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Small company trying to help raise big debt for tiny Canadian explorers

A small Canadian company with an unclear track record is promising to help a couple of nano cap explorers source loans from the U.S. that, in sum, are well beyond their market capitalization.

The firm, Isatis Capital Group, signed an arrangement in late April to help raise US$10 million in high-interest debt for First Mexican Gold Corp., and more recently it agreed to try to source a US$13.5 million high-interest loan for East Asia Minerals Corp.

The sums of debt being considered are multiples of the market valuations of the juniors, which do not own major assets. First Mexican Gold, after its shares skyrocketed on the April loan news, has a market capitalization of about US$2.2 million, and East Asia Minerals has a market capitalization of about US$1.9 million.

How much money Isatis, not well-known as a mining sector financier, has arranged in the past is unclear.

Yves Legault, a partner with Isatis, said he had done several deals in the past. But Legault, reached by phone June 1, declined to name them and the brokers he worked with, saying the information is proprietary or subject to nondisclosure agreements.

He said First Mexican and East Asia are the only two public companies he is doing business with, and otherwise, the companies that use Isatis are private. "All the other ones are private venture funds, private hedge funds ... sizable private companies," he said.

First Mexican has yet to receive funds through its Isatis agreement. Legault said the arrangements typically take four months to go through.

First Mexican President and CEO Jim Voisin told S&P Global Market Intelligence that the company expects funds to start flowing in June in US$2 million tranches, citing financial statements.

East Asia Minerals Chairman and CEO Terry Filbert could not be reached for comment on the Isatis arrangement as of press time.

That the debt will come through is no sure thing. Legault said in both cases that sourcing it was still in the works, and he partners with brokers in the U.S., which source debt under a U.S securities rule that allows for exemptions in raising funds from accredited investors.

Legault said Isatis and its partners do not own shares in the companies it works with, and it is paid through fees on an hourly basis and according to certain milestones. Legault emphasized that Isatis itself does not raise cash.

"We are financial architects," he said.