|Title:||Canada mining securities data for Toronto in number of issuers, new listings, number of financings, equity capital raised in Canadian dollars, and volume and value traded for 2011|
|Source:||E-MJ - Engineering & Mining Journal|
Start of full article - but without data
Mining at a Glance--YTD December XX, 2011
TSX Venture Dec-XX (TSX-V) TSX TSX-V and TSX
Number of X,XXX XX X-XXX Issuers
QMV (C$) XX,XXX,XXX,XXX XXX,XXX,XXX,XXX XXX,XXX,XXX,XXX
New Listings XXX XX XXX
Equity Capital X,XXX,XXX,XXX X,XXX,XXX,XXX XX,XXX,XXX,XXX Raised (C$)
Number of X,XXX XXX X,XXX Financings
Volume Traded XX,XXX,XXX,XXX XX,XXX,XXX,XXX XX,XXX,XXX,XXX
Value Traded XX,XXX,XXX,XXX XXX,XXX,XXX,XXX XXX,XXX,XXX,XXX
# of Trades X,XXX,XXX XX,XXX,XXX XX,XXX,XX
Walking through downtown Toronto, one cannot help but notice the sheer wealth that pervades the city's streets. As one of the premier financial centers of the world, Toronto boasts one of the most vibrant professional communities in North America. Teeming through the city's financial district are top-quality financiers and lawyers, with skills exceeding many of their counterparts in London and New York. In addition to the human capital found across this city, is the Toronto Stock Exchange, the leading exchange for mining companies around the globe. With XX% of the publicly traded mining companies in the world choosing to list on the TSX and TSX-V, the stock exchange is unparalleled when it comes to significance in the mining community. In 2010, The TSX and TSX-V dominated the mining finance world, raising XX% of world mining capital. Adding to Toronto's omnipresence in mining are the city's financial institutions, ranging from boutique shops to global banks; these firms specialize in raising finances for juniors and majors alike.
The reasons for Toronto's preeminence as the center for mining finance are varied. The most obvious reason appears to be the combination of technical knowledge and financial expertise that many white-collar Torontonians possess. "It is the classic story of why Toronto is a global mining center; there are more than XX mining analysts in Toronto, as well as highly knowledgeable investors with deep technical expertise in the sector. In contrast, other financial centers, specifically London and New York, are flush with investment money; however, they lack the technical expertise that Toronto possesses," said David Beatty, president and CEO of Rio Novo Gold.
Sharing Beatty's sentiment, precious metals guru Eric Sprott said, "There are hardly any analysts that follow gold stocks in the United States; it is difficult to mention five individuals that even follow an intermediate stock, let alone a junior."
Paul Stein, a partner at mining-focused law firm Cassels Brock, attributes Toronto's success as a global mining hub to historical factors. "Historically Canada is a natural resources nation, built based upon oil, gas and mining. In other places overseas, while there is a degree of enthusiasm in mining, it is not to the same extent as in Canada."
Other reasons for Toronto's dominance in the world of mining finance include its two-tier stock exchange. Often overlooked, the TSX-V has created a venue that successfully allows early stage junior companies to raise capital. "The Toronto Stock Exchange is the best two-tier exchange in the world. The London AIM market does not function very well in my mind. Currently, there is one silver stock listed on the LSE. If a company is listed on the LSE, it certainly must be listed in Toronto. On the other hand, if a company is listed in Toronto, there is no need for it to list anywhere else," said Sprott. As a result of the TSX's attractiveness, foreign mining companies look to the stock exchange to list their projects. According to Tammy Thompson, partner at BDO, a global accounting and consulting firm with a focus on mining in Canada, "There have recently arisen a large number of issues from emerging markets, and there is a lot of concern from an audit perspective if you are dealing in an emerging market."
This puts pressure on the firms dealing with such transactions, said Thompson. "There is a risk profile one needs to examine; if there is a client coming to Canada we go through a client acceptance procedure. BDO looks at who is on the board and where their assets are located. Emerging markets have created another level of risk that we need to look at and analyze."
Nevertheless, the demand for intermediaries who help with the TSX's listing requirements is strong. "There are companies calling BDO from overseas who want to get into public properties in Canada, and we assist them by talking with lawyers, and getting set up as a public company," said Thompson.
Another key factor to the stock exchange's success has been its ability to strike the correct balance between regulatory oversight and access to capital. "The TSX's listing requirements really understand the difference between a major and a junior company, and are very flexible in allowing smaller companies to list. They have the appropriate regulatory oversight, but it is not particularly burdensome as compared to AIM, for example.
It is much cheaper to list on the TSX, which, for a junior company, is a huge advantage. The TSX has created a system whereby a company can be listed relatively easily, without incurring a huge expense. The people at the TSX understand mining companies as well as the NI XX-XXX and other technical reports necessary to list," said Chris Irwin, Partner at Irwin Lowy LLP.
Nevertheless, Irwin concedes that while the TSX has emerged as the most attractive listing venue for junior companies, NI XX-XXX does require some fine-tuning, particularly when compared with Australia's JORC system.
"It is necessary to have the NI XX-XXX compliance system but more companies might migrate towards the JORC standard, which is a much simpler document. The NI XX-XXX is supposed to be a public document that the average investor can read and understand, but in practice, these documents are often XX to XX pages; the JORC documents are much smaller and easier for people to comprehend. The scheme could benefit from some type of simplification. It is appropriate to differentiate between an indicated and inferred resource, and necessary to differentiate the two," he said.
Changing the World of Mining Finance
Entering the office of Sprott Asset Management, one gets the impression of entering a museum rather than a place of work. Decorated with gold coins, the office stands to symbolize the impact precious metals and mining have had on the city of Toronto over the decades. Commenting on the importance of Toronto, Sprott said, "Toronto is the mining finance capital of the world; it is certainly the mining finance capital of precious metals. I like to think that this foyer Sprott Asset Management's office is the capital of the finance capital; everybody that matters has come in here. If you are the head of small company, you know you want to have a meeting here. While there are other investors, we are the biggest and most influential investor."
Over the years, Eric Sprott has built a name for himself throughout Toronto's finance community, particularly for his fervent support of gold as an investment. His unique investment strategy has seen his firm perform exceptionally well over the past XX years; achieving a XX% return on investments. This is in contrast to the global market that has experienced zero growth over the past decade. "For a fund to perform at a high level it is imperative that it assess the secular trend correctly. Sprott Asset Management has been able to do this. In our view, the global markets are experiencing a secular bear trend, paving the way for precious metals to become a dominant means for storing value throughout the globe. Funds must be able to find incredibly interesting investment opportunities; these will never be found with the big cap stocks, everybody already knows about them. It is impossible to discover a major player like Barrick. However, it is possible to find attractive investment opportunities in small and mid-cap companies," said Sprott.
While Sprott has called on investors to purchase bullion in the past, he believes that they should not shy away from investing in gold equities as well. "I believe that gold stocks will have a very serious run; they are incredibly inexpensive and are part of a small group of growth stocks in the world. Unfortunately, the majority of investors do not perceive them as growth stocks even though their profits have increased over the past decade. The price of gold has made almost every project feasible; a company could not have worked on a project in the last XX years without it being economic. Gold companies have inventories of properties that put them in an excellent position to grow: between the inherent growth that comes from production, the possibility of making synergistic acquisitions and the added value coming from the increase in the price of gold, there is a model for providing investors with very attractive opportunities."
Another very prominent name in the world of mining finance is that of Ned Goodman. A 2012 Canadian Mining Hall of Fame inductee, Goodman's name has become synonymous with mining finance over the decades. Since 1984, his company, Dundee Corp., has spent more than C$X billion to fund exploration for junior mining companies. Raising these finances takes a number of forms. "Dundee primarily engages in investment, specializing in the sectors of oil and gas, mining, energy, agriculture, and real estate. We are a brokerage firm which is also involved in under-writings and, although our largest holding is currently in real estate, a significant part of our business consists of providing financing to resource and commodity companies in Canada. Since 1984 we have spent C$X billion on Canadian exploration through our subsidiary manager called CMP Resource Limited Partnership, and for oil and gas we have a similar company called Canada Dominion Resources Group," said Goodman.
There are a number of reasons behind Dundee Corp.'s success over the years. "Dundee stands out largely because of our deep knowledge of the resource industry and our consistent commitment over many years to the sector's successful expansion. We invest our money with careful precision and thorough 'tire kicking,' paying attention to what we are doing day in and day out. It is this higher level of attention, combined with significant industry-specific expertise, that enables us to work so successfully with many companies that the big banks do not generally want to accept as clients--if only because they have not got the time. We have a culture of fairness and thoroughness that is underpinned by proven experience. This really helps us make decisions on investments quickly but wisely. And it helps us stay close to the businesses in which we have taken an interest," said Goodman.
In terms of what the company looks for in a junior mining company, the criteria are simple, yet strict. "Dundee does not buy for the sake of buying a position in what might become an opportunity. When someone approaches us in a search for funding, we evaluate their request on two criteria: good property and good people. If the property is right but the management team is not strong enough in our view, the Dundee Corp. will not invest. We want to support and encourage good management in an effort at protecting our investment," said Goodman.
The Dundee Corp. has traditionally invested in early-stage small- to mid-cap companies. Nevertheless, the firm has plans to begin investing in more advanced-stage companies through the establishment of the Dundee Global Resource Fund. "We are currently in fundraising mode; we have committed C$XXX million to the Dundee Global Resource Fund, and are looking for one to three investment partners to join with us as part of our expansion plans. When that happens, we will have sufficient depth to take projects from early development through completion without losing them at a later stage. That being said, we are not particularly concerned regarding our own capital; we have a capital base of more than C$X billion. As I have said, we are expanding in the resource sector, and have created a 'merchant banking' hybrid specifically for resource as well as for the real estate, agriculture and energy sectors."
Goodman emphasized the importance of focus and determination as two key components needed for the future success of the mining industry. "The world is in need of more resources and we have to work harder to find new ways to identify and develop those assets while working with the churn created by NGOs and governmental regulations. Everyone across the resource industries from engineers to investors, to the people on site, face the same challenges. The obstacles are not going to go away so we have to respond as best we can, keeping our business standards high and our focus sharp in an effort at encouraging those eager to get something underway to join with us in a partnership that promises the opportunity of sustainable profit growth."
Toronto's financial community is known for their understanding of early-stage projects that typically get overlooked by other financial centers. For juniors, another route besides standard capital investment is the royalties model, where companies will purchase a percentage of the project itself in the hopes of a large return once production begins. The model has been very successful for companies such as Royal Gold, Silver Wheaton and Franco-Nevada, who has bought royalties in Barrick's Goldstrike, Kinross's Tasiast and the Detour Lake project. "Our model appears to work over and over again; Goldstrike, Detour and Tasiast have gone from $X million to $X billion, and many more properties that have gone from $X million to $XXX million," said David Harquail, president and CEO of Franco-Nevada. The company holds rights in XX mines, with a further asset base of development and exploration properties.
Franco-Nevada's model has certainly been successful for the company, which at press time is valued at more than C$X billion; however, it does require a certain amount of patience from their investors. "We are not a retail stock. Most of the gold funds think they can pick winners better than us and want more leverage to the gold price, although we have outperformed almost every exploration story, gold fund manager and the ETF, because we are getting the benefits of our investments from XX years ago. Furthermore, we have few risks, no encroachments from governments and a diversified portfolio that allows us greater scalability than a mining company," said Harquail.
Boutique Firms with Big Plans
Being the center for mining finance, Toronto is host to a number of boutique investment firms specializing in mining finance. Jennings Capital is a full-service boutique investment dealer, founded in Calgary in 1993. Initially an oil and gas corporate financing boutique, the firm opened its offices in Toronto in 1999. Since then, the company has diversified with current revenue generation XX% mining and XX% oil and gas. As far as services are concerned, the company undertakes retail sales, sales trading, and equity research, and investment banking services. "We have daily morning meetings to review the stories brought in by research analysts, and then the sales people and traders get on the phones," said Daryl Hodges, president and CEO of Jennings Capital.
As a firm, Jennings Capital separates itself from its competitors by possessing a research team with a strong technical base in exploration and development and an in-depth understanding of geology. "We look to management teams who are knowledgeable and trustworthy, who understand the market, who understand ore bodies and how to develop them, and--most importantly--can get out there to sell the story and deliver results," said Hodges.
It is this competitive advantage that has allowed the company to continue to thrive in this very competitive time. "This is a highly competitive industry and recently the larger bank-owned dealers are competing directly with companies like us for our clients. We stay ahead of the curve by using our technical expertise to identify opportunities earlier, knowing the stories inside and out, and continuously communicating with companies and investors. Jennings Capital has a reputation for doing the initial heavy lifting with companies; to get a story out. We can set up meetings with a variety of institutions and small-cap investors throughout different countries. We have also expanded our research coverage in mining to allow us to move horizontally in that industry."
With regard to their future plans, Jennings Capital and its management team are not short on ambition. "We keep our noses down, work hard, and surprise people with our aggressiveness and the profitability it yields. There is a constant state of flux in this industry, but we hope to have a renewed, focused, dynamic team in the first half of 2012. We are always trying to improve our research to improve the product that we deliver. We are currently in the top XX independent dealers in Canada, and our goal is to be in the top five within the next two to three years. We value long-term relationships and try to work with clients through every step of the process. We want all parties to make money, and stick with clients on both sides through thick and thin; that is what Jennings Capital is about," said Hodges.
Other Ontario-based finance houses are placing even greater emphasis on their mining services, thanks to the industry's strength in the province. Fraser Mackenzie, an independent investment dearer based in Toronto, is boosting staff levels and fleshing out its mining research team. "We are fundamentally bullish on metals and mining going forward," said Michael Starogiannis, research analyst at Fraser Mackenzie. "We will take an opportunistic approach to pick up coverage on good-quality stories whose share prices are suffering thanks to global economics, meaning a broad spectrum of companies from grassroots exploration to current producers."