As we face the fourth consecutive year of declining commodity prices, we continue to ask ourselves, have we reached the bottom yet? As the mining industry is historically cyclical, we have been bracing ourselves for the eventual rebound in the markets.
Despite the doom and gloom, industry experts are cautiously optimistic. In the fall of 2014, Dundee Capital Markets predicted that mining stocks would outperform the S&P TSX index in 2015. Although mining stocks are still in a slump, some experts are hopeful that mining companies will benefit from the weakened Canadian dollar and dramatically lower energy prices.
At the Prospectors and Developers Association of Canada (PDAC) conference in Toronto in March, PDAC President Rod Thomas surmised that sentiment is definitely more upbeat and the market may be showing signs of a turnaround.
He recognized that it remains difficult to raise money in the resource sector. Although conditions are favourable for acquisitions, buyers are proceeding with caution when looking at M&A transactions.
In January, a slew of gold mining deals hit the market during a short-lived run-up in the price of gold. Romarco Minerals Inc., Detour Gold Corp., Osisko Gold Royalties Ltd., Premier Mining Corp., Asanko Gold Inc., Richmont Mines Corp., Yamana Gold Inc. and Lydian International Ltd. raised more than a billion dollars combined.
While gold company financings have since tailed off, some analysts predict that demand for the recently debuted solid-gold Apple smartwatch could have a noticeable impact on gold prices.
In March, Silver Wheaton’s announcement of a US$800 million bought deal was the talk of PDAC. With this news, we have to ask: is a silver model of the Apple smartwatch in the works?
A significant focus for issuers remains sourcing out alternative forms of financing, such as royalty streaming, strategic partners and private equity.
Based on the recently released survey of Citi and Mergermarket, Charting the course: The future of Canadian M&A in volatile markets, it is expected that private equity will rise in Canada due to the significant amounts of capital that these firms have to deploy, combined with the current level of opportunities.
It has been noted that mining fund X2 Resources has raised $5.6 billion and plans to start deploying cash.
There has also been discussion of tapping into crowdfunding. While operating in a securities law grey area, several crowdfunding proposals are currently being considered by the regulators.
Coming up with creative and exciting ways to attract investors, while remaining National Instrument 43-101-compliant, will likely be a challenge. And let’s face it, mining companies do not exactly bring the same sex appeal that the typical players in the crowdfunding space do.
This article originally appeared in the Spring 2015 issue of Canadian Mining Magazine.
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