No issue is causing more concern for miners at this time than access to capital. So a complete house was on hand on Tuesday to listen to from a panel of well-known Bay Street bankers, who gave their thoughts about your mining financing and also the broader health of the industry. The speakers included Egizio Bianchini (BMO Capital Markets), Peter Collibee (Scotia Capital), Rick McCreary (TD Securities) and David Shaver (RBC Capital Markets).
Needless to say, they maintained a cautious outlook around the sector, though they are doing see possibility of significant dealmaking around ahead and are encouraged through the recent uptick in metal prices and financing activity.
But a lot of miners still a great deal of capital. Bianchini thinks the needs US$50 billion to US$60 billion to right itself after bingeing on debt at the top of the commodity cycle.
“(Debt) is most likely likely to kill a few companies this time around, or at least take a few appendages,” he explained.
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The bankers noted that selling equity is difficult because of the high volatility in the market. When large-cap mining stocks can fluctuate 10 or 20 per cent a day as they recently, investors are extremely reluctant to leap right into a bought deal. Having said that, recent financings around the gold side demonstrated that good companies can still get equity deals done.
Stream financing reached record levels last year, and the bankers expect another active year for streamers despite concerns in some circles that they’re “tapped out” after bingeing on acquisitions this past year. The streamers have maintained they still have lots of capacity on their own balance sheets to complete deals.
Senior miners have also been selling lots of assets to address their debt problems, and many more are actually on the market. A number of them have discovered their distance to Toronto-listed companies, along with a couple of the bankers expressed hope that spin-offs from the major producers could end as new IPOs in Toronto. Vale SA, for instance, has thought about a base metals IPO in Toronto, which would effectively bring Inco Ltd. back to life.
“I think we’ll see more IPOs here,” said Shaver.
