2018 minerals-focused financings off to slow start

22nd January 2018 By: Henry Lazenby - Creamer Media Deputy Editor: North America

VANCOUVER (miningweekly.com) – In the wake of a slow start to mineral-focused financing activity, analysts are predicting more of the same for at least the first four months of 2018.

This year is also not expected to surpass 2017 in the number and value of mineral-focused financings undertaken at the market, data company Oreninc told attendees at the 2018 Vancouver Resource Investment Conference on Sunday.

"Share prices will appreciate, but financing levels will probably be below 2017 levels," said CEO Kai Hoffmann.

Oreninc tracks all Canadian mining and metals and oil and gas equity financings for companies listed on the TSX, TSX-V and CSE. The data is used to create a deal log, which it uses in consulting services and which is available for public scrutiny free of charge.

Hoffmann does not expect the period from now until the Prospectors and Developers Association of Canada's Convention, early in March, to see much more action on the financing front, especially because December 2017 ended on such a high note.

According to Hoffmann's data, the last three months of 2017 saw frenzied financing activity, bringing the total number of deals in 2017 to 1 387, compared with 1 480 in 2016. In 2016, the market raised C$4.83-billion, compared with C$4.6-billion in 2017.

Hoffmann explained that the Oreninc Deal Index came off a slow third quarter in 2017, and saw deal volumes and values spike rapidly towards year end.

The week ending December 22 saw the number of financings rise to a new 35-week high, with 12 brokered financings announced for C$234.7-million – itself a 75-week high. Three bought-deal financings were also announced in the same week totalling C$107.9-million, which constituted a 45-week high, while the total dollar amount raised in the period jumped to C$342.9-million – a 292-week record.

The average offer size also grew to C$6.7-million – a 42-week high.

Contrasting that is a rather anaemic New Year, with data showing that financings are off to slow start during the first three weeks of 2018. Hoffmann noted that, despite there being several left-over deals from the bumper December period, which still closed early in the year, there have not been nearly as many deals opening, totalling only about C$55-million.

"We've seen bought deals disappearing completely, compared with 12 in December. Flow-through financings seem to have dried up for now. We are seeing a declining number of deals, but stable average deal sizes," Hoffmann said.

He noted that Africa took a massive blow in 2017, seeing 33 fewer financings closing successfully at 65, leaving many projects that did not get financed, he noted.

In Canada, Saskatchewan got a lot of funding during 2017, mainly on the back of project developer Encanto Potash securing C$100-million to start the engineering and design phase of the Muskowekwan potash mine. British Columbia saw a decline, because most major mine developments were financed in 2016, he pointed out.

"Despite fewer deals being expected this year, we believe that the quality of the deals are improving, meaning fewer deals being undertaken by companies looking to make ends meet."