April 13, 2021
The Northern Miner reports that the surge in private placements in the mining sector is set to continue this year. Citing TMX Group’s December 2020 Market Intelligence Group report, the publication noted that in 2020 miners listed on TSX and TSX Venture (TSXV) raised $4.8 billion in private placements in comparison to $3.4 billion in 2019.
According to TMX Group’s February report, the first two months of 2021 have seen heightened activity in the sector—with venture-listed miners representing $969 million of the $1.1 billion raised in private placements for publicly traded mining companies. This figure is more than double the $410 million raised privately within the same timeframe from last year.
Speaking to The Northern Miner on private placement trends in the sector, senior associate Braden Jebson told the publication that although retail and generalist investors have shifted attention away from mining, interest is picking up among specialist investors in the area.
“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,” Braden 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.”
Partner and co-head of Torys’ mining and metals practice Michael Pickersgill pointed out that there is an advantage to the emerging divide between specialist and generalist investors.
“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,” Michael said.
While the private placements process is often easier to navigate than public offerings and initial public offerings, Michael pointed out that there are still “commercial considerations” linked to private placements such as the four-month hold period on securities.
“There are commercial considerations for companies issuing by way of a private placement that counterbalance the speed of the model,” Michael said.
Michael and Braden further noted that not all private placements in the sector are used to fund exploration, mine development and acquisitions—many are opportune senior miners that have taken on strategic equity positions in up-and-coming junior mining companies.
You can learn more about Torys’ mining work by visiting the practice page.