"The stock prices moved so quickly that a number of our issuers and others saw their share price double or triple while they were in the market raising money. This resulted in many oversubscribed offerings."
How do you view the current climate for mining finance in 2020?
Earlier in the year when precious metals began to strengthen and generalist investors came in to the market, a flurry of equity financings got done, funding many early-stage gold and silver companies. In past transitions from bear markets to bull markets, typically this early money poured into larger producers first, and then slowly over time into the smaller producers and later stage development companies, before finally reaching exploration. In 2020 the wave of money flooded all stages and sizes of companies in the precious metals sector, from grassroots to the producers. It was wonderful to see, and allowed those with different risk profiles to participate where they felt comfortable from a risk/reward standpoint. The stock prices moved so quickly that a number of our issuers and others saw their share price double or triple while they were in the market raising money. This resulted in many oversubscribed offerings.
Can you tell us about some of the financings IBK Capital has been involved in this year?
IBK Capital does a lot of work on the exploration side, and we like to be at the beginning of the discovery curve. We very quickly funded nine juniors in our portfolio from May to September, starting with gold and silver companies in Q2, but then added battery metals in Q3. Many of the juniors have given up some market value in Q4 and that’s mainly due to the nature of the steep share price appreciation, which for one of our investments, Canada Nickel, was over ten times in five months, with most of the rest at least doubling.
Some of the financings include C$5.75 million for Viscount Mining, which is looking to grow its Silver Cliff silver resource in Colorado and Cherry Creek gold/silver project in Nevada; C$7.5 million for Blue Lagoon Resources, developing high grade gold in British Columbia, Canada; C$4 million for Vangold, exploring a prolific past producing silver and gold mine in Mexico, C$2 million for Cobalt Blockchain, developing cobalt hydroxide production in the DRC and C$1.75 million for Golden Birch Resources, drilling copper-gold porphyry targets in Papua New Guinea.
Which of the companies IBK Capital has financed in previous years have performed well in 2020?
We financed Minera Alamos when it was forming as a company, before the Osisko team came on board. Back then, the company’s strong management team with good assets in a highly prospective mining jurisdiction was trading at a market value of C$650,000. The stock has taken off this year as the company moves through development. It now has a market cap of C$280 million and the stock is up eight times from 2019 and much of those gains occurred post Covid lockdown in March 2020. It is a great example of a junior that can add value in a variety of ways, with a lot of exploration potential in addition to a near-term path to production.
Do you think the junior market has become frothy with the return of generalist investors?
A lot of good companies got funded with the return of some buoyancy but I do not see the market as being particularly frothy. The TSX-V index peaked at 2,464 in 2011, the end of the last bull cycle. Today it is around 680, which is double from the low of 330 but we have a ways to go before we hit frothy overall.
How do you suggest exploration companies balance the demands of shareholders to produce results in a hot market with the need to plan thoroughly?
From 2013 until mid-way through 2020 it was really the well-polished mining investor with the stomach for the ups and the downs who funded projects. The Osisko group is an example of one of these investors. This type of investor knows when to give a junior time to do sufficient preparation and work before spending money on the next phase. Now we have the new wave of investors, which is a great thing for the market, but does raise the level of urgency to get drill results.
While no company is immune to shareholders with short patience, it is important for management to manage expectations and provide clear communication. Drilling just for the sake of drilling is never a good idea and will ultimately waste the money of those who invested. The best projects will attract money and have success, even if it takes a little longer than some people expect.