Amid a boom in Canadian equity issuance, mining is a big standout this year, providing a crucial shot in the arm for bank-owned and independent broker-dealers alike.
Overall equity issuance is up 24 per cent year over year in Canada to $40-billion, according to Bloomberg data. All of the major sectors have seen sizable increases. Energy is on top with $19.5-billion in financings. Notable transactions include Encana Corp.'s recent $1.3-billion marketed secondary offering, and Suncor Energy Inc.'s $2.9-billion bought deal, announced in June.
While financings have climbed 21 per cent year over year in energy, that pales in comparison to growth in the white-hot mining sector, where issuance has risen 64 per cent to $6.9-billion. That's almost $2-billion more than mining rang up for the whole of 2015.
Standout secondary financings in mining this year include Franco-Nevada Corp.'s $920-million (U.S.) issuance announced in February, and Silver Wheaton Corp.'s $550-million bought deal, which closed in April. Both financings were increased in size, another sign of robust demand.
Investors are feeling a lot more confident about taking a flyer on a financing deal amid the renaissance in precious metals prices. After a protracted rout that started in late 2012 and ran until the end of 2015, gold has risen 26 per cent since the start of the year. Silver has rallied even more, surging 37 per cent.
In terms of dealers, BMO Nesbitt Burns Inc. has a commanding lead in the equity league tables, which rank investment banks by revenue. BMO has 25 per cent market share year-to-date in mining, and credit for participating in 30 deals, according to Bloomberg data.
Scotia Capital Inc. is in second place with 17 per cent share.
GMP Capital Inc. earns bragging rights as the top independent dealer in Canada, in sixth place, with 3.5 per cent share and participation in 25 deals, narrowly edging out National Bank Financial. Toronto-based GMP ended 2015 in 11th spot.
GMP has recently seen some personnel changes in its mining banking group. Earlier this month, the dealer parted ways with long-time banker Kevin Reid. Last week, GMP announced it had moved Peter Rockandel from its sales and trading desk into the mining banking group.
The rebound in mining, a key sector of the Canadian market, stands in sharp contrast to the beginning of the year, and may fuel a reversal in fortunes for the brokerage sector.
In early 2016, the independent dealer space in particular, was in disarray, with a number of firms like Canaccord Genuity Group Inc. and GMP posting steep losses, in large part because of the multiyear slump in resources.
There are now signs that the worst may be in the rear view mirror.
Tellingly, the strength in mining is not only about a handful of sizable one-time deals. Scores of financings have been done in the $50-million to $200-million category. That's something that especially helps the smaller dealers, who don't have the balance sheets to go after the big deals. Haywood Securities Inc., for example, has been in 36 mining deals so far this year (versus 14 for the whole of 2015). Beacon Securities Ltd., a tiny Toronto-based dealer, has participated in 14 deals.
Despite signs of life at the smaller end of the broker-dealer scale, the bank-owned dealers continue to have a stranglehold on the market, winning the crucial "left lead" underwriting spot in the vast majority of deals, both big and small. Scotia Capital, which topped the mining equity league tables in 2015, has been in 22 deals this year.