TSX investors flock back to mining stocks
>>The numbers back him up. The TSX says 11.5 billion mining and gold shares changed hands on the senior exchange in 2002, well ahead of the 5.4 billion that moved the year before.
Meanwhile, equity financings for miners and gold producers on the TSX and junior TSX Venture Exchange were about C$2.6 billion during the first 11 months of 2002, according to data collector Gamah International, up from C$1.2 billion raised for all of 2001.<<
Sunday February 9, 10:27 am ET
By Cameron French
TORONTO, Feb 9 (Reuters) - Canada's senior equity market may have long shed its "rocks and trees" image as a place to buy and sell shares in resource companies, but the meltdown of high-profile technology stocks has investors giving a second look at a resurgent mining sector.
In the bull market rush that peaked in 2000, it was technology and telecoms issues that helped the Toronto Stock Exchange outperform U.S. and European markets, with techs swelling to make up about half the TSX's main index.
Mining stocks were then a drag on the market-darling tech plays, but the pop of the tech bubble has once again made the miners a go-to for investors.
From its peak of around 11,400 in September 2000, the S&P/TSX composite (Toronto:^GSPTSE - News) has fallen about 43 percent. Over the same period, the TSX mining subgroup, which includes base metal plays but not golds, has risen 21 percent. The gold subindex has done even better, surging 90 percent.
"People are looking for hard assets, and they're looking at old, traditional-type hard assets," said Barry Allan, a mining analyst at Research Capital Corp. "They want strong earnings, strong cash flow, type of stocks, and that's really what these represent."
The numbers back him up. The TSX says 11.5 billion mining and gold shares changed hands on the senior exchange in 2002, well ahead of the 5.4 billion that moved the year before.
Meanwhile, equity financings for miners and gold producers on the TSX and junior TSX Venture Exchange were about C$2.6 billion during the first 11 months of 2002, according to data collector Gamah International, up from C$1.2 billion raised for all of 2001.
Some analysts say the sector is still the true gauge of Canada's corporate health, as base metal companies provide the building blocks for manufacturing and transportation.
"The commodity cycle tends to lead the business cycle," said Blair Falconer, portfolio manger at Northwest Mutual Funds in Toronto, noting that figures from mining companies "have been very very strong."
Rising metal prices along with signs of improving global economic conditions, plus gold's "safe-haven" premium brought on by Middle East tensions, have added luster to both base-metal and gold issues.
But some are worried that a campaign to overhaul Canadian securities regulations could knock some of the shine off the mining sector.
In a speech in Vancouver, British Columbia, last week, Linda Hohol, president of the TSX Venture Exchange, considered to be a proving ground for the mining sector, said the robust venture sector is in danger of losing ground to foreign exchanges. The trouble, she said, is Canada's complex regime of equities jurisdictions, with their overlapping costs and delays.
Canada's 13 provincial and territorial securities regulators have been moving toward uniform, national securities legislation as part of a wider campaign to improve investor confidence in equity and capital markets.
While some have called for a creation of a single federal securities watchdog, others have suggested simply streamlining rules to avoid regulatory overlap.
"Listing in multiple jurisdictions is what some of the smallest mining companies have to do to raise the money they need to explore and develop," Hohol said.
While Canadian venture startups currently enjoy lower listing costs than the rival AIM exchange for smaller stocks in London, she said, there are still unnecessary costs and complication in Canada.
London's AIM exchange has been on an aggressive promotions drive since last year to try to entice small-cap mining companies to its boards to get more exposure to European investors and raise capital.
But the situation is not yet dire, Hohol said, as the TSX Venture Exchange still boasts a far more robust start-up business than competitors.
Recent figures show that TSX Venture Exchange had 1,240 equity financings in 2002, compared to only 68 on AIM.
With 947 mining companies listed on the TSX Venture Exchange, as well as 194 on the senior market, the TSX claims more than half the miners in the world.
So much for shedding the rocks and trees image.
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