February 2012

How do we look?

“Canada Day” at Mines and Money London puts spotlight on Canuck mining

By Anna Reitman

On December 4, Canada’s opportunities were on display in the run-up to the Mines and Money conference in London. It was an auspicious beginning for the companies presenting, as they shared the day with Saint Barbara, the patron saint of miners. Although Canada’s reputation as a desirable and relatively stable resource investment destination and financial hub is intact, investors willing to take on greater risks to find higher returns were looking for listed companies with assets elsewhere.

From an operating perspective, Canada is viewed favourably, said Ed Bowie of Altus Capital, a U.K.-based fund manager in charge of a natural resources portfolio, although he added that certain parts of British Columbia are more difficult than others for general permitting and land claims issues. Also, there are certain areas around the developed world where environmental antimining lobbies are more vocal, and this can have an impact as well. In terms of TSX-listed companies and investment, he said that the huge pool of companies, making the exchange the biggest globally, is clearly attractive.

Ungad Chadda, senior vice-president at TSX, said that parent group TMX’s sponsorship of Canada Day at the international event is not just about getting out the message about the value proposition from a mining perspective, but also to support listed companies. “If you look at any international mining conference, I would argue that the majority of companies are going to be TSX or TSX Venture listed, so it’s important for us to fly the flag here – both the Canadian and TSX flag,” he said. “A day like today is a perfect example of sponsoring and taking the opportunity to get 13 of our companies in front of investors and other players.”

Over the last five years, the TSX and Venture exchanges have captured onethird of all equity mining finance and in some years, that number has been in the 60 per cent range. Breaking down those investment flows, some half of all capital is coming from Canadian sources, with the rest evenly split between the United States and Europe.

But support for future financing, especially from Asian and Middle Eastern investors, is becoming more urgent since the uncertain global economic outlook has dragged down base and precious metals prices. “Many of the companies we have on the market will put off financing for a quarter or more, but to maintain those properties and projects, they are going to need to raise capital,” Chadda notes. “Hopefully, there will be buoyancy in the market, and commodity prices can help. We still expect to raise a significant portion of the world’s mining capital in Toronto.”

Chris Wheatley, a London-based private investor in attendance at Canada Day, said that although there are some signs that Canadian-based resources investment is an overcrowded market, he thinks it still has room to run. However, Wheatley tends to invest in Canadian shares of companies with assets in Africa or South America because he sees a better chance for higher returns.

In general, Africa is becoming known as the last frontier of financial opportunity and the place to make returns, said Elena Clarici, a fund manager at Scipion Capital. The firm invests in companies developing African resources that are listed on the major exchanges – TSX, London or ASX – because African equity markets are still in early stages and do not yet have the necessary liquidity.

At the end of the day, the implications for Canadian-based resources development are that in a tough capitalraising and diminished returns environment, creative financing solutions need to be found. But certainly Canada is in a strong position to accomplish this. The country’s successful emergence from the financial crisis and its reputation as an investment-friendly country remains intact, despite “protectionist” leanings that resulted in a failed Saskatchewan potash bid and the collapse of a transatlantic merger with the London Stock Exchange.
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