Small mining companies have enjoyed a decade long commodities boom. But now, many have long spent the monies raised via the equity markets and are struggling to come up with new cash to fund operations.
About $400 million was raised through fewer than 30 deals in the spring and summer of 2012, compared with roughly $2 billion raised via 80 deals a year earlier, according to Oreninc. Orenic tracks financing activity among junior miners listed in Canada on the TSX and TSX-V.
With declining share prices and volatile markets the access to capital for junior mining companies is tight. But the situation may be getting better.
In what is clearly a “show me” market, a number of junior exploration and development companies have managed to attract capital this fall. Primarily development stage gold and silver companies on the heels of strong drill results.
Recently, companies including Pilot Gold (Stock Profile – TSXV:PLG), Balmoral Resources (Stock Profile – TSXV:BAR & OTC:BALMF), and Torex Gold Resources (Stock Profile – TSX:TXG) have announced healthy bought-deal financings.
Although the situation is improving, the Prospectors and Developers Association of Canada estimates 80% of Canadian mining companies are struggling to raise capital. This climate has forced some miners to abandon the equity markets and look toward non-traditional funding sources.
In response to the market malaise, some junior mining companies have turned to the debt markets to fund operations and development projects. While others are looking to strategic partners and royalty streamers like Sandstorm Gold (Stock Profile – TSX:SSL & NYSE.MKT:SAND). In today’s market, some form of connection to off-take is becoming an important advantage to have in securing capital.
Raymond James mining analyst Brad Humphrey writes, “For the junior developers we have adjusted our P/NAV multiples (down) to reflect a higher associated funding and development risk.”
Ivanplats, the mining company founded by billionaire Robert Friedland, began its long-awaited process to list on the TSX. It was reported the company will raise at least $300-million at $4.75 a share – a move that some think, if successful, may reignite the mining equity markets.