Ignored by Big Banks, Smaller Gold Miners Are Paying More to Expand – by Justina Vasquez (Bloomberg News – June 20, 2019)


The cost of money is rising for small and mid-sized gold miners. Newmont Goldcorp Corp. and Barrick Gold Corp., the biggest producers, have grown even bigger by buying up peers, shaping themselves as strong candidates for commercial bank lending.

Meanwhile, smaller companies struggling to meet deadlines and budgets on new projects are increasingly forced to turn to private equity to expand.

In some ways that’s good. Private financing often offers smaller miners more insight on projects than a commercial bank might. At the same time, private capital is harder to land and higher priced, with an average weighted cost of roughly 15%-20% compared with 5%-6% for the majors, according to Sprott Inc., a precious metals-focused money manager.

“Private equity money tends to be expensive,” said Douglas Silver, a portfolio manager at Orion Mine Finance. “But where else are they going to get the money? It’s expensive to mine these days.”

Small gold companies, which are usually mineral explorers and mine developers, have little to no revenue, while miners are considered mid-sized when they produce less than 1 million ounces a year. In contrast, Barrick, which closed on its acquisition of Randgold Resources Ltd. on Jan. 1, produced 1.4 million ounces in just the first quarter of 2019.

For the rest of this article: https://www.bloomberg.com/news/articles/2019-06-20/ignored-by-big-banks-smaller-gold-miners-paying-more-to-expand

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