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Canadian Mining Companies
Canada and mining – the perfect pair
The world turns on metals. Transportation, communication, habitation, health care, and just about everything else upon which we rely require metals, in steel beams, copper wires, aluminium frames, nickel batteries, iron magnets, and a host of other everyday applications. Even essentials like fertilizer come in large part from metals – potassium and chloride – that are contained in the rocks of the earth.
Those rocks are dug up, crushed, processed, smelted, shipped, and sold. But the first step in the long process of building a mine is finding a mine-able deposit. Simply finding gold, or uranium, or iron is not enough – the deposit has to come with a raft of specific characteristics. The grade has to be high enough, the deposit has to be big enough, the metal chemistry has to be such that the metals can be extracted, and the deposit has to be in a place where politics, society, and infrastructure make it possible to build a mine at a reasonable cost.
In general, major mining companies like Rio Tinto or BHP Billiton are not the ones that explore for new deposits. That job is left to junior exploration companies, who raise money on the stock market and spend it searching for the next big deposit. The companies that succeed are bought out by majors or grow into major mining companies themselves, providing serious returns for those investors who get in early.
Canada is without a doubt a world centre for the financing activities that make the mining world turn. The Toronto Stock Exchange (TSX) is home to more mining companies than any other stock exchange in the world – at the end of 2009 the TSX listed 59% of the world’s public mining companies with 1,434 listed issuers, compared to 610 on the Australian exchange and 171 in London. Over a five-year period ending with 2009 the TSX was responsible for 82% of the global mining industry’s public financings.
That fact – that 82% of the world’s mining financings took place through the TSX – shows just how integral Canada is to the world of mining and exploration. And a key component of that is the Toronto Venture Exchange, which is where most junior explorers list. The Venture is a proving grounds, where emerging companies can access small-scale capital in a regulated market.
The Venture exchange is important because it can handle equity financings in the $1 million to $5 million range efficiently. That ability is unique to the Venture among international stock exchanges, and it makes the Venture the perfect home for junior explorers, regardless of where in the world they want to explore. In 2010 companies listed on the TSX and Venture exchanges had close to 9,000 projects in progress, of which roughly half were in Canada and half were international. Canadian firms are responsible for the largest share of exploration spending in Canada, the United States, Latin America, Europe, and Africa. Canadian firms absolutely have global reach and vision.
That vision started right here: Canada is not only a global centre for mine financing but also for exploration itself. For 18 of the last 32 years Canada has been ranked the top destination in the world for mineral exploration investment, based on the key criteria of resource potential, government policy, and taxation. For the 14 years it was not ranked first Canada came in second. And mining has become absolutely integral to the Canadian economy – one of out every 50 jobs in the country depends on mining and the industry contributes more than $30 billion to Canada’s GDP. From 2010 to 2013 the mining and mineral processing industries are forecast to grow by 6.4% year-over-year, which is double the expected growth rate of the overall economy. In the Canadian investment environment, mining is the place to be.
The right picks generate sweet returns
Examples of buy-outs and the returns generated…
Clearly, investing in Canadian exploration companies can produce incredible returns. But there are thousands of junior explorers – how do you choose? While there are no guarantees, there are a few key criteria.
First and foremost, a company is only as good as the people running it. A great project will wither and die in a company with inexperienced management; a group of seasoned, successful professionals can take a company that has nothing and turn it into a multi-million dollar takeover target in just a few years. So the most important factor when assessing a Canadian exploration firm is its management. Canada has led the mining world for years and in that time has produced a long list of geologists, managers, and financiers with proven track records of success. Look for management teams and boards stacked with success.
And one interesting result of the mining world channeling its financings through Canada – really just through Toronto and Vancouver – is that the group of people involved is smaller than you’d think. The only way to really access that group is to become part of it, which is impossible for the average investor. But Kin is part of it, which means we can get you in on the ground floor of a new opportunity and keep you abreast of new developments because we work hard to follow everything that’s going on, from the inside.
Second, a successful company has focus. Every investment arena – mining, technology, fashion – goes through crazes, phases where everyone seems to flock to the latest, greatest idea. While those crazes do provide opportunity, they also create bubbles that often wipe out your gains in an instant. Rather than chase the newest craze, a successful company develops a game plan based on the best information available and sticks to it. Nevsun Resources, for example, believed that the prices of gold and copper were poised to climb and that Eritrea had strong exploration potential. As such Nevsun’s team remained focused on advancing its Bisha project towards production, throughout crazes for uranium, lithium, and rare earth metals. Nevsun recently poured its first bar of gold at Bisha, joining the ranks as a producer in a period of the highest gold and copper prices on record. Focus and foresight are integral to success.
Those are the key aspects of a good mining company.
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