Funding Floods into Small Miners, Stocks Soar
So far, 2012 has been a tough year for small, early-stage mining operations, but all of a sudden their luck has changed.
Equity financing is the make-or-break aspect of early-stage mining companies. Without sufficient inflows of capital, they have no way to fund the projects that eventually drive earnings as ore is extracted.
When economic fears paralyze markets, hundreds of small Canadian mining companies immediately feel the effect. With the euro crisis, debt ceiling crisis, worries about the fiscal cliff, pullbacks in emerging markets and all of the other uncertainties in the global economy over the past year, small miners couldn't secure much funding.
About $400 million was raised through fewer than 30 deals in the spring and summer of 2012. That is compared to roughly $2 billion raised via 80 deals a year earlier, according to Orenine.
With signs of stability in the global economy -- and silver and gold prices soaring -- all of that is about to change. The S&P TSX Metals & Mining Index is up more than 25% since July, and miners are chasing equity funding as investors search for new opportunities.
Tyler Swan, a managing director in equity capital markets at CIBC, expects a flurry of financings in the months ahead: "There is a large pipeline in place, of companies looking to come to market before the end of the year."
Premier Gold Mines, Torex Gold Resources Inc and Labrador Iron Mines Ltd are already on the move. Ivanplats and Potash Ridge are positioning themselves to pick up equity financing as well. The potential deals will top $750 million combined.
The real question is, how long will this window of opportunity stay open? All of the economic concerns in the past year are far from resolved.
Richard Steinberg, head of securities and M&A at Fasken Martineau in Toronto, stated: "A lot of people are optimistic and are hoping the window will extend for some time, but I think markets are still fairly volatile."
"There is nothing better than being first in line," he said. "Whether the window will extend to allow additional offerings by other similarly situated mining companies remains to be seen."+12
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