been updated to include three new binary channels - OTC Link Trade Channel, Reference Data Channel, Reference Data with Cusip Channel — and additional data fields. The OTC Markets Multicast Data Feed specifications may be found here. For more information, contact our Market Data Services at 212.220.2166 or marketdata@otcmarkets.com.

Regulation & Compliance

FINRA Updates Forms for Private Placement

 

 

In August, FINRA released updates to the Forms used by firms engaged in private placements. The regulatory notice can be found here.

SEC Adopts Amendments to Rule 506 and Rule 144A

 

 

On July 10th, the SEC adopted amendments to Rule 506 and Rule 144A that eliminate the prohibition against general solicitation and general advertising in Rule 506 and Rule 144A offerings. The amendments will be effective on September 23, 2013.  The adopting release can be found here.

SEC Announces Amendments to Regulation D

 

 

On July 10th, the SEC announced amendments to Regulation D, Form D and Rule 156 under the Securities Act. The announcement can be found here. Comments can be found here.

FINRA Amends Trade Reporting Period

 

 

In May, FINRA announced that effective November 4, 2013, FINRA Rule 6622 will be amended to require trades to be reported as soon as possible but no later than 10 seconds after execution. The new rule can be found here.

SEC Proposes Regulation SCI

 

 

On March 8th, the SEC proposed Regulation Systems Compliance and Integrity (SCI) that would revamp the regulatory requirements relating to market center technology systems. The proposed release can be found here. OTC Markets Group’s comments can be found here.

OTCQX - New Additions

8 new companies joined OTCQX in August:

A complete list of OTCQX companies is available on www.otcqx.com.

Our Marketplaces

OTCQX
The Best Marketplace with Qualified Companies

OTCQB
The Venture Stage Marketplace with U.S. Reporting Companies

OTC Pink
The Open Marketplace with Variable Reporting Companies

For questions, please contact OTC Markets Group.
www.otcmarkets.com • 212-896-4420 • info@otcmarkets.com

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© 2013 OTC Markets Group Inc.