Canada’s junior gold mining sector is on track for its best year for financing in nearly a decade as companies take advantage of soaring gold prices to load up on cash and advance long-delayed exploration and development projects.
Fuelled by a weak U.S. dollar and expectations of inflation, gold prices have raced higher in recent months, hitting US$1,900 an ounce on Friday, only about US$20 below the historic high in 2011.
This runup has allowed dozens of Canadian mining firms, long out of favour with investors, to tap equity markets in a wave of bought deals.
Most of the deals have been small, averaging around US$20-million this year. Senior mining companies are generally well-funded and cash-flow positive, so have not needed to raise additional capital.
For junior issuers, however, the market opening has allowed them to secure much-needed cash and push forward projects that weren’t considered fundable just months ago. In bought deals, investment banks buy a block of shares from a company, then sell it on to investors.
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