Resource World Magazine

52 www.resourceworld.com A P R I L / M A Y 2 0 2 0 Australian Update by Greg Barns A ustralian mining and explora- tion companies have poured over AUS $3 billion in investment into Canada over the last two years. This is a new phenomenon; for many years it was the other way around. It was largely Canadian players who piled into unwanted Australian assets over the past few decades. Canada's deeper capital markets meant that local producers and explorers in Australia often couldn't raise the cash in the past. So, why the change in fortune? There are a number of reasons but one that stands out is the drying up of capital for mining projects in Canada courtesy of the market's love affairs with marijuana stocks and crypto currencies. Hedley Widdup of the well-known minerals investment com - pany Lion Selection Group [LSX-ASX], said last year that marijuana equity raises counted for around 22% of the TSX equity raising total in 2018. In 2019, there were 22 new marijuana stocks listed on the TSX and TSX Venture Exchange and 35 new mining and explo - ration stocks. Given that the former is confined to the jurisdictions in which marijuana is legal, that tells you some - thing about the squeeze on mining equity raisings. Crypto currencies likewise have attracted investors and made life more difficult in Canada for mining and explora - tion stocks. Canada has been an early and innovative mover in recognizing the real- ity and potential of crypto currencies and investors who might previously have held speculative mining stocks or safe haven plays like gold miners, have moved into the crypto currency space. In fact, the Canadian rush out of min- ing and exploration stocks into marijuana and crypto currencies was a factor in Matador Mining Ltd.'s [MZZ-ASX] acquisition of the Cape Ray gold project in Newfoundland in April 2018. Announcing the deal, the company's CEO Scott Patrizi said, "We believe the acquisition of the Cape Ray gold project... has the potential to create a significant mid-tier gold company located in a mine-friendly jurisdiction with world class exploration potential. Canada is poised to become the second largest gold producer globally and this positioning can only benefit and further justify pursuing these types of projects, particularly given the current state of the Canadian junior mining sector where a focus on crypto currency and medicinal marijuana has left many juniors starved of capital." However, this situation is changing. The bloom is now off the rose and the mad rush into marijuana and cryptocurrencies is subsiding. Indeed, the big marijuana producer, Canopy Growth Corp. [WEED- TSX], and others, have seen their share prices dropping since last May. Canopy recently laid off 500 workers at their huge greenhouse operations in Delta and Abbotsford, British Columbia. The bottom line is that as Australian mining investment adviser EMR Capital Executive Director Tony Manini told Australian Mining on October 2 last year, "It's been extremely difficult for (min - ing) companies to raise any capital on the Canadian market. There has just been no interest in the sector. As a consequence of that, that's driven those companies to look at alternative listings." And it has presented cashed up Australian companies the opportunity to head to Canada to buy projects and develop them. Up until relatively recently Australian companies that wanted to invest in Canadian projects were advised they needed to list on the TSX or TSX Venture Exchange. Newcrest Mining Ltd. [NCM- ASX] listed on the TSX in 2012 only to de-list just over a year later. This has not stopped the gold and copper mining giant from spending AUS $805 million in 2019 to acquire 70% of the producing Red Chris gold and copper mine in northwest British Columbia, in a deal with Imperial Metals Corp. [III-TSX; IPMLF-OTC]. Newcrest's foray into Canada is one of many over a particularly busy last two years for Australian mining capital wend - ing its way across the Pacific. In November last year, Evolution Mining Ltd. [EVN- ASX] entered into an agreement with Newmont Goldcorp Corp. [NGT-TSX; NEM-NYSE] to acquire 100% of the Red Lake gold complex in northwest Ontario. Another Australian miner, Saint Barbara Ltd. [SBM-ASX], acquired the Atlantic Gold operation in Nova Scotia in July 2019 and estimates it will be in operation until 2030. Note that neither of these companies is listed in Canada. In addition to the tough Canadian equity raising landscape, what else is driv - ing Australian miners to hunt for assets in the Great White North? Shae Russell, an analyst who has been watching mining investment for a number of years and who writes for the Daily Reckoning investment newsletter, points to a number of factors. According to Russell, writing on July 30 last year, part of the advantage for Aussie gold miners is that when the US dollar gold was priced below US $1,300 an ounce, they were forced to become lean, efficient operators. Then there's the cost of gold in Aussie dollars. Australian explorers and miners targeting Canada

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