PDAC-Money returning for mining equity, bankers say

Sun Mar 4, 2012 12:44pm EST

* Commodity prices fuel appetite for mine equity

* Financing window started to open in mid-January

* Bankers see a number of mining IPOs in the wings

By Pav Jordan

TORONTO, March 4 (Reuters) - There's a new appetite for equity financing in the global mining sector, as investors tiptoe back into a market that has fretted about funding for the last six months.

Boosted by firm metals prices and a less pessimistic outlook for a still-fragile global economy, many mining companies are again able to sell shares in secondary offerings or tempt investors with an initial public offering.

"The buyers are back, the window is opening again, and there are deals getting done for exploration," said Mike White, president of IBK Capital Corp, a Toronto boutique firm that specializes in equity financing for miners with projects under development.

The next opportunity for cash-hungry companies to strut their stuff comes with this week's Prospectors and Developers Association of Canada convention, known in the industry as PDAC.

If last year's figures are anything to go by, the annual Toronto conference, which opens Sunday, could draw some 26,000 participants, bringing prospective investors together with hundreds of explorers and miners - often small-scale outfits.

"We've certainly seen institutional money and more accredited investor/high-net-worth-individual type money going into exploration, and I think that will make for a great PDAC," said White. "I think there'll be lots of deals done."

Canada's importance as a mining capital is rarely more evident than during PDAC, the industry's largest annual event and a premier opportunity for investors to meet with mining firms.

"There's been a lot of money that came out of the market that's sitting on the sidelines looking for an opportunity to come back in, and there has been a lack of supply of new issues," said Chris Gratias, director and co-head of global mining at CIBC Global Markets.

"Equity new issue volumes are down from what we would view as a historical run rate, but when companies have come to market, they have been very well received, and deals are getting done on attractive terms."

Bank loans previously offered a key source of cash, but the financial woes of Europe's banking sector make that a less viable option now, pushing more companies towards equity finance.

There could also be new entrants in the market as companies take advantage of the more favorable environment to launch an initial public offering, such as the one expected for Ivanplats, a metals explorer controlled by Ivanhoe Mines founder Robert Friedland.

The company said in a letter to shareholders last June that it planned to go public in late 2011 or early 2012 on one or more major international stock exchanges. But it has offered no update on its plans.

"We are certainly aware of a number of companies that are considering the opportunity to access the markets through an IPO, through a broad range of commodities, in base metals, precious metals and bulk commodities like iron ore," said Gordon Bell, head of global mining and metals for RBC Capital Markets , not in reference to any deal in particular.

Canadian miners did about $223 million in initial public offerings in 2011, down sharply from $1 billion in 2010, according to Thomson Reuters data. Miners raised a total of $6.87 billion in equity in Canada last year, compared with $11.28 billion in 2010.

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