TORONTO (miningweekly.com) – The Toronto Stock Exchange (TSX) and Toronto Venture Exchange (TSX-V) witnessed an improved level of financings across 2014, while the avalanche of companies predicted to delist failed to materialise, TMX head, business development, global mining TSX and TSXV Carlos Espinosa told members of the Canadian Institute of Mining’s Management and Economics Society in Toronto last week.

To assist the juniors, the TSX-V has also tried to smooth operational procedures, while both exchanges have supported the effort to increase shareholder participation in private placements, he added. In addition, the ability to dual-list on the Santiago Stock Exchange (SSE) by TSX-V issuers will be a boon for those focused on Latin American projects.

IT’S GETTING BETTER

Mining companies make up a large proportion of those listed on both Toronto exchanges, but particularly so for the TSX-V, Espinosa said. Effective September 30, there were just over 1 500 mining companies listed on the TSX and TSX-V, which compares with 420 companies involved in oil, gas and energy services, the next-largest category.

The total level of financings for all sectors year-to-date September 2014 stood at C$43.1-billion on the TSX, which compared with C$39.9-billion for year-to-date September 2013. The TSX-V recorded C$3.8-billion for both periods.   

Over the five-year period from 2009 to 2013, the value of all mining equity capital raised on major global exchanges stood at $157-billion. Toronto accounted for 44% of the figure, with the London Stock Exchange and the London-based Alternative Investment Market the next largest at 26%.  

Year-to-date September 2014, the TSX and TSX-V recorded C$6.8-billion in mining equity financing, which compares with the Australian Securities Exchange level of C$3.2-billion and London’s total of C$500-million.

Mining financing is a long way off the highs experienced across late 2009 into 2011, but at least 2013 marked a bottom, Espinosa said. “It was sad to see many juniors raising only around $500 000 last year,” he added. “For most that was only enough to keep the lights on. To advance their projects they needed figures more like $2-million or $5-million.”

Year-to-date October, 1 207 mining companies were listed on the TSX-V, accounting for just over C$1.44-billion of the equity capital raised. This compares with C$1.1-billion for the corresponding period in 2013, although considerably lower than the C$5.3-billion achieved year-to-date October 2011.

“So there’s been a small improvement [in 2014] and earlier predictions that over half of the TSX-V-listed companies would be delisted have simply not happened,” Espinosa said. “But we’re a long way from where we’d like to be.”

Of the companies that delisted from the Toronto exchanges year-to-date September 2014, most requested to do so or because of mergers and acquisition (M&A) activity and not because they were unable to comply with the listings requirements, he added.

STILL SURVIVING

Numerous factors have weighed on performance in 2014, including muted commodities prices and increasingly selective investors, some of whom remain wary of entering the mining space or who only favour companies that focus on jurisdictions considered less risky.

Many investors have exited the market entirely, left disillusioned after witnessing the poor performance of companies unable to match promises made at the height of the resource supercycle.

In addition, project development has also become harder; there is increased social opposition to mining and, dovetailing into this, a greater need to engage local communities through corporate social responsibility programmes. “And that’s an extra cost at the end of the day,” Espinosa said.

The cost of support services in exploration and production also remain stubbornly high for many, while the regulatory environment has become increasingly complex. The threat of resource nationalism is still a problem in several jurisdictions.

Given these torpid conditions, junior companies have continued to face difficulties in accessing capital. Traditional initial public offerings remain unfeasible for most, while those struggling with expenditure have had to cut activities or shutter their projects and operations.

Several governments have expressed concern about falling employment rates in and around projects or operations as the outsourcing of work to service providers has been slashed, Espinosa said.

Non-core projects and operations continue to be divested, with the cash raised either allowing firms to advance flagship projects or hibernate for longer. Others seek to advance by joint venturing or through M&A. For those near production or in production, alternative finance is an increasingly viable option, such as streaming or royalty deals.

ROAD TO SANTIAGO

In a bid to assist companies, the exchanges have supported reforms by the various Canadian securities authorities, including new exceptions by Alberta and British Columbia for existing shareholders seeking to participate in private placements, Espinosa said. The Ontario Securities Commission is also preparing a similar exception.

In addition, the TSX-V has endeavoured to speed up its administrative processes, notably in relation to online applications for private placement. In addition, the Canadian Securities Administration is preparing to ease regulatory requirements on TSX-V-listed companies.

For Latin American-focussed mining companies further support could come from the growing ties between Toronto and the SSE. Under an agreement signed in March, the SSE will make it easier for TSX-V-listed companies to dual list in Chile.

In addition, the Superintendence of Securities and Insurance of Chile will have an exemption for reporting if the SSE-listed issuer already reports in Alberta, British Columbia, Ontario, Quebec, Colombia, Peru or Mexico.

Listing on the SSE also has the advantage of granting a company access the Latin American Integrated Market (MILA), a trading bloc that comprises Chile, Colombia, Peru and Mexico.

In addition, the Lima Stock Exchange is making it easier for TSX-V-listed companies to dual list and, through this, trade on the exchanges of MILA members. However, Lima-listed companies will report to both the relevant Canadian and Peruvian authorities.

“If you list in Chile and Peru, you can have greater access to Latin American investors, especially institutional investors. This creates better opportunities for your company and extends the potential investor base,” Espinosa said. “This is something that hasn’t happened before.”