If anyone wondered whether the big cheque books were still open or not, the final week of August and opening days of September provided a fairly emphatic answer.
Across a snapshot of 35 capital raisings examined by the Bulls N Bears Cap Raise Crucible, committed or targeted funds totalled $687.5 million, as companies went hunting for everything from mine development and acquisitions to money for drilling, commercialisation and plain old working capital slash “directors’ fees”.
And nobody appeared to be working the phones harder than Canaccord Genuity.
The investment bank turned up on nine mandates in our snapshot worth about $380 million in capital. Euroz Hartleys was next with five mandates and $328 million, while Argonaut Securities took out third spot with three and a not insignificant $211 million.
There is plenty of overlap in the dollar values because brokers frequently shared mandates, but the transaction count is harder to argue with.
Nine. Five. Three.
The broking desks were humming.
But having your name on the most tombstones only wins one part of the contest. As always with the Bulls N Bears Cap Raise Crucible, the more interesting questions are what companies had to give away to get the money and whether investors were still smiling once the bookbuild champagne had gone flat.
Three deals provided particularly useful answers.
FIREFLY METALS (ASX: FFM)
Funding package: $190 million
Price: $1.78
Discount: 5.3 per cent
Current price: $1.81 – up 1.7 per cent
FireFly Metals didn’t so much knock on the capital market’s door as walk through it carrying a wheelbarrow.
The copper-gold developer assembled the period’s biggest funding package, comprising a $150 million Australian institutional placement, a Canadian-supplied war chest worth almost $30 million and a non-underwritten share purchase program (SPP) targeting another $10 million. The SPP is still to be completed.
The new cash pile will help push FireFly’s 1.464 million tonne copper equivalent Green Bay copper-gold project in Newfoundland towards development. The funding is slated for underground works, drilling, infrastructure, long-lead items and feasibility studies, with the company assessing both a 1.8 million tonne-per-annum (Mtpa) base case and a larger 4.6Mtpa alternative.
Canaccord Genuity Australia was sole lead manager and bookrunner to the Australian placement, with Euroz Hartleys and Argonaut Securities riding shotgun as co-managers.
A syndicate led by BMO Nesbitt Burns as lead underwriter and sole bookrunner, alongside RBC Dominion Securities, CIBC World Markets and Canaccord Genuity Corp., separately underwrote the Canadian portion of the raising.
FireFly finished our 10th September pricing cut-off at $1.76, leaving the new money with its nose just below water.
For the biggest funding package of the fortnight, that’s not a bad opening act given the small discount.
PC GOLD (ASX: PC2)
Equity raised: $77 million
Price: $1.05
Discount: 7.9 per cent
Current price: $1.06– up one per cent
PC Gold didn’t need FireFly-sized pockets to make its point. The company secured $75 million from institutional investors. Its incoming directors also put their hands in their pockets for another $2 million, with both sources kicking in at $1.05 per share, a 7.9 per cent discount to the previous close and a 5.4 per cent discount to the five-day volume-weighted average price (VWAP).
Wallabi Group acted as joint lead manager and sole bookrunner, with Hannam & Partners and Canaccord Genuity Australia (again) also joint lead managers.
The money gives PC Gold considerable firepower at its Spring Hill project in the Northern Territory’s Pine Creek gold province, where a July resource update delivered 1.51 million ounces at 1.1 grams per tonne (g/t), including one million ounces in the indicated category.
Funds will support a major drilling campaign, feasibility work and underground infrastructure as PC Gold chases resource growth and a higher-grade underground opportunity.
At $1.09 as at our 9th September cut-off date, punters were just one per cent in front, but hey, a win is a win.
A big cheque, a single-digit discount and an aftermarket price above issue is the kind of raising that gets everyone leaving the room claiming a victory of sorts.
EUREKA GROUP HOLDINGS (ASX: EGH)
Equity raised: $80.2 million
Price: 61.5 cents
Premium: 0.8 per cent
Current price: 64 cents – up 4.1 per cent
There is nothing quite like a capital raise done at a premium to market to get a stock moving north. Eureka Group nailed both a premium and a resultant market price lift after putting away $80m in our snapshot period.
The affordable rental accommodation operator launched a fully underwritten $80.2 million accelerated entitlement offer at 61.5 cents – slightly above its 61-cent pre-halt close and just 0.4 per cent below its five-day VWAP.
The money is helping fund the company’s $123.8 million acquisition of the NSW Living Portfolio, delivering a refreshing industry change and some M&A rather than just another drill program.
MA Moelis Australia Advisory, Morgans Corporate and Unified Capital Partners were bookrunners, underwriters and joint lead managers.
And institutions didn’t blink.
The institutional component raised $70.7 million, with eligible institutional shareholders taking up 95.1 per cent of their entitlements. The remaining retail component is expected to raise $9.5 million.
Eureka closed at 64 cents on 9th September – 4.1 per cent above the offer price.
Paying above the last trade for new stock and still making money isn’t normally how the discount game works.
Together, the headline trio accounted for $347.2 million, or just over half the money chased during the entire snapshot window. For the right stories, the equity window wasn’t merely open. Somebody had taken the hinges off.
Not everyone received quite the same treatment though.
Broken Hill Mines secured a fully underwritten $90 million package at 76 cents, a 10.1 per cent discount, to fund production growth, drilling and infrastructure at its 4.8Mt at 9.2 per cent zinc equivalent Centenary project in NSW and its 6Mt running 10.9 per cent zinc equivalent Pinnacles project just next door.
Petra Capital was sole lead manager, bookrunner and underwriter, with Euroz Hartleys as co-lead manager, Blue Ocean Equities as co-manager and Peloton Capital acting as broker to the placement.
At 68 cents by our cut-off date, however, investors were 10.5 per cent underwater - the same open equity window, but a slightly different view from the other side.
Andean Silver raised $40 million at $2.45 to accelerate work towards a potential restart of its Cerro Bayo silver-gold asset in Chile. Canaccord and Euroz were joint lead managers and bookrunners, with Jett Capital Advisors as co-manager. The 13.7 per cent discount looked generous. The stock sat at $2.30 by our cut-off date, so everybody’s 6 per cent on the wrong side of the ledger.
Falcon Metals raised $30 million at 60 cents for drilling at its Blue Moon and Errabiddy gold projects, with Canaccord, Jett and Bell Potter splitting the clip. The 11.8 per cent discount price didn’t quite hold, with the stock now at 54 cents and investors 10 per cent in the hole.
Then things got more interesting.
Titomic raised $16.5 million at 13 cents for its US expansion and commercialisation push, with Canaccord and Peloton as joint lead managers and Bell Potter weighing in as co-manager.
The brokers held Titomic’s feet to the flames and extracted a hefty 23.5 per cent discount but were rewarded when the shares reached 14.5 cents, up 11.5 per cent, but you had to be quick. It was chocolates to boiled lollies in the end, with the stock at 12.5 cents at Sept 10 cut-off date.
Sierra Nevada Gold raised $12.85 million at 10 cents for drilling at its As Safra copper-gold project in Saudi Arabia, with Fosters Stockbroking and Argonaut pulling the punters together. At 14 cents, investors were already up a whopping 40 per cent. Nice work if you can get it!
Black Bear Minerals secured $12.5 million at 55 cents, with Canaccord as sole lead manager and bookrunner, to advance its Shafter silver project in Texas. At 54 cents, the new money was just a touch underwater.
The small cap punters that regularly swing off the coat tails of CPS Capital overran the $3.5m West Coast Silver raise that quickly turned into a $6 million raise at 9.5 cents at a 13.8 per cent discount.
Paul Cronin, who achieved superman status along with Eric DeMori when the pair listed and grew Adriatic Metals to about $1.8 billion, weighed in as a cornerstone on this one.
CPS has been sweet on West Coast Silver ever since raising its initial bag of cash at close to 3 cents, and while 9.5 cents now looks like a big win, those that chose not to sell at the heady price of 29 cents in December last year probably don’t think so. The stock has come off a little post-raise but will accelerate work at the historic Elizabeth Hill silver project in WA that has some of the highest-grade silver occurrences on the planet.
The discount rack got considerably busier further down the list.
Core Energy Minerals raised $3.025 million at 0.6 cents – a 25 per cent discount to market – for exploration at its Nova uranium joint venture in Namibia.
Canaccord was lead manager, earning a six per cent cash fee and, subject to approvals, a lazy 25 million broker options.
At 0.7 cents, the new money was sitting on a sweet 16.6 per cent gain.
Castle Minerals went the other way, raising $4 million at 7.5 cents with Euroz as lead manager – only 2.6 per cent below its previous close and actually a 4.7 per cent premium to its 15-day VWAP – principally for its Nielle gold project in Côte d’Ivoire. The new money has its nose in front with the stock sitting at eight cents.
Critical Resources raised $1.6 million at half a cent, including $475,000 from directors, to fund exploration across its NZ, Canadian and Aussie projects along with its battery tech. 62 Capital got the gig as lead manager for a six per cent fee and a sweet 24 million broker options. At 0.7 cents, placement investors were a whopping 40 per cent ahead.
Mount Ridley Mines raised $2 million at 3.3 cents plus a $100,000 director commitment to advance its Grass Patch rare earths project and its Selectro processing technology. Alpine Capital led the raise at an eye-catching 17.5 per cent discount, with the new shares streaking as high as 5.4 cents and closing on our cut-off date at 4.2 cents, a satisfying 27 per cent hike.
Jameson Resources raised $5 million at 3.5 cents, with PAC Partners acting as lead manager and bookrunner. Its ticker is currently trading at 3.8 cents, so punters are generally happy.
Alliance Aviation Services raised $40 million at 70 cents for working capital and debt reduction, with Barrenjoey Markets underwriting the raise. It is currently trading at 59.5 cents - ouch! - while 4DS Memory sought almost $5 million at one cent alongside its proposed Jenesys acquisition, an Australian software developer specialising in Edge-AI (artificial intelligence processed locally on a device rather than in the cloud, with Jason Skinner’s JP Equity Holdings as lead manager. Punters are on the fence with the company trading at the offer price.
Not every company required a broker to go rattling the tin.
Duxton Farms’ $9.74 million raising involved an entitlement offer of one convertible note for every 11 shares, paying 7.5 per cent a year. Prescient Therapeutics went directly to shareholders too through a $7 million SPP, while WIN Metals raised $860,000 through notes paying 10 per cent.
The IPO market, with three new entrants, added another layer.
Almasar Minerals raised $12 million at 20 cents, with Oracle Capital Group and 708 Capital as joint lead managers. The newcomer traded as high as 28 cents before closing at 22.5 cents on September 10, leaving subscribers 12.5 per cent ahead.
Axiant Resources raised $8 million in its IPO at 20 cents with Argonaut as lead manager and bookrunner. It traded as high as 23.5 cents before closing at 19 cents, putting subscribers close to break-even.
Powerhaus Uranium floated at 20 cents, with Canaccord and Pamplona Capital as joint lead managers to put away $9.5m. Its September 10 close of 23 cents handed thrill-seekers a 15 per cent gain.
Three new floats. Three pretty comfortable starts.
While some established companies had to reach deep into the discount rack to fill their books, the new kids wasted little time showing some of the old hands how it was done.
And that brings us back to the brokers and, in summary: Canaccord emerged as the busiest house with nine mandates, ahead of Euroz on five and Argonaut on three in our snapshot. Those dollar figures overlap; FireFly alone appears in all three, so the mandate count remains the cleaner scoreboard.
For the brokers, the old soft-shoe shuffle remained the same – find enough of a discount to make institutional clients reach for their cheque books while persuading company boards they haven’t just sold the family silver.
But this last fortnight once again showed why the bookbuild isn’t the final scoreboard.
Broken Hill and Alliance Aviation’s new investors were underwater. Sierra Nevada’s were up a third. Mount Ridley and Critical Resources were both up more than 30 per cent -nice.
Eureka asked institutions to pay slightly more than the stock’s last trade, attracted a 95.1 per cent institutional take-up and then closed above the offer price.
And the new kids supplied their own lesson: Powerhaus was 15 per cent above issue, Almasar 12.5 per cent, with Axiant treading water as at the 10th of September.
Thirty-five deals and $687.5 million later, there was little evidence the Australian equity market had lost its mojo.
However, plenty of evidence proved appetite can come at wildly different prices.
For companies, getting cash in the tin matters and for brokers, getting the book away matters. For investors, only one thing really counts – what happened after they wrote the cheque.
Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au
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