Miners have raised $3.6-billion worth of equity in Canada since the start of September, according to FP Infomart, with gold and silver miners leading the charge.CHRIS HELGREN
Canadian miners are capitalizing on soaring metals prices by selling billions of dollars’ worth of shares, ending a multiyear financing rut that brought many junior companies to their knees.
Miners have raised $3.6-billion worth of equity in Canada since the start of September, according to FP Infomart, and gold and silver miners are leading the charge, fuelled by soaring prices for their underlying metals. The price of gold has jumped 65 per cent this year, and the price of silver is up 82 per cent over the same period.
The financing rush is a relief for many junior and mid-sized miners that have been starved of development capital, preventing them from finishing mines and exploring for new reserves. The list of companies selling shares includes Skeena Resources Ltd. SKE-T, which just raised $144-million to develop its gold and silver project in British Columbia’s Golden Triangle, and Highlander Silver Corp. HSLV-T, which recently raised $86-million to advance its San Luis gold and silver project in Peru.
Investor demand has been so strong this fall that financings are now routinely upsized. Blue Moon Metals Inc. MOON-X set out to raise $60-million but boosted its deal size to $75-million, and Collective Mining Ltd. CNL-T increased the size of its offering to $125-million from $100-million.
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Yet demand has turned so feverish, so quickly, that there are already questions on Bay Street as to how long this financing window will be open. Globally, there are even concerns that a bubble is forming for gold and silver because, in some cases, mining share prices resemble meme stocks early in the COVID-19 pandemic.
For now, though, demand for mining financings is real and broad-based. For years, generalist fund managers that invest in a range of sectors had minimized their exposure to mining, spooked by volatile commodity prices and the environmental, social and governance movement.
Lately, though, they’ve been buying into share sales again, said Chris Dale, head of equity capital markets at National Bank Financial. Precious metals prices are so hot that miners – gold miners in particular – are driving the S&P/TSX Composite Index’s 23-per-cent gain this year, which means generalist investors need to keep adding to their mining positions simply to track the market.
At the same time, there has been significant hedge fund demand for new issues, said Ilan Bahar, co-head of global metals and mining at BMO Nesbitt Burns. The sector’s returns have become so lucrative that short-term investors are wading back in and providing liquidity for financings.
And then there are retail investors, who also are showing more interest.
For decades, junior mining was viewed by speculative retail investors as a great place to earn outsized returns, but so many got burned when the commodity supercycle crashed in 2012 that they vowed to never touch the sector again, turning their attention instead to sectors such as cannabis, technology and cryptocurrency assets.
While the mining sector benefits from their renewed interest, a sharp market correction could also spook them all over again, with long-term damage that could more than offset the recent gains.
Another concern: The good times haven’t been evenly distributed. Gold and silver companies have benefited but, until recently, critical minerals miners were not seeing the same level of euphoria, limiting their ability to raise money.
That is starting to change, said BMO’s Mr. Bahar, with growing investor interest in other commodities such as copper, uranium and rare earths. But if precious metal prices keep climbing, it could suck capital away from the critical minerals projects that the federal government keeps touting.