Over several decades, TMX Group’s equity markets, Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), have cultivated their reputation as the undisputed home of global mining financing, offering access to huge pools of capital and a supporting ecosystem to mining companies around the world. This capital comes from a global investor base with a deep understanding of the mining sector, grounded in years of collective experience in Canada and around the world. TSXV offers a launch pad for grassroots explorers and the opportunity to graduate to the main board as the company fulfils its growth strategy. Canada’s senior equities market competes with the Australian and London exchanges for supremacy in the mining sector, and in the following Q&A session TSX’s head, business development, global mining, Dean McPherson tells RGN why Toronto continues to retain its crown as home to the international mining community.
JAW: Hi Dean. How confidently can you declare that Toronto is still the home of global mining financing, considering latest performance figures from last year? What trends have you noticed in the sector over the last 12 months?
DM: I’m very confident that Toronto is still the epicentre of global mining and the latest statistics point to that. At the end of 2018, close to half of the publicly listed mining companies in the world were on our marketplace. That’s a significant margin when you compare to our nearest competitor, the Australian Stock Exchange (ASX). We have close to 1,200 mining companies listed here, while the ASX has just over 600 mining companies listed.
As a result of the sheer volume of listed mining firms on our market, there is a lot more activity taking place in Toronto. In terms of equity capital raised through our market, over the last five years, 36 cents of every dollar raised through public equity by mining companies has been through our markets. Last year was in line; we saw 34% of all raises by mining firms coming through our markets.
In 2018, we saw a trend emerging in mining with a real pick up in mergers and acquisitions (M&A) activity, particularly in the latter half of the year when we saw some significant deals coming through. For some time, there was an expectation by many in the industry that consolidation was necessary, based on availability of quality assets and the need for efficiency improvements in the sector. Over the course of the year this M&A momentum has only been increasing.
As global mining companies shop for quality assets and management, they are turning to the world’s central mining market. Our markets have been central to this increased M&A activity. In step with M&A deals, global mining companies are choosing to enter or remain on our global markets to raise their profile amongst global mining investors who look to Toronto first.
Notable examples would be the merged Newmont-Goldcorp entity listing on TSX after their deal closed. Barrick also decided to maintain their listing in Toronto after their deal with Randgold closed. This trend is indicative of our leadership in the market.
JAW: How busy have you been in terms of attracting new IPOs this year and how have commodity performances driven performance on the exchange?
DM: The mining sector has had a tough year, especially in the first half. We’ve seen a slowdown across the board globally in mining. However, activities in the sector picked up around the middle of the year and continued in the second half on the back of precious metal prices trending up.
By all measures however, 2019 is proving to be much less robust in terms of new listings and financings compared to 2018, especially for junior mining companies. Nonetheless, our leadership in mining continues. We had more new mining listings than our key competitors combined so far this year. That’s very encouraging for us.
Last year we had 48 new mining listings at the same time last year. At this point in 2019, we have 23 new mining listings. When you consider the amount of capital raised, you’ll see there is also a drop off. Last year we raised over $6 billion for mining companies and to the end of October this year we’ve raised close to $4 billion.
Several significant IPOs we were expecting in 2019 have been delayed or shelved for various reasons. What is encouraging is the observation that these IPOs are being delayed rather than cancelled. We believe improving market conditions will encourage these projects to come to market.
In terms of commodities pricing, we have seen a pick-up on the precious metals side and continued volatility for base metals/copper. Gold went on a strong run in the middle of the year, breaking $1,500 per ounce for a long stretch, this of course is the reason for the pickup we mentioned earlier in the middle of the year. Copper, however, continues to be held back by volatile and unpredictable macroeconomic conditions, not least of which is the US-China trade standoff.
JAW: While conditions for new listings may have been challenging in the first half of the year, what does the recently launched TSX30 rankings say about the health of mining companies listed in Toronto?
DM: We launched the TSX30 programme to recognise the 30 top performers across all sectors over the previous three-year period based on dividend-adjusted share price appreciation.
Perhaps many people would be surprised to see mining companies on this list of outperformers, considering the difficult market conditions for mining over the past three years. We were happy to announce to the market that eight of the 30 outperformers were mining companies, led by Kirkland Lake Gold, which ranked 4th overall with a return over 600% over the period.
Trilogy Metals ranked 5th overall, while Wesdome Gold rounded out the mining group finishing 19th with a return of 170%. Other miners ranked on the TSX30 include Ivanhoe Mines, Anglo Pacific Group, North American Palladium and Grand Colombia Gold Corp.
The observation here is that there is money to be made in mining even in a changing and challenging market. TSX30 also helps our clients to gain wider visibility and recognition as we market the programme globally. We observe that common characteristics of these outperformers include quality and experienced management teams and safe predictable jurisdiction.
JAW: On the topic of jurisdictions, a lot of TSX-listed mining firms have traditionally owned assets in North America, specifically Canada. How geographically diverse is the current marketplace?
DM: TSX-listed companies are focused not only in Canada. In terms of the properties represented on our marketplace, about 45% of those are outside of North America. The next largest jurisdiction represented on our marketplace is Latin America, with about 19%. When you look at the distribution map, you will see that our geographic distribution is wide and far. You won’t find that global reach on any other market.
Our investor participation is just as global, with over 40% of trading on our markets originating outside of Canada. Participants in our marketplace are global investors and companies that list here and come from around the world to live in and leverage our global leading ecosystem.
We remain focused on our global strategy despite the jurisdictional risk, which sometimes can become significant. In recent months, much focus has been on the flare ups in regions such as Africa. The most dreadful news coming out of Burkina Faso, with respect to Semafo employees, is perhaps the worst example of some of the challenges our issuers and investors face in many jurisdictions.
Despite these challenges, we are steadfast in our global approach and continue to be active on the ground. TSX and many of our capital market partners/stakeholders are at Investing in African Mining Indaba in Cape Town. Our participation at this event is important to highlight the positives, understanding the challenges and significant opportunities for mining to play a central role in the growth and development of this continent.
In Latin America, recent social unrest across the region highlights the important role responsible mining has in helping many nations close the economic divide through economic growth opportunities.
The climb out of the last mining downcycle has been slow and not always consistent. However, it has brought a bit of renaissance to the sector. The importance of social licence, diversity and general accountability to not only shareholders, but all stakeholders, has brought mining in step with other industries in embracing Environmental, Social and Governance considerations into business planning and operations. We’ve come a long way in this regard but we must do more to highlight and encourage the progress being made.
JAW: Finally, what is your outlook for the mining industry over the next 12 months and what can you offer to mining companies looking to list on TSX in 2020?
DM: What we can offer to potential listing companies is a market that is ahead of the competition in ecosystem depth, global investor reach and visibility on a market where the mining sector is important. Joining our markets allows a company to be well-positioned North America, providing greater visibility and marketing opportunities, as well as access to capital to the globe’s largest pool of institutional and retail capital.
With the U.S. elections in the fall of 2020, we expect the volatility observed this year in the market will only continue if not increase going forward. The encouraging factor is that fundamentals and technological advancements, like the electrification trend, are persistent and point to a sector (particularly for copper and battery metals) that will see rapid growth when external factors like trade wars abate.
We think the M&A trend will continue in the short term as investors are encouraging mining companies to be more efficient and part of that strategy is to be larger and more efficient. Much of that activity will continue on our markets. If you are an investor or mining company seeking investors or partners for growth, it only makes sense to join the market that is the centre of global mining in Toronto.