TORONTO, March 4 /CNW/ - Global mining capital markets are being reshaped
thanks to the rapid pace of industry consolidation, says a new report from
Ernst & Young.
In 2005, for example, the London Stock Exchange (LSE) and the Toronto
Stock Exchange (TSX) had roughly the same market capitalization. Since then,
however, the mining market cap of the LSE has benefited from more than
US$70 billion of acquired market capitalization while the TSX has lost
US$129.3 billion in market cap due to takeovers.
Despite the wave of consolidation which has carted off some of Canada's
mining and metals giants, nearly 60 per cent of the world's public mining
companies are listed with TSX Group. And during the past three years,
TSX Group has remained the pre-eminent place to raise new equity capital for
mining ventures-that's close to 34 per cent of global mining capital raised in
2007. What's more, the TSX is home to 48 "billion dollar plus" mining
companies with an average market capitalization of US$5.7 billion.
"The trading and investing depth available in Canada is one of the
reasons the TSX is still regarded as the best place to raise capital," says
Tom Whelan, Ernst & Young's Canadian mining leader. "The depth of analyst
coverage and the large number of bankers, brokers, and institutional and
retail investors continue to make TSX Group an attractive choice for miners,
especially those in the exploration and development stages."
"There's also the fact that the vast majority of mining financings in
Canada come from the private-placement market, which is a very liquid market.
This liquidity is highly sought after by mid-caps and development-stage
miners," Whelan adds.
The report does note that though the UK has hardly any domestic mining
activity at all, it still hosts the world's largest mining companies. Four of
the six largest mining companies are listed on the LSE. One of the reasons the
UK is so attractive to giant mining companies is that if offers the world's
deepest and most efficient debt capital markets.
The report also reveals growing evidence that investors are using capital
markets as regional investment centres. TSX investors prefer the Americas and
Africa. LSE investors prefer Africa, Eastern Europe and the Middle East.
Johannesburg Stock Exchange (JSE) investors prefer Africa, and Australian
Securities Exchange (ASX) investors prefer the Asia-Pacific region. Superior
valuations generally follow these preferences.
"I think the real story here is not so much about competition between the
world's mining exchanges so much as it is about them playing complementary
roles," Whelan says. "Junior miners can flourish on the TSX or ASX, or
anywhere else, while the LSE provides them with an exit strategy when the time
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