There’s a new appetite for equity financing in the global mining sector, as investors tiptoe back into a market that has fretted about funding for the last six months.Boosted by firm metals prices and a less pessimistic outlook for a still-fragile global economy, many mining companies are again able to sell shares in secondary offerings or tempt investors with an initial public offering.
“The buyers are back, the window is opening again, and there are deals getting done for exploration,” says an analyst for a firm that specialises in equity financing for miners with projects under development. “There’s been a lot of money that came out of the market that’s sitting on the sidelines looking for an opportunity to come back in, and there has been a lack of supply of new issues,” said another mining investment consultant.
“Equity new issue volumes are down from what we would view as a historical run rate, but when companies have come to market, they have been very well received, and deals are getting done on attractive terms,” he said. Bank loans previously offered a key source of cash, but the financial woes of Europe’s banking sector make that a less viable option now, pushing more companies towards equity finance.
There could also be new entrants in the market as companies take advantage of the more favourable environment to launch an initial public offering, such as the one expected for Ivanplats, a metals explorer controlled by Ivanhoe Mines founder Robert Friedland.The company said in a letter to shareholders last June that it planned to go public in late 2011 or early 2012 on one or more major international stock exchanges. But it has offered no update on its plans.
“We are certainly aware of a number of companies that are considering the opportunity to access the markets through an IPO, through a broad range of commodities, in base metals, precious metals and bulk commodities like iron ore,” said Gordon Bell, head of global mining and metals for RBC Capital Markets , not in reference to any deal in particular.
(Edited from a Reuters report.)