Junior mining companies are increasingly turning to senior firms for capital, as traditional bought-deal financing becomes a riskier gambit in a difficult market for commodity plays.
Bought deals, which see investment dealers purchase stock from an issuer at a discount and then flip those securities to third-party investors, are getting harder to pull off. It’s a trend that is especially evident among junior miners – those most in need of equity capital.
Last year, even in the midst of a rebounding initial public offering market and a buoyant environment for mergers and acquisitions, the value of mining bought deals cratered.
Canadian companies raised $3.3-billion in secondary mining financings in 2017, down 44 per cent from $5.9-billion in 2016, according to data from Thomson Reuters.
“Traditional capital raising in the mining sector is a much more difficult proposition,” said David Cobbold, head of mining investment banking with Macquarie Capital Markets Canada Ltd.