Osisko Development Corp.’s (TSXV: ODV) $100 million private placement in December, raised to further the development of its Cariboo gold project in British Columbia, closed out a year of increased private placement financings in the mining sector and on the broader Toronto Stock Exchange and TSX Venture Exchange.
The year started out with a smattering of private placements from SilverCrest Metals (TSX: SIL; NYSE-AM: SILV) Laramide Resources (TSX: LAM; US-OTC: LMRXF; ASX: LAM) and Skeena Resources (TSX: SKE; US-OTC: SKREF) on the TSX and Venture-listed Orezone Gold (TSXV: ORE; US-OTC: ORZCF), Tinka Resources (TXSV: TK; US-OTC: TKRFF) and Cordoba Minerals (TSXV: CDB; US-OTC: CDBMF), which in January 2020 raised amounts ranging between $4.5 to $20 million.
Activity picked up from there, with notable deals including Artemis Gold’s (TSXV: ARTG) $175 million financing in August, co-led by Canaccord Genuity and BMO Capital Markets, which funded the company’s acquisition of the Blackwater project, as well as AEX Gold (TSXV: AEX; LSE: AEXG) reporting a $73 million financing and O3 Mining (TSXV: OIII; US-OTC: OIIIF) locking in a $40 million private deal, both in July.
According to the December 2020 Market Intelligence Group report from TMX Group, the owner of both the TSX and the TSX Venture, miners raised $4.8 billion in private placements, up from $3.4 billion in 2019. Venture-listed mining companies represented 70% of the total amount raised. The trend mirrors a broader one on both exchanges, where public issuers raised $14.5 billion in private placements, a 57% increase from $9.3 billion in 2019. The TSX represented $9.9 billion of that, and the Venture $4.5 billion.
The trend seems set to continue in 2021. According to TMX Group’s February report, publicly traded mining companies raised $1.1 billion in private placements in the first two months of the year — with Venture-listed miners representing $969 million of that — more than doubling the $410 million raised privately by the same time last year. On the broader exchanges, public companies raised $3.1 billion privately, up from $1.5 billion in the first two months of 2020.
Dean McPherson, head of business development and global mining for TMX Group, noted the upswing in private placements has come as the price of gold experienced a meteoric rise, reaching an all-time high of US$2,000 in mid-2020, before consolidating at around US$1,700 an ounce.
“Traditionally the mining investment climate tends to be in windows,” he said. “The window opened up and companies rushed to [it] to get their financings done.”
Braden Jebson, senior associate in the mining group at Torys LLP, said he sees the increase in private placements as part of the years-long trend of retail and generalist investors moving away from the mining space and the sector increasingly dealing with specialist investors.
“Even when general investors are looking for exposure, we think it’s moving more to going through the specialist investor rather than trying to pick a winner,” he said. “So the specialist, mining-focused institutional investors, companies are now able to access them directly. Rather than going through the cost and time of a public marketing deal, the connections are in place to move quickly with brokered private placements.”
The generalist and specialist divide in 2020 was particularly stark. Investor flows into physical metals and gold exchange traded funds (ETFs) were a record-breaking US$47.9 billion, or 877 tonnes of gold, according to the World Gold Council. But flows into active and passive fund strategies were “lacklustre,” according to a September 2020 open letter sent to mining CEOs and boards by 25 major institutional investors, including Sprott, Invesco, Mackenzie Investments, Paulson & Co. and Franklin Templeton.
“The contrast suggests that the appeal of mining equities remains limited to specialist funds and has escaped the attention of generalist investors,” wrote the group, which was comprised of presidents, executive directors, chief investment officers and portfolio managers. “Despite strong performance, mining shares are still episodically inexpensive.”
Michael Pickersgill, a partner at Torys and co-head of the firm’s mining and metals practice, said there’s an upside to this divide. “That trend of generalist investors and retail investors being less and less significant in the books of mining capital raising just leads to an ability to use this private placement tool, and it can be more efficient for the company.”
Private placements tend to be quicker, have simpler paperwork and involve less regulatory review than public offerings and initial public offerings, as issuers don’t need a prospectus offering to complete a private deal.
However, securities acquired under those deals are subject to a four-month hold period, which means they’re usually sold at a discount to issuer’s current stock valuation. “There are commercial considerations for companies issuing by way of a private placement that counterbalance the speed of the model,” Pickersgill said.
According to Jebson and Pickersgill, miners have used private placements to finance exploration, mine development and acquisitions, such as Osisko’s and Artemis’s raises and Aris Gold’s (TSX: ARIS) $85-million private placement in late November, which it’s using to modernize and expand its Caldas Gold mining operations in Colombia. As well, they noted, a chunk of the private placement deal numbers are senior miners who’ve chosen to take strategic equity positions in junior miners with promising projects.
The December TMX report also noted new mining registrants on the TSX and Venture had increased in 2020; with a total of 57 companies joining the exchanges (48 listing on the Venture and nine on the TSX), in comparison to 35 in 2019 (28 on the Venture and seven on the TSX).
—Kelsey Rolfe is a free-lance writer in Toronto and has written extensively about the mining industry.
*For more data on capital raisings, please consult the database of our sister company, Mining Intelligence. www.miningintelligence.com.