In a stunning display of demand, investors poured $679.8 million into TSX Venture issuers in July, according to the latest TMX Group data. What makes July’s financing figures so impressive, is not that it came in mid-summer, but that it was following June’s whopping $569.8 million in total financings. These are massive monthly numbers and point to a gold bull market building serious momentum. Mining companies continue to be the ultimate benefactor of the current environment.
Rising gold and silver prices are unleashing a rush of capital into junior miners. Bought deals abound as retail investors beg brokers for access to the hottest deals, and oversubscriptions become the norm. I like to call this phase of a bull market ‘rush’ as the stampede into quality miners ensues. While still in the early innings, retail has both feet in the water, and institutions will be next. If gold continues to stabilize above $2,000 per ounce, earnings numbers from senior producers may be about to take valuations to the next level. For many money managers, the margins may soon be impossible to ignore.
Barrick Signals Higher Base Price for Gold
Barrick announced Monday that it would increase its quarterly cash dividend by 14%. Significant because it points to a belief in higher gold prices for the long-term. Mining companies, like any other, do not like to lower or discontinue dividends.
When asked about the price of gold, BNN Bloomberg cited Barrick CEO, Mark Bristow:
“The “base price of gold” is definitely going to rise, Bristow said Monday in a telephone interview. “What is that number? I can’t tell you. But it’s below the current gold price, I’m sure.”
$2,000 Gold Ushers in New Era of Liquidity for Mining Companies
2020 is turning into the year of gold. As gold continues to hit new highs above $2,000 an ounce, investors are looking for leverage by buying into gold mining companies. For the TSX Venture, everything is turning up right now. The exchange hit another multi-year high of 755 earlier today as valuations, financings, and liquidity all increase.
It is worth noting, close to 99% of the money raised on the TSX Venture over the past two months is flowing into the mining sector.
While total financings are running 32.6% higher year over year ($2.13 billion January through July of 2019 vs. $2.83 billion January through July of 2020) according to TMX Money, it may be just the beginning. June and July represent more than 40% of all funds raised on the TSX Venture thus far in 2020!
With gold above $2,000 now, August may be the biggest month yet as companies race to secure funds to drill before Canada’s winter arrives. Unsurprisingly, valuations are increasing rapidly. Market cap listed issuers on the TSX Venture have added close to $11 billion to their market caps year over year – from a total value of $47.9 billion in July of 2019 to $58.8 billion in July of 2020. Even since the end of July (from which this data is recorded), valuations have increased markedly.
With gold and silver on fire, many mining companies are positioning themselves for re-rates upon successful drill programs. The positive news flow will lead to buyouts, more financings, and higher valuations still. Buckle up; the ride is a long way from over.