Mining startups appear to escape fallout from Silicon Valley Bank collapse

The US banking sector turmoil is unlikely to rock early-stage mining ventures because miners and explorers largely do not depend on US financiers for startup cash, industry experts say.

US regulators shuttered Silicon Valley Bank (SVB) on March 10 after it was unable to manage a sudden outflow of deposits. Days later, regulators closed Signature Bank over liquidity issues.

SVB was well known as an early-stage funder of technology startups, including those dabbling in the US energy transition. But small-cap mining and exploration companies, many of which rely on venture capital to fund their activities, are mostly listed outside the US, according to S&P Global Market Intelligence data.

"I think, for the most part, the mining business has managed to avoid the SVB mess," Chris Berry, president of House Mountain Partners, an advisory firm that focuses on battery metals and early-stage mining and exploration companies, said in an email. Berry said he has not heard of any mining sector companies that were hurt by the recent troubles in the banking sector.

Canada- and Australia-listed junior mining companies, with $0-$50 million in annual revenues, and intermediates, with $50 million-$500 million in annual revenues, dominate global financings relative to their peers in other countries. Companies listed on the Australian Securities Exchange raised $12.24 billion between Jan. 1, 2021, and Feb. 28, 2023. In Canada, companies raised $7.31 billion on the Toronto Stock Exchange and $7.04 billion on the TSX Venture over the same period.

In contrast, juniors and intermediates listed on the NYSE raised $956 million in that time frame.

The limited exposure to US banks shielded small-cap mining companies, including many working on new mineral processing technologies and battery-metal projects, from the fallout that affected startups in other industries.

There was "no direct hit" from the SVB collapse, Alex Grant, principal at Jade Cove Partners, a resource sector consultancy focused on energy transition metals, said in an email. Grant also co-founded Lilac Solutions Inc., a California-based lithium extraction technology startup.

A golden lining

The broader mining sector also appears to be insulated from the troubles at SVB and Signature Bank. In recent years, mining companies have benefited from relatively strong profits on the back of healthy metal prices and have paid down debt.

"Furthermore, mining issuers have typically set up facilities with multiple well-established lenders," Brian Szeto, an analyst at Morningstar, said in a March 16 report. "In contrast, SVB had a specialized business model that was focused on banking for the venture tech and life-sciences industries and their associated sponsors. We are not aware of any banking services or capital that SVB provided to mining companies."

Indeed, some mining companies stand to benefit from the market turmoil.

The price of gold, considered by some a safe haven asset, jumped in recent trading sessions. Gold traded for $1,827.89 per ounce on March 9, the day before US regulators shut SVB down, but climbed 8.2% to $1,978.47/oz as of March 20, according to Market Intelligence data.

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