Analysis: Canadian miners see signs of thaw in equity financings

Thu Oct 4, 2012 12:33pm EDT
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By Euan Rocha

TORONTO (Reuters) - A sudden squall of equity deals arranged for Canadian junior miners signals a potential thaw in a year-long freeze on new financings that has held back the pace of mining exploration.

Over the past year, the flow of bought deals - a type of equity financing commonly used by early-stage miners in Canada - slowed to a crawl as the euro zone debt crisis and a pullback in emerging economies fueled market uncertainty.

Equity financings are the lifeblood of early-stage mining companies, which rely on them to fund their projects, and when economic fears paralyze markets hundreds of Canadian miners and explorers are often deprived of the capital needed to survive.

Mining stocks have now started to bounce back after falling more than 40 percent over the past year, reflecting a brighter macroeconomic outlook. And the S&P TSX Metals & Mining Index is up more than 25 percent since July, giving some early-stage miners confidence to wade back into equity markets.

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," he said.

Sandstorm Gold Ltd was one of the first to take the plunge. The company, which recently raised C$150 million ($153 million) for itself, focuses on arranging production-sharing, or so-called streaming, deals to fund mining projects of others.

"Our financing was somewhat of a bellwether for the rest of the industry to see that financings can be done, and investment banks since then having been going around trying to convince mining companies to raise equity," said Nolan Watson, chief executive of Sandstorm.   Continued...