"My theory is that there has been a renaissance in mining, whereby a lot more is demanded from companies because the sector in general has matured. The companies, the environment and investors have all changed and are demanding greater ROI."
In 2018, you mentioned that there was a return in investor confidence. Over the last year, how has this progressed?
The last 12 months have been good for TMX Group and its equity markets, Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), which remain global leaders in the mining sector. We ended 2018 maintaining our market dominance in the mining space and had almost twice the number of mining companies listed on our two exchanges (1,200) compared to the nearest competitor (ASX). 2018 was particularly encouraging; we had a notable presence in the number of large financings done globally as TSX issuers accounted for approximately 30% of global mega-financings.
One of the major trends we saw in 2018 was an increase in M&A activity, including the Barrick-Randgold merger and the Newmont-Goldcorp merger, both of which decided to list in Toronto. We have seen this trend continue in 2019 with the recent North American Palladium acquisition by Impala Platinum. If you are shopping for good products, you are going to look at Toronto first, just as investors will look at our markets first if they are looking for mining projects to invest in from an equity standpoint.
In terms of new listings and financings, 2019 has been a bit volatile, not only for the mining sector but across the board. This is a global issue, as the number of new listings on TMX Group’s equity exchanges in 2019 is still more than those of our major competitors combined. We are not concerned as we are seeing the market pick up and the number of new listings have started to increase in Q3 2019, a trend we expect to continue into 2020.
In the first half of 2016 the gold price increased by approximately 20% and equity raises almost tripled. In Q3 2019 a similar rise in gold prices took place, but equity raises have not increased to the level we have seen before. What do you attribute this to?
I believe that it has a lot to do with structural changes in the marketplace, as well as two new industries competing in the market – cannabis and Bitcoin. From a stock exchange perspective, this is healthy as you want more industries for investors to be able to diversify their portfolio. My theory is that there has been a renaissance in mining, whereby a lot more is demanded from companies because the sector in general has matured. The companies, the environment and investors have all changed and are demanding greater ROI.
With the increase in commodity prices, we saw a notable surge in financing activities, especially below the US$50 million financing levels. We have not seen a mega-raise yet, but we believe that it is just a matter of time before it will happen as investors are still waiting for the volatility in the market, due to the trade wars, to subside.
Can you elaborate on the launch of the inaugural TSX30 program?
In October 2019, we launched the TSX30 program, which highlights the top 30 performers on the exchange over the last three years based on dividend adjusted share price appreciation. Eight of the companies were mining companies, with Kirkland Lake Gold being the fourth best performer overall with over 300% return. The program showcases that investors can still receive great returns in the mining market. We also noticed that management and jurisdiction plays a significant role in encouraging investor appetite. Mining companies have to demonstrate to the market that they have the structures and controls in place to show how investment money will be spent.
What is TMX Group’s strategy to expand its global reach?
In 2019, we hired someone on the ground in Lima, Peru, and we have had a JV partnership with Santiago Stock Exchange since 2014. We are the only global stock exchange in Latin America with a full-time presence in the region. Approximately 45% of the projects that are represented in our market are outside of Canada, and Latin America contributes to 20% of all projects represented on our exchanges. In October 2019, we had our first Latin America mining investor day in Toronto, bringing together eight companies that have a focus in Latin America with investors and stakeholders.
Africa is also a strong market for TMX Group, and we have offices in China and are developing business in Australia, Israel and Kazakhstan. Once Australian companies get beyond a US$100 million market cap, they tend to look at TMX as they see us as a gateway to larger pools of capital.
As a final message to the global mining community, what does TMX Group have to offer in 2020?
TMX Group offers the most seamless and largest access to global capital for the mining sector. No other exchange can offer a mining ecosystem of bankers, research analysts and traders, all of which can ensure success post listing. We offer a complete service that extends beyond the initial capital raise. For TMX, the objective is to maintain market dominance and continue to be leaders in the mining sector.
We are a leading and trusted partner for both investors and mining companies as we can offer market integrity at a competitive price globally. We maintain a competitive advantage through innovations such as the Capital Pool Company (CPC) program, which we developed for our venture market. We have also brought on a team member whose sole focus is to investigate and evaluate ways in which we can remove barriers to the movement of capital across our markets on a global level.