Lynch said allowing the short-selling of stocks whether they were going up or down was a catastrophe for junior miners.
The Canadian mining industry is at risk of withering away because of short-sellers, according to Terry Lynch, who is the founder of the advocacy group Save Canadian Mining and the CEO of Chilean Metals (TSXV:CMX,OTC Pink:CMETF).
“Junior mining needs capital to find the next great ore discoveries. It’s what we did for 142 years, making Canada the mining finance capital of the world. It’s in a serious point of decline right now and if we don’t stop it now, it could be gone,” he said in an interview with the Investing News Network (INN).
The problem, says Lynch, is a rule change back in 2012 that allowed the short selling of stocks regardless of what direction they were going, whether it be up or down — and the result is a catastrophe for Canadian junior miners.
“Back in 2012 the rule was changed wherein up until then you could only really short a stock if it passed a tick test. In other words it had to be going up, not going down.
“For 142 (the rule) was in place, and in Canada we were a world leader in mining finance. In 2012, they changed the rule and seven years later we’re at 100-year mining lows and there’s a significant problem created by this rule and we need to change it,” he said.
Save Canadian Mining was created by Lynch after he noticed a poor turnout at PDAC in Toronto earlier this year, describing the low numbers on the floor of Canada’s biggest mining conference as “beyond belief.”
“It’s this bad because we can’t raise money, the stocks are crushed. You’re just giving your company away so nobody’s making money as an investor so why would you invest?”
Enter Save Canadian Mining, which Lynch described as a group designed to bring together Canadian mining advocates to make it clear to the government that the rule on short-selling needs to be changed in order to keep Canadian mining alive.
The average investor, said Lynch, can support the cause by visiting the Save Canadian Mining website and understanding the issue.
“Really, we’re just looking for their support,” Lynch said. “If we can change that rule, people will get investing again, there will be liquidity, people will be able to make a profit, and because we’re at 100 year lows, there’s going to be this one-time windfall profit opportunity, which I think will be awesome for the space, and awesome for investors.”
Listen to the full interview with Terry Lynch above, in which he also talks about some of the names supporting Save Canadian Mining, how short-selling is a global issue and how short-selling is affecting more than just the mining industry.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.