Kai Hoffman, CEO of Oreninc, shares his thoughts on the current landscape for mining industry financings in this PDAC 2018 interview.
Battery metals like lithium and cobalt are generating a huge amount of interest right now, and according to Oreninc CEO Kai Hoffman, that interest is reflected in the number of financings they are doing.
Oreninc provides financial information on the junior commodities space, and according to Hoffman, the company’s data shows that so far $170 million in battery metals-related financings have closed in 2018.
“Gold is always omnipresent,” he said. “But it’s definitely the battery metals that are taking a lot of the limelight right now. [$170 million is] a massive increase from what we’ve seen. And obviously the retail interest is more in that sector as well.”
That said, Hoffman noted that retail interest in the mining space as a whole is on the low side right now. “I think we’re lacking quite a bit of retail interest in the space,” he commented. Nevertheless, he’s optimistic about the industry in 2018.
“The index — we’ve set the benchmark in January 2011. So once we get closer to that number, you’ll know we’re in a frothy market. We’re far from it and things are moving along great,” he concluded.
Watch the video above for more insight from Hoffman. You can also read the transcript below or click here to view our full PDAC playlist.
INN: To start off, can you tell me a little bit about your company and what you do there?
KH: I’m the CEO of Oreninc, and we track all the financings in the junior mining space. Meaning we look at all the financings that are being announced and we put them on our website and track them — the opens, the closings, we update them regularly.
INN: Your research shows that a of couple weeks ago, we saw the lowest number of financings open since January 2016. What does that tell you about the resource space?
KH: I think we’re — I was very close to calling [that] we’re back in a bear market. But I think it seems more like a lull because we’ve done a little more research into that, and we’ve seen that a lot of financings haven’t been closed over the last couple months, especially January and February. And the numbers are exactly the same as in 2017. So we’ve seen roughly $650 million in financings closed in the space, and this year was the exact same number. Openings are slower. I think we’re lacking quite a bit of retail interest in the space for now.
INN: That’s interesting. I feel like coming into this show everybody was feeling quite optimistic — but the numbers are not telling us the same thing?
KH: No, the gold price is doing okay, we’re hanging in there over $1,300. So … there’s a justification of being optimistic. Companies have raised quite a bit of money in recent years or really the last 18 months, so they’ve got money to spend, they’ve got money to drill, so they’re happy and optimistic.
They’ve got stories to tell now again, right? And we’ve been lacking that in 2015. So companies are excited now. And yes, you’ll see it — more and more people here. I think the booths are being staffed more and more. There are more than — you know last few years, it was one or two people at the booths, now you see three, four, five people. That’s a big change.
INN: You’re talking about financings that have been opened. What about financings closed? Is it a similarly low level, or what is your data showing?
KH: The back end of 2017 where a lot of deals [were] announced as well, [we saw a] flurry of activity in just mid-December. I think we’re just seeing maybe the back end of that, of the deals closed. As I said earlier, $650 million would have been closed in total financings just in the last couple months, and that is the same number. I was surprised when I saw that number — I didn’t expect it to be the same. So it’s more of the financings that are being opened right now that are just lagging behind.
INN: What kinds of companies are opening and closing financings right now? Are you seeing any trends [in terms of a] specific commodity?
KH: Yes, definitely. Gold is always omnipresent. But it’s definitely the battery metals that are taking a lot of the limelight right now. We’ve seen I think $170 million in financings close this year already in that space, and it’s been a massive increase from what we’ve seen. And obviously, the retail interest is more in that sector as well, so gold stocks — you’ve been tracking the market obviously, we’re slower, we’re not advancing. Seasonality hasn’t been as strong as we’ve usually seen. It’s more of the battery metals that are taking that attention right now.
INN: Is that a trend you expect to see continue into 2018?
KH: Probably it’s going to be flat in my opinion, just because lithium, cobalt — there’ll be a certain saturation factor coming in when people understand that we don’t need a thousand lithium companies.
INN: Maybe not.
KH: You know, I think we’ll see saturation, but interest is definitely strong. One thing I like about it is it gets the younger generation involved in the space again because EVs are in everybody’s newspaper, magazines, on every app — EVs are that topic, and Bloomberg is doing a lot of reporting on it. It’s just attracting a lot of — maybe a new crowd of investors that I’m secretly hoping will trickle down to the gold space.
INN: Fingers crossed. If you’re an investor, what should you take away from all of that information? How should you use it?
KH: What we’re seeing right now — I think we’re seeing a lag in seasonality. We’re just lagging behind by eight weeks. And we’ve seen that massive drop off — what was that, three weeks ago? Something like that. We’ve seen a massive drop also in TSX Venture index. We are recovering, the stocks I’m tracking personally as well, I’m looking at a couple of mid-tier producers. We’re up to 15, 20 percent since then. My gut tells me that we might see that seasonality kicking in a bit late, post-PDAC instead of before.
INN: Any final words you want to leave investors with today?
KH: At Oreninc, we’re quite optimistic when it comes to the markets in general. The index — we’ve set the benchmark in January 2011. So once we get closer to that number, you’ll know we’re in a frothy market. We’re far from it and things are moving along great.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.