(Kitco News) - The mining sector has entered a bull market for the first time in many years, fueled by strong commodity prices, according to Elian Terner, Managing Director and Head of Global Mining & Metals at National Bank Financial.
Speaking at the PDAC in Toronto, Terner highlighted a significant shift in financing trends, with a notable increase in capital flowing to developer companies.
"I'm proud to say that for the first time in many years … we're in a bull market," Terner told Kitco Mining. He noted that while the past 15 years saw "windows of opportunity," the current environment, driven by record-high gold prices and strong copper prices, has led to a robust financing year.
A key trend Terner pointed to is the resurgence of risk capital targeting developer financing, in the range of $25 to $50 million. "What's exciting about that is we're seeing risk capital return," he said, adding that this capital will allow developers to advance their projects, potentially attracting larger companies in the future.
This renewed confidence is also reflected in the increasing number of bought deal financings for exploration companies and developers, which Terner sees as a "hundred percent" sign of a bull market. "That cohort in the food chain, if you will, is unfortunately one of the last to to receive its needed capital," he explained, noting a significant uptick in such financings over the past year.
When junior companies seek funding, Terner emphasized the importance of being organized. Common errors include not having basic documents and regulatory matters in order and failing to implement a proper marketing schedule with regular engagement with potential investors. "The biggest error is companies wanting monies who haven't laid down the groundwork that I described," Terner said.
Terner also highlighted the innovative Allied Gold deal, where National Bank Financial acted as the lead bookrunner. This deal involved a strategic alliance with Ambrosia, a fund from the United Arab Emirates, initially stemming from a power supply discussion but evolving into a significant equity investment.
This illustrates the emergence of new sources of finance from regions like the United Arab Emirates and Saudi Arabia, where governments are increasingly focused on developing their mining sectors. "I was at Future Minerals Forum as well, and I was very impressed by the energy and the vision that I saw," Terner commented.
Looking ahead, Terner anticipates increased M&A activity in the gold sector, especially as high gold prices generate strong cash flow for producers. He noted the Calibre and Equinox transactions as examples of "smart industrial M&A" that the market would like to see more of.
Terner believes that while most M&A typically happens during "peak valuations," there is still room for valuation growth in the gold sector, suggesting a more active M&A cycle to come. "M&A is going to tick along and get actually more active," he stated.
Interestingly, Terner also pointed to a potential trend of gold companies looking at acquiring copper assets, driven by confidence in the market and an understanding of mining fundamentals.
Special thanks to our sponsors, GoldMining Inc., UEC & URC for making this coverage possible.
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