Watch the on-demand replay as sector leaders discuss recent capital market success stories, organic growth and greenfield projects, enterprise risk management, and the green agenda.
Topics discussed include:
- How you can navigate through the opportunities and challenges of the changing world to gain and maintain competitive advantage now, next and beyond.
Good morning/Good afternoon everyone, depending on where you are. Thank you so much for joining us today for this informative conversation about the trends coming out of the COVID-19 era in mining. I'm Brenna Daloise, I'm a Mining Assurance Partner at EY, and I will be the moderator for the panel discussion.
I would like to begin by acknowledging the indigenous people of all the lands we are on today. We are meeting virtually, but from coast to coast to coast, we acknowledge the ancestral unceded territory of the Inuit Metis and First Nations people that call this land home.
I would also like to introduce the members of the panel that will be joining us today. Following our panel discussion, we will be opening up the conversation for questions from the audience. Please use the chat feature at the bottom of your screen to pre-populate any questions you have now, or as our conversation goes on.
Daniella Dimitrov is Executive Vice President and Chief Financial Officer of IAMGOLD Corporation, where she oversees all aspects of finance, information, technology and investor race relations. Prior to this, Daniella was Partner, Investment Banking at Sprott Capital Partners. She has also served as the President and CEO of a multi-mine precious metals producer, as Executive Vice Chair of an iron ore developer and in various corporate development roles in mining and financial services. She is currently also a Director of Nexa Resources, ChemTrade Logistics, as well as a member of Ontario's Mining Advisory Group. In 2016, she was chosen as one of the top 100 global inspirational women in mining. Welcome.
David Cates is Director, President and CEO of Denison Mines. He has extensive expertise in the Canadian and international uranium mining industry, from over a decade of senior management and financial experience in various roles with Denison. David was appointed President and CEO of Denison in 2015. Having previously served as the company's Vice President, Finance and Tax, and Chief Financial Officer. Prior to joining Denison in 2008, he held positions at Kinross Gold and PwC. David also serves as the Director of Denison, as a Director of the Canadian nuclear association, Skyharbour Resources, GoviEx Uranium. Thank you for being here.
Jason Simpson is the CEO of Orla Mining. He is a mining executive with over 24 years of experience in operations, leadership, mining engineering and project construction. Prior to joining Orla, he was the Chief Operating Officer of Torex Gold Resources, where over his nearly six-year tenure, he oversaw the successful construction and operation of the ELG mine in Mexico. Prior to Torex, Jason spent 11 years at Valet in various roles and also worked at McIntosh Red Path Engineering on mining studies for companies, including Barrick, Freeport CVRD, Rio Tinto and Falconbridge among others where he's gained global multi-commodity experience and perspective. Welcome.
Dean Braunsteiner is an EY Canada Partner who leads our assurance practice for mining and metals clients. Dean guides clients in redefining what's possible in the face of industry-wide transformation. A senior leader with two decades of experience providing assurance and consulting services, Dean has worked extensively with large multi-national public companies on corporate governance, mergers and acquisitions and initial public offerings. Dean's expertise spans IFRS, US GAAP and SEC reporting. Dean is also a member of several industry groups and community boards, including the Prospectors and Developers Association and the Canadian Mining Innovation Council. Thank you all for being here.
Before we get started on our panel, I wanted to take a minute and set the stage of our last year and a half. This COVID-19 pandemic has been one of the greatest challenges facing a generation and has played out in the mining and metal sector in many different iterations. Throughout this crisis, the priority of mining and metal companies has been to protect their people, but they have also acted fast to maximize liquidity by preserving capital, reducing costs and prioritizing the operations of lower-cost assets. With this in mind, companies were initially taking a cautious approach to capital spending, delaying investment decisions, reducing CapEx guidance and deferring dividend payouts.
We saw declining exploration budgets and pre-production assets put on hold, as well as a deferral, a sustaining capital and non-essential maintenance. However, as the pandemic carried on, we saw a significant increase in commodity prices period over period, which helped drive interesting activity in the capital markets, and also helped companies make growth decisions. In addition, mining companies were forced to rethink their enterprise risk management strategies with a broader view of capitalizing on the upside opportunities that presented themselves. All of this, while trying to balance actions around the environment and the broader ESG initiatives.
Our panellists today will lend views to how this has unfolded over the past 15 months, and what we might expect in the future. Let’s start off with a question to all of our panelists. As we focused on sort of the recent capital markets, tell us where you have had the most amount of success in capital markets, and has COVID-19 helped or hindered you? I'll start with Daniella.
Thank you very much Brenna, and it's an absolute pleasure to be here today and to join the discussions with my fellow colleagues. As you mentioned, I recently joined IAMGOLD about two months ago, and prior to that I was a Partner, Investment Banking at Sprott Capital, so we certainly had a front-row seat as to all the activity in our capital markets space over the last 18 months. To your point, we entered 2020 with stronger precious metal prices, although with a cautious approach and particularly in the first and second quarter, where we saw some of the operations around the world being suspended as a result of government action. We saw that in Quebec and Canada, we saw that in Peru. Those are some of the jurisdictions where we saw suspensions. In some cases, such as Peru, those suspensions lasted two months, so certainly for the end of the first quarter and into a good part of the second quarter and then with a ramp-up period. That really drove the cautiousness that you talked about in the first half of the year.
However, towards that first half and into the second half, we really saw a lot of activity in the capital market space. We saw new companies being created, again, particularly in precious metals, and then at the tail end of 2020, US-based metals followed a lot of activity in the base metal space, copper and nickel. We saw companies being created through IPOs and RTOs, we saw companies along the whole development continuum access the capital markets and be able to finance, in some cases, access to capital markets multiple times. We saw that with junior explorers, we saw it with developers and we saw it with producers.
There certainly was a lot of capital that came into the resource-focused funds while we were all waiting for the generalist to come to the party, in a sense. A lot of capital looking to be put to use with not a lot of projects being progressed far enough from the de-risking phase in order to actually be able to really access that capital, particularly on the debt side. So certainly, a lot of activity in 2020’s second half, and that really continued in 2021.At IAMGOLD, we certainly participated in that activity. We refinanced $450 million of high-yield notes in the second half of 2020, and we were able to extend our maturity to October,2028. We were very happy about the long tenure that we were able to achieve as well as the reduction in our cost of capital.
Our previous bonds that we refinanced had a coupon of 7%, and our new bonds have a coupon of five and three quarters, certainly a longer tenure and a reduction in coupon. At the beginning of 2021, we were able to extend our half a billion-dollar revolving credit facility to January,2025. Although we experienced a slight increase in our cost of capital then, as a result of market conditions at the time, over the course of 2021 we have seen, from January to now, a relaxation in the credit.
From what I understand, a number of companies have gone back to the lenders and pushed to grab back that small cost increase that those who renewed to those facilities around the end of 2020 and beginning of 2021, had experienced. Again, we're certainly seeing availability of credit and the lowering of the cost of capital on that front Lastly, for us in the second quarter, we had a couple of further financing activities where we were able to move forward our prepay obligation that we entered into in 2019 from 2022 to 2024, pushing that obligation forward, but at much more attractive terms than those we were able to achieve in 2019.
From wearing an investment banker and precious metals hat I'd say, 2020 and 2021 were really fantastic years from an activity perspective and capital being available. From IAMGOLD's perspective, similarly, we've had quite a bit of success in refinancing our balance sheet at much more attractive terms than going into 2020.
Excellent. Jason, what about yourself?
Thank you, Brenna. I think Daniella has perfectly characterized the context that we all went through from 2019 to 2021. What I can say is, Orla was an example company that Daniella spoke to, that had to navigate a project financing through those stages. We started putting together a debt facility at the end of 2019. In our new lexicon pre-COVID-19 we had that in place, but always knew that in order to complete the project financing, we had to go to the equity markets. Just at about the time we were making that decision, COVID-19 really started to take hold in North America, and the Orla board was faced with a decision. We knew we needed to raise equity as part of our debt arrangement. Do we stop everything and wait for COVID-19 to pass and then potentially restart everything? The board at Orla decided no, we will proceed with completing the project financing via an equity raise in April,2020.
If verybody recalls, that was exactly the time that the markets were very skittish, and nobody quite knew what direction COVID-19 was going to go. The decision at Orla was frankly based upon a confidence in our shareholder base We knew that we could rely upon that luxury, I know that not everybody has. But we went to market in April 2020 and completed that equity financing. We now had the financing we needed to build the mine. It was uncertain times and we had to make decisions of whether we were going to deploy that capital and actually begin the process of constructing the mine.
We decided to proceed for a number of reasons, not the least of which is that, our stakeholders, to a large extent, are reliant upon the continuity of our operation and our work, but also because we knew we could do some early stages of construction engineering procurement in 2020, which would set us up well for the onsite construction in 2021. And that's exactly what happened. We deployed that capital in 2020 through advancing our engineering, procuring all the equipment we needed for the construction, and throughout 2021 have been living on that luxury of having all of those things done the year before, which bodes well for our target of pouring the first goal by the end of this year.
We really did go through the full spectrum of the COVID-19 life cycle while trying to finance. Fortunately for Orla and its stakeholders, we were able to raise the money, deploy the capital in a responsible way and hope to be pouring gold by the end of the year.
Perfect. David, what about yourself?
Thanks Brenna. It's actually quite interesting to hear Jason and Daniella's comments on this. I may just add a little bit to it because I think they've captured the essence of the pandemic well.
Our company is a uranium developer. We are in the environmental assessment and feasibility study stage, not where Jason's at in terms of actually raising money for the project. We had a slightly different experience, but really the pandemic was a story of really two stories. A story of initial constraint in the capital markets on the onset of the pandemic, which was quite severe, followed by an opening up of markets that's actually almost been euphoric in some sectors. That's where a company like ours has been able to truly benefit in that we do rely largely on equity at this stage of the mining life cycle.
As the equity markets have opened up post the normalizing of the pandemic, the sort of interest rates to zero, the where do I invest my money phenomenon, the idea that there's more free money and new money that needs to be invested, that certainly has driven the equity sector or the equity side of the capital markets It has provided tremendous opportunity for developers and explorers to access capital that immediately post pandemic was absolutely not there. That's where we've done really well being positioned with a shelf prospectus early in the game to be able to then quickly access capital markets as that window opened in a large and substantive way.
That's great. While I'm with you David, we might give the next question to you, if you don't mind. Could you talk a little bit about investors’ reception to uranium? Some of these investments you've made in the last year, and how that set you up for success?
Well, it has been a significant shift in investor interest in the uranium sector and in the nuclear energy sector. Building on what we've talked about in that swing in the pandemic effect, we've really seen a multiplier in terms of the access to capital, what we've done with our business based on both the equity markets opening up and a surge of new interest into the climate change debate, clean energy and the recognition of nuclears’ role there. That has been building since the US election results in late 2020 and it really started to take off in the beginning of 2021, where we have seen quite a dramatic shift in the interest from our investors. The financing window has been opened and it is wide open to the extent where we've seen all of the companies in the sector make use of it often in some cases, and in our case multiple times to shore up our company's position for project development, but also now moving towards funding and project construction.
We completed a number of equity raises in the last 12 months. We raised CA$175 million. We used every dollar available in our base shelf prospectus. For those of you who think, how big is the number you should put on your base shelf prospectus, you should put a big one out there because there might be something like this that happens where it might make sense to use it. We've certainly benefited from having that base shelf available to us.
Our last financing was US$85 million that completed in March with the primary purpose to purchase physical uranium. Our strategy there was to hold the uranium as a long-term investment that we could use as a source of collateral to borrow against as we fund our project construction, which even in this stage is still several years out. That's just the extent of depth of the capital that's looking at investing in the uranium sector right now, that we could capture that capital to hold as a long-term investment for a project development decision that has not been made yet and is still a few years out.
Now we're funded well through completion of our feasibility studies in EAs, but also a third of the way into our CapEx for the project based on our pre-feasibility study. That's quite a long way that we've come from immediately after the pandemic, where we were in a position where we had a going-concern note in our financial statements.
Interesting movements in the uranium sector as well too from several companies. Thank you. Dean, why don't we flip over to you for a little bit? Can you talk a about our frothy IPO markets? We've seen some very interesting activity. All of the panellists have alluded to that, but other stuff as well. Can you share your experience?
Sure Brenda. As you mentioned, the capital markets have been on a tear over the last 12 months. As the panellists have talked about, we're seeing a lot more mining companies take advantage of it. To set the stage, the Canadian IPO market just this year alone has raised about $4.3 billion and that compares to about $7 billion in 2020. We're thinking the year 2021 is on track to surpass that number.
To throw out another comparison to 2019, the Canadian market alone saw about $1.6 billion. To put things into context, clearly a lot more activity in the last two years than what we've seen. In a COVID-19 world, it goes to show you that investors are still looking to deploy capital.
In terms of the industries, we really saw the tech stocks kind of leading the way, but certainly in 2021 we're starting to see mining companies come to the forefront. I'm sure everyone would have heard of Triple Flag, one of the more recent mining IPOs, and that was surprisingly, I didn't realize this, the largest in the last nine years. It just goes to show you that mining's kind of been on the backseat, but with the re-emergence of commodity prices, we’re seeing a lot more activity on the mining side, and we're seeing that in the pipeline as well.
There are a number of mining companies, at various states of readiness, we're expecting those to come through in the second half of the year and likely a heavy influence of companies that are in the base metal side. That's kind of an interesting note, but maybe not surprising seeing where copper prices are these days.
As Daniella has mentioned, it's a nice thing here that we're starting to see juniors and mid-tiers involved, something that was kind of missing the last probably at least five years. Even when we talk about the IPO market lower dollars per issue, but just a lot more companies participating in it. And it's not just about the IPO market. As the group has talked about, just generally mining companies are raising a lot more capital.
In North America, about $4.5 billion was raised over 2020. So, whether that's IPO, or as the group has talked about, refinancing old debt to push out some of the repayment schedules. That's coming from a lot of institutional shareholders, so there's a thought that the retail sector still hasn't participated and there's room to grow from a valuation perspective. We're keeping an eye on that to see what's going to happen, because I think that's going to take a little bit more time, and the retail investors are still looking for a bit of prudence from the industry in terms of spending and return of capital to some of those shareholders and stakeholders.
There's been a lot of talk about specs, that's hit the US market. That's been tempered somewhat in the last little while given kind of the scrutiny by the SEC on that; not something that's really picked up from a Canadian perspective and certainly not part of the mining story to date. It's had some limited success. What I could say is, certainly exciting times to this point, and I think there's more to come in the second half of 2021.
Exactly. Thank you. Jason, with respect to Camino Rojo, you started construction during COVID-19. How has that impacted your focus on execution?
Thank you, Brenna. Well, I think having gone through construction a number of times, I can say that each time you do it, you need to have a comprehensive risk management plan that spans all aspects of risk to your construction program Related to your question, one of the key aspects this time around had to be our focus on the health and safety of not only our construction employees, but also the surrounding communities where we work. We took this quite seriously and work very diligently to make sure that we had a comprehensive plan in place. We're able to take some examples from responsible companies that were leading the way, like at Nikon. We spoke about the shutdown in Quebec. I can speak to the experience of a brief shutdown in Mexico and really the way that the resource companies handled this risk in such a responsible way really led the way to those industries being reopened in the various nations and provinces and states.
Our approach is not particularly unique. We need to screen and test people as they come onto the construction site, make sure that we are keeping the infection at bay as much as we can. When people do get onto the site, having the proper separation and hygiene practices that we expect in the offices and shopping areas and other parts of our world need to be in place.
You need to prepare for the worst, should you have an outbreak of infection. How you're going to quarantine, trace contact, make sure that that individual returns to health and is supported through that process, and in the meantime, protecting the rest of your workforce and certainly protecting the surrounding community. Only by adopting such a risk management approach, either during construction or in the cases of producing mining companies during their operation, will the nations and societies where you work trust you to keep your employees and their community safe. We were able to do that and that approach that I described building during a pandemic has worked and kept us on schedule during our construction.
We have to maintain our diligence. We have over a thousand people on the construction site, and I can assure you that our team in Mexico has to keep their eye on this every day, all the time. We were very fortunate in most nations, and Mexico is one of those to be getting vaccines deployed but we're not through this yet. Equally, we're not through our construction yet, so we haven't let up on our diligence and we won’t until we're through this. Then, it's just a new risk management program that we'll have to employ during our operation to make sure that we're keeping everybody safe, hopefully with the pandemic in the rear-view mirror for everybody.
Daniella, with regards to Cote Gold, this is a billion-dollar CapEx project, in this vein of organic growth and building, what will success look like for you at IAMGOLD?
Thank you. We went through the similar decision-making processes that Jason talked about, and specifically the company had been working on getting its balance sheet ready for about a year and a half along with progressing detailed engineering in order to de-risk the project then. That kind of brought the company to the beginning of 2020 facing our construction decision now in a COVID-19 environment and with quite a large construction site.
IAMGOLD made the construction decision after COVID-19 and broke ground in the late fall of 2020….
The CapEx number that you've talked about is only IAMGOLD's portion. We have a 30% partner in Sumitomo, and they're contributing to the tune of 30% so our total CapEx is greater than the billion dollars that you've talked about. I guess, with the passage of time from when we entered it, although it was during COVID-19, we had significantly de-risked the project. We were through more than 50% detail engineering; we had committed to a number of the long-lead items already when the construction decision was made.
What does success look like? Again, to Jason's point, first and foremost would be the health and safety of the team. We similarly have a very large construction team at site with those numbers continuing to ramp up over the course of 2021. We did start Earthworks about three months early in January, 2021, rather than in April, 2021, so we got a bit of a head start on the project schedule. At the moment we're scheduled to be through a commissioning in the second half of 2023, so I would say in terms of what success looks like, number one being health and safety, number two would be keeping the project schedule and hopefully actually keeping that momentum that we've been able to achieve so far in 2021. So project schedule would be second, third would be the CapEx and again, although a majority of our CapEx had been committed coming into 2021 there were certain portions of our CapEx that had not yet been committed and we're working on completing those contracts now and therefore we are facing some of the impacts of the inflation that we've all heard about. We're seeing that in steel, we're seeing it in cement, we're seeing it in lumber, we're seeing it in copper on that front. Managing through those inflationary pressures, as they relate to the CapEx that remains to be committed I guess is the third element of success. And lastly, the other thing that we're really keeping a close eye out for is the FX.
We budgeted our CapEx at a $30 US-Canada exchange rate. We were able to hedge about 70% of our CapEx for 2021, which gives us some comfort around that, but we're somewhere around, 121, 120 and although we have layered some hedges on for 22 and 23, we do have a significant exposure to the CAD-USD FX rate going into those subsequent years. We're watching that very carefully.
We're thinking about what other alternatives and strategies we can employ to manage the FX risk and that's something that's really on top of the mind for at least the finance people, while the construction team progresses with those activities. These would be sort of the three or four things that impact our success on that front.
There's a question that's come through in that very same vein that you just talked about from the audience. Is there much discussion on inflationary forces, on supply chain and projects? Are you starting to see cost pressures on OPEX and CapEx? And, obviously, Daniella you started to talk a little bit about that, I don't know if you want to add on, and let the others add on, before we go to David for our next question?
Maybe one other comment that I would make is around a supply chain. The other thing that I'm sure all of us have heard about, and maybe even experienced, is around that. That is something from a procurement and expediting perspective. We're really being hands-on with it and keeping a close eye on it in terms of the fabrication that takes place off-site in terms of some of the longer lead items that we've made a commitment on. Also, checking in with those fabricators and managing that supply chain quite closely, so that if challenges arise then we're right on top of it, and can pivot and have contingency plans along that, and so that's an excellent question. That's the other thing that we're working through closely.
I can't add a lot more than Daniella. I would characterize the things that I look at for our projects, exactly the same as Daniella has characterized. We have to worry about health and safety, cost and schedule. We too play from the same playbook, which is if you can take one risk out of construction, try and take the FX risk out. Daniella has perfectly articulated the things one needs to watch for in construction.
Also, keep in mind that the project that they're building at Cote is much larger than the project we're building in Mexico. So, they have to think it over a longer period of time, and one needs to appreciate that. Fortunately, for Orla our time span is very short. We were able to do a lot of our procurement in 2020, so before some of these inflationary pressures had taken hold and we're reaping the benefits of having bought all that stuff just ahead of this. Having said that, this won't be our last project. And, as we look out to our next project perhaps in Panama, we're going to need to consider these sorts of inflationary pressures that have taken hold and understand how they could relate to that project.
We did consider in 2020 the context we were in, which is a pandemic context on the decisions we had to make about sourcing. When one can choose between vendors and in other parts of the world versus the Americas, if equal, one would of course choose a more regional supplier just to reduce that risk of transporter shipments, pandemic shutdowns, and so on. That's a good example of how you need to take the context of the pandemic in consideration of the decisions that you're making, locking in your prices as quick as you can, whether that's FX or commodities, so that you don't have to suffer inflationary or FX changes, and then be considerate of where you're trying to source things from in the past. I might've sourced something from Europe that if I can get in the Americas today, I would certainly do so.
Good. David, maybe for you, what is your company's perspective on growth and scaling, and how have you done that?
Brenna, it's an interesting question. A lot of growth has to do with the assets that you have access to, whether you can grow internally. For us that's a question of whether exploration continues to make sense. We do love the potential for exploration to drive value in our business, given that we've spent so much time focused on one of our assets where we've had great success, but we have other assets where we really think there's a great potential. But where we've seen scale really be relevant, is again vectoring back to the capital markets.
Our size, relative to our peers and the liquidity that we've been able to offer has absolutely been a differentiator compared to our peers. Being listed on the NYC American and having daily trading volumes or values that create good opportunities for investors to be in or out of your story, has led to a very much a sort of a premium valuation and/or sort of a premium access to capital.
I'm not sure that that's always a statement on assets. It is really a question of investors wanting to put money to work and scale, and liquidity being something that matters to them, and we've seen that be a key differentiator. I could see from not necessarily from our standpoint, but like from an MNA standpoint, you could certainly see how crossing certain scale or liquidity thresholds could be quite meaningful for some companies that may have great assets, but that aren't quite able to access that next group of investors that has such larger or sizable pockets of capital that they want to put to work. But they just can't get there if they don't have that liquidity or scale for those investors to be comfortable to be investing in that company.
A lot of great questions coming in, and again on some of these same topics that we've covered. I'm going to take one of them right now, if you don't mind, but going back to our IPO discussion, what's going on in the market’s conversation? What are the views on M&A, and that's a very broad question so I might just turn that over to all of you to start off with that, if you've got that over the next year. Jason, do you want to lead us off?
I think this, comes out of the answer that David gave. He talked about it in an organic way. The question of M&A, is the other part of it, the inorganic opportunity. It really does come to the word growth, and how is your company going to grow? I couldn't agree more with David in his characterization that scale, and to a certain extent diversity matters. It really does matter. But what I have said in this cycle different than the last is that growth can't come at any cost. There were certainly influences in the marketplace that were encouraging growth at any cost in the previous cycle. I do sense a difference in both the forces in the market, as well as the discipline in mining companies as it relates to growth.
What it comes down to is a company that has to balance that desire for scale and potentially diversity with the choices on the M&A market that need to consider quality of assets, need to consider re-investment in your own business, speaking to what David was referring to, it needs to address your balance sheet.
We know some companies in the past have leaned heavily on their balance sheet to finance M&A. Then, the conversation that's clear these days is there's an expectation of returns to investors, at some point, and I think that that needs to be, a characterization of a mining company: responsibility and maturity. If you're running the business in such a way that you can do all of those things, including returns to investors, then I think, you have solved the problem. It is growing your business considerate of all those things to achieve that kind of scale that is important, and we're no different in that respect.
Brenna, I might just add on one thing, which is a reference to some of these at-the-market-type mergers that we've seen and that this is a dynamic thing. They haven't necessarily persisted at that level, but that is to me a strong indicator that you do see people. And as Jason points out, doing this trade-off of whether this makes sense or not, and actually weighing the cost of combination or M&A, but it's also saying that there are opportunities for the company that's being acquired to truly generate value for their shareholders by being part of something that is larger. That scale benefit is something that's being shared between those two shareholder groups, rather than the conventional idea that the larger company is paying a big premium. That's where the benefits are coming from for the company that's being acquired.
I think there are many cases where people have seen there is a real benefit for the shareholders and the companies that are being acquired just to access that benefit of scale, and again, for us, we would often see that being connected to market liquidity and things like that. But I can't see how at-the-market deals are happening, if that's not on the mind of the company that's being acquired.
I think we haven't seen a lot of at-the-market deals, and at the end of the day, it's all about relative valuation between two companies that are getting together. Institutional shareholders, although, are pushing and have pushed for consolidation. There are still a number of institutional shareholders that do look to be on the receiving end of a 30% or 40% market premium.at the end of the day, in order to actually support that consolidation, which has made it more difficult.
I think the themes on the recent investor institutional investor conferences that have taken place, at least in the precious metals space, have been around the growth, and to Jason's point that discipline around capital allocation between internal growth, possibly external growth. Although, I think the general comment has been that that asset prices have certainly gone up and are quite healthy between returns of capital to shareholders. I also think that we can expect to see going forward an increase in capital allocation towards, ESG, sustainability taxes, royalties particularly around taxes and royalties as a number of governments, and some of the countries that we all operate in have really had a tough time through the COVID-19 environment and are looking to rebuild the revenue streams. They have turned and are turning to the mining industry in order to support that. I believe that we will continue to see an increase in capital being allocated towards that, as well as in sustainability. This as we all turn from reporting, what we've done in the past year, and the activities and the capital that we've allocated to our activities in the sustainability space in our last year, to really setting more aspirational goals around carbon emission reduction, water usage reduction over the course of the next 10 years/20 years/30 years. We have to put plans and capital in place in order to actually fund those activities that drive us to achieve certain goals that we're setting ourselves up, whether that's because, it's the right thing or because society is pushing us to do so, or because institutional investors are pushing us to do so, or all of the above on that front.
Discipline, capital allocation focused on growth, discipline growth, possibly external growth on that, and maybe not those mega mergers but again, certainly in the precious metal space in the last, five, six months we've seen sort of more reserved growth. So, either toeholds being taken, or juniors being taken… maybe M&A, but at a different size than mega M&A.
And Brenna, I would just add on that as well, and Daniella just kind of touched on it, that we're starting to see rather than just pure M&A, a lot more joint ventures. So rather than selling, it's about let's put a joint venture together or have earning arrangements, and that's becoming a lot more, I'll call it trendy at the moment. So not these sorts of blockbuster mergers and acquisitions, but I'd say it's more, as Daniella said, kind of these toehold or unique arrangements to get to that growth, and scale that both to what Jason and David talked about.
Some of the questions that have come up through the audience, we're touching on these as we go. Just as we go through this conversation, obviously the other thing that's changed over the last 15 months is the enterprise risk management philosophies of companies. It was a real challenge going through that, and obviously there were changes.
Jason, maybe we’ll start with you and then turn it over to the others. Tell us what your company and you have been doing regarding this.
Sure, and in the interest of time Brenna, I'll say that companies always need to manage risk. It's a fundamental component of running a company. The ERM processes are not new.
COVID-19 is the most recent risk that we can point to and say it needed to be managed, but really it's connected to ESG. ESG from an investors’ perspective is the concept of them trying to select companies that manage the ESG risks very well because there's significant data that shows that managing those risks results in greater shareholder returns, and that's a prime interest to them. From an ERM perspective, our ambition is to make sure that the business is able to run continuously and that none of these risks manifest themselves in the disruption that either slows down or stops the business, and to make sure that the company is not having a detrimental effect in its actions. By doing so, we maintain our ability to operate again keeping our business consistent and reliable. That's the ERM world and the work that we do especially at the executive level to make sure that we are taking a long view on the risks that exist within our context, and managing those actively so that investors and stakeholders, whether those be employees or communities, can continue to reap the benefits of the company's operation.
And maybe the next level of that. From the management point of view, but flipping over to the board's point of view, David, are you seeing a lot more challenges from boards, or how are boards becoming engaged in the ERM conversation with management?
Brenna, it's interesting for us. We're at a different stage of course than Jason and Daniella, but ERM is really part of our culture. I'm a CPA by background. Our team and our board has had a keen interest in managing our risks always. Our board is very engaged, always has been, and I think that one of the key ingredients to having a risk management mindset is a board that actually cares about what is happening and what you're working on.
Let's use the pandemic as an example. Our board was immediately engaged on the real critical decisions that we had to make, and one of which was the decision to suspend the environmental assessment process for our Wheeler River Project in light of the stage it was at and the community consultation that was necessary, realizing it probably was not a smart decision to continue to push that forward, despite the great risks that we were seeing in Northern Saskatchewan with our indigenous partner communities. The board was absolutely at the helm of making that decision and similar decisions around resuming work in the pandemic, in that we had to work through the process of creating a safe workplace at site.
Our board was active in terms of reviewing our protocols, our EHNS committee taking that level of care to review our protocols with us and to be comfortable that it was the right decision to resume activity. At the end of the day, even in a junior company, I think Jason's remarks are really so powerful that it's our duty to be managing these risks as business managers. We have seen our board step up in these times of challenge to make sure that that level of attention is given to these risks.
Great. Thank you. I'm looking at all of the questions coming in. Please continue to send them just before we maybe move off this topic. Dean, risk management, broader ESG, will this start to have an impact on a company's ability to attract capital? One of the questions from the audience as well in that same vein is looking at sustainability funds and how they're investing in mining, and we can open that up to everyone else when you're done.
Sure Brenna. So, I think that the short answer is yes, it will. And I think the longer answer is at what point? Because I think there's still a lot of, I'll call it confusion around ESG. At this point, there are, a number of different standards that can be applied. There are inconsistent metrics or ratings, to rank and measure ESG performance. We've just done a survey where clearly investors, who are 98% of the investors, said it's very important to use ESG to make investment decisions, yet the majority of those who responded said, but there's just a lack of transparency and consistency across companies and industries. It's important, but it's hard to understand how it's actually influencing decisions. At the moment, it almost seems a bit binary. It's like you've got a policy. It kind of makes sense. You've ticked the box, or you don't have something, but it's harder to really demonstrate whether, within the risk rating, is there a benefit or not? I think everyone can agree. It's just the right thing to do and so as the panellists have talked about, you need to have a solid ESG strategy. It's got to cover communities, employees, the environment and shareholders.
If I could crystal ball the future a little bit, I think at some point there is going to be standardization and in fact there's been conversations, I know I've had with people in the US and I think it was yesterday, the US Fed held a one day session on ESG reporting. They're looking to direct the SEC to come up with some sort of standardized metric to help companies better understand what are the goalposts, and provide investors a level of consistency and reporting. So, you can see this is really getting attention, at the highest level.
Once you get this kind of standardization, that's when the metrics will start to develop and you'll really understand, how important it is and when companies are allocating capital or investors those certainly be able to pinpoint what was it about the ESG rating or strategy that a company has that, makes them look better than perhaps an alternative investment. I think for the mining industry, the other aspect that's starting to be bantered around is if you've got a good ESG rating. Does that impact the commodity price that you're going to receive? If you're producing a commodity that's very traceable back to the mine site, should you not get benefit from that? I don't think we're quite there yet, but I think that's the future and there'll be a natural evolution to not just ranking the company, but also perhaps getting a premium for what you're producing.
And on that second part, just sustainability funds, maybe Daniella, Jason or David over to you on whether you're seeing mining companies being included in these conversations more with investors on this ESG perspective?
In Europe some regulations came into effect at the end of March, requiring investment funds to disclose their own approach to assessing ESG in their investment decisions and what their investee companies' approach is, that's certainly been in our experience where there's been a more elevated focus on understanding what we do from that perspective. Dial the clock back two, three years ago where maybe some of this information that was being presented by mining companies was included in the appendix. Now this information is right at the forefront of your investor presentation. It could be that the first 5 or 10 minutes of a meeting, particularly with a larger fund, like a BlackRock is actually spent on that with their ESG team in the room before you actually move into an update on your operations or your development projects. I think that's progressing in North America. I don't think it's as prevalent as it is in Europe.
On the debt side we've seen all of the rating agencies, Fitch, SMP and Moody's more recently, as recently as I think a few weeks ago, coming out with their own ESG ratings and attempting a standardization across industries not just across all mining companies. To give you an example of Moody's, I think there are 45 mining companies that are debt rated by Moody's and you can benchmark yourself against your peers, but also that the ratings go across in industries as well government-issued debt on that. So, I can imagine it must have been quite an undertaking.
By the nature of our industry, because of, underground operations or some of the countries we operate in and our safety impact, our industry automatically starts with a lower rating than other industries on that front, and so it's certainly something that is continuing to be elevated in terms of focus of both equity and debt investors.
Dean, I really hope that we get to some form of standardization. Probably Jason and David would echo my comments around the reporting standards, and right now from our perspective, we report under GRI, we'll be reporting under SAS fee, we do Mac reporting, we do reporting under the UN sustainability standards under the World Gold Council responsible mining standards and are looking at the Climate Change Board on that front. Certainly, some standardization on that front would be very much welcomed by the industry.
I know we are almost at the end of our time here, so I just wanted to quickly before we go, give you guys one last chance to answer one last question. We've gone through a bunch of the questions here. I thank the audience very much for participating. I wanted to thank our team here, the panellists for participating. I really appreciate your time.
We have made a donation in your name to your chosen charities, so thank you so much for that. As we look to wrap up this presentation, we're also going to send a quick little survey to all of you. If you can just look through your screen, there should be a live link to a survey. We would very much appreciate your feedback on that.
Before we go, one last question to our panellists and I'm going to give all of you a chance to answer this. We'll start with David. As you look back in time, if your post-pandemic self could tell your pre-pandemic self something going into this pandemic that would have helped you, what would that have been?
Its hindsight being 2020, I think I would say that we all know we're supposed to expect the unexpected risks but the envelope of what can be unexpected is something that we should really push in our minds. This was not something that I think people were really prepared for. Even if they were prepared for a pandemic, I'm not sure that they could have prepared for this.
I think if I were to go back to myself, I'd advise that being a junior miner some of the things that are in the playbook around trying to find the right value for capital and those things that you may need to prioritize it differently from keeping a balance sheet in position where no matter what happens, you can continue with your plans, and that the dice rolling that some of the exploration companies might do by nature of their business is high-risk. If the unexpected thing is that much greater than you ever estimated.
Thank you, Brenna. We've talked a lot in this discussion about risk management and the processes that companies undertake to consider risk and to deal with it if they need to. In consistency with what David said, I think what we probably haven't seen in my generation and now know is that when something as significant as this pandemic occurs, and it is such a global situation that your risk management often presumes that you'll have the freedom to make the choices. What I've learned over this is that in circumstances that affect the entire world, those choices are not always yours as an executive and in a company, and so some of your choices to keep operating, or not, to how to manage different risk circumstances, will be removed from you. You need to consider to David's point, what would happen if you have to shut down and you have no choice and that was the big difference I learned over the past year that sometimes the freedom of choice can actually be affected in a circumstance as significant as a global pandemic.
To build on David and Jason's excellent points, I think for me as I look back, I didn't necessarily think of the mining industry as being very agile. It takes a long time to make a discovery. It takes a long time to permit. It takes a long time to develop. From the first dollar you're spending in the ground to the first dollar of revenue, it could be and often is over 10 years on that front. Therefore sometimes the decision-making process fails the time available. But I certainly saw in 2020,IAMGOLD and all of the companies in the industries, show such an incredible agility to adopt new protocols, to manage balance sheets, to reduce capital, to shift protocols as the pandemic shifted to respond to governments, suspending operations, to respond to governments, to restart operations the list goes on and to enact crisis management teams and protocols, and to have boards a lot more involved in that decision-making processes as we all navigate through 2020 and 2021.
I hope the agility and flexibility that we all had to implement in the course of the last 18 months really stays with us. We're seeing it with continuation of flexible work environments, how we think about sustainability and how we think about certain of these protocols. For me, as I look back, I would be maintaining agility and flexibility in the decision-making process in the industry.
Perfect. I wanted to thank you all for being here again. Thank you so much to our audience. And on that note, I apologize, we went over by five minutes, but I thought the conversation was really good. Thank you so much, everyone have a great day. Thank you.
- Brenna Daloise, Mining Assurance Partner, EY
- Daniella Dimitrov, CFO, IAMGOLD
- David Cates, CEO, Denison Mines
- Jason Simpson, CEO, Orla Mining
- Dean Braunsteiner, National Assurance Mining Leader, EY
Time your local time