Resource Financings Returning with the Market

By Andrew Willis

Resource financings large and small are hitting the market, as mining and oil companies rush to offer institutions a place to put cash to work.

The biggest share sale seen in a busy session came from Detour Gold (DRGDF.PK), which raised $250 million late Wednesday in a bought deal. Detour bills itself as the owner of the largest untapped properties in Canada - a claim that Osisko Mining (OSKFF.PK) might dispute - and will use this cash to build a mine in northern Ontario.

Against a backdrop of soaring bullion prices, RBC Dominion Securities, BMO Nesbitt Burns and TD Securities led a sale of 17.5 million Detour shares at $14.25, a relatively tight 3% discount to where the stock closed on Wednesday.

Working down to smaller deals, African gold play Nevsun Resources (NSU) raised $32.8 million in a private placement - no underwriter was named on this transaction.

In the small cap space, BNK Petroleum sold $20-million of shares in a bought deal done with Canaccord Capital (CCDPF.PK), Macquarie Capital Markets and Genuity Capital Markets. And Dynasty Metals & Mining (DMMIF.PK) pulled in $6 million in a bought deal led by Canaccord.

Earlier this year, financing activity was focused on large cap Canadian companies. Institutions wanted to increase their exposure to equity, but stay with the perceived safety of blue chip stocks.

In recent months, risk tolerance has increased and smaller cap resource plays have become investor darlings, as the market anticipates an economic recovery and a bull market for bullion (and yes, I realize those two events tend to be mutually exclusive).

Comments

[Slvrizgold:]

Detour is one to watch. I am very impressed that they could raise that much money without diluting the stock in a massive way. Detour will be an immediate midtier producer right out of the gate. It's only 13 bucks and was $25 last year. I would not tell someone who isn't knowledgeable about mining to overweight a stock like Detour, but definitely fits the bill of a good junior to include in a diversified basket.

Oct 22 08:18 PM