Bridging traditional investment with cryptocurrencies? One Canadian miner's story

On Monday, junior uranium explorer Madison Metals released the results from its agreement with a Bahamas-based company specialized in administering the tokenization of real-world assets.

CEO Duane Parnham doesn't regret this experiment in the world of cryptocurrency, although the results don't compare to more traditional ways of raising cash in the mineral exploration sector.

"We've received a bit of funding from it …for a junior exploration company, any capital that comes in is always welcome," said chairman and CEO Duane Parnham, whose company explores uranium deposits in both Canada and Namibia.

In a 2023 agreement, Madison Metals sold parts of its future production of one of its deposits to Sanmiguel Capital Investment, which was then provided for the world's first uranium-backed tokens.

These went online late last fall, "forever changing how uranium is traded, bought and sold," claimed Sanmiguel Capital Investment in a November press release.

Each token, managed by the company Uranium3o8, represents one pound of Madison Metals' future production of uranium in Namibia, to be delivered over the next ten years.

The move is part of a rising trend to link cryptocurrencies to real life assets including real estate, art or commodities. 

While there's a growing number of gold-backed tokens already on the market, cryptocurrencies linked to critical metals are rarer.

"The idea was to broaden the audience for junior mining and provide an investment thesis that historically has never been available to an investor in the cryptocurrency world," said Parnham. 

A few months after the tokens entered the market, Parnham says "the theory proved itself successful," although perhaps not quite as lucrative as he had hoped for.

"It's innovative. It has challenges, like any innovation does," he said. "But I strongly believe that digitization of real world assets is a movement that is going to be significant in today's world and in the future." 

Why turn to blockchain? 

Jeremy Clark, an associate professor at Concordia University who specializes in blockchain technology, says he's heard a lot of people discussing how digital tokens could be used in the critical metals mining industry, but "never of a project that actually went out and did it."

"I would commend [them] for the experiment, and trying to see whether it works or not," he said. 

Clark says there are many reasons why companies might want to experiment with digital currencies linked to real world assets.

"The main advantage of blockchain is that once you have an idea of what you want to do, you can quickly deploy it and it's a very secure platform," he said. 

"Technically you don't need permission in the sense that the market will run by itself on a blockchain," he added. 

Clark stresses that companies still need to go through the normal regulatory process and register with their local securities commission, but that once those steps are completed, there's less red tape than in traditional markets. 

"Once the regulator says go, you could be trading in 30 minutes, and you set it up once and you walk away, and then it's done," he said.

Whether the crypto market will translate into a new pool of investors remains to be seen, according to Clark.

"It could be that you're appealing to institutional traders who are just using a different platform… 

"Or it could be a new class of investors that wouldn't do this type of speculation if it meant going through capital markets, but since it's coming on their home turf, which is the crypto market, then they might try and do it," said Clark. 

On Monday, Madison Metals released an update on its partnership with Sanmiguel Capital Investment. 

It confirmed it had received funds since the tokens went online in November, at an average price of US$68 per pound of uranium.