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Canadian junior mining companies often operate in the most remote and unstable countries in the world, in a sector rife with failure
There are few business sectors where Canada can claim global dominance, but as a centre for mining development, it is an industry leader.
The Toronto Stock Exchange (TSX) and its small-cap partner, the Venture Exchange, are home to 58 per cent of the world’s public mining companies and raised 36 per cent of global mining equity finance from 2007 through 2011. Collectively, they are first in the number of listed mining companies with nearly 1,700, well ahead of competitors, the London Stock Exchange and Australia’s ASX, according to the TSX.
No other place has the same concentration and depth of services and financial market sophistication to support mining finance and development.
How does Canada do this? According to Kevan Cowan, president of TSX Markets, Canadians have a long history of participating in early-stage mining investments and a “whole ecosystem” has developed to support the industry.
“We have a tremendous network of industry players. Our legal services are the best expertise in this sector worldwide, together with a huge pool of geologists, engineers and mining entrepreneurs, as well as sophisticated capital markets for mining finance. We are a world ahead of our competitors.”
This is an investment landscape transformed from just over a decade ago when the Venture Exchange was created in 1999 from the merger of Canada’s regional exchanges – the former Vancouver, Alberta and Winnipeg stock exchanges and the small-cap portion of the Bourse de Montréal.
Although investment in small-cap mining on the Vancouver and Alberta exchanges was accepted to be an adventure, the Bre-X gold scandal of 1997 – when Calgary-based penny stock Bre-X fraudulently inflated itself to a market value of $6-billion through falsified mining samples – signalled the need for reform.
Global mining centre
Innovation and best practices have since established a world-beating financial and mining centre. The creation of a two-tiered public market, with the Venture Exchange as the home of small-cap miners who can graduate up to the TSX, is now widely emulated.
Stronger listing requirements for public companies have contributed to greater clarity and pricing of risk, enabling massive growth of the public mining market. Stricter requirements for reporting on mineral resources by mining companies – Canada’s widely admired National Instrument 43-101 – have been critical in raising public confidence.
The Canadian market is now far more international – as a centre to raise mining finance and as an institutional platform for foreign companies that choose a local listing. Many have their offices and management teams outside Canada, in such places as Australia, Latin America and South Africa. Companies from the United States and Britain look to a Canadian listing to raise financing for projects with higher risk.
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