Project backer Triple Flag eyes IPO as gold prices up

TORONTO In the latest sign that rising gold prices are giving Canada’s mining market a shot in the arm, Toronto-based Triple Flag Precious Metals Corp. has announced plans to raise $360 million through an initial public offering scheduled for next year.

The company, which finances mining projects for a cut of the revenue produced by the mine, known as royalties or streams depending on the details, was founded in 2016 by former Barrick Gold Corp. executive Shaun Usmar with backing from Elliott Management, a U.S. hedge fund known for its activism.

Now, with gold prices rising and the equity financings still slow for mining companies, Triple Flag said it plans to open up a 17-per-cent stake in the company to public investment, by issuing 20 million shares, priced between $15 and $18. Elliot Management would retain control of 83 per cent of the company, or about 97 million shares.

“We didn’t invent the streaming and royalty business model, but we have embraced it for its record of superior performance relative to bullion and gold mining company equities,” Usmar wrote in the prospectus, “whether prices are rising, declining or stable, as evidenced by the equity performance of our peer companies.”

The IPO comes in a year when the mining companies on the

TSX and TSX-Venture exchange, through October, had raised just $10.4 million through IPOs, and about $1 billion through public offerings versus nearly $3 billion in private placements.

By comparison, mining companies on those exchanges had raised $31 million through IPOs, $1.4 billion through public offerings and $4.3 billion through private placement during the same period last year.

It ties into a broader decline for the sector during the past decade,

In 2011, for example, the mining sector raised $12.5 billion across roughly 200 new listings.

Neil Woodyer, chief executive of Leagold Mining Corp., said streaming and royalty deals have emerged as a key supplement to equity and debt financing, which have become harder to obtain for mining companies.

“They’re not predatory,” said Woodyer, about streams and royalties, “but they’re not cheap.”

The most successful streaming companies have built up portfolios of streams and royalties on mines around the world, which provide cash flows highly leveraged to metal prices but without the operational risk that miners face, such as labour conflicts, environmental concerns or permitting disputes.

Triple Flag, which said in its prospectus it would focus on projects in the Americas, Australia and Europe, already controls 37 royalties and streams including nine on producing mines, five projects under construction and 23 in exploration or development stage. The company said it aims to keep 80 per cent of its portfolio in precious metals.

Triple Flag reported $30 million in free cash flow through the first nine months of 2019, an approximately 41-per-cent increase from the prior year period.

It holds a two-per-cent net smelter royalty on Kirkland Lake Gold Ltd’s Fosterville mine, one of the highest grade gold mines in the world, acquired in June 2018 as part of a $145-million purchase of gold royalties from Toronto-based Centerra Gold Inc.

In March, it paid Continental Gold Inc. $100 million for a 2.1-per-cent stream on the gold, and 100 per cent of the silver from its Buritica mine project under construction in Colombia.