Although the past few years have been challenging for the mining industry, it continues to attract new funding. This is according to a report recently issued by market analysis company SNL Metals & Mining.
Below is a summary of the report’s highlights, as presented by SNL and author Chris Galbraith.
Evaluating financings by the destinations of capital raised shows that the regional distribution is hardly static and that some clear trends can be identified in the geographical distribution of funds from January 2013 through early 2015.
2015 gains momentum
Financings got off to a poor start in 2015. January was abysmal: With less than US$500 million raised (not including senior debt over $1 billion), it was by far the worst month in the period for capital-raising.
No other month between January 2013 and March 2015 had financings totaling less than $1 billion. February and March returned to somewhat healthier totals, however, with well over $1 billion raised in each month.
First-quarter trends in 2015 are somewhat different from those in 2013-2014. Canada-focused financing has moved ahead to take up a third of all funds raised in the year so far, followed by Latin America (26%) and Asia/Middle East (13%).
Things appear most dire in Australia, which attracted 15% of total financings in 2013-2014 but has fallen to only 5% of 2015 financings to date. However, although mining-associated fundraising has been largely stagnant in the first quarter, there may be more movement as the year unfolds.
A few notable offerings by majors that should make 2015 a more robust year than it has looked so far include First Quantum Minerals Ltd.‘s recently closed C$1.44 billion offering to be applied across its portfolio of operations; Zijin Mining Group Co. Ltd.‘s recent US$412 million investment in Ivanhoe Mines Ltd.‘s Kamoa project in Democratic Republic of Congo; and Rio Tinto‘s planned US$6 billion campaign to fund underground development at Oyu Tolgoi in Mongolia.
January 2013-March 2015
During this period, SNL Metals & Mining tracked $82.92 billion in financing for mining and exploration operations worldwide. SNL also identified the intended global destinations of those financings.
The analysis includes financings for all metals and minable commodities (precious and base metals, iron ore, uranium, coal, potash/phosphates and specialty metals such as rare earth elements, graphite and lithium).
Africa fairs poorly
The Asia/Middle East region received the most funding during the period at 20% ($16.92 billion), followed by Latin America with 17% ($14.10 billion) and Australia with 15% (US$12.83 billion); the remainder was rounded out by Canada (14%), the U.S. (12%), Europe — including Russia and central Asia — (10%), Africa (8%) and Pacific/Southeast Asia (3%).
Of the almost $17 billion destined for Asia/Middle East targets, almost two-thirds of the funding came from Asian/Middle Eastern companies (primarily headquartered in China). Although Canadian companies raised the most during the period at $22.16 billion, less than one-third was allocated domestically.
Despite the tough times, Canadian miners continue to focus on assets outside their home turf. By contrast, African and Latin American companies spent 82% and 96% of their funds, respectively, within their home regions. Of Africa’s $6.69 billion total, only 12% was targeted domestically by African companies; in Latin America, 28% of the region’s $14.10 billion came from Latin American companies.
Gold’s strong performance
Among financings allocated by specific commodity (as reported by the companies and captured by SNL Capital Offerings), primary gold projects received the largest share of the total raised during the period. Unlike many other targets, gold financings were relatively evenly divided among the target regions, with similar totals raised for gold projects in Latin America, Canada and Europe.
Base metals and silver projects together had the second-largest share, with Latin America in top place, distantly followed by Canada.
Copper was the primary commodity targeted by this group. Coal also received a considerable amount of funding, with more than half of coal’s allocations going to fund projects in Australia, followed by projects in Europe and Asia.
PGM financings were predominantly targeted at South Africa, with smaller amounts for a few Canadian operations. Potash and phosphates received almost as much direct capital as PGM, with most of the funding going to operations in Canada and the U.S. More than half of the funding for diamonds was directed to Canada, followed by Africa and Australia.