Mining Companies Need To Create Value For Shareholders – Mines and Money
(Kitco News) - Although there are expectations that investment capital will flow back into the mining sector, companies have to do more to show value, according to some finance executives.
At a panel discussion during the Mine and Money conference in Toronto, Caroline Donally, managing director of private equity firm Denham Capital, said that in the past, companies have done poor job at creating value for shareholders.
She added that major producers need to show that they are able to make money to bring some confidence back to the marketplace.
“Once that side of the market gets its act together, there will be more appetite for risk,” she said. “Until we can show that the mining sector can make money, it will be difficult to attract investors.”
While the panel acknowledged the difficulty faced by mining companies looking for investment capital, there was still a sense of general optimism on the stage.
Greg Honig, director of origination at Resource Capital Funds, another private equity firm, said that he is confident that investors will come back to the sector as commodity prices eventually rise.
“There are some supply and demand stories in the marketplace right now that will drive prices and deal flows,” he said.
Miranda Werstiuk, senior vice-president at IBK Capital, a boutique investment banking firm said that there is a growing disparity between the general market and the mining sector and it’s only a matter of time before investors move into natural resources as a diversification tool.
Sheldon Vanderkooy, general counsel at Triple Flag Mining Finance, a relatively new streaming and royalty company in the precious metals space, said that they have only been in the financing game for a few years now, but since then the company has allocated $700 million in capital.
“And we are still looking for more opportunities,” he said in the discussion.
He added that now is an excellent time for investors to get their hands on good assets at great value.
Despite some optimism in the marketplace, the panel warned that investment capital will continue to be selective. Most participants noted that management is critical for a company when it comes to finding much-needed finance.
“Management teams that can provide an edge, teams that understand the environment will continue to attract capital,” said Werstiuk. “Ultimately a company needs a good asset with good management in a good jurisdiction.”