Lenders are still "very selective" when financing new mines but there is now significant liquidity available in the equity markets for companies that need to raise funds, according to the chief financial officer of major gold miner Agnico-Eagle Mines Ltd. (TSX:AEM).
"The amount of healing that's occurred in the market is remarkable," said David Garofalo, speaking to a lunchtime gathering of the Canadian Investor Relations Institute on Tuesday.
However, banks are still hesitant to issue long-term financing. In the mining industry, this reticence is hitting one-asset junior companies particularly hard, he said.
Luckily, juniors and other miners finding it difficult to get financing through the credit markets can now turn to the equity markets. A year ago, share offerings as a way to raise capital were virtually non-existent due to a lack of investor confidence. Today, several miners have shown that this is no longer the case by making successful share offerings — including Barrick Gold Corp. (TSX:ABX), which managed to raise US$4 billion in September.
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"Money is available for juniors (in the equity markets)," Garofalo said. "We've seen valuations in the junior space escalate significantly and that's giving them the confidence to go out and raise money."
Garofalo said the outlook for gold miners is particularly encouraging due to shrinking supply and soaring demand for the yellow metal. Existing mines aren't enough to keep up with demand and new projects in stable jurisdictions are increasingly hard to come by.
In addition, gold is considered a safe-haven investment that will help offset the effects of inflation as governments around the world continue to fund massive stimulus spending projects.
"There's a competitive debasement of currencies going on and I think that will drive the gold price to unprecedented levels," Garofalo said.
"There's going to be a panic to buy gold when inflation rates start to spike up," he added.
Agnico-Eagle will continue to focus on exploration and development of new projects to increase its shareholders' leverage to the price of gold, Garofalo said.
Agnico-Eagle is one of the biggest gold miners in Canada, with operations or projects in Quebec, Nunavut, Finland, Mexico and the U.S.