The one bright spot in Canadian equity capital markets this year has been mining and metals companies. But whether that’s a glass half full or half empty for this sector is up for debate.
Firms in the materials sector have raised C$1.6-billion on the Toronto Stock Exchange since the beginning of 2023, or about 71% of the total brought in by all firms on the exchange. Moreover, miners, headlined by Capstone Copper's C$327-million deal announced in March, accounted for eight of the 10 largest issuances.
That sector dominance has been mirrored on the small- to mid-cap TSX-Venture Exchange, where basic materials companies made up 75% of the total C$1.6-billion raised so far this year.
Mining firms are tapping Canada’s equity markets even as other sectors are struggling to raise funds. The amount of equity issuance on the Toronto Stock Exchange is down 7.5% from this time last year largely due to a 20% drop in total capital raised by companies in the industrial, technology, energy and consumer sectors.
“We are in the early stages of a new mining cycle,” said Jeremiah Katz, PI Financial’s managing director, capital markets. “It is apparent that the electrification of vehicles will cause a significant demand for copper in both the production of vehicles and upgrading of the electrical grid to support the new vehicles on the road. The mining industry is playing catch-up in meeting this new demand.”
Not all are as sanguine. After a relatively strong start to the year, the momentum in issuance for the base metals sector has started to fade amid a slew of weaker-than-expected economic data from China, which is the largest consumer of industrial metals like copper and steel.
“The China data for April wasn’t as strong as people were hoping for,” said RBC Capital Markets analyst Sam Crittenden. “It was really the April data that sent copper down below $4 and certainly that closes the window for financings.”
Even as base metal deals show signs of easing, analysts continue to expect gold and silver miners to tap equity markets this year after financial turmoil and recession concerns helped propel a rally in gold prices to a multi-year high over $2,050 an ounce earlier this month. It has since given up some of those gains.
“That’s a red hot commodity, we’re likely to see financings,” said Paradigm Capital analyst Gordon Lawson. “When prices are elevated like this, it always attracts more financings.”