Publicly traded mining companies are dumping shares onto the market faster than they have in a decade, and no one blinks an eye.
North American miners raised $2.9 billion in 185 deals in October alone, with gold prices soaring for much of the year and demand for the critical mineral increasing. This is the largest monthly tally since November 2013, according to Bloomberg.
Gold and silver miners accounted for a third of stock trading in October, even though prices for both metals have fallen since October 21.
Still, investors were undaunted. There are cash-chasing transactions happening all over the place. “I can’t think of a deal that’s been struggling for some time,” said Daniel Nolan, vice chairman of National Bank Capital Markets. “The market is very strong as almost everything is oversubscribed and many deals are being expanded.”
It is junior miners, not giants, that raise most of the funds
This record-setting breakthrough was not brought about by large companies dumping large amounts of stock. It came from the little people.
“So far, market activity has been completely dominated by a large number of young miners,” said Peter Miller, head of equity capital markets at Bank of Montreal. There are no big deals by a few big companies, and a bunch of smaller companies are grabbing all the money they can.
One of the biggest financings came from NexGen Energy Ltd., a uranium mining company listed in Toronto, New York and Sydney. They netted C$400 million ($287.2 million) in an acquisition deal, followed by a blockbuster sale of A$600 million ($395.9 million) in Sydney.
The largest precious metals transaction was with Hycroft Mining Holding Corporation, a Denver-based gold and silver producer. They raised $171.4 million and took the top spot in the gold and silver category for October.
Demand is strong as investors who missed out on gold’s soaring prices this year are scrambling for gold. “Investors who didn’t have adequate exposure to this sector this year would have lagged in terms of performance,” said Michelle Carilli, global head of ECM at Bank of Nova Scotia.
That decline in performance is now causing investors to try to rebalance their portfolios, with money moving back into precious and base metals.
U.S. government support and copper prices drive key minerals trade
Demand for critical minerals is soaring, helped by the U.S. government’s expansion into space.
Copper prices near record levels are also a factor. Nowlan said that despite recent declines in gold and silver prices, a combination of support and pricing strength will keep trading going “for some time.”
Miller said metal prices don’t need to be at “stratospheric” levels for these companies to continue selling their stocks, they just need to be “float” enough to warrant market interest.
Bank of Montreal was the busiest advisor on these deals in October, according to Bloomberg data.
Miller said the full lineup for November is already taking shape. This pace is not slowing down. New offers come in every day, and investors don’t turn them down. “We haven’t seen this much capital flowing into this space in a long time,” said John Ciampaglia, CEO of Sprott Asset Management.
More IPOs, SPACs, and equity raisings are expected. “You’re going to see a lot of these companies coming into the market, doing IPOs, SPACs, raising capital. They’re all going to be caught up in this bubble of competition to be the first to go to market,” said Benchmark analyst Subhash Chandra.
Gold stocks currently account for 12% of Canada’s S&P/TSX Composite Index. And in the US, Newmont’s value has doubled this year. Despite the recent decline, the company remains one of the top 10 stocks on the S&P 500.
