Financings on the TSX and TSX Venture rebounded last month as some miners prepared to restart operations and gold M&A surged.
According to data from the TMX Group, total financings raised for the TSX Venture jumped approximately 136% from $144 million in April 2020 to $340 million in May 2020. Interestingly enough, all of April 2020’s financing activity came from supplemental financings — $0 was raised in IPO and secondary financings. Even more noteworthy is the fact that May 2020’s total financing statistics are nearly identical to that of May 2019’s. Year-over-year, total financing activity only fell $1 million in May 2020 despite the adverse economic conditions created by COVID-19.
The TSX, on the other hand, had an even more phenomenal rebound — total financings increased 592% from $469 million in April 2020 to $3.2 billion in May 2020. The spike in TSX financing activity comes as Chinese firms continue to buy up TSX-listed gold miners.
“Zijin Mining Group Co. Ltd. agreed to buy Guyana Goldfields Inc. for cash on Friday, with a deal valuation of about C$323 million. This follows the May announcement by Shandong Gold Mining Co. Ltd. to buy TMAC Resources Inc. for cash at an equity value of about $149 million.”
M&A in the gold sector appears to be poised to continue. Today, Shandog Gold Mining announced it was buying Cardinal Resources Ltd. for approximately $221 million in cash.
Although TSXV-listed gold issuers have yet to noticeably benefit from the rising price of gold (the TSX Venture Diversified Metals & Mining Index is currently trading at 28.94, elevated just above the 25 – 26 range it traded at for the majority of 2019), this could change significantly in the coming years…
“As organic growth is waning, miners are looking to buy gold through mergers and acquisitions to secure their future. So far this has failed to significantly increase production. . .
Wood Mackenzie estimates the industry will need to commission 8Moz (262t) of projects by 2025 to maintain 2019 production levels.
This equates to roughly 44 projects. Based on the average project capital intensity of $4,610/ozpa Au, Wood Mackenzie estimates the industry must invest approximately $37 billion on greenfield projects and restarts over the next 5 years.”
Given the growing need for new gold projects, junior explorers will likely play a pivotal role for gold producers in the years ahead.
The Mining.com article continues,
“. . .Wood Mackenzie asserts smaller projects are proving an exciting proposition. They have the advantage of a lower initial capital outlay and can be typically brought online with speed and efficiency, particularly open pit deposits and mines that have previously been in operation.”
Junior Gold Miners Could Join M&A Rush
The revival in financings on the TSX and TSX Venture and resurgence in gold M&A suggest that liquidity could be coming off of the sidelines again. Although the price of gold continues to struggle to break out of the US$1,700s, the current bull market for gold — coupled with a decline in global gold supply — could be a boon for junior gold miners.