Toronto Stock Exchange (TSX) is the ninth largest exchange in the world by market capitalisation, however when it comes to mining TSX has positioned itself as a world leader for a variety of reasons. It is made up of the senior TSX and the junior TSX Venture Exchange (TSXV). Due to the wealth and breadth of mining companies listed on TSX it is now seen as the place to list if you want to raise funds and grow your company. Its unique position in the global markets and opportunity for equities has seen it become the hub for mining companies of all sizes and stages of growth.
The global mining industry is beginning to shows signs of a recovery following two years of commodity price slumps, the financings on TSX are growing in volume and value, TSX-listed mining companies are beginning to see results from their price-crash resilience and the exchange continues to attract new listings.
RGN spoke to Orlee Wertheim, head of business development for global mining at TSX, to understand what makes the TSX such an attractive proposition for mining companies, how the industry is recovering and where the key growth sectors are. We also discussed the connection between TSX and African mining operations and what the latest TSX innovations mean for the exchange.
Firstly, it is important to understand the economic eco-system in Canada which is so conducive to a successful stock exchange, particularly in the mining world of volatile prices and cyclical slumps. One of the most important factors is the strength of the Canadian economy and the stability of the political system in such a globally interconnected world. Canada has been ranked for several years in a row as the best country in the G7 for doing business, the banking system has sound foundations and it among the lowest debt-to-GDP countries in the G7.
“The Canadian economy has remained stable [during the commodity slump], which is very important for our clients and issuers, I think it’s a very important factor when global companies are looking at a listing destination,” explains Wertheim.
This stability has been reflected in the financings TSX has seen this year and the strength of the investor interest in both TSX and TSXV-listed companies. Wertheim says it is the unique nature of TSX in its regulation, stability and the exposure companies get that attracts such a high volume of mining companies.
“We have a unique eco-system here, which provides the companies the expertise and coverage they need in order to be a successful public company. Once we started building a significant cluster of mining companies, more and more became attracted to that. We are known by investors as being the place to go if you want to invest in mining companies. I think that really encourages companies to look at TSX and TSXV as a listing option.”
It is on the junior market that these properties are really valued. There are many junior mining companies who struggle for finance on major exchanges but TSXV provides a platform to get exposure and to raise capital at any stage of a project.
Wertheim says for junior companies the key strength of TSXV is the ability to get funding to move a project forward and the access to analysts on the exchange.
“There are around 300 analysts who cover the mining sector on TSX and TSXV, and it really provides exposure for companies at all stages of growth. We recently looked at the smaller sized companies in terms of a market capitalisation between US$50-100 million. We were happy to see that those companies on average had three analysts covering them. That is the unique coverage you get on our market.”
While the commodity downturn has had its impact on mining companies the junior market has recently seen a large increase in the volume and values of transactions happening. For Wertheim, an indication of a healthy market is seeing companies graduate from TSXV to TSX – as of July there have been five graduations.
“We are starting to see a lot of the venture companies raise money – grow in terms of market capitalisation and then move up to TSX.”
The challenges presented by the dip in commodity prices over the last two years have forced mining companies to adapt to their environments. Mining is a cyclical industry and it appears to be returning to an upswing, particularly for gold and clean technology-related metals such as lithium and vanadium. Mining companies across the board have had to tighten their belts and innovate and now they are reaping the benefits.
“It shows how resilient many of these companies are and how many of them have adapted to the market. Many of them have looked at ways to run more efficiently, looked at new technology and reduced capital costs.
“Now that we are seeing positive movement in commodity prices, we are seeing many of these companies well positioned for a better market.” Wertheim says this is demonstrated by the significant share appreciation for many mining companies in the first half of 2016.
The gold price picked up in the final week of June and beginning of July and this period saw a large number of announced financings on TSX of over $500 million in value over 10 days. Wertheim notes that the companies that are graduating from TSX-V are either gold companies or those involved in technology metals.
Part of Wertheim’s role is to develop new business for TSX and TSXV and attract new companies to list. She feels one of the key roles of TSX is to provide a venue for issuers to get attention from investors and from analysts, but at the same time they are always looking for new business. RGN
TSX has a presence at all major mining conferences and Wertheim works with a colleague who covers Europe, The Middle East and Africa and they are constantly telling companies about the opportunity to raise capital on TSX.
African mining is a market of particular interest. There has been a growing connection between African mining companies and companies involved in African projects and the TSX. To date, there are 132 companies listed on TSX and TSXV that have projects in Africa, operating across 37 countries. Last year those companies with African ties raised $1 billion in equity capital which goes to demonstrate the strong investor interest in the continent.
“Last year, on a year when we didn’t see many new mining listings, we did have two new mining companies with projects in Africa on TSXV – that’s significant in such a challenging market.”
Wertheim and TSX are taking a global approach to attracting growth in new listings. While the Canadian market continues to form the base of issuing companies, making up 50% of the exchange, Wertheim is experiencing a lot of interest from Latin American firms.
She says there is a lot of interest from private and public companies looking for dual listings, mostly originating from Brazil, Mexico, Peru, Argentina and Chile. Further afield Wertheim says there are a number of large Australian companies that are either single-listed on TSX or dual-listed on the ASX.
A key focus for TSX in remaining at the forefront of global exchanges is to be a technology driven solution provider with a real focus on the clients, “We are constantly looking at how we can provide our clients with new and innovative products to improve their business.”
In terms of those developments, as part of the TSXV revitalisation project the exchange consulted the market across Canada to find out how it can be improved according to the clients. One of the key issues raised was to reduce administrative costs in a meaningful way. While this is being addressed, Wertheim stressed it would not be at the expense of market regulation.
“We feel the regulation needs to be there because without strong regulation we don’t have a market place where investors will look to put their capital – it’s very important to us.”
Wertheim continued, “We are also looking at how we can expand the base of investors that are financing our companies. As part of our investor development programme we are looking at ways to highlight the success stories on the exchanges.”
This initiative is demonstrated by the Venture50 that highlights the 50 top performing, cross-sector companies on TSXV. Every year 10 are mining companies and it is another way to get more exposure.
On the technology side, TSX has recently launched two apps. TSX discovery allows investors to complete a search based on their criteria which can identify companies that meet their investment goals.
The second app, TSX investinit provides daily updates of all the financings on both exchanges and across sectors. It allows investors to be aware of the financings that are happening and give them the opportunity to get involved.
As commodities recover and the outlook returns to a more positive situation, Wertheim says TSX will continue to focus on the mining industry.
“We see mining as a very important sector for us and we will continue to devote a lot of time and effort to providing thought-leadership in that sector and spending time with our customers and prospects. We believe there is opportunity for continued growth with us in mining.
“I would say the same about the energy sector where we already play a key role in the global market and we will continue to see more growth in that in Latin America and Africa.”