Foran Mining Corp. (TSX: FOM), a Canadian company with a promising copper and zinc project in Saskatchewan, is raising C$200-million to fund its next stage of development, a rare financing for a junior miner in a tough market for share sales.
Foran, which is based in British Columbia, is selling up to C$190-million worth of new shares at C$4.10 apiece through a private placement, as well as C$10-million worth of “flow-through” shares that carry a special tax treatment.
Foran’s shares have soared nearly 2,500% over the past three years, transforming the company from a penny stock to an enterprise worth C$1-billion, but even established mining companies are struggling to raise money in this market. Many investors got burned when the commodity supercycle fuelled by China’s demand for metals crashed in 2012.
Social norms have also changed over the past decade and shareholders have embraced the ESG movement that advocates environmental, social and governance principles.
Foran, whose McIlvenna Bay project is located in eastern Saskatchewan, has benefited from filing formal reserve estimates, which means its investors are not necessarily taking a shot in the dark, and it also attracted some reputable early-stage backers, including Canadian mining magnate Pierre Lassonde and Fairfax Financial Holdings (TSX: FFH), which lent some credibility.
Foran will also produce copper and zinc, two metals that Ottawa has designated as critical for Canada’s success in the energy transition because they are the core materials used in green power sources such as EV batteries and solar panels.
A decade ago, a C$200-million share sale by a mining company would not garner much attention, because deals like this one were commonplace. Canada used to be the top destination globally for raising junior mining capital, and there was an entire ecosystem built around the country’s historic mining projects.
But the past 10 years have been brutal for the industry, and mining has lost its lustre in the Canadian market. The S&P/TSX Venture Exchange, which is largely made up of junior mining companies, is down 78 per cent since 2011, when the commodity supercycle was in full swing.
Because returns have been so dismal, there are now fewer investment banks providing research coverage of up-and-coming mining companies here, and fewer investment advisers paying attention to the sector. Since the ecosystem has dwindled, many junior miners now look to Australia to raise capital. The mining sector there is still running hot from feeding China’s hunger for iron ore and lithium over the past decade.
The current financing lull has politicians in Canada and the United States worried because both countries are losing the global critical minerals war and there are fears that China will use its critical minerals advantage against the West in a geopolitical provocation.
Foran’s shares first started climbing in late 2020, around the same time that stocks of all stripes started soaring during the pandemic bubble. Yet, unlike many other speculative companies, Foran’s stock never returned to earth. It just kept climbing.
Some of this success is attributable to Foran’s reputable management team. In November, 2020, the company hired Dan Myerson, who had run Glencore’s zinc business in Canada, as executive chair, and showered him with stock options. Mr. Myerson was granted six million stock options that vest in three stages over five years, based on certain development milestones. The options can be exercised at 20 cents a share and, if they all vested today, would be worth C$23.6-million.
Foran has also hired executives with deep mining and financing experience, including chief operating officer Gilbert Lamarche, who was previously head of technical services for mines and mills at Vale’s Canadian operations. As well, Foran has raised C$100-million in equity from Fairfax, plus up to $200-million in convertible debt, the full amount of which is dependent on meeting certain development milestones, from Ontario Teachers’ Pension Plan.
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