Engineering & Mining Journal

DEC 2018

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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www.e-mj.com E&MJ • DECEMBER 2018 73 MINING IN ONTARIO Toronto's financial district The investment engine of global mining Toronto is the financial heart of the mining industry, spearheaded by the Toronto Stock Exchange (TSX) and TSX Venture, which to- gether accounted for 59% of all global mining financings in 2017. Almost 56 billion mining shares were traded in 2017, with a total val- ue of C$206 billion, and there was tangible evidence of renewed investor confidence, il- lustrated by one of the largest mining IPOs in TSX's 165 year-history, as Nexa Resources raised over C$730 million in Q4. There are currently four ways companies can list on the Toronto stock exchanges: Cap- ital Pool Company programs (CPCs), IPOs, dual listings and reverse takeovers (RTOs). Since the introduction and success of the CPCs, the Special Purpose Acquisition Com- panies (SPACs) was introduced – the TSX version of the CPC shell concept. The Capital Pool Company (CPC) program introduces experienced investors to entre- preneurs whose growth and development- stage companies require capital and public company management expertise. Different to a traditional IPO, the CPC program enables seasoned directors and officers to form a Capital Pool Company with no commercial operations and no assets other than cash, list it on TSX Venture Exchange, and raise capi- tal. The CPC then uses these funds to seek out an investment opportunity in a growing business. Dean McPherson, head of business development and global mining at the TMX Group, expanded on the benefits of the CPCs: "The CPC program has been a huge success for TSX, with 2,464 created since the start of the program, 87% of which have completed qualifying transactions. Currently, we have 78 CPCs trading on TSXV." Dean pointed to the qualifying transaction made by Brazilian based company Sigma Lithium in May 2018 as a recent example of this alternative way to list. The return to dual listings was another indicator of the global upswing: "Companies listed on the LSE or the ASX are looking to our exchanges to access over US$20 trillion in investor capital," continued McPherson. "The last time we saw any significant IPO ac- tivity was 2012, so there is a general enthu- siasm returning to the marketplace." The TSX and TSXV have been comple- mented by the rise of the Canadian Securities Exchange (CSE), which announced that the first half of 2018 was the strongest six-month period in its history, with significant increas- es in number of listings, trading volume and value traded compared to the same period in 2017. By the end of August 2018, the CSE had reached just under C$2 billion in issuer financing, with the mining sector accounting for the second largest number of new issuers, behind the booming cannabis space, accord- ing to Richard Carleton, CEO of the CSE. In 2019, the CSE plans to introduce a blockchain clearing and settlement system that will provide listed companies a venue to list and trade tokenized securities. As transactions occur on the exchange, they will be cleared and settled instantaneously, solving one of the challenges for junior and mid-size companies in terms of the non-dilutive effect it will have for existing shareholders. Carleton explained: "This will mean dealers will not have to fund open-position during the settlement period that we currently have, which will reduce the fric- tion that currently exists for companies paying dividends, royalty streams, splits or consolida- tion distributions to shareholders." Canada's FTS (Flow-Through Share) pro- gram, introduced by the federal government in 1972, is a tax driven structure that allows an individual or corporation to invest in a Ca- nadian exploration company and receive the tax benefit from those expenses being spent on the ground for exploration. Financial services in the city If the Toronto stock exchanges provide the platform for junior mining companies to raise capital, it is the financial service institutions in the city that orchestrate the transactions. Companies such as IBK Capital, Sprott Asset Management, Franco-Nevada, Dundee Cor- poration, and Mackie Research Capital, all headquartered in Toronto, provide the back- bone of the financial district that anchors both the Canadian economy and the global mining industry. Dundee Corporation is one of the heavy- weights of international mining finance. Founded by Ned Goodman, one of Canada's most successful investment leaders, Dundee

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