Mining the Markets: Canadian mining companies exploring the London Stock Exchange

Charles Bond: Hello, welcome to this Gowling WLG pre-recorded panel.

Today we are going to be looking at the recent flurry of activity of Canadian Mining Companies that have been dual listing in London. Last year was particularly busy with a stream of Canadian companies setting up store in London such as Pure Gold, Taseko, Yamana Gold and Wheaton Precious Metals. On this video we wanted to touch on some of the reasons that companies have decided to take this route, how they have done it and what are the pros and cons of doing so.

By way of introduction my name is Charles Bond and I am a Corporate Finance Partner and Head of Gowling WLG's Mining Group in London. I am very grateful to the other participants on this call today who are joining us.

First of all we have Rusty Bell, who is the Managing Director and Head of Corporate Finance at Velocity Trade Capital in Toronto. Velocity is a global equity foreign exchange and precious metals broker.

We are also very grateful to the London Stock Exchange for joining us today in the form of Chris Mayo. Chris is Head of Primary Markets for the Americas.

Also on the corporate finance side we have James Asensio from Canaccord Genuity. James is based in London and is a member of Canaccord's very busy Natural Resources Investment Banking Team.

Last but not least by any means we have a representative from a Canadian company who has just completed their own London listing being Richard Williams the Chief Executive Officer of Cornish Metals, a mineral exploration and development company focussed on its mining projects in Cornwall being the flagship projects of the United Downs Copper Tin Project and the South Crofty Tin Project.

Charles: Thank you all for joining us and we look forward to your views today. Rusty if it is okay I am going to start with you, I know that you have been involved in a lot of these dual listing deals over the last 18 months, maybe you could talk a little bit about why Canadian companies are choosing to do this and why they want to do it at the moment and then we can open it out to the others.

Rusty Bell: Sure, thanks Charles and thanks for allowing me to join today, I appreciate it very much.

Yeah, no we have done a significant amount of work, you know, I just, maybe seeing the landscape a little bit going back when you look at the Canadian Mining Market Place 15 years ago and we look at the specialist pools of capital, those pools of capital were somewhere in the neighbourhood of over $20 billion and we had on the TSX and TSXV probably 15 hundred, you know, plus mining companies, public mining companies.

When we started to take a look at where I think we reference as kind of, the capital of the pollution dynamic we went back about six years and six years ago we saw that pool of capital from 20 grand go down to, I guess it was just, just covering around six billion and today frankly that same pool of capital is just over three billion and we have 12 hundred companies listed between TSX and TSXV so not to be sort of negative about the environment because Canada remains to be one of, you know, the biggest sources of access to great mining companies and a great incubator of mining companies but it was a clear realisation that, you know, Canadian mining companies, when you have 12 hundred companies chasing $3 billion or $3 billion chasing 12 hundred companies it is an unsustainable model at this point and so we took a very aggressive route to look outside Canada for different pools of capital and London was an obvious place for us to go.

Maybe I will just take a step back and talk a little bit about why there was this significant capital depletion dynamic and we kind of look at it as four legs to a stool and in some senses it is a perfect storm.

The first leg obviously I guess arguably the mining sector has been slightly out of favour for the last ten years, but the biggest impact was in passive investment so, you know, the proliferation of ETFs and passive investment vehicles was massive in Canada and North America and in particular in Canada we have now over 100 ETFs whereas in London there is, you know, I think you are going to struggle to find 10 ETFs. So passive investment was just pulling huge flows of capital out of those specialist active managers' hands. What that did unfortunately for them is it created an environment where if you are facing redemptions you need to hold on to securities that have high liquidity levels and if you have higher liquidity levels you are more likely are looking at higher market cap companies and that means more, very difficult to invest in the earlier stage exploration, earlier stage development companies and limits the number of companies you can invest in.

You know the second leg of that stool is probably momentum sectors. We have gone through a few variations and we are kind of back to one of them but certainly the activity around cannabis and the activity around you know crypto currency have been substantial in Canada and the diversion of capital going to those sectors has certainly impacted on the junior mining space considerably and then you know thirdly when you look at method two which a lot of people in Canada do not completely understand but is a really important part of the rationale behind the capital pollution dynamic but it is much more difficult for Canadian companies to have their stories or their opportunities published, distributed, or reach a global audience, especially and specifically in the UK and EU and that is sort of a back drop, or back room kind of impact on those companies.

And then the last one which frankly I believe we are going to start seeing more of it you know this surge in ESC. I mean ESG has now become the single largest category of investment flows globally and whether the question is that its coming to Canada, you know, very quickly and if you are part of a big marketing engine, you know those marketing dollars are going to the funds that are most attractive and that further puts pressure on these Canadian Fund Managers so, you know, that was, at the end I do n0t want to be negative because Canada is a very robust market and, you know, commodity prices are moving the right way but it did for us really identify the pressure that Canadian Fund Managers were seeing and that obviously translates into 1,250 companies in Canada having a more difficult time accessing capital and that led us not to speak for too long because there is a lot of areas of interest here but that really led us to the relationship we developed with the London Stock Exchange about four, five years ago and Chris Mayo and John Attenborough and their entire team they have been fantastic and further contributed to the data that we now have sort of compiled and, you know the experience that we have had identifying what companies in Canada truly work in different exchanges and specifically why these companies can succeed so well and access, you know, greater pools of capital on the London Stock Exchange.

Charles: Thanks Rusty, Chris maybe you are the natural follow on from there, I guess a lot of that chimes with your experience when talking to North American companies?

Chris Mayo: Yeah, I think that is rights and I think, you know, just to move on from Rusty's point, you know, we do not see this as a kind of either or conversation. We see this as something that can be complimentary to mining companies existing, you know, Toronto listing and so we think they can add additional investors by taking this step.

I would say also what we also believe is that additional burden of doing this once you are already listed in Toronto is not that significant so it is something that a company can add, ok it's not cheap to do a listing but I think that the additional burden relative to doing things in other markets from Canada to London is actually relatively modest and I think that is why there is a bit of traction to these companies.

What I would also say is that it is almost a kind of life cycle argument you can make here where Canada has a lot of really early stage companies as they have never been very good at financing those kind of companies over the years where I think London as companies start to mature and move through their development cycle London can be a really good source of additional capital for those kind of companies but I think it is important to say we are not just catering to for large companies, we are catering to companies of all sizes.

So if you take [unclear 00:09:14] Cornish Metals as we have on this particular webinar they're a small company with great potential relatively small but then if you look at other companies we have had. We have had Umano, probably six billion US dollars when it went public, sorry when out of the UK listing. Wheaton 20 billion dollars and you have Pure Gold that was probably just over 100 million dollars and I would say a lot larger when it added its London listing. We believe we can cater to companies of all sizes through London and that the investor base is really looking for high quality mining opportunities and we can add something to the kind of investor platform that exists in Toronto listed companies already have.

Rusty: I think that is a really important message Chris I mean certainly what was attractive to the companies we represented was review the process of the standard listing.

I mean there are multiple ways of listing in London but the standard was a major advantage for, especially Canadian mining companies. One, it was cost effective. Two, all of your regulatory and compliance reverted back to home country so it was not a duplication or further burden for them and the ongoing costs because that regulation and compliance reverted back to home country was quite nominal for them so in the case of and the success in doing that was quite efficient.

As you mentioned we listed Pure Gold I guess at about 110 million dollar market cap which is touched on a billion dollar market cap now, pulled back a little bit but maybe around 800 million. Taseko's another one that we did with you and that was again about 120 million dollar market cap when we listed and it is about 600 or 700 hundred million dollar market cap now and then the ability to break ground and then bring a company with the likes of a Yamana Gold which is one of Canada's most prominent multiple asset gold companies to bring them to the London Stock Exchange I think really got the attention of so many more new larger companies and seeing the advantage of that.

They have all had tremendous success on the back of the standard listing and one of the challenges from a marketing stand point certainly has been in Canada the number of people you would be going to tell your story to and the case of those three companies I brought up we have had well over a hundred anyway new institutional investor meetings for all those companies and participation is showing. Certainly in the case of Pure Gold to be more than 20% of the daily volumes now traded on the London Stock Exchange and that is in a relatively short period of time and.

Charles: Maybe we should ask Richard giving you have got the most recent experience I mean I know you have been planning this for some time but, and obviously you are probably one of the only listed UK assets which is great for the UK but I am sure that was not the only thing that brought you from Canada to London. What were the other reasons that persuaded you to come and list here?

Richard Williams: I am not sure I entirely agree with all the statements so far. I think for a company of our size and certainly at the expiration end of the business you know I think Canada really understands expiration companies, the risks involved, as you advance the project there is always dilution that comes in to the story because you need to raise more money and advance the project.

I think there is a real difference in the view of investors in the UK compared to the view of investors in Canada when it comes to understanding the expiration cycle and what that involves.

And also I think for smaller companies, you know the additional costs of listing in the UK right at the small end their view of the expiration and it might be too much. From our perspective, having a project in the UK, there is really not many for investors to look at, so the attraction for us was really exposure to the UK investment community and a lot of it comes down to timing as well as you had alluded to. We did try to list in 2019 but at that time the head winds were against us and I think for a number of reasons that would be completely beyond our control. We were not successful in 2019.

We all know that the resource sector is a cyclical business and at this point we started our process for listing last summer and our initial target was to be listed before Christmas and our experience is that there is a tremendous amount of work involved and maybe that was just particular to our situation. Some of the issues in the UK expiration and mining sector may be different to other parts of the world. We ended up listing in January and that also coincided with strong growth in the copper price, the tin price and investor interest in that so we have benefited from timing this time around and it certainly what we have seen in the last week which Rusty and Chris alluded to tremendous liquidity since we listed certainly not the kind of liquidity we have seen in Canada and so a lot of it comes down to I think in our case anyway local interest to see projects in the UK advance.

I think certainly at the earlier stage companies need to understand that there is a different outlook from investors in the UK when it comes to dilution versus Canadian investors understanding of what it takes to go from generational project, discovery of an asset, advancing it through to resources, EA, feasibility.

I think from our perspective at our size of company it made sense because it is a UK project.

Charles: Okay so maybe James we can ask you a question from the broker investment perspective, Rusty already touched upon the different types of markets in the UK and some of the benefits of the standard listing, do you want to just maybe for any kind of Canadian companies out there listing just explain some of the differences between Aim and the standard market and what you would normally recommend for each type of company.

James Asensio: You sure look very happy to, I think the starting point the way we look at it is really about what type of company it is, what do you think the development is at and what therefore the likely investor appetite will be for their company once listed in the UK. I guess within that obviously Aim is considered to be the duly market and therefore there is a set investor audience for it and then the general perception is that if you go to the standard market the investor audience does widen and occasionally some portfolios can increase on that basis.

However, I think what is important to note is that from the investors that we speak to and we are very much focused on small and mid-cap investors both generalist and specialists the reality is that there is only really one account, one investor up in Scotland that cannot invest the name. Most of the other guys can invest in on [unclear 00:17:16] so from an investor targeting and [unclear 00:17:20] investor appetite we do not see a huge issue between him and the new market so then it goes really into what are the company objectives medium and long term and I think I would say typically what we would tend to advise obviously an emerging developer that is going to require seeing if he can capital or a couple rounds of capital raising in the short to medium term they should probably look more towards AIM to get to that consolidated platform of a junior producer level. If it is more a consolidated producing company we would typically advise them they should go down the standard segment route and if applicable [unclear 00:18:07] obviously.

So I think that is the broad trope of the advice we tend to give. I think it is very tailored to each company, each project but I think the ultimate decision making has to come from where are you likely to get the most investor appetite and that is on a case by case basis along those parameters.

Charles: And just following up on one of Rusty's other points as well where you noted the ESG implements over the investment community at the moment, is that something you are also seeing here in the UK big impact of ESG investors?

James: Absolutely I am not 100% familiar with North America alone but I would say that actually the UK is probably leading the pack in terms of ESG investing and setting what the appropriate ESG standards are for buying companies to be following. The discussion comes to what other standards and standardising the standards because there is a big complicated moment but for sure we're seeing most investors up on a certain scale have their own ESG teams internally that look at every investment on its own ESG merits and in some cases do not even allow portfolio managers to continue with their investment thesis if it does not tick the issues boxes so absolutely it is an absolute requirement tool to have an ESG focused strategy for each company and I think it is definitely going to be a growing trend going forward.

Charles: Chris maybe I could just turn to you now and maybe ask a little bit about the process from the LSE's perspective what do you do to kind of help these Canadian companies come to London the services that you offer and how you may be making it a little bit easier for them and are you anticipating any changes coming up through the pipeline which may make it even easier?

Chris: Well yeah I mean there are a couple of things to say there I mean obviously at the start of the process what we do is we try to act as kind of the first point of contact for a number of companies just to explain to them what the process is. We talk about the differences between Aim and standard, we provide connections to relevant advisers people like Gowling and people like Canaccord and people like VT so we are there to kind of be the first port of call for information the company is considering listing in London and talk through the pros and cons and the costs and all that kind of thing and we tried to demystify that process so that is one part of the things.

I think you are also alluding to are what changes may there be from regulatory perspective to make it easier to list so I think that you know there is an ongoing review going on at the moment with regards to competitors of the UK listing regime. I actually think UK listing regime overall is pretty competitive in terms of its flexibility and having both Aim and Standard as alternatives makes it so.

I would say that things, this is in the press, things like dual class voting. Which actually is possible in the UK already but making that more formal, things like reduction of free flow requirements. These are all things that are under consideration that may come out of the Woodhill review but that will probably be published in the near term. I think something specific to mining and actually and also oil and gas that may come up is the fact that more flexibility about the inclusion of a competent person's report or a mineral expert's report in a prospectus and the need to have that as an existed listed company from say Toronto our New York there may be changes that happen in that area which would make it more flexible but we will have to wait and see what actually comes out of the review.

Charles: Rusty from your perspective in Canada is that something that Canadian mineral companies would welcome, I guess anything that cuts down some of the red tape would be good.

Rusty: Yeah but absolutely, listening to James and what Chris was just talking about with regards to the Canadian mining companies coming over and deciding on which platform or which exchange tool this time.

One of the things that we initially took some pushback on was on the root of the standard listing simply because there were a lot of people telling us that they wanted nomad representation and what came from that was quite fascinating in the sense that from mining specifically the standard works so well in London because of all the regulatory burden they go through in their home country.

So when they actually arrive in London and when we talked about Chris the 43101 and everything else they are actually super compliant already and that is a hurdle we initially went over and now I think that is very much clear sailing so another huge advantage for and as Richard mentioned you have got to be at the right stage to take advantage of the standard listing but if you are that is a huge advantage definitely.

Charles: I think we are also hoping as well that the review may also address some of the inequity maybe for royalty companies which are obviously very popular in Canada, have been very successful and which we probably have too few in the UK and it has always been difficult for royalty companies because we have a material assets test which may catch a number of different royalties held by royalty company meaning they have to produce a competent person's report on every one of those which becomes untenable really so it will be interesting to see if the royalty companies if they will be given a bit more of an easier ride in this review as well.

Chris: What I would say it is that we will have done that exercise so at least there is recent precedent. Obviously they are streaming rather than a royalty company but there is a similar kind of principal behind that and I would hope as you say Charles that there will be I think an appetite for more roles in streaming companies in the UK so I would hope that there would be more opportunity for those companies to list them going forward.

Charles: Definitely. Maybe we could just talk about the practicalities of costs and timing. I know you have already said Richard it maybe took a little bit longer and cost a little bit more than you thought it might do. James in your view when you talk to companies how do you prepare companies for that discussion?

James: We tend to be as up front as possible with the granular costs that would come with the listing and I guess for the winner a kind of a worst case scenario both in terms of cost but also timing which I think typical timelines that you see online in the various guidance that people will look at would give you a sense that three to four months is the easy timetable to follow and I think we tend to guide people up front to the fact that yes that is the standard but there are depending on the complexities around the projects and to the access the company owned it may be longer. That is something that we work with them quite a lot. It would cost I think its again a matter of being granular and really assessing each and every bit of each company's requirements and determining within the range of costs that you would typically have for a listing where are you likely to fall. Are you likely to fall on the lower end or the higher end and I think again going back to my point standard versus Aim I think there is no one size fits all and it all has to be very tailored and in our view that kind of tailored advice needs to be provided very much up front for companies to understand exactly what they are getting into from the first moment.

Charles: One of the things that we are often asked is the ongoing costs for standard list versus a named list obviously if you are on Aim you have ongoing fees to pay to your nominated adviser which you do not have to do for a standard list but you have other costs to incur so for example if you want to issue more shares more than 20% of your issued share capital then at least in the first 18 months you may have to issue another prospectus so I think there is always a balance to be had in these things and Chris if you agree with that one?

Chris: I do actually and his point to say that all these costs are transparent from an exchange perspective and I think advisers will be open about this too. Standard from an exchange perspective our costs are higher so the admission cost is higher, the annual fees are higher and also the admission costs for newly issues securities and following references you were talking about is also higher but as you say on the flip side of that you will not have the cost of a nomad. So the pros and cons to looking at and that is why sometimes when you see smaller companies which have large capital requirements are going to raise a lot of follow on capital they may look to Aim for that reason because if you think about over a number of years the cost may be a lower from that perspective but certainly the larger companies we looked at have also looked at standard because you know they will say well we are a larger company and we are already listed in Canada, we do not need to have a nomad, and the standard listing fits our requirements perfectly especially as we can take most of what we are doing in Canada, Rusty has already alluded to and just basically use that in the UK without having to change much at all. I think these things are transparent you can look at the fees for LSE on our website and it is there for all to see and you can actually do the calculations yourself.

Charles: Richard when you look back over the last six to eight months is there anything that caught you unawares, anything you would wish you had known at the start of the process?

Richard: Not really I think we have been from day one when we acquired the Cornish assets I think we knew by the way that this was a company that should have a UK listing so we had been working on it for a long period and certainly difference in how directors are viewed by the authorities in the UK versus Canada and what is classed as independent there are some differences of opinion. I think if you are going to list in the UK and you have just got a Canadian slate of directors you are going to have to look at UK representation as a non-exec director one or two people. So there is a change in that regard.

Some of the other things are it is just differences of how people view, investors view companies. I think there is, in Canada it is fairly typical to offer directors management stock options it is not as common to UK listed companies. In fact I think investors view directors in the UK as having options as potentially a conflict of interest whereas in Canada a lot of companies just do not have financial capacity to pay directors on top of the other costs for running the company. So those things you need to be aware of. Also I think UK investors typically from what we saw anyway with our recent listing prefer financings to be straight share issuances rather than unit offerings which are more common in Canada so there is again a different view of the attraction or the pros and cons of warrants from a financing stock. They are things that you just need to be aware of before you come to the market here.

Charles: We are sometimes separated by a common language with our Canadian colleagues when it comes to some of these things. Rusty from your point of view, what does the future look like for these dual listings? Are you still seeing a lot of demand?

Rusty: Absolutely Charles. I think we all have to be understanding of the environment that we are in and I think it is really important for any management team to understand that by getting a listing whether it is on Aim or standard or premium but it is not flicking a light switch. You have to put the work in. You have to build a relationship and rapport with new investors. It comes with tremendous amount of advantages if you use the toolbox properly and I think that is certainly what we are experiencing now very positively is we really created a significant infrastructure on the ground in London. It is a very exciting opportunity for a lot of management teams and looks really good on a spreadsheet. But at the end of the day to make it work there is a lot of pieces that have to be in place and for ourselves working with Gowling and working with other legal teams has been an experience and everyone brings different advantages but we also work with almost all the communications groups on the ground in London from Brunswick and FDI down to not down to but with Buchanan and Pavistock and Comarco and then we also it is really important as Richard is using two joint brokers and SP Angel and Han and Partners but there is a number of different brokers and they all bring different things and they all have different relationships so it is really important that we manage all of those advantages that you get out of the London market properly and also may help with navigating that but yeah the I guess back to the question is there still appetite to go to London and I think there is massive appetite to go to London and I think there is a lot of people hesitant because of the current environment we are in right now but we will certainly probably bring three new Canadian well-known companies to the market this year and I suspect as the traction increases which it is I think many more will follow so we are very.

Charles: So a tourist Canadian minor looking at this video and you are now just beginning to pick up this idea, how far ahead do you think you think you have to plan this. Are you talking about a year, six months or shorter?

Rusty: Honestly it really depends and I am sure you would agree with this, it depends on the management team because this is not an easy decision for a company just to go ahead and do so it requires more approval and that always seems to be the hold up as when can we get the board together, when can we, and there is always someone that has a question and you have to go back to ground zero and go through it all. I think once you get through the initial decision process and this is something we should do as James mentioned it is a very, you know the process, it is a very efficient process and it is about a three to four month process. You like to look at it as you know the initial submission of the prospectus and the initial documents of the UKLA which we would do at Gowling and then making an intentional list or announcement and by the time we make an intentional list we certainly would hope we are within, you know on the outside a couple of months first day of trading and then we create with the infrastructure we built on the ground in London and a momentum to surely have a good reception.

Charles: OK maybe just a couple more questions, one maybe for you Chris. You know if you are a Canadian camper then you are probably being attracted because it is very hot at the moment to the Australian stock exchange what would you say is the benefit of having a dual list in London for a TSX listed company rather than the ASX.

Chris: Well I think that you know the UK is more of a generalist market and a deeper market than both Australia and Canada and I think part of the thing I would say about that is that we are increasingly seeing Australian listed minors coming to London and again what I will stress is that you know this is not, kind of removing Toronto listing, we are not suggesting that, we are actually saying you are adding London, you are adding access to funds which have a UK mandate. By the fact that you have the London listing they can therefore list in your stock, sorry invest in your stock and I think that that is something more likely to be added to if you have Toronto you know to London it would be with Australia. I think, obviously Australia is more of a mining focussed market in the same way Toronto is. I think there is more differentiation in London from an investor base perspective that you would find between Toronto and Australia and quite frankly the UK is by far the deepest market in Europe when it comes to assets and managed active equity assets under management and that should really be what you are getting access to.

Actively managed capital can invest in you as a result of you adding the one listing, that amount of capital in London is very large, obviously you have to work very hard you know through brokers, and likely in Cannacord to get access to those guys getting them to invest in you but you know potential, the size of that pool in the UK is just so large, that is the opportunity.

Charles: James, maybe just one for you. I mean what are investors by way of minerals looking at at the moment clearly copper is very hot, gold has been doing well. Are you seeing any other intense buying opportunities?

James: Yes I think battery materials as a theme is one that is quite attractive at the moment, I think everyone knows that copper fits in quite nicely with that but there are others that fit in also quite nicely within that. Obviously lithium and, and increasingly the rarer segments, the rarer sub-segment which is quite interesting as well. So I think, I guess taking a step back I think the UK investors or London investors but the generalist guys will typically focus on the mainstream commodities. Anything that diverted us away from that starts becoming quite a bit harder and more specialist and so therefore relying more on the specialist funds to lead the charge and so investing on that. So I think the commodities bill will tend to focus on at least for the time being and I would say the foreseeable future are there other mainstream commodities and that is gold, copper, zinc and then perhaps you can have the odd ones like lithium etc. that form part of a wider fanatic. It is really not a wide spectrum of commodities but I think there is, you know, that leaves a huge pool of potential companies that come over to London that sit in with those commodities and I think just touching on one or two points that Rusty and Chris made and I think the opportunity in London is still there, in that, you know given that, it has been a pretty busy time in terms of new listings, you know it is not a very deep bench in terms of high quality mining companies that are listed in London when you compare it to Toronto and Australia. You know when you compare that to, also to, the level of investment interest that we are getting from those generalist funds in terms of looking for new mining ideas and new mining opportunities over and above, you know the usual suspects they have been seeing the last decade. You know I think that does still leave quite a lot of room for new companies to come here and be very differentiated by a much more competitive landscape in Toronto and Australia so, you know there is still much more room for new companies to come into market here.

Charles: OK so I think we are nearly done but I will just open it up to the floor in case anybody else wants to comment on the jewel listing process or any other themes. In which case I am going to thank you all very much, Rusty Bell, Chris Mayo, James Asensio and Richard Williams, thanks very much for joining us. We hope to see you all at BDAC next year. It think certainly in the UK we are going to be released around the middle of June back into civilised society and if you want to see any more of our videos we have a couple more on our website BDAC one on mining disclosures and one on investment in the EDG but for the time being thanks very much for joining us and thank you to our participants today.