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SVB's Non-Mining-Focused Business Model Results in Minimal Impact on Mining Issuers

The bank failure of SVB Financial Group (SVB; unrated by DBRS Morningstar) was the first of its kind in the U.S. since 2020 and the largest failure since the 2008–09 financial crisis. The run on deposits quickly led to the failure of Signature Bank and a general sell-off in the banking sector. Although regulators have stepped in to provide additional liquidity to the banking system by backstopping deposits in these failed banks above FDIC-insured levels, investors are trying to understand whether the failure and subsequent banking sell-off will affect other sectors globally.

Currently, mining issuers have robust cash balances with additional access to liquidity in the form of undrawn credit facilities. Furthermore, mining issuers have typically set up facilities with multiple well-established lenders. In contrast, SVB had a specialized business model that was focused on banking the for 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.

The failure of these U.S. banks led to a rally in safe-haven assets such as gold to above the USD 1,900/ounce level as well as concerns regarding a worsened U.S. economic outlook where the full extent of the impact from the bank failures will not be fully understood for some time. However, we believe that the overall impact on the mining sector and DBRS Morningstar’s mining coverage universe is minimal.