• Lithium Royalty’s $150 million IPO ranks as one of the five largest on the TSX in the past year
  • Canadian companies raised a record $10.2 billion from the public market in 2021
  • In 2022, companies became IPO-shy, with only 42 companies raising a meagre $1.3 billion, about 10 per cent of what was raised in 2021
  • The International Energy Agency projects that the demand for lithium will grow by 30 per cent yearly over the next decade
  • Lithium Royalty Corp. intends to use the proceeds from the offering to increase the size and pace of its investments in lithium mines

Lithium Royalty’s initial public offering of over $150 million is a huge boost to the mining sector.

The five-year-old company filed papers on Wednesday for an initial public offering on the Toronto Stock Exchange to raise money for the funding of the mines that feed the fast-growing battery industry for electric vehicles.

At a time of IPO drought, Lithium Royalty’s IPO ranks as one of the five largest on the TSX in the past year.

Approximately 77 Canadian companies raised a record $10.2 billion from the public market in 2021.

However, in 2022, companies became IPO-shy, leading to a cooling off in the IPO market. The number of new Canadian IPOs plummeted to 42 companies in 2022, raising a meagre $1.3 billion, about 10 per cent of what was raised the previous year.

Unlike 2021, when the TSX soared by 21 per cent as a result of confident investors’ money flooding the market, 2022 was a completely different kettle of fish.

Investors became cautious as inflation and interest rates began to rise sharply. Markets fell, and investors lost money. Russia’s invasion of Ukraine in February 2022 was identified as a global disruption, and supplies of commodities, especially crude oil, fell sharply.

Against this background of uncertainty, Toronto-based Lithium Royalty’s move to raise $150 million in the first quarter of 2023, when inflation and interest rates are still high, and investors are still cautious, is a courageous move. In addition to the positive effect on the mining sector, this move will serve as a confidence booster for the stock market and the economy as a whole.

According to its prospectus, the company intends to use the proceeds from the offering to increase the size and pace of its investments in lithium mines. Currently, it holds royalty agreements on 27 projects in seven countries, with an average investment of $4.5 million in each mine.

Two of its mines in Australia are producing, while four properties in Argentina, Brazil and British Columbia are under construction. The other projects are at the incubation stage.

Lithium Royalty made a net earning income of $10.2 million on its investments in the first nine months of 2022, in comparison with the $5 million it earned in the same period a year earlier.

The company intends to focus on investing in North American hard-rock lithium mines, as well as in projects in Quebec, to meet automakers’ demands for shorter, reliable supply chains. Currently, Chinese producers hold the lion’s share in the lithium market.

The lithium market has experienced volatility in prices in the past year. From its peak in November, it has lost about 30 per cent in value. With the global continued shift to electric vehicles, there are projections that the future is bright for lithium as demand for batteries, which power electric vehicles and renewable power storage facilities, increases.

Because of this, the International Energy Agency projects that the demand for lithium will grow by 30 per cent yearly over the next decade, beating the growth in the market for other minerals critical to a decarbonized economy, such as nickel and copper.

The IPO is led by investment banks Canaccord Genuity Corp. and Citigroup, along with TD Securities Inc., Cormark Securities Inc., National Bank Financial Inc., BMO Nesbitt Burns Inc., Scotia Capital Inc., Raymond James Ltd. and Red Cloud Securities Inc.

Davies Ward Phillips & Vineberg LLP is advising the company, while Blake, Cassels & Graydon LLP is the investment banks’ counsel.


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