The second-largest country in the world by landmass, Canada, has a vast wilderness and is blessed with an abundance of natural and mineral resources. Even so, it seems like a stretch to say that it possesses three-quarters of the world’s minerals. Why then are 75 percent of mining companies based in Canada?
The answer is metal streaming, a unique financial arrangement that makes Canada a prime spot for mining companies to make public offerings, even if they do not intend to operate mines in Canada. In attracting mining businesses, Canada draws off reserves, prices, financing, exploration, and capital investment, a combination which other countries, including the U.S., are not able to match.
Just looking at the numbers, Canada’s involvement in the mining industry is staggering. The Toronto Stock Exchange and Toronto Venture Exchange accounted for $12.5 billion, or 40% of global mining equity capital in 2011. Canadian law makes both listing mining companies and complying with federal regulations less burdensome than in other financial centers, including London and New York.
Even though each of the 13 Canadian territories and provinces has its own securities commission, these authorities coordinate in order to ensure that Canadian financial markets remain in harmony. In part, this reflects Canada’s relatively open policy towards foreign mine ownership.
While Canada can offer access to free trade agreements and a stable legal system, another factor that makes it attractive to mining companies is its financial system. Opening a new mine incurs high upfront costs which are intended to be repaid over the course of the lifespan of the mine, which often extends for 30 years or more. Since 2004, Canadian law has allowed for what is called a metal streaming transaction.
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