Facing a funding shortfall and apathy from public investors, mining companies are increasingly turning to private equity for much-needed capital.
But this alternative and growing funding source is unlikely to prove to be a panacea for the entire industry.
The latest generation of specialized mining private-equity firms is known for being extremely picky, taking months before pulling the trigger on deals, and insisting on tough terms.
Poor industry returns over the past decade, the decline of active management and the flight of investor capital into other sectors such as bitcoin, means the traditional bought deal is no longer the de facto option for mining companies to raise capital in Canada.
(In a bought deal, investment banks purchase shares in a mining company at a discount from an issuer and then resell the stock to public investors.) Against this backdrop, mining companies have been forced to seek out alternative sources of capital, particularly private equity.