Strong demand greets mining sector IPO
TMAC Resources riding high on executive team’s track record
TORONTO — The mining sector’s first initial public offering on the Toronto Stock Exchange since 2012 is shaping up to be a big success.
The IPO of TMAC Resources Inc. has been upsized by $30 million because of overwhelming investor demand, according to sources familiar with the transaction. TMAC is now planning to raise $135 million, and as much as $155 million if the banks sell the entire overallotment. One source said it is a “safe assumption” that will happen.
TMAC plans to use the money to develop the Hope Bay gold project in Nunavut. The IPO values the Torontobased company at between $446 million and $466 million.
It is a very impressive debut given the rough state of the mining sector, and the junior mining sector in particular. Metal prices have been weak, and smaller companies like TMAC have struggled to raise money. IPOs have been non-existent in mining because of poor demand, even though they have been very popular in other sectors of the Canadian economy this year.
The success of the TMAC offering will be interpreted as proof that market conditions are turning around. But sources said it is largely about the track record of the TMAC team.
TMAC is named after Terry MacGibbon, 68, the company’s executive chairman. He made a fortune for investors at FNX Mining Company Inc., a base metals company he founded that made big discoveries in the Sudbury Basin. FNX merged with Quadra Mining Ltd. and the combined company was sold for almost $3 billion in 2012. MacGibbon brought a number of people from the FNX team over to TMAC, including chief executive Catharine Farrow.
“They made people so much money at FNX, and they’ve put the same vigour into this project,” said one source involved in the IPO.
TMAC bought the Hope Bay project from Newmont Mining Corp. in 2013. Hope Bay was a disappointment for Newmont, which paid $1.5 billion for it in 2007 but never went forward with development. However, the TMAC team had tremendous exploration success at the project last year. It boosted the measured and indicated gold resources by 59 per cent to 4.4 million ounces.
In April, TMAC released a pre-feasibility study on Hope Bay that demonstrated it is a very lucrative project. The study envisions a mine that produces an average of 160,000 ounces of gold a year at very low all-in sustaining costs of $785 US an ounce. The project is located near tidewater, which simplifies the shipping and logistics despite the remote location.