Top 100 mines on TSX increased value by $125 billion in 2010: report

The Toronto Stock Exchange (TSX) top 100 miners emerged from a period of sharp recovery in 2009 to become a group of operationally efficient, growth-oriented companies. Mining sector listings on the TSX and TSX Venture hit record levels in 2010, with the total market capitalization of these miners increasing from $325 billion in 2009 to over $467 billion in 2010, according to Ernst & Young. 

"Listings on the Canadian exchanges have doubled since 2009, with the Venture and TSX appreciating 50 and 14%, respectively," says Tom Whelan, Leader of Ernst & Young's national mining and metals practice. "Strong commodity prices and the fundamental need to develop long-term reserves will continue to drive activity into 2011, particularly in the gold sector. We've also seen sustained interest in potash as the global race to secure fertilizer assets carries on."

The cut-off to become a member of the TSX top 100 rose from $430 million to $809 million this year as 18 new entrants joined the list, raising the market capitalization threshold by 88%. In 2010, 80 companies on the TSX had a market capitalization of over $1 billion, compared to just 54 companies in 2009. Approximately 61% of new entrants were focused on gold. Following its surge in price, silver represented the second-largest commodity of entrants. Copper also stepped into the spotlight, with its global supply/demand conditions expected to remain in a deficit position going into 2011 with continued strong demand from China.

In 2010, there were 52 mining initial public offerings (IPOs) across the TSX and TSX Venture raising more than $1.3 billion. The total amount of capital raised through IPO, public offering and private placements for the sector exceeded $17.7 billion. (By comparison, the closest industry to follow was oil and gas at $11.3 billion.) Globally, the mining and metals sector also had the highest market share of IPO- and equity-related issues by volume as compared to any other industry.

In addition to heightened transaction activity in 2011, Whelan expects the industry will see carve-outs and single-mine IPOs gain popularity as a unique means of financing mine development.

Carve-out transactions typically occur when part of a business is financially and operationally separated from its parent, usually in advance of an IPO or sale. Recent examples of carve-outs and single-mine IPOs include Pretium Resources' $265 million IPO as a spinout of assets from Silver Standard Resources. The year 2010 also saw Goldcorp carve out its San Dimas gold-silver mine to create Primero Mining and spin out its Escobal silver project to Tahoe Resources, which became the largest TSX mining IPO of the year at $383 million.

The recent global commodities boom has also brought discussions of a merger between the TSX and London Stock Exchange (LSE), a transaction that Whelan says would be welcome news for the Canadian sector: "Mining is truly a global industry, where companies seek capital from investors across the globe. A merger of these premier markets would bring together two complimentary platforms, widening mining companies' access to capital."

Both the LSE and TSX have provided rich sources of capital to companies at different stages in the mining lifecycle. Whereas the TSX has typically attracted startup and exploration companies, the LSE has been the focus for developed and diversified businesses.