According to a 2021 report from Accenture Global (NYSE:ACN), 59 percent of investors want miners to aggressively pursue decarbonization and be market leaders in that effort. The report, entitled “Global Institutional Investor Study of ESG in Mining,” was based on responses from 200 public and private institutional investment firms from around the
world.
Raising Capital: A Key Challenge for Junior Mining Companies
While ESG was the main concern identified by companies in the EY report, the second place went to raising capital, a challenge that mainly affected junior mining companies in North America.
The need for capital has also been compounded by the speed with which the energy transition must take place.
“Capital has risen in the ranking as the sector competes for investments and incentives to accelerate the exploration and development of minerals and metals vital to the energy transition,” reads the EY report.
“We are seeing a shift from a short-term focus on returns to a long-term view of value, encouraged by the recognition that longer investment horizons are necessary to achieve net zero goals by 2050.”
Even as some investors take a longer-term stance, PDAC panelists have noticed an increase in risk appetite.
The market has become less tolerant to interruptions than it was a decade ago, when there was a more favorable environment for investment and growth, Przybylowski explained.
“Investors nowadays are much more scared or nervous about operational risks, geopolitical risks — any kind of interruption,” he said. “And so we see a much bigger response in the stock price today than when I started my career.”
In addition to the growth in risk appetite, there has been a loss of speculative capital since the late 2010s.
“In the last five years, we haven’t seen great successes in the exploration space — the big hits are the big premium acquisitions we’ve seen in the past,” said RBC’s Thompson. “This probably keeps some of the capital out of the game. You also lost capital, that most speculative capital, in Bitcoin, in cannabis a few years ago.”
Thompson added that there isn’t the same flow of capital in exploration as it used to be.
For his part, Przybylowski noted that some of the capital raising could be hampered by portfolio managers who avoid stocks with a market capitalization of less than 2 billion dollars.
“When I talk to generalist investors looking for new ideas, that’s pretty much the limit for a lot of them, and it’s also considered small-cap funds in the United States,” he said.
“Everyone knows that raising capital for junior mining stocks is becoming increasingly difficult.”
