Mining finance is in better shape than it was a year ago,
but the markets are still not fighting fit, a top executive for
the worlds largest exchange for natural resources capital
Speaking in London at the Global Mining Finance Autumn
Conference, Graham Dallas, head of business development for
Europe, the Middle East and Africa at the Toronto Stock
Exchange (TSX), told IM that the
market was definitely in a healthier position than it was this
|More money is being raised for mining, but investors
to accept the new status quo (source: 401(K)
Weve seen about 60 miners delist from the
markets since last year, down to around 1,555 from 1,600
said Dallas, who also covers the
TSX-Venture exchange for small cap miners.
The market is definitely healthier at the top end.
Weve got some big ticket transactions on the way, but
its also getting better at the bottom end (...) We seem
to have come through the five stages of
grief, he said.
Dallas explained that
small cap explorers had suffered most acutely from the
confidence in the mining sector since 2012 and that it has
taken time for investors to accept the new status quo.
When the market was booming, investors came to view
that situation as normal, so it has taken a while for them to
adjust [to the weaker conditions], he said.
Dallas said that while the Toronto markets had seen a number
of miners delist, there had not been the rush for the
door that some commentators had predicted.
Its not all bad news (...) While we dont
expect to see a flurry of
IPOs [initial public offerings] anytime soon, more money is
being raised almost $6bn already this year, he
Open for (debt) business
According to George Rogers, CEO of London-based financial
services group, RockFace Capital, financing is available for
mining projects, but investors are still cautious about where
they put their money.
Ive heard some people say the debt markets are
closed theyre not, theyre absolutely
open, Rogers said. Certainly, in London, there is a
lot of money looking for a home.
Lenders tend to drift in and out of mining finance
(...) if you chuck your money around in this sector without
being cautious and sensible, youre going to get
losses, he added.
Rogers stressed that decent, well managed
projects are likely to secure funding and said that, when
things do go wrong for a mining company, this can typically be
traced back to poor management during the boom
alternative forms of financing which have recently come to
prominence, such as royalties and streaming, suggesting that
traditional debt and equity financing was beginning to
thaw towards the resource sector.
Its very difficult to predict the future,
he said. I think all of us in this sector are slight
natural optimists, but things certainly seem to be
Andrew Lindsay, director of Chile-based copper producer
Antofagasta Plc, offered a general perspective on the lack of
mergers and acquisitions (M&A) in the mining industry,
noting that the predicted rise in buyouts to compensate for
scant financing had not materialised.
In theory, youd think at this stage in the
[commodities] cycle it would be better to buy than to build,
but it hasnt quite worked out like that, he
There has been a paucity of assets coming onto the
market and those that do tend to go for substantial
We thought that the source [of businesses for sale]
was going to be the big boys discarding non-core assets, but
this hasnt happened, Lindsay explained.
He added that the problem faced by junior miners looking to
sell assets to majors was funding the development of their
projects to a point where bigger companies would consider
There is no such thing as a problem-free mine,
Lindsay said, adding that the biggest determining factor when
it comes to M&A is usually a projects risk
Everything is a trade-off size, location and
risk profile; the greater the risk, the higher the return
youll need to look for, he said.