By any standard, 2015 was a horrendous year for metal prices. Yet First Quantum Minerals Ltd. could accomplish the largest base metals equity offering on the planet since 2007.
It is difficult to overstate the quantity of an anomaly this transaction was. First Quantum raised $1.44 billion. Canada’s second-largest base metals equity amount of 2015 belonged to Travali Mining Corp. It was worth $30.Six million, or about two percent products First Quantum raised.
“This will be a fantastic deal,” said Luke Gordon, md of investment banking at Goldman Sachs. “It was one our client (First Quantum) was happy about.”
The deal, which closed at the begining of June, was priced at $16.25 per share. Copper prices subsequently fell off a cliff, and First Quantum’s stock is worth under $3 today. The timing couldn’t are actually much better.
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The roots within the financing go back to 2014. First Quantum was pouring vast amounts of capital into its US$6.4 billion Cobre Panama project while dealing with volatile commodity prices along with a sizable debt load. The company often visit a potential funding gap afterwards. A huge equity offering was the logical method of address it.
RBC Capital Markets and Goldman Sachs were tapped to guide the offering. Both were logical choices. RBC’s relationship with First Quantum goes back towards the early 2000s, once the miner’s value was under $100 million. “We’ve done all their financing and advisory work since,” said Gordon Bell, RBC’s global head of metals and mining.
Goldman, meanwhile, was one of the advisors on First Quantum’s hostile takeover of Inmet Mining Corp. in 2013, that was worth nearly $5 billion. Which was an elaborate deal that remained hostile to the finish, and Goldman kept an ongoing dialogue when using the company after it closed.
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Critically, RBC and Goldman have big global sales forces. For just about any deal this big, it absolutely was apt to be all at work deck.
“It’s vital to have the ability to reach into all corners around the world to locate those investors that need to find opportunities,” said Michelle Khalili, Goldman’s head of equity capital markets for Canada. “Whether they’re in Hong Kong or Middle East or perhaps Canada. It is exactly what we provide.”
Throughout the initial 1 / 2 of 2015, First Quantum was watching industry carefully to choose the best moment for your equity offering. The $1.25-billion deal premiered inside the late afternoon on May 20. It had been priced at an excellent 5.8 percent discount to First Quantum’s prevailing stock price.
While most Canadian companies approach bought-deal financings, First Quantum chosen a weekend marketed offering. This made sense since the company includes a global shareholder base spread across different timezones. The marketed offering also gave the business a chance to make its pitch to investors.
“The overnight marketed (strategy) arranged well while using company’s shareholder base, the dialogue they’d with shareholders round the long time, along with a wish to have them as part of the discussion in relation to raising the money,” said Lance Rishor, a md in RBC’s mining group.
First Quantum President Clive Newall got on the telephone london and started calling shareholders. The company held 31 one-on-one conference calls with major shareholders over roughly 15 hours. They spent most of the night speaking with Canadian and American institutions, were built with a several hours sleep, then entered with Asian and European institutions every morning.
The calls were extremely productive, as much those investors supported First Quantum’s vision and bought in to the offering.
“The process was effective. We built a strong order book overnight coupled with tremendous momentum every morning,” said Ryan Latinovich, md from RBC’s equity capital markets group.
Before long, it had been oversubscribed. The bankers went ahead and exercised the full over-allotment, bringing the proceeds to $1.44 billion.
The distribution within the deal reflected First Quantum’s global shareholder base. American and European investors led to another within the deal each, while Canadian and Asian investors bought modest amounts.
Given what’s happening to commodity markets recently, the first Quantum offering looks smarter than ever before. It might be some time before anyone pulls off another mining deal such as this.
Khalili said she loves to think good companies can still arrived at market, but she acknowledged the planet looks a great deal different today laptop or computer did last spring.
“Mining comes from the table completely,” she said.
pkoven@nationalpost.com
Twitter.com/peterkoven
