ACCESS
TO CAPITAL

An outlier in 2021 and source of a significant part of the global financing drop in 2022 was the United States where funds raised dropped by nearly 90% on US stock exchanges year-over-year. It is noteworthy that roughly 40% of the proceeds (US$3.6 billion) raised in the US in 2021 went into critical minerals and lithium projects and more than 75% of the funds raised can be attributed to only six deals.

Switching our focus to Canadian markets (and now in Canadian dollars), Figure 6 shows equity raised on the Toronto Stock Exchange (TSX) and the Venture exchange (TSXV) over the last decade. 

We saw a healthy rebound in capital investment from all sources over the last couple of years and in 2021 private placements hit a decade high and public offerings and IPOs (see Figure 7 below) were at a level not reached since 2016 and 2017 respectively. Collectively, the amount of money invested into the sector in Canada in 2021 was the most recorded since 2012 and is largely attributable to the upward price trends for most metals recorded over the period and increasing availability of capital.

The same cannot be said for 2022, and as overall markets have weakened, we have seen major indices like the S&P and DOW down as much as 20% or more at points and this has evaporated the amount of risk capital as commodity prices largely trended downward in 2022. On a positive note, while 2022 fell short of 2021’s peak, the amount raised in the year was closer in line with historical averages and well ahead of 2019’s low point. 

Figure 7 outlines combined financing in TSX & TSXV, disaggregated by the type of equity being issued into the market.

Seeing the share of public deals (public offerings + IPOs) increase over four consecutive years, as the dashed line illustrates, is encouraging as this deal type enables companies to expand their investor base, which typically has positive implications for future fundraising capacity. 

Figure 8 presents flow-through share (FTS) funds raised on Canadian stock exchanges, which must be dedicated towards domestic mineral exploration.

The flow through share regime is a big Canadian advantage and enables Canadian mineral explorers to remain attractive investment in a weak market.

Flow-through has been the source of roughly $2.5 billion in domestic exploration financing over the previous two years and 2021 represented an all-time high. While this peak was not reached in 2022, flow-through financings exceeded $1 billion for only the third time since the regimes inception in the 1970’s.

The last series of figures (9-12) provides a snapshot of exploration activity, and where investment dollars are being directed on the ground. We start by looking at exploration spending at the global level, then dial down to look at Canadian spending by province and territory as well as by commodity.

Figure 9 presents global exploration expenditures based on the region where the exploration activity took place. 

The figure on the right outlines the amount of mineral exploration dollars going into the ground in various regions around the world over roughly the last decade and we can see that 2022 is likely to represent a relative high point since 2013, both globally and in Canada.

With a lag period between financing activity and exploration in mind, there is a good chance we will see an exploration slowdown in 2023 on the back of markets cooling in 2022, both in terms of total amount of equity and flow-through share funds raised.

Figures 11 and 12 compare global and Canadian exploration spending over the last decade, respectively, and differentiate between targeted commodities. 

A comparison of domestic and global budgets reveals that the main difference is a higher share of domestic gold exploration (60% vs. 50%), which is offset by a lower share of copper exploration (8% in Canada vs. 23% globally). This likely reflects a difference in deposit scales, infrastructure availability and the potential for improved economics for copper projects outside Canada when compared to other mining regions such as Chile. 

Market activity seems to be off to a bit a slow start in 2023 with a little over $420 million raised on the TSX/TSXV in the month of January, which compares to roughly $620 million and a whopping $1.25 billion raise in the same month in 2021 and 2022 respectively. This could signal a tough year for the mineral industry in accessing new capital, however, we will closely watch the trajectory of major commodity prices like copper and gold to guide whether sector investment will trace up or down from where we left off in 2022. 

*'Other' includes: Diamonds, platinum, zinc, uranium, potash and other minerals