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Markets opening up to mining industry

From juniors to producers, growing numbers of mining firms are having more and more success in capturing the imagination of investors and tapping into a new-found confidence in the financial markets.
liberty mines(1)
Liberty Mines' Timmins-area producing properties have been revived through the sale of a majority stake to Chinese firm Jilin Jien Nickel Industry Company Ltd. (Photo supplied)

From juniors to producers, growing numbers of mining firms are having more and more success in capturing the imagination of investors and tapping into a new-found confidence in the financial markets.

Queenston Mining, an active explorer in the Kirkland Lake camp, raised $15 million over the summer months. Premier Gold Mines Limited has raised $15 million to support its Hardrock project south of Geraldton, while Noront Resources Ltd. dug up $25 million from the market in advance of its proposed takeover of Freewest Resources.

Even smaller juniors such as Trelawney Mining and Exploration Inc. have got in on the action, with the latter having raised $3-million for its Chester project in the Gogama area, halfway between Sudbury and Timmins.

The project was able to attract investment because it has elements that are common to any company that’s seen recent success on the market, says Greg Gibson, Trelawney’s president and CEO.

A project with “decent” grades, near-term production potential and additional exploration opportunities will tend to be able to score a direct hit with most investors.

“The only thing we don’t have that would allow us to go out and raise $25-million is we don’t have the million ounces everybody likes to see,” says Gibson.

Being able to demonstrate strong resources is also proving to be a sure thing on the market, which has also lifted the fortunes of various producers like Kirkland Lake Gold, which raised $37-million in August.

Other recent market success stories include Sudbury miner FNX Mining Company Ltd., which secured $144-million in financing in August 2009.

“The financing and the credit markets have certainly improved over the last few months, though it tends to depend a bit, on the commodity side, on what sectors you’re in,” says Dave Constable, vice-president of investor relations with FNX.

The sinking value of the U.S. dollar as a result of that nation’s debtload has lent strength to gold markets, while uranium and nickel prices have struggled somewhat, he adds.

For FNX, the money represents “swagger money” for potential property acquisition opportunities arising from recessionary times and lower nickel prices.

Earlier in 2009, the company also raised $15 million to shift from exclusively conducting production-related exploration to “blue sky” exploration on non-producing properties over the next year. Despite these and other positive stories seen in the financial media, debt markets continue to be “very tough,” says Constable, adding that Canadian banks in particular remain difficult to convince to loan out money.

“That market is there, but only for the biggest players, whereas the equity market has opened up significantly, even for the mid-sized players,” says Constable.

The problem with this willingness to invest, however, is that the tough financial times have caused many companies’ share prices to dip, meaning that any money being sought from the market will tend to dilute the company’s general ownership.

Few junior exploration firms know this dynamic better than Liberty Mines, whose Timmins-area producing mines were brought to a halt by sinking nickel prices.

With debt financing falling through, a loan due in October and a variety of expenses, Liberty Mines arranged a $30-million financing with China’s Jilin Jien Nickel Industry Company Ltd. in April 2009. The move gave Jilin Jien a 51 per cent stake in Liberty.

Despite the negative connotations that can sometimes arise, the spectre of foreign ownership fails to faze Liberty CEO Gary Nash, who says Jilin Jien deserves a lot of credit and respect for stepping in where others would not.

Indeed, giving up majority rule over of one’s company can sometimes be the answer to prying badly needed money from the markets, especially if rival firms see the tough economic times as an opportunity to prey on financial weakness.

“There were 14 Canadian companies sitting in the woodworks, just waiting to take a piece of Liberty apart in receivership,” says Nash. “Rather than step up to the plate and work with us to solve our problem, they just stood there like vultures. Everybody says, ‘Now you have a foreign country that owns half your company,’ but half of everything is better than 100 per cent of nothing.”