World’s first security token backed by an African asset
The offset agreement between Global Li-Ion Graphite Corp.(LION.CN) and Swiss EMX has set the pace in the African investment arena. It represents a new kind of investment, a security token that will be backed by an African asset.
Which asset, how is it African, and why is it a unique opportunity?
LION is restarting its mining project in Madagascar which makes 2019 an exciting year for the Ambato Arana graphite mines. Once the compliance measures per Madagascar’s regulatory frameworks are in place, the establishment will be good to go. Global Li-Ion has appointed ECG Auguste to carry out the environmental and social impact assessment. The environmental consultant boasts of a 25-year track record, and with its team having ten years of experience in the field, it is an asset for LION.
The company has also appointed Tom Cushman as the resident manager to lead its operations in Madagascar. He has a vast experience in helping foreign investors navigate the Malagasy business environment as the Managing Director of Richfield Investor Services. The company focuses on minerals and mining. It also offers logistical and administrative support.
Mr. Cushman’s input will go a long way in providing the support that LION requires in the new mining venture.
Meanwhile, the Ambato Arana project will give Africa a new face once the project is underway. Many industries in the motor vehicle sector are now turning to electric vehicle (EV) production. This signals a significant market demand for graphite and lithium in the near future, as demand for EVs soars. For example, the United Kingdom has issued a ban on petrol and gasoline vehicles by 2040, and manufacturers like Tesla and Renault have already ventured into producing EVs.
New opportunities through fintech
Swiss EMX has looked at the Ambato Arana mines project from the perspective of financial technology (fintech). Using blockchain technology, the company believes it will be able to facilitate the trade of the new commodity through smart contracts.
After graphite and lithium, among other resources, were listed as critical for national security in 2017, Swiss EMX believes there is an opportunity to set transparency in the e-mineral market for the commodities.
The bigger picture in this new agreement is how Swiss EMX seeks to introduce a security token which will be the first of its kind — powered by Western security (blockchain) and backed by an African commodity (graphite). This gives investors another opportunity to invest in Africa.
A graphite-backed security token will open new doors for investors using the blockchain technology. The first risk it averts is the fear of money loss through a scam. A study by Statis Group shows that 80 percent of initial coin offerings (ICO) conducted in 2017 were purely fraudulent. This makes a security token trustworthy, given the fact that it is a legally defined financial mechanism.
Investors can easily buy this token with cryptocurrency, which makes it an open arena for anyone in the world to venture in.
Swiss EMX intends to first sell the security tokens to investors, a plan that is underway since the offset agreement was signed.
The symbiotic advantage
Global Li-Ion will need money to relaunch the mines. On one hand, the $250,000 payment Swiss EMX has promised to make in good faith will be a boost for the mining company. It is this mutual benefit that prompted LION into agreeing to supply Swiss EMX with 10,000 tonnes of graphite.
On the other hand, Swiss EMX is at an advantageous position as it can use graphite as a physical asset to back up its security token. The purpose of the token is to increase liquidity in the e-metals market which has the potential to be a deal changer. The company claims the cutting-edge technology will streamline transactions and delivery between key market players.
Will this move see Swiss EMX win the trust of the consumer market?
Once the token is launched, Swiss EMX will be a pacesetter in the market price of the commodity, starting off with trading the token on regulated exchanges. The benchmark price set by tokens will give retail investors something to trust and a definite figure.
Retail investors will have the opportunity to purchase tokens and this could be a good deal for those already in the EV manufacturing company. They could also get a chance to acquire the tokens as early as now and at a later stage, as well as redeem the tokens for real graphite when the demand increases.
At the moment, it will be a wait-and-see for many investors. For those who will buy now when others are fearful, it will be all smiles when everyone will be scrambling to invest in the future.
By having an African asset back a security token, Africans in the mining sector will call it a win when job opportunities arise. For Madagascar, the investment is economic empowerment.
For LION, Swiss EMX is heaven-sent, having to provide capital for the relaunch of the Ambato Arana project. Swiss EMX will invest in the future and give retail investors something to trust as it will return value once the market bursts into life.
