I will spare you the now badly overused “without precedent.” As the Chinese curse goes, “may you live in interesting times.” As we roll through what feels like the 100th day of March, we have a range of new issues on the desks of counsel to mining companies. These include novel considerations in responding to the pandemic, new opportunities and new challenges. Miners and their lawyers have been engaging a broad range of these. My comments below highlight a few for your consideration and planning.
In terms of immediate responses, mining companies have been engaged in health and safety updates. What was drilled for in terms of disease response and safety protocols came in handy. Isolation, community protection measures and shutdowns of varying severity and duration have evolved around the world. Fly-in, fly-out projects faced particular challenges to demonstrate to their host communities that they were taking adequate precautions to ensure the spread of COVID-19 was not facilitated by miners. The opportunities to highlight skills in community relations, government relations and occupational health and safety showed many miners and mining lawyers in a great light.
It was interesting to track disclosure of the impact of COVID-19. As miners faced operational challenges they reacted with speed to announce procedures in place, impacts on guidance, and implications for operations. Some excellent disclosure emerged which allowed companies to highlight the decision in most jurisdictions that what they do is an essential service, a nice reminder that – to parrot advertising of the 1990s – we may not make the operating room, but we make the raw materials that make the equipment in the operating room, from surgical steel on up!
The best of disclosure I have reviewed highlighted the risk of transmission, and noted the true impacts of the pandemic on business may go beyond the disease itself, and arrive in the form of government and market reactions to the disease.
Ten years into a gold drought, the world seemed to have abandoned the gold hedge on currency and inflation, despite the challenges of quantitative easing inﬁnity. The pandemic brought us a new version of QE∞. So rapid has been the advent of free money, writers on the economy seem to just be reeling without the time to name it (at least as far as I have seen to date).
Unnamed it might be, but QE-Steroids have injected gold and silver with new enthusiasm. BofA led in April calling for an 18-month gold price of US$3,000 per oz. The fundamentalists are celebrating and generalists are busily looking for a way to play. Equity raisings have kept lawyers, bankers and issuers busy tapping the new enthusiasm for the next round of ﬁnancing. With the bulk happening since May of this year, there have been, according to Reﬁnitiv, 49 equity raisings by Canadian gold miners, compared with 53 in all of 2019. The well, once dry, runs again. It isn’t back to the roaring torrent of the early 2000s, but it is running for quality with a vigor unknown in recent years.
What this means is that equity is back. Financings, and even IPOs are out of hibernation. The competitors to equity have new challenges to demonstrate value or seek opportunity from those who equity still avoids. The rotation back to private placements and prospectuses has helped to challenge mobile phone and home internet infrastructure.
Outside of gold and silver, there have been challenges similar to those faced by the broader economy. Mining companies and their counsel have been ﬁlling days seeking to qualify for relief by traditional lenders and working through emerging rules for new government support programs. Miners have been working with lending lawyers, restructuring specialists and government relations supports to ﬁnd new ways to survive in an economy that’s in a cocoon.
As miners feverishly draft disclosure for new offerings, assist with evaluation of M&A opportunities, and help their clients meet the challenge of the day, they are mindful that discipline continues to be the watchword of the COVID-19 era. They are also mindful that, as 1918 Spanish flu pandemic showed a hundred years earlier, this isn’t without precedent, and as parts of the world drift back into lockdown, that this isn’t over. The mining community needs to remain nimble to meet the challenges of these times and seize the opportunities as they arise. The interesting times are set to continue.
Sander Grieve is a partner and head of the mining industry team at Bennett Jones, Toronto.