On one hand, it is encouraging that after many years of decline in public fundraising, in 2020 we saw an impressive year-over-year increase in public funds that help to broaden and diversify the company’s investor base. However, the absolute amount of public funds raised in 2020 is still relatively low compared to levels of financing in or before 2016.
Another notable data point is the high number of equity transactions, as seen in Figure 9 below.
The figure indicate that in 2020 the number of equity transactions was the highest since 2012. It also shows that the proportion of total funds raised via top 10 largest transactions decreased from ~60% in 2015 to less than 20% in 2020. . This shift suggests that an increasing amount of the dollars raised in 2020 were distributed to a broader suite of companies, and implies an improved financing environment for juniors manifested during the year.
Figure 10 shows that 2020 was very good in terms of flow-through share (FTS) financing, with over $900M raised via the FTS mechanism – the highest level since 2011.
The figure shows that 2020 was very good in terms of FTS financing, with over $900M raised via the FTS mechanism – the highest level since 2011. Based on exploration trends outlined in the subsequent figures, increased domestic investment appears to responding to the increase in the gold price throughout 2020 as domestic precious metals exploration activity is up substantially from 2019.
Funds raised using the FTS financing can be spent only in Canada, and therefore have become a very significant source of funding for exploration in Canada, with ~70% of the funds obtained through this mechanism. Moreover, for sub-$20 million transactions, which are more typical for junior exploration companies, the proportion of funding sourced from FTS increases to nearly 80%.
A spark in FTS deals in mid-2020 was likely influenced by the Government of Canada responding to PDAC’s advocacy efforts and deferring timelines associated with FTS funds raised in 2019 and 2020. This decision was in response to the COVID-19 pandemic and provided companies with needed flexibility to access strong equity markets and be confident exploration plans could be executed.