Marijuana companies have mesmerized retail investors, depriving the mining sector of the risk capital that’s typically been its “lifeblood.” But two mega-deals and a dramatic hostile battle in the gold space may finally give moribund mining stocks a shot in the arm.
Retail investors have historically held 15 per cent of most mining equities, driving their liquidity, TD Securities’ Deputy Chairman Rick McCreary said in the same interview. However, “we have seen all those sorts of liquidity of trading go into the cannabis side.” Top of mind is the fray in the gold space. In September, industry leader Barrick Gold Corp. agreed to buy Randgold Resources Ltd. for US$5.4 billion. Three months later, its long-time rival Newmont Mining Corp. announced a plan to purchase Goldcorp Inc. for US$10 billion, which would leapfrog it into the leading gold-producer spot. The latter deal was thrown into question last week when Barrick announced a US$17.8-billion hostile bid for Newmont.
Mergers probably won’t benefit all companies equally. Mega-deals would certainly create better liquidity, and that will give the giants better access to funding, according to Randy Smallwood, chief executive officer of Wheaton Precious Metals Corp. That could be a negative for alternative-funding sources, such as the streaming and royalty companies, he says.
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