Source: https://www.snl.com/InteractiveX/Article.aspx?cdid=A-32895957-10789
The past several years have
unquestionably been particularly challenging for the mining industry.
Nevertheless, in spite of hardships, the mining industry continues to attract
new funding. Evaluating financings by the destinations of capital raised shows
that the regional distribution is hardly static and that some clear trends can
be identified in the geographical distribution of funds from January 2013
through early 2015. While the 2013-2014 periods have been relatively consistent
in total funds raised for mining and exploration, 2015 has so far been off to a
troubled start.
During the past nine quarters
(January 2013-March 2015), SNL Metals & Mining tracked US$82.92 billion in
financing for mining and exploration operations worldwide. SNL also identified
the intended global destinations of those financings, either definitively for
projects mentioned in company releases, or estimated with help from SNL's 2013 and 2014 Corporate Exploration
Strategies studies. The analysis includes financings for all metals
and minable commodities (precious and base metals, iron ore, uranium, coal,
potash/phosphates and specialty metals such as rare earth elements, graphite and
lithium). Except where application to a specific mining project was mentioned by
the company raising funds, SNL excluded senior debt in excess of US$500 million,
as it usually represents the shuffling of accounts and not direct project
financing.
The Asia/Middle East region
received the most funding during the period at 20% (US$16.92 billion), followed
by Latin America with 17% (US$14.10 billion) and Australia with 15% (US$12.83
billion); the remainder was rounded out by Canada (14%), the U.S. (12%), Europe
— including Russia and central Asia — (10%), Africa (8%) and Pacific/Southeast
Asia (3%).
Of the almost US$17 billion
destined for Asia/Middle East targets, almost two-thirds of the funding came
from Asian/Middle Eastern companies (primarily headquartered in China). Although
Canadian companies raised the most during the period at US$22.16 billion, less
than one-third was allocated domestically. Despite the tough times, Canadian
miners continue to focus on assets outside their home turf. By contrast, African
and Latin American companies spent 82% and 96% of their funds, respectively,
within their home regions. Of Africa's US$6.69 billion total, only 12% was
targeted domestically by African companies; in Latin America, 28% of the
region's US$14.10 billion came from Latin American
companies.
The US$39.89 billion raised
in 2014 was a slight increase (4%) over the US$38.23 billion raised in 2013. The
year-on-year changes varied regionally. While Australia and Pacific/Southeast
Asia held relatively steady in both years, Asia/Middle East increased 19%, from
US$7.43 billion in 2013 to US$8.87 billion in 2014. Canada experienced the most
dramatic shift — more than doubling from US$3.21 billion in 2013 to US$6.59
billion in 2014. These two regions are important for also being the domestic
markets for the majority of the world's miners and explorers with listings on
the ASX, TSX, Hong Kong and Shanghai exchanges. Financings targeted at Latin
America declined 13% year on year, from US$6.85 billion in 2013 to US$6.00
billion in 2014, and Africa as a target fell by almost a quarter, from US$3.65
billion in 2013 to US$2.80 billion in 2014.
An analysis of fundraising by
regional headquarters shows a clear increase in domestic spending year on year.
Canadian companies raised US$8.04 billion in 2013 and planned to spend 19% of
the total domestically. In 2014, Canadian companies raised US$11.59 billion and
planned to spend 35% of the total in Canada — almost doubling the domestic share
of spending. Australian companies followed a similar trend, raising US$3.77
billion and allocating 53% of it domestically in 2013, and raising US$6.00
billion in 2014 and targeting 73% of it
domestically.
Evaluating by company type,
it is unsurprising that the majors raised most (43%) of the US$82.92 billion
funding secured between January 2013 and March 2015. Latin America and
Asia/Middle East were the top two target regions for the majors — fully 55% of
the total funding intended for Latin America came from the majors and 44% of the
total targeted at Asia. Although Europe accounted for only 12% of majors'
financings, the majors were responsible for 52% of the region's total
allocations. However, the majors did not dominate in all regions: they were
third in Pacific/Southeast Asia with 21% (behind the intermediates' 29% and the
juniors' 27%); and in Africa, 46% of the total came from the juniors, compared
with 31% from the majors. The U.S. and Asia/Middle East regions had the smallest
shares of the juniors' targeted spending, with 17% and 11%,
respectively.
Among financings allocated by
specific commodity (as reported by the companies and captured by SNL Capital
Offerings), primary gold projects received the largest share of the total raised
during the period. Unlike many other targets, gold financings were relatively
evenly divided among the target regions, with similar totals raised for gold
projects in Latin America, Canada and Europe. Base metals and silver projects
together had the second-largest share, with Latin America in top place,
distantly followed by Canada. Copper was the primary commodity targeted by this
group. Coal also received a considerable amount of funding, with more than half
of coal's allocations going to fund projects in Australia, followed by projects
in Europe and Asia. PGM financings were predominantly targeted at South Africa,
with smaller amounts for a few Canadian operations. Potash and phosphates
received almost as much direct capital as PGM, with most of the funding going to
operations in Canada and the U.S. More than half of the funding for diamonds was
directed to Canada, followed by Africa and
Australia.
Financings got off to a poor
start in 2015. January was abysmal: With less than US$500 million raised (not
including senior debt over US$1 billion), it was by far the worst month in the
period for capital-raising. No other month between January 2013 and March 2015
had financings totaling less than US$1 billion. February and March returned to
somewhat healthier totals, however, with well over US$1 billion raised in each
month.
First-quarter trends in 2015
are somewhat different from those in 2013-2014. Canada-focused financing has
moved ahead to take up a third of all funds raised in the year so far, followed
by Latin America (26%) and Asia/Middle East (13%). Things appear most dire in
Australia, which attracted 15% of total financings in 2013-2014 but has fallen
to only 5% of 2015 financings to date. However, although mining-associated
fundraising has been largely stagnant in the first quarter, there may be more
movement as the year unfolds. A few notable offerings by majors that should make
2015 a more robust year than it has looked so far include First Quantum Minerals
Ltd.'s recently closed
C$1.44 billion offering to be applied across its portfolio of
operations; Zijin Mining Group Co.
Ltd.'s recent US$412 million
investment in Ivanhoe Mines Ltd.'s
Kamoa
project in Democratic Republic of Congo; and Rio Tinto's planned US$6
billion campaign to fund underground development at Oyu Tolgoi
in Mongolia.