Denis S. Frawley,
Partner,
ORMSTON LIST FRAWLEY LLP
"Mining has become very adaptable in that companies are able to advance projects in tight financial circumstances – the industry has improved from a capital allocation standpoint. I think this puts the sector in a good position for the years ahead.”

To what extent do you think the mining sector has been affected by the pandemic?

In general, the inflow of capital to the mining sector has been reduced due to the pandemic. Unless there is a particular aspect that distinguishes a company and aligns it with an emerging need, it has been difficult for companies to raise funds. Although the sector has faced challenges in 2020, it has not been decimated either; gold and metals for clean technology continue to attract investment. The mining clients we work with that are doing better tend to have a variety of liquidity sources with which to weather the storm.

More recently, the second wave of infections has brought back uncertainty; however, it is not comparable to the shock felt during Q2. I believe the sector will look to 2021 with a sense of tempered optimism because the long-term and macro fundamentals look favorable, especially for precious metals. For base metals, the fundamentals are contingent on whether the lifestyle changes brought on by the pandemic such as remote working become permanent.

What are some of the key considerations for private junior companies looking to list publicly?

One of the key mistakes management teams make involves the capital structure of companies when they plan to go public. Proponents can be rushed by favorable market conditions and neglect aspects such as the share structure and meeting market requirements in order to classify for listing. The regulators can provide very constructive feedback, and following this feedback closely will ensure the requirements for a company to go public are met. It is also very important for management to work closely with their audit partners to plan and manage expectations well, and to clearly present the company’s financial structure to shareholders early.

Given the potential of the mining sector to help grow the economy in a post-Covid landscape, do you think regulations could be modified to fast-track project development?

Expediting the development process has always been a mandate for government and it is difficult to argue how the current situation makes that any different. Over the past decades, the number of stakeholders that have an input in moving a project forward has increased and that makes execution more difficult – governments cannot ignore those stakeholders. Accompanying the multiple parties involved through the regulatory process and being mindful of all the stakeholders should be a priority. Specifically, government should lead those discussions and help identify potentially contentious points in order to prevent them from festering into lingering problems. If a company is mindful of all stakeholders and plans accordingly to ensure agreement, the route to execution is made smoother.

In comparison to previous bull markets, where in the cycle would you say we are now?

The market has not reached 2011 levels where it started boiling over. Since the end of the super cycle, there has not been a sustained boom and the exuberance of gold has not spread to other areas. Managers and geologists have been very careful with their budgets, and this has helped the industry through the pandemic. Mining has become very adaptable in that companies are able to advance projects in tight financial circumstances – the industry has improved from a capital allocation standpoint. I think this puts the sector in a good position for the years ahead.

How would you summarize OLF’s expertise and its focus moving forward?

OLF continues to work primarily with junior exploration companies and offers not only legal advisory, but practical advice around deal execution. We help companies avoid common pitfalls that can lead to undue complications and expose transactions to risk. The last 12 months have taught clients that moving quickly is of the utmost importance, and the uncertainty of the current economic panorama has highlighted that juniors need to take advantage of windows of opportunity.

Moving forward, we are very interested in market consolidation when well-funded companies acquire projects from smaller companies that have promising assets, but are doing less well. There are opportunities for bigger juniors or producers to cherry-pick interesting projects and do out-right acquisitions. Our experience makes OLF well-suited to contribute within this ecosystem.

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