Issue link: http://resourceworld.uberflip.com/i/712968
66 www.resourceworld.com a u g u s t / s e p t e m b e r 2 0 1 6 e p i l o g u e D a v i d D u v a l M ark Twain once observed that reports of his death had been greatly exaggerated. Perhaps the same can be said for the collective health of Canada's junior miners which has suffered years of low commodity prices and bear- ish market sentiment that has devastated share prices and limited their capacity to refinance. Making matters worse, the regulatory burden of maintaining stock exchange listings has also proved onerous, with too much money being allocated to account- ing, legal and administration fees and not enough for exploration. The fact that there hasn't really been a major grass roots dis- covery in Canada since the early 1990s speaks volumes, in my opinion. It's hard to rationalize how mining investors are being well served by the heavy regulatory burden that was imposed on junior companies after the Bre-X fraud and one could realistically conclude that there's simply been too much money chas- ing too little risk. That being said, financing options are beginning to open up for junior companies with upside production potential and good exploration projects although allocations for higher risk, grass roots exploration will – barring a runaway commodities market for gold and base metals – probably lag the pack for some time (years?) to come. Canadian banks, which, in my view, tend to be much savvier than their inter- national competitors when it comes to determining inflection points in commodi- ties markets, have started to dip back into the sector. In actual fact, there's hardly a shortage of good mineral projects to choose from and entry points remain at histori- cally low levels for any investor with cash – and heaven knows banks have plenty of it these days. Let's have a look at a few recent deals with some thoughts on what they mean for the future. Not all of the money is going into gold despite the metal's meteoric rise from the beginning of 2016. Arizona Mining, which appears to have made a very substantial zinc-lead-silver-copper discovery on its 100%-owned Hermosa Project in Santa Cruz County, Arizona, announced in late May an $18 million private placement with a syndicate of banks led by Scotiabank and RBC Capital Markets. The lead investor for the financing, which involved the placement of 14 million common shares at $1.29 each, was none other than JP Morgan Asset Management U.K. (After years of upbeat forecasts, maybe the zinc market is finally turning the corner?) Sean Roosen's quick-moving Osisko Gold Royalties concluded a $15.6 mil- lion financing a month earlier in Arizona Mining which saw the company acquire a 1% net smelter royalty on all sulfide ores of lead and zinc (and any copper, silver or gold recovered from the concentrate from such ores) mined from its Hermosa Project for proceeds of $10.0 million. In addition, Osisko subscribed to a $5 million-unit offering at $0.56 per share, generating a double on its investment in just over a one- month period. In my experience, banks have a ten- dency to wait for a credible investor like Osisko to make the first move even if it means paying higher prices later on. (If the gold market in particular unfolds, as I think it will over the next two to three years, the banks can have my share portfo- lio at much higher prices as well). A word of warning, however: when banks start piling willy-nilly into every deal in the marketplace, you can bet the bull market is over and it's time to head for the hills. I've seen the movie before. A syndicate of almost one dozen banks led by Macquarie Capital Markets and including TD Securities, BMO Nesbitt Burns, CIBC World Markets and Scotia Capital, concluded a $31 million bought deal with Richmont Mines at $10.40 per share. Richmont currently produces gold from the Island gold mine in Ontario and the Beaufor Mine in Québec where it also oper- ates the Camflo mill. In addition, Richmont is completing an extensive development program to access a high-grade, million- ounce, deeper resource established below its Island Gold Mine. This is expected to reposition the mine into a long-life, higher- production, lower-cost operation capable of generating long term free cash flow and high-quality growth. CEF Holdings Ltd., owned jointly by CK Hutchinson Holdings Ltd. and CIBC, recently concluded a US $60 million pri- vate placement with NexGen Energy which appears to have made a barn burner of a uranium discovery in Saskatchewan's Athabasca Basin. When it comes to ura- nium deposits, they really don't get much better than those found in this world class uranium basin. What most of these financings have in common is the fact they are focused on producing or advanced stage explora- tion projects, overwhelmingly in Canada, but also in stable jurisdictions in the US and Mexico. The sustainability of this trend is certainly something to watch and what we might end up seeing is a renaissance in Canadian explo- ration activity and discovery that is long overdue. n Financing opportunities open up for quality projects