Why are Canadian mining companies listing in London?

In recent months, Canadian mining companies have turned their attention to the London Stock Exchange, one of the world’s oldest markets, as a complementary option for a dual listing. These include the likes of Taseko Mines, Pure Gold Mining, Thor Explorations, AEX Gold, Gensource Potash and Wheaton Precious Metals.

The pull factor of the UK markets is not so surprising, given the LSE has a long pedigree in the mining sector, offers deep pools of institutional capital, high liquidity, and sophisticated long-term investors. Indeed Australian miners have been tapping the UK markets for a very long time.

London offers a diverse and long established financial services ecosystem, with specialist research and analysts, corporate financiers, brokers, accountants, PR and lawyers. It caters well for the juniors, many with their market cap at less than US$100mn, coming to the LSE's AIM market, which was launched in 1995 to help smaller and growing companies raise equity with over 3,000 companies from around the world having listed in London to date, many coming from a natural resources background.

Equally it has always attracted the majors on its main market, such as Rio Tinto, Polyus and Antofagasta.

For those companies that already have a listing on the ASX or the TSX, adding a London listing can be very much advantageous. A new investor pool of liquidity can be built up in a separate time zone with a global investor base.

It is probably true that for those companies with assets only in Canada, then the TSX or TSX Venture exchange are always going to make more sense given local investor sentiment and knowledge. However when, as so frequently happens, the assets are for example in Africa, Europe or even now South America, the London investment community are likely to be just as approachable.

There is however no one single reason why companies might want to come to London. Part of it is the access to longer-term capital, but it can also be about international profile, liquidity for existing shareholders or just preparation for the large chunk of project finance which may be easier to find in London in due course. The international investment profile of London is also helping to drive the winds change in ESG, which in itself is a major attraction for mining groups wanting ensure they are not just making money for investors, but doing the right thing from a social and environmental perspective as well.

Flexible investor appeal of London to international mining companies

The way in which Canadian companies can approach the London markets is also flexible. While it is helpful to raise money on listing to create local liquidity, various dual listed companies have chosen rather to build up a local profile through research and PR so that when they are ready to raise funds, the investment community will be more aware of the relevant projects and keener to invest.

Whilst historically Canada has been the home of the listed royalty and streaming companies, asset free and income rich royalty and streaming groups are now becoming a possibility in London.

The England capital city has historically relied on income stocks, and the opportunity for good yields for royalty and streaming companies could play into investor sentiment in the UK. It is true that the regulatory landscape can make it harder for royalty companies to list in the UK, but ideally, now it is out of Europe, rules around equivalence of technical reporting will change sufficiently to recognise that Canadian continuous reporting is sufficient, so that prospectuses and admission documents can be shortened and the listing process simplified.

From a regulatory and cost perspective, in reality there is not a great deal of difference between Canada and the UK, despite what fans or detractors might say on each side of the Pond. Each market has its own pros and cons, but in the wider scheme of things they both entail engaging sophisticated advisers who are subject to pricing in an ever-changing market, and there are always deals to be done. Time to get to market is not that different and cost should not be a fundamental factor.

There may be some regulatory hurdles that can make a difference, such as the recent changes for companies wanting to carry out a Standard Listing on the LSE's Main Market, which now requires a minimum market capitalisation of £30mn.

It is also noteworthy that Canadian companies do not enshrine pre-emption rights for investors as English companies do. Having a Premium Listing on the LSE's Main Market is also going to be more costly given ongoing obligations are more onerous, but fundamentally there are normally other factors at play over and above regulation, especially as CEOs and their investors will be keen to see money being spent in the ground and not on regulation.

It is not altogether surprising that other sectors are following in the footsteps of the miners – such as the Canadian medicinal cannabis groups that are now beginning to approach the UK markets as well.

Charles Bond is a partner and head of Gowling WLG's Natural Resources Group in London and has acted on variety of Canadian dual listings recently, including on Gensource Potash, Thor Explorations and Arrow Exploration