The Toronto Stock Exchange (TSX) seeks to attract more mining companies from South America, mainly juniors via its venture exchange.
The Canadian exchange wants to take advantage of the region’s rich mineral resources that are in high demand by clean energy projects, along with precious metals.
Guillaume Légaré, head of South America at the Toronto Stock Exchange and the TSX Venture Exchange (TSX-V), sheds light on the plans in this interview.
BNamericas: What are [parent group] TMX Group’s plans to attract Brazilian mining players to the Toronto Stock Exchange?
Légaré: The TSX and TSX-V are playing an active role in helping to develop Brazil’s mineral wealth. In 2019, the TMX Group became the first international exchange to make a strategic decision to establish a full-time presence in South America, and Brazil is a top priority.
Our main objective for 2021 is to better promote our junior exchange TSX-V to local management teams. We signed an MOU with Ibram [Brazil’s mining association] last year, and we’re working with the key industry players to facilitate access to capital for Brazilian mining companies, especially juniors.
We want to connect potential new issuers with dealmakers and the professional advisors that service the Canadian capital markets ecosystem. In the second semester of 2021, we will organize an event like our first virtual Latin America mining investor day in October 2020, in which we introduced six private and public mining companies to strategic investors and stakeholders, and there are already a few good candidates from Brazil.
BNamericas: How many Brazilian companies do you expect to attract to be listed?
Légaré: Since 2020, we’ve perceived a momentum in our markets as we’ve seen a clear dominance of the mining sector on the TSX and TSX-V, and some positive signals coming from Latin America with the increase of TSX-V listings and mining financing activity from 168 in 2019 to 345 last year, corresponding to 105% growth. Therefore, it is obvious that compared to its Latin American peers, we should see more Brazilian companies and properties listed on our markets.
Latin America currently represents 25% of all mining issuers on the Toronto Stock Exchange and TSX Venture Exchange. There are 410 mining companies in Latin America listed on the TSX and TSX-V, with 1,061 mining properties and 36 of them are in Brazil, with 99 mining properties.
BNamericas: What are the biggest obstacles at this moment that hinder the plans of mining companies to list their shares?
Légaré: Access to capital is still quite challenging. Markets are increasingly competing for capital and investors are looking at the investment conditions, political stability, and pro-business environment. Investors and our issuers depend on us to maintain integrity and the measures some jurisdictions are taking to mitigate the impact of COVID-19 on the sector and how they’re tackling some of the ongoing challenges like environmental permitting processes and the social license to operate are market strengths that will have a positive impact on Latin America’s medium-to-long term growth and ability to raise capital in the mining sector.
National Instrument 43-101 is a Canadian mineral resource classification and it allows companies to get the best possible valuation for their business by allowing investors to compare one mining company to others and get the best possible valuation for their assets. That is somewhat unique to our market and helps drive valuations in mining. If you can get the best valuation for your property, that makes our markets a natural place to raise capital.
BNamericas: Along with Brazil, do you see a potential to attract players from other countries in the region to the TMX? In which countries do you see the most potential?
Légaré: Across the region, there’s an incredible opportunity around the clean energy transition, that will be significantly mineral intensive. Latin America is rich in base and precious metals and has some of the largest reserves of critical metals necessary for the clean energy revolution. If Latin American companies are to seize this opportunity and deliver on these global needs, it’s imperative that we see more local management teams positioning their companies for future growth. Brazil can develop its entrepreneurial capacity to move up the value chain. Clean energy mineral producers, base metals and battery metals are driving a lot of interest in our markets.
BNamericas: How many Latin American companies and projects are listed in Canada today and how much can that grow over the next five or 10 years?
Légaré: I mentioned earlier that Latin America is the most important mining market for the TMX Group, it currently represents over 25% of all mining issuers on the TSX and TSX-V, with Cdn$2.9bn [US$2.3bn] equity capital raised in 2020 by companies with mining projects in Latin America.
The growth potential for the next 5-10 years is considerable. With constraints on capital, investors are looking for the best possible management teams developing projects efficiently. I think investors are much more likely to back projects that have credible management teams with a successful track record. Latin American countries have some of the greatest untapped potential for new discoveries and production. There are opportunities and challenges in Latin America and TSX/TSX-V want to play an active role in helping to develop their mineral wealth.
BNamericas: Has TMX been engaged in any kind of partnership with the Brazilian stock exchange [B3] to attract more mining companies to the capital market?
Légaré: We don’t have a formal agreement with B3. Our teams are working together, and we do some joint work to promote the exchanges. In fact, there’s no need for a formal agreement, because the two exchanges can use their own listing rules to support companies.
If B3 is interested in doing more than that, we could have something similar to what we already do with some of the other exchanges. For example, we have a clearing relationship with Peru, so the process of liquidating shares is easier when they’re listed on both exchanges.
In Chile, they have a junior market, and we have an agreement under which companies that meet the listing criteria on one exchange are already automatically allowed to list on another exchange. In addition to Peru, we have a clearing agreement with DTCC, a North American clearing company. If the companies in Brazil then choose to list on our exchanges, American investors will be able to trade their shares, on account of the clearing agreement with the DTCC.
BNamericas: Are there partnerships in development in other countries in the region?
Légaré: We’re close to the local exchanges in the region, and several companies have taken advantage of the dual-listing approach. Our main objective is to allow our listed clients to have access to new pools of capital, and to optimize access to capital. Canada’s equity markets represent an ideal growth platform for LatAm businesses, providing global leadership and world class access to capital and liquidity.
What is unique about the TMX Group markets is the two-tiered system that utilizes the venture exchange approach, which is something mining companies need right now. There is already the MILA [Latin American Integrated Market] exchange agreement which allows investors access to companies should they come via Mexico or Peru. We’ll be working with the local exchanges in the region to make sure this is made as efficient as possible.
BNamericas: The mining sector has been one of the main focuses of attention of global investors regarding ESG aspects. How can share listings help companies in the sector show their real engagement with ESG practices?
Légaré: Sustainable finance is emerging as the new standard for mining companies to maintain access to capital. The proper level of disclosure around ESG issues and the availability of sustainability reports are sought by investors. To help our mining companies listed on the Toronto Stock Exchange and TSX Venture Exchange meet higher ESG standards, TMX Group has developed an ESG resource, ESG 101, to help companies navigate the complexities of ESG reporting and learn about the best practices to meet stakeholder ESG demand.
Our goal is to support our issuers, of all sizes, in discovering for themselves how important it is to start their ESG risk and opportunity assessments and create some level of disclosure for the growing number of investors and stakeholders seeking this information.