eye on business
The TSX and AIM—the investment landscape
for Canadian exploration companies
by Gregory Ho Yuen, Fasken Martineau DuMoulin LLP, Toronto
and Anca Enica, Fasken Martineau Stringer Saul LLP, London
Toronto is
currently the
largest mining
finance marketplace in the
world. The statistics for the
Toronto Stock
Exchange (TSX)
and the TSX
Venture
Exchange (TSX-V)
over the first
half of 2006
were impressive
Gregory Ho Yuen
with approximately 1,200 listed mining issuers and
53 per cent (US$6 billion) of the mining
equity capital raised globally.
Concurrently,
the
Alternative
Investment Market (AIM) of the
London Stock Exchange (LSE) enjoyed
a year of remarkable progress in 2006.
Over 2,500 companies were admitted to
AIM and a significant number were
non-UK companies. Liquidity on AIM
increased, with market turnover in 2006
of £58 billion and average funds raised
at £21.5 million.
Obtaining a listing
TSX and TSX-V
An application for a TSX or TSX-V
listing is made by completing the prescribed form or, if in conjunction with a
prospectus filing, the prospectus serves
as the basis for the application. The
application is reviewed and considered
by the exchange, which applies criteria
such as the stage of development, working capital, proposed work programs,
and the experience and background of
the applicant’s directors and management. Sponsorship by a broker-dealer is
a significant factor considered by staff
and is mandatory for all but the most
senior of applicants. Technical reports,
48
prepared in accordance with National
Instrument 43-101, and title opinions
are required to supplement the application for listing. A management-prepared
18-month projection of sources and
uses of funds must also be submitted.
An applicant must be able to satisfy certain minimum requirements relating to
the number of shares held by the public
and number of shareholders, typically
not less than 300, each holding at least
one board lot (100 shares).
tion, a mining company must also provide a Competent Person’s Report
(CPR) on its assets and liabilities.
If the company’s business has not
been independent and earning revenue
for at least two years, AIM rules require
that all related parties enter into “lockin” agreements pursuant to which they
agree not to dispose of any interest in
their shares of the company for one
year after the company’s date of admission to AIM.
AIM
On the other hand, AIM is simple to
join as there are no prescribed minimum criteria. There is no requirement
for a minimum trading record, number
of shares in public hands or market capitalization, and no shareholders’
approval is required, apart from major
acquisitions and disposals. An AIM
admission normally takes around 12 to
24 weeks, and a fast-track route is also
available for companies who have a listing record on other international markets such as the TSX, for at least 18
months prior to the AIM application.
A successful flotation on AIM is
achieved with the help of an expert
team of advisors. The team usually consists of a nominated adviser (NOMAD),
solicitors, brokers, auditors, and reporting accountants. The NOMAD will act
as an intermediary between the applicant and the LSE, advising and guiding
the company through the application
process, but also ensuring that the company is commercially viable to join the
market.
AIM-listed shares must be freely
transferable and, unlike the TSX and
TSX-V, eligible for electronic settlement.
A set of documents will need to be prepared including an admission document, long and short form accounts,
and a working capital review. In addi-
Ongoing obligations
Once a company has obtained a listing on the TSX/TSX-V or AIM, it has an
ongoing obligation to make accurate
and timely disclosure of all material
developments, whether financial, geological, or of another nature. TSX/
TSX-V-listed companies are required to
notify the regulator responsible for
market surveillance and provide it with
a copy of any proposed announcement
prior to dissemination. AIM-listed
companies are required to retain a
NOMAD throughout the term of their
AIM listing and keep the market up-todate with all significant developments
in its business.
The TSX and TSX-V have benefited
from Canada’s long history in mining
and finance and have become the
most mature stock exchanges in the
world for mining companies.
However, in the 12 years since its formation, AIM has evolved into a viable
alternative, which offers access to
deep capital pools in London and an
investor base that seems to demonstrate a greater interest in mining
projects. As AIM investors increase
their appetite for mining companies
and trading liquidity on AIM
improves, we anticipate that AIM may
quickly close the gap on its Canadian
counterparts. ■
CIM Magazine ■ Vol. 2, Nº 3