Plight of Canadian gold company Banro a study in frontier-market risk – by Niall McGee (Globe and Mail – February 1, 2018)

In the fall of 2012, investors in junior Canadian gold company Banro Corp. had a lot to feel good about. After about a decade and a half of toil, its first gold mine in the Democratic Republic of Congo (DRC) began commercial production.

Banro had the backing of Blackrock Inc., one of the biggest institutional investors in the world. The company had also started construction on a second mine, which was due to come on-stream about a year later.

Meantime, gold bullion was trading around US$1,700 an ounce, only about US$200 shy of its record high. Banro’s own shares were on a roll too, with the company trading at a market value of around $900-million.

But 5 1/2 years later, Banro has crashed. Its shares collapsed to pennies a share before regulators halted trading in November. Then shortly before Christmas the Toronto-based company filed for court protection from creditors. While the company is still operating, its future is very much up in the air. Common shareholders are set to be completely wiped out and creditors owed about US$379-million are facing a major haircut.

“Banro has fallen on hard times,” said John Ing, president of investment firm Maison Placements Canada Inc. “At one time when it was up there, it had a number of different suitors.” But now he says Banro has become a “booby prize.”

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