Editorial: Navigating the new terrain of mine financing

In early October, The Northern Miner was privileged to play host to a roundtable discussion bringing together some of the heaviest hitters and nimblest minds on Bay and Howe streets to hash out the state of alternate finance methods in the mining industry.

Sponsored by flow-through financing specialists PearTree Securities and held in the chic offices of Newport Private Wealth, the roundtable was titled “New Frontiers in Mining Finance” and moderated by Northern Miner publisher Anthony Vaccaro. Some of the fodder for the discussion were the results of new data generated by The Northern Miner’s polling of its readers on their attitudes and understanding of alternate mine financing.

The roundtable participants were a dream team of experts on the matter: David Harquail, president and CEO of royalty king Franco-Nevada; Randy Smallwood, president and CEO of streaming pioneer Silver Wheaton; Carol Banducci, executive vice-president and chief financial officer at cash-rich gold miner Iamgold; Rod Thomas, president of the Prospectors & Developers Association of Canada; Kerry Smith, vice-president and senior mining analyst at independent investment firm Haywood Securities; Chad Williams, president and CEO of capital markets advisory firm Red Cloud Mining Capital; David Thomas, managing director (Canada) of mining-focused private equity fund Resource Capital Funds; Andrew Farncomb, managing partner at independent merchant bank Cairn Merchant Partners; Liam M. Fitzgerald, accounting powerhouse PwC’s mining leader in Canada; Darin Wagner, president and CEO of the financially savvy gold junior Balmoral Resources; Ian Ball, the innovative president and CEO of Abitibi Royalties; industry veteran Trent Mell, PearTree Securities’ president and head of mining; and crowdfunding evangelist Oscar Jofre, CEO and founder of KoreConX.

Through our research, The Northern Miner is seeking to gauge the mining industry’s need for alternate financing methods that encompass royalties, flow-through financing (including charity flow-through financing), private equity, streaming and the strange new kid on the block, equity crowdfunding.

Royalties have been a lucrative business for Franco-Nevada, the former upstart company of the 1990s that has now settled into its status as an established industry player. Franco’s Harquail took the most sober approach during the discussion, warning of the dark side of money that comes too easily — as inferred by advocates of crowdfunding — but holding out hope that more long-term money could enter the mining sector from pension funds that see royalties as a particularly good fit.

In contrast, Silver Wheaton’s Smallwood was more curious about the possibilities of equity crowdfunding, and looked straight at KoreConX’s Jofre, and told him, “I listen to you and I see myself ten years ago” — back in the days when Smallwood spent much of his time trying to convince people that streaming was a viable financing vehicle for mining. He noted streaming only hit its stride after several breakthrough deals were sealed with majors Glencore, Vale and Barrick Gold.

The concept of equity crowdfunding also got approval from Balmoral’s Wagner, who likened it to grubstaking of old, and Red Cloud’s Williams, who said crowdfunding will replace the retail investor in mining.

In some quarters, private equity has been held out as a financial saviour for the mining industry, but RCF’s David Thomas said the story isn’t that simple, as many general interest private equity firms may not have the in-house technical expertise to invest in mining companies.

Charity flow-through financing got a hearty endorsement from Wagner — who noted Balmoral has made use of it — and from Iamgold’s Banducci, who underscored that her firm raised $50 million this way for the new Westwood gold mine in Quebec. PearTree also helped Pretium Resources raise $75 million using charity flow-though financing.

But this, and our front-page story on new finance frontiers, are only a taste of what will come out in our full stand-alone report, which we’ll include in a regular issue of The Northern Miner next month.