he world’s top stock exchanges
for mining companies have said that they will not consider
relaxing listing requirements in order to get their equity
markets moving, despite the climate of stagnation for
resource-related initial public offerings (IPOs).
IPO activity among mining companies
on the Toronto, Australian and London exchanges experienced one
of its worst years in almost a decade in 2013, as the recoiling
of investors from commodities desiccated financial liquidity
for exploration firms.
Speaking during the 20th
Mining Indaba Conference in Cape Town (see pp8-9) in
February, representatives from each of the exchanges, which
together account for the majority of mining equity capital
raised worldwide, said that loosening the rules to make it
easier for new companies to list would unduly risk investor
protection.
“It would be very difficult to
relax the level of regulation for new listings,” Graham
Dallas, head of business development, EMEA, for the TSX and
TSX-Venture Exchange (TSX-V) told IM.
“We have made some small
changes around things like the way rights issues are managed;
but the level of investor protection that is achieved through
the TSX’s regulation is very valuable,” he added.
TSX firm on listing
rules
With more than 1,600 mining
companies on its books, the TSX and TSX-V jointly hold a
dominant global share of small-mid size listed resource firms,
and felt the full force of the collapse in exploration
funding.
Between January and November last
year, just 62 mining companies listed on the TSX and TSX-V,
compared to 129 listings during the same period in 2012, and
more than 200 in each of the preceding two years.
Last September, in an effort to
boost Canada’s beleaguered resource finances, TSX-V
president, John McCoach called on the country’s securities
regulators to relax rules barring retail investors from
participating in private placements for Canadian small cap
companies.
While this proposal remains under
consideration, the exchange has made it clear that any similar
slackening of listing requirements is not on the cards.
According to Martine Valcin,
director of listed issuer services for the TSX, the
exchange’s regulations are the “bare minimum”
that a company can be expected to comply with in order to gain
some liquidity on the Toronto investment market.
“Once a company has been
listed, there is more the TSX can do to help them access
capital,” Valcin explained to IM.
She added that the TSX tries to be
“as flexible as possible” by creating exemptions for
companies who meet certain criteria in order to streamline the
listing process.
One Australia-based junior accused
the TSX, banks and regulators of having “no mercy”,
when it came to small companies.
“It’s ok if you’re a
BHP [Billiton], or one of the big boys, but things are not
getting better for smaller companies Ð in fact,
they’re getting worse,” said the CEO, speaking from
the floor at Indaba.
Companies that have successfully
listed and raised capital on the Toronto market in recent years
were however in favour of maintaining the exchange’s
present IPO requirements, which are backed by Canada’s
renowned “National Instrument 43-101: Standards of
Disclosure for Mineral Companies,” (NI 43-101).
“The TSX is one of the most
regulated markets on earth, and NI 43-101 is recognised as the
world’s most rigorous disclosure policy for mining
companies making statements to the market,” said Michael
Jones, CEO of Platinum Group Metals.
“This sends out a clear
message: If you want to play in this sand box, you’ve got
to be a grown up,” he added.
ASX stresses need for
simplicity
In Australia, 2013 was also a
difficult financial year for the resource industry, with mining
and metals firms accounting for just 16%, or 14, of the 85 new
listings on the ASX last year.
As the world’s third largest
pool of investable funds, and with 1,000 listed resource
companies making up 51% of its overall listings profile, the
ASX goes head-to-head with the TSX for much of its small to
mid-cap mining business.
“We haven’t suffered as
badly as the Toronto market,” James Posnett, manager for
listings business development at the ASX, told
IM, “but that’s not to say it’s
been easy for mining companies in Australia.”
Posnett said that while it was
important not to go “too heavy” on regulation,
investors look to robust listing requirements to give them the
confidence to put money into newly listed stock.
“In terms of regulation, the
ASX is somewhere between the US and London’s AIM
market,” he explained.
“One of the benefits of an ASX
IPO is that, once a company has floated, it has a main board
listing, so there is no ambiguity in terms of compliance.
Compare this to the TSX or London exchange, which have the
TSX-V and AIM for small caps, and we believe that the ASX
listing situation is simpler,” Posnett said.
Jenny Cutri, assistant manager,
listings compliance for ASX Perth, said that while the exchange
demands a high level of regulatory compliance for new listings,
it is important to make the listing process as smooth as
possible to encourage companies to float and for investors to
support IPOs.
she explained that if a company is
considering a dual listing with a different exchange as the
primary market, the ASX may grant certain waivers, particularly
in terms of reporting requirements.
These reporting requirements are
governed by Australia’s Joint Ore Reserves Committee
(JORC) Code, which Posnett described as being “less
prescriptive” than NI 43-101, while affording investors an
equal level of confidence.
London looks for
transparency
Although London lags both the TSX
and ASX by some distance when it comes to mining company
listings, and saw just 5 mining IPOs in 2013, the London Stock
Exchange (LSE) and its small cap AIM market are distinguished
by the depth and diversity of liquidity they offer resource
companies.
According to Katherine Mulhern,
partner for corporate and capital markets, at international law
firm, Proskauer, London is the “most sensible” of the
top mining exchanges in terms of its approach to
regulation.
“For miners looking at listing
and the IPO process, they need to have three things clear:
disclosure, transparency and corporate governance,”
Mulhern said.
She said that while listing on London’s markets was by
no means an “easy” feat, having a clear equity story
and ensuring that corporate strategy is transparent to
investors, meant that the LSE can be a “very good
place” to raise money for mining projects.